NABI Opposes Tariffs in the USTR Review of Action in the Enforcement of U.S. WTO Rights

Updated: Jun 18


(NABI News Release) | National Association of Beverage Importers, Inc. | Washington, DC

NABI Opposes Tariffs in the USTR Review of Action in the Enforcement of U.S. WTO Rights in Large Civil Aircraft Dispute (Docket No. USTR-2019-0003)

Consistent with its strident position against tariffs, NABI voiced strong opposition to the continuation of the retaliatory tariffs on wines and distilled spirits in the Airbus trade dispute, any increase in the rate of the additional duties aka tariffs, and the addition of any further wines, distilled spirits, or beer to the retaliatory tariffs. Tariffs are taxes on American businesses and consumers. In the letter below, NABI articulates many of the harms to American workers, consumers, and local communities arising from these retaliatory tariffs.

Submitted electronically via www.regulations.gov :

NATIONAL ASSOCIATION OF BEVERAGE IMPORTERS INC.

Press Club Building, Suite 1183

Washington, DC 20045

(202) 393-6224

***

January 13, 2020

Joseph Barloon

General Counsel

Office of the United States Trade Representative

600 17th street, NW

Washington, DC 20508

Re: Review of Action: Enforcement of U.S. WTO Rights in Large Civil Aircraft Dispute (Docket No. USTR-2019-0003)

Dear Mr. Barloon:

The National Association of Beverage Importers (NABI) submits this letter in response to the Federal Register Notice published on December 12, 2019 (84 Federal Register 67992) requesting comments on whether products currently subject to the 25 percent additional duty should be removed from the list or remain on the list, whether the rate of additional duty on these products should be increased up to a level of 100 percent; and whether additional products from the prior two notices from April and July 2019 should now be subject to additional duties of up to 100 percent. The Notice seeks comments on whether these additional duties are moving the EU closer to compliance with the WTO decision and whether these additional duties are resulting in a disproportionate harm to U.S. economic interests, including small and medium sized businesses and consumers.

NABI is the leading trade association, since 1935, for importers of wine, distilled spirits, and beer/malt beverages, including low and non-alcoholic malt beverages. Unique to NABI is our mandate focuses on all three categories of alcohol beverages.

NABI is part of the Joint Beverage Alcohol Coalition that submitted joint comment letters on. May 28, 2019, and August 5, 2019 in this matter that strongly objected to the inclusion of distilled spirits, wine, and non-alcoholic beer. NABI signed the joint comment letter that was submitted as part of this request for comments and this letter is an additional submission. These letters articulate why additional duties on wines and distilled spirits will create job losses in the United States, cause economic harm to importers, wholesalers, retailers and others in the hospitality industry, and increase the likelihood that the EU will impose additional retaliatory tariffs on wine and distilled spirits as part of the EU dispute with the United States relating to Boeing in United States — Measures Affecting Trade in Large Civil Aircraft (second compliant)-Resource to Article 21.5 of the DSU by the European Union and in other trade disputes with the United States, such as the Action Pursuant to Section 301: France 's Digital Services Tax (Docket No. USTR-2019-009).

We want to highlight several points that have been made repeatedly in various public submissions and testimonies given earlier in this action. All support not increasing the current 25 percent additional duty on certain wines and distilled spirits and not expanding the beverage alcohol products subject to additional duties. Rather, NABI requests that all beverage alcohol products be removed from the additional duty consideration in this action. At a minimum, the current additional duties on wines and distilled spirits should be reduced to 10 percent for parity of impact on the importer with the 10 percent additional duty on large civil aircraft.

Importers are businesses operating locally and providing jobs in their communities that indirectly support other jobs. The beverage alcohol distribution system creates many jobs from the imported products so a large portion of the retail value is generated here in the United States and not with the foreign supplier so local communities benefit from these jobs. These jobs include shippers, truckers, warehouse workers, bookkeepers and accountants, sales representatives, customs brokers, managers and others in the hospitality industry, just to name a few, that are put at risk by these additional duties currently in place and any expansion of the alcohol beverages subject to additional duties, or an increase in the rate of the additional duties. Many are solid middle-class family jobs.

As clearly evident from the testimonies at the public hearing on the Acton Pursuant 10 Section 301: France 's Digital Services Tax (Docket No, USTR-2019-009)9 there are small and medium sized import businesses that have cancelled new hiring, laid off employees and are facing potential shut-downs as a result of the current 25 percent additional duty on wines. Their stories are stories of real people facing job losses and business collapse.


Importers are working with their foreign suppliers and distributors in the United States in an effort to share the cost of the additional duties but the results have been mixed with no long-term solution. The importer is squeezed here between independent businesses and is the entity that must bear the financial burden of the additional duty at the time of the consumption entry into the United States.

Importers of all sizes face increased costs not only from the additional duties but due to the increased cost from financial institutions backing the upfront costs of the import shipments and the increased costs of larger customs bond coverage.

Additional duties of 25 percent are not sustainable for many importers whose brand portfolio are primarily ones covered by the current additional duties. If raised to 100 percent there would be widespread closures. The Government should not be picking winners and losers in the domestic marketplace by these additional duties.

In the case of premium wines with limited allocations, some importers are facing foreign producers who are shifting those allocations to countries in Asia and elsewhere to avoid the uncertainty of the United States market. These are hurting business relationship that took many years, if not decades, to develop.

Other wines and distilled spirits are losing market share as a result of the price increases arising from the additional duties. Brands have different price sensitivities. For some brands, the additional duty results in a consumer perception that the product is "overpriced." Market share once lost is very difficult to recover once the additional duties are ended.

This WTO dispute involves large civil aircraft and not the beverage alcohol industry. The additional duties should focus on the civil aircraft and aeronautical parts and equipment, The 10 percent additional duty on civil aircraft means that the purchaser of a $200 million aircraft would pay $20 million whereas the 25 percent tariff on the importer of wine or distilled spirits currently covered by the additional duties would pay $50 million on the importation of $200 million of wine and distilled spirits, that is, two and one half times more. Simply put, this results in a disproportionate harm to beverage alcohol products covered by the additional duties.

Nonalcoholic Beer

In this request for comments, USTR asks whether products from the prior two lists not subject to current additional duties should be now be subject to additional duties. Nonalcohol beer (HTS subheading 220291.00) appears on the proposed lists. Nonalcoholic beer is not discussed in detail in the Joint Beverage Alcohol Coalition letters. Because NABI has beer and malt beverages within its mandate, we are providing comments on why nonalcoholic beer should not now be subject to additional duties.

First, the imposition of additional duties on nonalcohol beer would not move the EU closer to compliance with the WTO decision. In 2018, all nonalcoholic beer (foreign and domestic) accounted for just 0.3 percent of the off-premise sales (grocery, liquor and convenience stores) in the United States. Even if this market share is increasing as many consumers are moving to lower-alcohol content products, the import volume is not sufficient enough to where the additional duty would push the EU to move more quickly on a negotiation.

Second, the imposition of an additional duty on nonalcoholic beer would result in a disproportionate harm to consumers in the United States The Federal government through the Department of Health and Human Services (HHS), National Institute on Alcoholism and Alcohol Abuse (NIAAA), National Institute of Health (NIH), and the Dietary Guidelines for Americans, among others, has a strong public health policy of promoting responsible and moderate consumption of alcohol beverages by those consumers who decide to drink in the first instance.

Nonalcoholic beers directly advance and support this vital public health policy, Additional duties making access to these nonalcoholic beers more expensive undercuts the promotion of this sound public health policy.

The arguments stated above are consistent with those stated in the enclosed letter, dated June I I, 2019, from several Members of Congress encouraging USTR to remove nonalcoholic beer from list of EU products that might subject to additional duties.

NABI appreciates this opportunity to comment. Please do not hesitate to contact me should you require further information.

Sincerely,

Robert M. Tobiassen

NABI President

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