ACSA Board of Director Becky Harris, CEO Margie A.S. Lehrman, Editor in Chief Jeff Cioletti, Public Policy Advisor Jim Hyland, members of the Virginia Distillers Association and Distilled Spirits Council staff talked tariffs and the federal excise tax with U.S. Senator Mark Warner (D-VA) during a roundtable discussion at Lost Rhino Brewing Co. in Ashburn, Virginia, on Friday, May 17.
Distillers detailed how retaliatory trade tariffs in Europe have all but eliminated their prospects to grow their export business.
“We had hoped to have 25 percent of our sales from the EU,” noted Becky Harris, ACSA Board Member and co-founder and distiller of Catoctin Creek Distilling in Purcellville, Va. “The price increase [from tariffs] couple with the difficulty on our part to absorb that cost—we have to pass that sort of thing along [to consumers]—means we’re non-competitive there now. There’s a global market for whiskey and we’re losing mindshare, as well as market share.”
Harris added that only 1 percent of Catoctin Creek’s 2018 sales came from the EU, thanks to the retaliatory tariffs.
Sen. Warner used the very audible sound effects from one of Lost Rhino’s many pinball machines—Star Wars, in particular—to articulate his analogy about the challenges that small producers face.
“If there’s any doubt about the threats that Becky and all of you face, you heard the Death Star in the next room,” Warner said. “The Death Star is starting to move closer.”
Gareth Moore, CEO and co-owner of Virginia Distillery Co. in Lovingston said his company had to dial back its export plans entirely.
“We’re not going into Europe in 2020, which was the original plan,” Moore revealed. “Right now it’s going to be too hard and it was already an expensive, competitive market.”
But the fact that Warner stopped short of committing to co-sponsoring Senate Bill 362—the re-introduced version of the Craft Beverage Modernization and Tax Reform Act—underscores the work that still needs to be done on Capitol Hill. It also highlights the misinformation that travels in legislative circles. Warner’s reticence stemmed from the misconception that the mega-producers were benefiting from the FET reduction as much as craft producers are.
“I say this as a big supporter of business and I’ve said this of the big guys: there’s no reinvestment in America for that, they want to keep all of the [benefits],” Warner said.
He was unaware that the $10.80 that every distiller has saved on every proof gallon since the CBMTRA’s passage nearly a year and a half ago only applied to a distiller’s first 100,000 proof gallons. Additionally, he hadn’t realized that distillers would take a bigger hit than breweries and wineries if the FET reverts to pre-CBMTRA levels. Breweries and wineries already had a tiered system for large and small producers and they’d just revert to that. Small spirits producers would revert to paying the same level as the Jim Beams of the world.
After the meeting, Warner revealed that he was a bit more open to supporting the bill.
“I’m more aware, after the hour I spent here, of the immediate whack you would take,” Warner said.