Substitution Drawback Fix Requested in Major Tax Cuts Bill
When the House Ways and Means Committee asked all House members for their opinions on what should belong in the tax cut bill the Republicans are shaping, Rep. Andy Barr, R-Ky., used the opportunity to talk about both taxes and trade.
Sign up for a free preview to unlock the rest of this article
If your job depends on informed compliance, you need International Trade Today. Delivered every business day and available any time online, only International Trade Today helps you stay current on the increasingly complex international trade regulatory environment.
Barr noted that whiskey and bourbon, because of their different Harmonized Tariff Schedule codes at the 8-digit level, cannot be used for substitution drawback claims. In other words, if a company imported whiskey from Ireland and exported bourbon, that would not work for drawback.
Barr told the committee that the European Union only temporarily ended its punitive tariff on American bourbon, and that a 50% tariff could be imposed on the product on March 31.
He said he's talked to commerce secretary nominee Howard Lutnick about negotiating a return to zero tariff on European spirits and a zero tariff on American spirits. The EU first imposed a 25% tariff on American spirits to put pressure on then-Majority Leader Mitch McConnell, R-Ky., to try to convince him to pressure the president to end 25% tariffs on EU steel. Those tariffs were replaced with TRQs during the Biden administration, and the EU called a temporary truce on its retaliation as the two sides tried to reach an agreement on global trade in sustainable steel.
In a hallway interview outside the hearing, Barr said he has constituents who are very concerned about the possibility that the EU might put 50% tariffs on their exports.
"One of the things ... the [U.S. trade representative] needs to remind the Europeans is that putting a tariff on bourbon whiskey made in the United States is actually putting a tariff on Europe," because there are European companies that own bourbon brands, in addition to the impact on European consumers who like to drink bourbon.
He said he told Europeans that a retaliatory tariff on bourbon is not smart, and some said that if the U.S. would just roll back the 25% tariffs on European steel, it would be solved.
"They know this is a pressure point for us, so they want to use it," he said. But, he argued, "this issue is different than steel and aluminum, it's not a national security-related issue."
If the U.S. and Europe can't return to zero tariffs on spirits on both sides, he said, fixing substitution drawback for the industry is an important stopgap.
"It's important regardless, but it's a great fall back, that in the event there was a snapback of the European tariffs, it's a way to protect American whiskey producers," he said. He said he thinks the Ways and Means lawmakers are receptive to making the change to drawback in the larger tax bill "because it makes sense. It's almost like a quirky error [at CBP]. They should be treated like-kind, and they're not right now."
At the hearing, trade was also touched on when Rep. Neal Dunn, R-Fla., asked the committee to consider restricting the number of packages eligible for de minimis as a pay-for in the bill. He called it a "no-brainer and a substantial pay-for."
He said his proposal to make it so Chinese manufacturers cannot be covered by the Generalized System of Preferences benefits program was part of the GSP reform the committee passed -- "the reauthorization of which is way overdue," he added.