LIQ-14: WAR-2-02: ENT 7-07
RR:CR:DR: 227261 CK
Category: Bonded Warehouse
Port Director of Customs
U.S. Customs Service
ATTN: Trade Manager
198 West Service Road
Champlain, New York 12919
RE: Internal Advice Request; Non-tax paid domestic merchandise;
Bonded warehouse; 19 C.F.R. 177.11; 26 U.S.C. 5214 (a)(9); 19
U.S.C. 1557 (a)(1)(A); Bonded Warehouse Manual.
Dear Sir:
With your September 23, 1996, memorandum you requested
Internal Advice on the availability of any provision which allows
Customs to continue control of non-tax paid domestic merchandise
remaining in the bonded warehouse after liquidation of the
warehouse entry on which the merchandise was entered. You
question that if the entry is liquidated in accordance with
Customs Directives, what would ensure that the domestic
merchandise is eventually exported and not sold domestically
without Internal Revenue Tax being paid.
FACTS:
Domestic merchandise, non-tax paid alcohol, was entered into
a Duty-Free store, Class 9 bonded warehouse, on a type 21
warehouse entry. On the same type 21 warehouse entry, foreign
merchandise was entered into the Class 9 bonded warehouse. The
domestic alcohol was transferred from the bonded premises of a
distilled spirits plant in approved containers.
Each shipment of alcohol, both domestic and foreign was
transferred on bonded carriers to the warehouse. Each warehouse
entry, type 21, is clearly marked, "Merchandise destined only for
export. It is not to be withdrawn or diverted for consumption."
Additionally, during a telephone call with your Port in June
1998, you stated that the domestic and imported alcohol has been
physically separated in the warehouse, and that while they are
commingled on the warehouse entry documents, they are not
physically commingled.
ISSUE:
May Customs retain control of non-tax paid domestic and
imported alcohol, that is in a bonded warehouse, after it has
been liquidated, in order to be assured the merchandise is
exported and that the Internal Revenue Taxes are paid.
LAW/ANALYSIS:
Section 26 U.S.C. 1514 (a)(9), states, that distilled
spirits on which the internal revenue tax has not been paid or
determined may, subject to such regulations as the Secretary
shall prescribe, be withdrawn from the bonded premises of any
distilled spirits plant in approved containers- without payment
of tax, for transfer (for the purposes of storage pending
exportation) to any customs bonded warehouse from which distilled
spirits may be exported, and distilled spirits transferred to a
customs bonded warehouse under this paragraph shall be entered,
stored, and accounted for under such regulations and bonds as the
Secretary may prescribe." Therefore, the transfer of the
domestic alcohol to the warehouse was authorized and correctly
entered.
Section 19 U.S.C. 1557 (a)(1), states, that any merchandise
subject to duty... may be entered for warehousing and be
deposited in a bonded warehouse... Such merchandise must be
withdrawn, at any time, within 5 years from the date of
importation, for consumption upon payment of the duties and
charges accruing thereon at the rate of duty imposed by law upon
such merchandise at the date of withdrawal; or may be withdrawn
for exportation or for transportation and exportation to a
foreign country,... without the payment of duties thereon, or for
transportation and rewarehousing at another port, or elsewhere,
or for transfer to another bonded warehouse at the same port;
except that-- (A) the total period of time for which such
merchandise may remain in bonded warehouse shall not exceed 5
years from the date of importation. Therefore, the imported
distilled spirits, even though entered on the same 21 type
warehouse entry document as the domestic distilled spirits, is
subject to this 5 year warehouse limitation.
Additionally, as to internal revenue taxes on imported
distilled spirits, section 26 U.S.C. 5061 (2)(D) states, that
distilled spirits, wines, and beer which are imported into the
United States (other than in bulk containers)- no internal
revenue taxes will be due on any article which is shown to the
satisfaction of the Secretary to be destined for export.
In regard to the domestic distilled spirits, part
11.2(d)(2)(iii) of the Bonded Warehouse Manual states, distilled
spirits on which internal revenue tax has not been paid may be
withdrawn from an ATF-bonded distilled spirits plant, without
payment of tax, for transfer to a Customs bonded warehouse from
which the distilled spirits may be exported. (26 U.S.C.
5214(a)(9)).... The warehouse entry will be processed and
liquidated in the same manner as any other warehouse entry,
except that: 1. The goods need not be withdrawn within the 5-year
period specified in Section 557 TA...
Therefore, although the domestic distilled spirits are
liquidated in turn, they are not restricted to the 5-year
warehouse limitation. Since, the distilled spirits in this case
have been physically separated in the warehouse, you will be able
to identify which goods need to be removed after 5-years and
those goods may remain in the warehouse beyond the 5-year
limitation.
Finally, Customs Directive (C.D.) 3260-29, dated June 15,
1989, section D(4) states,
"Domestic distilled spirits, whether destined for
exportation or diplomatic use, are exempt from the payment of
internal revenue tax within 14 days after removal from a bonded
warehouse under 26 U.S.C. 5061 (d), as amended by Public Law 99-509."
Therefore, internal revenue taxes do not accrue for domestic
distilled spirits until they have been removed from the
warehouse. While the domestic distilled spirits are within the
warehouse, no tax is due, as long as they are marked for
exportation. In this case, the type 21 entry documents specify
that the domestic and imported distilled spirits are destined for
export, and as long as they remain in the Customs bonded
warehouse no taxes are due on them. Additionally, as long as the
distilled spirits remain in the Customs bonded warehouse they are
under the supervision of Customs, whether liquidated or not.
However, once they are removed the importer has within 14 days to
pay the taxes if the merchandise is not exported, and the
merchandise is no longer within Custom's control. As long as
Customs is satisfied that the merchandise is destined for export,
and will be exported, Custom's control and obligation regarding
taxes are over.
HOLDING:
Customs may assert control of domestic and imported
distilled spirits as long as the merchandise remains in a Customs
bonded warehouse, whether the entry has been liquidated or not.
However, Customs does not have control over the payment of
internal revenue taxes due on such domestic distilled spirits
after it has been removed from the warehouse. Taxes are not due
until merchandise has been removed and may be paid within
fourteen days of such removal, which is outside of Custom's
control.
This decision should be mailed by your office to the
internal advice requester no later than 60 days from the date of
this letter. After sixty days, the Office of Regulations and
Rulings will take steps to make the decision available to Customs
personnel via the Customs Rulings Module in ACS, and to the
public via the Diskette Subscription Service, Freedom of
Information Act, and other public access channels.
Sincerely,
William G. Rosoff, Chief
Duty and Refund Determination
Branch