Wyden Says Drawback Changes for Tobacco on 'Menu of Options' for Pay-Fors

Senate Finance Committee Chairman Ron Wyden, D-Ore., says that although his initial list of pay-fors did not include any taxes on tobacco, he thinks the House Ways and Means Committee proposal is worthy of being included on what he called "a menu of options" to give Democratic senators choices. "I happen to think that this is an important idea, they're talking, I gather, at e-cigarettes," he said during a Capitol hallway interview.

"I like this idea as one of the options," he said, referring to applying tobacco excise taxes to nicotine cartridges used in vaping pens (see 2109130038). When asked specifically about the Ways and Means proposal to limit substitution drawback for tobacco products, he said he didn't want to get too specific, but said, "I like this idea of one of a menu of options, and I want to talk to my colleagues about it."

The National Association of Manufacturers won a case that involved CBP's decision to bar the use of substitution drawback in cases where exporters had not paid excise tax and yet were getting a refund of excise taxes paid on similar imports (see 2108230021). In that case, the judges said that the regulatory action was contrary to congressional intent. Passing the law would end that argument with regard to tobacco products.

Ken Monahan, vice president of international economic affairs at NAM, said in a phone interview that "this isn’t the time to hike taxes on American exporters, especially in cases where they're deciding to locate their production here in the U.S." He said that while the proposal only targets tobacco, not wine, beer and spirits producers, as the CBP regulation did, making the change for tobacco "would really undermine the certainty that other industries have at the moment."

Monahan said he was surprised to see drawback in the list of pay-fors, but then, he said, there were a lot of surprises as the committee aims to increase revenue by $2.9 trillion over 10 years. The organization will be watching closely what the Senate will consider in pay-fors, he said.

Michael Kaiser, vice president of WineAmerica, said that wineries that import and export wine, and therefore can take advantage of drawback substitution, will be relieved that the ban on what Congress is calling "double drawback" only affects tobacco products. "We’re obviously happy we’re not being targeted for any kind of removal [from drawback] or tax increase," he said. Kaiser said it's mostly the biggest businesses in wine and spirits that take advantage of duty drawback.