U.S. distilled spirits trade associations urged Congress to provide additional economic relief to the thousands of distilleries facing enormous financial hardship due to the impact of COVID-19. The letter was signed by the presidents of the Distilled Spirits Council of the United States, American Craft Spirits Association, the New York State Distillers Guild and the Kentucky Distillers’ Association.
“Distillers who have seen sudden and steep declines in sales with the closure of stores in certain areas and travel-related outlets, restaurants, bars and tasting rooms,” the leaders said. “As a result, many distilleries have been forced to furlough or lay off employees. Absent additional relief, some distilleries soon may be faced with the tough decision to permanently close their doors.”
They underscored that these serious developments are having a devastating ripple effect throughout the entire supply chain.
“Uniquely positioned at the nexus of the hospitality, agriculture, retail and tourism industries, the distilled spirits industry proudly supported over 1.6 million jobs across the country and generated over $190 billion in economic activity in 2018. The livelihoods of farmers, glass bottle makers, truck drivers, warehouse workers and countless others connected to the hospitality and tourism industry are compromised by the challenges confronting the distilled spirits industry,” they added.
The association heads urged congressional leaders to include four key components to support struggling distilleries as part of any new economic relief package:
Provide Federal Excise Tax Relief.
Suspend federal excise taxes on domestic and imported spirits products, which are paid by the American importer, and waive interest on late payments, effective from Jan. 1 through Dec.31, 2020. This is crucial to allowing producers to dedicate scarce resources to payroll and other operating costs.
Enact the Craft Beverage Modernization and Tax Reform Act (H.R. 1175/ S. 362). This legislation to make the current federal excise tax rates permanent has broad bipartisan support with 73 Senate cosponsors and 342 House cosponsors. Many distilleries fear that a return to “normal” operations will be closely followed by a scheduled tax increase at the end of the year, creating further financial turmoil. Making this bill permanent is important to providing certainty to distillers as they plan for the rest of 2020 and beyond.
Seek the Suspension of Tariffs on Distilled Spirits.
De-escalate the trade dispute with the European Union (EU) by urging the simultaneous removal of the tariffs on EU and U.S. distilled spirits products. Compared to 2018, the 25% tariff the EU has had in place on American Whiskey resulted in a 27% reduction in American whiskey exports in 2019. U.S. tariffs resulting from the WTO Airbus dispute on Single-Malt Scotch Whisky, Single-Malt Irish Whiskey from Northern Ireland, and Cordials and Liqueurs from Ireland, Italy, Spain, Germany and the United Kingdom is resulting in higher costs for consumers and lost American jobs. Suspending tariffs on distilled spirits provides an opportunity for both the EU and the U.S. to support jobs on both sides of the Atlantic during this period of tremendous economic uncertainty.
Create an Industry Stabilization Fund.
Develop a government-wide grant program that would prioritize the hard-hit beverage alcohol industry. A new industry stabilization fund should provide cash advances to ensure distilleries have enough receivables to pay their employees and to borrow against as well as grants with minimal procedural delay.
Continue Robustly Funding No- and Low-Interest Loan Assistance.
Commit significant new resources for the Small Business Administration (SBA) to ensure business continuity for distilleries. U.S. government-guaranteed no-and -low-interest loans remain critical for affected businesses, including distilleries.
The spirits industry leaders concluded, “We are proud that over 700 small and large distilleries are also doing their part to prevent the spread of COVID-19 by transitioning to produce hand sanitizer, but they will continue to need the help and support of Congress for months to come.”
The spirits industry is part of Wednesday’s beverage alcohol industrywide Day of Action. So far, industry workers have sent more than 13,000 communications to Congress imploring them to include critical, urgent relief to American distillers and the broader hospitality sector as part of any future COVID-19 economic relief packages for businesses.
“We are hearing daily from craft distillers who are having to lay off their workers after shutting down their tasting rooms and experiencing significant sales declines from restaurant and bar closures,” Chris Swonger, President & CEO, Distilled Spirits Council of the United States.” In towns across America, these distilleries are key to the economic vitality of their surrounding communities by creating jobs, boosting tourism and supporting local agriculture. We need Congress’ help to ensure these small businesses do not fail.”
Eric Gregory, President, Kentucky Distillers’ Association: “Without being asked, Kentucky distillers quickly transitioned from producing the world’s best Bourbon to desperately needed hand sanitizer, donating more than 125,000 gallons already to hospitals, first responders and other organizations in this unprecedented time of crisis. Now, it’s time for Congress to step up and help these essential businesses and valuable community partners outlast the pandemic. The last two years have been trying times due to retaliatory tariffs that have crippled spirits exports and threatened bottom lines. The COVID-19 crisis has added to their economic uncertainty, especially among craft distillers struggling to survive while tourism centers are closed. The KDA and its 40 members implore Congress to act quickly and help save Kentucky jobs, investment and our signature spirit.”