Distilled Spirits Council Outlines Key Foreign Trade Barriers Impacting the U.S. Spirits Sector in Report to USTR
–Permanent Removal of Retaliatory Tariffs on U.S. Spirits Products Top Priority–
WASHINGTON – The Distilled Spirits Council of the United States (DISCUS) submitted a detailed report with the United States Trade Representative (USTR) identifying key foreign trade barriers impeding U.S. distilled spirits exports.
The report provided a comprehensive review of the major trade barriers facing U.S. spirits exporters in countries around the globe, including retaliatory tariffs, discriminatory taxes, regulatory standards, and certification and labeling measures.
“International trade is essential to the U.S. distilled spirits sector and is instrumental to its long-term viability,” said Robert Maron, Distilled Spirits Council Vice President for International Trade. “In large part due to the comprehensive market-opening trade agreements that the United States has achieved, U.S. spirits exports have expanded significantly over the past two decades. However, U.S. spirits continue to face an array of new and existing tariff and non-tariff barriers in export markets.”
Maron stated that the U.S. spirit sector’s top trade priority continues to be securing the permanent removal of retaliatory tariffs on U.S. spirits exports imposed by key trading partners.
Currently, retaliatory tariffs on U.S. distilled spirits products as part of trade disputes with the EU and UK over steel-aluminum and aircraft subsidies are suspended. The only retaliatory tariffs that remain on U.S. distilled spirits are those applied by China in the Section 301 dispute and by Turkey over steel and aluminum.
Due to the application of the EU and UK retaliatory tariffs from 2018 to 2021, total U.S. spirits exports were down 12% to $1.6 billion and American Whiskey exports were down 18% to $975 million.
Maron noted that as a result of the retaliatory tariffs, U.S. distillers of all sizes have had export contracts canceled and distribution negotiations postponed and that many have put expansion and investment plans on hold indefinitely. The impact of the retaliatory tariffs has been felt across the entire U.S. supply chain, from farmers to suppliers.
Following a decrease in exports between 2018 and 2021 due largely to retaliatory tariffs, this long-term positive trend restarted in 2022. From January-August 2022, total U.S. spirits exports and American Whiskeys in particular increased by 22% and 20%, respectively, over the same period the previous year.
“We strongly urge the administration to secure the permanent return to zero-for-zero tariffs on spirits with the EU and UK,” said Maron. “If the retaliatory tariffs were to return, they would reverse the rebound in U.S. spirits exports that has been seen through August 2022.”
DISCUS member companies export to more than 130 countries worldwide, with total U.S. spirits exports in 2021 valued at more than $1.6 billion. In 2021, U.S. spirits were exported from small, medium, and large distillers located in 45 states, up from 41 in 2020.
In 2021, the top five markets for American spirits exports by value were: 1) Canada ($242 million, down 3%); 2) Netherlands ($121 million, up 112%); 3) Japan ($120 million, down 5%); 4) UK ($107 million, up 28%); and 5) Australia ($102 million, down 11%).
American Whiskey drives U.S spirits exports and accounts for 62 percent of total American spirits exports. In 2021, the top five markets for American Whiskey exports by value were: 1) Japan ($96 million, down 1%); 2) UK ($88 million, up 23%); 3) Australia ($85 million, down 14%); 4) Germany ($81 million, up 7%); and 5) France ($78 million, down 11%).
The DISCUS submission also identified countries that assess excessive tariffs, discriminatory excise taxes, and other non-tariff barriers on imported distilled spirits, including:
- India: maintains an excessive tariff of 150 percent ad valorem
- Vietnam: imposes a 45 percent ad valorem tariff
- EU, Brazil, Thailand, Indonesia, Peru, and Costa Rica among others: continue to apply discriminatory spirits taxes or product markups in favor of domestically produced spirits
- Singapore, Brazil, India, Malaysia, South Africa, and elsewhere: labeling requirements and standards of identity are under consideration, which are inconsistent with standard international practices and could impose unnecessary barriers to entry for U.S. spirits exporters