Excise Duties, Bonded Handling & Liquid Loss

Last updated: January 29.01, 2026

(Spirit-Based Products)

This document sets out Tiny Keg’s (“TK”) policies regarding excise duties, bonded spirits, and liquid losses during production. These provisions are essential to ensure legal compliance, operational clarity, and realistic production expectations.

1. Excise Duty, Bonded Storage & Processing Controls

1.1 Bonded Status

Tiny Keg is licensed to receive and store spirits under bond.

1.2 Customer Responsibility for Excise

The Customer is solely responsible for the payment of all excise duties, levies, and taxes applicable to spirits or spirit-based ingredients supplied for production.

1.3 Processing Restriction

Notwithstanding its bonded status, TK will not process, open, dilute, blend, carbonate, or package any spirits unless excise duties have been fully paid and verified in advance.

This restriction exists to ensure compliance with excise legislation and to avoid the transfer of excise liability to TK.

1.4 Proof of Excise Payment

Before any production activity may commence, the Customer must provide verifiable proof of excise payment, including but not limited to:

  • a commercial invoice clearly stating excise duty paid, or

  • a distiller’s delivery note confirming duty-paid status.

1.5 Receipt vs Processing

Where excise duties have not yet been paid:

  • TK may, at its discretion, receive and store spirits under bond; however

  • no production or processing activities will take place until excise compliance has been confirmed.

Any delays, rescheduling, or costs arising from unpaid or unverified excise duties will be for the Customer’s account.

1.6 Right to Refuse Delivery

TK reserves the right, at its sole discretion, to refuse delivery of spirits where excise compliance presents an operational, financial, or regulatory risk.

1.7 SARS Allowable Warehouse Loss (Clarification)

SARS permits a limited fixed allowance for losses within a bonded warehouse for excise accounting purposes only.
 At the time of writing, this allowance is 1.5% of total absolute alcohol received into the bonded warehouse.

This allowance:

  • applies only to bonded warehouse excise accounting,

  • is assessed over an accounting period, not per production run, and

  • does not represent excise-free production waste or a guaranteed loss entitlement.

Once spirits are processed or removed from bond for use, excise liability is fully crystallised and any subsequent liquid loss is excise-paid.

1.8 Critical Excise Clarification

Excise duty is not determined by production yield or packaged volume.

Once excise has been paid and spirits are processed:

  • all liquid used, retained, or lost during production is excise-paid, and

  • excise duties are not refundable, adjustable, or reversible based on process loss or waste.

2. Liquid Yield & Process Loss Expectations

Packaging spirits—particularly into cans—requires product-specific calibration and optimisation. Liquid loss during production is an inherent and unavoidable part of this process, especially for new products.

2.1 New Product Development (NPD) Runs

For the first production run of any product not previously packaged by TK, the Customer must budget for process losses of up to 15%.

These initial runs are classified as New Product Development (NPD) and reflect:

  • unknown liquid behaviour during filling (foaming, carbonation response, viscosity, nucleation, etc.)

  • machine setup and calibration specific to the product

  • iterative adjustments required to achieve stable, repeatable production without compromising quality

2.2 Established Production Targets

Once a product has:

  • successfully completed its NPD phase, and

  • is produced in batch sizes of 6,000 litres or more,

TK will target long-term process losses of 5% or less.

This target reflects steady-state production and cannot be assumed for first runs or smaller batches.

2.3 Yield Liability

TK is not responsible for the cost of excise-paid liquid lost within the process loss ranges described above.

The Customer acknowledges that:

  • all spirits supplied to TK are excise-liable to the Customer,

  • excise duties apply to spirits processed, irrespective of final yield, and

  • process loss is an inherent part of manufacturing, calibration, and quality assurance.

3. Practical Implications for Customers

  • SARS allows a limited bonded warehouse loss allowance, but this is not a production yield entitlement.

  • Excise duty is triggered by use and processing, not by packaged output.

  • Liquid lost during production is excise-paid process loss, not “undutied waste.”

  • First production runs are NPD by definition and carry higher expected losses.

  • A 5% loss target applies only to established, optimised production, not initial runs.

  • Failure to budget for excise on expected process loss may result in production delays or cancellation.

4. Acknowledgement

  • By proceeding with spirit-based production at TK, the Customer confirms that they:
    understand the excise, bonded handling, and process loss framework described above, and

  • accept responsibility for excise duties and process losses within the stated parameters.




 

 

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