[Federal Register Volume 66, Number 105 (Thursday, May 31, 2001)]
[Rules and Regulations]
[Pages 29480-29483]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 01-13630]


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DEPARTMENT OF THE TREASURY

Bureau of Alcohol, Tobacco and Firearms

27 CFR Parts 18, 19 and 24

[T.D. ATF-455; Ref: Notice No. 823]
RIN 1512-AB59


Volatile Fruit-Flavor Concentrate Shipments and Alternation With 
Other Premises (2000R-290P)

AGENCY: Bureau of Alcohol, Tobacco and Firearms (ATF), Department of 
the Treasury.

ACTION: Final rule (Treasury decision).

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SUMMARY: This final rule specifically authorizes the transfer of 
volatile fruit-flavor concentrate (VFFC) unfit for beverage use from 
one VFFC plant to another for further processing and permits facilities 
to be alternately used as a VFFC plant, a distilled spirits plant or a 
bonded wine cellar. This rule allows greater flexibility in the 
production processes and in the equipment and facilities of VFFC 
plants.

DATES: Effective date: May 31, 2001.

FOR FURTHER INFORMATION CONTACT: Robert P. Ruhf, Regulations Division, 
650 Massachusetts Avenue, NW, Washington, DC 20226; (202) 927-8210; or 
<a href="/cdn-cgi/l/email-protection#98f9f4fbecf7fad8f9ecfef0e9b6f9ecfeb6eceafdf9ebb6fff7ee"><span class="__cf_email__" data-cfemail="5a3b36392e35381a3b2e3c322b743b2e3c742e283f3b29743d352c">[email protected]</span></a>.

SUPPLEMENTARY INFORMATION:

Background

    Previously, ATF received a request to vary from the regulations in 
27 CFR part 18, Production of Volatile Fruit Flavor Concentrate. This 
request was to allow the transfer of volatile fruit-flavor concentrate 
(VFFC) that is unfit for beverage use for further processing from one 
proprietor of a volatile fruit concentrate plant to another. The 
current regulation regarding transfer of volatile fruit-flavor 
concentrate (27 CFR 18.54(a)) does not provide for such a transfer.
    Another current regulation (27 CFR 18.51) allows the transfer to a 
producer's premises of ``processing material'' that is produced 
elsewhere subject to certain restrictions and recordkeeping 
requirements. However, the definition of ``processing material'' (27 
CFR 18.11) does not include concentrate that is intended for further 
processing. Furthermore, the regulation at 27 CFR 18.56 allows only a 
VFFC proprietor to receive shipments of returned concentrate previously 
shipped by such proprietor.
    Consequently, ATF proposed to amend the regulations in 27 CFR 18.56 
to allow such transfers subject to the

[[Page 29481]]

existing recordkeeping and reporting requirements of 27 CFR 18.56 
(Notice No. 823, 61 FR 30017). At this time, ATF also solicited 
comments concerning other changes to part 18. Specifically, ATF 
requested comments about whether to allow facilities to be operated 
alternately as a VFFC plant, a distilled spirits plant, a bonded winery 
or other regulated facility.

Transfer of Concentrate

    ATF is adopting the proposed regulations to allow VFFC proprietors 
to transfer, for further processing, volatile fruit-flavor concentrate 
that is unfit for beverage use. This change in the regulations allows 
VFFC proprietors greater flexibility without jeopardizing the revenue.

Alternation of VFFC Premises

    In response to our request for other possible changes in Notice 823 
(61 FR 30017), Distilled Spirits Council of the United States (DISCUS) 
supported the proposal for temporarily alternating VFFC plant with a 
distilled spirits plant, bonded wine cellar or other regulated 
facility. As a result, we have written regulations to allow facilities 
to be operated alternately as a VFFC plant, a distilled spirits plant, 
or a bonded wine cellar. We believe that limiting alternations between 
a VFFC and a distilled spirits plant or a bonded winery should address 
the present needs of all proprietors. However, ATF will consider any 
future request to alternate a VFFC plant with other regulated 
facilities.
    In addition, DISCUS recommended that the Bureau ``streamline'' the 
evidence required for such alternations by using batch records. Under 
the provisions of the Internal Revenue Code (IRC), each type of 
regulated operation (for example, a distilled spirits plant, bonded 
wine cellar or volatile fruit-flavor concentrate plant) is subject to 
separate and distinct regulatory requirements. These regulatory 
requirements have been tailored to the particular operation being 
conducted in order to protect the revenue. Where particular premises 
are being alternated, ATF has found that the notice of alternation of 
premises is necessary to protect the revenue and is not unduly 
burdensome on businesses. The notice identifies the portion of the 
premises being alternated and identifies the operations that will occur 
and the specific time during which they will occur. Without this 
information, ATF would, at best, have difficulty in determining which 
type of operation was occurring at any particular place or time. Also, 
batch records would not necessarily allow ATF to verify records, 
reports, tax returns, and bonds that are required to be filed under the 
IRC regulations, thus presenting a jeopardy to the revenue. 
Accordingly, ATF opposes the use of batch records to evidence 
alternation of premises.

Regulatory Flexibility Act

    In accordance with the provisions of the Regulatory Flexibility Act 
(5 U.S.C. 601 et seq.), it is hereby certified that this final rule 
will not have a significant impact on a substantial number of small 
entities. This final rule liberalizes the regulations related to 
volatile fruit-flavor concentrate plants. Accordingly, a regulatory 
flexibility analysis is not required. As required by 26 U.S.C. 7805(f), 
a copy of this final rule was sent to the Chief Counsel for Advocacy of 
the Small Business Administration. No comments were received.

Executive Order 12866

    It has been determined that this final rule is not a significant 
regulatory action as defined by Executive Order 12866. Therefore, a 
regulatory assessment is not required.

Paperwork Reduction Act

    The collections of information contained in this final rule have 
been reviewed and approved under the requirements of the Paperwork 
Reduction Act of 1995 (44 U.S.C. 3507(j)). The Office of Management and 
Budget (OMB) has issued control number 1512-0046 for this collection of 
information. An agency may not conduct or sponsor, and a person is not 
required to respond to, a collection of information unless it displays 
a valid control number assigned by OMB.
    The additional collection of information in this regulation is in 
27 CFR 18.39, 18.40 and 18.42. This information is required to make 
sure that a proprietor of a volatile fruit-flavor concentrate plant is 
properly qualified to alternate to a distilled spirits plant or a 
bonded wine cellar, and to record alternations of premises. ATF uses 
this information to ensure that persons are qualified and that 
operations are conducted in accordance with law and regulations. The 
collection of information is mandatory. The likely respondents may 
include small businesses or organizations.
    ATF estimates the burden of qualification and recordkeeping at ten 
(10) additional respondents and an additional one hour per respondent. 
ATF estimates that the total annual reporting and/or recordkeeping 
burden under control numbers 1512-0046 is 40 hours.

Administrative Procedure Act

    This final rule relieves restrictions on the operations of volatile 
fruit-flavor concentrate plants by allowing certain transfers of high-
proof concentrate unfit for beverage use and providing for the 
alternation of VFFC plants with distilled spirits plants or bonded wine 
cellars. Consequently, it is exempt from the delayed effective date 
provisions of 5 U.S.C. 553(d).

Drafting Information

    The principal author of this document is Robert Ruhf, Regulations 
Division, Bureau of Alcohol, Tobacco and Firearms.

List of Subjects

27 CFR Part 18

    Alcohol and alcoholic beverages, Fruits, Labeling, Reporting and 
recordkeeping requirements, Spices and flavorings.

27 CFR Part 19

    Administrative practice and procedure, Authority delegations 
(Government agencies), Chemicals, Claims, Custom duties and inspection, 
Electronic fund transfers, Excise taxes, Exports, Gasohol, Imports, 
Labeling, Liquors, Packaging and containers, Reporting and 
recordkeeping requirements, Research, Scientific equipment, Security 
measures, Spices and flavorings, Surety bonds, Transportation, 
Warehouses, Wine.

27 CFR Part 24

    Administrative practice and procedure, Authority delegations 
(Government agencies), Claims, Electronic fund transfers, Excise taxes, 
Exports, Food additives, Fruit juices, Labeling, Liquors, Packaging and 
containers, Reporting and recordkeeping requirements, Research, 
Scientific equipment, Spices and flavorings, Surety bonds, Taxpaid wine 
bottling house, Transportation, Vinegar, Warehouses, Wine.

Authority and Issuance

    For the reasons set out in the preamble, 27 CFR Parts 18, 19 and 24 
are amended as follows:

PART 18--PRODUCTION OF VOLATILE FRUIT-FLAVOR CONCENTRATE

    Paragraph 1. The authority citation for part 18 is revised to read 
as follows:

    Authority: 26 U.S.C. 5001, 5171-5173, 5178, 5179, 5203, 5351, 
5354, 5356, 5511, 5552, 6065, 7805.

[[Page 29482]]

    Par. 2. Section 18.11 is amended by adding the term ``distilled 
spirits plant'' in alphabetical order as follows:


Sec. 18.11  Meaning of terms.

* * * * *
    Distilled spirits plant. An establishment qualified under 27 CFR 
part 19, excluding alcohol fuel plants, for producing, warehousing, or 
processing distilled spirits (including denatured distilled spirits).
* * * * *

    Par. 3. A new section 18.39 is added before the heading ``Subpart 
E--Operations'' to read as follows:


Sec. 18.39  Qualification to alternate a volatile fruit-flavor 
concentrate plant and a distilled spirits plant.

    A proprietor of a volatile fruit-flavor concentrate plant operating 
a contiguous distilled spirits plant may alternate the use of such 
premises between the two functions through extension and curtailment by 
filing with the appropriate ATF officer the following information:
    (a) ATF Form 27-G (5520.3) and ATF Form 5110.41 to cover the 
proposed alternation of premises;
    (b) A special diagram, in duplicate, delineating the premises as 
they will exist, both during extension and curtailment and clearly 
depicting all buildings, floors, rooms, areas, equipment and pipe lines 
(identified individually by letter or number) which are to be subject 
to alternation, in their relative operating sequence; and
    (c) A bond or a consent of surety to cover the proposed alternation 
of premises.

(Approved by the Office of Management and Budget under control 
number 1512-0046)

    Par. 4. A new section 18.40 is added before the heading ``Subpart 
E--Operations'' to read as follows:


Sec. 18.40  Qualification to alternate volatile fruit-flavor 
concentrate plant and bonded wine cellar.

    A proprietor of a volatile fruit-flavor concentrate plant operating 
a contiguous bonded wine cellar may alternate the use of each premise 
by extension and curtailment by filing with the appropriate ATF officer 
the following information:
    (a) ATF Form 27-G (5520.3) and ATF Form 5120.25 to cover the 
proposed alternation of premises;
    (b) A special diagram, in duplicate, delineating the premises as 
they will exist, both during extension and curtailment and clearly 
depicting all buildings, floors, rooms, areas, equipment and pipe lines 
(identified individually by letter or number) which are to be subject 
to alternation, in their relative operating sequence; and
    (c) A bond or a consent of surety to cover the proposed alternation 
of premises.

(Approved by the Office of Management and Budget under control 
number 1512-0046)

    Par. 5. A new section 18.41 is added before the heading ``Subpart 
E--Operations'' to read as follows:


Sec. 18.41  Separation of premises.

    The appropriate ATF officer may specify additional means of 
separating the volatile fruit-flavor concentrate plant from a distilled 
spirits plant or bonded wine cellar premises.

    Par. 6. A new section 18.42 is added before the heading ``Subpart 
E--Operations'' to read as follows:


Sec. 18.42  Record of alternation.

    After approval of the qualifying documents for the alternation of 
premises, the proprietor must execute a record each time that the 
premises are alternated. The record will contain the following 
information:
    (a) Identification assigned by ATF, including the plant or registry 
number, of the volatile fruit-flavor concentrate plant and the 
distilled spirits plant or bonded wine cellar;
    (b) Effective date and time of proposed change; and
    (c) Description of the alternation that identifies the diagrams 
depicting the premises before and after the alternation.

(Approved by the Office of Management and Budget under control 
number 1512-0046)


    Par. 7. A new section 18.43 is added in subpart D to read as 
follows:


Sec. 18.43  Conditions of Alternation.

    (a) Curtailment of volatile fruit-flavor concentrate plant. The 
proprietor must remove all concentrate, fruit mash, and juice from the 
volatile fruit-flavor concentrate plant alternated to a distilled 
spirits plant or to a bonded wine cellar premises, unless such 
concentrate, fruit mash, or juice is being simultaneously transferred 
to the distilled spirits plant or bonded wine cellar premises.
    (b) Extension of volatile fruit-flavor concentrate premises and 
curtailment of distilled spirits plant. The proprietor must remove all 
spirits, denatured spirits, articles and wine, except for concentrate, 
fruit mash, or juice that is being simultaneously transferred to the 
volatile fruit-flavor concentrate plant.
    (c) Extension of volatile fruit-flavor concentrate premises and 
curtailment of bonded wine cellar premises. The proprietor must remove 
all wine and spirits from the alternated bonded wine cellar premises, 
except for concentrate, fruit mash, or juice that is being 
simultaneously transferred to the volatile fruit-flavor concentrate 
plant.

    Par. 8. Section 18.56 is revised to read as follows:


Sec. 18.56  Receipt of concentrate.

    (a) General. The proprietor of a concentrate plant may accept the 
return of concentrate that the proprietor shipped. In addition, 
concentrate that is unfit for beverage use may be received from another 
concentrate plant for further processing in accordance with this part.
    (b) Record of concentrate received. When concentrate is received, 
the proprietor must record the receipt, including the name of the 
consignor and a notation regarding any loss in transit or other 
discrepancy.

(Approved by the Office of Management and Budget under control 
number 1512-0098)

PART 19--DISTILLED SPIRITS PLANTS

    Par 9. The authority citation for part 19 continues to read as 
follows:

    Authority: 19 U.S.C. 81c, 1311; 26 U.S.C. 5001, 5002, 5004-5006, 
5008, 5010, 5041, 5061, 5062, 5066, 5081, 5101, 5111-5113, 5142, 
5143, 5146, 5171-5173, 5175, 5176, 5178-5181, 5201-5204, 5206, 5207, 
5211-5215, 5221-5223, 5231, 5232, 5235, 5236, 5241-5243, 5271, 5273, 
5301, 5311-5313, 5362, 5370, 5373, 5501-5505, 5551-5555, 5559, 5561, 
5562, 5601, 5612, 5682, 6001, 6065, 6109, 6302, 6311, 6676, 6806, 
7011, 7510, 7805; 31 U.S.C. 9301, 9303, 9304, 9306.

    Par. 10. A new section 19.207 is added before the undesignated 
center heading of ``Permanent Discontinuance of Business'' to read as 
follows:


Sec. 19.207  Alternate use of distilled spirits plant and volatile 
fruit-flavor concentrate premises.

    If a proprietor of distilled spirits plant wishes to use all or a 
portion of such premises alternately as a volatile fruit-flavor 
concentrate plant or vice-a-versa, the proprietor must comply with the 
requirements of Secs. 18.39 and 18.41 through 18.43 of this title.

PART 24--WINE

    Par. 11. The authority citation for part 24 continues to read as 
follows:

    Authority: 5 U.S.C. 552(a); 26 U.S.C. 5001, 5008, 5041, 5042, 
5044, 5061, 5062, 5081, 5111-5113, 5121, 5122, 5142, 5143, 5173, 
5206, 5214, 5215, 5351, 5353, 5354, 5356, 5357, 5361, 5362, 5364-
5373, 5381-5388, 5391, 5392, 5511, 5551, 5552, 5661, 5662, 5684, 
6065, 6091, 6109, 6301, 6302, 6311, 6651, 6676, 7011, 7302, 7342, 
7502, 7503, 7606, 7805, 7851; 31 U.S.C. 9301, 9303, 9304, 9306.

[[Page 29483]]


    Par. 12. A new sentence is added at the end of Sec. 24.135(a) to 
read as follows:


Sec. 24.135  Wine premises alternation.

    (a) General. * * * If a proprietor of a bonded wine cellar or 
winery wishes to use all or a portion of such premises alternately as a 
volatile fruit-flavor concentrate plant or vice-a-versa, the proprietor 
must comply with the requirements of Secs. 18.40 through 18.43 of this 
title.
* * * * *

    Signed: March 6, 2001.
Bradley A. Buckles,
Director.
    Approved: March 14, 2001.
Timothy E. Skud,
Acting Deputy Assistant Secretary (Regulatory, Tariff and Trade 
Enforcement).
[FR Doc. 01-13630 Filed 5-30-01; 8:45 am]
BILLING CODE 4810-31-U


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