Customs and Border Protection and the Treasury Department would like to end a duty drawback practice the agencies claim allows goods subject to federal excise tax to enter U.S. commerce virtually duty-free.
Under the proposed rule importers would no longer be able to claim substitution drawback on certain alcohol, tobacco and petroleum products that are assessed federal excise taxes.
Duty drawback has been part of U.S. customs law since the founding of the republic. It’s designed to encourage exports of U.S.-made goods by reducing the costs of imported materials. In the current environment, drawback advocates see it as an incentive for companies to stimulate the economy.
The current rule allows an importer to claim a 99 percent refund on the excise taxes it pays on imported spirits, wine, tobacco and petroleum products if it exports products that are “commercially interchangeable” with the imported goods.
Customs gave the example of a domestic wine manufacturer that pays excise taxes on imported wine, then claims substitution drawback on domestic wine that it exports.
However, the drawback means the government is getting only 1 percent of the excise taxes it is due on the imported products, Customs said.
The deadline for comments on the proposed rule is Nov. 16. The complete rule may be found in Thursday’s Federal Register, online at: http://edocket.access.gpo.gov/2009/E9-24789.htm
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