In October 2019, the beverage alcohol industry was subject to WTO tariffs that imposed an additional 25% in ad valorem duties to a vast list of European imports. Now the federal government is set to review its tariff policy again in August and there is a possibility that new products from new countries of origin will be added to the tariff list, as well as a risk that the existing 25% fee could be increased unless industry members act before July 26.
WHAT ARE THE WTO TARIFFS?
THE WTO TARIFFS are retaliatory duties imposed on some European wines, spirits, as well as other categories. These duties stem from a long-running dispute over subsidies the EU gave to the European plane manufacturer Airbus. After many years of deliberation, the World Trade Organization gave the US permission to tax up to $7.5 billion annually in trade of European exports until a settlement is agreed upon or until Europe is compliant with its rules.
The following liqueurs, wines, and spirits were affected by the new tariff:
- Still wines of 14% abv. or less in 2 liter bottles or less imported from France, Germany, Spain and the UK.
- Liqueurs and cordials imported from Germany, Ireland, Italy, Spain, and the UK.
- Single malt or straight whiskey from Scotland and Ireland.
Although the industry strongly protested, the duties were implemented and maintained during the latest review period in February 2020.
HOW IS THE TARIFF APPLIED?
The tariff is considered a duty not a tax. The rate is ad valorem set at 25%. This means the fee is calculated from the cost of the goods at importation as listed on the commercial invoice used for importation. For example, if a still wine is imported from France and the producer bills the US importer $80,000, an additional fee of $20,000 will be added to the importation.
Other key applications include:
- The tariff is billed in addition to any already existing duties, taxes, and import fees.
- The tariff is due at the time the entry is made.
- The new tariff is applied to withdrawals from bond since October 18th, 2019, even if such bond entered the US before October 18th, 2019.
- This is a tariff imposed by CBP which is completely separate from federal excise tax and that is managed by the TTB. As a result, CBMA tax reductions do not have any effect over the application of the 25% retaliatory duty.
WHAT CAN INDUSTRY MEMBERS DO?
The next review of action period of the WTO tariffs is coming up again on August 12, 2020. This date is being preceded by an opportunity to comment on the proposed changes as released by the United States Federal Registry that is open through July 26.
The upcoming August 12th review is a crucial time for changes as the United States Trade Representative can make the decision of modifying, removing, or replacing products on the list.
To view a step-by-step guide to submitting a comment to the USTR, please view our latest Park Street University video: https://youtu.be/0jqp-55nhiI