poses; and such other operations as may be conducted in a manner that will not jeopardize the revenue or conflict with wine operations.

SEC. 5362. REMOVALS OF WINE FROM BONDED WINE CELLARS.

(a) WITHDRAWALS ON DETERMINATION OF TAX.-Wine may be withdrawn from bonded wine cellars on payment or determination of the tax thereon, under such regulations as the Secretary or his delegate shall prescribe.

(b) TRANSFERS OF WINE BETWEEN BONDED WINE CELLARS.Wine on which the internal revenue tax has not been paid or determined may, under such regulations as the Secretary or his delegate shall prescribe, be transferred in bond between bonded wine cellars. For the purposes of this chapter, the removal of wine for transfer in bond between bonded wine cellars shall not be construed to be a removal for consumption or sale.

(c) WITHDRAWALS OF WINE FREE OF TAX OR WITHOUT PAYMENT OF TAX.-Wine on which the tax has not been paid or determined may, under such regulations and bonds as the Secretary or his delegate may deem necessary to protect the revenue, be withdrawn from bonded wine cellars

(1) without payment of tax for export by the proprietor or by any authorized exporter;

(2) without payment of tax for transfer to any foreign-trade zone; (3) without payment of tax for use of certain vessels and aircraft as authorized by law;

(4) without payment of tax for transfer to any class 6 customs manufacturing warehouse;

(5) without payment of tax for use in the production of vinegar; (6) without payment of tax for use in distillation in any distilled spirits plant authorized to produce distilled spirits;

(7) free of tax for experimental or research purposes by any scientific university, college of learning, or institution of scientific research;

(8) free of tax for use by or for the account of the proprietor or his agents for analysis or testing, organoleptic or otherwise; and (9) free of tax for use by the United States or any agency thereof, and for use for analysis, testing, research, or experimentation by the governments of the several States and Territories and the District of Columbia or of any political subdivision thereof or by any agency of such governments. No bond shall be required of any such government or agency under this paragraph.

SEC. 5363. TAXPAID WINE BOTTLING HOUSE OPERATIONS.

In addition to the operations described in section 5352, the proprietor of a taxpaid wine bottling house may, subject to regulations issued by the Secretary or his delegate, on such premises mix wine of the same kind and taxable grade to facilitate handling; preserve, filter, or clarify wine; and conduct operations not involving wine where such operations will not jeopardize the revenue or conflict with wine operations. The subchapter shall apply to any wine received on the bottling premises of any distilled spirits plant for bottling, packaging, or repackaging, and to all operations relative thereto. Sections 5021, 5081, and 5082 shall not apply to the mixing or treatment of taxpaid wine

under this section.

SEC. 5364. STANDARD WINE PREMISES.

Except as otherwise specifically provided in this subchapter, no proprietor of a bonded wine cellar or taxpaid wine bottling house engaged in producing, receiving, storing or using any standard wine, shall produce, receive, store, or use any wine other than standard wine. The limitation contained in the preceding sentence shall not prohibit the production or receipt of high fermentation wines, distilling material, or vinegar stock in any bonded wine cellar.

SEC. 5365. SEGREGATION OF OPERATIONS.

The Secretary or his delegate may require by regulations such segregation of operations within the premises, by partitions or otherwise, as may be necessary to prevent jeopardy to the revenue, to prevent confusion between untaxpaid wine operations and such other operations as are authorized in this subchapter, or to prevent substitution with respect to the several methods of producing effervescent wines. SEC. 5366. SUPERVISION.

The Secretary or his delegate may by regulations require that operations at a bonded wine cellar or taxpaid wine bottling house be supervised by an internal revenue officer where necessary for the protection of the revenue or for the proper enforcement of this subchapter.

SEC. 5367. RECORDS.

The proprietor of a bonded wine cellar or a taxpaid wine bottling house shall keep such records and file such returns, in such form and containing such information, as the Secretary or his delegate may by regulations provide.

SEC. 5368. GAUGING, MARKING, AND STAMPING.

(a) GAUGING AND MARKING.-All wine or wine spirits shall be locked, sealed, and gauged, and shall be marked, branded, labeled, or otherwise identified, in such manner as the Secretary or his delegate may by regulations prescribe.

(b) STAMPING.-Wines shall be removed in such containers (including vessels, vehicles, and pipelines) bearing such marks, labels, and stamps, evidencing compliance with this chapter, as the Secretary or his delegate may by regulations prescribe.

SEC. 5369. INVENTORIES.

Each proprietor of premises subject to the provisions of this subchapter shall take and report such inventories as the Secretary or his delegate may by regulations prescribe.

SEC. 5370. LOSSES.

(a) GENERAL.-No tax shall be collected in respect of any wines lost or destroyed while in bond, except that tax shall be collected

(1) THEFT. In the case of loss by theft, unless the Secretary or his delegate shall find that the theft occurred without connivance, collusion, fraud, or negligence on the part of the proprietor or other person responsible for the tax, or the owner, consignor, consignee, bailee, or carrier, or the agents or employees of any of them; and

(2) VOLUNTARY DESTRUCTION.In the case of voluntary destruction, unless the wine was destroyed under Government supervision, or on such adequate notice to, and approval by, the Secretary or his delegate as regulations shall provide.

(b) PROOF OF Loss.-In any case in which the wine is lost or destroyed, whether by theft or otherwise, the Secretary or his delegate may require by regulations the proprietor of the bonded wine cellar or other person liable for the tax to file a claim for relief from the tax and submit proof as to the cause of such loss. In every case where it appears that the loss was by theft, the burden shall be on the proprietor or other person liable for the tax to establish to the satisfaction of the Secretary or his delegate, that such loss did not occur as the result of connivance, collusion, fraud, or negligence on the part of the proprietor, owner, consignor, consignee, bailee, or carrier, or the agents or employees of any of them.

SEC. 5371. INSURANCE COVERAGE, ETC.

Any remission, abatement, refund, or credit of, or other relief from, taxes on wines or wine spirits authorized by law shall be allowed only to the extent that the claimant is not indemnified or recompensed for the tax.

SEC. 5372. SAMPLING.

Under regulations prescribed by the Secretary or his delegate, wine may be utilized in any bonded wine cellar for testing, tasting, or sampling, free of tax.

SEC. 5373. WINE SPIRITS.

(a) IN GENERAL.-The wine spirits authorized to be used in wine production shall be brandy or wine spirits produced in a distilled spirits plant (with or without the use of water to facilitate extraction and distillation) exclusively from fresh or dried fruit, or their residues, or the wine or wine residue therefrom (except that where, in the production of natural wine, sugar has been used, the wine or the residuum thereof may not be used, if the unfermented sugars therein have been refermented). Such wine spirits shall not be reduced with water from distillation proof, nor be distilled, unless regulations otherwise provide, at less than 140 degrees of proof (except that commercial brandy aged in wood for a period of not less than 2 years, and barreled at not less than 100 degrees of proof, shall be deemed wine spirits for the purpose of this subsection).

(b) WITHDRAWAL OF WINE SPIRITS.

(1) The proprietor of any bonded wine cellar may withdraw and receive wine spirits without payment of tax from the bonded premises of any distilled spirits plant, or from any bonded wine cellar as provided in paragraph (2), for use in the production of natural wine, for addition to concentrated or unconcentrated juice for use in wine production, or for such other uses as may be authorized in this subchapter.

(2) Wine spirits so withdrawn, and not used in wine production or as otherwise authorized in this subchapter, may, as provided by regulations prescribed by the Secretary or his delegate, be transferred to the bonded premises of any distilled spirits plant or bonded wine cellar, or may be taxpaid and removed as provided by law.

(3) On such use, transfer, or taxpayment, the Secretary or his delegate shall credit the proprietor with the amount of wine spirits so used or transferred or taxpaid and, in addition, with such portion of wine spirits so withdrawn as may have been lost either in transit or on the bonded wine cellar premises, to the extent allowable under

section 5008 (a). Where the proprietor has used wine spirits in actual wine production but in violation of the requirements of this subchapter, the Secretary or his delegate shall also extend such credit to the wine spirits so used if the proprietor satisfactorily shows that such wine spirits were not knowingly used in violation of law.

(4) Suitable samples of brandy or wine spirits may, under regulations prescribed by the Secretary or his delegate, be withdrawn free of tax from the bonded premises of any distilled spirits plant, bonded wine cellar, or authorized experimental premises, for analysis or testing.

(c) DISTILLATES CONTAINING ALDEHYDES.-When the Secretary or his delegate deems such removal and use will not jeopardize the revenue nor unduly increase administrative supervision, distillates containing aldehydes may, under such regulations as the Secretary or his delegate may prescribe, be removed without payment of tax from the bonded premises of a distilled spirits plant to an adjacent bonded wine cellar and used therein in fermentation of wine to be used as distilling material at the distilled spirits plant from which such unfinished distilled spirits were removed.

PART III-CELLAR TREATMENT AND CLASSIFICATION OF WINE

Sec. 5381. Natural wine.

Sec. 5382. Cellar treatment of natural wine.

Sec. 5383. Amelioration and sweetening limitations for natural grape

wines.

Sec. 5384. Amelioration and sweetening limitations for natural fruit and berry wines.

Sec. 5385. Specially sweetened natural wines.

Sec. 5386. Special natural wines.

Sec. 5387. Agricultural wines.

Sec. 5388. Designation of wines.

SEC. 5381. NATURAL WINE.

Natural wine is the product of the juice or must of sound, ripe grapes or other sound, ripe fruit, made with such cellar treatment as may be authorized under section 5382 and containing not more than 21 percent by weight of total solids. Any wine conforming to such definition except for having become substandard by reason of its condition shall be deemed not to be natural wine and shall, unless the condition is corrected, be removed in due course for distillation, destroyed under Government supervision, or transferred to premises in which wines other than natural wine may be stored or used.

SEC. 5382. CELLAR TREATMENT OF NATURAL WINE.

(a) GENERAL.-Proper cellar treatment of natural wine constitutes. those practices and procedures in the United States and elsewhere, whether historical or newly developed, of using various methods and materials to correct or stabilize the wine, or the fruit juice from which it is made, so as to produce a finished product acceptable in good commercial practice. Where a particular treatment has been used in customary commercial practice, it shall continue to be recognized as a proper cellar treatment in the absence of regulations prescribed by the Secretary or his delegate finding such treatment not to be a proper cellar treatment within the meaning of this subsection.

(b) SPECIFICALLY AUTHORIZED TREATMENTS.-The practices and procedures specifically enumerated in this subsection shall be deemed proper cellar treatment for natural wine:

(1) The preparation and use of pure concentrated or unconcentrated juice or must. Concentrated juice or must reduced with water to its original density or to not less than 22 degrees Brix or unconcentrated juice or must reduced with water to not less than 22 degrees Brix shall be deemed to be juice or must, and shall include such amounts of water to clear crushing equipment as regulations prescribed by the Secretary or his delegate may provide.

(2) The addition to natural wine, or to concentrated or unconcentrated juice or must, from one kind of fruit, of wine spirits (whether or not taxpaid) distilled in the United States from the same kind of fruit; except that (A) the wine, juice, or concentrate shall not have an alcoholic content in excess of 24 percent by volume after the addition of wine spirits, and (B) in the case of still wines, wine spirits may be added only to natural wines of the winemaker's own production made without added sugar or reserved as provided in sections 5383 (b) and 5384 (b).

(3) Amelioration and sweetening of natural grape wines in accordance with section 5383.

(4) Amelioration and sweetening of natural wines from fruits other than grapes in accordance with section 5384.

(5) In the case of effervescent wines, such preparations for refermentation and for dosage as may be acceptable in good commercial practice, but only if the alcoholic content of the finished product does not exceed 14 percent by volume.

(6) The natural darkening of the sugars or other elements in juice, must, or wine due to storage, concentration, heating processes, or natural oxidation.

(7) The blending of natural wines with each other or with heavybodied blending wine or with concentrated or unconcentrated juice, whether or not such juice contains wine spirits, if the wines, juice, or wine spirits are from the same kind of fruit.

(8) Such use of acids to correct natural deficiencies and stabilize the wine as may be acceptable in good commercial practice.

(c) OTHER AUTHORIZED TREATMENT.-The Secretary or his delegate may by regulations prescribe limitations on the preparation and use of clarifying, stabilizing, preserving, fermenting, and corrective methods or materials, to the extent that such preparation or use is not acceptable in good commercial practice.

SEC. 5383. AMELIORATION AND SWEETENING LIMITATIONS FOR NATURAL GRAPE WINES.

(a) SWEETENING OF GRAPE WINES.-Any natural grape wine made under this section may, if not in reserve inventory as hereinafter provided, be sweetened after fermentation and before taxpayment with pure dry sugar if the sugar solids content of the finished wine does not exceed 10 percent of the weight of the wine and the alcoholic content of the finished wine after sweetening is less than 14 percent by volume. (b) HIGH ACID WINES.

(1) Any natural grape wine of a winemaker's own production may, under this subsection, be ameliorated to correct high acid