STATEMENT OF WILLIAM J. SCHIEFFELIN III, CHAIRMAN, SCHIEFFELIN & C.O

NEW YORK, N.Y.

This Statement is submitted by Schieffelin and Company, New York, New York, in support of the basic purposes of the Trade Reform Act of 1973, H. R. 10710 and specifically to endorse authority contained in Section 102, "Nontariff barriers to and other distortions of trade."

Schieffelin and Company has for almost 200 years engaged in the business of importing and selling wines and spirits throughout the United States. Accordingly, we have been seriously affected by the so-called Wine Gallon/Proof Gallon method of assessing duty and Internal Revenue taxes on imported bottled distilled spirits since 1868.

Domestic and imported distilled beverages are subject to the U.S. internal revenue tax of $10.50 on each proof gallon, or wine gallon, when below proof.1 Both the internal revenue tax and the duty are calculated on a proof-gallon basis if the product imported for consumption is 100 proof or above. A proportionate amount of the base tax and duty is added when the product is above proof-100 proof. Each gallon (wine gallon) imported below 100 proof is subject to the internal revenue tax of $10.50 and is also dutiable at the rate specified "per gallon" in the TSUSA.2

The dual basis of taxation recognized in Section 5001 (1), i.e.: wine gallonproof gallon, opreates inequitably as between bottled domestic and bottled imported distilled spirits. The burden imposed upon imported bottled spirits is readily apparent when one considers the practice of the domestic industry and the times at which the tax attaches to domestic and imported spirits..

The tax on domestically produced spirits is levied at the time of their withdrawal from bond; on the other hand the tax and duty on imported spirits are

126 USCA 5001 (A) (1)—"There is hereby imposed on all distilled spirits in bond or produced in or imported into the United States an internal revenue tax at the rate of $10.50 on each proof gallon or wine gallon when below proof and a proportionate tax at a like rate on all fractional parts of such proof r wine galln.'

2 The term "proof" refers to the ethyl alcohol content of a liquid at 60 degrees Fahrenheit stated as twice the percent of ethyl alcohol by volume, e.g., a gallon of pure ethyl alcohol is 200 proof and is equivalent to 2 proof gallons. A "proof gallon" is the equivalent of a U.S. gallon containing 50% of ethyl alcohol by volume, i.e., 100 proof. A "wine gallon" is a standard U.S. gallon of liquid measure equivalent to a volume of 231 cubic inches. The term is normally applied to spirits that are less than 100 proof, i.e., less than 50% alcohol by volume.