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US Says Soju Importer Skimped on Federal Excise Tax in Customs Penalty Suit

The U.S. brought a customs penalty suit against importer E-Dong U.S.A. for failure to pay federal excise tax on entries of soju bottles from South Korea. Filing a complaint March 28 at the Court of International Trade, the government said that the company entered the soju, a Korean spirit, via "material or false statement" by failing to reference any of the owed excise tax (U.S. v. E-Dong, U.S.A., CIT # 24-00066).

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E-Dong imported soju from 2017 to 2020 to the ports in Los Angeles and Chicago, making 20 entries under Harmonized Tariff Schedule subheading 2206.00.4500 as rice wine or sake. Rice wine is assessed an $18 per barrel federal excise tax, though the U.S. alleged that E-Dong didn't pay the tax on any of its entries.

CBP said it discovered the failure to pay the excise tax in July 2021, alerting the company of the failure. In response, E-Dong said the failure was due to a software deficiency, saying the "custom broker's software required manually inputting the FET for each entry." The importer gave CBP the "entry documents, an ingredient breakdown, a production flowchart of the imported merchandise, a physical sample, and the product labeling."

In September 2021, a CBP import specialist said the product wasn't rice wine or sake but rather a "distilled spirit," due to the product's labeling identifying it as a distilled spirit and the manufacturing process flow chart showing that it required a "distillation step." CBP said E-Dong misclassified the entries, asserting the proper subheading to be 2208.90.7500, which covers undenatured ethyl alcohol with a less than 80% alcohol by volume.

The federal excise tax for distilled spirits is $13.50 per proof gallon. The complaint said a barrel has around 31 proof gallons, subjecting the importer to a significantly higher excise tax. The company failed to pay $361,479.92 in excise tax.

The president of E-Dong sent CBP a letter in January 2022 acknowledging the misclassification, though to date the company hasn't made any payments to make up the excise tax deficit, the complaint said. After CBP accounted for a $100,000 payment from the importer's surety, the final bill is $261,479.92, it said.