INTRODUCTION OF LEGISLATION TO SIMPLIFY THE TAX AND ELIMINATE THE DRAWBACK FEE ON CERTAIN DISTILLED SPIRITS USED IN NON-BEVERAGE PRODUCTS MANUFACTURED IN A U.S. FOREIGN TRADE ZONE OR DOMESTIC USE AND EXPORT -- (Extensions of Remarks - June 06, 2007)
* Mr. PASCRELL. Madam Speaker, I rise today to introduce a bill designed to equalize the competitive playing field between domestic and foreign users of certain distilled spirits used in the manufacture or production of non-beverage products.
* Non-beverage products include medicines, medicinal products, food products, flavors, flavoring extracts and perfumes, all of which are unfit for beverage purposes.
* The bill does this by allowing users that demonstrate to the Treasury Department that they are producing non-beverage products in a U.S. Foreign Trade Zone to avoid the excise tax on distilled spirits, which a foreign manufacturer of non-beverage product that uses distilled spirits does not pay.
* A Foreign Trade Zone is a restricted-access site authorized by the U.S. Department of Commerce and supervised by U.S. Customs where companies can use special Customs procedures for importing and exporting materials and finished products. Zones are located in or adjacent to a Customs port of entry and operated pursuant to public utility principles under the sponsorship of a corporation granted authority by the Commerce Department pursuant to the Foreign-Trade Zones Act and regulations.
* Authorized companies, of which there are many in New Jersey, therefore will be subject to continuous regulation by the Commerce and Treasury Departments as well as Customs.
* The bill preserves necessary safeguards for the government as it monitors which companies use distilled spirits for beverage purposes and which companies use them for non-beverage purposes.
* Such companies will be required to file regular reports with the Department of Treasury showing that the distilled spirits are used in the manufacture of non-beverage products. Currently, such manufacturers pay an excise tax of $13.50 per proof gallon and then must file for ``drawback'' with the burden on the claimant to show eligibility for drawback.
* Under the drawback procedure, the government rebates all but $1 per proof gallon, charging the companies a $1 administration fee. Companies subject to this procedure can have considerable cash flow tied up in this process for an appreciable period of time. Again, a foreign manufacturer of non-beverage products is not subject to such tax and consequently, is not burdened by the need to file for drawback.
* The imposition of this tax and burdensome drawback process on American manufacturers and producers put them at a competitive disadvantage, which I believe we should eliminate, while preserving the integrity of the government process to monitor the use of distilled spirits.