Firms that both import and export alcohol won’t have to pay excise taxes on the alcohol they import and sell.
That’s the result of a decision by the Court of International Trade striking down regulations intended to prevent a double drawback.
The decision should cheer not only the firms that benefit from it but also conservatives who have long wanted courts to stick to the Congressional language in deciding cases. That’s what the court appears to have done in a case involving drawbacks.
In a regulation dating from 2018, the government attempted to end a situation that appears to offer an advantage to imported products. Under regulations adopted by Customs & Border Protection, refund of excise taxes paid on imported products would be triggered only if an equivalent amount of excise taxes had been paid on U.S. products.
That’s not what prior practice had been. Since 2004, companies could use the value of products being exported to offset the value of products being imported. If the product being exported hadn’t been subject to tax, it could still be used to offset the value of a product being imported.
The practical effect: The imported product escapes paying excise tax. That, CBP said, was an unfair advantage for the imported product over domestic producers.
The Court agreed with the policy argument. But it said CBP and the Treasury Department had repeatedly asked Congress to close the “loophole.” Each time, Congress failed to act. The result was the court struck down the regulation.
Industry officials say drawback encourages U.S. exports.
The Court didn’t say it, but the message was clear: If Treasury doesn’t like the decision, it should get Congress to change the law, not write an administrative regulation.