Federal Register / Vol. 74, No. 118 / Monday, June 22, 2009 / Rules and Regulations 29401 

(b) Approved maps. The six United 

States Geological Survey topographic 

maps used to determine the boundary of 

the Upper Mississippi River Valley 

viticultural area are titled: 

(1) State of Minnesota, scale 

1:500,000; compiled in 1963; edition of 

1985; 

(2) State of Wisconsin, scale 

1:500,000; compiled in 1966; edition of 

1984; 

(3) State of Illinois, scale 1:500,000; 

compiled in 1970; edition of 1987; 

(4) State of Iowa, scale 1:500,000; 

compiled in 1965; edition of 1984; 

(5) Anamosa, Iowa, 1:100,000 scale; 

edited 1984; and 

(6) Marshalltown, Iowa, 1:100,000 

scale; edited 1984. 

(c) Boundary. The Upper Mississippi 

River Valley viticultural area is located 

in portions of southeast Minnesota, 

southwest Wisconsin, northwest 

Illinois, and northeast Iowa. The 

boundary of the Upper Mississippi 

River Valley viticultural area is as 

described below: 

(1) The beginning point is on the State 

of Minnesota map at the intersection of 

Interstate Highways 94 and 494 

(beltway), east of St. Paul at Oakbury in 

Washington County. From the beginning 

point, proceed east on Interstate 94, 

crossing over Lake St. Croix and onto 

the State of Wisconsin map at St. Croix 

County, and then continuing through 

Dunn County to Eau Claire County, to 

the intersection of Interstate Highway 94 

with Wisconsin State Highway 85, 

southwest of the City of Eau Claire; then 

(2) Proceed northeast on Wisconsin 

State Highway 85 toward the City of Eau 

Claire to U.S. Highway 12; then 

(3) Proceed southeast on U.S. 

Highway 12 into Jackson County and 

passing through Clark County, to 

Interstate Highway 94 at Black River 

Falls; then 

(4) Proceed southeast on Interstate 

Highway 94 into Monroe County to 

Interstate Highway 90, east of the Fort 

McCoy Military Reservation; then 

(5) Proceed southeast on Interstate 

Highway 90 through Juneau, Sauk, 

Columbia, Dane, and Rock Counties, 

crossing onto the State of Illinois map 

at Winnebago County to U.S. Highway 

20 at Cherry Valley; then 

(6) Proceed west on U.S. Highway 20 

to Illinois State Highway 2, west of the 

Rock River; then 

(7) Proceed southwest on Illinois State 

Highway 2, passing through Ogle 

County and into Lee County, to Illinois 

State Highway 26 at Dixon; then 

(8) Proceed south on Illinois State 

Highway 26 to Illinois State Highway 5 

(which has been redesignated as 

Interstate Highway 88 on contemporary 

maps of Illinois); then 

(9) Proceed southwest on Illinois State 

Highway 5 (Interstate Highway 88), 

passing through Whiteside County and 

into Rock Island County, to Interstate 

Highway 80 at Barstow; then 

(10) Proceed generally northwest on 

Interstate Highway 80, crossing the 

Mississippi River, onto the State of Iowa 

map at Scott County, and continuing 

west-northwest through Cedar County 

and into Johnson County to the 

intersection of Interstate Highways 80 

and 380 at Tiffin; then 

(11) Proceed north-northwest on 

Interstate Highway 380 into Linn 

County and Cedar Rapids on the State 

of Iowa map. Then using the Anamosa 

map, followed by the Marshalltown 

map, follow Interstate Highway 380, 

labeled ‘‘Under Construction’’ on the 

Anamosa map, northwest through 

Benton and Buchanan Counties to Black 

Hawk County, to U.S. Highway 20, 

southeast of Waterloo and Raymond; 

then 

(12) Using the State of Iowa map, 

proceed west-northwest on U.S. 

Highway 20 to Waterloo and U.S. 

Highway 63; then 

(13) Proceed north on U.S. Highway 

63 through Bremer, Chicksaw, and 

Howard Counties, skirting the Upper 

Iowa River at Chester, and crossing onto 

the State of Minnesota map at Fillmore 

County, to Minnesota State Highway 56; 

then 

(14) Proceed northwest and northerly 

on Minnesota State Highway 56 through 

Mower, Dodge, and Goodhue Counties 

to Dakota County, where it joins with 

State Highway 52 on commercial maps, 

to Interstate Highway 494 (beltway), 

south of St. Paul; then 

(15) Follow Interstate Highway 494 

(beltway) northeast into Washington 

County, returning to the beginning 

point. 

Signed: April 6, 2009. 

John J. Manfreda, 

Administrator. 

Approved: May 3, 2009. 

Timothy E. Skud, 

Deputy Assistant Secretary (Tax, Trade, and 

Tariff Policy). 

[FR Doc. E9–14574 Filed 6–19–09; 8:45 am] 

BILLING CODE 4810–31–P 

DEPARTMENT OF THE TREASURY 

Alcohol and Tobacco Tax and Trade 

Bureau 

27 CFR Parts 40, 41, 44, and 45 

[Docket No. TTB–2009–0002; T.D. TTB–78; 

Re: Notice No. 95] 

RIN 1513–AB72 

Implementation of Statutory 

Amendments Requiring the 

Qualification of Manufacturers and 

Importers of Processed Tobacco and 

Other Amendments Related to Permit 

Requirements, and the Expanded 

Definition of Roll-Your-Own Tobacco 

AGENCY: Alcohol and Tobacco Tax and 

Trade Bureau, Treasury. 

ACTION: Temporary rule; Treasury 

decision. 

SUMMARY: This temporary rule amends 

the Alcohol and Tobacco Tax and Trade 

Bureau regulations to implement certain 

changes made to the Internal Revenue 

Code of 1986 by the Children’s Health 

Insurance Program Reauthorization Act 

of 2009. The principal changes involve 

permit and related requirements for 

manufacturers and importers of 

processed tobacco and an expansion of 

the definition of roll-your-own tobacco. 

We also are soliciting comments from 

all interested parties on these 

amendments through a notice of 

proposed rulemaking published 

elsewhere in this issue of the Federal 

Register. 

DATES: Effective Dates: This temporary 

rule is effective June 22, 2009, through 

June 22, 2012. 

FOR FURTHER INFORMATION CONTACT: 

Amy R. Greenberg, Regulations and 

Rulings Division, Alcohol and Tobacco 

Tax and Trade Bureau (202–927–8210). 

SUPPLEMENTARY INFORMATION: 

TTB Authority 

Chapter 52 of the Internal Revenue 

Code of 1986 (IRC) sets forth the Federal 

excise tax and related provisions that 

apply to manufacturers and importers of 

tobacco products and cigarette papers 

and tubes and to export warehouse 

proprietors who hold such products, 

upon which tax has not been paid, 

pending export. Section 5702(c) of the 

IRC (26 U.S.C. 5702(c)) defines tobacco 

products as cigars, cigarettes, smokeless 

tobacco, pipe tobacco, and roll-yourown tobacco. Each of these terms is also 

separately defined in section 5702. 

Sections 5712 and 5713 of the IRC (26 

U.S.C. 5712 and 5713) require 

manufacturers and importers of tobacco 

products and export warehouse 


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29402 Federal Register / Vol. 74, No. 118 / Monday, June 22, 2009 / Rules and Regulations 

proprietors to obtain a permit to engage 

in such businesses. Section 5712 also 

allows for the promulgation of 

regulations to prescribe minimum 

manufacturing and activity 

requirements for such permittees. 

Sections 5721, 5722, and 5741 of the 

IRC (26 U.S.C. 5721, 5722, and 5741) 

authorize the promulgation of 

regulations to require inventories, 

reports, and recordkeeping, 

respectively. 

Regulations implementing the 

provisions of chapter 52 of the IRC are 

contained in 27 CFR parts 40 

(manufacture of tobacco products and 

cigarette papers and tubes), 41 

(importation of tobacco products and 

cigarette papers and tubes), 44 

(exportation of tobacco products and 

cigarette papers and tubes, without 

payment of tax, or with drawback of 

tax), and 45 (removal of tobacco 

products and cigarette papers and tubes, 

without payment of tax, for use of the 

United States). These regulations are 

administered by the Alcohol and 

Tobacco Tax and Trade Bureau (TTB). 

Children’s Health Insurance Program 

Reauthorization Act of 2009 

On February 4, 2009, President 

Obama signed into law the Children’s 

Health Insurance Program 

Reauthorization Act of 2009, Pub. L. 

111–3, 123 Stat. 8 (‘‘the Act’’). 

Section 701 of the Act amended the 

IRC to increase the Federal excise tax 

rates on tobacco products and cigarette 

papers and tubes. Section 701 also 

imposed a floor stocks tax on such 

articles held for sale on the effective 

date of the tax rate increases (April 1, 

2009). On March 31, 2009, TTB 

published in the Federal Register (74 

FR 14479) a temporary rule to amend 

the TTB regulations to reflect the 

section 701 changes. 

Section 702 of the Act included 

amendments to the IRC to extend 

permit, inventory, reporting, and 

recordkeeping requirements to 

manufacturers and importers of 

processed tobacco even though such 

processed tobacco is not subject to 

excise tax under the IRC. Section 702 of 

the Act also amended the definition of 

‘‘roll-your-own tobacco’’ generally to 

include cigar wrapper and filler. This 

document amends the TTB regulations 

to reflect these changes made by section 

702 of the Act. 

Regulation of Manufacturers and 

Importers of Processed Tobacco 

The Act amended sections 5712 and 

5713 of the IRC by adding references to 

‘‘processed tobacco’’ after the words 

‘‘tobacco products,’’ thereby requiring 

manufacturers and importers of 

processed tobacco, like manufacturers 

and importers of tobacco products, to 

apply for and obtain a permit before 

commencing such business. In addition, 

the Act amended section 5702 of the 

IRC by adding a new subsection (p) to 

define ‘‘manufacturer of processed 

tobacco.’’ Under this new definition, a 

manufacturer of processed tobacco is 

any person who processes any tobacco 

other than tobacco products; however, 

under the statutory definition the 

processing of tobacco does not include 

the farming or growing of tobacco or the 

handling of tobacco solely for sale, 

shipment, or delivery to a manufacturer 

of tobacco products or processed 

tobacco. 

Section 702 of the Act also included 

a transitional rule under which 

manufacturers and importers of 

processed tobacco who are engaged in 

such a business on April 1, 2009, and 

who file an application with TTB before 

June 30, 2009, may continue in business 

pending final action from TTB on that 

application. Finally, section 702 of the 

Act amended the IRC by extending to 

manufacturers and importers of 

processed tobacco provisions related to 

inventories (section 5721), reports 

(section 5722), records (section 5741), 

and packages, marks, labels, and notices 

(section 5723). 

General Approach to This Temporary 

Rule 

Congress mandated regulation of 

processed tobacco to strengthen the 

enforcement authority for the Federal 

excise tax on tobacco products, which 

significantly increased under the Act 

(See Joint Committee on Taxation, 

Description of the Revenue Provisions of 

the Children’s Health Insurance 

Program Reauthorization Act of 2009, 

(JCX–1–09), January 13, 2009). The Act 

provides enforcement mechanisms to 

assist in preventing the diversion of 

tobacco materials to illegal 

manufacturers. In promulgating these 

regulations, TTB has carefully 

considered how to effectively prevent 

diversion without creating undue 

administrative burdens by building on 

TTB regulations already applicable to 

manufacturers and importers of tobacco 

products and to proprietors of export 

warehouses (as that term is defined in 

26 U.S.C. 5702(h)). The discussion 

below focuses on the manufacturer and 

importer provisions of parts 40 and 41 

of the TTB regulations. A discussion of 

other changes to parts 44 and 45 is 

included later in the ‘‘Part by Part 

Discussion of Regulatory Amendments’’ 

section of this preamble. 

Definition of Processed Tobacco 

This temporary rule amends §§ 40.11 

and 41.11 by adding a definition of 

‘‘processed tobacco.’’ In addition to 

specifying what the processing of 

tobacco does not include, the new 

definition in each case specifies those 

activities that we consider to be 

‘‘processing’’ activities. In this regard, 

we consider the processing of tobacco to 

include stemming (the removal of the 

stem from the tobacco leaf), fermenting, 

threshing, cutting, and flavoring the 

tobacco, as well as combining the 

stemmed tobacco with other nontobacco ingredients. We do not believe 

that curing and baling are processing 

activities within the intent of the Act. 

In addition, in §§ 40.11 and 41.11 we 

have revised the definition of ‘‘package’’ 

and added a new definition of 

‘‘packaging’’ in order to make clear that 

‘‘processing’’ does not include 

consumer packaging of processed 

tobacco. The term ‘‘package’’ is revised 

to mean the immediate container in 

which tobacco products, processed 

tobacco, or cigarette papers or tubes are 

put up by the manufacturer and offered 

for sale or delivery to the ultimate 

consumer. The definition further 

provides that a container of processed 

tobacco, the contents of which weigh 10 

pounds or less (including any added 

non-tobacco ingredients or constituents) 

will be deemed to be in a package 

offered for sale or delivery to the 

ultimate consumer. This change is 

intended to reduce the potential for 

diversion of processed tobacco from 

permitted manufacturers. Thus, under 

these definitions, the placing of 

processed tobacco in a consumer 

package may not occur on the premises 

of a person who is qualified only as a 

manufacturer of processed tobacco, 

because such packaging creates a 

tobacco product, a taxable commodity 

that may be produced only on the 

bonded premises of a tobacco product 

manufacturer. 

Permits and Authorizations 

Under the regulations adopted in this 

temporary rule, any person who engages 

in the business of manufacturing or 

importing processed tobacco must 

obtain TTB approval as follows: 

• A person who processes tobacco 

and who does not also manufacture 

tobacco products must obtain a permit 

as a manufacturer of processed tobacco. 

• A person who holds a TTB permit 

as a manufacturer of tobacco products, 

who processes tobacco solely for use in 

the manufacture of tobacco products 

under that permit, and who does not 

remove the processed tobacco from the 


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Federal Register / Vol. 74, No. 118 / Monday, June 22, 2009 / Rules and Regulations 29403 

premises except for destruction, is not 

required to obtain authorization from 

TTB to engage in the manufacture of 

processed tobacco. 

• A person who holds a TTB permit 

as a manufacturer of tobacco products is 

required to obtain TTB authorization to 

remove processed tobacco for purposes 

other than destruction. Such activity is 

considered an ‘‘other business’’ and is 

governed by the provisions of 27 CFR 

40.47. 

• A person who imports processed 

tobacco, and who does not also import 

tobacco products under a TTB permit, 

must obtain a permit to import 

processed tobacco. 

• A person who imports processed 

tobacco, and who also imports tobacco 

products under a TTB permit as an 

importer of tobacco products, is 

required to amend the existing importer 

permit to authorize the importer to 

engage in the importation of processed 

tobacco under that permit. 

• A person who is qualified as a 

manufacturer of cigarette papers and 

tubes in accordance with 27 CFR 

40.391, and who also processes tobacco, 

must obtain a TTB permit as a 

manufacturer of processed tobacco. 

• A person who produces processed 

tobacco solely for his or her own 

personal use and consumption is not 

considered to be a manufacturer of 

processed tobacco for purposes of the 

new requirements. 

A transitional rule applies both to 

applicants for permits as manufacturers 

or importers of processed tobacco and to 

persons who are only required to obtain 

authorization under an existing permit. 

Persons to whom the transitional rule 

applies (that is, persons who are 

engaged in business on April 1, 2009, 

and who apply for a permit or 

authorization before June 30, 2009), will 

receive a written acknowledgment from 

TTB upon receipt of the application. 

The acknowledgment will provide an 

identifying number that can be used by 

the applicant, similar to a permit 

number, for purposes of showing that 

the holder is authorized to engage in 

such business pending action on the 

application. Anyone required to obtain 

a permit or authorization, and to whom 

the transitional rule does not apply, 

must obtain a permit before 

commencing operations. 

The Act did not impose an excise tax 

on the manufacture or importation of 

processed tobacco and therefore did not 

provide for the making of a bond to 

cover such activities. Accordingly, the 

regulations contained in this temporary 

rule do not require a bond of 

manufacturers or importers of processed 

tobacco or additional bond coverage of 

existing tobacco product manufacturers 

who process tobacco. 

Issuance and Duration of a Permit 

Under the regulations adopted in this 

temporary rule, a permit to manufacture 

processed tobacco will be issued 

without an expiration date; retention of 

the permit is conditioned upon 

continued compliance with the 

provisions of chapter 52 of the IRC and 

the regulations promulgated thereunder 

including the minimum manufacturing 

and activity requirement as discussed 

later in this preamble. A permit to 

import processed tobacco will be valid 

for a period of three years from the date 

shown on the permit, with the 

possibility of renewal of the permit if 

the importer applies to TTB for renewal 

within 30 days of the permit’s 

expiration date. These new permit 

provisions for manufacturers and 

importers of processed tobacco mirror 

the existing provisions for 

manufacturers and importers of tobacco 

products. The three-year permit period 

for importers of tobacco products was 

included in the regulations when 

Congress, in the Balanced Budget Act of 

1997, extended permit requirements to 

importers. The three-year duration was 

determined by the Bureau of Alcohol, 

Tobacco and Firearms (ATF), TTB’s 

predecessor agency, to be a reasonable 

method to avoid the proliferation of 

numerous unused permits, which 

would pose administrative difficulties 

and thus potential jeopardy to the 

revenue through unnecessarily diverted 

agency resources. (See preamble for T.D. 

ATF–422, 64 FR 71947, published in the 

Federal Register on December 22, 1999.) 

TTB believes that this rationale still 

applies and therefore should apply 

equally to permits for importers of 

processed tobacco. 

As noted above, an importer of 

tobacco products may apply to amend 

the existing permit to obtain 

authorization to import processed 

tobacco under that permit. Such 

authorization expires when the permit 

expires. TTB continues to believe that a 

limited-duration permit is not necessary 

for manufacturers of tobacco products or 

processed tobacco. We note in this 

regard that the business of a 

manufacturer requires significant capital 

commitments for premises and 

equipment (and, in the case of the 

manufacturer of tobacco products, bond 

coverage) in order to obtain a permit. 

Therefore, because a manufacturer of 

tobacco products or processed tobacco 

is much less likely to choose to obtain 

(or be able to obtain) a permit without 

making such commitments, it is also 

less likely that a manufacturer would 

seek to qualify for a permit that would 

subsequently go unused. 

Minimum Manufacturing and Activity 

Requirements 

Section 5712 of the IRC, which 

applies to manufacturers and importers 

of processed tobacco as a result of the 

changes made by the Act, provides, 

among other things, that an application 

for such a permit may be denied if the 

activity proposed to be carried out does 

not meet such minimum capacity or 

activity requirements as the Secretary of 

the Treasury may by regulation 

prescribe. Congress enacted this 

provision to ensure that those who 

apply for a permit and operate under 

that permit are actually engaged in the 

bona fide business of manufacturing or 

importing and in a way that will 

adequately protect the revenue and 

comply with applicable law and 

regulations. 

As noted above, a permit as an 

importer of processed tobacco will be 

issued for a three-year period. However, 

notwithstanding the reasons for the 

three-year duration of a permit as 

explained above, TTB believes that 

there could be a significant number of 

speculative processed tobacco importer 

permits applications that lead to the 

issuance of permits under which no 

activity takes place. TTB does not 

believe that it is appropriate to devote 

agency resources to permit renewals in 

such cases. Accordingly, the regulations 

in this temporary rule provide that an 

application for the renewal of a permit 

as an importer of processed tobacco may 

be rejected and the permit denied if no 

activity has taken place or been reported 

under such permit for a period of one 

year immediately prior to the 

application for renewal. 

The regulations in this temporary rule 

also provide that a permit as a 

manufacturer of processed tobacco may 

be suspended or revoked for non-use if 

no activity has taken place or been 

reported under such permit for a period 

of one year. This provision clarifies the 

TTB position that any minimum activity 

requirement promulgated pursuant to 

section 5712 is a continuing condition 

of a manufacturer’s permit. 

Records, Reports, and Inventories 

As noted above, the Act extends 

inventory, reporting, and recordkeeping 

requirements to manufacturers and 

importers of processed tobacco. 

Accordingly, the regulations in this 

temporary rule generally require 

manufacturers and importers of 

processed tobacco to take inventory, 

report, and keep records in a manner 

similar to that required for 


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29404 Federal Register / Vol. 74, No. 118 / Monday, June 22, 2009 / Rules and Regulations 

manufacturers and importers of tobacco 

products, and in a manner that is 

consistent with good business practice. 

The new regulations in this temporary 

rule also recognize that there may be 

circumstances involved in a 

manufacturer’s or importer’s business 

that require enhanced recordkeeping 

and reporting. Such circumstances 

include, for example, the transfer of 

processed tobacco to a person who does 

not hold a TTB permit as a tobacco 

product manufacturer and therefore is 

not subject to the statutory and 

regulatory provisions administered by 

TTB. 

As noted above, the Act extended the 

provisions of the IRC to processed 

tobacco in order to strengthen 

enforcement authority over tobacco 

products and thus prevent the diversion 

of materials used for making tobacco 

products to unauthorized manufacturers 

who would not be accountable to TTB. 

However, the IRC as amended by the 

Act places no limitations on the persons 

to whom manufacturers or importers of 

processed tobacco may transfer or sell 

processed tobacco. TTB believes that 

unregulated transfers or sales of 

processed tobacco to persons who do 

not hold TTB permits could lead to 

processed tobacco falling into the hands 

of persons who would be unknown and 

unaccountable to TTB, including illegal 

manufacturers. In order to better 

regulate processed tobacco and to 

minimize its transfer to unauthorized 

manufacturers, the new regulations in 

this temporary rule require more 

detailed records of those who transfer or 

sell processed tobacco to persons who 

do not have TTB permits as a 

manufacturer or importer of tobacco 

products or of processed tobacco, or as 

an export warehouse proprietor. The 

new regulations also include a 

requirement to file a report with TTB 

covering all such transfers or sales. 

These reports must include detailed 

information regarding the persons and 

circumstances involved in the transfer 

or sale of processed tobacco, and the 

reports must be filed by the close of the 

business day following such action. 

Roll-Your-Own Tobacco 

Expansion of the Definition 

Prior to the changes made by the Act, 

the IRC at 26 U.S.C. 5702(o) defined the 

term ‘‘roll-your-own tobacco’’ to mean 

‘‘any tobacco which, because of its 

appearance, type, packaging, or labeling, 

is suitable for use and likely to be 

offered to, or purchased by, consumers 

as tobacco for making cigarettes.’’ 

Section 702(d) of the Act amended the 

definition by adding at the end ‘‘or 

cigars, or for use as wrappers thereof.’’ 

The principal effect of this change is to 

extend the Federal excise tax, permit, 

and related statutory provisions 

applicable to manufacturers and 

importers of roll-your-own tobacco to 

manufacturers and importers of tobacco 

for making cigars and for use as 

wrappers of cigarettes or cigars. The 

amendment made by section 702(d) 

applies to articles removed (that is, 

removed from the factory or from 

internal revenue bond under IRC section 

5704 under regulations prescribed by 

the Secretary, or released from customs 

custody) after March 31, 2009. There is 

no transitional rule with regard to the 

permit requirement for persons affected 

by this statutory change; any person 

engaged in the business of 

manufacturing or importing any product 

that falls within the new statutory 

definition of roll-your-own tobacco is 

required, as of April 1, 2009, to have a 

TTB permit. 

Further, as a result of the Act, the 

products that were incorporated into the 

definition of roll-your-own (products 

commonly referred to as ‘‘cigar 

tobacco’’, ‘‘cigarette wrapper’’ or ‘‘cigar 

wrapper’’) must now comply with the 

package, mark, label, and notice 

requirements set forth in parts 40, 41, 

and 44. Under 27 CFR 40.216b and 

41.72b, packages of roll-your-own 

tobacco must bear a notice that includes 

the designation of the product for tax 

purposes. Prior to the amendments of 

this temporary rule, the permissible 

designations were ‘‘roll-your-own 

tobacco,’’ ‘‘cigarette tobacco,’’ and ‘‘Tax 

Class J.’’ We are amending this notice 

requirement to add as permissible 

designations on packages of roll-yourown tobacco the following: ‘‘Cigar 

tobacco,’’ ‘‘cigarette wrapper,’’ and 

‘‘cigar wrapper,’’ and are removing the 

words ‘‘Tax Class J’’ as a permissible 

designation as discussed later in this 

preamble. In addition, to allow 

sufficient time for affected 

manufacturers and importers to comply 

with the packaging requirements, we are 

amending 27 CFR 40.216c and 41.72c to 

provide that packages of roll-your-own 

tobacco to which one of the new 

designations applies (that is, cigar 

tobacco, cigarette wrapper, or cigar 

wrapper) may be removed, until August 

1, 2009, without being in compliance 

with the notice requirements of 

§§ 40.216b and 41.72b. With this 

amendment, we are also removing from 

§§ 40.216c and 41.72c existing text, now 

obsolete, which provided a use-up 

period for roll-your-own tobacco 

packages removed in the year 2000. 

Distinguishing Between Roll-Your-Own 

Tobacco and Pipe Tobacco 

The tax rate increases adopted in 

section 701 of the Act resulted in a 

significant difference between the rate 

of tax imposed on roll-your-own tobacco 

($24.78 per pound) and the rate of tax 

imposed on pipe tobacco ($2.8311 per 

pound); prior to the amendments made 

by the Act, the two rates were the same. 

While the definition of roll-your-own 

tobacco was amended by the Act as 

noted above, no change was made to the 

definition of pipe tobacco, which reads, 

‘‘any tobacco which, because of its 

appearance, type, packaging, or labeling, 

is suitable for use and likely to be 

offered to, or purchased by, consumers 

as tobacco to be smoked in a pipe.’’ 

Currently, the TTB regulations 

contain no standards to differentiate 

between roll-your-own tobacco and pipe 

tobacco beyond a repeat of the statutory 

definitions; when the tax rates on the 

two products were the same, TTB and 

its predecessor agencies considered it to 

be sufficient to require manufacturers 

and importers to meet certain notice 

requirements, as discussed below. 

However, because of the revenue 

implications resulting from the tax rate 

changes made by the Act, including the 

creation of a new incentive for industry 

members to present a product as, and 

thus pay the tax at the lower rate for, 

pipe tobacco, TTB recognizes that there 

is now a heightened need for more 

regulatory detail to clarify the difference 

between the two products. We are 

currently evaluating analytical methods 

and other standards to differentiate 

between roll-your-own tobacco and pipe 

tobacco, and we may publish 

rulemaking proposals on this subject for 

public comment in the near future. 

We note that the definitions of pipe 

tobacco and roll-your-own tobacco both 

require consideration of the packaging 

and labeling of the product in order to 

determine its classification for tax 

purposes. In this temporary rule we are 

amending the classification and notice 

provisions of the tobacco product 

manufacturer and importer regulations 

in parts 40 and 41 to more clearly 

differentiate, on the basis of packaging 

and labeling, between these two types of 

taxable products. The nature of, and 

reasons for, these changes are discussed 

below. 

Sections 40.25a and 41.30, which set 

forth the tax rates for pipe tobacco and 

roll-your-own tobacco, are amended by 

designating the existing text as 

paragraph (a) with the heading ‘‘tax 

rates’’ and adding a new paragraph (b), 

with the heading ‘‘classification,’’ that: 

(1) Provides that pipe tobacco and rollVerDate Nov<24>2008 14:26 Jun 19, 2009 Jkt 217001 PO 00000 Frm 00010 Fmt 4700 Sfmt 4700 E:\FR\FM\22JNR1.SGM 22JNR1

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Federal Register / Vol. 74, No. 118 / Monday, June 22, 2009 / Rules and Regulations 29405 

your-own tobacco must be put up in 

packages that conform to the applicable 

package and package notice 

requirements; (2) provides that any 

tobacco that has been processed and 

that is removed in a package that does 

not bear a notice prescribed under parts 

40 or 41 will be deemed to be roll-yourown tobacco; and (3) provides that, even 

though tobacco that has been processed 

is removed in a package that bears the 

notice required for pipe tobacco, it will 

be deemed to be roll-your-own tobacco 

if either the package does not bear the 

words ‘‘pipe tobacco’’ wherever the 

brand name appears or the package or 

accompanying materials bear any 

representation suggesting a use other 

than as pipe tobacco. 

In addition, the notice requirements 

for pipe tobacco in §§ 40.216a and 

41.72a are amended by removing from 

paragraph (a) the last sentence and 

thereby providing that only the words 

‘‘pipe tobacco’’ will be permissible as a 

designation on a package of pipe 

tobacco and that the designation ‘‘Tax 

Class L’’ may no longer be used as an 

alternative designation. Similarly, in the 

notice requirements for roll-your-own 

tobacco in §§ 40.216b and 41.72b, 

paragraph (a) is amended by removing 

the reference to ‘‘Tax Class J’’ and also 

by adding ‘‘cigar tobacco,’’ ‘‘cigarette 

wrapper,’’ and ‘‘cigar wrapper’’ as 

permissible designations (as discussed 

above). Thus, in the case of roll-yourown tobacco, the only permissible 

package designations will be ‘‘roll-yourown tobacco,’’ ‘‘cigarette tobacco,’’ 

‘‘cigar tobacco,’’ ‘‘cigarette wrapper,’’ or 

‘‘cigar wrapper.’’ Finally, §§ 40.216c and 

41.72c are revised to set forth a new useup period, until August 1, 2009, for 

packages that contain the ‘‘Tax Class L’’ 

or ‘‘Tax Class J’’ designations, which are 

no longer permissible under the notice 

requirements adopted in this temporary 

rule. 

The changes to §§ 40.25a and 41.30 

described above are intended to address 

two distinct but related tax rate issues. 

The first issue relates to the significant 

difference between the rates applicable 

to pipe tobacco and to roll-your-own 

tobacco and the resulting incentive for 

a taxpayer to classify a product as pipe 

tobacco rather than as roll-your-own 

tobacco. The amendments are tied to the 

revised notice requirements for pipe 

tobacco and roll-your-own tobacco 

because the way those notices appear on 

the package goes directly to the inquiry 

required under each statutory 

definition, that is, whether, because of 

the packaging or labeling of the product, 

the product is ‘‘likely to be offered to, 

or purchased by, consumers as’’ tobacco 

to be smoked in a pipe or tobacco for 

making cigarettes or cigars. The 

circumstances in which a product is 

deemed to be roll-your-own tobacco 

rather than pipe tobacco in the amended 

texts are intended to ensure that the tax 

collected on the product is consistent 

with the way the product is presented 

to the consumer. 

The second issue regarding the 

changes to §§ 40.25a and 41.30 relates to 

the fact that ‘‘processed tobacco’’ is not 

subject to tax. TTB believes that it is 

essential to recognize that there will be 

a point at which tobacco will have been 

processed in such a way that it is no 

longer the untaxed commodity but 

rather has become a taxable ‘‘tobacco 

product.’’ For example, activities such 

as cutting and flavoring are processes 

that would result in a ‘‘tobacco product’’ 

(such as roll-your-own tobacco) but for 

the fact that it is not in a consumer 

package. Thus, under the regulatory 

texts in this temporary rule, processed 

tobacco that is removed from a factory 

or imported in a package with a content 

of 10 pounds or less will be deemed to 

be roll-your-own tobacco for permit and 

tax purposes unless the package fully 

complies with the notice requirements 

for pipe tobacco or for the other noncigarette and non-cigar tobacco products 

(that is, smokeless tobacco, also referred 

to as snuff and chewing tobacco). 

The removals of the ‘‘Tax Class L’’ 

and ‘‘Tax Class J’’ designations were 

done in order to ensure that the 

packaging and labeling of the two 

products convey the type of tobacco 

contained inside; as noted above, the 

notice requirements speak directly to 

the consideration of the effect the 

packaging or labeling of a product has 

on how a product is likely to be offered 

to or purchased by consumers. Because 

specific references to the contents are 

now required, continued use of the tax 

class designations would be 

inappropriate. The addition of 

references to ‘‘pipe tobacco,’’ ‘‘cigarette 

wrapper,’’ and ‘‘cigar wrapper’’ is 

simply intended to conform the texts to 

the addition of the words ‘‘or cigars, or 

for use as wrappers thereof’’ at the end 

of the statutory definition of roll-yourown tobacco. 

Effect on Manufacturers and Importers 

of Tobacco Products 

Minimum Manufacturing and Activity 

Requirement 

As noted above, the regulations 

adopted in this temporary rule provide 

that the permit of a manufacturer of 

processed tobacco may be suspended or 

revoked, and a processed tobacco 

importer’s application for permit 

renewal may be rejected, if there has 

been no activity or if no activity has 

been reported under that permit for one 

year prior to the application for renewal. 

TTB believes that the rationale for such 

provisions applies equally to importers 

and manufacturers of tobacco products 

because, as noted above, the intention of 

the limited-duration permit was to 

ensure that only those engaged in bona 

fide business were issued, and continue 

to hold, a TTB permit. TTB has found 

that unused permits are not uncommon 

and that they cause unnecessary 

administrative burden and divert 

resources from enforcement activities 

related to persons actually engaged in 

the businesses that TTB regulates. 

Accordingly, we are also amending the 

regulations applicable to manufacturers 

and importers of tobacco products in 

§§ 40.61 and 41.202, respectively, to 

state that such permits may be subject 

to suspension or revocation, or in the 

case of importers may not be renewed 

for non-use. We are also adding in part 

40, for clarification and cross-reference 

purposes, a new § 40.256 to provide that 

the minimum activity requirement set 

forth in § 40.61 is a continuing 

condition for retention of a 

manufacturer’s permit. 

Recording of Processed Tobacco 

Section 40.182 has required 

manufacturers of tobacco products to 

account for all tobacco, other than 

tobacco products, that is received, 

shipped, lost, and destroyed. This 

temporary rule amends § 40.182 to 

require manufacturers to account on a 

daily basis for processed tobacco and 

amends § 40.201 to require that 

inventories include both tobacco 

products and processed tobacco. The 

recording of other tobacco is not 

required. Specifically, the revised 

§ 40.182 text provides that a 

manufacturer of tobacco products who 

processes tobacco on the factory 

premises solely for use in the 

manufacture of tobacco products under 

that permit, and who does not remove 

processed tobacco from the factory 

premises for any purpose other than 

destruction, must maintain daily 

records that show the total quantity in 

pounds of all processed tobacco on 

hand, received, used in the manufacture 

of tobacco products, lost, and destroyed. 

A manufacturer of tobacco products 

who removes processed tobacco from 

the factory for any purpose other than 

for destruction must keep the same 

records and submit the same reports as 

those required for manufacturers of 

processed tobacco. 


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29406 Federal Register / Vol. 74, No. 118 / Monday, June 22, 2009 / Rules and Regulations 

Part by Part Discussion of Regulatory 

Amendments 

This temporary rule adds new subpart 

L to part 40 and new subpart M in part 

41 to set forth the qualification and 

other requirements applicable to 

manufacturers and importers of 

processed tobacco discussed above. This 

temporary rule also makes a number of 

conforming changes to parts 40, 41, 44, 

and 45, including amendments to the 

definitions of ‘‘export warehouse 

proprietor’’, ‘‘package’’, ‘‘removal and 

remove’’, and ‘‘roll-your-own tobacco’’, 

and the addition of definitions of 

‘‘processed tobacco’’ and ‘‘manufacturer 

of processed tobacco’’, and the addition 

of references to ‘‘processed tobacco’’, 

where appropriate. The following 

additional points are noted regarding 

the regulatory amendments contained in 

this document: 

Part 40 

In § 40.11, we are replacing the 

definition of ‘‘permit number’’ with a 

more general definition that would be 

equally applicable to permits issued to 

manufacturers and importers of 

processed tobacco and to permits issued 

to manufacturers and importers of 

tobacco products. This change does not 

affect existing permit holders. 

Section 40.61 describes general 

qualification requirements for 

manufacturers of tobacco products. In 

addition to including the amendment 

regarding minimum activity discussed 

above, we are revising the text for the 

following reasons: 

First, we believe that it is appropriate 

to specify that a proprietor of a customs 

bonded warehouse is not required to 

qualify for a permit as a manufacturer 

with respect to the operations of such 

warehouse. This exemption appears in 

the IRC at 26 U.S.C. 5702(d) and the 

amendment merely reflects the statutory 

language. 

Second, we are adding a provision to 

clarify that a retailer such as a 

tobacconist may, without triggering a 

TTB permit requirement, take a taxpaid 

tobacco product out of the package and 

place it into a different container for 

sale directly to a consumer; this 

amendment reflects the language that 

appears in 26 U.S.C. 5751(a)(3). 

Finally, we have placed the existing 

minimum manufacturing and activity 

provisions in new paragraph (c) and 

added a new provision stating that the 

activity of packaging processed tobacco 

alone may be sufficient to qualify a 

person as a manufacturer of tobacco 

products. We believe this position is 

necessary to implement the 

amendments made by the Act, under 

which processing of tobacco may result 

in a product that, except for the fact that 

it is not in a package, would qualify as 

a taxable tobacco product. It is the 

position of TTB that the placing of 

processed tobacco in a container that 

meets the definition of a ‘‘package’’ 

under amended §§ 40.11 and 41.11 

indicates a clear intent to create a 

taxable commodity because, in fact, a 

taxable commodity is what results from 

such a packaging operation. 

Accordingly, such packaging may only 

occur on the premises of a bonded 

manufacturer of tobacco products. Thus, 

because packaging of processed tobacco 

results in a consumer-ready, taxable, 

tobacco product, we believe that the 

activity of packaging processed tobacco 

alone may be sufficient to qualify a 

person as a manufacturer of a taxable 

tobacco product. Without this provision, 

TTB would have an inadequate 

regulatory basis for controlling the 

diversion of processed tobacco that 

needs only to be packaged in order to 

be consumer-ready. However, the same 

rationale does not apply to the 

packaging of cigarettes and cigars, 

because the statutory definitions of the 

two products are met for tax purposes 

prior to the placing of the products in 

packages. 

In § 40.47, concerning other 

businesses within a factory, we have 

amended references to ‘‘factory’’ and to 

‘‘manufacturer’’ to specify that the 

former refers to the factory of a 

manufacturer of tobacco products and 

the latter to a manufacturer of tobacco 

products. These amendments clarify 

that the provisions of § 40.47 apply to 

the factory of a manufacturer of tobacco 

products and not to the factory of a 

manufacturer who only processes 

tobacco. We have also removed the 

requirement that the application for 

authorization to engage in an ‘‘other 

business’’ be submitted in triplicate, as 

multiple copies of the submission are no 

longer necessary. Finally, we have 

included text that applies the 

transitional rule to manufacturers of 

tobacco products who also process 

tobacco and remove it for purposes 

other than destruction. Such a 

manufacturer who is engaged in the 

business of processing tobacco on April 

1, 2009, and who submits an application 

for authorization under § 40.47 before 

June 30, 2009, may continue to engage 

in such business pending TTB action on 

the application. 

In § 40.61, we have also removed the 

statement that repackaging and 

relabeling alone do not qualify as a 

manufacturing activity. We believe this 

statement is unnecessary and could be 

misleading. Repackaging (that is, the 

removal of a tobacco product from the 

package in which it was removed from 

the factory or released from customs 

custody upon determination of tax, and 

the placement of that tobacco product 

into another package to be offered for 

sale to a consumer) may only occur 

under TTB authorization in accordance 

with § 40.217. 

We are amending § 40.72, concerning 

the use of factory premises to 

specifically address the use by a 

manufacturer of tobacco products of the 

factory premises for processing of 

tobacco. The amendment clarifies that a 

manufacturer of tobacco products who 

processes tobacco solely for use in the 

manufacture of tobacco products under 

an existing permit, who does not 

remove the processed tobacco for any 

purpose other than destruction, and 

who maintains records with respect to 

the disposition of the processed tobacco 

are not required to apply for TTB 

authorization under § 40.47. If any of 

these conditions are not met, that 

manufacturer must apply for 

authorization under § 40.47. 

In § 40.202, we are replacing the 

obsolete text of paragraph (b), which 

concerns the report of wholesale prices 

of large cigars removed before January 1, 

1991, with new text setting forth a 

requirement to keep records and submit 

reports when processed tobacco is 

removed from the factory premises other 

than for destruction. 

In § 40.211, we are adding a statement 

to reflect the language that appears in 26 

U.S.C. 5751(a)(2) and (3), to the effect 

that no person may purchase, receive, 

possess (except for personal 

consumption), offer for sale, or sell or 

otherwise dispose of, after removal, any 

tobacco products that are not put up in 

packages or that are put up in packages 

not bearing the marks, labels, and 

notices, as required under 27 CFR part 

40. That statutory prohibition is not 

reflected elsewhere in the TTB 

regulations and, due to the new 

significance placed on the packaging of 

products in the amendments made by 

this temporary rule, we believe an 

explicit statement in the regulations 

would be helpful to industry members. 

We are also adding a new § 40.257 to 

alert manufacturers of tobacco products 

to the provisions related to processed 

tobacco. The new section acts merely as 

a readers guide. 

Part 41 

Section 41.71, concerning tobacco 

product packages, is amended in the 

same manner and for the same reason as 

the amendment to § 40.211 described 

above. That is, a statement is added to 

reflect the language that appears in 26 


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Federal Register / Vol. 74, No. 118 / Monday, June 22, 2009 / Rules and Regulations 29407 

U.S.C. 5751(a)(2) and (3), to the effect 

that no person may purchase, receive, 

possess (except for personal 

consumption), offer for sale, or sell or 

otherwise dispose of, after removal, any 

tobacco products that are not put up in 

packages or that are put up in packages 

not bearing the marks, labels, and 

notices, as required under 27 CFR part 

41. 

We have removed § 41.192, which 

provided a transitional rule for the 

implementation of the permit 

requirement for importers of tobacco 

products prescribed in T.D. ATF–422 

(64 FR 71951, published in the Federal 

Register on December 22, 1999) because 

it is no longer needed. For the same 

reason, in § 41.201, we are removing the 

reference to temporary permits issued 

under former § 41.192. 

We have removed § 41.205 because 

that regulation was promulgated 

pursuant to the Contraband Cigarette 

Trafficking Act (18 U.S.C. 2342). The 

authority to promulgate regulations 

under the Contraband Cigarette 

Trafficking Act now rests with the 

Bureau of Alcohol, Tobacco, Firearms, 

and Explosives at the Department of 

Justice, not with TTB. 

We have revised §§ 41.206, 41.207, 

and 41.208, concerning reports and 

records, for organizational and editorial 

reasons and to remove obsolete text. In 

§ 41.206, we have removed the 

requirement that the first reports 

submitted by an importer cover all 

months beginning January 1, 2000, as 

this requirement arose from a prior 

transitional rule. We have also removed 

§ 41.207 and included its provisions, 

with some editorial changes, in § 41.208 

in order to have a single section 

covering the retention and maintenance 

of records. 

Part 44 

We have removed § 44.90, concerning 

restrictions relating to operations at an 

export warehouse premises, and have 

included its terms, with modifications, 

in new § 44.141a. The new section, 

under the heading ‘‘Use of premises’’, 

reflects the new definition of ‘‘export 

warehouse’’ by providing that an export 

warehouse premises may only be used 

for the storage of non-taxpaid tobacco 

products and cigarette papers and tubes, 

and for the storage of processed tobacco, 

pending export. 

Part 45 

We have conformed §§ 45.45a, 45.45b, 

and 45.45c to the revised notice and 

use-up provisions for pipe tobacco and 

roll-your-own tobacco as discussed 

above for parts 40 and 41. 

Temporary Rule 

Based on the April 1, 2009, effective 

date of the new permit provisions 

applicable to manufacturers and 

importers of processed tobacco and the 

expanded definition of roll-your-own 

tobacco, also effective April 1, 2009, 

TTB believes that proper administration 

and enforcement of those requirements 

necessitates the immediate adoption of 

implementing regulations as a 

temporary rule. TTB believes that such 

implementing action ensures that 

affected industry members will have 

timely knowledge of the regulatory 

requirements. 

Public Participation 

For submitting comments, please refer 

to the notice of proposed rulemaking on 

this subject published in the ‘‘Proposed 

Rules’’ section of this issue of the 

Federal Register. 

Regulatory Flexibility Act 

We certify that this temporary rule 

will not have a significant economic 

impact on a substantial number of small 

entities. Accordingly, a regulatory 

flexibility analysis is not required. The 

regulatory obligations and relevant 

collections of information derive 

directly from the Internal Revenue Code 

of 1986, as amended, and the 

regulations in this rule concerning these 

obligations and collections merely 

implement and provide necessary 

standards for complying with the 

statutory requirements. Likewise, any 

secondary or incidental effects, and any 

reporting, recordkeeping, or other 

compliance burdens flow directly from 

the statute. Pursuant to 26 U.S.C. 

7805(f), this temporary regulation will 

be submitted to the Chief Counsel for 

Advocacy of the Small Business 

Administration for comment on its 

impact on small businesses. 

Paperwork Reduction Act 

TTB has provided estimates of the 

burden that the collection of 

information contained in these 

regulations imposes, and the estimated 

burden has been reviewed and approved 

by the Office of Management and 

Budget (OMB) in accordance with the 

Paperwork Reduction Act of 1995 (44 

U.S.C. 3507) and assigned control 

numbers 1513–0024, 1513–0032, 1513– 

0033, 1513–0035, 1513–0068, 1513– 

0070, 1513–0078, 1513–0106, 1513– 

0107, and 1513–0130. 

Under the Paperwork Reduction Act 

of 1995, 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 OMB control 

number. 

Comments concerning suggestions for 

reducing the burden of the collections of 

information in this document should be 

directed to Mary A. Wood, Alcohol and 

Tobacco Tax and Trade Bureau, at any 

of these addresses: 

• P.O. Box 14412, Washington, DC 

20044–4412; 

• 202–927–8525 (facsimile); or 

• formcomments@ttb.gov (e-mail). 

Executive Order 12866 

This is not a significant regulatory 

action as defined in E.O. 12866. 

Therefore, it requires no regulatory 

assessment. 

Inapplicability of Prior Notice and 

Comment and Delayed Effective Date 

Procedures 

Because this document implements 

provisions of a law that are effective on 

April 1, 2009, and because immediate 

guidance is necessary to implement 

these provisions, it is found to be 

impracticable to issue this Treasury 

decision with notice and public 

procedure under 5 U.S.C. 553(b). 

Pursuant to the provisions of 5 U.S.C. 

553(d)(2), and (d)(3), we are issuing 

these regulations without a delayed 

effective date. TTB has determined that 

this regulation is an interpretative rule 

that implements Public Law 111–3 as 

provided for in section 553(d)(2). TTB 

also has determined that good cause 

exists to provide industry members with 

immediate guidance on procedures to 

apply for and obtain a permit for 

operations as importers and 

manufacturers of processed tobacco and 

to clarify the difference between certain 

taxable commodities that are subject to 

different tax rates, in accordance with 

section 553(d)(3). 

Drafting Information 

Amy R. Greenberg of the Regulations 

and Rulings Division, Alcohol and 

Tobacco Tax and Trade Bureau, drafted 

this document. Other employees of the 

Alcohol and Tobacco Tax and Trade 

Bureau also participated in its 

development. 

List of Subjects 

27 CFR Part 40 

Cigars and cigarettes, Claims, 

Electronic funds transfers, Excise taxes, 

Imports, Labeling, Packaging and 

containers, Reporting and recordkeeping 

requirements, Surety bonds, Tobacco. 

27 CFR Part 41 

Cigars and cigarettes, Claims, Customs 

duties and inspection, Electronic funds 

transfers, Excise taxes, Imports, 

Labeling, Packaging and containers, 

Puerto Rico, Reporting and 


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29408 Federal Register / Vol. 74, No. 118 / Monday, June 22, 2009 / Rules and Regulations 

recordkeeping requirements, Surety 

bonds, Tobacco, Virgin Islands, 

Warehouses. 

27 CFR Part 44 

Aircraft, Armed forces, Cigars and 

cigarettes, Claims, Customs duties and 

inspection, Excise taxes, Exports, 

Foreign trade zones, Labeling, Packaging 

and containers, Reporting and 

recordkeeping requirements, Surety 

bonds, Tobacco, Vessels, Warehouses. 

27 CFR Part 45 

Administrative practice and 

procedure, Authority delegations 

(Government agencies), Cigars and 

cigarettes, Excise taxes, Labeling, 

Packaging and containers, Reporting 

and recordkeeping requirements, 

Tobacco. 

Amendments to the Regulations 

■ For the reasons set forth in the 

preamble, title 27, chapter I, of the Code 

of Federal Regulations is amended as 

follows: 

PART 40—MANUFACTURE OF 

TOBACCO PRODUCTS, CIGARETTE 

PAPERS AND TUBES, AND 

PROCESSED TOBACCO 

■ 1. The authority citation for part 40 is 

revised to read as follows: 

Authority: 26 U.S.C. 5142, 5143, 5146, 

5701–5705, 5711–5713, 5721–5723, 5731, 

5741, 5751, 5753, 5761–5763, 6061, 6065, 

6109, 6151, 6301, 6302, 6311, 6313, 6402, 

6404, 6423, 6676, 6806, 7011, 7212, 7325, 

7342, 7502, 7503, 7606, 7805; 31 U.S.C. 9301, 

9303, 9304, 9306. 

■ 2. The heading to part 40 is revised to 

read as set forth above. 

■ 3. Section 40.1 is revised to read as 

follows: 

§ 40.1 Manufacture of tobacco products, 

cigarette papers and tubes, and processed 

tobacco. 

This part contains regulations relating 

to the manufacture of tobacco products, 

cigarette papers and tubes, and 

processed tobacco; the payment by 

manufacturers of tobacco products and 

cigarette papers and tubes of internal 

revenue taxes imposed by 26 U.S.C. 

chapter 52; and the qualification of and 

operations by manufacturers of tobacco 

products, cigarette papers and tubes, 

and processed tobacco. 

■ 4. In § 40.11: 

■ a. The definition of ‘‘Export 

warehouse’’ is amended by removing 

the words ‘‘tobacco products and 

cigarette papers and tubes’’ and adding, 

in their place, the words ‘‘tobacco 

products or cigarette papers or tubes or 

any processed tobacco’’; 

■ b. The definition of ‘‘Factory’’ is 

amended by adding after the words 

‘‘tobacco products’’ the words ‘‘or 

processed tobacco,’’; 

■ c. New definitions of ‘‘Manufacturer 

of processed tobacco’’, ‘‘Packaging’’, and 

‘‘Processed tobacco’’ are added in 

appropriate alphabetical order; 

■ d. The definitions of ‘‘Package’’ and 

‘‘Permit number’’ are revised; 

■ e. The definition of ‘‘Removal or 

remove’’ is amended by adding after the 

words ‘‘tobacco products or cigarette 

papers or tubes’’ the words ‘‘, or any 

processed tobacco’’; and 

■ f. The definition of ‘‘Roll-your-own 

tobacco’’ is amended by adding at the 

end before the period the words ‘‘or 

cigars, or for use as wrappers of cigars 

or cigarettes’’. 

The revisions and additions read as 

follows: 

§ 40.11 Meaning of terms. 

* * * * * 

Manufacturer of processed tobacco. 

Any person who processes any tobacco 

other than tobacco products. 

* * * * * 

Package. The immediate container in 

which tobacco products, processed 

tobacco, or cigarette papers or tubes are 

put up by the manufacturer and offered 

for sale or delivery to the ultimate 

consumer. For purposes of this 

definition, a container of processed 

tobacco, the contents of which weigh 10 

pounds or less (including any added 

non-tobacco ingredients or 

constituents), that is removed within the 

meaning of this part, is deemed to be a 

package offered for sale or delivery to 

the ultimate consumer. 

Packaging. The act of placing 

processed tobacco or a tobacco product 

in a package. 

Permit number. The identifying 

number and/or letters that are assigned 

to a TTB permit by the appropriate TTB 

officer. 

* * * * * 

Processed tobacco. Processed tobacco 

is any tobacco that has undergone 

processing, but does not include tobacco 

products. For purposes of this 

definition, the processing of tobacco 

does not include the farming or growing 

of tobacco or the handling of tobacco 

solely for sale, shipment, or delivery to 

a manufacturer of tobacco products or 

processed tobacco, nor does the 

processing of tobacco include curing, 

baling, or packaging activities. For 

purposes of this definition, the 

processing of tobacco includes, but is 

not limited to, stemming (that is, 

removing the stem from the tobacco 

leaf), fermenting, threshing, cutting, or 

flavoring the tobacco, or otherwise 

combining the tobacco with non-tobacco 

ingredients. 

* * * * * 

■ 5. Section 40.25a is amended by 

revising the section heading, 

designating the existing text as 

paragraph (a), adding a heading to 

newly designated paragraph (a), and 

adding a new paragraph (b). The 

revision and additions read as follows: 

§ 40.25a Pipe tobacco and roll-your-own 

tobacco tax rates and classification. 

(a) Tax rates. * * * 

(b) Classification. (1) Pipe tobacco and 

roll-your-own tobacco, before removal 

subject to tax, must be put up in 

packages that conform to the 

requirements of §§ 40.211 and 40.212, 

and of § 40.216a or § 40.216b as 

appropriate. 

(2) Any tobacco that has been 

processed and that is removed in a 

package, as that term is defined in 

§ 40.11, that does not bear the notice for 

smokeless tobacco prescribed in 

§ 40.216 or the notice for pipe tobacco 

prescribed in § 40.216a is deemed to be 

roll-your-own tobacco and subject to tax 

at the rate applicable to roll-your-own 

tobacco. 

(3) Any tobacco that has been 

processed and that is removed in a 

package, as that term is defined in 

§ 40.11, is deemed to be roll-your-own 

tobacco and subject to tax at the rate 

applicable to roll-your-own tobacco, 

even though the package bears the 

notice required for pipe tobacco under 

§ 40.216a, if: 

(i) The package does not bear the 

declaration ‘‘pipe tobacco’’ in direct 

conjunction with, parallel to, and in 

substantially the same conspicuousness 

of type and background as the brand 

name each time the brand name appears 

on the package; or 

(ii) The package or accompanying 

materials bear any representation that 

would suggest a use other than as pipe 

tobacco. (26 U.S.C. 5702 and 5723) 

■ 6. Section 40.47 is revised to read as 

follows: 

§ 40.47 Other businesses within factory. 

(a) General. The appropriate TTB 

officer may authorize such other 

businesses within the factory of a 

manufacturer of tobacco products as he 

finds will not jeopardize the revenue, 

will not hinder the effective 

administration of this part, and will not 

be contrary to law. A manufacturer of 

tobacco products who wishes to engage 

in another business within the factory 

must submit a written application to do 

so to the appropriate TTB officer. Except 

as otherwise provided in paragraph (b) 


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Federal Register / Vol. 74, No. 118 / Monday, June 22, 2009 / Rules and Regulations 29409 

of this section, a manufacturer of 

tobacco products may not engage in 

such other business until the 

application is approved by the 

appropriate TTB officer. The 

manufacturer must retain as part of its 

records any authorization provided 

under this section. 

(b) Processed tobacco. A manufacturer 

of tobacco products who removes 

processed tobacco for purposes other 

than destruction must apply for and 

obtain TTB authorization to engage in 

another business within the factory, in 

accordance with paragraph (a) of this 

section. Such manufacturer who is 

engaged in the processing of tobacco on 

April 1, 2009, and who applies for 

authorization before June 30, 2009, may 

continue to engage in such activity 

pending TTB action on the application. 

Subpart E—[Heading Amended] 

■ 7. The heading for subpart E is 

amended by adding at the end the 

words ‘‘of Tobacco Products’’. 

■ 8. Section § 40.61 is revised to read as 

follows: 

§ 40.61 Qualification. 

(a) General. Except as otherwise 

provided in paragraph (b) of this 

section, every person who manufactures 

tobacco products must qualify for, and 

obtain, a permit as a manufacturer of 

tobacco products in accordance with the 

provisions of this part. 

(b) Exceptions. The following persons 

are not considered to be engaged in the 

business of manufacturing tobacco 

products for purposes of this part: 

(1) A person who produces tobacco 

products solely for that person’s own 

consumption or use; 

(2) A proprietor of a customs bonded 

manufacturing warehouse with respect 

to the operation of such warehouse; 

(3) A retailer of tobacco products, 

such as a tobacconist, who takes taxpaid 

tobacco products out of the package, as 

that term is defined in § 40.11, in front 

of waiting customers and places the 

tobacco products into a different 

container for immediate delivery to 

those customers; or 

(4) A person whose operations are 

limited to, and who holds a permit as, 

a manufacturer of processed tobacco. 

(c) Minimum manufacturing and 

activity requirements. A permit to 

manufacture tobacco products will only 

be granted to those persons whose 

principal business activity under such 

permit will be the manufacture of 

tobacco products. A permit will not be 

granted to any person whose principal 

business activity under such permit will 

be to receive or transfer tobacco 

products in bond. As a minimum 

activity requirement, in order to qualify 

for a permit, the quantity of tobacco 

products manufactured under the 

permit must be equivalent to, or exceed, 

the quantity to be transferred or 

received in bond under the permit. For 

the purposes of this section, the activity 

of packaging processed tobacco may be 

sufficient to qualify as a manufacturing 

activity. 

■ 9. Section 40.72 is revised to read as 

follows: 

§ 40.72 Use of factory premises. 

(a) General. Unless otherwise 

authorized by the appropriate TTB 

officer as provided in § 40.47, the 

premises used by a manufacturer of 

tobacco products for his factory shall be 

used exclusively for the purposes of 

manufacturing and storing tobacco 

products; storing materials, equipment, 

and supplies related thereto or used or 

useful in the conduct of the business; 

and carrying on activities in connection 

with business of the manufacturer of 

tobacco products. 

(b) Manufacturers who process 

tobacco. (1) A manufacturer of tobacco 

products who processes tobacco on the 

factory premises solely for use in the 

manufacture of tobacco products under 

that permit, who does not remove 

processed tobacco from the factory 

premises for any purpose other than 

destruction, and who maintains 

adequate records with respect to the 

disposition of the processed tobacco in 

accordance with § 40.182, may engage 

in such operations under the authority 

of its existing permit on the factory 

premises and without application for 

such authorization from TTB. If any of 

these conditions is not met, the 

manufacturer must, in order to engage 

in the processing of tobacco under the 

existing permit, obtain authorization 

from TTB in accordance with § 40.47, 

and must keep records and submit 

reports as prescribed in §§ 40.521 and 

40.522. 

(2) A manufacturer of tobacco 

products who removes processed 

tobacco from the factory premises for 

any purpose other than destruction 

must obtain authorization of that 

activity from TTB in accordance with 

§ 40.47 and must keep records and 

submit reports as prescribed in 

§§ 40.521 and 40.522. 

Subpart F—[Heading Amended] 

■ 10. The heading for subpart F is 

amended by adding at the end the 

words ‘‘of Tobacco Products’’. 

Subpart H—[Heading Amended] 

■ 11. The heading for subpart H is 

amended by adding at the end the 

words ‘‘of Tobacco Products’’. 

■ 12. Section 40.182 is revised to read 

as follows: 

§ 40.182 Record of processed tobacco. 

(a) A manufacturer of tobacco 

products who processes tobacco on the 

factory premises solely for use in the 

manufacture of tobacco products under 

that permit, and who does not remove 

processed tobacco from the factory 

premises for any purpose other than 

destruction, must maintain a daily 

record that shows the total quantity in 

pounds of all processed tobacco: 

(1) On hand; 

(2) Received, together with the name 

and address of the person from whom 

received; 

(3) Used in the manufacture of 

tobacco products; 

(4) Lost, together with the 

circumstances of the loss; and 

(5) Destroyed, together with the 

circumstances of the destruction. 

(b) In addition to the recordkeeping 

and reporting requirements set forth 

elsewhere in this part, a manufacturer of 

tobacco products who removes 

processed tobacco from the factory 

premises for any purpose other than for 

destruction must keep records and 

submit reports as prescribed in 

§§ 40.521 and 40.522. 

(Approved by the Office of Management and 

Budget under control number 1513–0068) 

§ 40.201 [Amended] 

■ 13. The first sentence in § 40.201 is 

amended by adding after the words ‘‘all 

tobacco products and’’ the word 

‘‘processed’’. 

■ 14. In § 40.202, paragraph (b) and the 

Office of Management and Budget 

control number reference are revised to 

read as follows: 

§ 40.202 Reports. 

* * * * * 

(b) Report of processed tobacco 

removed. In addition to the 

recordkeeping and reporting 

requirements set forth elsewhere in this 

part, a manufacturer of tobacco products 

who removes processed tobacco from 

the factory premises for any purpose 

other than destruction must record and 

report those removals in accordance 

with § 40.522 of this part. 

(Approved by the Office of Management and 

Budget under Control No. 1513–0033) 

* * * * * 

■ 15. Section 40.211 is amended by 

adding a sentence at the end of the 


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section and by revising the statutory 

citations. The addition and revision 

read as follows: 

§ 40.211 Package. 

* * * No person may purchase, 

receive, possess (except for personal 

consumption), offer for sale, or sell or 

otherwise dispose of, after removal, any 

tobacco products that are not put up in 

packages bearing the marks, labels, and 

notices, as required under this part. 

(26 U.S.C. 5723 and 5751) 

§ 40.216a [Amended] 

■ 16. In § 40.216a, paragraph (a) is 

amended by removing the last sentence. 

■ 17. In § 40.216b, paragraph (a) and the 

Office of Management and Budget 

control number reference are revised to 

read as follows: 

§ 40.216b Notice for roll-your-own 

tobacco. 

(a) Product designation. Every 

package of roll-your-own tobacco, before 

removal subject to tax, must have 

adequately imprinted on it, or on a label 

securely affixed to it, the applicable 

designation ‘‘roll-your-own tobacco’’, 

‘‘cigarette tobacco’’, ‘‘cigar tobacco’’, 

‘‘cigarette wrapper’’, or ‘‘cigar wrapper’’. 

* * * * * 

(Approved by the Office of Management and 

Budget under control number 1513–0091) 

■ 18. Section 40.216c is revised to read 

as follows: 

§ 40.216c Package use-up rule. 

(a) A manufacturer of pipe tobacco or 

roll-your-own tobacco may remove 

packages of such products bearing the 

designation ‘‘Tax Class L’’ (to designate 

pipe tobacco) or ‘‘Tax Class J’’ (to 

designate roll-your-own tobacco) only if 

such packages were in use prior to April 

1, 2009, and such manufacturer may 

continue to remove packages bearing 

those designations until August 1, 2009. 

(b) A manufacturer may, until August 

1, 2009, remove roll-your-own tobacco 

for which the applicable designation is 

‘‘cigar tobacco,’’ ‘‘cigarette wrapper,’’ or 

‘‘cigar wrapper’’ even if the packages of 

such products do not meet the 

requirements of § 40.216(b). 

■ 19. The undesignated center heading 

before § 40.251 is amended by removing 

the words ‘‘Tobacco Products’’ and 

adding, in their place, the word 

‘‘Operations’’. 

■ 20. A new § 40.256 is added at the end 

of subpart H to read as follows: 

§ 40.256 Minimum manufacturing and 

activity requirements. 

The minimum manufacturing and 

activity requirement prescribed in 

§ 40.61(b) of this part is a continuing 

condition of a manufacturer’s permit, 

that is, a permit to manufacture tobacco 

products is conditioned upon a person’s 

principal business activity being the 

manufacture of tobacco products. A 

permit may be suspended, and 

subsequently revoked, if the person’s 

principal business activity under such 

permit is to receive or transfer tobacco 

products in bond, or if the person has 

no activity under such permit for a 

period of one year. As a minimum 

activity requirement, the quantity of 

tobacco products manufactured under 

the permit must exceed the quantity 

transferred or received in bond under 

the permit. 

■ 21. A new § 40.257 is added at the end 

of subpart H to read as follows: 

§ 40.257 Processed tobacco. 

A manufacturer of tobacco products 

may be required to obtain authorization 

from the appropriate TTB officer with 

regard to the activities involving 

processed tobacco. See § 40.72. Such 

manufacturers also must maintain 

records and may be required to submit 

reports regarding such activities. See 

§§ 40.182 and 40.202. 

■ 22. A new subpart L, consisting of 

§§ 40.491 through 40.534, is added to 

read as follows: 

Subpart L—Manufacture of Processed 

Tobacco 

Sec. 

Qualification Requirements for 

Manufacturers of Processed Tobacco 

40.491 Persons required to qualify. 

40.492 Application for permit. 

40.493 Transitional rule. 

40.494 Corporate documents. 

40.495 Articles of partnership or 

association. 

40.496 Trade name certificate. 

40.497 Additional information. 

40.498 Investigation of applicant. 

40.499 Notice of contemplated disapproval. 

40.500 Issuance of permit. 

40.501 Retention of permit and supporting 

documents. 

Changes After Qualification 

40.511 Change in name. 

40.512 Change in ownership or control. 

40.513 Change in location or address of 

factory. 

Operations by Manufacturers of Processed 

Tobacco 

40.521 Record of processed tobacco. 

40.522 Reports. 

40.523 Inventories. 

40.524 Retention of documents. 

40.525 Discontinuance of operations. 

40.526 Minimum manufacturing and 

activity requirements. 

40.527 Authorization to package processed 

tobacco. 

40.528 Suspension and revocation of 

permit. 

Other Provisions Related to Manufacturers 

of Processed Tobacco 

40.531 Alternate methods or procedures. 

40.532 Emergency variations from 

requirements. 

40.533 Penalties and forfeitures. 

40.534 Power of attorney. 

Subpart L—Manufacture of Processed 

Tobacco 

Qualification Requirements for 

Manufacturers of Processed Tobacco 

§ 40.491 Persons required to qualify. 

(a) General. Except as otherwise 

provided in paragraph (b) of this 

section, every person who engages in 

the processing of tobacco must first 

qualify for and receive a permit as a 

manufacturer of processed tobacco in 

accordance with the provisions of this 

subpart. 

(b) Exceptions. (1) A person who 

engages in the processing of tobacco 

solely for his own personal use or 

consumption and not for sale or transfer 

to another person is not engaged in the 

manufacture of processed tobacco for 

purposes of this part and, accordingly, 

is not required to qualify as a 

manufacturer of processed tobacco. 

(2) Any person who holds a TTB 

permit for the manufacture of tobacco 

products is thereby authorized to 

process tobacco solely for use in the 

manufacture of tobacco products under 

that permit, so long as the processed 

tobacco is not removed from the factory 

for any purpose other than destruction. 

Such a manufacturer is not required to 

qualify under this subpart as a 

manufacturer of processed tobacco. 

(3) Any person who holds a TTB 

permit for the manufacture of tobacco 

products who removes processed 

tobacco from the factory for any purpose 

other than destruction must apply for 

authorization from TTB to engage in 

that activity, in accordance with § 40.47, 

under the manufacturer’s existing 

permit. 

§ 40.492 Application for permit. 

The application for a permit as a 

manufacturer of processed tobacco must 

be made on TTB F 5200.3, according to 

the instructions on the form. All 

documents required under this subpart 

to be furnished with the application 

must be included with the application. 

§ 40.493 Transitional rule. 

(a) Any person who: 

(1) On April 1, 2009, is engaged in 

business as a manufacturer of processed 

tobacco; and 


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(2) Before June 30, 2009, submits an 

application for a permit or authorization 

as provided in this part to engage in 

such business, may continue to engage 

in that business pending final action on 

the application. 

(b) Pending final action on an 

application or request for authorization 

submitted under paragraph (a) of this 

section, all provisions of chapter 52 of 

the Internal Revenue Code of 1986 shall 

apply to the applicant in the same 

manner and to the same extent as if the 

applicant were a holder of a permit to 

manufacture processed tobacco under 

chapter 52. 

(c) Upon receipt of an application, the 

appropriate TTB officer will provide the 

applicant with a written 

acknowledgement that may be used for 

a limited period as confirmation of TTB 

authorization to engage in the business 

of a manufacturer of processed tobacco. 

§ 40.494 Corporate documents. 

Every corporation that files an 

application for a permit as a 

manufacturer of processed tobacco must 

furnish with its application for the 

permit required by § 40.492 a true copy 

of the corporate charter or a certificate 

of corporate existence or incorporation 

executed by the appropriate officer of 

the State in which incorporated. The 

corporation must likewise furnish duly 

authenticated extracts of the 

stockholders’ meetings, bylaws, or 

directors’ meetings, listing the offices 

the incumbents of which are authorized 

to sign documents or otherwise act in 

behalf of the corporation in matters 

relating to 26 U.S.C. chapter 52, and 

regulations issued thereunder. The 

corporation must also furnish evidence, 

in duplicate, of the identity of the 

officers and directors and each person 

who holds more than ten percent of the 

stock of such corporation. Where any of 

the information required by this section 

has previously been filed with the 

appropriate TTB officer and such 

information is currently complete and 

accurate, a written statement to that 

effect, in duplicate, will be sufficient for 

the purpose of this section. 

§ 40.495 Articles of partnership or 

association. 

Every partnership or association that 

files an application for a permit as a 

manufacturer of processed tobacco must 

furnish with its application for the 

permit required by § 40.492 a true copy 

of the articles of partnership or 

association, if any, or certificate of 

partnership or association where 

required to be filed by any State, county, 

or municipality. Where a partnership or 

association has previously filed such 

documents with the appropriate TTB 

officer and such documents are 

currently complete and accurate, a 

written statement, in duplicate, to that 

effect by the partnership or association 

will be sufficient for the purpose of this 

section. 

§ 40.496 Trade name certificate. 

Every person that files an application 

for a permit as a manufacturer of 

processed tobacco must furnish with the 

application for the permit required by 

§ 40.492 a true copy of the certificate or 

other document, if any, issued by a 

State, county, or municipal authority in 

connection with the transaction of 

business under such trade name. If no 

such certificate or other document is so 

required, a written statement, in 

duplicate, to that effect by such person 

will be sufficient for the purpose of this 

section. 

§ 40.497 Additional information. 

The appropriate TTB officer may 

require such additional information as 

deemed necessary to determine whether 

the applicant is entitled to a permit 

under this subpart. The applicant shall, 

when required by the appropriate TTB 

officer, furnish as a part of the 

application for the permit such 

additional information as may be 

necessary for the appropriate TTB 

officer to determine whether the 

applicant is entitled to a permit. 

§ 40.498 Investigation of applicant. 

Appropriate TTB officers may inquire 

or investigate to verify the information 

in connection with an application for a 

permit. The investigation will ascertain 

whether the applicant is eligible for a 

permit. A permit may be denied if the 

applicant (including, in the case of a 

corporation, any officer, director, or 

principal stockholder and, in the case of 

a partnership, a partner)— 

(a) Is, by reason of his business 

experience, financial standing, or trade 

connections or by reason of previous or 

current legal proceedings involving a 

felony violation of any other provision 

of Federal criminal law relating to 

tobacco products, processed tobacco, 

cigarette paper, or cigarette tubes, not 

likely to maintain operations in 

compliance with this chapter; 

(b) Has been convicted of a felony 

violation of any provision of Federal or 

State criminal law relating to tobacco 

products, processed tobacco, cigarette 

paper, or cigarette tubes; or 

(c) Has failed to disclose any material 

information required or made any 

material false statement in the 

application therefor. 

§ 40.499 Notice of contemplated 

disapproval. 

If the appropriate TTB officer has 

reason to believe that the applicant is 

not entitled to a permit, the appropriate 

TTB officer will promptly give to the 

applicant notice of the contemplated 

disapproval of the application and 

opportunity for hearing thereon in 

accordance with part 71 of this chapter. 

If, after such notice and opportunity for 

hearing, the appropriate TTB officer 

finds that the applicant is not entitled 

to a permit, an order will be prepared 

stating the findings on which the permit 

request is denied. 

§ 40.500 Issuance of permit. 

If the application for permit, together 

with the supporting documents, 

required under this part is approved, the 

appropriate TTB officer will issue a 

permit on TTB F 5200.28 to the 

applicant as a manufacturer of 

processed tobacco. 

§ 40.501 Retention of permit and 

supporting documents. 

The manufacturer must retain the 

permit, together with the copy of the 

application and supporting documents 

returned with the permit, at the same 

place where the records required by this 

subpart are kept. The permit and 

supporting documents must be made 

available for inspection by any 

appropriate TTB officer upon request. 

Changes After Qualification 

§ 40.511 Change in name. 

(a) Change in individual name. When 

there is a change in the name of an 

individual operating under a permit as 

a manufacturer of processed tobacco, 

the manufacturer must, within 30 days 

of such change, make application on 

TTB F 5200.16 for an amended permit. 

(b) Change in trade name. When there 

is a change in a trade name used by a 

manufacturer of processed tobacco in 

connection with operations authorized 

by the permit, the manufacturer must, 

within 30 days of such change, make 

application on TTB F 5200.16 for an 

amended permit to reflect such change. 

This requirement also applies to the 

addition or discontinuance of a trade 

name. The manufacturer must also 

furnish a true copy of any new trade 

name certificate or document issued to 

the manufacturer, or statement in lieu 

thereof, required by § 40.496. 

(c) Change in corporate name. When 

there is a change in the corporate name 

of a manufacturer of processed tobacco, 

the manufacturer must, within 30 days 

of such change, make application on 

TTB F 5200.16 for an amended permit. 

The manufacturer must also furnish 


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such documents as may be necessary to 

establish that the corporate name has 

been changed. 

§ 40.512 Change in ownership or control. 

(a) Fiduciary successor. If an 

administrator, executor, receiver, 

trustee, assignee, or other fiduciary is to 

take over the business of a manufacturer 

of processed tobacco as a continuing 

operation, such fiduciary shall, before 

commencing operations, make 

application for a permit in accordance 

with this subpart, furnish certified 

copies, in duplicate, of the order of the 

court, or other pertinent documents, 

showing his appointment and 

qualification as such fiduciary, and 

make a commencing inventory in 

accordance with § 40.523. However, 

where a fiduciary intends only to 

liquidate the business, qualification as a 

manufacturer of processed tobacco will 

not be required if such fiduciary 

promptly files with the appropriate TTB 

officer a written statement to that effect, 

in duplicate. 

(b) Transfer of ownership. If a transfer 

in ownership of the business of a 

manufacturer of processed tobacco 

(including a change of any member of a 

partnership or association) is to be 

made, such manufacturer shall give 

notice, in writing, to the appropriate 

TTB officer, naming the proposed 

successor and the desired effective date 

of the transfer. The proposed successor 

shall, before commencing operations, 

qualify as a manufacturer of processed 

tobacco in accordance with this subpart. 

The manufacturer shall give notice of 

the transfer, and the proposed successor 

shall make application for permit, in 

ample time for examination and 

approval thereof before the desired date 

of such change. The predecessor shall 

make a concluding inventory and 

concluding report, in accordance with 

§§ 40.523 and 40.522, respectively, and 

surrender the permit with such 

inventory and report. The successor 

shall make a commencing inventory and 

first report, in accordance with 

§§ 40.523 and 40.522, respectively. 

(c) Change in officers, directors, or 

stockholders of a corporation. Upon 

election or appointment (excluding 

successive reelection or reappointment) 

of any officer or director of a 

corporation operating the business of a 

manufacturer of processed tobacco, or 

upon any occurrence that results in a 

person acquiring ownership or control 

of more than ten percent in aggregate of 

the outstanding stock of such 

corporation, the manufacturer shall, 

within 30 days of such action, so notify 

the appropriate TTB officer in writing, 

giving the identity of such person. 

When there is any change in the 

authority furnished under § 40.494 for 

officers to act in behalf of the 

corporation, the manufacturer shall 

immediately so notify the appropriate 

TTB officer in writing. 

(d) Change in control of corporation. 

When the issuance, sale, or transfer of 

the stock of a corporation operating as 

a manufacturer of processed tobacco 

results in a change in the identity of the 

principal stockholders exercising actual 

or legal control of the operations of the 

corporation, the corporate manufacturer 

shall, within 30 days after the change 

occurs, make application on TTB F 

5200.3 for a new permit. Otherwise, the 

present permit shall be automatically 

terminated at the expiration of such 30- 

day period, and the manufacturer shall 

dispose of all processed tobacco on 

hand, make a concluding inventory and 

concluding report, in accordance with 

the provisions of §§ 40.523 and 40.522, 

respectively, and surrender the permit 

with such inventory and report. If the 

application for a new permit is timely 

made, the present permit shall continue 

in effect pending final action with 

respect to such application. 

§ 40.513 Change in location or address of 

factory. 

Whenever a manufacturer of 

processed tobacco intends to relocate its 

factory, the manufacturer shall, before 

commencing operations at the new 

location, make application on TTB F 

5200.16 for an amended permit. 

Whenever any change occurs in the 

address, but not the location, of the 

factory of a manufacturer of processed 

tobacco as a result of action of local 

authorities, the manufacturer shall, 

within 30 days of such change, make 

application on TTB F 5200.16 for an 

amended permit. 

Operations by Manufacturers of 

Processed Tobacco 

§ 40.521 Record of processed tobacco. 

(a) Every manufacturer of processed 

tobacco and every manufacturer of 

tobacco products who removes 

processed tobacco from the factory for 

any purpose other than destruction 

must keep records of daily operations 

and transactions that show total 

quantity of processed tobacco: 

(1) On hand; 

(2) Used in the manufacture of 

tobacco products; 

(3) Processed; 

(4) Received, together with the name 

and address of the person from which 

it was received; 

(5) Removed from the factory for 

shipment to a person holding a TTB 

permit as a manufacturer of processed 

tobacco, a manufacturer of tobacco 

products, or an export warehouse 

proprietor, together with the name and 

address of the person to whom shipped 

or delivered; 

(6) Removed from the factory for 

shipment to a person not holding a TTB 

permit as a manufacturer of processed 

tobacco, a manufacturer of tobacco 

products, or an export warehouse 

proprietor; 

(7) Removed from the factory for 

export; 

(8) Removed for any purpose other 

than described in paragraphs (a)(5), (6), 

and (7) of this section; 

(9) Lost, together with the 

circumstances of the loss; and 

(10) Destroyed, together with the 

circumstances of the destruction. 

(b) The records of any manufacturer of 

processed tobacco who removes 

processed tobacco from the factory for 

shipment to a person who does not hold 

a TTB permit as a manufacturer of 

processed tobacco, as a manufacturer of 

tobacco products, or as an export 

warehouse proprietor must include 

dated, commercial records that show the 

following information about each 

removal under this paragraph: 

(1) The full name and address 

(including city and State) of the 

purchaser (or recipient, if there is no 

purchaser); 

(2) The full name, address (including 

city and State), and driver’s license 

number of the person picking up the 

processed tobacco for delivery; 

(3) The license number of the vehicle 

in which the processed tobacco is 

removed from the manufacturer’s 

premises; 

(4) The street address of the 

destination of the processed tobacco; 

(5) The quantity of processed tobacco 

in the shipment; 

(6) A declaration by the purchaser (or 

recipient, if no purchaser) of the specific 

purpose of the purchase or receipt (for 

example, delivery to another, resale); 

and 

(7) A declaration by the purchaser (or 

recipient, if no purchaser) of the name 

and address of his or her principal when 

acting as an agent. 

(c) The entries in the records of 

removals required under this section 

must be made for each day by the close 

of the business day following the day on 

which the removal occurs. Although no 

particular format for the records in this 

section is prescribed, the required 

information must be readily 

ascertainable from the records kept. 

(26 U.S.C. 5741) 


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§ 40.522 Reports. 

(a) General. Every manufacturer of 

processed tobacco must prepare a 

monthly report on TTB F 5250.1 in 

accordance with the instructions for the 

form. The report must be prepared at the 

times specified in this section and must 

be prepared whether or not any 

operations or transactions occurred 

during the period covered by the report. 

The manufacturer must retain a copy of 

each report in accordance with the 

provisions of this subpart. 

(b) First report(s). The first monthly 

report must be submitted by the 20th 

day of the month following the month 

in which the permit or authorization is 

issued. If the manufacturer is operating 

as a manufacturer of processed tobacco 

under the transitional rule set forth in 

§ 40.493, the manufacturer must submit 

the first report by the 20th day of the 

month following the month in which 

TTB provides written acknowledgement 

of the receipt of the application filed 

under § 40.492. In the transitional case, 

the manufacturer must also submit 

reports for all previous months back to 

April 2009. For example, a 

manufacturer who receives an 

acknowledgement, dated July 17, 2009, 

must submit by August 15, 2009, a total 

of four reports, one each for April, May, 

June, and July 2009. 

(c) Reports of no activity. Reports with 

the notation ‘‘No Activity’’ must be 

made for those months in which no 

activity occurs. 

(d) Reports of removals. A 

manufacturer who removes processed 

tobacco for shipment to someone other 

than a person holding a TTB permit as 

a manufacturer of processed tobacco, a 

manufacturer of tobacco products, or an 

export warehouse proprietor must 

report such removal on TTB F 5250.2 by 

the close of the business day on the day 

following the removal, in accordance 

with the instructions on the form. A 

manufacturer operating under the 

transitional rule set forth in § 40.493 

must also comply with the requirements 

of this paragraph. 

(e) Concluding report. A concluding 

report, covering the period from the first 

of the month to the date of the 

concluding inventory, shall be made 

with such inventory. 

(26 U.S.C. 5722) 

§ 40.523 Inventories. 

Every manufacturer of processed 

tobacco must provide a true and 

accurate inventory on TTB F 5210.9 in 

accordance with instructions for the 

form. The manufacturer must make such 

an inventory at the time of commencing 

business, at the time of transferring 

ownership, at the time of changing 

location of the factory, at the time of 

concluding business, and at such other 

time as any appropriate TTB officer may 

require. In the case of a manufacturer 

operating under the transitional rule set 

forth in § 40.493, that manufacturer 

must make an inventory within 10 days 

of the date of TTB’s written 

acknowledgement of the receipt of the 

application filed under § 40.492. Each 

such inventory is subject to verification 

by the appropriate TTB officer. 

(26 U.S.C. 5721) 

§ 40.524 Retention of documents. 

Every manufacturer of processed 

tobacco must retain all records and 

reports required under this subpart, 

including copies of permits, 

authorizations, inventories, and reports, 

for three years following the close of the 

calendar year in which filed or made, or 

in the case of an authorization, for three 

years following the close of the calendar 

year in which the operation under such 

authorization is concluded. Such 

records shall be made available for 

inspection by the appropriate TTB 

officer upon request. 

(26 U.S.C. 5741) 

§ 40.525 Discontinuance of operations. 

Every manufacturer of processed 

tobacco who desires to discontinue 

operations and close a factory must 

dispose of all processed tobacco on 

hand, make a concluding inventory and 

concluding report, in accordance with 

the provisions of §§ 40.523 and 40.522, 

respectively, and surrender the permit 

to the appropriate TTB officer. 

(26 U.S.C. 5721, 5722) 

§ 40.526 Minimum manufacturing and 

activity requirements. 

A permit to manufacture processed 

tobacco will only be granted to those 

persons engaged in the processing of 

tobacco. A permit may be suspended, 

and subsequently revoked, if the person 

has no activity under such permit for a 

period of one year. A person whose 

permit as a manufacturer of processed 

tobacco has been revoked for non-use, 

who wishes to engage in such business, 

must re-apply for such permit. 

(26 U.S.C. 5712) 

§ 40.527 Authorization to package 

processed tobacco. 

A permit to manufacture processed 

tobacco does not authorize packaging of 

processed tobacco. Packaging of 

processed tobacco may only occur on 

the bonded premises of a manufacturer 

of tobacco products. 

§ 40.528 Suspension and revocation of 

permit. 

Where the appropriate TTB officer has 

reason to believe that a manufacturer of 

tobacco products has not in good faith 

complied with the provisions of 26 

U.S.C. chapter 52, and regulations 

thereunder, or with any other provision 

of 26 U.S.C. with intent to defraud, or 

has violated any condition of his permit, 

or has failed to disclose any material 

information required or made any 

material false statement in the 

application for the permit, or is, by 

reason of previous or current legal 

proceedings involving a felony violation 

of any other provision of Federal 

criminal law relating to tobacco 

products, processed tobacco, cigarette 

paper, or cigarette tubes, not likely to 

maintain operations in compliance with 

26 U.S.C. chapter 52, or has been 

convicted of a felony violation of any 

provision of Federal or State criminal 

law relating to tobacco products, 

processed tobacco, cigarette paper, or 

cigarette tubes, the appropriate TTB 

officer shall issue an order, stating the 

facts charged, citing such person to 

show cause why his permit should not 

be suspended or revoked. Such citation 

shall be issued and opportunity for 

hearing afforded in accordance with 

part 71 of this chapter, which part is 

applicable to such proceedings. If, after 

hearing, the hearing examiner, or on 

appeal, the Administrator, finds that 

such person has not shown cause why 

his permit should not be suspended or 

revoked, such permit shall be 

suspended for such period as the 

appropriate TTB officer deems proper or 

shall be revoked. 

Other Provisions Relating to 

Manufacturers of Processed Tobacco 

§ 40.531 Alternate methods or procedures. 

(a) General. A manufacturer of 

processed tobacco, on specific approval 

by the appropriate TTB officer as 

provided in this section, may use an 

alternate method or procedure in lieu of 

a method or procedure specifically 

prescribed in this subpart. The 

appropriate TTB officer may approve an 

alternate method or procedure, subject 

to stated conditions, when the 

appropriate TTB officer finds that— 

(1) Good cause has been shown for the 

use of the alternate method or 

procedure; 

(2) The alternate method or procedure 

is within the purpose of, and consistent 

with the effect intended by, the 

specifically prescribed method or 

procedure, and 

(3) The alternate method or procedure 

will not be contrary to any provision of 


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law, and will not result in an increase 

in cost to the Government or hinder the 

effective administration of this subpart. 

(b) Application. A manufacturer of 

processed tobacco who desires to 

employ an alternate method or 

procedure must submit a written 

application to the appropriate TTB 

officer. The application shall 

specifically describe the proposed 

alternate method or procedure, and 

shall set forth the reasons therefor. An 

alternate method or procedure shall not 

be employed until the application has 

been approved by the appropriate TTB 

officer. The manufacturer shall, during 

the period of authorization of an 

alternate method or procedure, comply 

with the terms of the approved 

application. Authorization for any 

alternate method or procedure may be 

withdrawn whenever, in the judgment 

of the appropriate TTB officer, the 

effective administration of this part is 

hindered. Any authorization of the 

appropriate TTB officer under this 

section shall be retained as part of the 

manufacturer’s records in accordance 

with this subpart. 

§ 40.532 Emergency variations from 

requirements. 

The appropriate TTB officer may 

approve methods of operation other 

than as specified in this subpart, where 

it is determined that an emergency 

exists and the proposed variations from 

the specified requirements are 

necessary, and provided that the 

proposed variations will not hinder the 

effective administration of this subpart 

and will not be contrary to any 

provision of law. Variations from 

requirements granted under this section 

are conditioned on compliance with the 

procedures, conditions, and limitations 

set forth in the approval of the 

application. Failure to comply in good 

faith with such procedures, conditions, 

and limitations will automatically 

terminate the authority for such 

variations, and the manufacturer of 

processed tobacco thereupon must fully 

comply with the prescribed 

requirements of the regulations from 

which the variations were authorized. 

Authority for any variation may be 

withdrawn whenever in the judgment of 

the appropriate TTB officer the effective 

administration of this subpart is 

hindered by the continuation of such 

variation. Where a manufacturer desires 

to employ such variation, the 

manufacturer must submit a written 

application to do so to the appropriate 

TTB officer. The application must 

describe the proposed variations and set 

forth the reasons therefor. Variations 

may not be employed until the 

application has been approved. Any 

authorization of the appropriate TTB 

officer under this section shall be 

retained as part of the manufacturer’s 

records, in accordance with this 

subpart. 

§ 40.533 Penalties and forfeitures. 

Anyone who fails to comply with the 

provisions of this subpart may be liable 

to the civil and criminal penalties, and 

forfeitures, provided by law. 

§ 40.534 Power of attorney. 

If the application for permit or any 

report or other document required to be 

executed under this subpart is to be 

signed by an individual (including one 

of the partners for a partnership or one 

of the members of an association) as an 

attorney in fact for any person, or if an 

individual is to otherwise officially 

represent such person, power of 

attorney on TTB F 5000.8 shall be 

furnished to the appropriate TTB 

officer. Such power of attorney is not 

required for persons whose authority is 

furnished with the corporate documents 

as required by § 40.494. TTB F 5000.8 

does not have to be filed again with the 

appropriate TTB officer where such 

form has previously been submitted to 

that appropriate TTB officer and is still 

in effect. 

PART 41—IMPORTATION OF 

TOBACCO PRODUCTS, CIGARETTE 

PAPERS AND TUBES, AND 

PROCESSED TOBACCO 

■ 23. The authority citation for part 41 

is revised to read as follows: 

Authority: 26 U.S.C. 5701–5705, 5708, 

5712, 5713, 5721–5723, 5741, 5754, 5761– 

5763, 6301, 6302, 6313, 6402, 6404, 7101, 

7212, 7342, 7606, 7651, 7652, 7805; 31 U.S.C. 

9301, 9303, 9304, 9306. 

■ 24. The heading for part 41 is revised 

to read as set forth above. 

§ 41.1 [Amended] 

■ 25. Section 41.1 is amended by 

removing the words ‘‘and cigarette 

papers and tubes’’ in the section 

heading and where they first appear in 

the text and adding, in their place in 

each case, the words ‘‘, cigarette papers 

and tubes, and processed tobacco’’. 

■ 26. In § 41.11: 

■ a. The definition of ‘‘Export 

warehouse’’ is amended by adding the 

words ‘‘or for the storage of processed 

tobacco,’’ after ‘‘paid,’’; 

■ b. The definition of ‘‘Factory’’ is 

amended by removing the words 

‘‘tobacco products or cigarette papers or 

tubes’’ and adding, in their place, the 

words ‘‘tobacco products, cigarette 

papers or tubes, or processed tobacco’’; 

■ c. The definition of ‘‘Importer’’ is 

amended by adding, after the words 

‘‘tobacco products or cigarette papers or 

tubes’’, each time they appear, the 

words ‘‘, or any processed tobacco,’’ 

■ d. The definition of ‘‘Removal or 

remove’’ is amended by adding after the 

words ‘‘tobacco products or cigarette 

papers or tubes’’ the words ‘‘, or any 

processed tobacco’’; 

■ e. The definition of ‘‘Roll-your-own 

tobacco’’ is amended by adding at the 

end before the period the words ‘‘or 

cigars, or for use as wrappers thereof.’’ 

■ f. New definitions of ‘‘Manufacturer of 

processed tobacco’’, ‘‘Processed 

tobacco’’ and ‘‘Packaging’’ are added in 

appropriate alphabetical order; 

■ g. The definition of ‘‘Package’’ is 

revised; and 

■ h. The definition of ‘‘Sale price’’ is 

amended by adding, after the words 

‘‘importer or’’, the word ‘‘United 

States’’. 

The additions and revision read as 

follows: 

§ 41.11 Meaning of terms. 

* * * * * 

Manufacturer of processed tobacco. 

Any person who processes any tobacco 

other than tobacco products. 

* * * * * 

Package. The immediate container in 

which tobacco products, processed 

tobacco, or cigarette papers or tubes are 

put up by the manufacturer or the 

importer (prior to release from customs 

custody) and offered for sale or delivery 

to the ultimate consumer. For purposes 

of this definition, a container of 

processed tobacco, the contents of 

which weigh 10 pounds or less 

(including any added non-tobacco 

ingredients or constituents), that is 

removed within the meaning of this part 

is deemed to be a package offered for 

sale or delivery to the ultimate 

consumer. 

Packaging. The act of placing 

processed tobacco or a tobacco product 

in a package. 

* * * * * 

Processed tobacco. Processed tobacco 

is any tobacco that has undergone 

processing, but does not include tobacco 

products. For purposes of this 

definition, the processing of tobacco 

does not include the farming or growing 

of tobacco or the handling of tobacco 

solely for sale, shipment, or delivery to 

a manufacturer of tobacco products or 

processed tobacco, nor does the 

processing of tobacco include curing, 

baling, or packaging activities. For 

purposes of this definition, the 

processing of tobacco includes, but is 

not limited to, stemming (that is, 


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removing the stem from the tobacco 

leaf), fermenting, threshing, cutting, or 

flavoring the tobacco, or otherwise 

combining the tobacco with non-tobacco 

ingredients. 

* * * * * 

■ 27. Section 41.30 is amended by 

designating the existing text as 

paragraph (a), and by adding a heading 

to newly designated paragraph (a) and 

adding a new paragraph (b), to read as 

follows: 

§ 41.30 Pipe tobacco and roll-your-own 

tobacco. 

(a) Tax rates. * * * 

(b) Classification. (1) Pipe tobacco and 

roll-your-own tobacco, before removal 

subject to tax, must be put up in 

packages that conform to the 

requirements of § 41.71 and of § 41.72a 

or § 41.72b as appropriate. 

(2) Any tobacco that has been 

processed and that is removed in a 

package, as that term is defined in 

§ 41.11, that does not bear the notice for 

smokeless tobacco prescribed in § 41.72 

or the notice for pipe tobacco prescribed 

in § 41.72a is deemed to be roll-yourown tobacco and subject to tax at the 

rate applicable to roll-your-own tobacco. 

(3) Any tobacco that has been 

processed and that is removed in a 

package, as that term is defined in 

§ 41.11, is deemed to be roll-your-own 

tobacco and subject to tax at the rate 

applicable to roll-your-own tobacco, 

even though the package bears the 

notice required for pipe tobacco under 

§ 41.72a, if: 

(i) The package does not bear the 

declaration ‘‘pipe tobacco’’ in direct 

conjunction with, parallel to, and in 

substantially the same conspicuousness 

of type and background as the brand 

name each time the brand name appears 

on the package; or 

(ii) The package or accompanying 

materials bear any representation that 

would suggest a use other than as pipe 

tobacco. 

(26 U.S.C. 5702 and 5723) 

■ 28. Section 41.71 is amended by 

adding a sentence at the end and by 

revising the statutory citations. The 

addition and revision read as follows: 

§ 41.71 Package. 

* * * No person may purchase, 

receive, possess (except for personal 

consumption), offer for sale, or sell or 

otherwise dispose of, after removal, any 

tobacco products that are not put up in 

packages bearing the marks, labels, and 

notices, as required under this part. 

(26 U.S.C. 5723 and 5751) 

§ 41.72a [Amended] 

■ 29. In § 41.72a, paragraph (a), is 

amended by removing the last sentence. 

■ 30. In § 41.72b, paragraph (a) and the 

Office of Management and Budget 

control number reference are revised to 

read as follows: 

§ 41.72b Notice for roll-your-own tobacco. 

(a) Product designation. Every 

package of roll-your-own tobacco, before 

removal subject to tax, must have 

adequately imprinted on it, or on a label 

securely affixed to it, the applicable 

designation ‘‘roll-your-own tobacco’’, 

‘‘cigarette tobacco’’, ‘‘cigarette 

wrapper’’, ‘‘cigar tobacco’’ or ‘‘cigar 

wrapper’’. 

* * * * * 

(Approved by the Office of Management and 

Budget under control number 1513–0091) 

■ 31. Section 41.72c is revised to read 

as follows: 

§ 41.72c Package use-up rule. 

(a) An importer of pipe tobacco or 

roll-your-own tobacco may remove 

packages of such products bearing the 

designation ‘‘Tax Class L’’ (to designate 

pipe tobacco) or ‘‘Tax Class J’’ (to 

designate roll-your-own tobacco) only if 

similar packages had been removed by 

that importer prior to April 1, 2009, and 

such importer may continue to remove 

packages bearing such designations 

until August 1, 2009. 

(b) An importer may, until August 1, 

2009, remove roll-your-own tobacco for 

which the applicable designation is 

‘‘cigar tobacco,’’ ‘‘cigarette wrapper,’’ or 

‘‘cigar wrapper’’ even if the packages of 

such products do not meet the 

requirements of § 41.72(b). 

§ 41.192 [Removed and Reserved] 

■ 32. Section 41.192 is removed and 

reserved. 

■ 33. Section 41.201 is revised to read 

as follows: 

§ 41.201 Duration of permit. 

Permits issued under this section will 

be valid for a period of three years from 

the effective date shown on the permit. 

The expiring permit will continue in 

effect until final action is taken by TTB 

on the application for renewal, provided 

a timely application for renewal is filed. 

■ 34. Section 41.202 is revised to read 

as follows: 

§ 41.202 Renewal of permit. 

(a) General. Importers wishing to 

continue operations beyond the 

expiration of their current permit must 

renew their permit by making 

application within 30 days of such 

expiration. 

(b) Minimum activity requirement. A 

permit to import tobacco products will 

only be renewed for those persons who 

have engaged in the importing of 

tobacco products under the current 

permit in the one year period prior to 

the application to renew. 

§ 41.205 [Removed and Reserved] 

■ 35. Section 41.205 is removed and 

reserved. 

■ 36. Section 41.206 is revised to read 

as follows: 

§ 41.206 Reports. 

(a) General. Importers must file a 

monthly report on TTB F 5220.6 in 

accordance with the instructions for the 

form. 

(b) First report. The first monthly 

report must be submitted by the 15th 

day of the month following the month 

in which the permit is issued. 

(c) Reports of no activity. Reports with 

the notation ‘‘No Activity’’ must be 

made for those months in which no 

activity occurs. 

(d) Concluding report. When a 

transfer of ownership of the business of 

an importer of tobacco products 

described in § 41.224, or when a change 

in control of a corporation described in 

§ 41.226 occurs, a concluding report 

with the notation ‘‘Concluding Report’’ 

must be made for the month or partial 

month during which the transfer of 

ownership or change in control becomes 

effective. A concluding report must also 

be made for the month or partial month 

during which an importer concludes 

operations under the permit. 

§ 41.207 [Removed and Reserved] 

■ 37. Section 41.207 is removed and 

reserved. 

■ 38. Section 41.208 is revised to read 

as follows: 

§ 41.208 Maintenance and retention of 

records and reports. 

(a) Maintenance. All records, reports, 

and other documents required under 

this part must be maintained separately, 

chronologically by transaction or 

reporting date, at the importer’s 

principal place of business. The 

appropriate TTB officer may, pursuant 

to an application by the importer for an 

approved alternate method or procedure 

under § 41.26, authorize such 

documents to be maintained at another 

business location under the control of 

the importer, if the conditions of § 41.26 

are met and provided that the use of the 

alternate location does not cause undue 

inconvenience to TTB when attempting 

to examine the files and does not delay 

the timely transmittal of any document 

required to be submitted to TTB. 


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(b) Retention. All records and reports 

and documents or copies of documents 

supporting these records or reports 

required by this part to be submitted to 

TTB or retained by the importer must be 

retained for not less than three years 

following the close of the calendar year 

in which filed or made. Such records, 

reports, and other documents must be 

available for inspection by the 

appropriate TTB officer upon request. 

Furthermore, the appropriate TTB 

officer may require these records, 

reports, and other documents to be kept 

for an additional period of not more 

than three years in any case where it is 

necessary to protect the revenue. 

■ 39. A new subpart M, consisting of 

§§ 41.231 through 41.273, is added to 

read as follows: 

Subpart M—Importation of Processed 

Tobacco 

Sec. 

Qualification Requirements for Importers of 

Processed Tobacco 

41.231 Persons required to qualify. 

41.232 Application for permit or 

amendment of existing permit. 

41.233 Transitional rule. 

41.234 Corporate documents. 

41.235 Articles of partnership or 

association. 

41.236 Trade name certificate. 

41.237 Additional information. 

41.238 Investigation of applicant. 

41.239 Notice of contemplated disapproval. 

41.240 Issuance of permit. 

41.241 Duration of permit. 

41.242 Renewal of permit. 

41.243 Retention of permit and supporting 

documents. 

Changes After Original Qualification 

41.251 Change in name. 

41.252 Change in ownership or control. 

41.253 Change in location or address. 

Operations of Importers of Processed 

Tobacco 

41.261 Records. 

41.262 Reports. 

41.263 Maintenance of records and reports. 

Other Provisions Applicable to Importers of 

Processed Tobacco 

41.271 Power of attorney. 

41.272 Cross reference. 

41.273 Suspension and revocation of 

permit. 

Subpart M—Importation of Processed 

Tobacco 

Qualification Requirements for 

Importers of Processed Tobacco 

§ 41.231 Persons required to qualify. 

Except as otherwise provided in 

§ 41.233, every person, before 

commencing business as an importer of 

processed tobacco, must apply for, and 

obtain, either a permit as an importer of 

processed tobacco or, if the person 

holds a TTB permit as an importer of 

tobacco products, an amendment to the 

existing permit authorizing the 

importation of processed tobacco under 

such permit, in accordance with the 

provisions of this subpart. 

§ 41.232 Application for permit or 

amendment of existing permit. 

(a) Application for permit. Any person 

who intends to engage in the business 

of importing processed tobacco, and 

who is not engaged in the business of 

importing tobacco products, must apply 

for a permit by completing and 

submitting TTB F 5230.4 in accordance 

with the instructions on that form. All 

documents required under this subpart 

to be furnished with the application 

must be included with the application 

when it is submitted. If the appropriate 

TTB officer determines that the 

application is incomplete and, for that 

reason, does not include sufficient 

information for TTB to make a decision 

on the application, and if the applicant 

has not provided the missing 

information within one year of a written 

request for it or within any shorter time 

period specified in the written request, 

the application will be deemed 

abandoned and the applicant will be 

notified in writing that no permit will 

be issued in response to the incomplete 

application. In the case of an 

application filed in accordance with 

§ 41.233, such notification will 

constitute the final action on the 

application and such party will no 

longer be able to continue as an 

importer of processed tobacco. 

(b) Application for amendment of 

existing permit. Any person who holds 

a TTB permit as an importer of tobacco 

products may also qualify to engage in 

business as an importer of processed 

tobacco under the same permit by 

making application on TTB F 5230.5 for 

an amended permit. 

§ 41.233 Transitional rule. 

(a) Any person who: 

(1) On April 1, 2009, had already been 

engaged in business as an importer of 

processed tobacco; and 

(2) Before June 30, 2009, submits an 

application for a permit or an 

amendment of an existing permit, as 

provided in § 41.232, to engage in such 

business, may continue to engage in that 

business pending final action on the 

application. 

(b) Pending final action on the 

application, all provisions of chapter 52 

of the Internal Revenue Code of 1986 

shall apply to the applicant in the same 

manner and to the same extent as if the 

applicant were a holder of a permit as 

an importer of processed tobacco or an 

amended permit authorizing the 

importation of processed tobacco under 

chapter 52 and this subpart. Upon 

receipt of an application, the 

appropriate TTB officer will provide the 

applicant with a written 

acknowledgement that may be used for 

a limited period as confirmation of TTB 

authorization to engage in such business 

of an importer of processed tobacco. 

§ 41.234 Corporate documents. 

Every corporation that files an 

application for a permit as an importer 

of processed tobacco must furnish with 

its application for the permit required 

by § 41.231 a true copy of the corporate 

charter or a certificate of corporate 

existence or incorporation executed by 

the appropriate officer of the State in 

which incorporated. The corporation 

must likewise furnish duly 

authenticated extracts of the 

stockholders’ meetings, bylaws, or 

directors’ meetings, listing the offices 

the incumbents of which are authorized 

to sign documents or otherwise act in 

behalf of the corporation in matters 

relating to 26 U.S.C. chapter 52, and 

regulations issued thereunder. The 

corporation must also furnish evidence, 

in duplicate, of the identity of the 

officers and directors and each person 

who holds more than ten percent of the 

stock of such corporation. Where any of 

the information required by this section 

has previously been filed with the 

appropriate TTB officer and such 

information is currently complete and 

accurate, a written statement to that 

effect will be sufficient for the purpose 

of this section. 

§ 41.235 Articles of partnership or 

association. 

Every partnership or association that 

files an application for a permit as an 

importer of processed tobacco must 

furnish with its application for the 

permit required by § 41.231 a true copy 

of the articles of partnership or 

association, if any, or certificate of 

partnership or association where 

required to be filed by any State, county, 

or municipality. Where a partnership or 

association has previously filed such 

documents with the appropriate TTB 

officer and such documents are 

currently complete and accurate, a 

written statement, in duplicate, to that 

effect by the partnership or association 

will be sufficient for the purpose of this 

section. 

§ 41.236 Trade name certificate. 

Every person that files an application 

for a permit as an importer of processed 

tobacco operating under a trade name 


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must furnish with the application for 

the permit required by § 41.231 a true 

copy of the certificate or other 

document, if any, issued by a State, 

county, or municipal authority in 

connection with the transaction of 

business under such trade name. If no 

such certificate or other document is so 

required, a written statement, in 

duplicate, to that effect by such person 

will be sufficient for the purpose of this 

section. 

§ 41.237 Additional information. 

The appropriate TTB officer may 

require such additional information as 

deemed necessary to determine whether 

the applicant is entitled to obtain either 

a permit as an importer of tobacco 

products or, if holding a permit as an 

importer of processed tobacco, an 

amended permit authorizing the 

importation of processed tobacco, under 

this subpart. The applicant must, when 

required by the appropriate TTB officer, 

furnish as a part of the application for 

the permit or authorization such 

additional information as may be 

necessary for the appropriate TTB 

officer to determine whether the 

applicant is entitled to a permit or an 

amended permit. 

§ 41.238 Investigation of applicant. 

Appropriate TTB officers may inquire 

or investigate to verify the information 

in connection with an application for a 

permit. The investigation will ascertain 

whether the applicant is eligible for a 

permit. A permit may be denied if the 

applicant (including, in the case of a 

corporation, any officer, director, or 

principal stockholder and, in the case of 

a partnership, a partner)— 

(a) Is, by reason of his business 

experience, financial standing, or trade 

connections or by reason of previous or 

current legal proceedings involving a 

felony violation of any other provision 

of Federal criminal law relating to 

tobacco products, processed tobacco, 

cigarette paper, or cigarette tubes, not 

likely to maintain operations in 

compliance with this chapter; 

(b) Has been convicted of a felony 

violation of any provision of Federal or 

State criminal law relating to tobacco 

products, processed tobacco, cigarette 

paper, or cigarette tubes; or 

(c) Has failed to disclose any material 

information required or made any 

material false statement in the 

application therefor. 

§ 41.239 Notice of contemplated 

disapproval. 

If the appropriate TTB officer has 

reason to believe that the applicant is 

not entitled to a permit, the appropriate 

TTB officer will promptly give to the 

applicant notice of the contemplated 

disapproval of the application and 

opportunity for hearing thereon in 

accordance with part 71 of this chapter. 

If, after such notice and opportunity for 

hearing, the appropriate TTB officer 

finds that the applicant is not entitled 

to a permit, an order will be prepared 

stating the findings on which the 

application is denied. 

§ 41.240 Issuance of permit. 

If the application for the permit 

required under this subpart is approved, 

the appropriate TTB officer will issue a 

permit on TTB F 5200.24 to the 

applicant as an importer of processed 

tobacco. 

§ 41.241 Duration of permit. 

A permit issued under § 41.240 of this 

part will be valid for a period of three 

years from the effective date shown on 

the permit. 

§ 41.242 Renewal of permit. 

(a) General. Importers of processed 

tobacco wishing to continue operations 

beyond the expiration of their current 

permit must renew their permit by 

making application within 30 days of 

the expiration date on the permit, in 

accordance with instructions for the 

permit form. The expiring permit will 

continue in effect until final action is 

taken by TTB on the application for 

renewal, provided a timely application 

for renewal is filed. 

(b) Minimum activity requirement. A 

permit to import processed tobacco will 

only be renewed for those persons who 

have engaged in the importing of 

processed tobacco under the current 

permit in the one year period prior to 

the application to renew. 

§ 41.243 Retention of permit and 

supporting documents. 

The importer of processed tobacco 

must retain the permit, together with the 

copy of the application and supporting 

documents returned with the permit, at 

the same place where the records 

required by this subpart are kept. The 

permit and supporting documents must 

be made available for inspection by any 

appropriate TTB officer upon request. 

Changes After Original Qualification 

§ 41.251 Change in name. 

(a) Change in individual name. When 

there is a change in the name of an 

individual operating under a permit as 

an importer of processed tobacco, the 

importer must, within 30 days of such 

change, make application on TTB F 

5230.5 for an amended permit. 

(b) Change in trade name. When there 

is a change in a trade name used by an 

importer of processed tobacco in 

connection with operations authorized 

by the permit, the importer must, within 

30 days of such change, make 

application on TTB F 5230.5 for an 

amended permit to reflect such change. 

This requirement also applies to the 

addition or discontinuance of a trade 

name. The importer must also furnish a 

true copy of any new trade name 

certificate or document issued to the 

importer, or statement in lieu thereof, 

required by § 41.236. 

(c) Change in corporate name. When 

there is a change in the corporate name 

of an importer of processed tobacco, the 

importer must, within 30 days of such 

change, make application on TTB F 

5230.5 for an amended permit. The 

importer must also furnish such 

documents as may be necessary to 

establish that the corporate name has 

been changed. 

§ 41.252 Change in ownership or control. 

(a) Fiduciary successor. If an 

administrator, executor, receiver, 

trustee, assignee, or other fiduciary is to 

take over the business of an importer of 

processed tobacco as a continuing 

operation, such fiduciary shall, before 

commencing operations, make 

application for permit in accordance 

with § 41.232, furnish certified copies, 

in duplicate, of the order of the court, 

or other pertinent documents, showing 

his appointment and qualification as 

such fiduciary. However, where a 

fiduciary intends only to liquidate the 

business, qualification as an importer of 

processed tobacco will not be required 

if he promptly files with the appropriate 

TTB officer a written statement to that 

effect. 

(b) Transfer of ownership. If a transfer 

in ownership of the business of an 

importer of processed tobacco 

(including a change of any member of a 

partnership or association) is to be 

made, such importer shall give notice, 

in writing, to the appropriate TTB 

officer, naming the proposed successor 

and the desired effective date of the 

transfer. The proposed successor must, 

before commencing operations, qualify 

as an importer of processed tobacco in 

accordance with this subpart. The 

importer must give notice of the 

transfer, and the proposed successor 

must make application for permit, in 

ample time for examination and 

approval thereof before the desired date 

of such change. The predecessor must 

make a concluding report, in accordance 

with § 41.262, and surrender the permit 

with the report. The successor must 


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29418 Federal Register / Vol. 74, No. 118 / Monday, June 22, 2009 / Rules and Regulations 

make a first report, in accordance with 

§ 41.262. 

(c) Change in officers, directors, or 

stockholders of a corporation. Upon 

election or appointment (excluding 

successive reelection or reappointment) 

of any officer or director of a 

corporation operating as an importer of 

processed tobacco, or upon any 

occurrence that results in a person 

acquiring ownership or control of more 

than ten percent in aggregate of the 

outstanding stock of such corporation, 

the importer shall, within 30 days of 

such action, so notify the appropriate 

TTB officer in writing, giving the 

identity of such person. When there is 

any change in the authority furnished 

under § 41.271 for officers to act on 

behalf of the corporation, the importer 

must immediately so notify the 

appropriate TTB officer in writing. 

(d) Change in control of corporation. 

When the issuance, sale, or transfer of 

the stock of a corporation operating as 

an importer of processed tobacco results 

in a change in the identity of the 

principal stockholders exercising actual 

or legal control of the operations of the 

corporation, the corporate manufacturer 

must, within 30 days after the change 

occurs, make application on TTB F 

5230.4 for a new permit. Otherwise, the 

present permit shall be automatically 

terminated at the expiration of such 30- 

day period, and the importer must make 

a concluding report, in accordance with 

§ 41.262, and surrender the permit with 

the report. If the application for a new 

permit is timely made, the present 

permit will continue in effect pending 

final action with respect to such 

application. 

§ 41.253 Change in location or address. 

Whenever an importer of processed 

tobacco intends to relocate the principal 

business office, the importer must, 

before commencing operations at the 

new location, make application on TTB 

F 5230.5, and obtain an amended 

permit. Whenever any change occurs in 

the address, but not the location, of the 

principal business office of an importer 

of processed tobacco, as a result of 

action of local authorities, the importer 

must, within 30 days of such change, 

make application on TTB F 5230.5 for 

an amended permit. 

Operations of Importers of Processed 

Tobacco 

§ 41.261 Records. 

(a) Any person who imports, or who 

knowingly causes to be imported, 

processed tobacco must make and keep 

records of operations and transactions. 

A person purchasing processed tobacco 

from the importer in a domestic 

transaction and who does not 

knowingly cause the processed tobacco 

to be imported is not required to make 

and keep records unless the terms and 

conditions of the importation are 

controlled by the person placing the 

order with the importer (for example, 

the importer is not an independent 

contractor but the agent of the person 

placing the order). Records maintained 

must reflect the date and quantity of 

processed tobacco: 

(1) Imported; 

(2) Received otherwise than through 

importation; 

(3) Returned to customs custody; 

(4) Transferred or sold to a person 

who holds a TTB permit as an importer 

or manufacturer of tobacco products or 

of processed tobacco or as an export 

warehouse proprietor; 

(5) Transferred or sold to a person 

who does not hold a TTB permit as an 

importer or manufacturer of tobacco 

products or of processed tobacco or as 

an export warehouse proprietor; and 

(6) Lost or destroyed. 

(b) The records of any importer who 

transfers or sells processed tobacco to a 

person who does not hold a TTB permit 

as an importer or manufacturer of 

tobacco products or of processed 

tobacco or as an export warehouse 

proprietor must include dated, 

commercial records that show the 

following information about each 

removal: 

(1) The full name and address 

(including city and State) of the 

purchaser (or recipient, if there is no 

purchaser); 

(2) The full name, address (including 

city and State), and driver’s license 

number of the person picking up the 

processed tobacco for delivery; 

(3) The license number of the vehicle 

in which the processed tobacco is 

picked up for delivery to purchaser or 

transferee; 

(4) The street address of the 

destination of the processed tobacco; 

(5) The quantity of processed tobacco 

in the shipment; 

(6) A declaration by the purchaser (or 

recipient, if no purchaser) of the specific 

purpose of the purchase or receipt (for 

example, delivery to another, resale); 

and 

(7) A declaration by the purchaser (or 

recipient, if no purchaser) of the name 

and address of his or her principal when 

acting as an agent. 

(c) The entries in the records required 

under this section must be made for 

each day by the close of the business 

day following the day on which the 

transfer or sale occurs. Although no 

particular format for the records is 

prescribed, the required information 

must be readily ascertainable from the 

records kept. 

(d) An importer operating under the 

transitional rule, set forth in § 41.233, 

must also comply with the requirements 

of this section. 

(26 U.S.C. 5741) 

§ 41.262 Reports. 

(a) General. Every importer of 

processed tobacco must prepare a 

monthly report on TTB F 5220.6 in 

accordance with the instructions for the 

form. The report must be prepared at the 

times specified in this section and must 

be prepared whether or not any 

operations or transactions occurred 

during the period covered by the report. 

The importer must retain a copy of each 

report in accordance with the provisions 

of this subpart. 

(b) First report(s). The first monthly 

report must be submitted by the 15th 

day of the month following the month 

in which the permit is issued. If the 

importer is operating as an importer of 

processed tobacco under the transitional 

rule in accordance with § 41.233, the 

importer must submit the first report by 

the 15th day of the month following the 

month in which TTB provides written 

acknowledgement of the receipt of the 

application filed under § 41.232. 

(c) Reports of no activity. Reports with 

the notation ‘‘No Activity’’ must be 

made for those months in which no 

activity occurs. 

(d) Reports of sales and transfers. An 

importer who transfers or sells 

processed tobacco to someone other 

than a person holding a TTB permit as 

an importer or manufacturer of 

processed tobacco or tobacco products 

or as an export warehouse proprietor 

must report such sale or transfer on TTB 

F 5250.2 by the close of the business 

day on the day following the transfer or 

sale, in accordance with the instructions 

on the form. An importer operating 

under the transitional rule set forth in 

§ 41.233 must comply with the 

requirements of this paragraph. 

(e) Concluding report. When a transfer 

of ownership of the business of an 

importer of processed tobacco described 

in § 41.252(b) occurs, or when a change 

in control of a corporation described in 

§ 41.252(d) occurs, a concluding report 

with the notation ‘‘Concluding Report’’ 

must be made for the month or partial 

month during which the transfer of 

ownership or change in control becomes 

effective. A concluding report must also 

be made for the month or partial month 

during which an importer concludes 

operations under the permit or 

authorization. 

(26 U.S.C. 5722) 


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Federal Register / Vol. 74, No. 118 / Monday, June 22, 2009 / Rules and Regulations 29419 

§ 41.263 Maintenance of records and 

reports. 

All records and reports required by 

this subpart must be maintained 

separately, chronologically by 

transaction or reporting date, at the 

importer’s principal place of business. 

The appropriate TTB officer may, 

pursuant to a written request, authorize 

files, or an individual file, to be 

maintained at another business location 

under the control of the importer, 

provided that the alternative location 

does not cause undue inconvenience to 

TTB when attempting to examine the 

files and does not delay the timely 

transmittal of any documents required 

to be submitted to TTB. 

(26 U.S.C. 5741) 

Other Provisions Applicable to 

Importers of Processed Tobacco 

§ 41.271 Power of attorney. 

If the application for a permit or 

authorization or any report or other 

document required to be executed under 

this subpart is to be signed by an 

individual (including one of the 

partners for a partnership or one of the 

members of an association) as an 

attorney in fact for any person, or if an 

individual is otherwise to officially 

represent such person, power of 

attorney on TTB F 5000.8 shall be 

furnished to the appropriate TTB 

officer. Such power of attorney is not 

required for persons whose authority is 

furnished with the corporate documents 

as required by § 41.234. Form 5000.8 

does not have to be filed again with an 

appropriate TTB officer where such 

form has previously been submitted to 

TTB and is still in effect. 

§ 41.272 Cross reference. 

For other applicable provisions 

pertaining to forms prescribed, retention 

of records, interference with 

administration, alternate methods or 

procedures, emergency variations from 

requirements, penalties and forfeitures, 

and delegations of the Administrator, 

see subpart C of this part. 

§ 41.273 Suspension and revocation of 

permit. 

Where the appropriate TTB officer has 

reason to believe that an importer of 

processed tobacco has not in good faith 

complied with the provisions of 26 

U.S.C. chapter 52, and regulations 

thereunder, or with any other provision 

of 26 U.S.C. with intent to defraud, or 

has violated any condition of his permit, 

or has failed to disclose any material 

information required or made any 

material false statement in the 

application for the permit, or is, by 

reason of previous or current legal 

proceedings involving a felony violation 

of any other provision of Federal 

criminal law relating to tobacco 

products, processed tobacco, cigarette 

paper, or cigarette tubes, not likely to 

maintain operations in compliance with 

26 U.S.C. chapter 52, or has been 

convicted of a felony violation of any 

provision of Federal or State criminal 

law relating to tobacco products, 

processed tobacco, cigarette paper, or 

cigarette tubes, the appropriate TTB 

officer shall issue an order, stating the 

facts charged, citing such person to 

show cause why his permit should not 

be suspended or revoked. Such citation 

shall be issued and opportunity for 

hearing afforded in accordance with 

part 71 of this chapter, which part is 

applicable to such proceedings. If, after 

hearing, the hearing examiner, or on 

appeal, the Administrator, finds that 

such person has not shown cause why 

his permit should not be suspended or 

revoked, such permit shall be 

suspended for such period as the 

appropriate TTB officer deems proper or 

shall be revoked. 

PART 44—EXPORTATION OF 

TOBACCO PRODUCTS AND 

CIGARETTE PAPERS AND TUBES, 

WITHOUT PAYMENT OF TAX, OR WITH 

DRAWBACK OF TAX 

■ 40. The authority citation for part 44 

is revised to read as follows: 

Authority: 26 U.S.C. 5701–5705, 5711– 

5713, 5721–5723, 5731, 5741, 5751, 5754, 

6061, 6065, 6151, 6402, 6404, 6806, 7011, 

7212, 7342, 7606, 7805; 31 U.S.C. 9301, 9303, 

9304, 9306. 

■ 41. In § 44.11: 

■ a. The definition of ‘‘Export 

warehouse’’ is amended by removing 

the words ‘‘tobacco products and 

cigarette papers and tubes’’ and adding, 

in their place, the words ‘‘tobacco 

products or cigarette papers or tubes or 

any processed tobacco’’; 

■ b. The definition of ‘‘package’’ is 

revised; 

■ c. A new definition of ‘‘Processed 

tobacco’’ is added in appropriate 

alphabetical order; and 

■ d. The definition of ‘‘Roll-your-own 

tobacco’’ is amended by adding at the 

end before the period the words ‘‘or 

cigars, or for use as wrappers thereof.’’ 

The addition and revision read as 

follows: 

§ 44.11 Meaning of terms. 

* * * * * 

Package. The immediate container in 

which tobacco products, processed 

tobacco, or cigarette papers or tubes are 

put up by the manufacturer and offered 

for sale or delivery to the ultimate 

consumer. For purposes of this 

definition, a container of processed 

tobacco, the contents of which weigh 10 

pounds or less (including any added 

non-tobacco ingredients or 

constituents), that is removed within the 

meaning of this part, is deemed to be a 

package offered for sale or delivery to 

the ultimate consumer. 

* * * * * 

Processed tobacco. Processed tobacco 

is any tobacco that has undergone 

processing, but does not include tobacco 

products. For purposes of this 

definition, the processing of tobacco 

does not include the farming or growing 

of tobacco or the handling of tobacco 

solely for sale, shipment, or delivery to 

a manufacturer of tobacco products or 

processed tobacco, nor does the 

processing of tobacco include curing, 

baling, or packaging activities. For 

purposes of this definition, the 

processing of tobacco includes, but is 

not limited to, stemming (that is, 

removing the stem from the tobacco 

leaf), fermenting, threshing, cutting, or 

flavoring the tobacco, or otherwise 

combining the tobacco with non-tobacco 

ingredients. 

§ 44.90 [Removed and Reserved] 

■ 42. Section § 44.90 is removed and 

reserved. 

■ 43. Section § 44.141a is added to read 

as follows: 

§ 44.141a Use of premises. 

Export warehouse premises may only 

be used for the storage of tobacco 

products and cigarette papers and tubes, 

upon which the Internal Revenue tax 

has not been paid, for subsequent 

removal under this part, and for the 

storage of processed tobacco pending 

export. 

§ 44.142 [Amended] 

■ 44. Section 44.142 is amended in the 

first sentence of paragraph (e) by adding 

the words ‘‘, and any processed 

tobacco’’ after the words ‘‘cigarette 

papers and tubes’’, and by revising the 

Office of Management and Budget 

control number reference to read, 

‘‘(Approved by the Office of 

Management and Budget under control 

number 1513–0070)’’. 

§ 44.147 [Amended] 

■ 45. In § 44.147 the first sentence is 

amended by removing the words 

‘‘tobacco products, and cigarette papers 

and tubes’’ and adding, in their place, 

the words, ‘‘tobacco products, cigarette 

papers and tubes, and any processed 

tobacco’’. 


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29420 Federal Register / Vol. 74, No. 118 / Monday, June 22, 2009 / Rules and Regulations 

PART 45—REMOVAL OF TOBACCO 

PRODUCTS AND CIGARETTE PAPERS 

AND TUBES, WITHOUT PAYMENT OF 

TAX, FOR USE OF THE UNITED 

STATES 

■ 46. The authority citation for part 45 

is revised to read as follows: 

Authority: 26 U.S.C. 5702–5705, 5723, 

5741, 5751, 5762, 5763, 6313, 7212, 7342, 

7606, 7805; 44 U.S.C. 3504(h). 

■ 47. In § 45.11, 

■ a. The definition of ‘‘Roll-your-own 

tobacco’’ is amended by adding at the 

end before the period the words ‘‘or 

cigars, or for use as wrappers thereof’’; 

and 

■ b. The definition of ‘‘Package’’ is 

revised to read as follows: 

§ 45.11 Meaning of terms. 

* * * * * 

Package. The immediate container in 

which tobacco products, processed 

tobacco, or cigarette papers or tubes are 

put up by the manufacturer and offered 

for sale or delivery to the ultimate 

consumer. For purposes of this 

definition, a container of processed 

tobacco, the contents of which weigh 10 

pounds or less (including any added 

non-tobacco ingredients or 

constituents), that is removed within the 

meaning of this part, is deemed to be a 

package offered for sale or delivery to 

the ultimate consumer. 

* * * * * 

§ 45.45a [Amended] 

■ 48. In § 45.45a, paragraph (a) is 

amended by removing the last sentence. 

■ 49. In § 45.45b, paragraph (a) and the 

Office of Management and Budget 

control number reference at the end are 

revised to read as follows: 

§ 45.45b Notice for roll-your-own tobacco. 

(a) Product designation. Every 

package of roll-your-own tobacco, before 

removal subject to tax, must have 

adequately imprinted on it, or on a label 

securely affixed to it, the applicable 

designation ‘‘roll-your-own tobacco’’, 

‘‘cigarette tobacco’’, ‘‘cigar tobacco’’, 

‘‘cigarette wrapper’’, or ‘‘cigar wrapper’’. 

* * * * * 

(Approved by the Office of Management and 

Budget under control number 1513–0091) 

■ 50. Section 45.45c is revised to read 

as follows: 

§ 45.45c Package use-up rule. 

(a) A manufacturer of pipe tobacco or 

roll-your-own tobacco may remove 

packages of such products bearing the 

designation ‘‘Tax Class L’’ (to designate 

pipe tobacco) or ‘‘Tax Class J’’ (to 

designate roll-your-own tobacco) only if 

such packages were in use prior to April 

1, 2009, and such manufacturer may 

continue to remove packages bearing 

those designations until July 1, 2009. 

(b) A manufacturer may, until August 

1, 2009, remove roll-your-own tobacco 

for which the applicable designation is 

‘‘cigar tobacco,’’ ‘‘cigarette wrapper,’’ or 

‘‘cigar wrapper’’ even if the packages of 

such products do not meet the 

requirements of § 40.216(b). 

Signed: April 15, 2009. 

John J. Manfreda, 

Administrator. 

Approved: May 26, 2009. 

Timothy E. Skud, 

Deputy Assistant Secretary (Tax, Trade, and 

Tariff Policy). 

[FR Doc. E9–14546 Filed 6–19–09; 8:45 am] 

BILLING CODE 4810–31–P 

DEPARTMENT OF DEFENSE 

Department of the Navy 

32 CFR Part 706 

Certifications and Exemptions Under 

the International Regulations for 

Preventing Collisions at Sea, 1972 

AGENCY: Department of the Navy, DoD. 

ACTION: Final rule. 

SUMMARY: The Department of the Navy 

is amending its certifications and 

exemptions under the International 

Regulations for Preventing Collisions at 

Sea, 1972 (72 COLREGS), to reflect that 

the Deputy Assistant Judge Advocate 

General (Admiralty and Maritime Law) 

has determined that USS 

INDEPENDENCE (LCS 2) is a vessel of 

the Navy which, due to its special 

construction and purpose, cannot fully 

comply with certain provisions of the 72 

COLREGS without interfering with its 

special function as a naval ship. The 

intended effect of this rule is to warn 

mariners in waters where 72 COLREGS 

apply. 

DATES: This rule is effective June 22, 

2009 and is applicable beginning June 

11, 2009. 

FOR FURTHER INFORMATION CONTACT: 

Lieutenant Commander Ted Cook, 

JAGC, U.S. Navy, Admiralty Attorney, 

(Admiralty and Maritime Law), Office of 

the Judge Advocate General, Department 

of the Navy, 1322 Patterson Ave., SE., 

Suite 3000, Washington Navy Yard, DC 

20374–5066, telephone number: 202– 

685–5040. 

SUPPLEMENTARY INFORMATION: Pursuant 

to the authority granted in 33 U.S.C. 

1605, the Department of the Navy 

amends 32 CFR part 706. 

This amendment provides notice that 

the Deputy Assistant Judge Advocate 

General (Admiralty and Maritime Law), 

under authority delegated by the 

Secretary of the Navy, has certified that 

USS INDEPENDENCE (LCS 2) is a vessel 

of the Navy which, due to its special 

construction and purpose, cannot fully 

comply with the following specific 

provisions of 72 COLREGS without 

interfering with its special function as a 

naval ship: Annex I paragraph 2 (a)(i), 

pertaining to the location of the forward 

masthead light at a height not less than 

12 meters above the hull; Annex I, 

paragraph 3(a), pertaining to the 

location of the forward masthead light 

in the forward quarter of the ship, and 

the horizontal distance between the 

forward and after masthead lights; 

Annex I, paragraph 2(f)(i), pertaining to 

the placement of the masthead light or 

lights above and clear of all other lights 

and obstructions; Annex I, paragraph 

3(c), pertaining to the task light’s 

horizontal distance from the fore and aft 

centerline of the vessel in the 

athwartship direction; and Rule 21(a), 

pertaining to the arc of visibility of the 

aft masthead light. The Deputy Assistant 

Judge Advocate General (Admiralty and 

Maritime Law) has also certified that the 

lights involved are located in closest 

possible compliance with the applicable 

72 COLREGS requirements. 

Moreover, it has been determined, in 

accordance with 32 CFR parts 296 and 

701, that publication of this amendment 

for public comment prior to adoption is 

impracticable, unnecessary, and 

contrary to public interest since it is 

based on technical findings that the 

placement of lights on this vessel in a 

manner differently from that prescribed 

herein will adversely affect the vessel’s 

ability to perform its military functions. 

List of Subjects in 32 CFR Part 706 

Marine safety, Navigation (water), and 

Vessels. 

■ For the reasons set forth in the 

preamble, the Navy amends part 706 of 

title 32 of the Code of Federal 

Regulations as follows: 

PART 706—CERTIFICATIONS AND 

EXEMPTIONS UNDER THE 

INTERNATIONAL REGULATIONS FOR 

PREVENTING COLLISIONS AT SEA, 

1972 

■ 1. The authority citation for part 706 

continues to read as follows: 

Authority: 33 U.S.C. 1605. 

■ 2. Section 706.2 is amended as 

follows: 


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