Ralph at Tuthilltown

EXPORTING WHISKEY TO EU

13 posts in this topic

Many new American micro distillers are producing whiskey. And much of it young, under three years; which in the EU means "it ain't whisky". The EU at the behest of the Scotch Whisky Association passed a law some time ago with the blessing of the first (Senior) Bush administration that redefines what may be sold in the EU as American "whiskey" or "whisky" and sets a minimum time in oak, contrary to American law which contains no minimum time in oak. This obvious protectionist move is keeping new American whiskey out of the EU for three years minimum.

In the US, in order to describe a product as a particular "Type" of whiskey, like Bourbon Whiskey, or Rye Whiskey, or Single Malt Whiskey, the spirit must be "stored in a charred new oak barrel", by law. There is no minimum storage time required.

Scotch and Irish and Canadian Whiskies (which are aged in used American bourbon barrels) are given specific exemptions from this law, and are described in the law as "products of Scotland" or Ireland or Canada, "made according to the laws of" that country, and may be called "whiskey" and sold as such in the US legally. The American code which exempts Irish, Scotch and Canadian whiskies from American regulations pertaining to the legal definition of "whiskey" or "whisky", does NOT include exemptions for emerging distillers in England and Wales for instance, or for that matter any of those made on the Continent. Whisky is now being made in Germany and Switzerland for instance.

In EU law, in order to describe a product as "whiskey" or "whisky" the spirit must be in an "oak barrel" for minimum three years. No requirement of "new" oak barrels (both Scotch and Irish whiskies age in used American bourbon barrels which greatly reduces the cost to those UK whisky makers compared to American distillers' costs) and no mention of "charred" as with American whiskeys. No reciprocal exemption is made for non-EU whiskies made according to the laws of the country of origin, such as American whiskeys.

For three years we have worked with the INTERNATIONAL TRADE OFFICE and the US TRADE OFFICE in DC to challenge the artificial trade barrier the EU rule presents to all new American whiskey makers who are making legal American whiskey aged under three years. Our position is that the EU has redefined American whiskey and given the largest, oldest American whiskey makers a great advantage over their smaller "micro" distillery cousins who are prohibited form exporting to EU countries their legal American whiskeys which are less than three years in oak.

Our efforts have been unsuccessful getting EU regulators to consider the effect these artificial trade barriers have on both EU and US producers and agriculture as a result. There needs be greater pressure brought to bear on the EU in this regard to get them to the table to renegotiate these restrictions.

In England there is a movement to establish a micro distillers GUILD, such as those which are forming across the US at this time in response to the proliferation of American small distilleries. I have been in contact with the organizer of the English guild and proposed to him that working together from both ends, we might be able to resolve both trade barriers, open the markets in EU to the new distillers of legal American whiskeys, and open the US to English, Welsh and other EU distillers.

The EU law is prejudicial, favoring just two countries (Ireland and Scotland), the old guard and outdated perceptions about the so called "whisky tradition"; ignoring the fact that the American whiskey tradition is not the same as the Scotch tradition, nor should be. The American law is prejudicial against all but Scotch and Irish whiskies, and keeps other whisky making non-US producers from taking advantage of the opportunities in the US, as well as limiting the variety of choice offered to American consumers.

We've been very successful introducing our whiskeys to the EU over the last four to five years. But in order to sell in the EU we had to remove the word "whiskey" from all our labels. Notwithstanding the obvious problems with trying to sell new product called "aged grain spirit" rather than "whiskey", we've been very happy with the sales of our spirits abroad. There are advantages to the new distiller considering export. All goods exported are exempt from Federal and State excise taxes, a substantial savings. And goods exported bypass your local distributor and save you that margin. European consumers are hungry for new spirits products and welcome American whiskeys that are other than the standard fare they get from the major producers.

Both the US and the EU laws are prejudicial. The US law inappropriately prevents any whisky but those made by Scotch and Irish whisky makers from being sold as "whisky" or "whiskey" in the US thereby giving those country's producers an exclusive right to sell foreign whisky in the US and keepting such as Welsh and English whisky makers out. The EU law prevents any whisky which does not match the Scotch Whisky Association form for whisky from being sold as "whiskey" (American) in the EU regardless its legality in the US or elsewhere under local law. And Scotch Whisky Association representatives are aggressively lobbying other countries to adopt the same three year rule for whisky/whiskey, thereby further eliminating any possible competition.

If you're planning to take advantage of the benefits of export, I suggest you contact your State International Trade office and make the case that the US should pressure the EU and encourage the UK to do the same, to change the three year rule. At the same time the US should delete the two specific exclusive exemptions for Irish and Scotch whiskies and replace them with a broad exemption for any spirits made legally under the rules of the source country, so that it may be recognized under that country's product class and type.

We received some flack for going to the EU with our products when the American market is so vast and untapped. We disagree. Sell your goods where you can. Get the best price you can. Success in the stylish important markets in the EU like Paris, Milan, Berlin and even London puts your products in front of eager consumers and demonstrates the broad acceptance of your products. A placement at Le BAR FORUM in Paris or THE SAVOY in London tells buyers in the US that your product is high quality, accepted by the best and most discriminating whiskey consumers. These placements open doors in the US. And export is profitable.

Regardless your feelings about the relative quality of "young" or "aged" whiskey, it should up to the consumers to decide on quality and the success or failure of new whiskey brands, not the law. And certainly not the Scotch Whisky Association.

Join the fight for an open market for new American micro distillers' products in the EU.

Ralph Erenzo

TUTHILLTOWN

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Good stuff, Mr. Erenzo.

Although I'm not sure about this statement:

"The US law inappropriately prevents any whisky but those made by Scotch and Irish whisky makers from being sold as "whisky" or "whiskey" in the US thereby giving those country's producers an exclusive right to sell foreign whisky in the US and keepting such as Welsh and English whisky makers out"

I know of no such CFR that keeps non-Irish/Welsh distillers out of the US market.

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Ralph, I am always appreciative of what you are doing on all fronts for the legal acceptance and enhancement of this industry. As one of the newer comers I am glad to see someone had started the fight for us. That being said I would like to ask for a little bit of clarification on a few points. You stated

"No requirement of "new" oak barrels (both Scotch and Irish whiskies age in used American bourbon barrels which greatly reduces the cost to those UK whisky makers compared to American distillers' costs) and no mention of "charred" as with American whiskeys."

I am curious if this is factual, that our used barrels are sold to them at a cheaper price or if the cost plus shipping makes this truly less expensive for them. I would think it true in the case of buying many small barrels to age the same amount as a large barrel, but that would be comparing apples to oranges.

Secondly, you wrote: "Scotch Whisky Association representatives are aggressively lobbying other countries to adopt the same three year rule for whisky/whiskey, thereby further eliminating any possible competition".

This doesn't sound like elimination of competition. While many of America's craft distillers are still holding to the small barrel, short age model none of that precludes them from putting a few barrels away early to cover this time gap. Furthermore, if they did so at the beginning, by the time they had reached a point where most of them could reach out to foreign markets (if that is their goal) They would meet the requirement. So while I still agree it is unfair to have something which gives them special favor here without reciprocation, I don't think it amounts to elimination of competition unless there is something else you know which you forgot to mention.

I am not writing this as a challenge, I am just looking to understand this better. Thanks again for all you are doing and I will be contacting my representatives to make them aware of this issue.

Rick

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Denver Distiller, remember that the CFR requires explicit wording. The STANDARDS OF IDENTITY exempt only Scotch, Irish and Canadian whiskies from the "new charred oak barrel" rule because it stipulates they are foreign products made under the laws of the countries of origin. It says nothing about any other country's whiskies. We are aware of an English distiller whose product was refused approval for sale in US as whiskey/whisky because England is not specifically mentioned in the STANDARDS as exempt from the new oak rule or as acceptable because it is a product of Scotland or Ireland or Canada and made under their rules.

It may be true that I assumed incorrectly on the savings in cost by the Scots and Irish using used Bourbon barrels, considering dismantling, shipping, reconditioning for reuse and what that costs them. I don't know the actual costs to the Scotch makers importing used American barrels. Perhaps someone else has access to that data. But imagine the cost savings to small American whiskey makers if they could reuse oak used for Bourbon or Rye or Single Malt to produce spirits also known as Bourbon, Rye and Single Malt whiskeys. If an American distiller made a single malt whiskey using the same process as Scotch whisky makers, it would be disallowed from calling the product Single Malt Whiskey under US law since it would mean using a used bourbon barrel for aging. How is this fair?

Rick, The Scotch Whisky Association has approached the US already trying to get the US to match the EU law. It is pitching the case in South America and Asia as well. The reason given is that the SWA wants to protect the integrity of the term "whisky". The SWA has every right to protect the provenance and integrity of "Scotch whisky" but no authority or history to imply authority over all whiskey/whisky made in other than Scotland. The fact they are unwilling to recognize American whiskey process and law while at the same time taking advantage of American largess specifically toward Scotch, Irish and Canadian whiskies is unfair. It is unlikely the EU would admit to the trade barrier and protectionist nature of the law, but there it is and that is what it actually does. I'm sure some SWA or EU representative would argue otherwise. The USITO considers this an "artificial trade barrier" and trade barriers are by nature exclusive and protectionist, which by its nature stifles competition.

One more point, EU three year rule keeps American "Corn Whiskey" out of EU entirely, a product that is being produced widely now as the proliferation of American micro distilleries continues. It's a specifically American spirit that must be called "grain spirit" in EU, not by its traditional American designation which is clearly defined in the STANDARDS OF IDENTITY as a specific "Type" in the Class of Whiskey.

Of course it's all arguable, but that's our perspective after making inquiries for the last three years.

And no need to apologize for the "challenge", better we should all get it right than accept rumor and speculation. I'm open to other opinions on this. Someone convince me otherwise if possible.

R

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Ah, gotcha, Mr. Erenzo. Makes sense.

Seems like you don't want them to have protected spirits processes.... in other words, the issue is why should the Scots and Irish be the only cats who can use used bourbon barrels and call their work "whisk(e)y". Your argument makes complete sense... why would we allow them an unfair advantage in the US (or EU, for that matter) marketplace?

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Exactly. Thanks. Quid pro quo.

Especially since the EU does not allow the US to define whiskey under US law, allowing a similar exemption as US law permits Scotch and Irish producers, the EU law effectively redefines American Bourbon and Rye whiskeys which are sold in the EU.

R

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And no need to apologize for the "challenge", better we should all get it right than accept rumor and speculation. I'm open to other opinions on this. Someone convince me otherwise if possible.

Ralph,

27CFR 5.22 clearly states,

Class 2; whisky. “Whisky” is an alcoholic distillate from a fermented mash of grain produced at less than 190° proof in such manner that the distillate possesses the taste, aroma, and characteristics generally attributed to whisky, stored in oak containers (except that corn whisky need not be so stored), and bottled at not less than 80° proof, and also includes mixtures of such distillates for which no specific standards of identity are prescribed.

There is no mention of "new" in the definition of the CLASS whiskey. Also, pay attention to the the final sentence, "and also includes mixtures of such distillates for which no specific standards of identity are prescribed."

Before I go any further, I'll reiterate what we already know. "Right" and "Wrong" are not defined by law, but are defined by power, influence and money. Regardless of what the law says, it is entirely possible that some TTB agent is going to tell us to label our product contrary to law. At that point, we ask ourselves, do we have the power, influence, and money to take on the TTB? But I digress...

I believe that your confusion may be originating from the definitions of the various TYPES of whiskey, including bourbon, rye, malt, corn, light, and blended (to name a few). As I am sure that you know, corn whiskey is permitted to be stored in any container. However, as the defintion of the CLASS of whiskey makes clear, and as the Beverage Alcohol Manual reiterates* the TTB recognizes the possibility of more "types" of whiskey than they inclued in their official TYPES, namely the "types" of blends of the TYPES (yes, your confusion is very understandable).

Ralph, I am going out of my way here to cite references for my reasoning. If you wish to contradict me, I humbly ask that you deign to do the same. There is very little that can be said in response to a comment like "Those of us who hold General Permits and State distilling permits know... or we run the risk of being shut down. Arguments parsing out what is and what is not permitted are a waste of time." as you have previously said. Let's try to keep it constructive, shall we?

Nick

*Chapter 4 of the BAM states that the term "whisky" alone is:

Sufficient as class and type designation ONLY for whiskies made by:

--Blending two or more specific types of whiskies, e.g., a blend of rye whisky and corn whisky should be designated "whisky"

OR

--Treating with harmless coloring, flavoring or blending materials a specific type of whisky not customarily so treated, e.g. bourbon whiskey treated with caramel should be designated "Whisky"

Note: by blending any two TYPES of whiskies (including corn and light) it is permissible to label your product simply, "whisky"

(But I'm sure that if you included in "e" in the "whisky" you would soon be overrun by ski-masked, gun-toting, underpaid, overworked, and very friendly TTB agents)

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Respectfully, you're misunderstanding what Mr. Erenzo is saying (so did I).

Here's an example of what a Scotch which is made with 100% malted barley and aged in used oak barrels can label itself as "Oban Single Malt Scotch Whiskey".

Now take that same label, and apply it to an English distillery's whiskey made with 100% malted barley and aged in used oak barrels.

Can you label it "Brand X Single Malt English Whiskey"??

No, you can't. Because the Standards of Identity tell you that Malt Whiskey can only be aged in new char. So the TTB is effectively not only protecting Scotch (which is fine), they are protecting the Scottish Distiller's production method of fermenting and distilling malted barley and aging it in used oak barrels.

So if you are an American or English distiller and you wish to go after the consumer who has a preference for single malt whiskey, you can't go after them directly with a clear and easy to understand labeling. You have to label that distillate simply "Whiskey" (which we all know means nothing at all since any type of grain can be used to make it), and are prohibited from calling it what it is..... namely, single malt whiskey.

This is nonsense.

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Yes, Denver, I did see you ask a similar question, but I didn't really understand Ralph's response. The way you explain it makes a certain amount of sense to me, but the way that Ralph was wording things really made it sound like he thought this "new charred oak barrel" rule applied to all whiskey, domestic and import. But in retrospect, I'm sure that he doesn't think that (at least about domestic whiskey). But still, I think that there may be a nuance to this "malt whiskey" nonsense, as you so perfectly described it, that both of you may be missing.

There is no standard of identity for "single malt whiskey". There are standards for "malt whiskey" and for "whiskey". As you both seem to realize, "malt whiskey" must be made in charred new oak containers, but this is not the case with "whiskey".

The TTB seems to deal with this silliness by (usually) making people put "whiskey" on a seperate line. There are many domestic examples of "single malt" "whiskey" that is produced in used cooperage; it is just not "malt whiskey". If these guys from England that Ralph mentioned wanted to sell a whiskey made from malt in the US, all that they would (likely) need to do would be to call it "whiskey" and not "malt whiskey".

To the consumer, the difference goes unnoticed. If the TTB cared about distillers misleading consumers into thinking that "single malt" "whiskey" was "single" "malt whiskey" they might go to greater lengths to prevent this sort of thing. But obviously they don't, because as Denver said, it's nonsense anyway.

So when Ralph said that the TTB prevented an English distillery from calling their product "whiskey" because it was made in used oak, I would wonder if the TTB in fact prevented them from calling it "malt whiskey" and not "whiskey" (which they would be right to do, if it was aged in used cooperage). I see no reason why the TTB would not allow them to call it "whiskey", though.

And as far as "Brand X Single Malt English Whiskey", my guess is that if "Single Malt English Whiskey" was all on one line, the TTB would get a little cranky. If "Single Malt" was on one line, and "English Whiskey" was on another, they'd probably not have too much of an issue, but who knows. If "Single Malt English" was on one line, and "Whiskey" was on its own line, I'd be very surprised if the TTB beefed them about that, and I'd say it would only take a casual letter from a lawyer to change their mind on the matter.

Sorry for diving into such detail over such a miniscule part of Ralph's more important issue, but it is an important point to me (as a domestic single malt whiskey producer utilizing used cooperage).

As far as the overall issue, I'd like to throw out an idea. I've never seen anything come of politics but compromise, and since the US has already played its "California Champagne" chip and finally recognized that AOC, maybe we could get the EU to recognize "American Whiskey" if we promised to give them back "Port" and make "California Port" illegal.

What do you think, Ralph? That'd be a hell of a deal to broker...

Nick

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I understand agree with the basic issue in the above discussion but I am lost with some of the detail.

The detail is quite important to me.

Since taking some of my 100% rye to the Louisville conference, a US importer wishes to get some of my product.

I have a very small distillery so I shouldn't be treading on any of your toes.

I was going to call it RYE WHISKY or WHISKEY. It is an unaged spirit, stored in used wood for a day or so. I think that satisfies the TTB rules if I made it in US.

Australian rules say it is not WHISKY until it has been in wood for at least 2 years.

What does this forum think I will be allowed to call it?

It is up to the importer to deal with the TTB but if you can help get the words correct at the start it would be much appreciated.

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I was going to call it RYE WHISKY or WHISKEY...

It is up to the importer to deal with the TTB but if you can help get the words correct at the start it would be much appreciated.

Pete,

As I write this post, I have the unique (in this hemisphere, at any rate) pleasure of sipping on your delicious rye spirit at the same time that I admire your amazingly classy packaging. Well done on both fronts.

I beg you to do whatever you can to keep the TTB from substantially changing your packaging. It really looks great. Take all of the BS that the US requires and throw it on a back label; the front label is a work of art and shouldn't be messed with (much).

That being said, the TTB will require your to figure out a "class" and "type" for your product, and that will need to go on the front label. I'm betting that you don't want to call it "rye whiskey" and that "whiskey" is going to be your only option. "rye whiskey" needs to be aged in a new charred oak barrel. "Whiskey" is more of a catch-all "class and type" and can be aged in used barrels.

While I'm aware of precedent for "single malt" "whiskey", I don't know of any similar "white rye" "whiskey". It's quite possible that the TTB would hassle you, but if I was you, I'd go for it. The worst thing that they can do is say no.

Looking at the label on this delicious bottle right now, it reads:

WHITE RYE

New Spirit

100% rye

If it was me, I'd submit something like the following to the TTB:

100% White Rye

WHISKEY

Working with the TTB is all about relationships, so you're right to rely on your importer to deal with them. If your importer knows somebody over there, and says you should make your label read a certain way, you should probably listen to him.

Good luck, and I can't wait to be able to buy your wares (somewhat) locally!

Nick

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I'm happy to see this discussion going on. People engaged.

Perhaps I misled in earlier post referring to English "whisky" rather than "malt whisky". The subsequent posts point out, correctly that the "Type" is what is limited for whiskey aged in used oak. The UK (non-Scotch or Irish) whisky makers were prevented from using the term "malt whisky" on their English whisky. And yes the problem for me is the protection offered Scotch and Irish whiskies brand and process, limiting those protections to only those countries for no good reason. And the other side of that coin is the redefinition of Bourbon Whiskey by the EU's trade barrier. EU law recognizes that Bourbon and Rye whiskey, and recently Tennessee whiskey, as all AMERICAN spirits, but then goes on to put a three year minimum which is totally outside the definition of American ("Type") whiskeys by American law.

The US should not discriminate among the countries exporting whiskey to the US and the EU is overreaching by establishing a minimum time in oak contrary to the American definitions.

It is a totally uphill fight, attempting to use any legal leverage, for instance suggesting elimination of the exemptions for Scotch and Irish whiskies from American law, and pushing to get them to conform with American labeling requirements for class and type. Seems a more reasonable tactic to attempt to simply change American law so that any spirit made according to the laws of the country of origin must be labeled as a product of that country.

One of the major objections surrounds the struggle between the SWA and Indian producers of "Indian Whisky" which is mostly made from sugar cane, what we call "Rum". The SWA would like to see Indian spirits now called "whisky" prevented from calling the non-grain product a "whisky". The argument may or may not be sound, but it has nothing whatever to do with the discrepancies between American law and EU law which are nothing less than prejudicial and exclusionary.

R

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