December 19, 2019

Our Response to the Tariff, both those in place against Europe and those being threatened by the US government.

For those of you interested in some of the substantive reasons to object to the expanding Trump trade war with the EU, please see MED’s comments to the US Trade Representative below. Until January 13 you can–and should!–add your voice to the debate. Visit Regulations.gov, search USTR-2019-0003, and click on the blue “Comment Now” button.

To Whom It May Concern:

As a partner at Vintage ’59 Imports, a firm engaged in the trading of fine wine and spirits from France, Italy, Portugal, and Spain, I can attest that the proposed action is an existential threat to our industry and its workforce.

The beverage industry is terrifically competitive today, with quality products being made in all corners of the world and a complex infrastructure of trade allowing those products to reach the US market at competitive prices. In practice that means that the slightest increase in the pricing of our products can lead to dramatic sales declines. The 2016 wine harvest in France is an indicative case study from our recent past. Grape yields in France that year were 6% less than average, which led many of our producers to increase prices in the 5 – 10% range for their finished wines. The resulting loss of sales for our firm was, in several instances, in excess of 50% during the following 12 months. We discontinued stocking certain items that effectively became unsaleable due to a baseline price increase of 10% or less. Demonstrably, small price increases result in significant economic harm to US firms like ours.

Some commentators have suggested that tariffs will be absorbed into the supply chain. This is patently impossible in our segment of the beverage industry. Nearly all of our suppliers are closely held family farms. Following the preliminary imposition of 25% tariffs on October 18, 2019, we requested a pricing reduction of 10% from all affected producers to allow us to realize sales through the end of the year without disruption. Many were unable to meet this modest request, even for a window of less than three months! By the same token, the majority of our customers are restaurants, a notoriously challenging business which does not allow for absorbing even the smallest portion of increased costs. Quite simply, any increased tariff burden levied on wines and spirits from the EU — whether 1% or 100% — will result in our customers choosing different products and potentially catastrophic losses for our firm.

To be more specific about the human costs involved, our company is, in fact, two separate entities, a national import business and a California distribution service. Between the two, we support 12 full-time employees, one part-time employee, and (partially) one 1099 sales broker (this is to say nothing of the tangential benefits we provide to our vendors in the shipping, warehousing and fulfillment, compliance, legal, accounting, etc. industries). By any measure, we are a small business. Nevertheless, we offer generous benefits and competitive salaries to our employees. Many of their spouses and children are covered through our group health insurance. Catastrophic sales losses, during even a short period, would require lay-offs. Any extended period of losses could lead to our full-scale collapse or reorganization.

While I respect the validity of the WTO ruling against the EU subsidies for Airbus, this proposed tariff action on wine and spirits from the EU is misguided–agricultural products have nothing to do with the aircraft industry–and punitive for US firms. Even in the best case scenario it will result in decreased choice and increased costs for US consumers, as well as widespread job losses and economic harm. I would strongly urge you to reconsider.

Michael Daniels,
Partner, Vintage ’59 Imports