October 26, 2021
Mr. Edward Gresser
Chair of the Trade Policy Staff Committee
Office of the United States Trade Representative
600 17th Street, NW Washington, DC 20508
RE: USTR-2021-0016: Comments Regarding Significant Foreign Trade Barriers to U.S. Exports – Submission by the American Craft Spirits Association (86 Fed. Reg. 51436 (September 15, 2021))
Dear Mr. Gresser:
On behalf of the American Craft Spirits Association (ACSA), I am pleased to submit a compilation of the major trade barriers confronting the U.S. craft spirits sector. ACSA is the national trade association representing the small business craft producers of distilled spirits in the United States. The craft spirits sector numbers more than 2,200 companies producing $6.1 billion in sales, growing at an annual growth rate of 27.1%. Exports of U.S. craft spirits decreased by 57.6% in 2020 versus 2019 to a total of 155,000 cases, adding 1.4% of additional volume to U.S. craft distillers’ total sales.
Our submission responds to United States Trade Representative’s request for public comments and reflects the range of trade barriers to U.S. spirits exports, including retaliatory tariffs, import policies, market access barriers, technical barriers, and standards-related measures.
Many craft spirits producers have expressed interest in exporting their products, but there are a number of significant barriers to this prospect which disproportionately affect small businesses as opposed to their multinational counterparts. To tease out the primary issues which deter craft producers from entering the export market, we conducted a survey of our members, asking those who export or who have considered doing so what they considered to be the primary barriers.
The biggest barrier that 81% of our respondents reported was a technical barrier: the difference in approved bottle sizes. Recently the TTB approved the 700ml bottle size for the U.S., helping imported spirits to simplify access to our markets, but the EU has not extended that same privilege to spirits exported into their member countries. It is extremely difficult for a small business to take on an investment in an additional size of glass bottles for export only, and American states’ policies and regulations may prevent adoption of this 700mL size domestically. A common standard bottle size, or an agreement by export markets to accept U.S. approved standards of fill, would greatly help our small producers get access to foreign markets.
The second technical barrier cited by 70% of respondents was inconsistencies in labeling. Labels are a significant expense incurred in producing distilled spirit products, and common international conventions in labels for these products would also significantly decrease the barriers to free and open trade in spirits, and allow our small businesses to more easily market their products globally.
For businesses exporting American whiskey, tariffs and minimum age statements are two significant barriers. Since June 22, 2018, the EU has imposed a retaliatory tariff of 25% on all American Whiskey imports in response to U.S. actions on steel and aluminum. This issue continues to depress American whiskey exports as a result of a completely unconnected trade dispute. This has been crushing export opportunities for four years and enables other small world whiskey brands to gain market share and mindshare in important EU markets at the expense of our small businesses in the U.S.. Minimum age statements for whiskey are touted as a quality requirement by the countries who hold them, but this is a protectionist requirement, without merit. In 2017, a two-year-old rye whiskey was ranked in the top 20 whiskies reviewed by a national whiskey magazine, yet by many international standards it is not worthy of the name. This arbitrary age statement disproportionately holds back small companies without the ability to hold large whiskey inventories aside to meet these standards. The Standards of Identity used to produce and label American Whiskey as such should be recognized by importing countries.
A final category, which affects distilled spirits which use botanical ingredients, are different lists of pre-approved ingredients. Large exporters have access to significant resources to investigate the fine print of importing countries’ regulations, but small producers often can be tripped up exporting products with approved ingredients in the U.S., but then can fall afoul of customs inspections upon reaching their export destination.
Thank you very much for the opportunity to provide these comments. We are happy to continue to represent and to communicate with small distilleries in the U.S. as issues change and evolve.
Margie A.S. Lehrman
Chief Executive Officer
American Craft Spirits Association