Many distilleries are involved in sending/receiving Bottled Spirit via Transfer in Bond. What they may not realize is that they’re running afoul of TTB regulations which have changed multiple times in recent years.
This post will summarize the past and current regulations.
Prior to 2018, bottled spirits could not be transferred in bond, aside from some exceptional circumstances that involved a one-off allowance from TTB (e.g. liquidation of a DSP’s inventory).
In 2017, the “CBMA” authorized unlimited transfer in bond of bottled spirits, starting January 1st, 2018. This allowance extended through 2018-2020 and officially ended on January 1st, 2021. If you didn’t know that the allowance ended, you could be forgiven for missing the notice: it was during a time when TTB was drafting a lot of guidance related to CBMA and COVID relief.
Since 2021, there are new rules governing the transfer in bond of bottled spirits. The regulations start out with a blanket prohibition (you cannot do it at all), and then poke some exceptions into it — you may transfer bottled spirit in bond under these two circumstances:
- between bonded premises belonging to the same person or members of the same controlled group, or
- if the distilled spirits are transferred in bond from the DSP who distilled or processed the spirits to another DSP for bottling or storage and returned to the transferor for removal, but only if the transferor retained title during the entire period between such distillation, or processing, and removal.
You might be wondering what exactly constitutes “distilled or processed”? In this context, if you are a DSP utilizing another DSP for packaging your product and you wish to receive bottles in bond, the regulation requires you to have distilled the spirit originally or to have performed a processing activity. A processing activity is an operation that physically changes the spirit or that filters it to remove a substance.
Check out our blog post on Controlled Groups and 100,000 PGs/yr for a deep-dive into that definition.
Receiving bottles via transfer in bond has the potential to save your DSP over $1 million per year in Federal Excise Tax, but you must take care to ensure you’re actually entitled to the savings. Reach out to our Consulting Team to schedule a free introductory call, and we’ll walk you through it.