Rev. Ruling 60-44
Advice has been requested whether drawback may be claimed on a case of distilled spirits lost under the circumstances described below.
A case of distilled spirits, while being laden for use as ship's supplies, was accidentally dropped over the side of the vessel and not recovered. The exporter contended that the fact that the process of lading was underway is evidence of the intention to export and that the case of spirits should be considered as having been exported in view of section 252.18 of the Drawback on Liquors Exported Regulations.
Section 309(b) of the Tariff Act of 1930, as amended, 19 U.S.C. 1309, provides that articles of domestic manufacture, laden as supplies upon certain categories of vessels, shall be considered to be exported for drawback purposes. See also section 317(b) of the Tariff Act of 1930, as amended, 17 U.S.C. 1317(b).
Section 5062 of the Internal Revenue Code of 1954 provides in part that on the exportation of distilled spirits manufactured or produced in the United States on which an internal revenue tax has been paid or determined, and which are contained in bottles packed in cases, there shall be allowed, under regulations prescribed by the Secretary of the Treasury or his delegate, a drawback equal in amount to the tax found to have been paid or determined on such distilled spirits.
Section 252.18 of the regulations defines an exportation as a severance of goods from the mass of things belonging to the United States with the intention of uniting them to the mass of things belonging to some foreign country.
Section 252.3 of the regulation provides in part that distilled spirits eligible for drawback of tax when exported shall be considered to be exported for the purpose of drawback of taxes when laden as supplies on vessels.
Section 252.18 of the regulations, in defining an exportation establishes the standard by which the export character of a distilled spirits shipment can be judged or determined. Section 252.3 of the regulations determines when an export shipment, as defined in section 252.18 of the regulations, is actually exported for purposes of drawback.
Accordingly, distilled spirits are not considered to be exported for the purpose of drawback until such spirits are actually laden as supplies on vessels. A case of distilled spirits which, through accident or otherwise, was dropped over the side of a vessel and, therefore, it is held that it cannot be considered eligible for drawback of tax.
26 U.S.C. 5062; 27 CFR 252.3 (27 CFR 252.21)