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:
- The industry member must retain title to the alcohol in the bailment warehouse until it is transferred to the wholesaler;
- The alcohol subject to the bailment agreement must be segregated from alcohol owned by the wholesaler;
- 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;
- 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);
- 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
- 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.