How CBMA Can Help Brands Save on Importing Costs

Apr 5, 2022 | , | Park Street University |

In 2021, congress moved to make the excise tax cuts from the 2017 Craft Beverage Modernization Act (CBMA) permanent moving forward. The new rates on imported beverages give owners the potential to significantly save on their costs if brands are armed with the knowledge on how to pursue them. With a sound understanding of the current federal import regulations, owners can save themselves valuable time and money. 

Nathaniel Vicens, Park Street’s CBMA Team Manager, is here to teach owners about the new excise tax guidelines and how to take advantage of them. He’ll break down how the new CBMA regulations compare to standards set in 2017 and how to know if your brand is eligible to pursue them. Vincens even dives into the details on how getting organized with your producer can lend itself to a successful tax credit reduction.

In part two of our series on the Craft Beverage Modernization Act, Vicens discusses the necessary documentation that brands will need in order to apply for tax reductions under CBMA. He covers the criteria needed to qualify for these savings and discusses the requirements for the Assignment Certification, Controlled Group Spreadsheet, and CBMA Spreadsheet.

Additional Resources Mentioned

 

How CBMA Can Help Brands Save on Importing Costs

Nathaniel Vicens 0:00

Hi, my name is Nathaniel Vicens, and I’m the CBMA Manager here at Park Street. Today, I want to discuss the Craft Beverage Modernization Act, or otherwise known as CBMA. In 2017, the Tax Cuts and Jobs Act made extensive changes to the Internal Revenue Code of 1986, including provisions we know today as CBMA, which relate to federal excise taxes on all distilled spirits, wine, and beer products. Those changes were originally effective for the calendar years 2018 and 2019. Fast forward to 2020, and in addition to making those CBMA provisions permanent, the Consolidated Appropriations Act of 2021 made several notable changes—some of which were effective in January 2021, and others taking effect in 2022 and 2023.

Nathaniel Vicens 1:02

So what does it mean for you, the brand owner? Imagine for a second that you’re importing one case of distilled spirits with six bottles per case at a size of 750 milliliters and an alcohol by volume (ABV) of 40% in each bottle. The non-CBMA rate, or the regular rate that you’re used to paying, is $12.84 in total federal excise tax (FET) per case. However, the CBMA rate would be only $2.57 in FET per case. Imagine extrapolating that to 1,000 cases of that same example: the difference in FETs is $10,271 back in the brand manager’s pocket.

Nathaniel Vicens 1:52

So how do you know if you’re eligible? Per TTB, all reduced tax rates and tax credits must be assigned by the originating foreign producer, otherwise known as the assigning entity. This means that the producer assigning the CBMA FET rates must track what they’ve already assigned to any or many importers within that given year, and they must allot the quantity for which the lower rates will be claimed within that year. For example, with red wine under 16% ABV, the regular FET rate is $1.07 per wine gallon. But if the CBMA tax credit is taken advantage of, the rate for the first 30,000 wine gallons is just $0.07 per wine gallon, and for the next 100,000 wine gallons, the rate is $0.17 per wine gallon. All regular rates and lower CBMA rates for alcoholic beverages can be accessed on the TTB website.

Nathaniel Vicens 3:19

How do you go about receiving these rates? There are two ways to claim these favorable rates. The first is upon receipt of the CBMA documentation: Park Street can make a retroactive refund claim for cargo where Park Street was the importer of record upon entry to the U.S. While this option has time limits on how far back we can claim, it is worth exploring if it applies to you. The second and optimal option is to have all documentation in place before the importation of your alcoholic beverage, allowing you to automatically pay the lower FET rate upon importation.

Nathaniel Vicens 4:07

To quickly summarize, we discussed the advantages of CBMA rates for the payment of federal excise taxes on imported alcoholic beverages. Imagine a difference of $2.00 per barrel for beer, paying just 20% of what is originally paid in FETs for distilled spirits like tequila, vodka, whiskey, or liqueur, or seeing a 30% discount for sparkling wine. We also discussed that the best way to know if you’re eligible is to work with the originating producer of the alcoholic beverage. Lastly, there are two ways to make a claim: requesting a refund retroactively, or applying the rates directly upon importation of the alcoholic product.

Nathaniel Vicens 4:59

If you’d like to know more about the benefits of CBMA or are ready to proceed with the documents required, please reach out to us at cbmtr@parkstreet.com. In this two-part series on CBMA, Park Street University will be releasing a separate video where we dive deeper into the specific information and documentation needed in order to take advantage of these CBMA rates. If this video was helpful, please press the like button below and subscribe to receive an alert when part two is released. Thanks for watching and have a great day!

Necessary Documentation for CBMA

Nathaniel Vicens 0:00

Hi, my name is Nathaniel Vicens, and I’m the Customs Entry Manager here at Park Street. This part two of our series focuses on CBMA, or the Craft Beverage Modernization Act. In part one, we focused on the benefits of the CBMA program and how those discounts affect foreign beer, wine, or spirits. If you’re watching this video, the goal is to better understand what documentation is needed to properly fill out as per CBP and TTB guidelines. We know that a claim is not considered complete until the CBMA spreadsheet, control group spreadsheet, and the assignment certification are provided to CBP.

Nathaniel Vicens 0:53

First, and I believe most importantly, is the CBMA assignment certification. In order to start that document, you need to understand who can be listed as the assigning entity. The assigning entity should be the foreign producer of the alcoholic beverage—defined as a foreign beer brewer, foreign wine producer, or foreign distilled spirits operation. CBP has left a thorough resource on their Q&A page regarding the producer definition. For distilled spirits, an assigning entity can be any entity that produces distilled spirits, brews mash or wash fit for distillation, separates spirits from fermented substances, or manufactures, mixes, bottles, rectifies, denatures, or otherwise processes distilled spirits.

Nathaniel Vicens 2:25

Once you have that document ratified by the assigning entity, they certify that they are an eligible producer and allot the rates to the importer of record. If you happen to be a brand affiliated with Park Street, Park Street handles all of your customs entry documentation and is listed as the importer of record, so the producer will allot the volume to Park Street on behalf of your brand. The certification must specify the alcohol type, the allotted volume, and the applicable tax rate. Crucially, the producer must certify that they have not allotted more than the allowable TTB rates to any single or multiple importers within that calendar year.

Nathaniel Vicens 3:30

For distilled spirits in 2022, the regular rate is $13.50 per proof gallon, but under CBMA, foreign producers can allot the first 100,000 proof gallons at a reduced rate of $2.70 per proof gallon. If you only plan to import 10,000 proof gallons, you only specify 10,000 proof gallons on the form for that given year. If a large producer exceeds 100,000 proof gallons, there is an intermediate tier rate of $13.34 per proof gallon available for up to 22,230,000 proof gallons. As part of CBMA provisions, importers must also submit a control group Excel spreadsheet listing the full name, address, country, and annual production volume for each foreign assigning entity, which must meet or exceed the total allotted volume.

Nathaniel Vicens 5:36

Lastly, if you work with Park Street as your importer of record, you do not need to prepare the CBMA import spreadsheet yourself. Park Street generates this document for every individual shipment arriving by air, ocean, or land border. During customs entry, we track and deduct the imported quantity from the foreign producer’s original allotment to ensure full utilization. To recap: full compliance requires a valid assignment certification, a control group spreadsheet for all assigning entities, and a shipment-specific CBMA spreadsheet.

Nathaniel Vicens 6:33

We also have a breaking news update: CBP and TTB announced that starting January 1, 2023, the governing body overseeing CBMA claims for imported goods will transition from CBP over to the TTB. While the exact operational shifts are being finalized, Park Street is actively working with legislators, governing entities, and legal counsel to keep clients fully compliant. If you have questions regarding these documents or your CBMA setup, please reach out to us at cbmtr@parkstreet.com. Have a productive week!

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