by 
Regulations require you to track and report your bulk Imported Spirit separately from your domestic spirit. This applies to spirit held in the Storage liquid account as well as the Processing account. We’ll cover the scenarios and ‘gotchas’ so that you can stay on TTB’s good side. And, be aware that we’re not going to cover Bottled Imports – that’s a subject for a later date.
First off, let’s review some definitions. What do we mean by “Imported” spirit? This term includes spirit produced in a country other than the US – think Tequila from Mexico or Whisky from Ireland. But, somewhat confusingly, this terms also encompasses Rum from US Territories like Virgin Islands and Puerto Rico.
When you purchase Imported Spirit, you can acquire it in a few different ways. You can buy it from a domestic DSP, and you can also acquire it directly from the foreign distillery. When importing the product yourself, you will need an Importer’s Permit. The bulk spirit can be brought over the border and it may or may not land in a Customs Bonded Warehouse, depending on how you structure your importation. When you receive imported spirit from a customs bonded warehouse, this receipt has different reporting requirements compared to a domestic TIB or a direct import. Be sure to mark these receipts appropriately in DISTILL x 5 or Whiskey Systems so that the PGs flow through to the correct report lines.
Once you have your Imported Spirit on hand, you need to be sure you’re categorizing and reporting it correctly. As a rule, you want to receive bulk spirit into your Storage account when you are holding it for an indeterminate amount of time, without specific plans for further processing.
When you receive Imported Spirit into your Storage account, you create a new reporting obligation for yourself. Depending on where your spirit comes from, you may have to file as many as three additional Storage reports (in addition to the Domestic Spirits and All Wines report that all DSPs are required to submit). Once you’ve stored spirit from Virgin Islands, Puerto Rico or any other country, you have to file the corresponding Storage report forever, unless you get specific relief from TTB:
Luckily, when it comes to the Processing account, you do not need to file multiple monthly reports because of handling Imported spirit. In Processing, you have categories like “Imported Whiskey” and “Rum (Virgin Islands)”:
Choose these categories carefully! For example, Caribbean Rum produced outside of PR/VI would be reported on the “Imported Spirits” Storage report and would have a Processing category of “Rum (“Other” Imported)”. If you are purchasing Imported Spirits for the first time or on a trial basis, it may behoove you to receive it directly into your Processing account, because then you can avoid creating an obligation to file the Imported Storage report (an obligation that does not go away even if you stop dealing in imported spirits!).
Now let’s talk about bottling your bulk imported spirits. If you receive bulk spirit that was imported and you bottle it as-is, or proof it down with pure water and bottle it as-is, then you are “Bottling For” the foreign producer, also known as “bottling as imported”. These quantities are reported in Processing Part IV column (c) “Bottled – Imported”. The approved COLA/Label for this product will indicate “Bottled For <X>” foreign distillery, rather than “Bottled By <Your Distillery>”. Be sure to configure DISTILL x 5 or Whiskey Systems accordingly!
If you use imported spirit in the manufacture/blending of other spirits products (for example, if you blend multiple different kinds of rum from different countries, or if you add sugar or flavoring materials, or re-barrel the product), this is considered a Processing operation that yields a domestic spirit (in other words, these types of products lose their “imported” status as a result of the domestic processing). As you might imagine, the operational / recordkeeping flow is that you move the base spirit (without changing its reporting category) from Storage to Processing. Then, subsequent to a Processing operation, you document the transformation from one spirit type to the other (e.g. VI Rum from Storage + Sugar, Flavor, Color added in Processing = Cordials/Liqueurs/Specialty in Processing). These bottlings report in Processing Part IV column (d) “Bottled”.
In Storage, spirit should enter and leave the account under the same reporting category. There aren’t any allowable Storage operations that change the reporting category of spirit on hand, so this follows logically. In contrast, the Processing account is exactly where you should carry out operations that cause a transformation in Class/Type and/or reporting category. In other words, spirit can enter Processing under one reporting category (e.g. VI Rum) and leave it under another one (e.g. Cordials/Liqueurs/Specialty).
A final note on Virgin Islands and Puerto Rico Rum imports. Products from these two particular locales are subject to “cover over”, a scheme enacted by Congress which redirects the Federal Excise Tax from domestic distilleries to the territorial governments of Virgin Islands and Puerto Rico, in rough proportion to the annual quantity of spirit that they export to the US. You don’t need to be an expert in these intricacies, but you do need to know that Line 48 of the Processing report has specific requirements for you to report the proof gallons of imported Rum that you remove (tax-pay) from your bonded area in a given month. Luckily, DISTILL x 5 and Whiskey Systems can be configured to report these proof gallons on Line 48!
Is your head spinning? Our experts are standing by. Reach out to Fx5 Consulting for a free, 20-minute consultation about Imported Spirits, along with any other regulatory/compliance questions!
