Tariffs on wine

I hope this is not “political”, but it does deal with wine. French wine in fact. See the latest tweet. I think the current EU tariff is about 10 eurocents, right?

Good luck with this one.

I think it’s possible to keep this non political. I would be very interested in the wonky details of the price impediments (tariffs or other) created by both France and the US for the import of wine. The question I start out with is whether there are still tariffs, etc. that are specific to France or whether everything is at the Eurozone level. I would also be interested in hearing from French and other Eurozone residents about the prices they pay for American wine. On the US side, I know that every time I’m able to do a straight comparison of what I’m paying here vs. the street price in France (e.g. from Wine Searcher) it’s a 3x difference, minimum. I’m curious how much of that differential is at the Federal level (or reflects actual costs for moving the wine) vs. how much is a function of the 3 tier system.

We’ll check in on this in about 60 minutes.

The US excise tax on wine has been 21 cents per 750ml, though that was reduced significantly for small producers as part of last year’s tax changes. (The rates are here.) I believe that applies to domestic as well as imported wines. The rate reduction for small producers was the result of US wine industry lobbying, as I recall.

There is also duty, but trying to figure what that is exactly from the US Trade Commission website (download the PDF for Chapter 22) is a challenge. It looks to me as if it’s 14 cents/liter up to 14% alcohol, and 22 cents/liter if it’s over 14% ABV. (As far as I can decipher, the higher rates in the righthand column under “2” are for wines originating in countries where we’ve imposed sanctions. But even there it’s only 33 cents/liter, or 24 cents/750ml.)

Bottom line: tax and duty do not explain the spread between prices on the Continent and the US for European wines.

I think it’s completely possible, and glad you posted this. I wanted to have this discussion after seeing his tweet, as there is merit in the discussion.

I think the real issue isn’t any tariffs, but definitely two factors at play. First, the type of wine I think he is referencing is bulk wine/grocery store level wine. The main factor there isn’t tariffs, but the fact that France is completely overrun in this market, and has been turning that overrun into useable fuel for several years now. Second, we don’t have a US wine trade contingency working with anyone overseas to create a market for US wine across Europe (not just France). We have small trade groups (mostly for high end wines, as I know Jackson Family sells a solid amount of high end wine in Europe), but nothing promoting the industry in a broad way to bring more US wine to Europe, and if there are “scary tariffs” in place, no one to ask for easing or removing those tariffs. I’m not sure which government branch would handle this kind of trade, but clearly they aren’t doing their job if we are to believe that his gripe is real.

If he’s talking about wines that the WB wants to drink, these wines definitely make it overseas. How well they sell I can’t really say, but I see grey market offers on a daily basis, but funny enough, guess what you can’t do with those wines? Repatriate them! Ha!

Experts will have to answer on tax and tariff questions. I do know some about the differences in prices between wines bought at domaines and the same wines bought here and I think the largest variables are a) what the domaine charges the importer, and b)how much profit the importer takes. The price difference varies between none at all (Pegau costs as much if not more at Pegau as it does in the US and I assume this is a conscious decision by the domaine and the their American importers pay much less; Beaucastel used to be the same way, though I no longer know what their situation is), and as much as three times. It is generally more like 1 and a half to 2 times and this varies with the exchange rate (when the price of the dollar falls drastically, as it did some years ago, importers seem to work to hold the line on their prices and the comparative prices beween prices here and there fall and the reverse when the dollar is stronger). I don’t think taxes account for that much of this.

None of this should be taken as a tax on importers. They have to make a living too.

Tariffs aside, there are several reasons already in place for why USA wines sell poorly overseas.

1. Wine already exists there as part of the everyday culture, so it’s a bit of a coals to Newcastle thing to begin with. And it’s already as inexpensive as it can be w/r/t taxes and any inherent shipping costs, whereas American wines have to deal with luxury item taxes before it even gets shipped and has those types of costs added in.

2. It’s already more expensive to have wines shipped from the West Coast to the East Coast than it is to have the equivalent # of cases come from Europe, based on what I’ve learned over the last 20 years in the industry. We are assuming that most of what people are thinking about shipping are the nicer California/Oregon/WA State items and not Virginia/MD/NY ones, which barely have any pull outside of their home states much less overseas. I have heard some customers say they saw some wines from Barboursville (VA) in someplace like a Harrod’s or some such luxury market over the years, and the wines were at the very high end of their category, dusty and several vintages behind. And people complain about the price of VA wines here already!

3. Therefore it’s only the luxury wines that these tariffs may or may not be affecting, wines whose European demand is likely already being satisfied on the auction market. It’s largely a non-issue for the EU because the list of wineries affected is so short. Tariffs/bans with the Pacific Rim is a much larger factor to American wine interests as a whole; without getting political, it may be that Trump is looking at the issue with a wholly personal business matter, angling to get Trump wines access overseas.

Craft beer actually have a MUCH higher potential stake in any tariffs that may be applied to alcohol if that becomes part of the plan (if it isn’t already). There are beer styles that just aren’t able to be attempted in Europe based on the availability of many hops that have been developed and grown here, are licensed and proprietary, and are largely sold out through all the thousands of craft breweries domestically. It’s a major reason breweries like Stone, S Nevada, Deschutes, etc have established facilities on the East Coast. There are already several Virginia craft breweries that have a presence in London and Paris without doing much work at all to expand anywhere close to going west of the Mississippi (see reason 2 above)

Here’s a table of EU duty and tax rates by country if you can figure it out.

EU member states can and do impose their own alcohol taxes and duties. The UK, for instance, has a stiff duty that really puts a floor under the prices of cheap wines: 289 pence/liter (=$3.72/liter or $2.79/750ml).

And retail prices over there include VAT (essentially a sales tax), which typically runs 20%-25%.

That’s a crucial point. You won’t find much Bordeaux on the shelves in Beaune, or Burgundy in the shops in Avignon. Needless to say, you won’t find Rioja or Barolo anyplace in France other than a few shops in Paris. Tastes are not just nationalistic, they’re highly regional.

FYI, there’s a Twitter thread on this topic where Alan Beattie of the Financial Times says the EU duty is just 11 euro cents/bottle.

Thanks for the discussions, folks! It seems governments on both sides of the water do their best to obfuscate what the current tariffs and government-added levies might be. I posted this because I doubted they were that high at present, but I have no idea what. Probably get taxed more bringing in more than your 2 bottles into Canada than what is currently being charged on a tariff basis. Fascinating.

This is some pretty interesting data that I think adds to our discussion.

https://www.wineinstitute.org/resources/pressroom/03192018

If you go back to my post above, the bulk wine/grocery store level wines market is France goes way beyond “we have enough” and “we like to drink local.” There is so much overrun it’s been turned into useable fuel for years.

No. Duties/tariffs are documented for trade professionals to address. They are not set up for consumers to have uninformed speculation about the intent of the documentation. Granted that you may enjoy uninformed speculation, but that doesn’t make it true.

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I’m not speculating on anything, David, just bringing something up that came up in the news. I’m not sure where your animus is coming from, though.

And, IIRC, even domestic acts of vandalism (wine terrorism?) to destroy some of the excess.

RT

Mark - Two things…your comment regarding obfuscation, and the never ending series of uninformed discussions of tariffs/duties both here (see Politics) and elsewhere.

As a trade professional it’s maddening.

And not to mention all the fakes (lower tier stuff) that gets found all the time, and subsequently destroyed.