It is in estuary, outside of Rhode Island (8)

I believe the answer is:

vermouth

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'it' is the definition.
(I've seen this before)

I can't explain the remainder of the clue.

(Other definitions for vermouth that I've seen before include "Flavoured wine used in cocktails" , "Flavoured wine often mixed with gin" , "Herb-flavoured wine drunk with gin" , "it in the bar" , "Wine flavoured with aromatic herbs" .)

I've seen this clue in The Telegraph.

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