U.S. distillers are worried about whether U.S. distilled spirits will be among the products on which the European Union will impose new tariffs Monday (11/9).
The new tariffs were authorized three weeks ago by the World Trade Organization (BND 10/13), the latest round in a long, protracted dispute over subsidies given by some EU nations to Airbus SE jets and by the U.S to Boeing.
The possibility of additional tariffs is especially alarming to distillers because, since 2018, when the European Union first imposed 25% tariffs on Bourbon and other U.S. Whiskeys in response to U.S. tariffs on steel and aluminum, American Whiskey exports to the EU have plunged 41%, Chris Swonger, president/ceo, Distilled Spirits Council of the U.S., told Kane’s Beverage News Daily.
Noting that the U.S. had just completed voting in a highly contested election, Swonger called on the EU to “stand down on imposing tariffs until the U.S. elections are resolved.
Any action by the EU could result in immediate retaliation by the United States, and now is the worst time to escalate this trade war,” he said. The Trump Administration has said additional tariffs will lead to swift and immediate retaliation.
The tariff controversy has hurt EU producers as well as American, Swonger said, noting there has been a 28% decline in U.S. imports of cordials and liqueurs and a 34% decline in imports of single malt Scotches.
“Why the EU would do this now, especially as the U.S. goes through a presidential transition, is beyond me,” he said.
Tariffs aren’t the only issue on Swonger’s agenda, he told us. No. 1 is getting Congress to reauthorize the Craft Beverage Modernization & Tax Act. Lower tax rates authorized in early legislation go away Jan. 1 unless extended. That would increase U.S. distillers taxes by 400%, with the first payment due in the second week of January — unless the the CBMTA is approved. What are the odds of CMBTA being approved?
Some 356 House members and 75 Seneate members have signed on as sponsors of the legislation, so there’s reason to expect it may get included before the end of the year in either a coronavirus relief package or in a bill extending expiring tax provisions.
However, in some cases the extender bill has been kicked down the road to March or April. If that’s the case, Swonger noted, it wouldn’t do U.S. distillers much good, since they would have to make those tax payments — at a 400% higher rate — to Alcohol & Tobacco Tax & Trade Bureau in the second week of January.
The third issue facing distillers — and, indeed, all bev/al suppliers — is a proposal by a subcommittee reviewing the U.S. Dietary Guidelines for Americans to reduce the recommended consumption of bev/al by men to one drink a day from two. “We want to make sure the final Guidelines are based on sound science,” Swonger told us. Just one of 27 studies reviewed by the Dietary Guidelines subcommittee that considered what the question of moderate consumption recommended a lower rate for men than the two drinks a day recommended by the current standard.
The fourth issue on which DISCUS is currently working is passage of the Restaurant Act, which would provide financial assistance to bars and restaurants. “We are very invested in getting aid for restaurants and bars,” Swonger told us, noting that DISCUS has been very involved in supporting cocktails-to-go, first as a temporary measure and now as a permanent provision in state liquor laws. Thus far, Iowa and Ohio have made cocktails-to-go permanent. The revenue generated by cocktails-to go has been a lifesaver for many restaurants and bar.