What do airplanes and wine have in common? The answer should be nothing. However, a dispute between the EU and the US aerospace industry in October of 2019 imposed tariffs on wine imports. These tariffs have harmed the Burgundy United States connection ever since. Add that to the effect of the pandemic, where fewer people are enjoying their wine in restaurants, and the Burgundy business has had a rough year and a half. But there is a silver lining in the form of a 4-month reprieve from the taxes, and wine connoisseurs are wondering if halting the tariffs will swing the pendulum back to the positive for the United States and Burgundy relationship.
Impact of the Tariff
The tariff was a hefty 25% on all wines imported, and what made it even more difficult was the fact that the entire tax had to be paid before the bottle entered the country. That was a massive expenditure of capital before a dime was even recovered for the wine importers.
Until the tariffs, the United States had been the number one importer of Burgundy wines. But the tariff was a hammer. American imports of French still wines fell by 35% in the first eight months of the tariffs, to the end of June 2020, according to France’s wine and spirits export body, FEVS.
By the end of the year, exports had dropped 15.2 percent in volume and 22 percent in value, according to the Bureau Interprofessionnel des Vins de Bourgogne (BIVB). This drop was devastating in an already tenuous relationship with winegrowers and importers.
Biography of Burgundy
Prices had already been going up before the wine tariffs were imposed. “We are seeing a saturation point for increased production from truly great producers that is making it difficult to sell through quality wines from very good vintages,” says Beaune Imports’ Michael Sullivan, noting that this happened even before the tariff-impacted 2017 vintage. “The inflation of prices at the producer level over the last five to ten years is the main reason for this.”
The burgundy wine industry has been making their money from the book ends, including the top-shelf Grand Crus type Burgundies and entry-level whites from Mâcon and Chablis. But the middle-of-the-road exports have been suffering.
A Burgundy is not generally the type of wine that you run to the store to bring home. Without the restaurant business in which to market their wines, especially the middle-of-the-road Burgundies, some importers had to get creative. They might offer a bottle as a carry-out option at a restaurant or try a marketing tactic to drum up more business.
In a sales-driven world where long-held personal relationships are key, the tariff has changed the game and forced a little more give and take between growers and importers, who both dipped into their own profits to not pass huge increases on to the consumer.
Future of the Burgundy
Considering that wine importers generally have a 3-4 month stock available, this news of the tariff reprieve will not immediately lower the price of wine, as buyers have already paid the tariff on these bottles in stock. Wine importers are also trying to recoup the tariff paid for bottles that are currently “on the water,” whose tariffs have already been paid.
But dropping the tariff for four months still seems like a positive for those in the wine industry.
Ben Aneff, president of the United States Wine Trade Alliance and owner of Tribeca Wine Merchants notes that “it’s incredibly heartening that the Biden administration heard the voices of so many American businesses around the country and got an understanding of the incredible damage these tariffs were causing. … It’s rare in this day and age that your voice is heard, but without a doubt, in this case, it was.”
Many French exporters are feeling positive as well. “Demand for Burgundy is much stronger and more widely distributed around the world in 2020 than in 2008,” says Etienne de Montille, the owner of Domaine de Montille. “If prices are stable, I think that the great domaines of Burgundy can survive the crisis without too many problems.” Time will tell what will happen to the US Burgundy relationship in the future.
And what will happen at the end of the four months? Will the tariffs be re-imposed or will the sanctions be over? Many experts think that both sides realize the hardship of the tariffs, and are working to end them. Aneff said, “We believe this timeframe was effectively designed because both the US and EU believe they’re far enough along in negotiations, that [four months] will allow them to put this issue to bed.”
In a year that has been difficult enough with the pandemic and all of the unrest that brought, the wine tariff has certainly made things harder for the Burgundy experts. With this 4-month tariff halting, both sides hope to get back to business as usual, and with any luck, the tariffs will be gone for good!