While most of the world was busy making merry during the festive period, the rusty wheels of government managed to complete a revolution. Last week, two important actions came our of the Beltway. Congress renewed and made permanent the CBTMRA while the Trump administration re-upped tariffs on European beverages such as spirits and wine.
Tucked inside of the stimulus package, finally signed by President Trump, was a key provision for the alcohol industry. After years of stopgap measures, the Craft Beverage Modernization and Tax Reform Act of 2019 was finally made permanent.
The measure slashes the federal excise tax on small manufacturers. For example, the current $7 per barrel fee was reduced down to $3.50 per barrel on the first 60,000 barrels for domestic brewers making fewer than two million barrels. Brewers making less than six million barrels are now taxed at $16 a barrel, down from $18. On the spirits side, small distillers saw their tax chopped from $13.50 per proof gallon to $2.70.
The cut was previously enacted on a temporary basis. Making the rates permanent has been a key industry priority over the last three years. The signing of the new legislation, S.362/H.R.1175, represents a big victory for producers.
“We are thankful that President Donald J. Trump and Congress delivered this much-needed economic relief to craft distilleries. While distilleries have faced extraordinary challenges this year, this legislation making their reduced tax rates permanent will give these distillers a renewed sense of certainty and hopefulness for the future,” said Distilled Spirits Council (DiSCUS) President & CEO Chris Swonger.
Tariffs Get Re-Upped
Alas, the industry received a lump of coal along with the CBMTRA stocking stuffer. The trade war between the US and Europe escalated and once again, wine and spirits were caught in the crosshairs.
Back in October, the US slapped a 25% tariff on the majority of European wines and liquors. The office of the US Trade Representative (USTR) just announced new sanctions that will expand the charge to include all EU wines as well as brandies (eg Cognac!)
The decision is only the latest chapter in a long running dispute over unfair trade practices employed by Europe aviation heavyweight Airbus. The EU responded by imposing tariffs of their own as compensation for unfair trade practices that aided US based aerospace OG Boeing.
The World Trade Organization (WTO) sanctioned both moves. Yet, the spirits industry—on both sides of the Pond—is opposed to the sanctions. DiSCUS labeled the industry as ‘collateral damage’ in an unrelated aviation dispute.
“We are extremely disappointed that the U.S. has announced it will impose more tariffs on additional categories of imports of EU distilled spirits in connection with the civil aircraft subsidy disputes, including certain Cognacs and other non-grape brandies. These tariffs not only harm EU spirits producers, they also disrupt and negatively impact the entire U.S. hospitality industry supply chain,” said Swonger.
“These tariffs are continuing to have a devastating impact on our businesses, which are also suffering due to the closings of restaurants, bars, and distillery tasting rooms because of the COVID-19 pandemic. We continue to urge the EU and the US to negotiate an agreement that will end the excessive and unwarranted tariffs on distilled spirits across the Atlantic without any further delay.”
One positive development occurred in the UK. Following Britain’s BREXIT deal, the nation will no longer be subject to US tariffs.