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Honorable 0.N. Humphreys, Jr. Administrator Texas Alcoholic Beverage Commission P.O. Box 13127, Capitol Station Austin, Texas 78711 Opinion No. M-877 Re: Whether vendors selling beer from ships' chandlerage under United StatesCustoms Bond are subject toprovisions of Dear Mr. Humphreys: the Texas Liquor Control Act. Your request for an opinion on the captioned subject presents three questions. The first question presented inquires as toyour Commission's authority, if any, to enforce pertinent provisions of the Texas Liquor Control Act against avendor selling beer from ships' chandlerage* under United States Customs Bond when such vendor holds no license orpermit issued by the Texas Alcoholic Beverage Commission. The second question presented inquires as to the Board's authority, if any, to enforce pertinent provisions of the Texas Liquor Control Act against avendor selling beer from ships' chandlerage under United States Customs Bond when such vendor holds avalid license orpermit issued by the Texas Alcoholic Beverage Commission. The third question presented assumes that the vendors in the first and second questions are subject to regulation under the Texas Liquor Control Act, and inquires as towhether the Commission may strictly regulate or even prohibit the activities of such vendors because of the substantial practical
*"Ship Chandler -A Dealer in supplies and equipment for ships." Webster's Third New International Dictionary (Unabridged Ed. 1969).

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difficulties which the Commission faceswith respect to enforcing state liquor laws as they may pertain to the sales inquestion. Your request presents only limited facts and it isnot accompanied by a copy of the regulations andprocedures of theUnited States Bureau of Customs under which the specific vendors in question purport to operate. For thepurpose of this opinion, wewill assume that all of thebeer inquestion has been brewed andplaced in containers in abrewery operated under internal revenue supervision and bond; that the containers have been clearly stamped and labeled for export withoutpayment of federal taxes at thebrewery; that they have been transported into the State of Texas by a carrier bonded to and under the supervision of appropriate agencies of the Federal government; and that once the beer reaches the state it is continuously held in facilities which arebonded to and under the supervision of federal authorities until placed aboard ship (fortransportation to destinations in foreign countries, Hawaii, Alaska, or thepossessions of theUnited States; or for the use as ships' supplies). A comprehensive statutory and administrative regulatory scheme isprovided for thispurpose by federal law, and at all steps in the transfer frombrewery to ship, and until the beer reaches its destination at a foreign port, if so consigned, the beer in question would under the federal regulatory scheme, be subject to close supervision by federal agents. Pertinent statutory provisions, are inpart, as follows: "26U.S.C. 55092. Definition of brewer "Everyperson who brews orproduces beer for sale shall be deemed abrewer." "26U.S.C. 85401. Qualifying documents II

. . . "(b) Bonds. -Every brewer
. . .shall execute abond to theUnited States . . .conditioned

. . .that he shall in all respects faithfully

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camp ly, without fraud or evasion, with all requirements of law relating to theproduction and sale of any beer
. . ." "19U.S.C. 91309. Supplies for certain vessels and aircraft -Exemption from customs duties and internal revenue tax. '(a) Articles
. . .may be withdrawn
. . . from anybrewery
. . .free of internal revenue tax "(1) for supplies
. . .of (A)vessels

. . .operated by theUnited States, (5)vessels of the United States employed in the fisheries orwhaling business, or actually engaged in foreign trade or trade between theAtlantic and Pacific ports of theUnited States orbetween theUnited States and any of itspossessions, orbetween Hawaii and any other part of the United States or between Alaska and any other part of theUnited States . . . "(2) for supplies
. . .of (A)vessels ofwar of any foreign nation, or (B) foreign vessels engaged in foreign trade or trade between theUnited States and any of itspossessions, or between Hawaii and any other part of the United States orbetween Alaska and any other part of the United States, where such trade by foreign vessels ispermitted
. . ." "26U.S.C. 55053. Exemptions "(a) Removals for export. -Beer may be removed from thebrewery without payment of tax, for export, in such containers and under such regulations, and on the giving of such notices, entries, andbonds and other security, as the Secretary or his delegate may prescribe."

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Complementary to the statutory provisions above quoted, extensive administrative regulations have been adopted. See Section 245.1 through Section 245.257, Title 26, Chapter 1, Code of Federal Regulations; and Section 252.141 through 252.1504, Title 26,Chapter 1,Code of Federal Regulations. Section 252.143, Title 26, Chapter 1,Code of Federal Regulations provides, inpart: II

. . . [Ejachkeg, barrel, case, crate, or other package containing beer tobe removed without payment of tax under theprovisions of this subpart shall be marked as specified below: "(a) 'Export -Without Payment of Tax' - where the beer is tobe removed for export from theUnited States, or for shipment to theArmed Services for export; "(b) 'UseonVessels (orAircraft) - Without Payment of Tax' -where the beer is tobe removed for use as supplies on vessels or aircraft; and "(cl Where thebeer is removed fordeposit in a foreign-trade zone, in addition to and immediately following the markings prescribed inparagraph (a)of this section, thewords 'viaF.T.Z. No.' followed by the number of the zone . . ." Section 252.144, Title 26, Chapter 1,Code of Federal Regulations, provides further: "The consignment, shipment, and delivery of beer removed from abrewery without payment of tax under this subpart shall be in accordance with the applicable provisions of Subpart M." "Subpart M" towhich the last above quoted section makes reference, provides, inpart:

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"5252.241. on vessels Shipment for export, or foruse
"All liquors
. . .intended for export or liquors intended for use as supplies on vessels shall be consigned to thedirector of customs at theport of exportation or port of lading for supplies on vessels, except thatwhen the shipment is for export to a contiguous foreign territory it shall be consigned to the foreign consignee at destination in care of thedirector of customs at theport of export." Federal officials are responsible for, andhave control over beer shipped under the aforesaid provisions to the exclusion of state regulation and controi. Texas Liquor Control Board v.Ammex Warehouse Company, 384 S.W.Zd 768 (Tex.Civ.App. 1964, error ref. n.r.e.) -- cert.den. 86S.Ct. 547 (1965):

., 377U.S. 324, 12 I ;.Ed.2d Department ofAlcoholic Beverage Control v.Ammex~Warehouse,378s. 124 12L.Ed.2d 743, 84S.Ct. 1657 (1963);National Distiller; Products Corp. v. City and County of San Francisco, 297 P.2d 61 (Cal.App. 1956) cert.den. 352U.S. 928 (1 956). Cf. McGoldrich v. Gulf Oil

(1940) inwhich the court discussed similar federal bonding procedlres for oil. Corp., 309U.S. 414, 60 S.Ct. 664
Under the theory that thebeer here inquired about is at all times under United States bond andwill not be sold or distributed in or returned to this State, itwould be held not subject to state regulation or control under the cited cases. Turning now toyour specific inquiries, we advise you as follows:

The Texas Alcoholic Beverage Commission has no authority to enforce provisions of the Texas Liquor Control Act against vendors who sellbeer or other alcoholic beverages from ships'

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chandlerage under United States Customs Bond assuming that the with applicas described vendors inquestion operate in strict compliance ableprocedures set up by the Federal Government above. II. Under the assumption above stated, no legal would exist based uponwhether or not thevendor distinction inquestion held a license orpermit issued by theTexas Alcoholic Beverage Commission, since the Commission would have no jurisdiction or authority over the above described activities; and a vendor by qualifying for intra state dealings in alcoholic beverages under the Texas Liquor Control Act does not thereby subject his activities under theUnited States Custom bonding procedure described above to supervision or control by the Texas Alcoholic Beverage Commission, other than insofar as the Commission may require him tokeep his activities strictly segregated from his internal state operations. III. Your third question is answered in the negative in accordance with our answers to the first and second questions. SUMMARY Assuming that the applicable federal statutes and administrative regulations herein discussed are strictly complied with, the Texas Alcoholic Beverage Commission has no authority or jurisdiction to regulate sales of beer by vendors who sell suchbeer from ship's chandlerage under United States Customs Bond. YqLi very tru&y,

y General of Texas

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Honorable 0. N. Humphreys, Jr., Page 7

Prepared by Larry J. Craddock Assistant Attorney General APPROVED: OPINION COMMITTEE Kerns Taylor, Chairman W. E.Allen, Co-Chairman Ben Harrison Scott Garrison Sam Jones Jay Floyd MEADE F. GRIFFIN Staff Legal Assistant ALFRED WALKER Executive Assistant NOLA WHITE First Assistant Attorney General (M-877)

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