CAFC Affirms CIT Rejection of Excise Tax Drawback Regulations

The U.S. Court of Appeals for the Federal Circuit agreed with the Court of International Trade's rejection of CBP regulations that limit the amount of drawback that can be claimed on excise taxes, the CAFC said in a ruling. "We conclude that the expansive definition in the Rule, which extends drawback to situations in which tax is never paid or determined, conflicts with the unambiguous text of the statute," said the CAFC.

The ruling is a result of a National Association of Manufacturers challenge to the CBP regulations that deemed exportation without payment of excise taxes to be a form of drawback, and limited the amount of drawback to the amount of taxes paid on the export that forms the basis for the drawback claim. The now-invalidated provisions meant that drawback claims that rely on excise-unpaid exports (such as domestic wine never sold for domestic consumption) were a form of prohibited “double drawback.”