With Government Shutdown and Limited Guidance From TTB and Customs, Importers Struggle to Properly Submit Claims to Receive Reduced Tax Rates on Alcohol

On October 16th, 2018, U.S. Customs and Boarder Protection (CBP) issued additional guidance for importers which revised previous CBP guidance on the implementation of the Craft Beverage Modernization Act (CBMA) and provided importers with general guidelines on how to take advantage of reduced tax rates on imported alcohol beverages. Although the CBP outlines the submission process for claims, post summary corrections, and protests, the overview provided leaves importers and customs brokers with many questions and submission concerns. With potentially hundreds of thousands of dollars on the table, there is a concern among importers that submission errors may delay or even halt the refund process.

A consensus among those trying to take advantage of substantial tax refunds is that, when asked for assistance with CBMA submissions, CBP representatives have stated that they too have not been trained on the CBMA submissions and cannot provide guidance on the topic until they have received adequate training. Further, with the federal government shutdown, “non-essential” customs employees, which include drawback specialists who should theoretically be in the position to provide guidance, are not available to answer technical submission questions at the most critical stage in the submission process, where importers are scrambling to submit their 2018 protests and post summary corrections before January 31, 2019.

Specific challenges to submissions include obtaining foreign supplier sign-off on the assignment certification letters, properly identifying the supplier control group for purposes of calculating both annual production and the assignment allocations bestowed upon multiple importers by one control group (to ensure that the foreign supplier has not allocated more of the reduced tax rates/tax credits than allowed by law),  properly filling out the CBMA spreadsheets due to the vague column headings, the time consuming quantity conversions to barrels, gallons, and proof gallons, and the  CBP’s online portal, the Automated Commercial Environment (ACE) and the Document Image System (DIS) which many complain of as being “non-user friendly”.

Another key source of confusion has been determining which entry summaries have been liquidated and which have not, which is a key component to determining how to properly file importer submissions. If an importer were to file a protest as opposed to a post summary correction, the submission will either be delayed or rejected.

The CBP has stated that claims will not be considered complete until importers file all mandatory forms with all mandatory information, but importers and customs brokers are unfamiliar with the new CBMA terminology and forms, and therefore question whether or not they have completed all mandatory information. CBP states that it 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, but 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. As for 2019 claims, the CBP has stated that it will issue further communication for 2019 entries “at a later date”. With 2019 upon us, and 2018 claims due within a few weeks, importers hurrying to submit claims are at a disadvantage without the assistance from TTB and CBP due to the government shutdown. Although it is likely that TTB and CBP will be lenient with submission deadlines and minor submission errors, it is still recommended that importers submit all 2018 CBMA claims before the end of the month and should seek assistance from alcohol beverage and customs attorneys who are well versed in navigating the nuances of alcohol beverage and customs law.