US 25% tariff on European wines; 100% "digital" tariff on French products called off for the moment

[Dan Kravitz]

The problem for me and other importers specialized in affected wines from France, Spain and German is that I foresee most consumers as being unwilling to pay. If a $20 wine is suddenly $25, then the consumer is more likely to try a different $20 wine than to pay $25 without searching for alternatives.

Of course every wine should have unique, therefore irreplaceable, character. But for the majority of wines, there are alternatives. Germany is hardest to replace, because many if not a majority of the wines are truly inimitable. Rioja is also very hard to replace. It is the only case where I am raising my prices to almost the level indicated by the tariffs.

Great Burgundy and Bordeaux are inimitable, but when I say 'great', I am talking about wines so expensive that the Americans who buy them are probably rich enough to keep buying them. However at the ~$15 - 75 level, the Burgundy drinker can look to Oregon, California Appellations like Sonoma Coast, Carneros and Santa Cruz Mountains, New Zealand and a host of other more obscure places (like Patagonia). The Bordeaux drinker has an even vaster world to explore... Napa is already often above that price level, but many Sonoma Appellations, SLO, Washington, Argentina, South Africa and again more obscure places (Black Ankle from Maryland) provide plausible alternatives to mid-range Bordeaux.

The Mediterranean reds in which I specialize also have alternatives... neither California nor Washington are short of Syrah and Grenache.

I think a lot of small, dedicated, good, hard-working importers of French and Spanish wines are at best among the walking dead. And I am afraid they will soon be simply out of business. To say that this is unfair is a vast understatement.

As for how long it's been in the works, I remember hearing something about 6 months ago, when Trump was getting off a plane in Europe and said that soon there would be a 100% tariff on French wine. I assumed it was just more wind because he says a whole lot of stuff that doesn't happen. This time, something happened. Not 100%, which I think would have ended all imports of affected wines, but just enough to be too much for small importers to survive, while the multinational drinks companies absorb a tiny hit to the bottom line and grab market share.

I am restructuring to include zero wines subject to tariffs, with the exception of two Spanish producers. One has very inexpensive wine and I sell as much 3L bag-in-box as bottle. The other is a very competitively priced producer of Rioja. I'm dropping all of my other Spanish wines 14% or lower.

Dan Kravitz

[Nola Palomar]

Yep, it is going to be next to impossible.

[alan weinberg]

I'm dropping all of my other Spanish wines 14% or lower.

Dan Kravitz

I thought the % listed on a label only had to be within 1.5% of actual. If that is true, can’t you label wines that are 12.5% and higher (up to 15.5%) as 14% and legally sell them, avoiding tariff?

[Dan Kravitz]

Alan,

This is theologically subtle.

Under American law, you have flexibility of 1.5%, but not if you cross the 14% barrier! Then there is zero flexibility.

Under French law, you have flexibility of 0.5%, they don't care about 14%.

Last year the U.S. sensibly, finally changed the definition of 'table wine' to a max of 16% instead of 14%, recognizing that most wines between 14 - 16% are NOT fortified. Many of my producers, having labeled wines from 14.1 - 14.5% as 14% to avoid the tax, simply kept labeling them 14$. Now these are subject to tariff. As per earlier posts in this and other threads, they are now laboriously and expensively (certified lab analyses) being recertified as 14.1 - 14.5%.

Dan Kravitz

[D@vid Bu3ker]

I'm dropping all of my other Spanish wines 14% or lower.

Dan Kravitz

I thought the % listed on a label only had to be within 1.5% of actual. If that is true, can’t you label wines that are 12.5% and higher (up to 15.5%) as 14% and legally sell them, avoiding tariff?

In all the prior discussions we have had about alcohol % and taxes over the years, it was excise taxes.

Tariffs have their own classifications, and improperly representing a wine as being in a tariff code (e.g. saying it is over 14% when it is not...despite labeling allowances) is subject to significant penalties. This is why, as Dan mentioned, producers are testing wines for relabeling, thus providing proof that the wines do not fall in the 14% and under tariff code.

[William Woodruff]

Kris,
Yes, a 40ft container. Two pallet's of Burgundy (12,5% by volume) with a purchase value of $18k( $18x.25%), 1000 bottles of Crozes-Hermitage Blanc with a purchase value of $7k at 12,5% by volume ($7k x 25%), 3 pallet's of White Rhone with a purchase value of $8k at 13% by volume ($8k x25%) and 14 pallets of Red Rhone at 14,5% (normal taxes)= $14,400!

(politics removed by admin)

[D@vid Bu3ker]

Looks like soon to be deleted irony.

Never mind that the Airbus case with the WTO was initially filed in 2004.

[AndrewH]

Looks like soon to be deleted irony.

Never mind that the Airbus case with the WTO was initially filed in 2004.

Remedy, whatever its merits, is this administration.

[D@vid Bu3ker]

I don't think so - at least from an over all trade+WTO situation. Any resolution requires a decision in the Boeing case. That could come in February 2020 or take much longer.

[Todd F r e n c h]

hey folks - don't post comments about politics, just report them, otherwise there's more for us to remove

[William Woodruff]

Sorry

[Kris Patten]

Kris,
Yes, a 40ft container. Two pallet's of Burgundy (12,5% by volume) with a purchase value of $18k( $18x.25%), 1000 bottles of Crozes-Hermitage Blanc with a purchase value of $7k at 12,5% by volume ($7k x 25%), 3 pallet's of White Rhone with a purchase value of $8k at 13% by volume ($8k x25%) and 14 pallets of Red Rhone at 14,5% (normal taxes)= $14,400!

(politics removed by admin)

Totally makes sense. Do you see a problem still selling the 2 White Rhone's?

[William Woodruff]

I suppose we will find out

[Dan Kravitz]

Todd,

Sorry for the political post provoked by William's post.

Dan Kravitz

[YLee]

Data point: Received my 3rd shipment and again no tariff.

[D@vid Bu3ker]

Data point: Received my 3rd shipment and again no tariff.

What was in it, what HTS code was declared, and what was the date it cleared US Customs.

All that information is needed to know if your data point is meaningful.

[YLee]

Data point: Received my 3rd shipment and again no tariff.

What was in it, what HTS code was declared, and what was the date it cleared US Customs.

All that information is needed to know if your data point is meaningful.

How do I find the HTS code?

[D@vid Bu3ker]

It is on the Customs paperwork.

[jleedionne]

It is on the Customs paperwork.

I am guessing that he has no contact with the broker, because he is not the importer of record, and does not see the 7501.
The merchant in France is having a third party importer and broker clear the goods via DHL/Fed Ex/UPS.

[YLee]

Sorry. I dont know how all this work. I simply made the purchase from shops in EU. They had it shipped.
All 3 times were 3 different shops. France, UK and Belgium.

[D@vid Bu3ker]

It is on the Customs paperwork.

I am guessing that he has no contact with the broker, because he is not the importer of record, and does not see the 7501.
The merchant in France is having a third party importer and broker clear the goods via DHL/Fed Ex/UPS.

Quite probably so, but without the info we cannot determine why he wasn’t charged, or if perhaps the importer of record is eating the charges.

[John Morris]

Alan,

This is theologically subtle.

Under American law, you have flexibility of 1.5%, but not if you cross the 14% barrier! Then there is zero flexibility.

Under French law, you have flexibility of 0.5%, they don't care about 14%.

Last year the U.S. sensibly, finally changed the definition of 'table wine' to a max of 16% instead of 14%, recognizing that most wines between 14 - 16% are NOT fortified. Many of my producers, having labeled wines from 14.1 - 14.5% as 14% to avoid the tax, simply kept labeling them 14$. Now these are subject to tariff. As per earlier posts in this and other threads, they are now laboriously and expensively (certified lab analyses) being recertified as 14.1 - 14.5%.

Dan Kravitz

That’s wonderful— a loophole through which so many wines can escape the tariff.

Probably no one drafting the rules knew much about actual contemporary alcohol levels.

As a subsidiary benefit, we’ll get more accurate ABV labels.

[Dan Kravitz]

to David Bueker,

Is it possible that they simply are not looking at shipments to consumers, only commercial shipments? Just waving through shipments of 12 - 60 bottles and looking at pallets and containers?

Despite being itb, I know almost nothing about customs and clearance. When I started the business in 1985 and for the next few years, I worked directly with freight fowarders and customers brokers and had some idea about how things worked. Once the business grew a little and I had somebody in the office to do this stuff, I lost track of the details.

Dan Kravitz

[D@vid Bu3ker]

to David Bueker,

Is it possible that they simply are not looking at shipments to consumers, only commercial shipments? Just waving through shipments of 12 - 60 bottles and looking at pallets and containers?

Despite being itb, I know almost nothing about customs and clearance. When I started the business in 1985 and for the next few years, I worked directly with freight fowarders and customers brokers and had some idea about how things worked. Once the business grew a little and I had somebody in the office to do this stuff, I lost track of the details.

Dan Kravitz

It’s possible. Individual consumer deliveries will end up coming in amongst a lot of other stuff, and may not get picked out for inspection. The paperwork still has to be cleared, but “errors” might slip through.

[Nola Palomar]

IDK how they are getting them in without the added tariff. Are the wines greater than 14%? When I’ve shipped samples over, they still have to have all the docs, shipping invoice, COLA or COLA waiver. FDA Prior notice. Air shipments don’t get and ISF (Importer Security Filing). If they are wines that fit in the tariff group, hey good for you!!!!!

[jleedionne]

Who is keeping track of the $7.5B in imports that need to happen for the tariffs to subside?

[Markus S]

Who is keeping track of the $7.5B in imports that need to happen for the tariffs to subside?

The Government.

[AndrewH]

Who is keeping track of the $7.5B in imports that need to happen for the tariffs to subside?

Is it clear the tariffs go away once they hit in $7.5b in revenues? My understanding is that amount represents the (illegal) subsidies to Airbus that happen each year, and thus the tariffs can continued to be collected until the various countries involved discontinue those subsidies (or swap those subsidies for not placing tariffs in retaliation for the Boeing subsidies that are currently pending). Not clear to me if the tariff accounting year started Oct. 18 (and thus runs to 10/17/20) or is on a calendar year basis.

[johnbonds]

I just got an e-mail from a wine retailer for some 2016 futures indicating that they have basically pushed the delivery date to WAY in the future (2022) until this issue gets "resolved"

[RichardFlack]

Who is keeping track of the $7.5B in imports that need to happen for the tariffs to subside?

The Government.

Oh dear.

And, ummm which government.

[William Gladstone]

I just got an e-mail from a wine retailer for some 2016 futures indicating that they have basically pushed the delivery date to WAY in the future (2022) until this issue gets "resolved"

I will assume you have posted this in this forum because you are open to outsiders thoughts.
I'd demand my money returned, we've delivered all of the 2016 futures - and if someone has not brought those bottles in which have been available for almost one year depending upon Chateau,
I would feel it is unfair as well as risky, and a note that they are looking at 2022, I'd demand a return of my money.
I wonder what your contract states? you should read it.. There are a lot of ways to make this not worth their while... and then go figure out how to purchase the items some where else,
which is probably in stock, I'm just saying.

I apologize if I've crossed some barrier you did not intend.

[D@vid Bu3ker]

Who is keeping track of the $7.5B in imports that need to happen for the tariffs to subside?

Is it clear the tariffs go away once they hit in $7.5b in revenues? My understanding is that amount represents the (illegal) subsidies to Airbus that happen each year, and thus the tariffs can continued to be collected until the various countries involved discontinue those subsidies (or swap those subsidies for not placing tariffs in retaliation for the Boeing subsidies that are currently pending). Not clear to me if the tariff accounting year started Oct. 18 (and thus runs to 10/17/20) or is on a calendar year basis.

I was not going to revive the thread to address this, but it came back to life on its own.

The tariffs do not go away at $7.5B in revenues. The tariffs are applied to an estimated $7.5B in anticipated imports. That’s how the list of tariff items and tariff levels are set. It DOES NOT mean that if they get to $7.5B the rest of a given year is tariff free. Not at all. The tariffs apply to all goods in the selected groups.

There was in fact congressional testimony that led up to the selected items. Some of the things initially selected were dropped. Some other things were added to make up the difference. Wine was always on the list from the beginning.

[Nola Palomar]

Who is keeping track of the $7.5B in imports that need to happen for the tariffs to subside?

Is it clear the tariffs go away once they hit in $7.5b in revenues? My understanding is that amount represents the (illegal) subsidies to Airbus that happen each year, and thus the tariffs can continued to be collected until the various countries involved discontinue those subsidies (or swap those subsidies for not placing tariffs in retaliation for the Boeing subsidies that are currently pending). Not clear to me if the tariff accounting year started Oct. 18 (and thus runs to 10/17/20) or is on a calendar year basis.

I was not going to revive the thread to address this, but it came back to life on its own.

The tariffs do not go away at $7.5B in revenues. The tariffs are applied to an estimated $7.5B in anticipated imports. That’s how the list of tariff items and tariff levels are set. It DOES NOT mean that if they get to $7.5B the rest of a given year is tariff free. Not at all. The tariffs apply to all goods in the selected groups.

There was in fact congressional testimony that led up to the selected items. Some of the things initially selected were dropped. Some other things were added to make up the difference. Wine was always on the list from the beginning.

I’m sure EVOO was always there too.

[D@vid Bu3ker]

Yes it was. Sorry.

[Dan Kravitz]

Many thanks to David B for his knowledgeable comments. For people in the position of some ITB board members, me definitely included, you are a wonderful resource. I am grateful for your comments. Please continue to reply as specific things come up.

Dan Kravitz

[Mark Golodetz]

Interesting! Apparently Large formats (more than 2 liters) are exempt.

[M A T T H A R T L E Y]

Was just told by one of our freight forwarders that they are floating customers to the tune of $1m a day in tariffs (these tariffs are due 10 days after it hits port) and people are freaking out.

[D@vid Bu3ker]

Interesting! Apparently Large formats (more than 2 liters) are exempt.

That came up several pages ago, but yes. It’s probably just because it’s a different HTS code, and nobody noticed prior to publishing the list.

[D@vid Bu3ker]

Was just told by one of our freight forwarders that they are floating customers to the tune of $1m a day in tariffs (these tariffs are due 10 days after it hits port) and people are freaking out.

Actually, it’s 10 days after it clears Customs, rather than when the items arrive at the port of entry. Clearance can take a variable amount of time.

[Nola Palomar]

Here is the whole list again.
https://www.crowell.com/files/EU_Large_ ... 022019.pdf

[Kelly Walker]

How did France escape the cheese tariffs?

[Nola Palomar]

How did France escape the cheese tariffs?

They didn't, France is listed in sections 13 and 15 for cheese and other.

[Dan Kravitz]

Actually, reading as well as I can, it looks like most French cheeses escape. But it's so weird... Roquefort is not subject to the tariff, but apparently all other French blues cheese are. I don't see truffles or Foie Gras. Is this an effeteist conspiracy??? Champagne, truffles, foie gras, roquefort are all tariff exempt.

I just skimmed through the list. Here are a few noteworthy items, with comments:

Products of the UK included in the list include straight Irish Whiskey. I’ll bet the Irish didn’t know they were part of the UK. Actually, assuming there is Whiskey produced in Northern Ireland, how is it labeled? Labeling it Irish Whiskey could start a fight that might outlive the Sunni-Shia schism.

German roasted decaffeinated coffee… darn!

German switchblades. The Jets and Sharks must be crying in their beer.

UK waffles… sure, they've been doing it over Brexit for 3 years now… feels like decades.

From Germany, the UK and Spain: Frozen meat of Swine. Did Elsa find her true calling as a butcher?

Already noted, from France, Germany, the UK and Spain, wine other than Tokay.

This is what is close to putting me out of business after 35 years. And anybody in France, Germany, the UK or Spain who is producing Tokay has bigger problems than the U.S. market… try felony fraud (although I assume this means you can buy real Tokay in England and ship it here tariff-free).

From the whole EU, juice of any single vegetable, other than tomato… in general, I have sympathy and respect for US Gov’t. employees, but I will Shout from the Rooftops that a tomato is a fruit of the vine… although not one that makes good wine.

They got my prune juice, but I never touch the stuff.

RAZOR CLAMS!!!!!!!!! So the Jets and the Sharks can't even find a decent substitute for the switchblades.

Gotta laugh to keep from crying.

Dan Kravitz

[Kelly Walker]

Funny post Dan. I really feel bad about the impact on your company and others in your position. My best friend is a major importer and its a cataclysmic event.

Thankfully my epoisse has been spared.

[Markus S]

This is what is close to putting me out of business after 35 years.

After 35 years in any job, perhaps this is Divine Providence giving you a hint to think of retirement? {sorry}

[Dan Kravitz]

Markus,

I have been in negotiations to sell the business to long-time employees. I really want to keep working part time, because I love selling good wine at fair prices and at 73 years of age I enjoy good health.

I actually had a date of October 15th established to make an agreement with willing, informed buyers (legal settlement to follow). The date turns out to be ironic.

For very obvious reasons, I released my potential buyers from their obligation to agree on my offer by 10/15.

So here I am. The value of my business has declined by at least 50%, a generous estimate. There are no possible guidelines for establishing the value of my business today, but it is worth far less than it was a few months ago. It may have little, if any value, although I am working on restructuring it to survive. I will know more in the next few weeks.

I'd sell 100% of it tomorrow, except that it is not on the market because I'm ethically unable to make a sale to anybody brain-damaged enough to make an offer. If you buy a pig in a poke, you might be able to ascertain if the pig is alive. This is not my current situation, although I hope it will be soon.

Dan Kravitz

[Jud Reis]

Dan - having been through this already in my business (seafood), there is very little logic to some of the decisions. We have product that is caught in US waters and then filleted in China which are now subject to tariffs and some other products that are not. It feels like USTR just grabbed some customs codes and not others to apply the tariffs. I really feel for you - these relationships and supply chains take years to build and are an integral part of businesses - it hurts to have them ruined with one politically based decision.

[Dan Kravitz]

Jud:
Thanks for the kind words.

to all:
I don't want to whine. Regardless of what happens with my business, my family and I will be fine. The people I've had to lay off will all find employment. Nobody has suffered more than a moderate financial setback... literally billions of people are in worse shape than my most junior laid-off employee. I am very motivated to restructure the business to be viable and I think I'm making progress.

Dan Kravitz

[D@vid Bu3ker]

Good to see you staying positive Dan. A good attitude helps a lot.

[Nola Palomar]

On that positive note, I too am inching forward to mitigate these tariffs by moving my bottling operation of EVOO to my warehouse in Dayton. I already have FDA USDA and Ohio Dept of Agriculture certificates for warehousing and have gotten a list of modifications to be done to start bottling. I just cannot fathom how else I can survive this tariff on all my imports. Mussels are out for now, as are the jamones. Wines will be only ones that aren’t hit by the tariff.
It is all very depressing and sad, but I have to push through and turn that sow’s ear into the silk purse otherwise it will consume me.