Advance Procedures and Requirements: Implementing the Craft Beverage Modernization and Tax
Reform Act of 2017
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. The provisions of the CBMA are effective during calendar years 2018 and 2019. On June 27, 2018, CBP issued initial guidance on the implementation of CBMA via CSMS message #18-000403. On August 31, 2018, CBP issued additional guidance on CBMA implementation via CSMS message # 18-000511.
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 foreign producer/assigning entity (as described in the CBMA). Further, the allocations of the tax credits or reduced tax rates by the foreign producer/assigning entity to all importers may not exceed the quantities allowed by law. Thus, for an importer to be eligible to receive a reduced tax rate or a tax credit, importers must substantiate that the foreign producer/assigning entity has assigned an allotment of its reduced tax rate or tax credits to the distilled spirits, beer, or wine imported by that importer.
Pursuant to the interim final rule on Refund of Alcohol Excise Tax, 83 Fed. Reg. 40,675 (August 16, 2018), U.S. Customs and Border Protection (CBP) and the Department of Treasury amended 19 CFR 24.36, which authorized CBP to issue refunds owed on entries where the importer received a foreign producer allocation or assignment pursuant to the CBMA when appropriate.
On September 1, 2018, CBP deployed in the Automated Commercial Environment (ACE) an entry summary line level flag to identify imported alcohol for which the importer has received a CBMA allocation from the foreign producer/assigning entity. In our August 31, 2018, CSMS message # 18-000511, CBP encouraged importers to use the CBMA entry summary line level flag (CBMA flag) to identify imported alcohol for which the importer had received a CBMA allocation from a foreign producer/assigning entity. CBP advised the trade that the CBMA flag could be transmitted at time of entry summary filing, or subsequently as a Post Summary Correction (PSC) for unliquidated entry summaries.
PROCEDURES AND REQUIREMENTS
This communication serves to provide advance information to the trade of upcoming changes, and revises previous CBP guidance on CBMA. This communication addresses the foreign allocation aspect of CBMA for 2018 entries. CBP will issue further communication for 2019 entries at a later date. CBP will also issue separate procedures and requirements addressing the CBMA’s temporary changes to the tax classification of certain wines, including wines containing more than 14% but not more than 16% alcohol by volume.
In mid-October 2018, CBP will advise importers via CSMS to claim at the time of entry summary the reduced tax rate or tax rate incorporating applicable tax credits as permitted by the CBMA (hereinafter “CBMA rate”) for which the importer has received a CBMA allocation from a foreign producer/assigning entity. Thus, going forward from that mid-October 2018 CSMS message, importers will use the CBMA flag to identify entry lines for which the CBMA rate will be claimed and declare the lower tax rate (as opposed to the excise tax rate required prior to the enactment of the CBMA). At that time, importers should ONLY use the CBMA flag when claiming the CBMA rate, whether at the time of entry summary filing or the filing of a PSC.
For entries filed since January 2018 with CBMA claims that have not liquidated, effective with the mid-October 2018 CSMS message:
A) If not flagged, importers should file a PSC with the CBMA flag and the CBMA rate.
B) If flagged but the CBMA rate has not been claimed, importers should file a PSC with the CBMA rate and the CBMA flag should continue to be part of the entry record.
For those importers that have liquidated entries for which they would like to claim the CBMA rate, the importer may file a protest. Importers filing protests claiming the CBMA rate should identify “CBMA” in the protest issue dropdown.
For any entries filed since January 1, 2018 for which the low excise tax rate was claimed, importers must complete the CBMA claim by flagging the entry immediately via PSC, and submitting the substantiating documents, as defined below, prior to CBP review and liquidation. PSC is the mechanism for submitting CBMA claims in this situation if within the PSC timeframe.
As will be discussed at length below and in greater detail in the mid-October 2018 CSMS message, importers will be required to file documentation to complete their CBMA claim, and the documentation should be filed at the time of entry summary, PSC filing or protest filing. To complete a CBMA claim, importers will be required to submit two Excel spreadsheets (the CBMA Spreadsheet and the Controlled Group Spreadsheet) and an Assignment Certification to CBP. A claim will not be considered complete until the CBMA Spreadsheet, the Controlled Group Spreadsheet and the Assignment Certification are provided to CBP.
CBP will process and liquidate claims for entries made in calendar year 2018, beginning January 31, 2019. CBP will begin its review with the oldest entry on file with a CBMA claim and work forward chronologically. Any 2018 CBMA claims that are not substantiated with the required documentation by January 31, 2019 are at risk of being liquidated without the benefit of the CBMA rate. If the importer has a complete and valid claim and the allocation limit has not been reached at the time of CBP review, CBP will liquidate the entry and apply the CBMA rate.
The forthcoming October 2018 CSMS message will include the required CBMA Spreadsheet template containing the following information: Entry Number; Entry Line Number(s); Classification; Value; Importer of Record (IOR) Type; IOR Number; CBP Center Team Number; Protest Number (if applicable);
FDA Manufacturer Name; Alcohol Type; CBMA Tax Rate/Credit Assigned and Requested by Line; Quantity Claimed for Tax Rate/Credit by Line; Excise Tax Paid; Excise Tax Due; Foreign Producer/Assigning Entity Contact Information (name, address, phone number, email address); Total Annual Assignment Received from Each Foreign Producer/Assigning Entity; Decrement of Annual Assignment Taken on this Claim; Total Allocation Remaining, date the CBMA Controlled Group Spreadsheet was submitted to CBP, and date the CBMA Assignment Certification was submitted to CBP. Each data field will be further described in the template. Importers will submit the Excel (not .pdf) spreadsheet via the Document Image System (DIS), linked to the entry number. A CBMA Spreadsheet is expected for every entry for which the importer asserts a CBMA claim.
The forthcoming October 2018 CSMS message will also include the required Controlled Group Spreadsheet template containing the following information: Foreign Producer/Assigning Entity Contact Information (name, address, phone number, email address); Alcohol Type (for production capacity); Annual Production Capacity; Foreign Producer/Assigning Entity Controlled Group Members (both foreign and domestic); IOR Number for each Importer in Controlled Group; and Annual Assignments per IOR. Each data field will be further described in the template. Importers or the foreign producer/assigning entity will submit the Excel (not .pdf) spreadsheet via DIS, linked to the IOR. A Controlled Group Spreadsheet is expected to be on file for every entry for which the importer asserts a CBMA claim.
Finally, the October 2018 CSMS message will include an Assignment Certification template which must be issued on the letterhead of the foreign producer/assigning entity. Further, the Certificate of Assignment will be required to be signed by a duly authorized officer or employee of the foreign producer/assigning entity. Importers will submit the Assignment Certification via DIS, linked to the IOR. An Assignment Certification is expected to be on file for every entry for which the importer asserts a CBMA claim.
If you have any questions or require additional information, please contact CBMA@cbp.dhs.gov. CBP encourages trade members to continue to visit the CBMA page on CBP.gov at https://www.cbp.gov/trade/basic-import-export/craft-beverage-modernization-tax-reform-act-2017.