Bailment Warehouses

06/5/09

TTB has received numerous inquiries concerning the March 11, 2009 posting of guidance relative to bailment warehouse agreements. As such, we are providing additional, clarifying guidance to address the questions we received.

While TTB does not approve contracts or business models as a general policy, we will offer guidance as to what is acceptable under the various laws and regulations we enforce.

In our view, private bailment warehouse agreements do not violate the consignment sales provisions of 27 U.S.C. 205(d) so long as they satisfy the following conditions:

  1. The industry member must retain title to the alcohol in the bailment warehouse until it is transferred to the wholesaler;
  2. The alcohol subject to the bailment agreement must be segregated from alcohol owned by the wholesaler;
  3. The wholesaler must place an order in writing or by telephone with an authorized representative of the industry member (who need not be on the warehouse premises but must be considered to have custody of the product) and such order must have been accepted by the industry member;
  4. The alcohol must be readily accessible to the industry member without consent of the wholesaler (in other words, the industry member must be free to sell the alcohol to other purchasers);
  5. The industry member and wholesaler must maintain adequate commercial records that show the transfers of the products to and from the bailment warehouse to the wholesaler’s inventory of products; and
  6. The transfer from the bailment warehouse to the wholesaler’s inventory of products must be a final bona fide sale.

Failure to satisfy these conditions could result in a violation of the consignment sales provisions of the Federal Alcohol Administration Act.

Also keep in mind that States may have their own regulations concerning bailment warehouse operations.

Please direct your questions to the Director, Trade Investigations Division at 202-927-1797.

Page last reviewed: March 26, 2018
Page last updated: June 5, 2009
Maintained by: Trade Investigations Division

Federal Alcohol Administration Act provision

27 United States Code, Chapter 8, Subchapter I, Section 205

(c) Commercial bribery

[It shall be unlawful ...] To induce through any of the following means, any trade buyer engaged in the sale of distilled spirits, wine, or malt beverages, to purchase any such products from such person to the exclusion in whole or in part of distilled spirits, wine, or malt beverages sold or offered for sale by other persons in interstate or foreign commerce, if such inducement is made in the course of interstate or foreign commerce, or if such person engages in the practice of using such means, or any of them, to such an extent as substantially to restrain or prevent transactions in interstate or foreign commerce in any such products, or if the direct effect of such inducement is to prevent, deter, hinder, or restrict other persons from selling or offering for sale any such products to such trade buyer in interstate or foreign commerce: (1) By commercial bribery; or (2) by offering or giving any bonus, premium, or compensation to any officer, or employee, or representative of the trade buyer.

Source: U.S. Code Online via GPO Access

Page last reviewed/updated: 09/04/2012

Federal Alcohol Administration Act provision

27 United States Code, Chapter 8, Subchapter I, Section 205

(d) Consignment sales

[It shall be unlawful ...] To sell, offer for sale, or contract to sell to any trade buyer engaged in the sale of distilled spirits, wine, or malt beverages, or for any such trade buyer to purchase, offer to purchase, or contract to purchase, any such products on consignment or under conditional sale or with the privilege of return or on any basis otherwise than a bona fide sale, or where any part of such transaction involves, directly or indirectly, the acquisition by such person from the trade buyer or his agreement to acquire from the trade buyer other distilled spirits, wine, or malt beverages--if such sale, purchase, offer, or contract is made in the course of interstate or foreign commerce, or if such person or trade buyer engages in such practice to such an extent as substantially to restrain or prevent transactions in interstate or foreign commerce in any such products or if the direct effect of such sale, purchase, offer, or contract is to prevent, deter, hinder, or restrict other persons from selling or offering for sale any such products to such trade buyer in interstate or foreign commerce: Provided, That this subsection shall not apply to transactions involving solely the bona fide return of merchandise for ordinary and usual commercial reasons arising after the merchandise has been sold.

Source: U.S. Code Online via GPO Access

Page last reviewed/updated: 09/04/2012

Federal Alcohol Administration Act provision

27 United States Code, Chapter 8, Subchapter I, Section 205

(a) Exclusive outlet

[It shall be unlawful ...] To require, by agreement or otherwise, that any retailer engaged in the sale of distilled spirits, wine, or malt beverages, purchase any such products from such person to the exclusion in whole or in part of distilled spirits, wine, or malt beverages sold or offered for sale by other persons in interstate or foreign commerce, if such requirement is made in the course of interstate or foreign commerce, or if such person engages in such practice to such an extent as substantially to restrain or prevent transactions in interstate or foreign commerce in any such products, or if the direct effect of such requirement is to prevent, deter, hinder, or restrict other persons from selling or offering for sale any such products to such retailer in interstate or foreign commerce.

Source: U.S. Code Online via GPO Access

Page last reviewed/updated: 09/04/2012