HJ 9 A5 L76 Cornell University Library The original of tiiis book is in tine Cornell University Library. There are no known copyright restrictions in the United States on the use of the text. http://www.archive.org/details/cu31924005748300 DISTILLED SPIRITS-FROIT BRANDY HEARINGS BEFORE TUE COMMITTEE ON WAYS AND MEANS OF THE HOUSE OF REPRESENTATIVES 6 1st congress, 3d SESSION ON H. R 28626 JANUARY 17, 1911 WASHINGTON GOVERNMENT FEINTING OFFICE 1911 '\ A*? nil COMIMIITTEFG ON ^WA'YS A.NT> M:E;A.N"S, HOUSE OF REPRESENTATIVES, SiXTY-FmST CONGBESS, THIRD SESSION. SERENO E. PAYNE, Chaieman. JOHN DALZELL, JOHN W. DWIGHT, SAMUEL W. McCALL, WILLIAM E. ELLIS, EBENEZER J. HILL, CHAMP CLARK, HENRY S. BOUTELL, OSCAR W. UNDERWOOD, JAMES C. NEEDHAM, EDWARD W. POU, WILLIAM A. CALDERHEAD, CHOICE B. RANDELL, JOSEPH W. FORDNEY, ROBERT F. BROUSSARD, JOSEPH H. GAINES, FRANCIS BURTON HARRISON, NICHOLAS LONGWORTH, WILLIAM G. BRANTLEY. Arthur E. Blauvelt, Clerk. 166 ^ OOl^TENTS. Page. Bill under consideration (H. R. 28626) 182 Brandy distillation, record of 182 Section 3255, R. S., comments on 180 Statement of — Cabell, Royal E., Commissioner of Internal Revenue 169-180 Reinhart, W. H 168-179 Secretary of the Treasury, opinion 181 167 DISTILLED SPIRITS-FRUIT BRANDY. Committee on Ways and Means, Tuesday, January 17, 1911. The committee this day met at 10 o'clock a. m., Hon. Serene E. Payne (chairman) presiding. Present: The chairman and Messrs. Hill, Boutell, Needham, Cal- derhead, Fordney, Longworth, Ellis, Pou, Randell, and Harrison. The Chairman. This meeting is called for a hearing on the bill H. R. 28626, to amend the internal-revenue laws relating to distilled spirits, and for other purposes. STATEMENT OF ME. W. H. KEINHART, PRESIDENT AND MANA- GER OF THE SWEET VALLEY WINE CO., SANDUSKY, OHIO. Mr. Reinhart. Mr. Chairman and gentlemen, the people whom I represent are producers of native wines and distillers of fruit brandies. A recent construction placed on section 3255, regulating the distil- lation of fruit brandies, by the honorable Commissioner of Internal Revenue prohibits the distillers from distilling the residue of grapes or other fruits in which sugar solution has been used in fermentation previous to the extraction of the juice from the pomace, and as our material which we have for distilling fruit brandies has all been, more or less tainted with sugar solution, of course the distilleries were immediately closed and remained closed for some time, until a com- mittee of the distillers proceeded to Washington and called on the honorable commissioner and put up the matter to him in such- a way that he modified his ruling, permitting the fruit distilleries to distill the amount of material on hand. The recent ruling I speak of was made in July, and a little later we received notice of the modification, so that we distilled the material on hand. During the fall season of making wines we, of course, accumulated a great deal of distilling material again, which is the residuum of grapes and peaches, and again we had the pleasure of calling on the commissioner, and he modified his ruling to permit the distillers to proceed for a period of 90 days, not to exceed the 15th day of March, I believe, in any case. Is that right, Mr. Commissioner ? Mr. Cabell. Yes, sir. Mr. Reinhart. We are now operating under that suspension. For more than 40 years the distillers of Ohio and the Central States and Northern States where this product is grown have been distilling fruit brandies from the very material from which we are now prohibited from distilling. I say the Commissioner of Internal Revenue placed a construction on section 3255. You will find the words "the Secretary of the Treasury may exempt distillers of brandy made exclusively from 168 FRUIT BEANDY. 169 apples, peaches, grapes," etc., and the commissioner said he had no alternative, that he was satisfied in his mind that it did not permit the distillation of any fruits in which any sugar solution had been used for the purpose of correcting the must before fermentation. As we have no other kinds of fruits to distill, naturally all these dis- tilleries were closed down. . The tenth district of Ohio pays annually $165,000 revenue from brandies of this class; the State of Ohio possibly $210,000; and through the other States, especially New York, Ohio, Indiana and Missouri, $600,000 to $900,000. At the suggestion of the Commissioner of Internal Revenue and with his approval, this bill H. R. 8626, was drafted, and you will note that in the next to the last line it says: "Provided, That where, in the manufacture of wine, artificial sweetening has been used the wine or the fruit pomace residuum may be used in the distillation of brandy." That is the language which changes section 3255 imder which we are now operating. This amendment would place the authority and power in the hands of the commissioner, approved by the Secretary of the Treasury, to regulate the fruit distilleries and to state what kinds of material could be distilled. It is abso- lutely necessary, gentlemen, if you could see this matter in the same light as we do as distillers, that tliis bill be reported immediately. If you do not, you lose the revenue. Of course, we are not very anxious to pay the enormous amount of money, but we are willing to do so. The Chairman. The last amendment to this section was made in 1896. What is the particular necessity that you say makes it abso- lutely necessary at this late date in the last session of this Congress to come in with this biU ? Mr. Reinhart. I had not finished my remarks, Mr. Chairman. I say it is absolutely necessary, not only to preserve the revenue from this source, but to keep the properties moving. We have 15 or 20 fruit distilleries in Ohio alone, and I do not know how many there are throughout the States which I have enumerated, and unless the commissioner sees fit to modify his ruling and keep it as it is now, we will naturally be closed down, imless. this amendment should be fiassed immediately. Mr. Chairman, I think the Commissioner of nternal Revenue could explain to your satisfaction why it is abso- lutely necessary that this should be done now. The Chairman. Do you want to yield to him? Mr. Reinhart. Yes, sir; if the commissioner will take the floor. STATEMENT OF ME. ROYAL E. CABELL, COMMISSIONER OF INTERNAL REVENUE. Mr. Cabell. The conclusion reached by the speaker who has been addressing you is correct. The necessity for the legislation at this late day comes about as follows: Distilleries are divided into two classes, one producing distilled spirits from fruit and the other from material other than fruit. At an early date Congress authorized the Commissioner of Internal Revenue to exempt the distilleries produc- ing spirits exclusively from fruit from any of the provisions of law except the taxes thereon. Acting under that autnority, the com- missioner exempted the distilleries producing spirits from fruits from practically all tne provisions, except as to the taxes. Shortly after 170 FRUIT BRANDY. that time the Congress defined by statute the method of distilling for the other class of distilleries and limited the periods of fermenta- tion, making the greatest period of fermentation 96 hours. We had then the two classes, one from fruit exclusively, with practically no restrictions, and the other from material other than fruit, absolutely circumscribed with restrictions. A year ago it developed that certain distilleries were using, sur- reptitiously, sugar in connection with fruit distilleries, and were there- fore guilty of a violation of the statute prohibiting the use of unregis- tered material. We proceeded against about 40 of these distiUenes, operated almost exclusively by some Poles and Kussians who had come over here, and we secured convictions in practically every case on the ground that unregistered material was being used. In the course of that investigation it developed that in Ohio and in western New York, western Pennsylvania, and in Missouri certain wine makers had been using sugar in raising their wine must to the proper saccharine strength; that they would draw off a portion of this must and use it in the manufacture of wine and distill the residuum which had a certain portion of sugar or of artificial sweetening, and that therefore they were not manufacturing brandy exclusively from fruits, and therefore they were not entitled to be exempted from the Erovisions from which they had been exempt. Thus they were-caught etween the upper and nether millstone, because they could not pos- sibly ferment their product within the prescribed hmits, 96 hours being the maximum and about 5 days being the minimum for fruit fermentation, and it sometimes takes 14 or 15 days. Therefore they could not possibly quahfy as ordinary distillers, and as they have to use materials other than fruit they can not be exempt from the pro- vision of the statutes relating to regular distillers. If this legislation is not passed these parties will be closed out of business. It is not a new construction, but the bureau took official cognizance of a matter that had never been taken up before on account of the fraudulent practices that were being perpetrated, and it became necessary to make a fixed rule applicable to all distilleries, so that any distillery that used materials other than fruits should be prosecuted under the statute prohibiting the use of unregistered material. Now, a large committee of these distillers came here and we asked them the question: "Are you using materials other than fruit, or is your product manufactured exclusively from fruit?" They had to say: Our product is not manufactured exclusively from fruit." Therefore, they were cut out from the exemptions authorized. Then, as I say, they could not register under the other branch because of the impossibility of fermenting their product. When that was dis- covered, we permitted them to distill tne product on hand, and then, acting under the authority that is granted the Treasury Department, we permitted them to run experimentally for a period of 90 days so that these gentlemen might come to you and ask you to make legiti- mate a practice that has been in effect for 25 years or longer, but to legitimatize it in such a way that we can entirely control it. Quite an amount of revenue is involved on the proper side, so far as the Government is concerned, in having this bill passed. Mr. Nebdham. This would not interfere in any way with wine made entirely from grapes ? PEXJIT BRANDY. 171 Mr. Cabell. No, sir. Wine manufacture is not considered. The Chaieman. When did you discover that they were violating the law in this way ? Mr. Cabell. Just about a year ago we began the investigations, and when the investigation was completed we proceeded against some 30 or 40 of the manufacturing plants. We did not fail of conviction in a single case. The biggest case ended in Chicago about 15 days ago, in which we convicted a number of people under this very statute referred to, and if these distillers continued the practice they would be Uable to conviction. The Chairman. Do I understand that this covers only that part of the product which is made from the refuse of the grapes after the wine has been taken out of them ? Mr. Cabell. Not exactly. All the juice is drawn off or only a por- tion of it is drawn off, and the brandy is often made from the wine itself; sometimes they take the wine itself and distill that, and that makes, I think, the highest grade, but if sugar has been used in that, of course that also would be prohibited. The bulk of the brandy, however, is manufactured from the residue after that part of the must which is clear and of a uniform quality has been drawn off for the manufacture of either grape juice or wine, including champagne in the designation of wine. The portion from which brandy is dis- tilled is the residue rather than the refuse. The Chairman. Would not this be of any value if it was not per- mitted to be used in that way? Mr. Cabell. It would be an absolute loss, which would have a bad effect on the manufacturer of wine as well as the distiller of brandy. Mr. Ellis. What per cent of the whole product of fruit would that make, do you think? Mr. Cabell. One of the manufacturers could answer that question better than I can. You can not get this residue without the sugar in it. Mr. Ellis. By the addition of sugar, what per cent is added to your product of spirits, including the wine ? Mr. Reinhakt. About a gallon and a half to a barrel. Mr. Ellis. That is an easy calculation, because sugar theoretically produces its own weight in proof spirits. Mr. Reinhakt. The residue of the grapes made from unfermented juice will amount to about 3^ gallons to the barrel in the pomace, ''and the residue of the grapes in which the sugar solution has been used for fermentation will produce 5 gallons. Mr. Ellis. If you got a hundred gallons of wine from the fruit, how many gallons of spirits would you get by the addition of the sugar 1 Mr. Reinhakt. I do not quite understand that question. Mr. Ellis. If the pomace you used produced 100 gallons of wine, what would be the gain by the addition of sugar ? Mr. Reinhakt. A ton of grapes produces 1 J barrels of pomace, and a ton of red grapes about four-fifths of a barrel of pomace, and you can figure comparatively the amount of gallons. I would like to answer also the inquiry which the commissioner did not just explain. We have the wine lees — that is, the sediment after the fermentation in the cask — and then wine which becomes unmar- ketable, which has been made and sometimes turns sour or gets a bad taste, and then the pomace. Those are the three ingredients. 172 T-RUIT BEANDY. The Chairman. Is there any law that you know of that allows any party to make wine out of anything except grape juice, to be fortified m some case with fruit brandy — that is, made from the grapes ? Mr. Cabell. The California winemakers are permitted to add 10 per cent of sugar to their product, which is the sweetest in the world, lor purposes of fortification. Mr. Hill. Is not that limited to a certain degree ? Mr. Cabell. Yes, sir. They are also permitted to add a certain arnount of condensed must, which is merely grape sugar in liquid form. Wine, excepting fortified wine, is not subject to any statute, and as long as it is a wme there is no restriction at all as to how much sweet- ening a man can add. He can do that in any proportion he sees fit. The Chairman. This bill does not limit the amount of sugar that can be used ? Mr. Cabell. No, sir. Mr. Needham. But, of course, they must pay the full tax? Mr. Cabell. Yes, sir. Of course, as far as we are concerned in this law, it is mainly to secure the revenue. Distilled spirits bear the same tax whether produced from sugar, from fruit, or from any admixture of any number of these ingredients. The matter of making brandy from fruit to which sugar has been added might raise a question of labeling from the pure-food department, but in no way would that affect the revenue, and thai question could, it appears, be very easily adjusted. The Chairman. Is the present practice held to be a violation of the pure-food act ? Mr. Cabell. I do not know, sir; but that would be a question for the Department of Agriculture to pass upon. Mr. LoNGWORTH. What was your ruling which made this bill nec- essary ? Mr. Cabell. The statute states that as to distilled spirits or brandy produced exclusively from fruits the Commissioner of Internal Reve- nue, or rather the Treasury Department, is authorized to exempt manufacturers of such a product from any or all of the provisions of the internal-revenue law, except as to the tax thereon. Mr. LoNGWOETH. The restrictions apply as to grain distilleries? Mr. Cabell. Yes, sir. Now, the Treasury Department acted on that authority and has practically exempted manufacturers of brandy from all the restrictive provisions of the internal revenue law, except as to taxes. Subsequently, some additional statutes were passed defining the method of work at the other distilleries, the period of fermentation, etc., not made applicable to these distillers because these distillers had been exempt, and under that a practice grew up, or probably was in existence when that law was passed, with these manufacturers, in order to make their wines conform to the commercial standard, to add sugar to the must when first produced and then draw off the juice to make the wine, using the residuum in which a portion of the sugar remains for the manufacture of brandy. Last year we began a crusade against some Poles and Russians who came to this country and registered as producers of brandy from dried fruit and who had begun surreptitiously to add sugar. We prose- cuted them on the ground that they were using unregistered mate- rial — that is, while they registered to use fruit exclusively, they had added sugar, and we secured a conviction in practically every one of FRTJIT BRANDY. 173 the cases. I think we secured some 30 convictions. During that investigation it developed that the very thing for which we prosecuted these parties had been done in Ohio, westeVn New York, and north- western Pennsylvania for 40 years. Therefore, when the matter came up squarely before us, we made a ruling that if distillers were using material other than fruit (and they admitted that they were), that they were liable to prosecution. So a coijimittee of distillers came onto see us, and we ordered the practice stopped; but we then author- ized their operating until they had used up the material on hand. Then we extended the authority to opera-te, under the authority granted the Treasury Department, for 90 days, experimentally, so as to go beyond the short session of this Congiess in order that the gen- tlemen might come to you and have the practice made legitimate. There does not seem to be any possible objection to it from a revenue standpoint or from a Treasury Department standpoint, or an admin- istrative standpoint. In fact, this law will mean more revenue and better administration. The Chairman. The effect of this bill, as I understand it, is to remove the limit of 10 per cent of sugar in the making of wine. That is the first effect? Mr. Cabell. No, sir. The Chairman. It comes pretty close to it ? Mr. Cabell. I fear I have created a wrong impression. Except as to wine manufactured for the purpose bf being fortified there is no limitation as to sugar. In fact, many housewives throughout the country manufacture in their own homes wine in which perhaps 50 per cent of sugar is used. In the ordinary household wines, blackberry or elderberry wine, 50 per cent or more of sugar is used. There has never been any limit on sugar for ordinary wine. Mr. Needham. As I understand, the 10 per cent which is per- mitted to be used in the manufacture of wine is only where the wine is to be fortified free of tax ? Mr. Cabell. Yes, sir. Mr. Needham. You can use all the sugar vou want, provided you pay the 11.10 tax? " • Mr. Cabell. Provided sufficient grape product is added to make it genuine wine. However, there has been no hard and fast iiding. Up to the present time artificial sweetening has never received any official ruling or received any very serious consideration, except as to fortified sweet wine. Mr. Needham. Then this would not increase the amount that could be used in the manufacture of wine free of tax? Mr. Cabell. No, sir; it is not for that purpose. Bear in mind that this proposition is separate and distinct froni the manufacture of wine. Mr. LoNGWORTH. It only applies to the distillation and not to the manufacture ? Mr. Cabell. Yes, sir; the two are distinct. Mr. LoNGWORTH. Would not this come in conflict with the pure- food law?, Mr. Cabell. I can not see how it would- The decision of the President with the existing pure-food regulations are, in my personal opinion, amply sufficient to cover any question that could arise as to a proper method of marking or branding. Mr. LoNGWOKTH. You say this would onh- apply to the particular localities you mentioned — Ohio, New York,, and Pennsylvania ? 174 FBUIT BEANDY. Mr. Cabell. So far as I know. Possibly Missouri and possibly Indiana; only the eastern grape-growing sections. Mr. LoNGWORTH. It would not apply to California? Mr. Cabell. No, sir. Mr. Harrison. Are the grape growers of the Keuka district dis- tillers as well as manufacturers of wine ? Mr. Cabell. That is a little difficult to answer, because a person who is not a distiller himself often sells his pomace to a person who is a distiller. We do not keep any record or material until it comes on the premises of the distillery. Mr. Harrison. There are distilleries in that region ? Mr. Cabell. I think so. Mr. Harrison. That is one of the regions in western New York that you referred to ? Mr. Cabell. Yes, sir; I referred to the region rather as a grape- growing region producing material fit for distillation, but oftentimes such material is shipped to a point where it can be more conveniently distilled. The Chairman. I find that this particular part of the provision has not been amended since 1868; that it has been amended twice in other particulars by including some other fruits, but this particular part has been in force since 1868. Mr. Cabell. Yes, sir. I think that is very easy of explanation. Up to the last five years brandy distilleries were very small affairs. There were many of them. Due to the prohibitory amendment the brandy distilleries have been enlarged and the little ones have gone out of business. During that time the amount of revenue derived from any particular plant in which brandy was distilled wae negli- fible. There was not very close supervision over them. We do not ave ofiicers assigned at brandy distilleries, but now they have gotten so large the need of better supervision is apparent, and one purpose of this bill is to authorize the Treasury Department prop- erly to take up the matter of regulation and make a complete new set of regulations applicable to brandy distilleries, the need for which is obvious at this time. Mr. Hell. You have been relying on voluntary returns ? Mr. Cabell. Yes, sir; there have been statements in rulings by various persons to the effect that the authority granted in that statute has been exhausted and could not be again exercised by the Treasury Department unless some statute authorized it. We are very anxious to take it up and very anxious to have clear authority to take it up. That is one reason why we are anxious that this biu should be enacted into law. Mr. Needham. Why name these specific fruits, "apples, peaches, grapes, ' ' etc. Could not you make brandy from anything provided you paid the $1.10 tax? Mr. Cabell. Not under this statute. Mr. Hill. Why omit figs and cherries ? Mr. Cabell. I see no reason for that omission except that in the past I do not think any brandy has been made from figs or cherries. Mr. Hill. Cherry brandy is made ? Mr. Cabell. Cherry smash, and those things, I think, are usually manufactured by taking fresh juice and adding tax paid spirits to it, PBTJIT BEANDY. 175 but there has never been any objection from the Treasury Depart- ment to putting those additional names in or, in fact, making it a blanket provision and saying "all fruits." Mr. Needham. I think that would be better, because they pay the full tax. Mr. Cabell. There would be no objection to that. The Chairman. You spoke of the increase of this business in pro- hibition territory. Can you give us any idea as to what the increase has been? Mr. Cabell. Yes, sir; I can. I would be afraid to trust my memory. The Chairman. You have a record of that in your office and can give it to us some time ; write us a letter ? Mr. Cabell. Yes, sir. The Chairman. I want to know what the increase has been in the last two years in the manufacture of brandy from fruits. Mr. Cabell. Yes, sir. It has been very considerable, something in the neighborhood of 7,500,000 gallons, and there were $8,250,000 of revenue derived during the past year. The Chairman. Can you give us an estimate of how much it was the year before ? Mx. Cabell. Subject to correction, I think the increase was about 15 per cent; that is my recollection, approximately that. Mr. Needham. Taking the country as a whole? Mr. Cabell. Fifteen per cent in the production of brandy. The production of brandy fluctuates and the production is not an index of the amount used because it can be stored and kept for various periods. The withdrawals are a better index of the amount used. Mr. Hill. Your reports show that ? Mr. Cabell. Yes, sir; from both sides. Mr. Needham. According to States ? Mr. Cabell. And districts. The Chairman. Please give us that information for the last three or four years. Mr. Cabell. Yes, sir. It should be understood that on March 15th, if this legislation is not passed, these gentlemen will go out of business. They are closed automatically, and it would be a very serious blow to their interests. Mr. Needham. I can not quite understand you. Why would it cause them to go out of business ? Mr. Cabell. If they went on after that they would be seized and prosecuted for using unregistered material. Mr. Ellis. And under the law they can not register it ? Mr. Cabell. No, sir; because they could not possibly operate under the statutory fermentation periods. Mr. LoNGWORTH. Otherwise they would have to operate as grain distilleries ? Mr. Cabell. Yes, sir; and they could not make any kind of a product that would be merchantable. The Chairman. If this legislation was not passed, would they be permitted to go on ? Mr. Cabell. We have no authority. We have given them the full limit of our authority, 90 days, and that expires on the 15th of next March. 176 FEUIT BEANDY. The Chairman. There is no way under the law of putting them under Government supervision so that they could go on with this business ? Mr. Cabell. They could register, but the first mash they made would make them liable to the Government. It would automatically close them up, and if they were thus closed out of business we would lose, perhaps, $500,000 in revenue a year. Mr. Randell. As I have understood from your statement, the makers of wine in these districts where there are so many grapes grown have been all along manufacturing their wine and they have taken the residue, whatever that amounted to, and distilled it into brandy ? Mr. Cabell. Yes, sir. Mr. Randell. And that was not considered against the law until the question as to the amount of sugar in it was raised ? Mr. Cabell. Never. Mr. Randell. Was there any secret about that being done ? Mr. Cabell. I can not say that there was. No Government offi- cers are assigned to these distilleries. Mr. Randell. And that method of manufacturing, I understand, has been going on and never has been done any differently ? Mr. Cabell. Yes, sir. Mr. Randell. And when the use of sugar to an extent that vio- lated the law had been found out, it was then you discovered that these people were violating the law also ? Mr. Cabell. Yes, sir. Mr. Randell. And that the law did not cover this particular kind of manufacturing ? Mr. Cabell. Yes, sir. Mr. Randell. And in the exercise of the discretion of the depart- ment they were allowed finally 90 days ? Mr. Cabell. Yes, sir. Mr. Randell. In your opinion, would a way be opened for the violation of the revenue laws if this bill was passed as you have approved it ? Mr. Cabell. No, sir. Mr. Randell. It would leave it entirely under the direction of the revenue department of the Government ? Mr. Cabell. Yes, sir. From the experiments that we have already made it has been demonstrated that it will be a comparatively simple matter to require these distilleries to modify their manufacturing plants slightly. Mr. Randell. It can be done by regulation if we give jou this authority ? Mr. Cabell. Yes, sir. Mr. Randell. In your opinion, is it necessary and proper to do so ? Mr. Cabell. Yes, sir. We would then assign officers to supervise the manufacture and require continuous distillation, and that would close up the opportunity for fraud which now exists, and that is the reason that we wish this legislation. Mr. Randell. Would this be liable to be an open door to fraud in the labeling of brandies ? Mr. Cabell. That would be a matter for the Department of Agri- culture to handle. The Department of Agriculture appears to have full authority to handle that. FRUIT BRANDY. 177 Mr. Randell. If there was a little inequality in the operation, either not continuous or otherwise, would this open the door to pass the revenue department ? Mr. Cabell. No, sir; because the amount of sugar that can be used in this product is limited by natural causes. That is, if you add more than a certain amount of sugar you will get a strong aroma — flavor — for one thing, and another thing, you will get too concentrated a must, fermentation will set in, and the distiller would lose the material he used. That almost automatically adjusts itself. Mr. Randell. You spoke in reference to the increase of brandy and the agitation of the prohibition question. Did you say that there was an increase in the prohibition districts or in the country ? Mr. Cabell. No. I am afraid I did not express myself clearly. What I intended to say was that the small distilleries have gone out of business and the increase is in the size of the distilleries. There are, for instance, now fewer than 500 fruit distilleries. Ten years ago there were 4,000 or 5,000. There are now few plants; the btisi- ness is concentrated, and formerly where, if an individual distUler attempted to defraud the Government, the amount he could get was very small, as the capacity was very small, now the plants are large and consequently there is just as much necessity for thorough super- vision of brandy distilleries as grain distilleries. Incidentally, the production and consumption of distilled spirits has greatly increased in the last two years. Mr. Needham. Would not this last clause, "Provided, That where, in the manufacture of wine," etc., permit the manufacturer of wine to use more than 10 per cent of sugar? Mr. Cabell. No, sir. This is entirely separate and distinct from wine. It has nothing at all to do with wine. This only deals with the residue from the wine after it comes on the bonded premises of the distillery. Mr. LoNGWORTH. A by-product ? Mr. Cabell. Yes, sir. Mr. Needham. The language is "That, where in the manufacture of wine, artificial sweetening has been used the wine or the fruit," etc. ? Mr. Cabell. I have never heard of any limit on the amount of sugar to be used in manufacturing wine. To use tax-free brandy in fortifying, the amount of sugar is limited, but everywhere else in wine manufacture, so far as I am advised, as much sugar can be used as the manufacturer cares to put in, provided he retains enough grapes to make it a grape product. I think probably the gentlemen here are better qualified to answer that question than I am. Mr. Hill. As I understand, there has been no law that permitted the making of this brandy from anything except the pure residuum of the pure juice of these fruits ? Mr. Cabell. That is correct. Mr. Hill. The Treasury Department has not recognized any dis- tinction between one fruit and another ? Mr. Cabell. No, sir. Mr. Hill. And it might just- as well read "fruits" as to specify them? Mr. Cabell. Yes, sir. 178 FRUIT BBANDY. Mr. Hill. And you have found that the practice of putting sugar in, which they had a right to do in making wine, has been going_ on, and they have not only been making wine, which they had a right to do, but they have been making brandy from the residuum that contained sugar, and therefore violated the law^ Mr. Cabell. Yes, sir. Mr. Hill. And they could not go on as registered distilleries be- cause they could not make the brandy in the time limited by the law for registered material ? Mr. Cabell. That is correct. Mr. Hill. And they must have this law or else stop entirely, because the residuum does contain sugar ? Mr. Cabell. That is correct. Mr. Hill. Is that the size of it ? Mr. Cabell. That is a complete summing up of the situation. Mr. Keinhart. I think the commissioner has covered the whole matter. I was only going to state that in no case is more sugar solu- tion used than you can possibly ferment. The residuum does not contain much sugar, but it has been tainted with it. The idea is that if you add more sugar than you can ferment you are going to lose money. The idea is to add only the amount you can ferment. In some instances IJ per cent or 1 per cent of sugar may remain in the residuum, but you do not want it to remain if you can help. Mr. Randell. Suppose you had a small wagon load of apples and distilled them into brandy or anythiug, could you continue making apple brandy and using cane sugar? Mr. Reinhart. You will have to ask some one who has been prac- ticing that. Mr. Randell. I do not understand that a man would have to be a fraud to understand a business and to be able to detect where a fraud could be. Mr. Reinhart. We do not distill apples and you would have to ask some one in that business. Mr. Randell. But grapes ? Mr. Reinhart. Yes, sir. Mr. Randell. Could not they go on making more brandy ? Mr. Reinhart. No, sir; there would not be any brandy to it. Mr. Randell. But the flavor would still exist? Mr. Reinhart. But when you get too much sugar in it you lose the flavor, the bouquet. Mr. FoRDNEY. You can not get anything out of the pomace after you get the strength out? Mr. Reinhart. No ; there would be nothing there for fermentation. Mr. Harrison. Could not they make a bouquet by adding some material like they do with some kinds of whiskies? Mr. Reinhart. That is under the control of the pure food law, and besides it would make the distiller a rectifier to add anything to the brandy in any shape or form, and he would lay himself liable to prosecution. I do not believe people would attempt anything of the kind. The distilling law is very strict. People who endeavor to do their best to comply with all the laws make mistakes even then. I have been in business since 1887, and we try our utmost, and we have made only this one mistake since then. FRUIT BBANDY. 179 Mr. Harrison. Is not the pure food law the only thing that would prevent that? Mr. Rbinhart. No; the internal revenue law prevents you doiag that. If you do that you are a rectifier, and you can not make a distillation withiu 600 feet of a rectifying house. It is against the law. The Chairman. The violation of the law has been universal among the distillers of brandy ? Mr. Reinhart. The violation has existed ever since the first, but no one knew of it. The Chairman. All the wine makers are engaged in it ? Mr. Reinhart. Yes, sir. The Chairman. Why did you leave out of this provision figs and cherries ? Mr. Reinhart. For no reason whatever. I do not know who drafted the first' bill. This is drafted identically like the other. I would like to have you put in paw paws, persimmons, and plums. We have a distillery in Missouri that is engaged in that business. Mr. Randell. I want to ask the commissioner a question. Have you considered what effect the passage of this bill or a bill similar to this would have in reference to its being a repeal of any of the provisions of the pure-food law ? In other words, if this permission should be given for certain regulations to be suspended and certain things to be done and that being authorized by tnis new law, would it not be the law in spite of any of the provisions of the pure-food act and would not that cause conflicts in the departments? Mr. Cabell. I can not see how there could be any such conflict. The Internal Revenue Bureau has exclusive charge of all distilled spirits in packages of 5 gallons and over. The pure-food legislation stops at the 5-gallon limit. In all packages of distilled spirits below packages of 5 gallons there appears to be concurrent jurisdiction in regard to the labeling, but the pure-food people have been left prac- tically in charge of that. Another reason why I do not think there could be any difficulty is that the Secretary of the Treasury is the chairman of the committee which determines all matters relating to labeling, and under the pure-food sections there would be no pro- hibition, as I understand it, to the adding of descriptive words to indicate the use of this sugar. That is done now m the case of whisky, under the President's decision, where certain changes are made. I can not see where there would be any conflict; at least, that is, in my mind, a very theoretical objection. Mr. Needham. Would it not be wine for commercial purpose if it should be limited to grapes ? Mr. Cabell. I would prefer not to express an opinion on that unless it is demanded. Mr. Longworth. As I understand, you are absolutely clear that this has nothing to do with the manufacture of wine ? Mr. Cabell. Yes, sir. Wine, with the exception of fortified sweet wine, is outside the jurisdiction of the Internal Revenue Bureau. Mr. Hill. You have no authority for any exemption from any provisions of law except this ? Mr. Cabell. Absolutely none. Mr. Hill. It has nothing to do with the pure-food law ? 180 FBUIT BRANDY. Mr. Cabell. No, sir. As we are looking' after the revenue solely, I can not see how the pure-food law could oe involved in this. Mr. LoNGWORTH. As I understand, on the 15th of March, if this law should not pass, these men who are now distilling brandy, which you say is an old custom, out of sweet grapes which have been sweetened in making wine, would have to come under the regular provisions in regard to ordinary distillers ? 3| Mr. Cabell. Yes, sir; which in practice puts them out of business. Mr. LoNGWOETH. They could not comply with the requirements ? Mr. Cabell. No, sir. 61 Mr. LoNGWORTH. Because they could not make the fermentation in accordance with the regulations ? Mr. Cabell. No, sir. Mr. LoNGWORTH. It has nothing to do with the manufacture of wine, but merely as to the question of whether they shall be grain distilleries or come under the ordinary provision for fruit distilleries ? Mr. Cabell. Yes, sir. Mr. Harbison. Are there various ways of" rectifying brandies, just as whiskies ? Mr. Cabell. Yes, sir; but that is covered by a complete system of statutes, which I do not think would be involved in this. A rectify- ing house can not be located within 600 feet of a distillery, etc. There is no connection and they are under different supervision. Mr. Harrison. Would it not be possible to take alcohol, a fruit flavor, and some coloring matter and manufacture brandy and call it rectified ? Mr. Cabell. You would have to label it "imitation brandy" under the regulations which are at present in force. Mr. Harrison. Has there oeen any official decision as to what is brandy ? Mr. Cabell. The same principles practically apply to brandy as to whisky. That matter is now in the United States courts. Mr. Harbison. Does not that let them out under the operation of the pure-food law largely ? Mr. Cabell. You are asking me questions in regard to which I can give you onlv my personal opinion. The effect of the decision which was rendered by the President was to construe the pure-food statute. Mr. Harrison. Was not the effect to let out from under the opera- tion of the pure-food law certain rectifiers of so-called whisky ? Mr. Cabell. Not as I understand it. That matter is now in the United States courts to receive judicial construction and before it is decided by the Supreme Court of the United States personal opinions will not be of much value. Mr. Harrison. I think the commissioner's opinion should be of very great value at all times. Mr. Reinhart. I would like to submit this paper for the considera- tion of the committee. The Chairman. Very well. (The paper submitted by Mr. Reinhart fallows:) Mr. Chairman and gentlemen, section 3255 of the Revised Statutes of the United States at present reads as fdllows: "The Commissioner of Internal Revenue, with the approval of the Secretary of the Treasury may exempt distillers of brandy made 'ex- clusively' from apples, peache.'!, grapes,, pears, pineapples, oianges, apricots, berries, prunes, figs, or "v^Sv-4s^::i^