Rev Ruling 54-416

Labeling of Distilled Spirits

Advice is requested whether "Sour Mash Bourbon Whisky" distilled in Illinois according to purchaser's specifications may be sold to a Kentucky distiller for redistillation without substantial change, and, after storage and bottling, labeled as "Kentucky Bourbon Whisky" without indication of Illinois origin and with the redistiller's name and address stated on the label as the name and address of the distiller.

A distiller in the State of Kentucky desires to purchase for redistillation "Sour Mash Bourbon Whisky" produced by a distiller in Illinois according to his (the purchaser's) specifications. Upon receipt of the whisky by the Kentucky distiller, it would be redistilled to conform to the specifications of his own whisky after which the whisky would be stored and subsequently bottled as a Kentucky sour mash bourbon whisky distilled by the purchaser. The labels to be placed on the bottled whisky would contain no reference to its Illinois origin.

Section 2883(e) of the Internal Revenue Code of 1939 provides in part that distilled spirits may be transferred from a distillery or an internal revenue bonded warehouse to any distillery for redistillation upon the showing of the need therefor.

Section 183.436 of Regulations 4 requires that a special application must be submitted to the Assistant Regional Commissioner, Alcohol and Tobacco Tax, for permission to receive spirits for redistillation. Such application must contain a statement of condition and necessity for redistillation of the spirits. Section 183.437 of Regulations 4 provides that the Assistant Regional Commissioner may authorize the removal of the spirits if, in his opinion, the redistillation of the spirits is justified. This requirement that spirits may be removed for redistillation only upon approval of an application stating the condition and necessity for redistillation stems from the provisions of section 2883(e) of the Code. It is the intent of this section that withdrawal for redistillation should be authorized only in the comparatively few instances where the distiller could show a legitimate necessity for such withdrawal.

It is held that section 183.437 of Regulation 4 authorizes the denial of a request for redistillation where the redistillation is desired for labeling purposes to conceal the true origin of the product and that it is not the intent of the law and regulations that distilled spirits be removed for redistillation for such purpose.

Section 21, class 8(c) of Regulations No. 5, provides as follows:

Geographical names that are not names for distinctive types of distilled spirits, and that have not become generic, shall not be applied to distilled spirits produced in any other place than the particular place or region indicated in the name. The following are examples of geographical names for distilled spirits that are not generic and are not names of distinctive types of distilled spirits: Cognac, Armagnac, Greek Brandy, Pisco Brandy, Jamaica Rum, Kentucky Straight Bourbon Whiskey, Maryland Straight Rye Whiskey.

Section 35(e) of Regulations No. 5 provides that labels of whisky and straight whisky shall disclose the State of distillation of such whisky, if such whisky is not distilled in the State given in the address on the label. This section further provides that the brand label shall show the State of distillation in all cases where the Assistant Regional Commissioner finds that without such statement the label is misleading as to the State of actual distillation.

Section 21, class 8, of Regulations No. 5 prohibits distilled spirits produced outside of the State of Kentucky from being labeled as "Kentucky Straight Bourbon Whisky." Also, section 35(e) of Regulations No. 5 requires the appearance on the label of the statement "Distilled in Illinois," with the name and address of the Kentucky purchaser stated as the bottler of the product. In the instant case, the product for all practical purposes was produced in Illinois and the Illinois distiller (rather than Kentucky distiller) is the "distiller" insofar as these
regulations are concerned.

Under the provisions of the said Regulations 4 and Regulations No. 5, "Sour Mash Bourbon Whisky" may not be produced by a distiller in Illinois and transferred to distiller in Kentucky for redistillation without substantial change and, after storage and bottling, be labeled as "Kentucky Bourbon Whisky" without identification of Illinois origin and with the redistiller's name and address stated on the label as the name and address of the distiller.

26 U.S.C. 2883(e) (Internal Revenue Code of 1939); 26 CFR 183.436 (27 CFR 201.273)