[Federal Register Volume 87, Number 184 (Friday, September 23, 2022)]
[Rules and Regulations]
[Pages 58021-58035]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-20412]
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DEPARTMENT OF THE TREASURY
Alcohol and Tobacco Tax and Trade Bureau
27 CFR Parts 26 and 27
[Docket No. TTB-2022-0009; T.D. TTB-186; Re: Notice No. 186]
RIN 1513-AC89
Implementation of Refund Procedures for Craft Beverage
Modernization Act Federal Excise Tax Benefits Applicable to Imported
Alcohol
AGENCY: Alcohol and Tobacco Tax and Trade Bureau, Treasury.
ACTION: Temporary rule; Treasury decision.
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SUMMARY: This temporary rule amends the Alcohol and Tobacco Tax and
Trade Bureau (TTB) regulations to implement certain changes made to the
Internal Revenue Code by the Taxpayer Certainty and Disaster Tax Relief
Act of 2020 (Tax Relief Act), which amended the Craft Beverage
Modernization Act (CBMA) provisions of the Tax Cuts and Jobs Act of
2017. The Tax Relief Act transfers responsibility for administering
CBMA provisions regarding reduced tax rates and tax credits on imported
alcohol from U.S. Customs and Border Protection (CBP) to the U.S.
Department of the Treasury, effective January 1, 2023. Beginning on
that date, importers will pay the full tax rate at entry and
subsequently submit refund claims to TTB to receive the lower rates.
This rule establishes procedures for industry members to take advantage
of reduced tax rates and tax credits that may be applied to specified
limits of imported alcohol products that are entered for consumption in
the United States beginning on January 1, 2023. These regulations
establish the procedures by which foreign producers
[[Page 58022]]
may assign the reduced tax rates and tax credits to importers and the
procedures by which such importers may receive the assignments and
submit refund claims to TTB. TTB is soliciting comments from all
interested parties on these amendments through a notice of proposed
rulemaking published elsewhere in this issue of the Federal Register.
DATES:
Effective date: This temporary rule is effective October 24, 2022.
Comment due date: Comments on the proposed rule must be received on
or before November 22, 2022. See the Public Participation section of
the SUPPLEMENTARY INFORMATION for information on how to comment on the
proposed rule.
FOR FURTHER INFORMATION CONTACT: Jesse Longbrake, Regulations and
Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G
Street NW, Box 12, Washington, DC 20005; telephone (202) 453-1039,
extension 066.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
A. Transition to Refunds in Lieu of Reduced Tax Rates and Tax
Credits for Imported Alcohol
B. TTB Authority
II. Overview of Temporary Regulations
A. Foreign Producer Registration
B. Foreign Producer Assignment of CBMA Tax Benefits
C. Importer Product Entry and Refund Claims Procedures
D. Procedures for Revocation of Eligibility
III. Public Participation
IV. Regulatory Analyses and Notices
A. Executive Order 12866
B. Regulatory Flexibility Act
C. Paperwork Reduction Act
D. Inapplicability of Prior Notice and Comment
I. Background
A. Transition to Refunds in Lieu of Reduced Tax Rates and Tax Credits
for Imported Alcohol
This temporary rule amends the Alcohol and Tobacco Tax and Trade
Bureau (TTB) regulations to implement changes to the Internal Revenue
Code of 1986 (IRC) pursuant to the Taxpayer Certainty and Disaster Tax
Relief Act of 2020 (``Tax Relief Act''). The principal regulatory
changes establish procedures for taking advantage of reduced tax rates
and tax credits established under the Craft Beverage Modernization Act
(CBMA) (collectively, ``tax benefits'' or ``CBMA tax benefits'') for
imported alcohol products entered for consumption \1\ in the United
States beginning in 2023. These CBMA tax benefits were first made
available in 2018, through the Tax Cuts and Jobs Act (Pub. L. 115-
97).\2\
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\1\ This temporary rule implements statutory tax refund
provisions that apply to imported products ``removed'' after
December 31, 2022. See 26 U.S.C. 5001(c)(4), 5041(c)(7), and
5051(a)(6)). TTB regulations at 27 CFR 27.48 provide that any
internal revenue taxes payable on imported distilled spirits, wines,
and beer upon release from customs custody are collected, accounted
for, and deposited as internal revenue collections by U.S. Customs
and Border Protection (CBP) in accordance with CBP requirements.
There are different types of entry under CBP regulations, and
``entered for consumption'' refers to a type of customs entry filed
to introduce the goods into the stream of U.S. commerce. Such
entries are subject to applicable tax and duties. Accordingly,
consistent with TTB regulations and CBP policies, TTB interprets the
term ``removed'' as used in the CBMA tax refund statutory provisions
for imported products to mean ``entered for consumption.'' For
purposes of this temporary rule, ``entered for consumption''
includes withdrawal from a CBP bonded warehouse for consumption.
\2\ The ``Craft Beverage Modernization and Tax Reform Act.''
These statutory provisions apply to beverage and non-beverage
alcohol. See Public Law 115-97, sections 13801-13808 (CBMA
provisions of the law commonly known as the Tax Cuts and Jobs Act).
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The CBMA provisions of the Tax Cuts and Jobs Act provided limited
tax benefits to domestic and foreign producers of distilled spirits,
wine, and beer. Domestic industry members are eligible for CBMA tax
benefits when they pay tax to TTB. Foreign producers must assign the
applicable tax benefits to importers, who then may elect to take them.
Since 2018, U.S. Customs and Border Protection (CBP) has administered
the provisions for imported alcohol, and established procedures for the
foreign producer to assign tax benefits to importers, as well as for
the importers to receive the benefits and apply them at the time of
entry. The CBMA tax benefits available to domestic and foreign
producers are subject to controlled group limitations, which are
described more fully later in this document. The CBMA tax benefits for
imported alcohol products \3\ are as follows:
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\3\ These tax benefits apply to alcohol from foreign countries
and other areas outside of the customs territory of the United
States (as defined in 19 CFR 101.1) that is imported into the United
States (as defined at 26 U.S.C. 7701(a)(9) as the 50 States and the
District of Columbia) and entered for consumption subject to tax.
Foreign producers may not assign tax benefits to domestic distilled
spirits plants, bonded wine cellars, or breweries that receive bulk
distilled spirits, natural wine, or beer that is withdrawn without
payment of tax from customs custody for transfer to their bonded
premises under 26 U.S.C. 5232, 5364, or 5418.
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Each foreign distilled spirits operation receives tax
benefits in the form of reduced tax rates that they may assign to
importers. The benefits apply to the first 22,230,000 proof gallons of
that foreign producer's product imported into the United States in a
calendar year. These rates are, for each foreign producer, $2.70 per
proof gallon on the first 100,000 proof gallons imported, and $13.34
per proof gallon on the next 22.13 million proof gallons imported into
the United States.
Each foreign wine producer receives tax benefits in the
form of tax credits that they may assign to importers. The benefits
apply to the first 750,000 wine gallons of that producer's production
imported into the United States in a calendar year. The credits are,
for each foreign producer, $1 per wine gallon on the first 30,000 wine
gallons of wine imported, 90 cents on the next 100,000 wine gallons
imported, and 53.5 cents on the next 620,000 wine gallons imported. The
tax credits apply to all wine tax rates,\4\ except that CBMA provides
for adjusted credits for imported wine eligible for the hard cider tax
rate (6.2 cents, 5.6 cents, and 3.3 cents, respectively).
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\4\ Wine tax rates vary based on a number of factors such as
alcohol and carbonation content. See 26 U.S.C. 5041.
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Each foreign brewer receives tax benefits in the form of a
reduced tax rate of $16 per barrel. These tax benefits may be assigned
to importers for the first 6,000,000 barrels produced by that foreign
producer and imported into the United States in a calendar year.
These CBMA tax benefits applied to calendar years 2018 and 2019,
and were subsequently extended and finally made permanent through the
Tax Relief Act.\5\ In making these tax benefits permanent, this Act
also transferred responsibility for administering the CBMA tax benefits
for imported alcohol from CBP to the Department of the Treasury
(Treasury).\6\ Consequently, beginning January 1, 2023, importers must
pay the full tax rate \7\ on imported alcohol products to
[[Page 58023]]
CBP and then subsequently submit refund claims for the difference
between the tax paid at the full rate and the amount that would have
been paid if tax liability had been calculated using the tax benefits
foreign producers assigned to them. These regulations establish the
procedures by which foreign producers assign the CBMA tax benefits to
importers and the procedures by which such importers receive the
foreign producer's assignment and submit refund claims to TTB.
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\5\ See Public Law 115-97, sections 13801-13808 (CBMA provisions
of the law commonly known as the Tax Cuts and Jobs Act); Public Law
116-94, section 144 (Further Consolidated Appropriations Act, 2020
extending and amending CBMA provisions); Public Law 116-260,
Division EE, sections 106-110 (Tax Relief Act of 2020 making CBMA
provisions permanent with amendments).
\6\ See Section 107(e) & (f) of the Tax Relief Act of 2020 (Pub.
L. 116-260, Division EE) (134 Stat. 3048). Paragraph (e) reads,
``The Secretary of the Treasury (or the Secretary's delegate within
the Department of the Treasury) shall implement and administer
sections 5001(c)(4), 5041(c)(7), and 5051(a)(6) of the Internal
Revenue Code of 1986, as added by this Act, in coordination with the
United States Customs and Border Protection of the Department of
Homeland Security.'' Paragraph (f) reads, ``The Secretary of the
Treasury (or the Secretary's delegate within the Department of the
Treasury) shall prescribe such regulations as may be necessary or
appropriate to carry out the purposes of this section. . . .''
\7\ Here the ``full tax rate'' refers to the tax rate applicable
without taking into account any reduced rates or credits available
under CBMA; importers of distilled spirits will still be able to pay
a reduced rate to CBP based on eligible wine or flavor content
pursuant to 27 CFR 27.76 and 27.77.
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These temporary regulations set forth the procedures under which
foreign distilled spirits operations, wine producers, and brewers
(collectively ``foreign producers'') may elect to assign CBMA tax
benefits to importers and the procedures by which importers may elect
to receive the assignments and file refund claims with TTB to receive
those benefits starting in 2023. Generally, these provisions: (1)
require foreign producers to register with TTB prior to assigning tax
benefits to importers; (2) establish the information foreign producers
must submit in order to register and assign those benefits; and (3)
establish the information that importers must provide to claim a refund
based on the foreign producer's assignment of tax benefits to them. The
information the importers must provide includes information the
importer will generally submit through CBP's Automated Commercial
Environment (ACE) as part of the entry summary,\8\ as well as
information the importer submits directly to TTB with the claim.
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\8\ TTB understands that the vast majority of importers file
entry and entry summary data electronically in ACE. As explained
below, the electronic submission of import data in ACE is a
prerequisite for using TTB's CBMA importer claims interface.
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The temporary regulations also include provisions to implement
statutory limitations on the CBMA tax benefits. For example, the CBMA
tax benefits available for assignment by foreign producers are subject
to controlled group limitations that apply to producers under common
ownership. See 26 U.S.C. 5001(c)(3)(C), 5041(c)(3), and 5051(a)(5)(B).
Accordingly, the temporary regulations require foreign producers to
either attest that they are not under common ownership with other
alcohol producers or to provide details about their owners when
registering with TTB, as authorized by 26 U.S.C. 6038E.\9\ The
temporary regulations also address the statutory provisions that
provide for revoking the eligibility of foreign producers to assign and
importers to receive CBMA tax benefits due to the foreign producer's
submission of erroneous or fraudulent information that is material to
qualifying for CBMA tax benefits. See 26 U.S.C. 5001(c)(3)(B)(iv),
5041(c)(6)(B)(iv), and 5051(a)(4)(B)(4). These provisions are discussed
in detail in section II of this document.
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\9\ See 26 U.S.C. 6038E (authorizing Treasury to require that
foreign producers provide information related to a foreign
producer's assignment of CBMA tax benefits to importers, including
information about a foreign producer's controlled group structure).
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TTB will administer the CBMA import refund program through two
components of an online system, ``myTTB,'' \10\ as described in the
Treasury Department's, ``Report to Congress on Administration of Craft
Beverage Modernization Act Refund Claims for Imported Alcohol,'' dated
June, 2021.\11\ Using the online system, foreign producers will
register, receive a TTB-issued Foreign Producer ID, and assign the CBMA
tax benefits to importers. The importers will use the online system to
elect to receive CBMA tax benefits assigned to them by foreign
producers, and to submit refund claims based on those assignments and
the information submitted by the importers themselves through ACE in
connection with entries that are subject to CBMA claims.
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\10\ TTB is currently engaged in a multiyear initiative to
develop and deploy ``myTTB,'' a single, online interface for all
industry transactions with TTB, including permit, label, and formula
applications, as well as tax filings, payments, and claims. When
complete, myTTB will provide both industry and TTB with online
access to a consolidated view of an industry member's records,
approvals, and filings.
\11\ Available at https://www.ttb.gov/images/pdfs/treasury-cbma-import-claims-report-june-2021.pdf.
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B. TTB Authority
TTB regulates, among other things, the importation of distilled
spirits, wine, and malt beverages \12\ pursuant to the Federal Alcohol
Administration Act (FAA Act). TTB also administers the provisions of
the IRC with respect to the taxation of domestically produced distilled
spirits, wine, and beer.\13\
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\12\ The terms ``distilled spirits'' and ``wine,'' when used in
the context of the FAA Act, apply only to distilled spirits and wine
for nonindustrial use, and ``wine'' is further defined under the FAA
Act as containing ``not less than 7 percent'' alcohol by volume. See
27 CFR 1.10. Additionally, the FAA Act defines ``malt beverage'' as
``a beverage made by the alcoholic fermentation of an infusion or
decoction, or combination of both, in potable brewing water, of
malted barley with hops, or their parts, or their products, and with
or without other malted cereals, and with or without the addition of
unmalted or prepared cereals, other carbohydrates or products
prepared therefrom, and with or without the addition of carbon
dioxide, and with or without other wholesome products suitable for
human food consumption.'' Id.
\13\ Under the IRC, alcohol subject to tax as ``distilled
spirits'' includes both beverage and industrial spirits, as well as
wine that contains more than 24 percent alcohol by volume. See 26
U.S.C. 5001(a)(1) and (3). Alcohol subject to tax as ``wine''
includes wine containing up to 24 percent alcohol by volume. The IRC
defines ``beer'' as ``beer, ale, porter, stout, and other similar
fermented beverages (including sake or similar products) of any name
or description containing one-half of 1 percent or more of alcohol
by volume, brewed or produced from malt, wholly or in part, or from
any substitute therefor.'' See 26 U.S.C. 5052(a). References to
``beer,'' ``wine'' and ``distilled spirits'' in TTB's IRC
regulations refer to those terms as they are defined in the IRC.
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The FAA Act requires a TTB permit before engaging in certain
activities related to distilled spirits, wine, and malt beverages,
including importation. See 27 U.S.C. 203(a). Section 203(a) provides
that it shall be unlawful, except pursuant to a ``basic permit,'' to
engage in the business of importing into the United States distilled
spirits, wine, or malt beverages. Section 203(a) also states that it is
unlawful for any person so engaged to sell, offer or deliver for sale,
contract to sell, or ship, in interstate or foreign commerce, directly
or indirectly or through an affiliate, imported distilled spirits,
wine, or malt beverages without a basic permit. Because many--but not
all--alcohol products that are subject to tax under the IRC fall under
the FAA Act definitions of distilled spirits, wine, and malt beverages,
most--but not all--alcohol importers are required to obtain a TTB
importer's basic permit under the FAA Act.\14\
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\14\ Importers of industrial alcohol, wine under 7 percent
alcohol by volume, or beer that is not a ``malt beverage'' may
engage in the business of importing such alcohol without an FAA Act
basic permit.
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Chapter 51 of the IRC pertains to the taxation and regulation of
distilled spirits (including spirits used for both beverage and
nonbeverage purposes), wine, and beer. The IRC imposes a Federal excise
tax on all distilled spirits, wine, and beer manufactured in or
imported into the United States. See 26 U.S.C. 5001, 5041, and 5051,
respectively. The tax on distilled spirits, wine, and beer either
imported from foreign countries or brought into the United States from
beyond the customs territory of the United States, as defined in 19 CFR
101.1, including the U.S. Virgin Islands, is generally collected by CBP
along with any import duties as part of CBP's exercise of its delegated
customs revenue functions.\15\ See
[[Page 58024]]
Treasury Order 100-16, ``Delegation of Authority to the Secretary of
Homeland Security,'' dated May 23, 2003.
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\15\ Imported bulk distilled spirts, natural wine, and beer
withdrawn without payment of tax from customs custody and
transferred in bond to a domestic distilled spirits plant, bonded
wine cellar, or brewery under 26 U.S.C. 5232, 5364, and 5418 is
outside the scope of this rule as, in those cases, the tax is
collected from domestic industry members by TTB and not from the
importers by CBP.
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The IRC provides general authority to the Secretary of the Treasury
(Secretary) to issue regulations to carry out the provisions of the
IRC. See 26 U.S.C. 7805(a). With respect to the tax benefits available
under CBMA to foreign producers and to importers, the IRC directs the
Secretary to issue rules, regulations, and procedures as appropriate
for the assignment of such tax benefits. See 26 U.S.C. 5001(c)(3),
5041(c)(6), and 5051(a)(4). Additionally, these include procedures for
allowing a foreign producer to assign and an importer to receive the
CBMA tax benefits; limitations to ensure that the quantity of products
for which a foreign producer assigns reduced rates does not exceed the
statutory quantity limitations on such rates; requirements for foreign
producers to provide any information the Secretary determines necessary
and appropriate for making assignments; and procedures allowing for
revocation of a foreign producer's eligibility to assign reduced rates
based on erroneous or fraudulent information provided by the foreign
producer that is material to qualifying for a reduced rate. Id. The IRC
further provides specific authority for the Secretary to require
foreign producers seeking to make assignments of CBMA tax benefits to
provide information, at such time and in such manner, as the Secretary
may prescribe, including information about the controlled group
structure of such foreign producer. See 26 U.S.C. 6038E. An importer
will only be allowed a refund for CBMA tax benefits if a foreign
producer has elected to assign, and the importer has elected to
receive, such benefits in accordance with the rules, regulations, and
procedures. See, e.g., 26 U.S.C. 5001(c)(4)(C).
TTB administers these IRC and FAA Act provisions pursuant to
section 1111(d) of the Homeland Security Act of 2002, as codified at 6
U.S.C. 531(d). In addition, the Secretary has delegated certain
administrative and enforcement authorities to TTB through Treasury
Order 120-01. Responsibility for collecting the excise taxes incident
to the importation of distilled spirits, wines, and beer is vested by
statute with the Secretary. See 26 U.S.C. 7801. Under the authority of
the Homeland Security Act of 2002, the Secretary has delegated these
customs revenue functions to the Secretary of Homeland Security. See
Treasury Department Order 100-16. Accordingly, TTB regulations provide
that such taxes are collected, accounted for, and deposited as internal
revenue collections by CBP in accordance with CBP requirements. See 27
CFR 27.48; see also 27 CFR 26.200(d).
Sections 107(e) & (f) of the Tax Relief Act set forth the
Secretary's ability to delegate the implementation, administration, and
rulemaking authority concerning the assignment of a foreign producer's
CBMA benefits to importers, and the claims of importers seeking to
receive those benefits, to ``the Secretary's delegate within the
Department of the Treasury.'' Treasury indicated in its June 2021
``Report to Congress on Administration of Craft Beverage Modernization
Act Refund Claims for Imported Alcohol,'' \16\ that it planned to
delegate its authority to administer these provisions to TTB, and TTB
was delegated such authority.
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\16\ Available at https://www.ttb.gov/images/pdfs/treasury-cbma-import-claims-report-june-2021.pdf.
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TTB regulations implementing the applicable provisions of chapter
51 of the IRC are found in 27 CFR part 27. Specifically, this part
contains requirements relative to the importation of distilled spirits,
wine, and beer into the United States from foreign countries, including
the information importers are required to submit upon importation and
the records importers must keep. Regulations at 27 CFR part 26
implement chapter 51 of the IRC as it applies to distilled spirits,
wine, and beer brought into the United States from the U.S. Virgin
Islands.
TTB has authority under section 2(d) of the FAA Act, Public Law 74-
401 (1935) ``to prescribe such rules and regulations as may be
necessary to carry out [its] powers and duties'' under the FAA Act. The
TTB regulations at 27 CFR part 1 implement the permit requirements of
the FAA Act.
II. Description of Temporary Regulations
As noted above, the temporary regulations set forth in this
document address the procedures under which foreign producers of
alcohol products elect to assign the tax benefits available under CBMA
to importers and under which electing foreign producers can make such
assignments. It also addresses how such importers may elect to receive
the assignments and claim refund of tax based on those assignments of
CBMA tax benefits for imported alcohol products entered for consumption
in the United States beginning in 2023. These provisions require the
use of electronic registration and filing systems that are intended to
streamline processing of CBMA import refund claims. The electronic
systems are necessary for the administration of the tax benefits and
will, to the extent possible, accelerate the approval and payment of
valid refund claims.
A. Foreign Producer Registration
TTB's temporary regulations require that foreign producers seeking
to assign CBMA tax benefits to importers first register with TTB
through an online foreign producer interface and obtain a Foreign
Producer ID. The Foreign Producer ID will be necessary to link the
foreign producer's assignment to the importer's associated customs
entry data and refund claim. See, infra, section II(C).
The foreign producer registration is also necessary to protect the
revenue by ensuring that entities seeking to assign CBMA tax benefits
to importers are in fact existing foreign producers and by allowing TTB
to collect certain ownership information necessary for TTB to enforce
controlled group rules that limit assignments when there is common
ownership with other producers.
Under the temporary regulations at 27 CFR 27.254, foreign producers
will register by submitting basic identifying information for their
business and for a point of contact at the business. This information
includes the business name and address, as well as name, title, country
of residence, phone number, and email address for an employee or
individual owner of the business who can serve as a TTB point of
contact for the foreign producer. If the individual submitting the
foreign producer's registration information is different than this
point of contact, the individual submitter must also provide basic
identifying information, including the individual's name, address,
phone number, and email address. TTB may request additional
information, if necessary, to verify the submitter's identity.
The submitter may be the proprietor of the foreign producer, an
employee thereof, or any agent that the foreign producer has authorized
to act on its behalf. The submitter (and, if different, the employee or
individual owner of the business identified as a point of contact) must
have authorization from the foreign producer to provide the required
registration information, edit the foreign producer's registration
information, designate additional persons who are also authorized by
the foreign producer to act on the foreign producer's behalf or cancel
the designations of authorized persons, and make assignments of
[[Page 58025]]
CBMA tax benefits, because the submitter will be able to take these
actions in the online foreign producer interface.
To validate the existence of the registered entity and to assist in
preventing a single foreign producer from registering with TTB multiple
times and making assignments to importers exceeding the statutory
quantity limitations, the temporary regulations require foreign
producers to submit, as part of the TTB registration, the U.S. Food and
Drug Administration (FDA) Food Facility Registration number(s) that are
generally reported to FDA in connection with the importation(s) into
the United States of such producer's products.
Additionally, the foreign producer must either attest that it does
not share common ownership with other producers or submit identifying
information for any individual or entity that owns 10 percent or more
of the foreign producer being registered. As explained further below,
this information is necessary for TTB to enforce statutory controlled
group rules that limit assignments of CBMA tax benefits when there is
common ownership with other producers.
The registering foreign producer must also provide certain
certifications attesting to the submitter's authority and the
truthfulness of the information submitted. The foreign producer must
also acknowledge that providing erroneous or fraudulent information may
result in the revocation of the foreign producer's eligibility to
assign CBMA tax benefits. See, infra, section II(D) of this document.
Finally, the temporary regulations require registration information
to be submitted in the English language, except an individual's name,
the name of a company, and the name of a street may be submitted in a
foreign language. All information, including these items, must be
submitted using the English alphabet.
i. FDA Food Facility Registration Number
In order to identify and prevent duplicate and fraudulent
registrations, TTB's temporary regulations generally require
registering foreign producers to provide the unique FDA Food Facility
Registration number(s) that is typically reported to FDA in connection
with the importation of the producer's products pursuant to the FDA
prior notice regulations at 21 CFR 1.281(a)(6)(ii) implementing 21
U.S.C. 381(m).\17\ The FDA Food Facility Registration and prior notice
requirements carry out the Public Health Security and Bioterrorism
Preparedness and Response Act of 2002 (the Bioterrorism Act), which
directs the FDA, as the food regulatory agency of the Department of
Health and Human Services, to take steps to protect the public from a
threatened or actual terrorist attack on the U.S. food supply and other
food-related emergencies. See Public Law 107-188, sections 301-315.
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\17\ FDA prior notice regulations at 21 CFR 1.281(a)(6) require
reporting of the foreign manufacturer's name, partial address, and
FDA registration number or the name, full address, and the reason
the registration number is not provided.
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Foreign distilled spirits operations, wine producers, and brewers
who produce products for consumption in the United States generally
must register their production facilities with FDA, see 21 U.S.C. 350d;
21 CFR 1.225, 1.227 (requirements applicable to foreign facilities that
manufacture/process, pack, or hold food in storage for consumption in
the United States).
Due to the long-established FDA Food Facility Registration
requirement and its direct application in this context, TTB is not
requiring a separate, potentially duplicative system for validation of
foreign producers.
Rather, TTB's temporary regulations require the foreign producer to
submit to TTB each FDA Food Facility Registration number that they have
already obtained for FDA purposes prior to the importation of their
distilled spirits, wine, or beer, into the United States. TTB believes
requiring the Food Facility Registration numbers minimizes burden on
foreign producers since it allows them to use identifying information
already used for the importation of their products.
TTB understands there are cases where a foreign distilled spirits
operation, wine producer, or brewer does not have an FDA Food Facility
Registration number because its products are further manufactured or
processed (including packaging) by another foreign facility before
shipment to the United States. See 21 CFR 1.226(a). In such cases,
TTB's temporary regulations require the registering foreign producer to
submit the Food Facility Registration number of the facility further
manufacturing or processing the distilled spirits, wine, or beer.
Because the Food Facility Registration number is already required to be
obtained from FDA and is generally required to be submitted to FDA in
connection with the import under FDA's regulations, TTB expects that
the foreign producer will be able to obtain such registration number
directly from the other foreign facility or from the importer(s) to
whom the foreign producer intends to assign CBMA tax benefits.
TTB also understands that a foreign producer that produces only
alcohol for industrial use (as defined at 27 CFR 1.60 through 1.62)
also will not have an FDA Food Facility Registration number when such
alcohol is not reasonably expected to be directed to a food use. In
such cases, TTB's temporary regulations provide that, in lieu of
providing an FDA Food Facility Registration number, the foreign
producer will certify that it does not have an FDA Food Facility
Registration because FDA does not require one for its operations.
ii. Ownership Information
A foreign producer's assignments of CBMA tax benefits may be
restricted by statutory controlled group rules that limit eligibility
for tax benefits when there is common ownership with other
producers.\18\ It is the foreign producer's ultimate responsibility to
ensure that it does not assign tax benefits in excess of the quantities
allowed. However, to collect information necessary for enforcing the
controlled group limitations in the event of noncompliance, the
temporary regulations at new 27 CFR 27.256 require foreign producers
who are under common ownership with other foreign or U.S. distilled
spirits operations, wineries, or breweries also assigning CBMA tax
benefits or taking CBMA tax benefits (if a domestic alcohol producer)
to provide information for any individual or entity that owns 10
percent or more of the foreign producer.
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\18\ The IRC provides that the quantity limitations for the CBMA
tax benefits are applied to the entire controlled group and shall be
apportioned among the members of the controlled group. See 26 U.S.C.
5051(a)(5)(B), 5001(c)(3)(C), and 5041(c)(3). For these purposes the
term ``controlled group'' has meaning assigned to it by the IRC at
26 U.S.C. 1563(a), except that the phrase ``more than 50 percent''
is substituted for the phrase ``at least 80 percent'' in each place
it appears in that paragraph. Pursuant to TTB regulations, these
controlled group principles apply to common ownership situations in
which one or more producers is not a corporation. See 26 U.S.C.
5001(c)(3)(C)(ii); 5041(c)(3); and 5051(a)(5)(A)-(B).
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Specifically, for each individual or entity with an ownership
interest of 10 percent or more, the foreign producer must provide that
owner's name, address, phone number, and, if the owner is a business
entity, the owner's Employer Identification Number (EIN) issued by the
U.S. Internal Revenue Service (for U.S. entities, and only if the
domestic owner has an EIN) or Dun & Bradstreet Data Universal Numbering
System (DUNS) number (for foreign entities, and only if the foreign
owner has a DUNS).
[[Page 58026]]
Given controlled group rules that require aggregation of certain
ownership interests, as well as the statutory requirement to apply U.S.
legal definitions of controlled groups to business arrangements outside
the United States, TTB believes that requesting this information for
those with an ownership interest of 10 percent or more is generally the
least information necessary, reported in the most simplified and
consistent way, to enforce controlled group limitations. Foreign
producers whose owners do not have ownership interests in other alcohol
producers will only be required to certify to that fact.
iii. Changes in Registration Information
TTB's temporary regulations at new 27 CFR 27.258 require foreign
producers who register with TTB to update their registration within 60
days of any change to the information required as part of the original
registration. These provisions are necessary to ensure that TTB is able
to maintain the information necessary to timely and appropriately
process CBMA import claims, to identify foreign producers, to take any
appropriate enforcement action in the event of noncompliance with the
controlled group limitations discussed above, and to prevent duplicate
registrations. In addition, the foreign producer interface in myTTB
will include prompts for the foreign producer to either confirm or
update the ownership information on file with their registration. The
foreign producer may be unable to assign CBMA tax benefits until the
foreign producer updates its registration as required.
TTB understands that, under FDA rules, Food Facility Registrations
must be canceled when ownership of a food facility changes, and the new
owner must submit a new FDA registration for the facility within 60
days. See 21 CFR 1.234(b). If a facility goes out of business, FDA
requires that the previous owner must cancel its FDA registration
within 60 days. See 21 CFR 1.235.
TTB's temporary regulations do not require a foreign producer to
cancel its TTB registration in the event of a change in ownership, but
do require the foreign producer to update its information, for example,
regarding its ownership and any FDA registration, within 60 days of a
change. Depending on the circumstances, that may mean that the foreign
producer cancels its TTB registration to be consistent with the FDA
requirements.
iv. Electronic Registration
TTB temporary regulations at new 27 CFR 27.254(d) provide that
foreign producers elect to make tax benefit assignments by registering
with TTB electronically through myTTB. Collecting registration and tax
benefit assignment information electronically is essential to TTB's
administration of the CBMA importer refund program, as TTB must be able
to validate the existence of the foreign producers, enforce controlled
group limitations in the event of noncompliance, and ensure that
statutory limitations on assignable tax benefit quantities are not
exceeded. The requirement to file electronically is consistent with FDA
regulations that also require foreign producers to register
electronically under the Food Safety Modernization Act, see FDA,
``Amendments to Registration of Food Facilities; Final Rule,''
published in the Federal Register at 81 FR 45911, 51913 (2016). To
address rare situations where foreign producers have obtained an
electronic filing waiver from FDA under 21 CFR 1.245 and are also
unable to interact with TTB electronically, TTB is amending its
regulations at 27 CFR 27.221 to allow foreign producers to request an
alternate method from TTB regulations.
B. Foreign Producer Assignment of CBMA Tax Benefits
Once a foreign producer has registered with TTB and received its
TTB Foreign Producer ID, the foreign producer may begin assigning CBMA
tax benefits to importers. These CBMA tax benefits are described in
further detail below. TTB's temporary regulations set forth the
information that a foreign producer must provide to TTB to assign these
CBMA tax benefits. As previously noted, this assignment information
will be collected electronically through an online interface for
foreign producers within myTTB. The electronic submission of assignment
information, in the prescribed format, will facilitate the streamlined
processing of importer refund claims by allowing foreign producers to
directly create a record of the assignment in TTB's systems.
To make an assignment, TTB's temporary regulations at 27 CFR 27.262
require a foreign producer to submit the following information for each
assignment: (1) The calendar year for which the CBMA tax benefits are
being assigned; (2) the importer to whom the assignment is made,
identified by TTB permit number (or TTB-assigned reference number in
cases in which an importer is not required to have a permit number);
(3) the commodity for which the assignment is made (either distilled
spirits, wine, or beer); (4) the category of reduced rate or credit
being assigned; (5) the quantity of proof gallons, wine gallons, or
beer barrels being assigned; and (6) certain certifications and
acknowledgements that the assignment is in compliance with law and
regulation. These requirements are generally consistent with those
currently administered by CBP. See, e.g., Craft Beverage Modernization
Act (CBMA)--2022 Procedures and Requirements, CSMS #50484790 (Dec. 23,
2021); CBMA Assignment Certification, https://www.cbp.gov/trade/basic-import-export/craft-beverage-modernization-tax-reform-act-2017/certification (accessed June 22, 2022).
As described in section I(A) above, the law provides that a foreign
producer may assign reduced tax rates or tax credits only on a limited
quantity of imported alcohol during a calendar year. That is, each
calendar year, there is a limited quantity that a foreign producer may
assign to one or more importers. Under the temporary regulations set
forth here, foreign producers may assign tax benefits for a calendar
year starting no earlier than October 1 of the year prior, but must
assign the benefits no later than December 31 of the calendar year for
which the benefits would apply. For example, a foreign producer could
make assignments of tax benefits for importations in 2024 starting
October 1, 2023, but no later than December 31, 2024. After December
31, 2024, a foreign producer will not be allowed to assign, by any
method, tax benefits for imports in 2024. TTB believes specifying this
length of time for making assignments, that is, requiring that
assignments be made during the calendar year in which they would apply
to the import, is necessary to effectively administer these provisions.
For example, it may be impossible to adequately determine or verify a
foreign producer's controlled group status in prior years, and any
assignments within a controlled group could affect other assignments
among members of the controlled group. As a result, ensuring the
assignment is made in the timeframes provided, and no later than the
year during which the products are imported into the United States,
minimizes the potential impact on affected entities and risk to the
revenue.
It is important to note that the assignment of CBMA tax benefits
applies to the calendar year of importation, not the calendar year of
entry for consumption. That is, if in December 2023, alcohol products
arrive within the Customs territory of the United States or, in the
case of merchandise imported by vessel, within the limits of a port in
the United States
[[Page 58027]]
with intent then and there to unlade such merchandise, this is an
``importation'' under the provisions of the CBMA, and in order to
receive the CBMA tax benefits, the importer must have an assignment
from the foreign producer for those products for the year 2023.\19\
This is true even if the consumption entry for the products imported in
December 2023 is not filed until January 2024; the importer must still
have an assignment of CBMA tax benefits from the foreign producer for
the year 2023 (and the foreign producer must have assigned those
benefits no earlier than October 1, 2022, and no later than December
31, 2023). This is particularly important to note given that the
administration of the CBMA provisions transfers from CBP to TTB
beginning January 1, 2023. As explained above in section I(A) of this
document, TTB will be responsible for processing and issuing refunds on
foreign distilled spirits, wine, and beer entered for consumption on or
after January 1, 2023.
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\19\ TTB interprets its statutory mandate to ensure that the
quantity of tax benefits assigned ``to any importer does not exceed
[the quantity] produced by such foreign producer during the calendar
year which were imported into the United States by such importer,''
see, e.g., 26 U.S.C. 5041(a)(6)(b)(i)(I), as reiterating the
requirement that the assignment year correspond to the calendar year
of importation. New 27 CFR 27.262(c)(1) addresses general quantity
limitations on foreign producer assignments.
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In making an assignment, TTB's temporary regulations at new 27 CFR
27.262(b)(2) require the foreign producer to provide the importer's TTB
permit number (or TTB-assigned reference number) rather than identify
the importer to whom an assignment is made by name. As explained later
in this document, importers must file claims with TTB based on their
TTB permit number, except under limited circumstances in which the
importer is not required to have a TTB permit number (that is, when the
importer who imports alcohol does not have an FAA Act basic permit
because it does not import alcohol products that are regulated by the
FAA Act).\20\ In those rare cases, to facilitate the claim process for
CBMA tax benefits, the importer must request a TTB reference number for
such purposes under the provisions set forth at 27 CFR 27.266 and must
file the number in ACE as required by 27 CFR 27.264(c).
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\20\ See footnote 11.
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The foreign producer must make assignments of CBMA tax benefits
based on the TTB permit number or TTB reference number. Otherwise, the
assignment will not be valid. The foreign producer interface in myTTB
is designed to provide the importer name associated with a TTB permit
number for purposes of verifying that it is the permit of the intended
recipient of the assignment. This process should greatly minimize the
potential for spelling and other errors that arise with using names as
identifiers. In the case of assignments based on a TTB-reference
number, the foreign producer must obtain this number directly from the
importer.\21\
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\21\ TTB importer basic permit numbers are publicly available on
the TTB website as they are issued under the FAA Act; any reference
numbers issued by TTB for CBMA purposes are protected from
disclosure by IRC section 6103.
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As noted above, in addition to identifying the importer, the
foreign producer must identify the commodity, the rate, and the tax
benefit quantities assigned. The foreign producer must identify the
alcohol commodity for the assignment, either distilled spirits, wine
(including hard cider), or beer,\22\ and the particular reduced rate or
credit to be assigned. The reduced rates and credits available to be
assigned are as follows:
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\22\ Importers are responsible for accurately classifying their
products to CBP for tax purposes; foreign producers should confirm
with importers that CBMA tax benefits are assigned correctly. For
example, sak[eacute] is usually classified as beer under the
Internal Revenue Code, although it is subject to wine labeling
requirements under the FAA Act. Sak[eacute] importers will not be
able to claim a refund of taxes paid to CBP at $18 a barrel if the
foreign producer incorrectly assigns CBMA wine tax credits to the
importer. Note that sak[eacute] fortified with distilled spirits is
taxed as a distilled spirits product under the IRC at the rate of
$13.50 a proof gallon, see CBP Ruling NY A83563 (1996).
---------------------------------------------------------------------------
Each foreign distilled spirits operation may assign
reduced tax rates of $2.70 per proof gallon on the first 100,000 proof
gallons imported, and $13.34 per proof gallon on the next 22.13 million
proof gallons imported into the United States.
Each foreign wine producer may assign tax credits of $1
per wine gallon on the first 30,000 wine gallons of wine imported, 90
cents on the next 100,000 wine gallons imported, and 53.5 cents on the
next 620,000 wine gallons imported. The tax credits apply to all wine
tax rates,\23\ except that CBMA provides for adjusted credits for
imported wine eligible for the hard cider tax rate (6.2 cents, 5.6
cents, and 3.3 cents, respectively).
---------------------------------------------------------------------------
\23\ Wine tax rates vary based on a number of factors such as
alcohol and carbonation content. See 26 U.S.C. 5041.
---------------------------------------------------------------------------
Each foreign brewer may assign a reduced tax rate of $16
per barrel on the first 6,000,000 barrels imported into the United
States.
A foreign producer must also specify the quantity of proof gallons,
wine gallons, or beer barrels being assigned. Foreign producers may
assign the CBMA tax benefits to multiple importers so long as a foreign
producer's total assignments do not exceed the total quantities allowed
by law, including taking into account controlled group limitations.\24\
Finally, the foreign producer making an assignment must provide certain
certifications attesting to the submitter's authority and the
submitter's acknowledgement of statutory limitations on the quantities
of assignments that may be made. The foreign producer must also
acknowledge that providing erroneous or fraudulent information may
cause TTB to revoke the foreign producer's eligibility to assign CBMA
tax benefits. See section II(D) of this document, infra.
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\24\ As explained in further detail in section II(A)(ii), the
IRC provides that the quantity limitations on the reduced rates are
applied to the entire controlled group.
---------------------------------------------------------------------------
Under the temporary regulations, once a foreign producer assigns
CBMA tax benefits to an importer, the foreign producer may not revoke
or reduce the assigned benefits unless the importer elects not to take
the assignment. This is consistent with the current administration of
these benefits under CBP's responsibility; that is, under current CBP
procedures, the foreign producer must make an Assignment Certification
on company letterhead, signed by a duly authorized officer or employee
of the foreign producer,\25\ and once the importer is in possession of
that assignment, there was not a mechanism by which the assignment
could then be changed unilaterally by the foreign producer.
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\25\ See https://www.cbp.gov/trade/basic-import-export/craft-beverage-modernization-tax-reform-act-2017/certification?language_content_entity=en, accessed June 14, 2022.
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Information submitted to TTB by or on behalf of a foreign producer,
including the assignment of tax benefits to an importer, is the return
information of that foreign producer and TTB will not disclose such
information except as authorized by law. Because users of the foreign
producer interface must each be granted authority by the foreign
producer to act on its behalf, TTB is authorized under 26 U.S.C. 6103
to disclose the foreign producer's return information to users in the
online interface. Because assignments that a foreign producer makes to
an importer are also the importer's return information, TTB may
disclose information about the assignment to that importer under 26
U.S.C. 6103(e)(1) and (e)(7).
C. Importer Product Entry and Refund Claims Procedures
As stated above, beginning January 1, 2023, importers will no
longer be eligible to apply the CBMA tax benefits
[[Page 58028]]
when paying tax to CBP. Instead, importers must pay the full tax rate
initially to CBP and subsequently submit refund claims to TTB. The
temporary regulations set forth the procedures under which importers
will submit such claims. Importers are required to submit refund claims
electronically through an importer claims interface that will be part
of myTTB. TTB is providing the new electronic system, dedicated to the
processing of CBMA importer claims, and requiring its use to support
timely, effective, and accurate claims processing. TTB will separately
publish alternate procedures for submitting claims and supporting
documentation in the potentially rare cases where an importer is unable
to file entry or entry summary data electronically in ACE and/or
perfect a claim through the procedure established in the temporary
regulations.
Prior to submitting a claim, the temporary regulations require
importers to have filed the applicable entry summary information with
CBP electronically through ACE. TTB has attempted to streamline the
claims process by relying upon information the importer would have
already filed with CBP about the applicable entries through ACE, as
well as information about the foreign producer's assignment of benefits
to that importer through TTB's electronic system.
The procedures under which foreign producers will assign CBMA tax
benefits to importers are discussed in sections II(A) and (B) of this
document. The procedures for importers to provide through ACE the data
underlying a claim, as well as the procedures for filing a refund claim
with TTB, are explained below.
i. Electronic Filing and Information Required on Product Entry Summary
Prior TTB regulations did not require electronic filing of import
data, but set forth the information that an importer must file with CBP
on the entry or entry summary if filing TTB data electronically in
connection with distilled spirits, wines, and beer imported subject to
tax. See 27 CFR 27.48. Among the information required from electronic
filers is the importer's FAA Act basic permit number and certain
information necessary to determine the amount of tax due on the
imported product, such as the quantity and tax classification. See 27
CFR 27.48(a). In addition, under CBP's current rules for administering
the CBMA reduced tax rates and credits, importers must submit certain
information substantiating their eligibility for such reduced rates and
credits. See CSMS #50484790 (Dec. 23, 2021), available at https://content.govdelivery.com/bulletins/gd/USDHSCBP-3025636. To facilitate
TTB's electronic processing of CBMA importer claims in 2023 and onward,
these temporary regulations at 27 CFR 27.264(c) require importers
intending to file CBMA importer refund claims to file electronically
their CBP entries and/or entry summaries along with TTB data required
at 27 CFR 27.48(a)(2). The electronic filing must also include
information consistent with that currently required by CBP. Existing
ACE programming is expected to continue to collect this information,
with certain definitional updates described further below.
To claim an assigned CBMA tax benefit on imported alcohol, CBP
currently requires the importer to designate the entry summary with the
claim indicator ``C'' at the time of entry summary or when submitting a
post-summary correction (PSC). CBP further requires entry summaries
marked with the ``C'' indicator to include seven data elements
pertaining to qualification for the reduced rate or credit claimed. The
seven data elements are:
(1) Controlled Group Name,
(2) Foreign Producer Identifier,
(3) Foreign Producer Name,
(4) Allocation Quantity,
(5) Flavor Content Credit Indicator,
(6) CBMA Rate Designation Code, and
(7) TTB Tax Rate.
These data elements are defined in the ``CBP and Trade Automated
Interface Requirements--Entry Summary Create/Update'' (CATAIR)
available at https://www.cbp.gov/document/guidance/ace-abi-catair-entry-summary-createupdate. See also ``ACE CBMA Tax Rates Table,''
https://www.cbp.gov/trade/program-administration/entry-summary/cbma-2017/ace-cbma-tax-rates-table (last modified February 16, 2021).
For shipments entered on or after January 1, 2023, the ACE CBMA
claim indicator and associated data elements will continue to be
required by TTB, as reflected in these temporary regulations and in the
CATAIR, which will be updated. Importers may view the definitional
updates that will be effective in 2023 in future CBP revisions to the
CATAIR, available at https://www.CBP.gov. The updated requirements are
integral to TTB's plans for electronic processing of CBMA import refund
claims, as this information will allow TTB to associate a foreign
producer's assignment of CBMA rates with an importer's entry of
products subject to that assignment. This approach is also intended to
be least disruptive to importers, providing a bridge between the CBMA
requirements prior to 2023 and those applicable starting on January 1,
2023. TTB will consider the utility of the data elements as it begins
administering the amended CBMA provisions, to determine whether changes
are needed.
Importers intending to file a CBMA refund claim on alcohol products
entered for consumption on or after January 1, 2023, will be required
to include the claim indicator code ``C'' at the time of entry summary
or PSC. This ``C'' indicator will signify that the importer has or
reasonably expects to have a CBMA tax benefit assignment from the
foreign producer and expects to file a refund claim with TTB based on
the assigned reduced rate or credit. When designating an entry summary
with the ``C'' indicator, importers will also be required to provide
the following information for each line item on which they intend to
claim a CBMA refund:
(1) Controlled Group Name. This is the name, for purposes of CBMA,
that identifies the Controlled Group (e.g., parent company name) and
was previously collected by CBP through the CBMA Spreadsheet,
Controlled Group Spreadsheet, and the CBP ACE data elements.\26\
Importers that have received assignments from the same controlled group
in calendar years prior to 2023 should continue to report the same
controlled group name to TTB in 2023.
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\26\ TTB understands that, when a foreign producer is not under
common ownership with other alcohol producers, importers currently
report to CBP the foreign producer's name in this field, consistent
with the statutory provisions at 26 U.S.C. 5001(c)(3)(C),
5041(c)(6)(C), and 5051(a)(4)(C) stating that any importer electing
to receive assigned tax benefits is ``deemed to be a member of the
controlled group'' of the foreign producer. TTB does not interpret
these provisions as imposing any overall limitation on the quantity
of tax benefits that may be assigned to an importer by multiple
unrelated foreign producers. As set forth in these regulations,
controlled group limitations apply only to foreign and/or domestic
producers under common ownership.
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(2) Foreign Producer Identifier. This is the identifying code
provided to the foreign producer by TTB when the foreign producer
registers with TTB. The Foreign Producer Identifier identifies the
foreign producer who made or is reasonably expected to make the CBMA
tax benefit assignment applicable to the line item. This will differ
from the identifier reported to CBP in prior years.
(3) Foreign Producer Name. This is the name of the foreign
producer, registered with TTB, who made or is reasonably expected to
make the CBMA tax benefit assignment.
[[Page 58029]]
(4) Flavor Content Credit Indicator (for certain distilled spirits
only). This is an indicator that the importer is using an eligible
flavor content ``credit.'' This is used when depositing tax on imported
distilled spirits at an effective tax rate based on eligible wine and/
or flavor content, pursuant to 27 CFR 27.76 and 27.77.\27\
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\27\ If an importer uses an eligible wine and/or flavor content
credit, the allowable refund will not exceed the tax paid.
---------------------------------------------------------------------------
(5) CBMA Rate Designation Code. This is an ACE code that specifies
the CBMA rate for purposes of the TTB refund claim. The CBMA Rate
Designation Codes are provided in the `CBMA Rate Designation Code'
column on the `ACE CBMA Rate Table' spreadsheet publicly available at
TTB.gov.
(6) TTB Tax Rate (Confirmation). This is an ACE code that serves as
a validation of the CBMA Rate Designation Code to ensure that the CBMA
refund claim is based on the appropriate reduced tax rate or tax credit
category. The TTB Tax Rate codes are provided in the ``TTB Tax Rate
(Confirmation)'' column on the ``ACE CBMA Rate Table'' spreadsheet
publicly available at TTB.gov.
TTB recognizes that, in order to provide this information
accurately for the specific quantities of imported alcohol that will be
subject to refund claims based on foreign producer assignments, the
importer may need to report a shipment of a single product as multiple
line items on the entry summary. For example, assume that a foreign
winery assigns to an importer the entire 30,000 wine gallon allotment
of the $1.00 credit and the entire 100,000 wine gallon allotment of the
$0.90 credit. If the importer's first shipment from that foreign
producer consists of 40,000 wine gallons of a single wine product, its
entry summary will need two separate line items to account for the two
different CBMA tax credits assigned to it--one line item for 30,000
wine gallons with the $1.00 credit and one line item for the remaining
10,000 gallons with the $0.90 credit.
ii. Quarterly Submission of CBMA Import Refund Claims
After a foreign producer has made an assignment of CBMA tax
benefits to an importer, the importer has imported and entered for
consumption the products subject to the assignment, and the importer
has paid to CBP the tax due on those products, the importer is
generally entitled to seek a refund from TTB based on the assigned CBMA
tax benefits. The CBMA import refund claim provisions of the IRC
provide that amounts allowed as a refund may be determined no less
frequently than quarterly. See 26 U.S.C. 5001(c)(4)(A)(ii),
5041(c)(7)(A)(ii), and 5051(a)(6)(A)(ii). TTB's temporary regulations
establish a quarterly refund determination period, as TTB believes that
setting this refund period is necessary to provide TTB an opportunity
to analyze entry data for potential over-assignment of CBMA tax
benefits based on noncompliance with controlled group limitations.
Consistent with this quarterly refund period, the temporary regulations
provide that the calendar quarter must end before CBMA import refund
claims may be filed for any consumption entries made during that
quarter.
To minimize delay in issuing refunds on valid claims, TTB's
temporary regulations and electronic filing systems are intended to
facilitate electronic processing of CBMA import refund claims. By the
end of each calendar quarter, or shortly thereafter, the foreign
producer will have had the opportunity to submit its assignment to the
importer and the importer will have filed its entry summary and paid
the tax--the vast majority of the information required to substantiate
the importer's CBMA import refund claim. That is, two key elements of a
prospective CBMA import refund claim are (1) the foreign producer's
assignment of the CBMA tax benefit and (2) the importer's entry data
for the products subject to the foreign producer's assignment
(including payment of tax to CBP). As a result, the process for an
importer to submit a claim will primarily consist of electing to
receive tax benefit assignments by logging in to the myTTB system for
submitting CBMA importer refund claims, identifying the applicable
claim period and the lines on the customs entry summary for which a
claim will be filed, and otherwise verifying information the importer
already submitted through ACE for the consumption entry. Importers are
responsible for ensuring that the data that they have filed in ACE is
accurate before submitting their claims through myTTB.
Importers may begin filing claims for each calendar quarter after
that calendar quarter comes to an end. For example, claims for the
first calendar quarter ending March 31 may be filed beginning on April
1. There are, however, factors that could delay an importer's ability
to file a claim. First, the importer must have actually paid the tax
due on the imported alcohol before filing a claim for the refund of the
tax. Second, for purposes of processing the claim, particularly for
automation of such processing, TTB intends to use ACE data. The data
transfer from ACE to TTB's CBMA importer refund claims system is not
instantaneous, and entry data may even take several days to become
available.
CBMA importer refund claims will be treated in the same manner as
an overpayment of tax. See 26 U.S.C. 5001(c)(4)(A)(ii),
5041(c)(7)(A)(ii), and 5051(a)(6)(A)(ii). Under the electronic
submission process described above, TTB envisions that most valid
claims will be paid shortly after they are filed. As with any claim
related to an overpayment, if TTB determines that the importer is
entitled to the amount claimed, TTB will pay the claim along with any
required interest.\28\ Because these claims are treated in the same
manner as an overpayment of tax, the temporary regulations provide that
the limitations periods set forth in 26 U.S.C. 6511 apply to CBMA
importer refund claims.\29\ The general rule in section 6511(a)
requires a claim for refund of an overpayment to be filed by the
taxpayer within three years from the time the return was filed or two
years from the time the tax was paid, whichever period expires later.
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\28\ Interest is allowed at an established overpayment rate,
which is applied to the excess tax amount determined under statute
``for the number of days in the filing period for which the refund .
. . is being determined.'' See 26 U.S.C. 5001(c)(4)(B)(ii);
5041(c)(7)(B)(ii); and 5051(a)(6)(B)(ii) (effective January 1,
2023). Interest is disallowed in the case of refunds made within 90
days. See 26 U.S.C. 5001(c)(4)(D); 5041(c)(7)(D); and 5051(a)(6)(D)
(``Rules For Refunds Within 90 Days'') (effective January 1, 2023).
Thus, TTB will not pay interest if a refund is issued within 90 days
after a claim is filed.
TTB will calculate the 90-day period and allowable interest
starting with the date a complete and valid claim for refund is
filed with TTB rather than the date of tax payment to CBP because no
overpayment exists at entry as importers are not eligible for the
tax benefits at the time of entry. In addition, until the importer
submits a claim, no ``amount determined'' exists to be treated as an
overpayment. Absent an importer's claim, TTB would not know how much
tax would have been imposed at entry if the importer had been
eligible for the tax benefits at the time of entry. As a result,
interest will be applied to the lump-sum amount determined for each
filing period rather than to varying amounts paid with individual
entries.
\29\ While in its June 2021 Report to Congress on Administration
of Craft Beverage Modernization Act Refund Claims for Imported
Alcohol, Treasury noted the potential for ambiguity with respect to
the intersection between the Internal Revenue Code (IRC) and the
Tariff Act, TTB interprets the statutory language to require the
application of IRC statutes of limitations. This is also consistent
with TTB's current practice of applying IRC statutes of limitations
to importer claims that fall within TTB's delegated authority.
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iii. Electronic Submission of Claims
The temporary regulations require CBMA import refund claims to be
filed
[[Page 58030]]
electronically through myTTB. We understand that this is consistent
with CBP's implementation of the National Customs Automation Program,
through which almost all imported alcohol entry and entry summary
documentation is now filed electronically, in that case, in ACE. TTB
recognizes that there may be times when unforeseen circumstances
prevent an importer from filing entry or entry summary data
electronically in ACE and/or perfecting a claim through the procedure
established in the temporary regulations. TTB will publish alternate
procedures governing electronic uploads of claims and supporting
documentation for manual review to address these circumstances.
D. Procedures for Revocation of Eligibility
The statute requires the establishment of procedures for revoking
the eligibility of a foreign producer to assign, and an importer to
receive, CBMA tax benefits in cases where the foreign producer provides
any erroneous or fraudulent information that TTB deems to be material
to the foreign producer's qualification for such rates and credits. See
26 U.S.C. 5051(a)(4)(B)(iv) (beer); 5041(c)(6)(B)(iv) (wine); and
5001(c)(3)(B)(iv) (distilled spirits). Consistent with procedural due
process principles, the temporary regulations set forth the procedures
by which foreign producers will be notified of a contemplated
revocation and by which such entities will be given an opportunity to
be heard.
The temporary regulations provide that TTB may revoke a foreign
producer's eligibility for CBMA tax benefits if the foreign producer--
including anyone acting on its behalf--provides erroneous or fraudulent
information in a foreign producer registration or in an assignment of
CBMA tax benefits, and such erroneous or fraudulent information is
determined by TTB to be material to qualification for CBMA tax
benefits. Where TTB has reason to believe that the foreign producer has
provided material erroneous or fraudulent information, TTB will provide
written notice to the affected foreign producer of TTB's intent to
revoke their eligibility for CBMA tax benefits. This notice will set
forth the facts supporting TTB's contemplated revocation, specifically
the information TTB believes to be erroneous or fraudulent and an
explanation of its materiality to qualifying for CBMA tax benefits.
This notice will be provided to the foreign producer's representatives
registered with TTB.
Once a notice of contemplated revocation has been issued to a
foreign producer the temporary regulations require the foreign producer
to provide their written response within 45 days. This response should
explain why the foreign producer believes the information at issue was
not erroneous or fraudulent, or why such information is not material to
the foreign producer's eligibility for CBMA tax benefits. The temporary
regulations require this response to be submitted electronically
through means prescribed by the appropriate TTB officer.
TTB will review the foreign producer response to the notice of
contemplated revocation and come to an initial revocation
determination. The contemplated revocation action will either be
dismissed, or TTB will issue an order of revocation setting forth the
facts and analysis supporting revocation. This revocation of
eligibility is not to exceed three years, except where the foreign
producer has previously had their eligibility revoked (in which case
any subsequent revocation may be permanent). Further, in any case where
a criminal conviction results from the provision of erroneous or
fraudulent information, eligibility will be permanently revoked.
A foreign producer may appeal an order of revocation by submitting
a written appeal to the appropriate TTB officer within 45 days of
receipt of the order of revocation. The written appeal should explain
why the foreign producer believes its revocation of eligibility is in
error, supported by facts and analysis. The foreign producer must
submit the appeal electronically through means prescribed by the
appropriate TTB officer. TTB will review the appeal and, within 90 days
of receipt, notify the requestor whether the appeal has been granted or
denied. Consistent with the Administrative Procedure Act, the temporary
regulations require a foreign producer to first exhaust its
administrative appeals provided by regulation before seeking judicial
review of a revocation. See 5 U.S.C. 704.
III. Public Participation
For submitting comments, please refer to the notice of proposed
rulemaking on this subject published in the ``Proposed Rules'' section
of this issue of the Federal Register.
IV. Regulatory Analysis and Notices
A. Executive Order 12866
It has been determined that this rule is not a significant
regulatory action as defined by Executive Order 12866. Therefore, a
regulatory impact assessment is not required.
B. Regulatory Flexibility Act
In accordance with the Regulatory Flexibility Act (5 U.S.C. 601 et
seq.), TTB has analyzed the potential economic effects of this action
on small entities. In lieu of the initial regulatory flexibility
analysis required to accompany proposed rules under 5 U.S.C. 603,
section 605 allows the head of an agency to certify that a rule will
not, if promulgated, have a significant economic impact on a
substantial number of small entities. The following analysis provides
the factual basis for TTB's certification under section 605.
i. Impact on Small Entities
While TTB believes the majority of businesses subject to the
regulations are small businesses, the regulations in this document will
not have a significant impact on those small entities. TTB is requiring
the minimum information necessary to administer the statutory
requirements of The Tax Relief Act concerning the CBMA tax benefits for
imported alcohol. To the extent that any burden exists, such burden
flows from the statute itself and the shift to the refund method of
obtaining CBMA tax benefits. The electronic systems established by TTB
will not pose a significant burden because the majority of the foreign
producers and importers already file electronically with FDA and CBP
respectively.
In accordance with the Regulatory Flexibility Act (5 U.S.C. 601 et
seq.), TTB certifies that the regulations will not have a significant
economic impact on a substantial number of small entities. The rule
will not impose, or otherwise cause, a significant increase in
reporting, recordkeeping, or other compliance burdens on a substantial
number of small entities. TTB expects that the regulations will not
have significant secondary or incidental effects on a substantial
number of small entities. Accordingly, a regulatory flexibility
analysis is not required. Pursuant to 26 U.S.C. 7805(f), TTB will
submit the regulations to the Chief Counsel for Advocacy of the Small
Business Administration for comment on the impact of the regulations on
small businesses.
C. Paperwork Reduction Act
As noted previously in this document, TTB will administer the CBMA
import refund program through two information collection components in
its online filing system, ``myTTB.'' As described in new 27 CFR part
27, subpart P, Craft Beverage Modernization
[[Page 58031]]
Act Import Refund Claims, foreign producers will use the foreign
producer interface to register with TTB, receive a TTB-issued Foreign
Producer ID, and make assignments of CBMA tax benefits to importers.
The information collection requirements relevant to foreign producer
registration and assignments of CBMA benefits are described in new
sections 27 CFR 27.254 through 27.264. Importers will use the CBMA
importer claims interface to review and receive CBMA tax benefits
assigned to them by foreign producers, review and select the ACE
entries they identified as intended to be subject to a CBMA import
refund claim, and submit refund claims pertaining to those assignments
and entries. The information collection requirements relevant to CBMA
importer claims are described in new sections 27 CFR 27.264 and 27.266.
For the foreign producer interface, TTB estimates that 19,000
respondents will respond an average of once per year to that
information collection, resulting in 19,000 total annual responses,
with each response taking an estimated 0.75 hours to 2 hours to
complete, for a total estimated annual burden of 14,250 to 38,000
hours. This includes the time for reviewing instructions, searching
existing information sources, gathering and maintaining the data
needed, and completing and reviewing the collection of information.
For CBMA importer claims interface, TTB estimates that 7,000
respondents will respond 4 times per year, resulting in 28,000 total
annual responses. TTB further estimates that each response will require
0.5 to 2 hours to complete, resulting in an estimated total of 14,000
to 56,000 annual burden hours. This includes the time for reviewing
instructions, searching existing information sources, gathering and
maintaining the data needed, and completing and reviewing the
collection of information.
As noted above, TTB has submitted the new information collection
requirements to the Office of Management and Budget (OMB) for review
and approval under one OMB control number, titled ``Information Related
to Imported Alcohol Tax Refund Claims.'' The total annual burden for
this new information collection request, which will contain the two
components--for foreign producer registration and assignment and for
importer claims--noted above, is estimated as follows:
Number of Respondents: 26,000.
Number of Responses: 47,000.
Total Burden Hours: 28,250 to 94,000 hours.
Comments on these new recordkeeping and reporting requirements
should be sent to OMB at Office of Management and Budget, Attention:
Desk Officer for the Department of the Treasury, Office of Information
and Regulatory Affairs, Washington, DC 20503 or by email to
[email protected]. A copy should also be sent to TTB by any
of the methods previously described. Comments on the information
collections should be submitted no later than November 22, 2022.
Comments are specifically requested concerning:
Whether the collections of information submitted to OMB
are necessary for the proper performance of the functions of the
Alcohol and Tobacco Tax and Trade Bureau, including whether the
information will have practical utility;
The accuracy of the estimated burdens associated with the
collections of information submitted to OMB;
How to enhance the quality, utility, and clarity of the
information to be collected;
How to minimize the burden of complying with the proposed
collections of information, including the application of automated
collection techniques or other forms of information technology; and
Estimates of capital or start-up costs and costs of
operation, maintenance, and purchase of services to provide
information.
D. Inapplicability of Prior Notice
TTB is issuing this temporary rule without notice and prior
opportunity for public comment because it is a rule of agency procedure
exempt from notice and comment under section 4(a) of the Administrative
Procedure Act (APA) (5 U.S.C. 553(b)(A)). This temporary rule sets
forth the procedures governing TTB's processing and administration of
claims for CBMA tax benefits, including through establishing electronic
systems designed to authenticate foreign producers, applying statutory
limitations on the tax benefits that may be assigned, accelerating the
approval and payment of valid refund claims, and mitigating revenue
risks associated with the processing of claims. The rule prescribes the
procedures for importers to receive CBMA tax benefits from TTB based on
an assignment by foreign producers, as well as the procedures through
which TTB may revoke foreign producers' eligibility to make assignments
when erroneous or fraudulent information is submitted. The rule does
not address the substance of the reduced tax rates or tax credits
available under the CBMA.
In accordance with 26 U.S.C. 7805(e), TTB is soliciting public
comment on the regulatory provisions contained in this temporary rule
in a concurrently issued notice of proposed rulemaking.
List of Subjects
27 CFR Part 26
Alcohol and alcoholic beverages, Beer, Excise taxes, Imports,
Liquors, Notice requirements, Reporting and recordkeeping requirements,
Wine.
27 CFR Part 27
Alcohol and alcoholic beverages, Beer, Excise taxes, Imports,
Liquors, Notice requirements, Reporting and recordkeeping requirements,
Wine.
Amendments to the Regulations
For the reasons discussed above in the preamble, TTB amends 27 CFR
parts 26 and 27 as follows:
PART 26--LIQUORS AND ARTICLES FROM PUERTO RICO AND THE VIRGIN
ISLANDS
0
1. The authority citation for part 26 is revised to read as follows:
Authority: 19 U.S.C. 81c; 26 U.S.C. 5001, 5007, 5008, 5010,
5041, 5051, 5061, 5111-5114, 5121, 5122-5124, 5131-5132, 5207, 5232,
5271, 5275, 5301, 5314, 5555, 6001, 6038E, 6065, 6109, 6301, 6302,
6804, 7101, 7102, 7651, 7652, 7805; 27 U.S.C. 203, 205; 31 U.S.C.
9301, 9303, 9304, 9306.
0
2. Add Sec. 26.208 to read as follows:
Sec. 26.208 Craft Beverage Modernization Act Tax benefits.
The procedures set forth in 27 CFR part 27, subpart P, apply to the
application of Craft Beverage Modernization Act tax benefits for
products produced in and imported from the Virgin Islands and entered
for consumption subject to tax, except as subpart P would be manifestly
incompatible with the intent of the other regulations in this part.
PART 27--IMPORTATION OF DISTILLED SPIRITS, WINES, AND BEER
0
3. The authority citation for part 27 is revised to read as follows:
Authority: 5 U.S.C. 552(a), 19 U.S.C. 81c, 1202; 26 U.S.C. 5001,
5007, 5008, 5010, 5041, 5051, 5054, 5061, 5121, 5122-5124, 5201,
5205, 5207, 5232, 5273, 5301, 5313, 5382, 5555, 6038E, 6065, 6109,
6302, 7805.
Sec. 27.221 [Amended]
0
4. Section 27.221 is amended by:
0
a. Adding the phrase ``or foreign producer'' after the word
``importer'' in paragraph (a) introductory text; and
[[Page 58032]]
0
b. Adding the phrase ``or Foreign Producer ID of the foreign producer''
after the word ``importer'' in paragraph (a)(1).
Sec. Sec. 27.223 through 27.249 [Reserved]
0
5. Add reserved Sec. Sec. 27.223 through 27.249.
0
6. Add subpart P, consisting of Sec. Sec. 27.250 through 27.268, to
read as follows:
Subpart P--Craft Beverage Modernization Act Import Refund Claims
Sec.
27.250 Scope.
27.252 Meaning of terms.
27.254 Registration of foreign producer.
27.256 Foreign producer ownership information.
27.258 Changes to foreign producer registration.
27.260 Persons authorized to act on behalf of foreign producer.
27.262 Foreign producer's assignment of CBMA tax benefits.
27.264 CBMA import refund claim submission.
27.266 Importer reference number.
27.268 Revocation of eligibility for CBMA tax benefits.
Sec. 27.250 Scope.
This subpart contains procedural requirements relative to the
refunds of internal revenue tax for imported alcohol made available
under the Craft Beverage Modernization Act provisions of the Internal
Revenue Code of 1986 at 26 U.S.C. 5001(c)(4), 5041(c)(7), and
5051(a)(6). The refunds available under this subpart apply only to
imported products entered for consumption on or after January 1, 2023.
Sec. 27.252 Meaning of terms.
When used in this subpart and in forms prescribed under this
subpart, where not otherwise distinctly expressed or manifestly
incompatible with the intent thereof, terms have the meaning ascribed
in this section. Words in the plural form include the singular, and
vice versa.
CBMA. The Craft Beverage Modernization Act provisions (sections
13801-13808) of the law commonly known as the Tax Cuts and Jobs Act
(Pub. L. 115-97), as amended.
CBMA importer refund claims system. The electronic system
established by TTB for the collection and review of claims for refund
of internal revenue tax authorized under Sec. 27.264. The CBMA
importer refund claim system is available at https://www.TTB.gov.
CBMA tax benefits. The reduced tax rates or tax credits made
available under CBMA at 26 U.S.C. 5001(c)(1) (distilled spirits),
5041(c)(1) (wine), and 5051(a)(1) (beer), and made assignable to
importers by foreign distilled spirits operations, wineries, and
brewers pursuant to sections 5001(c)(3), 5041(c)(6), and 5051(a)(4),
respectively.
Foreign producer. A foreign distilled spirits operation, wine
producer, or brewer.
Foreign Producer ID. The identification number issued to a foreign
producer registered with TTB under Sec. 27.254.
Foreign producer registration and assignment system. The electronic
system established by TTB for the collection of information related to
the registration of a foreign producer under Sec. Sec. 27.254 through
27.260 and the assignment of CBMA tax benefits by such foreign producer
under Sec. 27.262. The foreign producer registration and assignment
system is available at https://www.TTB.gov.
Sec. 27.254 Registration of foreign producer.
(a) General. A foreign producer electing to assign CBMA tax
benefits to one or more importers must first register with TTB and
receive a Foreign Producer ID.
(b) Information required in registration. A foreign producer must
provide the following information through the foreign producer
registration and assignment system to register with TTB and receive a
Foreign Producer ID:
(1) The name, country of residence, and principal business address
of the foreign producer;
(2) The name, title, country of residence, phone number, and email
address of an employee or individual owner of the business who has
authority to act for the business;
(3) If different than the individual identified in paragraph (b)(2)
of this section, the name, address, phone number, and email address of
the individual submitting the registration and authorized to act on the
foreign producer's behalf;
(4) The Food Facility Registration number(s) obtained from the U.S.
Food and Drug Administration (FDA) under 21 CFR 1.225 that may be
reported to FDA under 21 CFR 1.281(a)(6)(ii) for the purposes of
importing into the United States the foreign producer's alcohol
products;
(5) Identifying information for the individuals and/or entities
with ownership interests in the foreign producer as required by Sec.
27.256, or a certification that Sec. 27.256 does not require the
foreign producer to provide such identifying information;
(6) Any prescribed certifications attesting to the authority of the
individual submitting the registration and the truthfulness of the
information submitted, the acknowledgement by the person submitting the
registration that providing erroneous or fraudulent information may
cause TTB to revoke the foreign producer's eligibility to assign CBMA
tax benefits, and consent to receive electronically any written notice
of contemplated revocation;
(7) Any additional information required by the appropriate TTB
officer (including, through the foreign producer registration and
assignment system) in order to verify a submitter's identity. Such
information may include identifying numbers (e.g., Employer
Identification Number, Social Security Number) as provided in 26 U.S.C.
6109; and
(8) Any additional information required by the appropriate TTB
officer on a case-by-case basis, to administer CBMA.
(c) Language. All registration information must be submitted in the
English language except an individual's name, the name of a company,
and the name of a street may be submitted in a foreign language. All
information, including these items, must be submitted using the English
alphabet.
(d) Electronic registration required. The foreign producer must
submit the information required by paragraph (b) of this section
electronically using the format provided by TTB.
Sec. 27.256 Foreign producer ownership information.
(a) When required. A foreign producer must provide, as part of the
registration required by Sec. 27.254, the identifying information set
forth in paragraph (b) of this section only when one or more of the
individuals or entities holding an ownership interest in the foreign
producer of 10 percent or more also holds an ownership interest in any
distilled spirits operation, winery, or brewery in the United States or
in any other foreign producer that has assigned or will assign CBMA tax
benefits for any calendar year in which the registering foreign
producer also assigns such benefits. Otherwise, the foreign producer
must only certify that this scenario does not apply.
(b) Identifying information--(1) Individual owner. For each
individual holding an ownership interest of 10 percent or more in the
foreign producer, the foreign producer must provide the following
information when required by paragraph (a) of this section:
(i) The name, address, and phone number of the individual.
[[Page 58033]]
(ii) [Reserved]
(2) Other entity. For each entity (other than an individual)
holding an ownership interest of 10 percent or more in the foreign
producer, the foreign producer must provide the following information
when required by paragraph (a) of this section:
(i) The name, address, and phone number of the entity;
(ii) If the entity is a U.S. entity, and if the entity has such a
number, the entity's Employer Identification Number issued by the U.S.
Internal Revenue Service; and
(iii) If the entity is a foreign entity, and if the entity has such
a number, the Dun & Bradstreet Data Universal Numbering System number
of the entity.
Sec. 27.258 Changes to foreign producer registration.
Whenever there is a change to any of the information submitted by
the foreign producer under Sec. 27.254, the foreign producer must
update its registration with the new information within 60 days.
Whenever the appropriate TTB officer determines that a foreign producer
has failed to update its registration information as required, the
foreign producer's registration is deemed invalid and the foreign
producer will be unable to assign CBMA tax benefits until the foreign
producer updates its registration as required or the appropriate TTB
officer is satisfied that no such update is required.
Sec. 27.260 Persons authorized to act on behalf of foreign producer.
(a) General. A foreign producer registered with TTB to assign CBMA
tax benefits must identify at least one person authorized to act on its
behalf. The person who initially registers a foreign producer under
Sec. 27.254 must have authorization from the foreign producer to
provide the required registration information, edit the foreign
producer's registration information, designate additional persons who
are also authorized by the foreign producer to act on the foreign
producer's behalf or cancel the designations of authorized persons, and
make assignments of CBMA tax benefits. All authorized representatives
of the foreign producer must have authority to receive and respond to
communications from TTB, including notice of contemplated revocation
under Sec. 27.268(b).
(b) Authorization of additional persons. (1) A foreign producer may
authorize more than one person to act on its behalf within the foreign
producer registration and assignment system. To designate an additional
person as described above, the foreign producer must provide the
following information:
(i) The name and email address of the person; and
(ii) The appropriate system role for the person, based on the
functions in paragraph (a) of this section that the person is
authorized to carry out.
(2) TTB may collect additional information from the additional
person, as needed, to verify their identity. Such information may
include identifying numbers (e.g., Social Security Number) as provided
in 26 U.S.C. 6109.
(c) Proof of authority. An individual acting on behalf of the
foreign producer in the foreign producer registration and assignment
system must maintain documentation establishing the individual's
authority to act for the foreign producer and provide this
documentation to TTB upon request. Any representative must be
authorized by the foreign producer pursuant to a duly executed power of
attorney or other document deemed acceptable to the appropriate TTB
officer.
Sec. 27.262 Foreign producer's assignment of CBMA tax benefits.
(a) General. A foreign producer who has registered with TTB under
Sec. 27.254 and received a Foreign Producer ID may assign its CBMA tax
benefits to importers, subject to the quantity limitations established
by law.
(b) Information required in assignment. A foreign producer must
provide the following information through the foreign producer
registration and assignment system to make an assignment of CBMA tax
benefits to an importer:
(1) The calendar year for which the CBMA tax benefits are being
assigned;
(2) The TTB importer permit number or TTB-assigned reference number
of the importer to whom the assignment is made;
(3) The Internal Revenue Code classification of the product for
which the assignment is made, either distilled spirits, wine, or beer;
(4) The reduced tax rate or tax credit being assigned, either:
(i) For distilled spirits:
(A) The reduced tax rate of $2.70 per proof gallon on the first
100,000 proof gallons imported in the calendar year; or
(B) The reduced tax rate of $13.34 per proof gallon on the next
22.13 million proof gallons imported in the calendar year;
(ii) For wine:
(A) The tax credit of $1 per wine gallon on the first 30,000 wine
gallons of wine imported in the calendar year (or credit of 6.2 cents
per wine gallon for wine classified as ``hard cider'');
(B) The tax credit of 90 cents per wine gallon on the next 100,000
wine gallons imported in the calendar year (or credit of 5.6 cents per
wine gallon for wine classified as ``hard cider''); or
(C) The tax credit of 53.5 cents per wine gallon on the next
620,000 wine gallons imported in the calendar year (or credit of 3.3
cents per wine gallon for wine classified as ``hard cider'');
(iii) For beer, the reduced tax rate of $16 per barrel on the first
6,000,000 barrels imported in the calendar year;
(5) The quantity by proof gallons, wine gallons, or beer barrels of
the reduced tax rate or tax credit being assigned; and
(6) Any prescribed certifications attesting to the submitter's
authority and the submitter's acknowledgement of statutory limitations
on the quantities of assignments that may be made; and
(7) Any additional information required by the appropriate TTB
officer on a case-by-case basis to administer CBMA.
(c) Limitations--(1) General. Quantities that may be assigned are
limited to the number of proof gallons, wine gallons, and beer barrels
in paragraph (b)(4) of this section, and also cannot exceed the
quantities of the foreign producer's distilled spirits, wine, and beer
that are reasonably projected to be imported into the United States
during the specified calendar year by the importer receiving the
assignment.
(2) Controlled group rules. Foreign and/or domestic producers under
common ownership are grouped together when applying the quantity
limitations in paragraph (c)(1) of this section. The quantity
limitations apply to:
(i) Foreign and/or domestic producers in a ``parent-subsidiary
controlled group,'' as defined in 26 U.S.C. 1563 and as modified by 26
U.S.C. 5051(5)(A)-(B);
(ii) Foreign and/or domestic producers in a ``brother-sister
controlled group,'' as defined in 26 U.S.C. 1563 and as modified by 26
U.S.C. 5051(5)(A)-(B);
(iii) Foreign and/or domestic producers in a ``combined group,'' as
defined in 26 U.S.C. 1563 and as modified by 26 U.S.C. 5051(5)(A)-(B);
(iv) Shared ownership structures similar to those described in
paragraphs (c)(2)(i) through (iii) of this section, but where one or
more producers under common ownership is not a corporation.
(d) Timing. Assignments of CBMA tax benefits may be submitted to
TTB beginning no earlier than October 1st of the calendar year prior to
the year for which the CBMA tax benefits are to be
[[Page 58034]]
assigned. Assignments of CBMA tax benefits must be submitted on or
before December 31st of the calendar year for which the CBMA tax
benefits are assigned.
(e) Changes to assignments. Once made, a foreign producer may not
revoke or reduce an assignment of CBMA tax benefits unless the assignee
importer has rejected the assignment.
(f) Electronic registration required. The foreign producer must
submit the information required by paragraph (b) of this section
electronically using the format provided by TTB.
Sec. 27.264 CBMA import refund claim submission.
(a) General. An importer who has elected to receive an assignment
of CBMA tax benefits from a foreign producer may file a claim in
accordance with this section for a partial refund of the tax paid to
Customs and Border Protection (CBP) on alcohol produced by the
assigning foreign producer and imported into the United States by that
importer. Refunds are to be determined no more frequently than
quarterly. The amount of refund is calculated as provided at 26 U.S.C.
5001(c)(4)(B) for distilled spirits, 5041(c)(7)(B) for wine, and
5051(a)(6)(B) for beer, on such products entered for consumption within
the calendar quarter and for which the importer has received an
assignment of CBMA tax benefits and paid to CBP the tax determined on
such products.
(b) Election to receive CBMA tax benefits. An importer who has been
assigned CBMA tax benefits by a foreign producer is presumed to have
elected to receive such assignment unless and until the importer
rejects the assignment through the online system prior to filing a
claim for a refund based on that assignment.
(c) Information required at entry summary. To be eligible for a
refund described in paragraph (a) of this section, the importer must
submit electronically the information required by Sec. 27.48(a)(2) for
distilled spirits, wines, and beer imported into the United States
subject to tax (in satisfaction of Sec. 27.48(a)(2), an importer who
does not have and is not required to obtain an FAA Act basic permit
must instead submit its TTB-assigned reference number obtained under
Sec. 27.266). The importer must also indicate its intent to claim a
refund on the entry summaries of the consumption entries for the
alcohol subject to the prospective claim, either at the time of entry
summary or through post-summary correction. These entry summaries must
include the following information for each line item to be included in
a claim for refund, in the electronic format prescribed by CBP:
(1) The TTB-issued Foreign Producer ID of the foreign producer who
assigned CBMA tax benefits to the importer;
(2) The name of the foreign producer who assigned CBMA tax benefits
to the importer;
(3) A statement of whether the importer is using an eligible flavor
content credit pursuant to Sec. Sec. 27.76 and 27.77; and
(4) An indicator or set of indicators specifying the particular
CBMA reduced tax rate or tax credit assigned by the foreign producer of
the alcohol.
(d) Information required in claim submission. To submit a claim for
a refund described in paragraph (a) of this section, the importer must
submit and/or verify, as appropriate, within the CBMA importer refund
claims system the following information for each consumption entry line
item to be included in the claim:
(1) The date of the entry for consumption;
(2) The year of importation, if different than the year of the
entry for consumption;
(3) The entry summary number and the entry summary line number;
(4) The particular CBMA reduced tax rate or tax credit assigned by
the foreign producer of the alcohol;
(5) The quantity of proof gallons, wine gallons, or beer barrels
entered for consumption subject to the rate or credit identified in
paragraph (d)(4) of this section;
(6) The TTB-issued Foreign Producer ID of the foreign producer who
assigned CBMA tax benefits to the importer;
(7) The amount of tax determined and paid by the importer;
(8) The amount of the refund sought by the importer;
(9) Information allowing the appropriate TTB officer to arrange
payment to the importer of the refund;
(10) Any prescribed certifications attesting to submitter's
authority and the truthfulness of the information submitted; and
(11) Any additional information, as needed by TTB on a case-by-case
basis, to administer CBMA.
(e) Timing of claim submission. Claims under this section may be
submitted only after the end of the calendar quarter in which the
entries for consumption were filed. The calendar quarters end on March
31, June 30, September 31, and December 31. Claims must be filed within
the limitations period set forth at 26 U.S.C. 6511.
(f) Authorization. Each person authorized to sign or act on behalf
of the importer must be authorized pursuant to a duly executed power of
attorney. TTB may collect additional information from the authorized
person, as needed, to verify their identity. Such information may
include identifying numbers (e.g., Social Security Number) as provided
in 26 U.S.C. 6109.
(g) Electronic filing required. To be eligible for a refund under
this section, an importer must submit the information required by
paragraphs (c) and (d) of this section electronically in the formats
prescribed by CBP and TTB, respectively.
Sec. 27.266 Importer reference number.
An importer who does not have and is not required to obtain an FAA
Act basic permit must request and receive a reference number from the
appropriate TTB officer before receiving assignments of CBMA tax
benefits from foreign producers under Sec. 27.262. The importer must
provide this reference number to any foreign producers that will assign
CBMA tax benefits to the importer.
Sec. 27.268 Revocation of eligibility for CBMA tax benefits.
(a) Revocation of foreign producer's eligibility. A foreign
producer who provides erroneous or fraudulent information that the
appropriate TTB officer determines is material to the eligibility of
the foreign producer to assign CBMA tax benefits under Sec. 27.262 may
have such eligibility revoked, for a period not to exceed three
calendar years following the year of revocation, under the procedures
set forth in paragraphs (b) through (e) of this section. If the foreign
producer has previously had its eligibility revoked under this section,
any subsequent revocation may instead be permanent. In any case where a
criminal conviction results from the foreign producer's providing of
erroneous or fraudulent information as described above, eligibility
will be permanently revoked.
(b) Notice of contemplated revocation. Where the appropriate TTB
officer has reason to believe that a foreign producer, including anyone
acting on behalf of a foreign producer, has provided erroneous or
fraudulent information as described in paragraph (a) of this section,
such officer will provide a written notice of contemplated revocation
to the foreign producer. Such notice will set forth the facts and
analysis supporting the contemplated revocation, as well as the period
of contemplated revocation. Written notice will be provided
electronically to persons authorized to act on behalf of the foreign
producer
[[Page 58035]]
within the online foreign producer registration and assignment system
as provided in Sec. 27.260.
(c) Response to contemplated revocation. A foreign producer in
receipt of a notice of contemplated revocation, or its representative,
may submit a written response to the appropriate TTB officer explaining
why the foreign producer believes the information at issue was not
erroneous or fraudulent, or why such information is not material to the
foreign producer qualifying for CBMA tax benefits. This response must
be submitted within 45 days of receipt of the written notice of
contemplated revocation and must be submitted electronically through
means specified in such notice. Any representative of the foreign
producer in these proceedings must be authorized by the foreign
producer pursuant to a duly executed power of attorney or other
document deemed acceptable to the appropriate TTB officer. If the
foreign producer does not submit a response within 45 days, the
appropriate TTB officer will issue an order of revocation as set forth
in paragraph (d) of this section.
(d) Revocation determination. Following receipt of a foreign
producer's response to a contemplated revocation, the appropriate TTB
officer will consider the arguments raised in the response and issue an
order either dismissing the contemplated revocation or imposing a
revocation as authorized under paragraph (a) of this section. Any order
imposing revocation will set forth the facts and analysis supporting
the revocation, taking into consideration any response provided by the
foreign producer under paragraph (c) of this section. The order will be
provided electronically to the foreign producer or the foreign
producer's representative in the matter.
(e) Review--(1) Appeal. A foreign producer may appeal an order of
revocation issued under paragraph (d) of this section by submitting a
written appeal to the appropriate TTB officer within 45 days of receipt
of such order. The appeal must explain why the foreign producer
believes its revocation is in error, supported by facts and analysis.
The appeal must be submitted electronically through the means specified
in the order of revocation. The appropriate TTB officer will issue a
final decision by notifying the foreign producer within 90 days of
receipt of the appeal whether the appeal is granted or denied, and the
reasons for the determination. The appropriate TTB officer may extend
this period of time once by an additional 90 days if the appropriate
TTB officer requires additional time to consider the issues presented
by an appeal and must notify the foreign producer of the extension
within the initial 90-day period. If the appropriate TTB officer fails
to issue a decision granting or denying the appeal within the
applicable deadline, the appeal is denied and such denial will be
considered a final decision.
(2) Judicial review. A final decision from the appropriate TTB
officer following appeal is required prior to application to the
Federal courts for review of any order of revocation.
(f) Notice to affected importers. In any instance where an order
imposing revocation of a foreign producer's eligibility for CBMA tax
benefits is issued under paragraph (d) of this section, the appropriate
TTB officer will notify any importer having an assignment of CBMA tax
benefits from that foreign producer of the revocation. In the event
that the revocation is appealed and the appeal is granted pursuant to
paragraph (e) of this section, the appropriate TTB officer will notify
any importer having an assignment from that foreign producer of the
dismissal of such revocation.
Signed: September 14, 2022.
Mary Ryan,
Administrator.
Approved: September 14, 2022.
Thomas C. West, Jr.,
Deputy Assistant Secretary (Tax Policy).
[FR Doc. 2022-20412 Filed 9-22-22; 8:45 am]
BILLING CODE 4810-31-P