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It is highly problematical whether this section of the bill would afford any real relief to the cooperage industry, but it seems quite certain that many evils would result if such a wide distribution of bulk whisky as the bill authorizes were to be permitted. It would be a stupendous task for the Alcohol Tax Unit to attempt to regulate the disposition of bulk whisky, if wholesalers, hotels, taverns, and private individuals were permitted to acquire whisky in this manner. The possibility of abuse, as outlined by the spokesmen of the Treasury Department and Mr. Choate, head of the Federal Alcohol Control Administration, are quite apparent.
It is a well-known fact that the activities of the bootlegger and the illicit distiller at the present time are centered largely in the manufacture and sale of bulk quantities of liquor. With such a large number of persons authorized to make purchases of whisky in bulk, it is quite apparent that a great impetus would be given to the business of the illicit distiller and the bootlegger.
As a practical matter there is no limit at the present time to the number of persons entitled to a permit to engage in the rectifying industry. Any person of good moral character and proper financial standing can secure such a permit. The committee has very wisely limited the right to secure a permit to such class of persons. Accordingly, if any proper wholesaler desires to purchase and bottle bulk whisky he may secure a permit therefor, and there would seem to be no occasion for throwing the gates wide open as this legislation proposes to do.
With respect to the labeling and advertising provisions contained in section 5 of the bill, it is strongly urged by this league that this entire question be made a matter of regulation by the Administrator without any specific provision being made in the statute, and furthermore that provision be made so that such regulations shall be drafted and adopted by the Administrator only after public hearings have been held, so that the members of the industry may be afforded an opportunity to be heard in advance of the promulgation of regulations.
Directly in this connection the bill in its present form contains a provision, which appears to be entirely superfluous, and which we believe was included through inadve”tence. Section 5 (e), lines 8 to 13, on page 17, and section 5 (g), lines 16 to 21 on page 20 of the bill, provides that labels and advertising matter covering distilled spirits produced by blending or rectification, must bear a legend stating whether neutral spirits have been used in the production thereof, and informing the consumer of the percentage of neutral spirits so used, and of the name of the community from which such neutral spirits have been distilled.
Section 8 (a) (6) on page 28 of the bill, in defining the term " distilled spirits" uses language sufficiently broad to include cordials, liqueurs, and similar products of rectification. The man in the street knows that cordials, liqueurs, etc., are manufactured by the mixture of various substances with alcohol. All that he is interested in knowing is the alcoholic content of such products. He knows full well that these products contain neutral spirits (alcohol) because that is the precise manner in which the product is manufactured. It would, therefore, be surplusage to require that the label on cordials, liqueurs, and similar products should contain, in addition to the alcoholic content, a further statement that neutral spirits had been used in the manufacture of the beverage.
In addition to the fact that the requirements of the bill, as now drafted, are entirely unnecessary with respect to labels and advertising matter of liqueurs, cordials, etc. (and I may say that no such requirements were ever contained in the misbranding and labeling regulations of the F. A. O. A.), there is a real practical matter involved here of vital interest to the members of the rectifying industry. These members have suffered considerable loss through the numerous changes of the label regulations of the Federal Alcohol Control Administration, which necessitated the scrapping of huge quantities of labels, which did not conform in every respect to such label regulations. At the time of the Schechter decision real progress had been made in effecting a stable set of regulations, and the rectifiers now have on hand many thousands of dollars worth of labels which were prepared in accordance with F. A. C. A. regulations. As I have just stated, these regulations did not require a rectifier to make a statement that neutral spirits were contained in any products except whisky. Accordingly, if this bill is enacted into law, these vast supplies of labels will become obsolete and the rectifier is again faced with huge losses through the scrapping of labels. And this without any offsetting
advantage whatever to either the Government or the consuming public, because the additional matter on the label which the bill seeks to require will not be of interest to either.
We believe the foregoing is a typical example of the dangers which result from covering the subject of labeling and advertising by specific statutory enactment. It is believed that these questions should be handled entirely by regulation, so that sufficient flexibility may be obtained.
In addition to the foregoing we wish to submit herewith copies of telegrams pertaining to the provisions of this bill received by the league from the Rectifiers and Blenders Association of New Jersey, Inc., and William H. Leininger on behalf of certain Michigan rectifiers. Respectfully submitted.
LEAGUE OF DISTILLED SPIRITS RECTIFIERS, INC., By FRED A. CASKEY, General Counsel.
UNION CITY, N, J.,
June 20, 1935. LEAGUE DISTILLED SPIRITS RECTIFIERS,
Woodward Building, Washington, D. C.: Rectifiers & Blenders Association of New Jersey, Inc., favors strict regulation of liquor industry. With reference to H. R. 8539 most of the provisions are satisfactory. Please call to attention of Committee on Ways and Means we are strongly opposed to bulk sales to anyone other than distillers or rectifiers, as we believe sales in bulk would open wide the doors to bootlegging and it would dispense with the safeguards set up by existing regulations requiring all bottles of liquor to have strip stamps affixed and requiring indicia of producer blown in bottle. These provisions are materially lessening bootlegging. It would be much easier for saloons, bars, and others to refill barrels than bottles. Reference page 16, line 18, of bill provisions, granting Administrator powers to prescribe regulations is entirely too broad, as it gives the Administrator the power to make any regulation which he deems necessary in his own opinion to prevent any label which may be likely to mislead the consumer, and we suggest the elimination of words “as the Administrator finds to be likely to mislead the consumer", and substitute therefor “as are misleading to the consumer.” Reference page 17, line 8, opposed to this requirement as same serves nó purpose of benefit to the public and operates against rectifiers only. Immaterial where neutral spirits are used as to what commodity sa me have been distilled from. If such requirements are to be made, same should apply to distillers, and they should be required to give exact details as to their products. Same objection applies to page 20, lines 16 to 31. Would suggest that act be amended so as to clarify rights of rectifiers as to include the right to bottle straight whisky. RECTIFIERS & BLENDERS ASSOCIATION OF NEW JERSEY, INC.,
WALTER H. PHILLIPS, President.
DETROIT, Mich., June 20, 1935. Mr. FRED A. CASKEY, 'League of Distilled Spirits Rectifiers,
Washington, D. C.: Have sounded Michigan rectifiers, bill 8539, consensus of opinion opposed subsection F, section 4, regarding selling in wood by wholesalers and retailers, as it opens up bootlegging opportunities. Section 5, subsection E, paragraph 3, relating name of distilled spirits 0. K. for gin and whisky, but cordials should be proof on labels as present not percentage or kind of neutral spirits used. Any change present label requirements should permit 1 year to get rid present labels.
WILLIAM H. LEININGER. The CHAIRMAN. The next and last witness on the calendar is A. D. O'Connor, former supervisor, code authority, wholesalers of beer for the United States.
STATEMENT OF A. D. O'CONNOR, FORMER SUPERVISOR OF THE
CODE AUTHORITY FOR THE WHOLESALE BEER DISTRIBUTORS
Mr. O'CONNOR. Mr. Chairman and gentlemen, I am A. D. O'Connor, former supervisor of the Code Authority for the Wholesale Beer Distributors, 752 National Trust Building.
I was supervisor of the Wholesale Beer Distributors under the Code of Fair Competition, and as such represented over 9,000 distributors in the United States. We operated under this code of fair competition, and as such operated with a permit issued by the Federal Alcohol Control Administration. All other industries, with the exception of the brewers, operated under the same kind of a permit.
Our industry was whole-heartedly in favor of the brewers being placed under a permit system. _They were not placed under a permit system. We approached the Federal Alcohol Control Administration on a number of occasions, but never had any
results. We ask in considering this bill and in adopting section 3 that all industries be placed under a permit system, if the brewers are not, and I suggest that no other industry, especially the wholesale beer industry, be not placed under a permit system. Our industry is by far and large greater than any industry that is contained in this bill today. We have over 9,000 distributors in the United States. I
present that for your consideration. Mr. KNUTSON. What do you represent, Mr. O'Connor, beer? Mr. O'CONNOR. The wholesale beer industry.
May I put into the record the following letters for your consideration?
The CHAIRMAN. From whom?
Mr. O'CONNOR. From our executive committee to the Federal Alcohol Control Administration, and their reply, on the question of permit.
The CHAIRMAN. Without objection, that will be permitted.
The CHAIRMAN. We thank you for your appearance and the testimony you have given the committee. (The letters referred to follow :)
FEDERAL ALCOHOL CONTROL ADMINISTRATION,
Washington, April 2, 1935. CODE AUTHORITY FOR THE ALCOHOLIC BEVERAGE WHOLESALE INDUSTRY,
Beer Division, Washington, D. C. (Attention: Mr. A. D. O'Connor, supervisor.) DEAR MR. O'CONNOR: We have your letter of March 23, 1935, proposing amendments to the Code of Fair Competition for the Brewing Industry.
While the proposal by any code authority of an amendment to the code of another industry is entitled to and will receive every consideration, the Board considers that the proposal should not be set for hearing at this time. The National Industrial Recovery Act, on which all the codes are based, expires on June 16, 1935. Congress is now considering the subject and whatever action it may take may profoundly modify the problem. It would seem impracticable to reach a sound decision until the future statutory basis of the alcoholic beverage codes is determined. Very truly yours,
J. H. CHOATE, Jr., Direotor Federal Alcohol Control Administration.
MARCH 23, 1935. FEDERAL ALCOHOL CONTROL ADMINISTRATION,
Washington, D. C. (Attention : Mr. F. P. Lee.) GENTLEMEN : At a meeting of the executive committee of the code authority, beer division, of the alcoholic beverage wholesale industry, held Thursday, March 7, 1935, in Washington, D. C., the following resolution was adopted :
" Resolved, That the supervisor and counsel be, and they are hereby, directed to present to the Federal Alcohol Control Administration, a recommendation that the brewers be placed under the permit system.” in that the Federal Alcohol Control Administration be authorized to require and issue permits to members of the brewing industry.
The following amendments are proposed to the code of fair competition for the brewing industry as amended to August 1, 1935:
“ SECTION 1. After such date and for such period as the administration may at any time specify, no member of the industry shall engage in the manufacture of or the distribution of products of the brewing industry, or both, except pursuant to a permit or permits issued by the director. Any person desiring to engage in, or who is engaged in the brewing industry in conformity with Federal, State, and local laws shall be entitled to have such permit or permits issued to him upon application therefor, if the director finds that the previous experience, financial standing, and trade connections of such person (or in case the applicant is a corporation or partnership, of its officers, directors, principal stockholders, or firm members) are such that applicant will be a legal manufacturer and distributor of products of the brewing industry.
“ Sec. 2. Any permit issued hereunder shall remain in effect during the duration of this code, unless suspended or revoked as hereinafter provided, and such permit shall be conditioned on the observance by the permittee of the provisions of this code (other than the provisions of art. III) and regulations prescribed by the Administration. Such permit shall not be taken or held to create in any permittee any vested right to any standard of profits or volume of business, or any right to engage in the distribution of any class of alcoholic beverages after the termination of the permit.
“ SEC. 3. Any permit issued hereunder may, after due notice and opportunity for hearing, be suspended in whole or in part or revoked by the Director, with the approval of the Administration, for a violation of any term or condition thereof, or of any provision of this code (other than the provisions of art. III), or of any regulation prescribed by the Administration, or if the permittee has not engaged in the industry for a period of more than 3 months, or if the Director finds, pursuant to regulations prescribed by the Administration, that such permit was erroneously issued.
" Sec. 4. Nothing in this article shall be construed to limit or modify any procedure or remedy which may be available for the enforcement of the provisions of this code." Respectfully submitted.
NATIONAL CODE AUTHORITY, BEER DIVISION,
ALCOHOLIC BEVERAGE WHOLESALE INDUSTRY.
A. D. O'CONNOR, Supervisor. Mr. Vinson. I want to file, for the purpose of the record, a copy of H. R. 8368, a bill that was reported from the Judiciary Committee this week. It is a bill to enforce the twenty-first amendment. I call the attention of the committee to the duties imposed upon the Secretary of the Treasury with reference to the enforcement of the liquor laws.
The CHAIRMAN. Without objection, it will be inserted in the record.
Mr. Cullen. Was this reported favorably by the Judiciary Committee?
Mr. COOPER. The bill was passed around to us here last night by the clerk.
Mr. Vinson. Yes; it has been favorably reported. (H. R. 8368 is as follows:)
[H. R. 8368, 74th Cong., 1st sess. I
A BILL To enforce the twenty-first amendment Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled, That this Act may be cited as the 'Liquor Enforcement Act of 1935."
SEC. 2. (a) Wherever used in this Act the word “State" shall mean and inelude every State, Territory, and possession of the United States, unless otherwise specifically provided.
(b) As used in this Act the word “vessel " includes every description of water craft used, or capable of being used, as a means of transportation in water or in water and air; and the word “ vehicle" includes animals and every description of carriage or other contrivance used, or capable of being used, as a means of transportation on land or through the air.
Sec. 3. (a) Whoever shall import, bring, or transport any intoxicating liquor into any State in which all sales (except for scientific, sacramental, medicinal, Gr mechanical purposes) of intoxicating liquor containing more than 4 per centum of alcohol by volume are prohibited, otherwise than in the course of continuous interstate transportation through such State, or attempts so to do, or assist in so doing, shall : (1) If such liquor is not accompanied by such permit or permits, license or licenses therefor as are now or hereafter required by the laws of such State; or (2) if all importation, bringing, or transportation of intoxicating liquor into such State is prohibited by the laws thereof; be guilty of a misdemeanor and shall be fined not more than $1,000 or imprisoned not more than one year, or both.
(b) The definition of intoxicating liquor contained in the laws of any State shall be applied in order to determine whether anyone importing, bringing, or transporting intoxicating liquor into such State, or anyone attempting so to do, or assisting in so doing, is acting in violation of the provisions of this Act.
SEC. 4. All intoxicating liquor involved in any violation of this Act, the containers of such intoxicating liquor, and every vehicle or vessel used in the transportation thereof shall be seized and forfeited. Such seizure and forfeiture, and the disposition of such property subsequent to seizure and forfeiture, or the disposition of the proceeds from the sale of such property, shall be in accordance with existing laws or those hereafter in existence relating to seizures, forfeitures, and dispositions of property or proceeds, for violation of the internal-revenue laws.
SEC. 5. No intoxicating liquor which, by the decree of any court of the United States, is ordered to be sold by the United States marshal, and no intoxicating liquor which has been summarily forfeited, shall be sold in any State, District, Territory, or possession of the United States, in violation of the laws of such State, District, Territory, or possession.
SEC. 6. The Secretary of the Treasury shall enforce the provisions of this Act and of sections 238, 239, and 240 of the Criminal Code (18 U. S. C., secs. 388–390), as herein amended,
When engaged in enforcing or attempting to enforce the provisions of this Act, or of sections 238, 239, and 240 of the Criminal Code, or of any law in regard to the manufacture, taxation, or transportation of, or traffic in, intoxicating liquor, the Secretary of the Treasury, the Commissioner of Internal Revenue, and his subordinates and agents appointed for such purpose, and any other officer, employee, or agent of the United States, shall have the rights, privileges, powers, and protection now conferred or imposed upon the Secretary of the Treasury by the Act approved March 3, 1927 (U. S. C., Supp. VII, title 5, secs. 281-281 (f)), or conferred or imposed on him or any other officer by any other law in respect of the taxation, importation, exportation, transportation, manufacture, possession, or use of, or traffic in, intoxicating liquor.
Regulations to carry out the provisions of this Act shall be prescribed by the Commissioner of Internal Revenue with the approval of the Secretary of the Treasury.
SEC. 7. Section 238 of the Criminal Code (18 U. S. C., sec, 388), is amended to read as follows: