Step 1: Understanding the Concept:
Compounded and flavored alcoholic beverages use botanical extracts, aromatic herbs, and spices for flavoring.
Step 2: Detailed Explanation:
Liqueurs (and cordials) are sweetened distilled alcoholic beverages produced by infusing, macerating, or redistilling neutral spirits with various botanical herbs, spices, roots, flowers, and barks, followed by addition of sugar ($> 2.5\text{--}10\%$).
Famous herbal liqueurs include Chartreuse, Benedictine, and Jägermeister.
Step 3: Final Answer:
Therefore, herbs are characteristically used in liqueurs.