The Distilled Spirits Council – DISCUS welcomes the announcement of a new, modernized trade agreement between the United States, Mexico and Canada. The new United States-Mexico-Canada Agreement or USMCA is set to replace the North American Free Trade Agreement or NAFTA that went into effect on January 1, 1994.
Clarkson Hine SVP Corporate Communications & Public Affairs at Beam Suntory.
“Trade is a key component to a strong economy, and the U.S. spirits industry and our consumers benefit from free and fair trade agreements,” said Distilled Spirits Council Interim President & CEO Clarkson Hine. “The USMCA agreement is welcome news for American spirits’ exporters. We hope this creates new momentum for further discussions in North America, the EU and elsewhere that lead to the swift removal of retaliatory tariffs on American spirits exports.”
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Distinctive Product Recognition for “American Rye Whiskey”
The new agreement reaffirms commitments concerning the internal sale and distribution of distilled spirits and tariff-free trade in spirits. It also establishes new best practices regarding labeling and certifications for beverage alcohol, which will help to facilitate trade in spirits among the three countries.
In addition, in a “Side Letter” the United States secured Mexico’s agreement to consider granting distinctive product recognition for “American Rye Whiskey,” a fast-growing category of American Whiskey. The new agreement also preserves distinctive product recognition for “Bourbon” and “Tennessee Whiskey” in Canada and Mexico, and for “Canadian Whiskey,” “Tequila” and “Mescal” in the United States.
U.S. – Mexico Side Letter on Distilled Spirits
“Mexico shall initiate, subject to its applicable laws and regulations, the process to consider prohibiting the sale of any product in Mexico as American Rye Whiskey, if it has not been manufactured in the United States in accordance with the laws and regulations of the United States governing the manufacture of American Rye Whiskey.”
The U.S. spirits sector has expanded significantly over the past two decades, and U.S. spirits are now exported from small, medium and large distillers located in 42 states, supporting the direct and indirect employment of an estimated 1.5 million people across America.
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What is American Rye Whiskey?
Export Tariffs Removed, Import Tariffs Remain for Now
While the agreement reached maintains duty-free access for U.S. spirits exports to Canada and Mexico, U.S. whiskeys continue to face retaliatory tariffs to those markets. Currently, Canada is imposing a retaliatory tariff of 10 percent on all U.S. whiskey imports in response to the steel and aluminum tariffs. In 2017, total U.S. whiskey exports to Canada were valued at $48.7 million. In addition, Mexico is imposing a retaliatory tariff of 25 percent on U.S. whiskeys. In 2017, total U.S. whiskey exports to Mexico were valued at $13.4 million.
“Now that this important agreement has been achieved, we hope the three parties can quickly resolve their other trade disputes so that free and fair trade for U.S. whiskey exports is resumed,” Hine concluded.
The deal which was agreed to by the leaders of the three countries on Sunday still requires congressional approval.
Resources
The full text of the USMCA Agreement can be read here.
The full text of the side letter that addresses the recognition of “American Rye Whiskey” can be read here.
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