What is a TTB Transfer in Bond?
If you work in the alcohol manufacturing industry, you may have heard of a TTB "Transfer in Bond", or "TIB".
A Transfer in Bond means that alcoholic beverage product is being transferred between two manufacturing-tier TTB bonded facilities (regardless of whether either facility is exempt pursuant to the PATH Act of 2015), generally in bulk form, and without payment of tax.
Perhaps the most confusing part of a TTB Transfer in Bond is that Federal Excise Taxes are not imposed upon removal of the product from the initial bonded premises; the reason being is that the product is not considered to be "removed from bond" by virtue of the fact that it is being transferred to another bonded facility.
From a practical perspective, this becomes most relevant for Distilled Spirits Plants (aka "DSP's") which source bulk spirits, typically Grain Neutral Spirits ("GNS"), from other Distilled Spirits Plants. The specific language authorizing bond to bond transfers of distilled spirits is set forth in 26 U.S.C. Section 5212. Section 5212 states that “bulk distilled spirits on which the internal revenue tax has not been paid or determined as authorized by law may, under such regulations as the Secretary shall prescribe, be transferred in bond between bonded premises in any approved container. For the purposes of this chapter, the removal of bulk distilled spirits for transfer in bond between bonded premises shall not be construed to be a withdrawal from bonded premises.”
If you are a new DSP and seek to acquire bulk GNS via a Transfer in Bond, the shipping DSP will generally request a copy of an approved Transfer in Bond from TTB before releasing the product from its premises. This is typically because TTB could assert that the shipping DSP should be liable for the Federal Excise Tax on the product if it is removed from the bonded premises without a valid Transfer in Bond approved by TTB.
So how do you get an approved Transfer in Bond from TTB? The process is surprisingly quick and simple; the receiving DSP needs to file an amendment to their existing DSP Basic Permit to include the name, address, and permit/registry number of the shipping DSP, as well as the quantities that they seek to ship.
Lastly, when submitting a Transfer in Bond amendment application, keep in mind that the amount of product that the receiving DSP may receive depends on its TTB bond coverage (or lack thereof if operating without a bond pursuant to the PATH ACT exception). Keep in mind that despite the fact that the Tax Cuts and Jobs Act of 2017 reduced Federal Excise Taxes for the DSP's for the first 100,000 proof gallons removed per year, the reduced rate does not apply to calculating authorized transfers pursuant to a Transfer in Bond. In other words, the authorized shipments pursuant to a Transfer in Bond are still calculated under the $13.50 per proof gallon rate in determining bond coverage.