[Congressional Record (Bound Edition), Volume 153 (2007), Part 11]
[Extensions of Remarks]
[Page 14951]
[From the U.S. Government Publishing Office, www.gpo.gov]




   INTRODUCTION OF LEGISLATION TO SIMPLIFY THE TAX AND ELIMINATE THE 
DRAWBACK FEE ON CERTAIN DISTILLED SPIRITS USED IN NON-BEVERAGE PRODUCTS 
  MANUFACTURED IN A U.S. FOREIGN TRADE ZONE OR DOMESTIC USE AND EXPORT

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                        HON. BILL PASCRELL, JR.

                             of new jersey

                    in the house of representatives

                         Tuesday, June 5, 2007

  Mr. PASCRELL. Madam Speaker, I rise today to introduce a bill 
designed to equalize the competitive playing field between domestic and 
foreign users of certain distilled spirits used in the manufacture or 
production of non-beverage products.
  Non-beverage products include medicines, medicinal products, food 
products, flavors, flavoring extracts and perfumes, all of which are 
unfit for beverage purposes.
  The bill does this by allowing users that demonstrate to the Treasury 
Department that they are producing non-beverage products in a U.S. 
Foreign Trade Zone to avoid the excise tax on distilled spirits, which 
a foreign manufacturer of non-beverage product that uses distilled 
spirits does not pay.
  A Foreign Trade Zone is a restricted-access site authorized by the 
U.S. Department of Commerce and supervised by U.S. Customs where 
companies can use special Customs procedures for importing and 
exporting materials and finished products. Zones are located in or 
adjacent to a Customs port of entry and operated pursuant to public 
utility principles under the sponsorship of a corporation granted 
authority by the Commerce Department pursuant to the Foreign-Trade 
Zones Act and regulations.
  Authorized companies, of which there are many in New Jersey, 
therefore will be subject to continuous regulation by the Commerce and 
Treasury Departments as well as Customs.
  The bill preserves necessary safeguards for the government as it 
monitors which companies use distilled spirits for beverage purposes 
and which companies use them for non-beverage purposes.
  Such companies will be required to file regular reports with the 
Department of Treasury showing that the distilled spirits are used in 
the manufacture of non-beverage products. Currently, such manufacturers 
pay an excise tax of $13.50 per proof gallon and then must file for 
``drawback'' with the burden on the claimant to show eligibility for 
drawback.
  Under the drawback procedure, the government rebates all but $1 per 
proof gallon, charging the companies a $1 administration fee. Companies 
subject to this procedure can have considerable cash flow tied up in 
this process for an appreciable period of time. Again, a foreign 
manufacturer of non-beverage products is not subject to such tax and 
consequently, is not burdened by the need to file for drawback.
  The imposition of this tax and burdensome drawback process on 
American manufacturers and producers put them at a competitive 
disadvantage, which I believe we should eliminate, while preserving the 
integrity of the government process to monitor the use of distilled 
spirits.

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