Everyone is familiar with Bottled-in-Bond whiskey. It is whiskey that is stored in a bonded warehouse for at least four years, the product of the same distiller, made in the same season and bottled at 100 proof. The act was passed in 1897, but bonded warehouses and the bonding period are much older than Bottled-in-Bond whiskey.
It all started with the American Civil War when Congress passed a tax on whiskey to pay for the war. They initially wanted the tax to be the same as the taxes passed in the 18th century with the tax being paid on what was made on any given day – right off the still. Our congressmen from Kentucky, Pennsylvania and other whiskey producing states objected to this because whiskey was an aged product by that time and they would be taxing the distillers for whiskey they could never sell because of the fact that the barrel soaked up part of the whiskey when they entered the whiskey in the barrel and then they had evaporation as it aged. They created bonded warehouses that would allow the distillers to put their whiskey in the warehouse and store it for six months before they had to pay the taxes on the whiskey. A government gauger would come to the distillery and measure the amount of whiskey that was in the barrel after six months and the distiller would pay the taxes on that amount of whiskey.
After the war was over, the bonding period was increased to one year in 1868. In 1879, the bonding period was increased to three years. However, the government gauger was given increased power because of the scandal of the Whiskey Ring under the administration of President Grant. Now there were two locks on every bonded warehouse with the distiller having the key to one lock and the government gauger having the key to the second lock. That meant that both people had to be there to open the warehouse at the beginning of the work day.
In 1894 the bonding period was increased to eight years. This was done because a financial depression was causing a strain upon distillers who were paying their taxes as they sold their whiskey at the end of three years, but they were having a hard time selling the whiskey because of the depression. In 1897 the Bottled-in-Bond Act of 1897 was passed and four years was determined to be the minimum age for bonded whiskey to be sold. The whiskey could be aged for up to eight years and sold as Bottled-in-Bond-Whiskey, but it still had to be removed from bond after eight years and the taxes paid. That is why so many “Very Old” brand names carried an eight year age statement.
Prohibition caused the bonding period to be ignored. Whiskey being sold as medicinal whiskey was all sold as bonded whiskey, but since the production of whiskey was illegal, they kept the whiskey in the warehouse until sold, even after it was eight years old. With the Repeal of Prohibition, the eight year bonding period was re-established for whiskey being made after 1935.
When the Korean War broke out, Lewis Rosenstiel of Schenley panicked and thought the war would expand to another world war and, with it, wartime prohibition would force distillers to make alcohol for the war and prohibit beverage alcohol production, repeating what happened during the Second World War. Rosenstiel ordered every distillery that he owned to go on a twenty-four hour, seven days a week work schedule and to fill their warehouses. He even built new warehouses to increase their stocks as a hedge against wartime prohibition. Other companies did not share Rosenstiel’s panic and kept up their normal production schedules.
When the war ended without escalating, Rosenstiel had a big problem. There was no way that Schenley could sell all of the whiskey that they had made after eight years and he would have to pay the taxes on all of that whiskey. The taxes would have bankrupted Schenley. He started to lobby the government to increase the bonding period to twenty years. Those distillers who had not overproduced earlier however opposed the extension. It was a bad business decision that Schenley had made and they should pay for that bad decision. Rosenstiel, however prevailed and the Forand Bill permitting tax-free whiskey for up to twenty years was passed on September 2, 1958 and took effect on July 1, 1959. That legislation increased the bonding period to twenty years and that is where it stands today.
Photos from the archive of Michael Veach. Cover image by Ralph Steadman.
November 11, 2024 at 2:04 pm
In 1979, the Distilled Spirits Tax Revision Act (Public Law 96–39, 93 Stat. 273, title VIII, subtitle A) effectively repealed the original Bottled in Bond Act, though it left behind the key provisions we see in 27 CFR 5, i.e. it must be distilled at a single distillery, in a single season, minimum of four years old, bottled at 100 proof to qualify for BiB labeling. What was removed was the maximum bonding period. Today spirits can be held in bond for as long as a distillery cares to do so.
What I have wondered about is the fate of the old system for tax discounting to account for loss (‘outage’) of product while held in bond, what became known as the ‘Carlisle Allowance’ in 1880, which only ever covered the first eight years of bond. I’ve never found any legislation that would have specifically amended or even repealed this provision after the passage of the Forand Act.
Any insights on this would be welcomed.
November 11, 2024 at 7:06 pm
Thanks for the history lesson on Bottled-inBond.
December 28, 2024 at 3:23 pm
Love the Ralph Steadman art! Been a huge fan of his for decades because of his connection with Hunter S. Thompson.
Now I need to find a print of that for the house now.
Also, excellent post as always, Mr. Veach! I have been going pretty deep down the rabbit hole here ans of late and am just loving all the info. Thanks for all of the hard work putting this blog together.