1513-0008 Law and Regs

1513-0008

26 U.S.C.

Sec. 7652. Shipments to the United States

(a) Puerto Rico

(1) Rate of tax

Except as provided in section 5314, articles of merchandise of

Puerto Rican manufacture coming into the United States and withdrawn

for consumption or sale shall be subject to a tax equal to the

internal revenue tax imposed in the United States upon the like

articles of merchandise of domestic manufacture.

(2) Payment of tax

The Secretary shall by regulations prescribe the mode and time

for payment and collection of the tax described in paragraph (1),

including any discretionary method described in section 6302(b) and

(c). Such regulations shall authorize the payment of such tax before

shipment from Puerto Rico, and the provisions of section 7651(2)(B)

shall be applicable to the payment and collection of such tax in

Puerto Rico.

(3) Deposit of internal revenue collections

All taxes collected under the internal revenue laws of the

United States on articles produced in Puerto Rico and transported to

the United States (less the estimated amount necessary for payment

of refunds and drawbacks), or consumed in the island, shall be

covered into the treasury of Puerto Rico.

(b) Virgin Islands

(1) Taxes imposed in the United States

Except as provided in section 5314, there shall be imposed in

the United States, upon articles coming into the United States from

the Virgin Islands, a tax equal to the internal revenue tax imposed

in the United States upon like articles of domestic manufacture.

(2) Exemption from tax imposed in the Virgin Islands

Such articles shipped from such islands to the United States

shall be exempt from the payment of any tax imposed by the internal

revenue laws of such islands.

(3) Disposition of internal revenue collections

The Secretary shall determine the amount of all taxes imposed

by, and collected under the internal revenue laws of the United

States on articles produced in the Virgin Islands and transported to

the United States. The amount so determined less 1 percent and less

the estimated amount of refunds or credits shall be subject to

disposition as follows:

(A) The payment of an estimated amount shall be made to the

government of the Virgin Islands before the commencement of each

fiscal year as set forth in section 4(c)(2) of the Act entitled

``An Act to authorize appropriations for certain insular areas

of the United States, and for other purposes'', approved August

18, 1978 (48 U.S.C. 1645), as in effect on the date of the

enactment of the Trade and Development Act of 2000. The payment

so made shall constitute a separate fund in the treasury of the

Virgin Islands and may be expended as the legislature may

determine.

(B) Any amounts remaining shall be deposited in the Treasury

of the United States as miscellaneous receipts.

If at the end of any fiscal year the total of the Federal

contribution made under subparagraph (A) with respect to the four

calendar quarters immediately preceding the beginning of that fiscal

year has not been obligated or expended for an approved purpose, the

balance shall continue available for expenditure during any

succeeding fiscal year, but only for emergency relief purposes and

essential public projects. The aggregate amount of moneys available

for expenditure for emergency relief purposes and essential public

projects only shall not exceed the sum of $5,000,000 at the end of

any fiscal year. Any unobligated or unexpended balance of the

Federal contribution remaining at the end of a fiscal year which

would cause the moneys available for emergency relief purposes and

essential public projects only to exceed the sum of $5,000,000 shall

thereupon be transferred and paid over to the Treasury of the United

States as miscellaneous receipts.

(c) Articles containing distilled spirits

For purposes of subsections (a)(3) and (b)(3), any article

containing distilled spirits shall in no event be treated as produced in

Puerto Rico or the Virgin Islands unless at least 92 percent of the

alcoholic content in such article is attributable to rum.

(d) Articles other than articles containing distilled spirits

For purposes of subsections (a)(3) and (b)(3)--

(1) Value added requirement for Puerto Rico

Any article, other than an article containing distilled spirits,

shall in no event be treated as produced in Puerto Rico unless the

sum of--

(A) the cost or value of the materials produced in Puerto

Rico, plus

(B) the direct costs of processing operations performed in

Puerto Rico,

equals or exceeds 50 percent of the value of such article as of the

time it is brought into the United States.

(2) Prohibition of Federal excise tax subsidies

(A) In general

No amount shall be transferred under subsection (a)(3) or

(b)(3) in respect of taxes imposed on any article, other than an

article containing distilled spirits, if the Secretary

determines that a Federal excise tax subsidy was provided by

Puerto Rico or the Virgin Islands (as the case may be) with

respect to such article.

(B) Federal excise tax subsidy

For purposes of this paragraph, the term ``Federal excise

tax subsidy'' means any subsidy--

(i) of a kind different from, or

(ii) in an amount per value or volume of production

greater than,

the subsidy which Puerto Rico or the Virgin Islands offers

generally to industries producing articles not subject to

Federal excise taxes.

(3) Direct costs of processing operations

For purposes of this subsection, the term ``direct cost of

processing operations'' has the same meaning as when used in section

213 of the Caribbean Basin Economic Recovery Act.

(e) Shipments of rum to the United States

(1) Excise taxes on rum covered into treasuries of Puerto

Rico and Virgin Islands

All taxes collected under section 5001(a)(1) on rum imported

into the United States (less the estimated amount necessary for

payment of refunds and drawbacks) shall be covered into the

treasuries of Puerto Rico and the Virgin Islands.

(2) Secretary prescribes formula

The Secretary shall, from time to time, prescribe by regulation

a formula for the division of such tax collections between Puerto

Rico and the Virgin Islands and the timing and methods for

transferring such tax collections.

(3) Rum defined

For purposes of this subsection, the term ``rum'' means any

article classified under subheading 2208.40.00 of the Harmonized

Tariff Schedule of the United States (19 U.S.C. 1202).

(4) Coordination with subsections (a) and (b)

Paragraph (1) shall not apply with respect to any rum subject to

tax under subsection (a) or (b).

(f) Limitation on cover over of tax on distilled spirits

For purposes of this section, with respect to taxes imposed under

section 5001 or this section on distilled spirits, the amount covered

into the treasuries of Puerto Rico and the Virgin Islands shall not

exceed the lesser of the rate of--

(1) $10.50 ($13.25 in the case of distilled spirits brought into

the United States after June 30, 1999, and before January 1, 2004),

or

(2) the tax imposed under section 5001(a)(1), on each proof

gallon.

(g) Drawback for medicinal alcohol, etc.

In the case of medicines, medicinal preparations, food products,

flavors, flavoring extracts, or perfume containing distilled spirits,

which are unfit for beverage purposes and which are brought into the

United States from Puerto Rico or the Virgin Islands--

(1) subpart F of part II of subchapter A of chapter 51 shall be

applied as if--

(A) the use and tax determination described in section

5131(a) had occurred in the United States by a United States

person at the time the article is brought into the United

States, and

(B) the rate of tax were the rate applicable under

subsection (f) of this section, and

(2) no amount shall be covered into the treasuries of Puerto

Rico or the Virgin Islands.

(h) Manner of cover over of tax must be derived from this title

No amount shall be covered into the treasury of Puerto Rico or the

Virgin Islands with respect to taxes for which cover over is provided

under this section unless made in the manner specified in this section

without regard to--

(1) any provision of law which is not contained in this title or

in a revenue Act; and

(2) whether such provision of law is a subsequently enacted

provision or directly or indirectly seeks to waive the application

of this subsection.

(Aug. 16, 1954, ch. 736, 68A Stat. 907; Pub. L. 85-859, title II,

Sec. 204(17), (18), Sept. 2, 1958, 72 Stat. 1430; Pub. L. 89-44, title

VIII, Sec. 808(b)(3), June 21, 1965, 79 Stat. 164; Pub. L. 94-202,

Sec. 10(a), Jan. 2, 1976, 89 Stat. 1141; Pub. L. 94-455, title XIX,

Sec. 1906(a)(55), (b) (13)(A), Oct. 4, 1976, 90 Stat. 1832, 1834; Pub.

L. 98-67, title II, Sec. 221(a), Aug. 5, 1983, 97 Stat. 395; Pub. L. 98-

213, Sec. 5(c), Dec. 8, 1983, 97 Stat. 1460; Pub. L. 98-369, div. B,

title VI, Secs. 2681(a), 2682(a), July 18, 1984, 98 Stat. 1172, 1174;

Pub. L. 99-514, title XVIII, Sec. 1879(i)(1), Oct. 22, 1986, 100 Stat.

2907; Pub. L. 100-418, title I, Sec. 1214(p)(1), Aug. 23, 1988, 102

Stat. 1159; Pub. L. 103-66, title XIII, Sec. 13227(e), Aug. 10, 1993,

107 Stat. 494; Pub. L. 103-465, title I, Sec. 136(b), Dec. 8, 1994, 108

Stat. 4841; Pub. L. 106-170, title V, Sec. 512(a), Dec. 17, 1999, 113

Stat. 1924; Pub. L. 106-200, title VI, Sec. 602(b), (c), May 18, 2000,

114 Stat. 305, 306; Pub. L. 107-147, title VI, Sec. 609(a), Mar. 9,

2002, 116 Stat. 60.)

27 CFR

Sec. 26.114 Permit to ship required.

Before liquors and articles of Puerto Rican manufacture, upon which

all internal revenue taxes have been paid or deferred as prescribed in

this subpart, may be shipped to the United States, a permit to ship,

Form 487B, must be obtained from the Secretary as provided in Sec. Sec.

26.115 and 26.116.

[T.D. 6551, 26 FR 1490, Feb. 22, 1961. Redesignated at 40 FR 16835, Apr.

15, 1975, and further redesignated and amended by T.D. ATF-459, 66 FR

38550, 38552, July 25, 2001]

Sec. 26.115 Application, Form 487B.

Application for permit to ship to the United States liquors and

articles of Puerto Rican manufacture on which all taxes have been paid

or deferred as prescribed in this subpart shall be made by the shipper

on Form 487B, in sextuple. Each Form 487B will be given a serial number,

by the applicant, beginning with ``1'' for the first day of January of

each year and running consecutively thereafter to December 31,

inclusive. This serial number will be prefixed by the last two digits of

the calendar year, e.g. ``61-1.'' All copies of the form shall be

delivered to the revenue agent for execution of his certification

thereon and forwarding of all copies to the Secretary within sufficient

time to allow for the issuance of the permit and customs inspection as

provided in Sec. 26.116.

[T.D. 6551, 26 FR 1490, Feb. 22, 1961. Redesignated at 40 FR 16835, Apr.

15, 1975, and further redesignated and amended by T.D. ATF-459, 66 FR

38550, 38552, July 25, 2001]

Sec. 26.116 Issuance of permit, Form 487B, and customs inspection.

If the application has been properly executed and the Secretary, or

his delegate, finds that all internal revenue taxes imposed under 26

U.S.C. 7652(a), have been computed under the provisions of this part and

have been paid or, pursuant to a sufficient bond, have been deferred

under the applicable provisions of this part, he will execute his permit

on all copies thereof, retain one copy of the form, return two copies to

the shipper, and send three copies to the district director of customs

in Puerto Rico. The shipper will submit the two copies of the Form 487B

to the district director of customs at least six hours prior to the

intended lading of the merchandise. The district director of customs

will then inspect the merchandise covered by the Form 487B after which

he will execute his certificate on each copy of Form 487B indicating all

exceptions. If discrepancies appear indicating differences between the

quantity covered by Form 487B and the quantity actually contained in the

shipment or the improper tax payment of the merchandise, he will

withhold release of the shipment and notify the Secretary of such

discrepancies. Thereupon, such discrepancies must be corrected in the

shipping documents and additional tax paid, if required, prior to

release of the merchandise. The district director of customs, upon

release of the merchandise for shipment, will retain one copy of the

Form 487B, return two copies to the shipper, and send two copies to the

district director of customs at the port of arrival in the United

States, one of which should be mailed and the other dispatched on the

vessel concerned for the guidance of the appropriate TTB officer who

will handle the cargo. After the shipment has been cleared by the district

director of customs in Puerto Rico, the shipper shall retain one copy of the

Form 487B and send one copy thereof, with other shipping documents, to

the district director of customs at the port of arrival.

[20 FR 6077, Aug. 20, 1955, as amended by T.D. 7006, 34 FR 2249, Feb.

15, 1969. Redesignated at 40 FR 16835, Apr. 15, 1975]

Sec. 26.117 Action by carrier.

The carrier of the merchandise specified on the Form 487B shall, at

the time of unlading at the port of arrival in the United States,

segregate and arrange the cases of liquors or articles for convenient

customs examination and will assume any expense incurred in connection

therewith.

Sec. 26.118 Inspection by district director of customs at port of arrival.

On receipt of properly executed Form 487B from the shipper and the

copies of Form 487B from the district director of customs in Puerto

Rico, the district director of customs at the port of arrival shall

inspect the merchandise to determine whether the quantity specified on

the Form 487B is contained in the shipment. He will then execute his

certificate on each copy of Form 487B received and indicate thereon any

exceptions found at the time of discharge. The statement of exceptions

should show the serial number of each case or other shipping container

which sustained a loss, the quantity of liquor reported shipped in such

container and the quantity lost. Losses occurring as the result of

missing bottles, cases, or other containers should be listed separately

from empty containers and containers which have sustained losses due to

breakage. Where the statement is made on the basis of bottles missing or

lost due to other cause, the number and size of bottles lost should be

shown. If the district director of customs finds that the full amount of

the taxes due has not been paid, he will require the difference due to

be paid prior to release of the merchandise in accordance with the

applicable provisions of this part. When the proper inspection of the

merchandise has been effected, and any additional taxes found to be due

on the liquors or articles collected, the merchandise will be released.

[20 FR 6077, Aug. 20, 1955, as amended by T.D. 7006, 34 FR 2249, Feb.

15, 1969. Redesignated at 40 FR 16835, Apr. 15, 1975. T.D. ATF-451, 66

FR 21669, May 1, 2001]

Sec. 26.119 Disposition of forms by district director of customs.

Two copies of the Form 487B will be forwarded to the appropriate TTB

officer, and one copy of the form will be retained by the district

director of customs and be available for inspection by appropriate TTB

officers.

[ T.D. ATF-451, 66 FR 21669, May 1, 2001]