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Sometimes, the world of regulatory compliance gets a little too dry, and I find myself reflecting on the past. It’s helpful to understand the background and chain of events that led us to the present.
After the fall of Prohibition in 1933, the US Treasury was the regulator/enforcer for distilleries. Their successors in distillery regulation, the ATF, was not created until 1972. As for the current iteration – TTB – that agency was created in 2003. Each successor agency adopted the rulings and policies of their predecessors; current guidance on Vodka production, for example, dates to a 1969 Revenue Ruling.
Before 1980, distilleries were assigned an ATF or Treasury Agent. That agent basically lived at the distillery for 6 months at a time. Then they’d rotate. This was called “Government Supervision”. DSP doors had two locks and both the agent and the proprietor had to be present to unlock and start the day. Similarly, spirit from distillation was collected into locked “spirit safes” that only the treasury agent could access. He would gauge the liquid, determine the tax liability, and only then release it to the proprietor. You couldn’t even taste, smell or proof your own liquid!
I have seen communications from 1981 from a DSP making a special request for supervision on a particular set of Sundays so as to meet elevated production goals. (Sundays would normally be a closed day). So it seems that it took ATF a while after the law went into effect to actually stop supervising.
One modern-day impact of Government Supervision is that the Bottled in Bond Act of 1898 includes the words “government supervision” as an optional label declaration, and this was not changed when, in 1980, deregulation got rid of the concept entirely. This means that you can still produce a Bottled in Bond product and still claim it was bottled under Government Supervision even though that hasn’t been a thing for almost 50 years.
The entire concept of liquid accounts (Production, Storage, and Processing) didn’t exist until 1980 (they were created to plug the informational/reporting hole left by getting rid of supervision).
I have heard tell of the interesting dynamic that this created. Would you just give the agent the bare minimum – a bucket and a chair? Or would you give them a nice office? What was the nature of that relationship? How would you deal with discrepancies between the two sets of records (proprietor and agent)?
