Wine Duty Drawback

Customs Establishes Wine Drawback Parameters

Customs Headquarters in a long-awaited ruling issued its interpretation related to a provision of the Food, Conservation, and Energy Act of 2008 that addressed the commercial interchangeability of wine for drawback purposes. Section 15421 of the law states—for drawback purposes imported and exported wine will be matched on a color for color basis (e.g. red for red and white for white) within a 50 percent wholesale price variance. The new law, while clear in its general intent, left the door open for Customs to limit its scope through a more restrictive interpretation.

The Customs ruling addressed a variety of specific issues raised by the San Francisco Drawback Office in a request for internal advice. San Francisco Customs sought clarification on the following points:

1. Whether wines produced from fermented rice or fruit other than grapes, such as cider, perry, plum wine, prune wine, sake, and mead, are within the scope of section 15421 of the Act;

2. Whether fortified wines that contain in excess of 14 percent alcohol by volume (including fortified dessert wine, sherry, port, and vermouth) are within the scope of section 15421 of the Act;

3. Whether carbonated wines, such as crackling wine, sparkling wine, or effervescent including champagne, are within the scope of section 15421 of the Act;

4. Whether imported and substituted wines in different size containers are within the scope of section 15421 of the Act; and,

5. Whether imported or substituted rose table wine is commercially interchangeable with either red or white table wine.

Customs narrowed the scope of commercial interchangeability as it relates to wine by holding that the law only applied to still table wines under 14 percent alcohol by volume. This excluded consideration of any other wines made from fruit other than grapes as well as sparkling wines or still table wine over 14 percent. Rose wine was held to be its own separate color category.

The one positive holding for the industry involved wines shipped in different size containers (bulk shipping vs. bottled case goods). Wines shipped in various size packaging was considered to be commercially interchangeable regardless of the packaging configuration. This portion of the ruling was a significant win for the trade community as bulk wine and case goods fall into different internal revenue department tax categories as well as HTS classifications.