Greenspoon Marder Hospitality, Alcohol & Leisure Blog: CBMA Reduced Tax Rates and U.S. Importers

Hospitality, Alcohol & Leisure Blog May 4, 2021 Miami, FL

By now producers of alcoholic beverages are aware of the Craft Brewer’s Modernization Act, or CBMA which has significantly reduced federal excise tax rates on alcohol up to a certain level of production. The initially temporary measure was designed to give small producers an opportunity to compete with larger producers who had the advantage of economies of scale and allow for reinvestment, innovation and job growth within the craft segment. The CBMA is now law and the success of its intended effects are open for discussion. That said, the reduced tax rates exist, and producers of all sizes (craft and institutional) are using them to their economic advantage. The adjusted tax rates are available to importers as well as domestic producers. Click here to view the CBMA excise tax rate as published by U.S. Customs and Border Protection (CBP).

The bureaucracy charged with monitoring and collecting excise tax from domestic producers, The Alcohol Tax and Trade Bureau (TTB), perhaps paradoxically, has managed the process efficiently. Importers of beverage alcohol are not facially discriminated by the Act, however, by implementation and execution by CBP these tax efforts under the CMBA are discriminatory by effect.

CBP has made the process extremely cumbersome and arcane by adding levels of ill-defined complexities that have cost U.S. importers of wine and spirits much treasure. It is not necessarily unusual in the world of consumer goods, including food and wine, for imported items to be exposed to duties and taxes and in some instances tariffs. Duties, taxes and tariffs, inter alia, are designed to give domestic producers who are not exposed to these pricing liabilities a shelf price advantage over imported items. They are discriminatory in purpose. These taxing strategies, practiced by virtually all countries, are not unusual in international trade and are often put in place to penalize foreign producers (or government actors).

The CBMA, however, as administered by CBP on imported beverage alcohol, is a domestic bureaucratic “border wall” costing U.S. importers significant sums and has the effect of placing U.S. wine importers at a disadvantage vis-à-vis domestic producers. The CBP process itself is confusingly discriminatory.

Below is the simplified and partial list of documents required for submission to CBP prior to entry:

CBMA Spreadsheet
Controlled Group Spreadsheet
Assignment Certification

The CBMA allows for foreign producers to assign their volume credit to its U.S. importer. CBP mandates that a letter of assignment (on producer letterhead) must be submitted prior to importation along with all other required accompanying documents. Missing, incomplete or inaccurate information of required CBMA documents may result in the liquidation or reliquidation of entries at the higher non-CBMA rate and/or enforcement action. It should also be noted that standard CBP appeals regulations apply at liquidation and if these appeals are not timely filed liquidation will be final…that is to say, au voir tax rate reduction and substantial sums of money.

CBP will continue to maintain administration over imports subject to CBMA for 2021-2022 calendar year. However, pursuant to the Consolidated Appropriations Act, 2021, CBMA administration will transfer to the Department of the Treasury after December 31, 2022, presumably TTB. Ideally this transfer will lead to a more efficient and simpler tax reduction or credit claim process. Until then, best advice for U.S. importers is to work with an experienced broker who understands the CBMA claims process (they are few and far between) and put a plan in place for proper claims execution prior to the beverage alcohol entry.

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Greenspoon Marder Hospitality, Alcohol & Leisure Blog: CBMA Reduced Tax Rates and U.S. Importers

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