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

[Alan Rath]

I see some retailers already adjusting to this.

[Steve Saxon]

Should I have concerns about price changes on '16 Bordeaux future that are paid for but still in France ?

You don't have to worry, your boy said that the EU will pay the tariffs.

[John Morris]

I see some retailers already adjusting to this.

How so?

[Alan Rath]

K&L took down some wines from their "New Product" feed. One still there has a note "Release delayed due to tariffs". I expect to see quite a bit more of this, as importers and retailers (at least those that can afford to) decide to delay shipments.

[Frank Murray III]

Is it accurate that Champagne is not part of the tariff?

[John Morris]

It all depends on the fine print of the consumer's order. The retailer may well have included language giving it the right to tack on the extra charge to existing purchases.

I checked a couple sites and did not see any such terms mentioned. Which would suggest there are no outs. But presumably they can hold onto the wine for years... one site mentions "As most of our wines are sourced in Europe, we make no guarantees with regards to arrival/ship dates. Too many factors come into play for us to guarantee a specific arrival date prior to our physical receipt of the wine in our temperature controlled facility." I am not sure
what a commercially reasonable time frame here is.. weather could be up to one year.. but if tariffs are a "factor", then in theory it could what a commercially reasonably view on a tariff hold is... maybe this allows a retailer to hold something up to another year?

I couldn't find any of the language during a quick search, either, but I know I've seen language to the effect "Buyer will be assessed for any taxes, etc levied after purchase date." You may not see it until you get to the point of finalizing the order. If you've made futures purchases, I'd suggest you check the invoices.

[Alan Rath]

Is it accurate that Champagne is not part of the tariff?

That depends on how this wording is interpreted "Wine other than Tokay (not carbonated)".

[John Morris]

Is it accurate that Champagne is not part of the tariff?

That depends on how this wording is interpreted "Wine other than Tokay (not carbonated)".

I think if you look up the code number next to that in the table, you'll find more a detailed definition. Don't have time to check now.

[D@vid Bu3ker]

I'm not asking about the politics of it. I'm asking what the current law says under these tariffs and how the mechanics would work.

If someone imports a big cellar from Europe on Oct 16, with lots of different old bottles, what will customs tell them?

Customs will tell them to pay the tariff on the value of the wines. For old wines that can be assessed through various means. I am not going to go into all the potential methods of valuation because it will turn into 6 pages of questions about why, why, why.

Thanks, David. So the point is, it's market value, however that is determined. Correct?

Can you comment on the question of whether the situation would be any different if the wines are, say, Bordeaux, so they originated from France, but they are not being imported from France? Ie, a shipment from London? (and whether that would change if, at the time of the shipment, the UK is or is not part of the EU)?

This would have a huge impact on any big auction sales planned for this coming season if the wines are expected to be imported. It also will surely kill whatever light demand there was from US bidders potentially bidding at HK sales and then re-importing the wines. Generally the wine doesn't flow that way anyway, but this will be a further deterrent. Between HK unrest and now eliminating US buyers bidding at foreign sales, it's a pretty stormy environment for the auctioneers.

So the applicable HTS code is based on what it is, not where it's shipped from. Shipping from Hong Kong does not change the essential "country of origin" of a French wine.

[Pat Martin]

I just spoke to K&L about my pre-arrivals, and they intend to honor the price originally paid by the customer on all pre-arrivals, even those impacted by the tariff. Quality outfit.

[L e o F r o k i c]

I am too lazy to check it myself, but it would be interesting to check each of those items and see which states consume them the most.

Perhaps the list was chosen to preferentially tax consumers in certain places?

Good point, in America's "heartland" most of those products are not available.

[Alan Rath]

Is it accurate that Champagne is not part of the tariff?

That depends on how this wording is interpreted "Wine other than Tokay (not carbonated)".

I think if you look up the code number next to that in the table, you'll find more a detailed definition. Don't have time to check now.

Looking around, but no idea how to interpret. Warms my heart to know that some government bureaucrats put in the effort to break things down like this

https://www.findhs.codes/HTSCodes/Of-Heading-2204

I can only imagine how many thousands of pages there are describing every possible product and its derivatives

[D@vid Bu3ker]

That depends on how this wording is interpreted "Wine other than Tokay (not carbonated)".

I think if you look up the code number next to that in the table, you'll find more a detailed definition. Don't have time to check now.

Looking around, but no idea how to interpret. Warms my heart to know that some government bureaucrats put in the effort to break things down like this

https://www.findhs.codes/HTSCodes/Of-Heading-2204

I can only imagine how many thousands of pages there are describing every possible product and its derivatives

FYI, harmonized system codes are global. Given the huge number of product types in the world there have to be an equally huge number of codes.

[Patrick Stella]

Customs will tell them to pay the tariff on the value of the wines. For old wines that can be assessed through various means. I am not going to go into all the potential methods of valuation because it will turn into 6 pages of questions about why, why, why.

Thanks, David. So the point is, it's market value, however that is determined. Correct?

Can you comment on the question of whether the situation would be any different if the wines are, say, Bordeaux, so they originated from France, but they are not being imported from France? Ie, a shipment from London? (and whether that would change if, at the time of the shipment, the UK is or is not part of the EU)?

This would have a huge impact on any big auction sales planned for this coming season if the wines are expected to be imported. It also will surely kill whatever light demand there was from US bidders potentially bidding at HK sales and then re-importing the wines. Generally the wine doesn't flow that way anyway, but this will be a further deterrent. Between HK unrest and now eliminating US buyers bidding at foreign sales, it's a pretty stormy environment for the auctioneers.

So the applicable HTS code is based on what it is, not where it's shipped from. Shipping from Hong Kong does not change the essential "country of origin" of a French wine.

Thanks, David.

[Alan Rath]

Is it accurate that Champagne is not part of the tariff?

That depends on how this wording is interpreted "Wine other than Tokay (not carbonated)".

I think if you look up the code number next to that in the table, you'll find more a detailed definition. Don't have time to check now.

it would seem there is a separate code for "Sparkling wine", which I assume includes Champagne. My interpretation would be that Champagne is not affected by the new tariffs. But I'm just an ordinary citizen, so probably confused...

[D@vid Bu3ker]

When I looked at the full list of affected codes I thought Champagne was not affected. I have not yet seen anything else that changes my mind.

[Neal.Mollen]

EU products winning reprieves include chocolate, Greek, French and Portuguese olive oil, helicopters, frozen fish, lobster, sparkling wine, stemware and tiles.

https://www.reuters.com/article/us-wto- ... SKBN1WH2G7

Champagne and sparkling wines appeared to have avoided the new tariffs, after a list published by the US Trade Representative’s office specified ‘non carbonated’ wines.

https://www.decanter.com/wine-news/us-w ... eu-425622/

[Robert Panzer]

Hopefully this is like the Trump proposed Mexican tariffs that were set to kick in which, due to such pressure, led to negotiations.
Maybe not.
Apparently the only historical precedent is a Bush Sr era proposed tariff on white wines for something in the low teens (13%?); it was never actually put into effect.
And doubly hopeful, even if it does go into effect, hopefully it doesn't last too long......
As to my planned policy, I plan on eating the loss, or possibly asking for voluntary contributions to share the burden. Should make for an interesting sociological/psychological case study.....

[etomasi]

Hopefully this is like the Trump proposed Mexican tariffs that were set to kick in which, due to such pressure, led to negotiations.
Maybe not.
Apparently the only historical precedent is a Bush Sr era proposed tariff on white wines for something in the low teens (13%?); it was never actually put into effect.
And doubly hopeful, even if it does go into effect, hopefully it doesn't last too long......
As to my planned policy, I plan on eating the loss, or possibly asking for voluntary contributions to share the burden. Should make for an interesting sociological/psychological case study.....

Well, as someone who has a thousand or so dollars in pre-arrivals with you, I plan on working with you. Just let me know if anyone drops out on pre-arrival burgs like Arnoux-Lachaux, Taupenot merme, Groffier, etc. lol

[YLee]

Hope this doesnt mean my En Primeur purchases will increase in cost. Maybe it is time to backfill more.

[D@vid Bu3ker]

Hope this doesnt mean my En Primeur purchases will increase in cost.

It may very well mean that.

[etomasi]

Hope this doesnt mean my En Primeur purchases will increase in cost. Maybe it is time to backfill more.

yeah, I don't really want to back out of my purchases, even though its totalwine. We'll see how it shakes out. Totalwine still has their 2018 futures page up. It doesnt look like they raised prices yet.... at least on the wines I bought.

[John Morris]

yeah, I don't really want to back out of my purchases, even though its totalwine.

Usually there's a substantial penalty if you drop out. They committed to buy the wine, afterall.

[YLee]

It would be pretty annoying if I had to pay 25% more on all of my expensive burg and 1st growth bdx En Primeur purchases. Maybe I can request those wines to be stored in France and hold?

[Greg K]

Can't wait to see who will be the first person busted for smuggling high end wine into Miami on their cigarette boat. Alfert?

[David K o l i n]

Can't wait to see who will be the first person busted for smuggling high end wine into Miami on their cigarette boat. Alfert?

From where? Cuba? Bimini?

[YLee]

I have wines coming in from France and England in Nov. How and where do I pay the tariffs?

[D@vid Bu3ker]

It would be pretty annoying if I had to pay 25% more on all of my expensive burg and 1st growth bdx En Primeur purchases. Maybe I can request those wines to be stored in France and hold?

Am doing pay storage charges...it will hit you either way.

[D@vid Bu3ker]

I have wines coming in from France and England in Nov. How and where do I pay the tariffs?

If you are the importer of record, you will get a direct request for funds from Customs. Pay quickly of pay steep fines. If your retailer is working with an import company, they have to handle payment, and either eat the cost or pass it on to you.

[YLee]

I have wines coming in from France and England in Nov. How and where do I pay the tariffs?

If you are the importer of record, you will get a direct request for funds from Customs. Pay quickly of pay steep fines. If your retailer is working with an import company, they have to handle payment, and either eat the cost or pass it on to you.

Thanks

[c fu]

Can't wait to see who will be the first person busted for smuggling high end wine into Miami on their cigarette boat. Alfert?

He already got busted for his paintings!

[Greg K]

Can't wait to see who will be the first person busted for smuggling high end wine into Miami on their cigarette boat. Alfert?

He already got busted for his paintings!

I'd worry about those on the water! Am picturing Alfert in a white jacket with a teal shirt holding a bottle of Clos Rougeard.

Can't wait to see who will be the first person busted for smuggling high end wine into Miami on their cigarette boat. Alfert?

From where? Cuba? Bimini?

Cuba, obviously.

[D@vid Bu3ker]

Cuba would be an OFAC violation.

[Robert.A.Jr.]

Can't wait to see who will be the first person busted for smuggling high end wine into Miami on their cigarette boat. Alfert?

He already got busted for his paintings!

I'd worry about those on the water! Am picturing Alfert in a white jacket with a teal shirt holding a bottle of Clos Rougeard.

Can't wait to see who will be the first person busted for smuggling high end wine into Miami on their cigarette boat. Alfert?

From where? Cuba? Bimini?

Cuba, obviously.

Sheez, this poor country squire just got home from work, relegated to microwave dinner while wife at a Club social, me drinking some mid-priced Chinon, and you guys are all over my phat arse.

I need to be clear here. Alfert is sleek Italian Yacht, not some cheesy cigarette boat.

Alfert does not wear white jackets. He ain’t Crockett. White Boss jeans, sure. Sans socks. But no white jacket.

Now Cuba to Miami, that’s good living right there.

[D@vid Bu3ker]

It may be good living, but it’s still an OFAC violation.

[Dan Kravitz]

Stuff about tariffs:

I spent a fair amount of time today on the phone with our customs broker and a brief call with an attorney.

The tariffs max out at $7.5 billion. They are not just on wine. Scotch, screwdrivers (the metal kind), suits from Savile Row and a whole lot more are included. Although the tariffs are only 10% on much of the machine tooling coming from Germany, everything else is 25%. In theory, once the U.S. collects $7.5 billion (on just over $30 billion worth of products), the tariffs go away.
Assuming there is no negotiated settlement before they kick in (consensus is that this is unlikely), I heard estimates of from 1 – 3 months before the dollar figure is reached.

Without discussing politics, the subsidy question is complicated (Newsflash! Everything is complicated!). Boeing derives a large percentage of its income from military work for the U.S. Europe complains that inflated Defense Department contracts with Boeing amount to a hidden subsidy. Supposedly and hopefully neutral bureaucrats trained in economics and statistics adjudicate these claims. Don’t change the channel <g>! This could take a while.

To David K: Trying to calculate the new price of a $50 bottle is also complicated. How much gets passed through to the consumer vs how much is eaten by the producer, importer, distributor and retailer in efforts to stay competitive with wines from non-tariff places? Or are some wines immune to this, as there are no comparable wines elsewhere? Don’t jump on me with “this is comparable, just as good”, because we’re talking both style and worldwide image, but I would imagine that 1st Growth Bordeaux, Grand Cru Burgundy, Champagne and German Rieslings have some immunity. Basic red Bordeaux? Savaged.
Anyway, I guess that a $50 bottle will become $55 (the chain eats a lot of the tariff) to ~$62.

To David Bueker, another news flash from the trade: The previous definition of Table Wine as 7 – 14% alcohol was changed last year to a more reasonable 7 – 16%. Until this, nobody making 14+ - 16% wine bothered changing their labels from 14%, now it’s STOP THE PRESSES! and print the reality. FWIW, the wine from my own vineyard has always come in at between 14.4% and 15.5% and has always been labeled 15% (completely legal, and I paid the extra tax, passing it on of course to the trade and eventually the end consumer).

To Kevin Gibbs: Yes, the tariff is calculated on ex-cellar invoice cost, but unless people in the trade chain eat part of the tariff, they will use the same multipliers and the price of $62.50 will be correct, give or take.

To Nola Palomar – I believe Ohio’s minimum is 33% Gross Profit, not 33% markup, which affects the rest of your calculations.

As to ’16 Bordeaux futures, they will probably not be affected as negotiations and/or the $7.5B cap will kick in before you ship. Please note ‘probably’, not ‘definitely’.

To Tom Reddick: The tariff will apparently apply to any wine that has not cleared customs before 10/18.

Champagne is not included. The exact tariff line has already been posted in this thread.

To Patrick Stella – The collector in Europe has to provide Zachy’s with an invoice. Add 25% to the price on that invoice and Bob’s your uncle.

To Robert Panzer – this has come up multiple times despite the posting of the actual tariff line, which I post again here, with the relevant words in boldface:
2204.21.50Wine other than Tokay (not carbonated), not over 14% alcohol, in containers not over 2 liters

To John Morris – Italy is not a partner in the Airbus consortium, which is why they are not included.

To Leo Frokic – These wines are available in abundance in “America’s Heartland”. Without looking up numbers, last year I probably sold 30,000 cases in the Midwest, Southwest and Mountain states.

To David Kolin, you wrote: “Greg K wrote: ↑
Thu Oct 03, 2019 5:33 pm
Can't wait to see who will be the first person busted for smuggling high end wine into Miami on their cigarette boat. Alfert?
From where? Cuba? Bimini?
The wines will be coming in from Venezuela (gallows humor, anybody?).

On a more serious note, my business will be impacted fairly severely. How severely I will find out in the next few days.

Dan Kravitz

[D@vid Bu3ker]

To Dan Kravitz...I don’t care. The HTS code definition has not changed.

[Robert Panzer]

"In theory, once the U.S. collects $7.5 billion (on just over $30 billion worth of products), the tariffs go away.
Assuming there is no negotiated settlement before they kick in (consensus is that this is unlikely), I heard estimates of from 1 – 3 months before the dollar figure is reached."
Is there such a limitation on the tariffs, that it is just to pay a certain fine/debt of sorts? What would prevent Drumpf from leaving the tariffs in place? 1-3 months ain't so bad.....indefinitely is bad.

[GregT]

Boeing derives a large percentage of its income from military work for the U.S. Europe complains that inflated Defense Department contracts with Boeing amount to a hidden subsidy. Supposedly and hopefully neutral bureaucrats trained in economics and statistics adjudicate these claims.

Which can be litigated for 20 years. What are "inflated" contracts? Training in economics has no bearing on whether or not you understand a particular business. And if you're part of a particular school of economics, your politics dictate your studies and your outcomes.

What's interesting is that since the 1962 Trade Expansion Act, which gave Kennedy some authority over tariffs, and the 1974 Trade Act, which gave the President the right to negotiate trade deals and then send them to Congress for a yay or nay vote, the U.S. Constitution grants Congress the power “to regulate commerce with foreign nations, and among the several states”. After Smoot Hawley, Congress kind of backed away. Today the President, whether Dem or Republican, takes the lead.

Ultimately it all comes home on the consumer. As imports become more expensive, domestic producers can raise their prices. This is exactly what happened with the auto industry. The net result is that consumers become relatively poorer, since they end up paying more for both imported and domestic items. That's especially true today, when so much is only produced overseas.

So it's like injecting a big shot of inflation into the economy. If I were Trump, I'd start dropping some of these really fast. You don't want to go into an election with the economy tanking.

[Robert.A.Jr.]

Boeing derives a large percentage of its income from military work for the U.S. Europe complains that inflated Defense Department contracts with Boeing amount to a hidden subsidy. Supposedly and hopefully neutral bureaucrats trained in economics and statistics adjudicate these claims.

Which can be litigated for 20 years. What are "inflated" contracts? Training in economics has no bearing on whether or not you understand a particular business. And if you're part of a particular school of economics, your politics dictate your studies and your outcomes.

Dead on right, Greg. The ability to prove this is like nil.

[Tom G l a s g o w]

Boeing derives a large percentage of its income from military work for the U.S. Europe complains that inflated Defense Department contracts with Boeing amount to a hidden subsidy. Supposedly and hopefully neutral bureaucrats trained in economics and statistics adjudicate these claims.

Which can be litigated for 20 years. What are "inflated" contracts? Training in economics has no bearing on whether or not you understand a particular business. And if you're part of a particular school of economics, your politics dictate your studies and your outcomes.

Dead on right, Greg. The ability to prove this is like nil.

Wait and see.

[William Gladstone]

I'm just starting to think about the details of this.
We have several shipments en-route now and I would be lucky if anyone of these arrive prior to the date of the start of the tariff.
If I can squeeze in under the wire...
Other wise my immediate thought is to postpone any shipments that have not departed and the 4 or 5 already on the seas to have those held in a DUTY FREE ZONE in the states until this ends.
We cannot tack on 25% to our cost and successfully sell. Nor take the risk that the tariff ends and others will bring in the same wines without the tariff at a later date.
Trump is a stable genius deal maker.

[Jeremy C]

While this may very well hit many of us, I'm very sorry for those of you whose livelihoods will be impacted.

[Mattstolz]

two things I don't understand about this whole situation:
1) the WTO also announced that they basically thought Boeing was also getting subsidies right? why not just announce them both getting subsidies, then say because of that no one can use tariffs?

2) Airbus is getting help. the US government gets to collect the money. why? are they the ones who were hurt by this? why don't I get to collect 7.5 billion? why can't Wine Berserkers institute and collect the tariffs?

[John Morris]

Stuff about tariffs:

I spent a fair amount of time today on the phone with our customs broker and a brief call with an attorney. . . . .

Thanks for a very informative post.

[John Morris]

two things I don't understand about this whole situation:
1) the WTO also announced that they basically thought Boeing was also getting subsidies right? why not just announce them both getting subsidies, then say because of that no one can use tariffs?

I guess we'd have to know something about WTO adjudication procedures, which I'm pretty confident no one here does. If I had to guess, the US filed its case first and the EU allegations were submitted later.

2) Airbus is getting help. the US government gets to collect the money. why? are they the ones who were hurt by this? why don't I get to collect 7.5 billion? why can't Wine Berserkers institute and collect the tariffs?

Because we'd spend it all on European wine, which would just exacerbate the trade imbalance.

[Rob Weaver]

From Flickinger:

You are receiving this email because you have prearrival wines purchased from Flickinger Wines.

As you have probably read, the US yesterday proposed a set of tariffs in response to the World Trade Organization’s (WTO) ruling that the European Union had damaged the US through illegal subsidies of Airbus aircraft manufacturing.

The precise details of exactly how this is supposed to work are still pending; we have consulted with our overseas suppliers, our logistics company, and our customs broker and the summary of those conversations is that there are many details still to be determined.

Moreover, the potential for a diplomatic resolution, or a serious escalation in the amount of the tariffs, or an all-out trade war are very real. For the time being, we have suspended offering all pre-arrival wines until we have greater certainty over the likelihood of the tariffs taking effect on October 18th. Our best understanding is that as currently defined, the tariffs will not apply to Italian wines, Sparkling wines (including Champagne), large format wines (over 2 liter bottles), and wines with alcohol over 14% - but that the amount and scope of the tariffs can change with little or no notice.

You currently have one or more pre-arrival order pending with us, which may or may not be subject to the proposed tariffs if/when they become effective. For now, we are counseling patience until the dust settles and more facts are known. Your wine will continue to be stored (if it has been released) at our suppliers’ cellars in Europe at no charge.

When the dust does settle, we will be contacting you individually to review the particulars of your pre-arrival purchase(s) and discuss available options at that time.

Thank you for your business and your understanding. Please know we are intensely focused on this issue, and will update you with further information as it becomes available.

[Neal.Mollen]

I need to be clear here. Alfert is sleek Italian Yacht, not some cheesy cigarette boat.

[Neal.Mollen]

Stuff about tariffs:

I spent a fair amount of time today on the phone with our customs broker and a brief call with an attorney. . . . .

Thanks for a very informative post.

Agreed. Very interesting, and Dan, my condolences on time spent on the phone with your attorney, even if it was a short call.

GregT: the slow but inexorable ebb of power from the legislative branch to the executive has been more or less unabated since the middle of the last century. We have lost many, many thousands of young people in undeclared wars, and you might recall a recent declaration of a "national emergency" that "allowed" the executive to spend unappropriated funds, and refuse to spend appropriated funds (check your personal copy of the Constitution for the clause that permits that and let me know what you find). Arguments can be made both ways about the wisdom of this executive aggrandizement but finding a constitutional footing for it is somewhat more difficult. But it is often easier for elected officials to cede power ad let someone else take the heat than to make a real decision

Anyway . . . .

[Eric Ifune]

Since I currently only buy Portuguese wines, I have no problem. Perhaps you all should too. As good as anything in France for a third the price even without tariffs.