Rev. Ruling 55-324

Domestic Distilled Spirits may be Reimported for the Purpose of Supplying Diplomats of Foreign Countries or Foreign Military Missions

Advice has been requested whether domestic distilled spirits withdrawn for exportation free of tax or with benefit of drawback may be reimported and withdrawn from customs custody without payment of duty (equal to the internal revenue tax) for the purpose of supplying diplomats of foreign countries, or foreign military missions in the United States under section 196a of Title 19 of the United States Code.

Section 5648(b) of the Internal Revenue Code of 1954 reads as follows:

Every person who intentionally relands within the jurisdiction of the United States any distilled spirits which have been shipped for exportation under the provisions of this chapter, or who receives such relanded distilled spirits, and every person who aids or abets in such relanding or receiving of such spirits, shall be fined not exceeding $5,000 and imprisoned not more than 3 years; and all distilled spirits so relanded, together with the vessel from which the same was relanded, within the jurisdiction of the United States, and all vessels, vehicles, or aircraft used in relanding and removing such distilled spirits, shall be forfeited to the United States.

The term "withdrawal for exportation" in section 5648(b) of the Code is interpreted to mean a withdrawal with the intention that such spirits be severed from the mass of goods in this country and entered into and flow in commerce in the foreign country. Similarly, "exportation" is not complete until the act of importation is effected in the foreign country. "Intentionally relands" is construed as meaning the bringing back to this country of goods that either have not been exported or were not withdrawn for valid exportation. Therefore, it would appear that a valid withdrawal for exportation which is followed by a completed exportation would not be subject to the prohibition against relanding contained in the above section of the Code, and would entitle the spirits, when reimported, to the advantages of the provisions of section 1201 of Title 19 of the U.S. Code.Since the validity of the withdrawal for exportation depends upon the intention of the exporter, no hard and fast rule may be laid down as to what does or does not establish such intent. Each reimportation of distilled spirits previously exported must rest upon its own facts. If it can be shown that the so-called "exportation" was merely to evade, defeat, or delay the payment of tax by giving the product a temporary situs in a foreign country, then, upon relanding, the goods and persons concerned would be subject to liability under section 5648(b) of the Internal Revenue Code of 1954 (section 2885(d)(2) of the Internal Revenue Code of 1939). Compare Flagler v. Kidd, 78 Fed. 341.

Where there has been a valid withdrawal for exportation followed by a completed exportation as to a certain lot of spirits and such spirits are reimported under the Tariff Act of 1930 and placed in a Class 2 customs warehouse, they may be withdrawn free of duty by foreign persons enjoying diplomatic or consular status, or by military personnel of foreign countries with the provisions of section 196a of Title 19 of the U.S. Code in the same manner that such persons can secure spirits of foreign origin from such warehouses free of duty.

26 U.S.C. 5648