Final Step Taken to Avoid Costly Tariffs on American Wine in Canada

3.7.2016

By Michael Kaiser

The Department of Agriculture (USDA) has finalized the rule repealing country of origin labeling rules (COOL) for certain muscle cuts of meat. The repeal, as authorized by the 2015 Omnibus Appropriations Bill, will allow the the US to avoid costly tariffs places on goods, including wine, exported into Canada and Mexico.

WineAmerica worked tirelessly as a member of the COOL Reform Coalition to make sure the COOL rules were repealed to avoid a complete disruption of the American wine market in Canada. In 2014, U.S wine exports to Canada reached $487 million, a 7% increase from 2013. Retail sales for American wine in Canada now eclipse $1 billion. In 2013 the U.S. was the second largest exporter of wine to Canada, with a 16% market share among wine imports sold in Canada. If the over $1 billion in retaliatory tariffs were implemented by Canada, the costs of US wine exported to Canada would have rose exponentially. If the Canadian market was to shrink, the excess wine would have remained in the United States, causing a glut. This was not something our industry would have been able to tolerate.

The COOL issue is an example of an issue that seemingly has no bearing on wine, but as a value added product, it is an easy target for tariffs and other trade barriers. WineAmerica did not have a position either way on the labeling rules themselves, but in order to protect the interests of American wine in the Canadian market and here in the United States, we had to become a leader in the COOL Reform Coalition. We worked hand in hand with our partners working House and Senate offices to secure repeal. When a witness was needed for a Senate hearing, we provided it (Wine Testifies for the Senate) and without the work of our grassroots network we would have never been able to stop the tariffs from being implemented. Wineries and associations from as far flung as Washington and Virginia played an important role in getting the message out about the dangers of this issue.

This COOL repeal is just one example of what WineAmerica is doing in Washington, DC to protect the business interests of American wineries. We are the only national organization working for the American wine industry in our nation’s capital.

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Questions? Contact Michael Kaiser, Director of Public Affairs, mkaiser@wineamerica.org

WineAmerica is the national voice of the American wine industry. Based in Washington, D.C., WineAmerica represents wineries in 43 states and leads a coalition of state and regional wine and grape associations. As an industry leader, WineAmerica encourages the dynamic growth and development of American wineries and winegrowing through the advancement and advocacy of sound public policy.

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Congress Approves Omnibus Appropriations Bill

Includes COOL Repeal and Increased TTB Funding

Happy Holidays from all of us at WineAmerica. We had a very productive and successful year and we look forward to 2016. We will be back in the new year with a full slate of work on such issues as music licensing requirements and federal excise tax reform.

Congress wrapped up their work for the year today with the passage of the Fiscal Year 2016 Omnibus Appropriations Bill, sending it to the President’s desk for final signature. The bill fully funds the federal government until September 30, 2016. The bi-partisan agreement features several provisions relevant to the American wine industry.

  • TTB Funding: The bill features $106,439,000 in appropriations funding for TTB. This is $5,000,000 more than last fiscal year, with that money dedicated to label and formula approval.
  • COOL Repeal: The bill repeals the mandatory country of origin labeling requirements for certain cuts of beef and pork. The repeal of the COOL rule will protect the American wine industry from costly tariffs placed on wine exported into Canada and Mexico.
  • Tax Filing Requirements: Alcohol producers liable for not more than $50,000 per year in federal excise taxes to file and pay such taxes on a quarterly basis, rather than by month. Additionally, those producers liable for not more than $1,000 per year may pay taxes annually, rather than quarterly. The provision also exempts such producers from IRS bonding requirements.
  • Definition of Hard Cider: The provision defines hard cider for purposes of alcohol excise taxes as a wine with an alcohol content of between 0.5 percent and 8.5 percent alcohol by volume, with a carbonation level that does not exceed 6.4 grams per liter, which is derived primarily from apples, apple juice concentrate, pears, or pear juice concentrate, in combination with water. The previous alcohol content limit for hard cider was 0.5 percent to 7 percent.
  • Market Access Funding: The bill fully funds the USDA Market Access Program (MAP) at $200 million.  MAP funds are key for states expanding their wine sales into foreign markets.

If you have any questions about these provisions or any other part of the bill, please contact Michael Kaiser, Director of Public Affairs at mkaiser@wineamerica.org.

Senate Must Act on COOL

The American wine industry is about to face crippling tariffs from Canada and Mexico, and we need your help! We need you to let your Senator know that a full repeal of Country of Origin Labeling (COOL) for meat and poultry is the ONLY way to avoid crippling tariffs on our industry.

How does meat labeling affect the American wine industry?

Country of Origin Labeling concerns how cuts of beef, pork and poultry are labeled. Canada disputed the U.S. law on the grounds that it violated World Trade Organization (WTO) rules. The WTO ruled in favor of Canada and Mexico and has green-lit over $3 billion in retaliatory tariffs on the U.S. if COOL is not repealed. Wine is on the retaliation list.

It is now in the hands of the United States Senate to protect U.S. commodities and the U.S. wine industry from these devastating tariffs by issuing a full repeal of COOL.

What affect will tariffs have on American wine?

Currently the U.S. wine industry holds a 16% market share in Canada. Canada is the U.S. wine industry’s largest export market, and the first foreign market U.S. wineries begin exporting to when growing their brand internationally. These tariffs would almost double the cost of an U.S. bottle of wine in Canada. Unable to compete with other wine producing countries, U.S. wineries will lose vital shelf space and market share which will take years to rebuild. If COOL is not repealed, punitive tariffs would last two years, significantly harming current exporting wineries  and rapidly expanding wine producing regions such as New York, Virginia, and Ohio. The federal government has spent time and money  developing this export market through funds from the Market Access Program (MAP).  If the tariffs are enacted all of the success cultivated by those funds would be lost.

What has Congress done so far?

Earlier this summer, the House of Representatives voted to repeal mandatory COOL labeling for meat and poultry by over a 3 to 1 margin. The Senate Agriculture Committee then held a hearing on June 25 to discuss the repeal of COOL. Jim Trezise of the New York Wine and Grape Foundation and a WineAmerica Board Member testified before the committee on the importance of repealing COOL. He emphasized the potential loss in business and the necessity for quick legislative action on the part of the Senate. He testified that nothing short of a total repeal of the COOL provision would stop Canada from excising the tariffs on wine and our industry paying the price.

Currently there are two active proposals to address the COOL issue in the Senate:

  • Senator Pat Roberts (R-KS), the Chair of the Senate Agriculture Committee has introduced a proposal identical to the House bill that passed in June, a full repeal of the COOL rules.
  • Senators Debbie Stabenow (D-MI) and John Hoeven (R-ND) have also introduced a proposal that would replace the mandatory labeling standard with a voluntary standard.

What needs to be done?

WineAmerica supports Senator Pat Roberts’ proposal. The Canadian government has made it clear only a full repeal will stop the tariffs from being implemented.

Supporters of COOL are saying that the voluntary standard is sufficient. IT’S NOT. Canada and Mexico have repeatedly said that they will implement tariffs unless anything short of full repeal is passed.

Reach out to Michael Kaiser, Director of Public Affairs here at WineAmerica with any questions. mkaiser@wineamerica.org

WineAmerica is the national voice the American wine industry. Based in Washington, D.C., WineAmerica represents wineries in 43 states and leads a coalition of state and regional wine and grape associations.  As an industry leader, WineAmerica encourages the dynamic growth and development of American wineries and winegrowing through the advancement and advocacy of sound public policy.

Wine Testifies for the Senate

Senate Agriculture Committee Hearing on COOL

June 25th, 2015

Washington D.C. — Today the Senate Agriculture Committee held a hearing on the Country of Origin Labeling dispute.  A list of U.S. commodities, including wine, faces over three billion dollars in tariffs from Canada and Mexico. WineAmerica Board Member and New York Wine and Grape Foundation President, Jim Trezise, spoke to the effect that these tariffs would have on the wine industry. Other panelists included representatives from the North American Meat Institute, the American Farm Bureau, Cattlemen’s Association, Kansas Livestock Association, Archer Daniels Midland Company Corn Processing Business Unit. The hearing was lead by Senator Pat Roberts (R-KS), Chairman of the Senate Committee on Agriculture and Ranking Member Senator Debbie Stabenow (D-MI).

Mr. Trezise presented the need for swift legislative action and the need for full repeal of COOL. Canada and Mexico have repeatedly stated that full repeal is the only solution that they will accept. Additionally, Trezise addressed the importance of the Canadian market for New York and other regions. Canada is the largest export market for U.S. wine, and the proposed tariffs will have a devastating impact on the the American wine industry.

WineAmerica thanks the Senate Committee on Agriculture, Nutrition, and Forestry for holding the hearing on COOL and for inviting a member of the wine industry to testify.

Background: Country of Origin Labeling, or “COOL,” is a law requiring retailers to indicate the country of origin on a cut of meat. In 2009 Canada challenged the American implementation of this law at the World Trade Organization (WTO). The WTO ruled in Canada’s favor and has continued to do so in all subsequent appeals. With today’s final ruling, Canada and Mexico will be able to levy tariffs against American products. Wine is on the preliminary “hit list” made public by Canadians.

Tariffs against American wine will be a huge hit to our industry. Canada is the largest foreign market for American wine.  Last year U.S wine exports to Canada reached $487 million, a 7% increase from 2013. Retail sales for American wine in Canada now eclipse $1 billion. In 2013 the U.S. was the second largest exporter of wine to Canada, with a 16% market share among wine imports sold in Canada.

The preliminary Canadian plan would place a tariff on wine based on the value of the product entering the country. For example, a wine with a $10 import value would be hit with a $10 tariff, doubling the cost of the wine sent into the country. Apart from the immediate financial loss, the American wine industry could face long term effects. Raising the price of a bottle of a US wine will hinder competition with other wine regions, notably South Africa and Australia. The United States could lose shelf space that would take years to regain.

Current Action: Earlier this month the House of Representatives passed a bi-partisan bill repealing the COOL requirements. With the August congressional recess looming, and with the WTO review period ending on August 17, the Senate must act quickly. The Canadian and Mexican governments have made it clear that, short of a full repeal of the COOL meat labeling rules, the tariffs will commence. If the COOL rules are not repealed, the tariffs will go into effect as early as September and will last at least two years.

WineAmerica is the national voice the American wine industry. Based in Washington, D.C., WineAmerica represents wineries in 43 states and leads a coalition of state and regional wine and grape associations.  As an industry leader, WineAmerica encourages the dynamic growth and development of American wineries and winegrowing through the advancement and advocacy of sound public policy.

View Chairman Robert’s statement on COOL

Questions? Contact Michael Kaiser at mkaiser@wineamerica.org

 

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