Michael Langan is head of distillery for Yellow Rose Distilling in Houston, Texas. The opinions expressed in this commentary are his own.
In a few short weeks, distillers across the country will be pulled deeper into the lingering trade war between the European Union and the United States with a doubling of the EU’s tariff on American whiskey to 50%. Small craft distilleries like mine simply can no longer shoulder the burden of these tariffs on top of the destructive economic impacts of the Covid-19 pandemic.
The recent agreements between the United States, EU and United Kingdom to invoke a four-month suspension on certain tariffs — including on other distilled spirits from the United States as part of the World Trade Organization’s long-running aircraft subsidy dispute — is a positive sign that 2021 might bring an end to this nearly three-year tariff standoff. It’s critical the Biden administration acts to protect the US’s largest spirits export, American whiskey. The EU’s planned June 1 doubling of the tariff on American whiskey will create such a high barrier to entry into the European market that it will bring my export business to a screeching halt.
Since opening Houston’s first legal whiskey distillery in 2014, our little business has expanded beyond the borders of Texas and into Europe, where international consumers have gravitated toward the taste of American whiskey.
US whiskey distillers face 50% tariff in Europe if Biden leaves Trump trade policy in placeAt our peak, we were shipping approximately 6,000 cases a year of our American whiskey to Spain and other European countries. This international success was not only benefitting our distillery and our employees, but our entire US supply chain from barrel makers to local farms. Then, in June 2018, the tariffs hit. American whiskey products exported to the EU and UK were slapped with a 25% retaliatory tariff as part of trade disputes concerning steel and aluminum tariffs, which are completely unrelated to distilled spirits. Read MoreAs a result, American whiskey distilleries are being crushed.Last year, our shipments to the EU dropped to just 3,000 cases, and this year, we are projected to ship only 1,000. Our declining international business has created significant challenges. American whiskey takes time to age, and production plans are made years in advance. Not only am I now losing out on exponential international sales, but I also have nowhere to store the whiskey we had planned to ship to Europe. And, with the severe impact of the pandemic, flooding our domestic market is not a viable option. At the start of Covid-19, our tasting room and tours were completely shut down for five months. We stayed busy by answering the call to produce hand sanitizer when our country was in need. Our distillery produced about 3,200 gallons of sanitizer for first responders, healthcare workers and our community. Since we reopened, we have kept a 50% occupancy for the safety of our staff and consumers.
Michael Langan inspecting the still at Yellow Rose Distilling in Houston, Texas.In a normal year, we would be welcoming 6,000 to 10,000 visitors a year to our distillery. But last year, we had just 2,000 guests. Due to the decline in visitors and the subsequent loss in sales, we were forced to furlough 10 of our 17 distillery workers. These tariffs are exacerbating an already devastating situation. As a result of the tariffs and the pandemic, we only realized about 35% of the sales we had projected for 2020, and now, we have had to put our plans to build a new distillery on hold.
President Biden’s chief trade negotiator Katherine Tai recently said before the Senate that the tariffs on American whiskey are “very much” on the administration’s minds and they are working with the EU on securing the removal of the tariff. I am optimistic that the Biden administration will make it a priority to untangle this tariff mess and allow small distilleries like mine to begin to rebuild, recover and get back on the path to growth.
Source: edition.cnn.com