US to slap 25% tariff on Cognac and brandy
The US will impose a 25% tariff on additional European goods, including Cognac and brandy from France and Germany, as part of a long-running dispute.
On 30 December 2020, the US Trade Representative (USTR) announced it will adjust tariffs on certain products from the European Union (EU). As part of the revision, certain Cognacs, grape brandies and wine from France and Germany will suffer a 25% duty rate from 12 January 2021.
The tariffs were put in place due to a dispute between the EU and US over subsidies for plane manufacturer Airbus, which the US claims caused the Boeing 777, 787 and 747 aircrafts to lose sales and market share, affecting revenue for US producers and jobs for US workers.
The spat saw the US introduce a 25% tariff on single malt Scotch, single malt Irish whiskey and liqueurs from the EU in October 2019. The tariffs resulted in a 34% decline in Scotch whisky exports and a 28% decline in liqueur and cordial exports between October 2019 and August 2020, compared to October 2018 through August 2019.
In November 2020, the EU imposed a 25% retaliatory tariff on imports of US rum, brandy, vodka and vermouth as part of the dispute.
The USTR said the EU’s latest tariff move was made based on trade data from a period when trade volumes had been ‘drastically reduced’ as a result of the impact of the pandemic on the global economy. As such, the EU enacted tariffs on substantially more products than would have been covered if it had utilised a normal period, the USTR said. The EU had also ‘refused to change its approach’.
As a result, the USTR said it was ‘forced’ to change its reference period to the same period used by the EU, but enforced less than the usual amount so as to not escalate the situation.
Trade body Spirits Europe said it was disappointed by the decision as distillers are “already struggling as a result of existing tariffs and the persisting effects of the Covid-19 crisis”.
Trade group the Distilled Spirits Council of the US (Discus) also voiced its concerns over the new tariffs and their impact on the struggling hospitality industry.
In a statement, Discus said: “These tariffs not only harm EU spirits producers, they also disrupt and negatively impact the entire US hospitality industry supply chain.
“Hospitality businesses and our consumers, as well as producers, wholesalers and importers of distilled spirits are collateral damage in a dispute wholly unrelated to the drinks business. 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.”
Spirits Europe’s director general Ulrich Adam called for the “swift removal” of all tariffs on spirits.
He said: “Continuing to drag unrelated sectors like ours into this long-standing dispute is only creating additional economic damage. This needs to stop.
“Both sides need to find a negotiated solution without delay that will ensure that unrelated sectors like ours stop paying the price for a dispute that is entirely beyond their control and that will effectively enable sectors like ours to contribute fully to an economic recovery in 2021.”
Discus added: “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.”
Last month, US trade representative Robert Lighthizer indicated that the outgoing US administration could agree a “mini deal” with the UK, which would ease punitive tariffs on single malt Scotch whisky.