Effective January 1, 2018, the Craft Beverage Modernization and Tax Reform Act of
2017 (CBMA) (as contained in Pub. L. No. 115-97) amended the Internal Revenue Code with respect to the tax treatment of certain alcoholic beverages. Since passage of the CBMA, U.S. Customs and Border Protection (CBP) and the Department of the Treasury have worked together to coordinate implementation of the CBMA for imports. The provisions of the CBMA are effective during calendar years 2018 and 2019.
The CBMA requires that procedures be established governing how an importer can receive a reduced tax rate on qualifying distilled spirits or beer, or receive a tax credit on qualifying wine. On January 31, 2018, CBP issued Cargo Systems Messaging Service (CSMS) #18-000103, which stated that, until such procedures are established and guidance issued, importers of beer, wine, and distilled spirits seeking to qualify for excise tax relief, based on qualifying assignments made by a foreign producer, should continue to pay the full excise tax rates.
Under the CBMA, reduced tax rates and/or tax credits are applicable to importations of certain limited quantities of distilled spirits, beer, or wine imported from each qualifying foreign producer. Further, the foreign producer must have affirmatively assigned those rates or tax credits to an importer or importers and the quantity assigned to all importers by that producer may not exceed the quantities allowed by law. As a result, for an importer to be eligible to receive a reduced tax rate or a tax credit, the importer must be able to substantiate that the foreign producer has assigned an allotment of its reduced tax rate or tax credits to the distilled spirits, beer, or wine imported by that importer.
Importers will continue to pay the full excise tax rate at time of entry summary filing. CBP and Treasury are considering amending current regulations (19 CFR 24.36) to allow CBP to issue refunds owed pursuant to the CBMA on entries when appropriate. These amendments to 19 CFR 24.36 would apply to entries that have not been finally liquidated and would be retroactive.
In anticipation of the new regulations, CBP suggests importers file protests on liquidated entries for which a CBMA reduced tax rate or credit may be due. Such protests should, at a minimum, include an Excel spreadsheet with information including entry number(s), line number(s) and the following information by line number: producer, alcohol type (beer, wine, cider or distilled spirits), tax rate or credit assigned and requested, and quantity claimed for tax rate or credit.
Refund requests will be processed no earlier than January 15, 2019.
Post Summary Corrections (PSCs) must not to be utilized for requesting refunds until 19 CFR 24.36 has been updated and necessary programming completed. The CBP Centers of Excellence and Expertise (Centers) will reject any PSCs pursuant to CBMA claims pending a regulatory change to 19 CFR 24.36.
Once the regulations are amended and CBP commences accepting CBMA refund requests, importers will need to identify entry summary lines that they believe qualify for excise tax relief under the CBMA. This identification will serve as the importer’s request for relief. CBP plans to develop a flag at the entry summary line level in the Automated Commercial Environment (ACE) that importers may utilize to request a refund. Further instructions will be published via CSMS once CBP is capable of accepting refund requests.
For the importer to substantiate its eligibility to receive the reduced tax rates or the tax credits and meet its reasonable care obligations, its internal records should, at a minimum, include:
- Foreign producer’s name;
- Foreign producer’s manufacturing facility address and FSMA registration number;
- Number of barrels of beer, number of gallons of wine, and number of proof gallons of distilled spirits eligible for each reduced rate/tax credit assigned to the importer for the calendar year by the representative of the foreign producer authorized to assign its allotment, and documentation showing that quantity as assigned to that specific importer;
- Contact information for such authorized representative; and
- Statement from the authorized representative of the qualifying foreign producer that the number of barrels or wine/proof gallons assigned by the foreign producer (including any members of a controlled group) to all importers for the calendar year does not exceed the quantities allowed by law and does not exceed the foreign producers capacity.
Importers who are assigned reduced tax rates and/or tax credits from multiple foreign producers should maintain in their records the above information applicable to each foreign producer.
If you have any questions or require additional information, please contact OTEntrySummary@cbp.dhs.gov.