SEC. 5314. SPECIAL APPLICABILITY OF CERTAIN PROVISIONS. (a) PUERTO RICO. (1) APPLICABILITY.-The provisions of this subsection shall not apply to the Commonwealth of Puerto Rico unless the Legislative Assembly of the Commonwealth of Puerto Rico expressly consents thereto in the manner prescribed in the constitution of the Commonwealth of Puerto Rico for the enactment of a law. (2) IN GENERAL.-Distilled spirits for the purposes authorized in section 5214 (a) (2) and (3), denatured distilled spirits, and articles, as described in this paragraph, produced or manufactured in Puerto Rico, may be brought into the United States free of any tax imposed by section 5001 (a) (4) or 7652 (a) (1) for disposal under the same conditions as like spirits, denatured spirits, and articles, produced or manufactured in the United States; and the provisions of this chapter and regulations promulgated thereunder (and all other provisions of the internal revenue laws applicable to the enforcement thereof, including the penalties of special application thereto) relating to the production, bonded warehousing, and denaturation of distilled spirits, to the withdrawal of distilled spirits or denatured distilled spirits, and to the manufacture of articles from denatured distilled spirits, shall, insofar as applicable, extend to and apply in Puerto Rico in respect of (A) distilled spirits for shipment to the United States for the purposes authorized in section 5214 (a) (2) and (3); (B) distilled spirits for denaturation; (C) denatured distilled spirits for shipment to the United States; (D) denatured distilled spirits for use in the manufacture of articles for shipment to the United States; and (E) articles, manufactured from denatured distilled spirits, for shipment to the United States. (3) WITHDRAWALS AUTHORIZED BY PUERTO RICO.-Distilled spirits (including denatured distilled spirits) may be withdrawn from the bonded premises of a distilled spirits plant in Puerto Rico pursuant to authorization issued under the laws of the Commonwealth of Puerto Rico; such spirits so withdrawn, and products containing such spirits so withdrawn, may not be brought into the United States free of tax. (4) COSTS OF ADMINISTRATION.-Any expenses incurred by the Treasury Department in connection with the enforcement in Puerto Rico of the provisions of this subtitle and section 7652 (a), and regulations promulgated thereunder, shall be charged against and retained out of taxes collected under this title in respect of commodities of Puerto Rican manufacture brought into the United States. The funds so retained shall be deposited as a reimbursement to the appropriation to which such expenses were originally charged. (b) VIRGIN ISLANDS. (1) IN GENERAL.-Distilled spirits for the purposes authorized in section 5214 (a) (2) and (3), denatured distilled spirits, and articles, as described in this paragraph, produced or manufactured in the Virgin Islands, may be brought into the United States free of any tax imposed by section 7652 (b) (1) for disposal under the same conditions as like spirits, denatured spirits, and articles, produced or manufactured in the United States; and the provisions of this chapter and regulations promulgated thereunder (and all other provisions of the internal revenue laws applicable to the enforcement thereof, including the penalties of special application thereto) relating to the production, bonded warehousing, and denaturation of distilled spirits, to the withdrawal of distilled spirits or denatured distilled spirits, and to the manufacture of articles from denatured distilled spirits, shall, insofar as applicable, extend to and apply in the Virgin Islands in respect of (A) distilled spirits for shipment to the United States for the purposes authorized in section 5214 (a) (2) and (3); (B) distilled spirits for denaturation; (C) denatured distilled spirits for shipment to the United States; (D) denatured distilled spirits for use in the manufacture of articles for shipment to the United States; and (E) articles, manufactured from denatured distilled spirits, for shipment to the United States. (2) ADVANCE OF FUNDS.-The insular government of the Virgin Islands shall advance to the Treasury of the United States such funds as may be required from time to time by the Secretary or his delegate for the purpose of defraying all expenses incurred by the Treasury Department in connection with the enforcement in the Virgin Islands of paragraph (1) and regulations promulgated thereunder. The funds so advanced shall be deposited in a separate trust fund in the Treasury of the United States and shall be available to the Treasury Department for the purposes of this subsection. (3) REGULATIONS ISSUED BY VIRGIN ISLANDS.-The Secretary or his delegate may authorize the Governor of the Virgin Islands, or his duly authorized agents, to issue or adopt such regulations, to approve such bonds, and to issue, suspend, or revoke such permits, as are necessary to carry out the provisions of this subsection. When regulations have been issued or adopted under this paragraph with concurrence of the Secretary or his delegate he may exempt the Virgin Islands from any provisions of law and regulations otherwise made applicable by the provisions of paragraph (1), except that denatured distilled spirits, articles, and distilled spirits for taxfree purposes which are brought into the United States from the the Virgin Islands under the provisions of this subsection shall in all respects conform to the requirements of law and regulations imposed on like products of domestic manufacture. SEC. 5315. STATUS OF CERTAIN DISTILLED SPIRITS ON JULY 1, 1959. (a) IN REGISTERED DISTILLERIES, FRUIT DISTILLERIES, AND INDUSTRIAL ALCOHOL PLANTS.-All distilled spirits which, at the close of June 30, 1959, are in registered distilleries, registered fruit_distilleries, and industrial alcohol plants (including spirits received for redistillation) and which have not been entered for deposit in storage in internal revenue bond or for withdrawal (including transfer or withdrawal for denaturation) as provided by law, shall be treated as if in the process of production in a distilled spirits plant. (b) PRODUCED AT REGISTERED DISTILLERIES, FRUIT DISTILLERIES, AND INDUSTRIAL ALCOHOL PLANTS.-All distilled spirits produced at registered distilleries, registered fruit distilleries, or industrial alcohol plants, which before July 1, 1959, have been entered for deposit in storage in internal revenue bond (including distilled spirits withdrawn for denaturation), and which immediately prior to such date are in registered distilleries, registered fruit distilleries, industrial alcohol plants, internal revenue bonded warehouses, industrial alcohol bonded warehouses, industrial alcohol denaturing plants, and distillery denaturing bonded warehouses, or in transit thereto, shall be stored, transferred, withdrawn, and used under the same conditions as like distilled spirits or denatured distilled spirits produced in a distilled spirits plant. (c) WITHDRAWN FROM CUSTOMS CUSTODY.-All imported distilled spirits which before July 1, 1959, have been withdrawn from customs custody without payment of the internal revenue tax for transfer to an industrial alcohol plant, industrial alcohol bonded warehouse or industrial alcohol denaturing plant, and which immediately prior to such date are in registered distilleries, registered fruit distilleries, industrial alcohol plants, internal revenue bonded warehouses, industrial alcohol bonded warehouses, and industrial alcohol denaturing plants, or in transit thereto, shall be stored, transferred, withdrawn, and used under the same conditions as like spirits withdrawn from customs without payment of tax and transferred to the bonded premises of a distilled spirits plant. (d) WITHDRAWN FREE OF TAX.-Distilled spirits which before July 1, 1959, have been withdrawn free of tax for purposes similar to those authorized under section 5214 (a) (1), (a) (2), or (a) (3), as provided by law, by any person holding a permit for such withdrawal, and which immediately prior to such date are lawfully in the possession of, or in transit to, any person holding a permit to procure or use distilled spirits (including specially denatured distilled spirits) free of tax or to deal in or recover specially denatured distilled spirits, shall be treated as if withdrawn from the bonded premises of a distilled spirits plant under the applicable provisions of section 5214 (a) (1), (a) (2), or (a) (3). (e) WITHDRAWN FOR USE IN THE PRODUCTION OF WINE.-Distilled spirits which before July 1, 1959, have been withdrawn without payment of tax by the proprietor of a bonded wine cellar, as authorized by law, for use in the production of wine, and which before such date had not been used in the production of wine, shall be considered for the purposes of section 5373 the same as if produced in a distilled spirits plant and withdrawn under the provisions of section 5214 (a) (5). Any person establishing premises for the production, blending, cellar treatment, storage, bottling, packaging, or repackaging of untaxpaid wine (other than wine produced exempt from tax under section 5042), including the use of wine spirits in wine production, shall, before commencing operations, make application to the Secretary or his delegate and file bond and receive permission to operate. Such premises shall be known as "bonded wine cellars"; except that any such premises engaging in production operations may, in the discretion of the Secretary or his delegate, be designated as a "bonded winery". SEC. 5352. TAXPAID WINE BOTTLING HOUSE. Any person bottling, packaging, or repackaging taxpaid wines at premises other than the bottling premises of a distilled spirits plant shall, before commencing such operations, make application to the Secretary or his delegate and receive permission to operate. Such premises shall be known as "taxpaid wine bottling houses." SEC. 5353. BONDED WINE WAREHOUSE. Any responsible warehouse company or other responsible person may, upon filing application with the Secretary or his delegate and consent of the proprietor and the surety on the bond of any bonded wine cellar, under regulations prescribed by the Secretary or his delegate, establish on such premises facilities for the storage of wines and allied products for credit purposes, to be known as a "bonded wine warehouse". The proprietor of the bonded wine cellar shall remain responsible in all respects for operations in the warehouse and the tax on the wine or wine spirits stored therein. SEC. 5354. BOND. The bond for a bonded wine cellar shall be in such form, on such conditions, and with such adequate surety, as regulations issued by the Secretary or his delegate shall prescribe, and shall be in a penal sum not less than the tax on any wine or wine spirits possessed or in transit at any one time, but not less than $1,000 nor more than $50,000; except that where the tax on such wine and on such wine spirits exceeds $250,000, the penal sum of the bond shall be not more than $100,000. Where additional liability arises as a result of deferral of payment of tax payable on any return, the Secretary or his delegate may require the proprietor to file a supplemental bond in such amount as may be necessary to protect the revenue. The liability of any person on any such bond shall apply whether the transaction or operation on which the liability of the proprietor is based occurred on or off the proprietor's premises. SEC. 5355. GENERAL PROVISIONS RELATING TO BONDS The provisions of section 5551 (relating to bonds) shall be applicable to the bonds required under section 5354. SEC. 5356. APPLICATION. The application required by this part shall disclose, as regulations issued by the Secretary or his delegate shall provide, such information as may be necessary to enable the Secretary or his delegate to determine the location and extent of the premises, the type of operations to be conducted on such premises, and whether the operations will be in conformity with law and regulations. SEC. 5357. PREMISES. Bonded wine cellar premises, including noncontiguous portions thereof, shall be so located, constructed, and equipped, as to afford adequate protection to the revenue, as regulations prescribed by the Secretary or his delegate may provide. PART II-OPERATIONS Sec. 5361. Bonded wine cellar operations. Sec. 5362. Removals of wine from bonded wine cellars. Sec. 5364. Standard wine premises. Sec. 5365. Segregation of operations. Sec. 5366. Supervision. Sec. 5367. Records. Sec. 5368. Gauging, marking, and stamping. Sec. 5369. Inventories. Sec. 5370. Losses. Sec. 5371. Insurance coverage, etc. Sec. 5372. Sampling. Sec. 5373. Wine spirits. SEC. 5361. BONDED WINE CELLAR OPERATIONS. In addition to the operations described in section 5351, the proprietor of a bonded wine cellar may, subject to regulations prescribed by the Secretary or his delegate, on such premises receive unmerchantable taxpaid wine for return to bond, reconditioning, or destruction; prepare for market and store commercial fruit products and by-products not taxable as wines; produce or receive distilling material or vinegar stock; produce (with or without added wine spirits, and without added sugar) or receive on standard wine premises only, subject to tax as wine but not for sale or consumption as beverage wine, (1) heavy bodied blending wines and Spanish-type blending sherries, and (2) other wine products made from natural wine for nonbeverage pur |