On December 22, 2017, “The Craft Beverage Modernization and Tax Reform Act” (“the Act”), was signed into law by President Trump making significant changes to the federal excise tax rates assessed on wines, distilled spirits and beer. The Act formally went into effect on January 1, 2018 and benefits the beer, wine and spirits industries as follows—
- Beer: The Act provides for a tax rate of $16 per barrel on the first six million barrels of beer brewed by the brewer and removed during the calendar year (or imported by the importer into the United States during the calendar year), as well as a rate of $18 per barrel on the remaining barrels not subject to the $16 rate. In the case of beer brewed or produced outside of the United States and imported, the Act provides for foreign brewers to assign the reduced rate described in the previous bullet to importers who elect to receive it. For U.S. brewers who produce no more than two million barrels of beer during the calendar year, the Act provides for a rate of $3.50 per barrel on the first 60,000 barrels removed during such calendar year which have been brewed or produced by such brewer. The Act also authorizes the transfer of beer in bond between brewers who are not owned by the same corporation or other entity.
- Wine: The Act allows three different credits on wine produced by the producer and removed during the calendar year (or imported by the importer into the United States during the calendar year). The credits are equal to $1 per wine gallon on the first 30,000 wine gallons of wine removed or imported, 90 cents on the next 100,000 wine gallons removed or imported, and 53.5 cents on the next 620,000 wine gallons removed or imported. The tax credits apply to all wine tax rates, except that the Act provides adjusted credits for the hard cider tax rate (6.2 cents, 5.6 cents, and 3.3 cents, respectively). In the case of wine produced outside of the United States and imported, the Act provides for foreign wine producers to assign the tax credits described in the previous bullet to importers who elect to receive them. The Act also authorizes application of the wine tax rate of $1.07 per wine gallon to still wines containing not more than 16% alcohol by volume.
- Distilled Spirits: The Act provides for reduced tax rates on distilled spirits distilled or processed and removed during the calendar year (or imported by the importer into the United States during the calendar year). These rates are equal to $2.70 per proof gallon on the first 100,000 proof gallons removed or imported, and $13.34 per proof gallon on the next 22.13 million proof gallons removed or imported. The tax rate for distilled spirits not subject to the reduced rates is $13.50 per proof gallon. In the case of distilled spirits produced outside the United States and imported, the Act provides for foreign distilled spirits manufacturers to assign the reduced tax rates to importers who elect to receive them. Further, the Act authorizes the transfer in bond of distilled spirits between distilled spirits plants irrespective of whether the distilled spirits are transferred in bulk or non-bulk containers. Moreover, the Act provides that the quantities to which the credits and reduced rates apply shall be applied to the controlled group, and an importer electing to receive an assignment of a credit or reduced tax rate from a foreign manufacturer shall be deemed a member of the controlled group of the foreign manufacturer. Two or more entities (whether or not under common control) that produce products marketed under a similar brand, license, franchise, or other arrangement shall be treated as a single taxpayer for purposes of the credits and reduced rates.
The tax reductions are scheduled to expire at the end of 2019 but may be extended by Congress.
At the present time, though, neither the Alcohol and Tobacco Tax and Trade Bureau (“TTB”) nor U.S. Customs and Border Protection (“CBP”) have implemented the new tax rates as of today’s date, and they have not yet established the necessary procedures that will allow U.S. importers to seek retroactive excise tax relief. CBP and TTB recently issued a message to alcohol importers stating that they are working to establish these procedures, and that they will be updating their websites with new guidance in due order. Eventually, importers will be allowed to apply for retroactive refunds of taxes paid on merchandise entered into the United States on or after January 1, 2018. For further details, see:
- CBP and TTB Message (CSMS #18-000103 dated January 31, 2018): https://apps.cbp.gov/csms/viewmssg.asp?Recid=23304&page=&srch_argv=18-000103&srchtype=all&btype=&sortby=&sby=.
- The TTB’s website guidance and FAQs: https://www.ttb.gov/alcohol/craft-beverage-modernization-and-tax-reform.shtml.
Therefore, for the time being, importers are advised by the TTB and CBP to continue paying the full excise tax rates and continue monitoring their websites for announcements of the new procedures.
If you have any questions relating to the Act, the status of new procedures to be rolled out by the TTB and CBP, or require further information on other international trade issues, please contact Melissa Proctor at Miller Proctor Law PLLC (firstname.lastname@example.org).