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US wine merchants, advocates decry proposed tariffs on $2.4B in French goods

Proposed tariffs on $2.4 billion in French imports into the U.S. will hurt the already low-margin domestic wine industry and cause thousands of job losses, wine merchants and industry advocates told a U.S. government panel Jan. 7.

The Wine & Spirits Wholesalers of America, along with several small retailers, said at a public hearing held by the Office of the U.S. Trade Representative that they oppose the inclusion of champagne and sparkling wine from France on a list of proposed tariffs being considered by the USTR.

"We strongly urge the U.S. and France to reach a negotiated settlement in this dispute and avoid the implementation of the new tariffs," said Barkley Stuart, executive vice president of Southern Glazer's Wine and Spirits, a wine and spirits distributor that employs more than 22,000 U.S. employees and represents 1,500 wine, spirits, beer and beverage suppliers.

At a minimum, the USTR should remove champagne and French sparkling wine from the final list of French origin products that would be subject to the tariffs "to avoid the negative economic impact," said Stuart, also an immediate past chairman of WSWA.

The USTR determined in December that the French digital services tax discriminates against U.S. tech companies including Amazon.com Inc., Alphabet Inc.'s Google LLC unit and Facebook Inc. The tax imposes a 3% tax on total annual revenues generated by some companies that provide certain digital services to, or aimed at, French users.

Tech companies have said the tax unfairly targets large U.S. tech companies and undermines plans by the Organisation for Economic Co-operation and Development to develop a common approach to the tax challenges of digitalization.

In retaliation to the French tax, the USTR is now considering duties of up to 100% on French products such as cheese, sparkling wine, makeup and handbags. The tariffs are expected to significantly impact LVMH Moët Hennessy - Louis Vuitton Société Européenne, the world's largest luxury company and maker of various high-end handbags, cosmetics and Champagne brands such as Moët & Chandon.

LVMH did not immediately respond to request for comment.

Many wine merchants also told the USTR that the tariffs will lead to layoffs and price increases for consumers in the U.S.

According to the WSWA, champagne and sparkling wine from France accounted for 12.14% of total U.S. wine imports and 2.76% of the total U.S. wine market in 2018. WSWA says the proposed 100% tariff on French sparkling wines would lead to a 2.5% consumer price increase for wine, a reduction of 1.84% in overall U.S. wine sales and the loss of 17,000 lost jobs.

David Bowler is the owner of New York-based Bowler Wine, a wine importer and distributor started in 2003 that generates $30 million in revenue. He testified that his company pays his employees well and provides healthcare for every staffer.

But he said Bowler Wine is already struggling with the 25% import tariff imposed on European wine in October and has canceled various trade events for his company in 2020. He said the additional tariffs of up to 100% will leave the wine industry "eviscerated."

William Tomaszewski, general counsel of Wine.com, an online wine retailer with 100 employees and warehouses in six states, echoed Bowler, saying the tariffs will mean that his company would "no longer be profitable."

"The effects of this tax on our company are beyond measure," he said.

Benjamin Aneff, managing partner with Tribeca Wine Merchants in New York, called the proposed tariffs the "greatest threat to the wine industry since prohibition."

Aneff said the wine industry is a heavily regulated and small margin enterprise, making it especially vulnerable to French tariffs. Once the tariffs are implemented, many wine businesses will fold, he said.

"It is the U.S., not Europe, that would see the most damage," Aneff said. "These American businesses are absolutely panicked and for good reason."