The US Intl. Trade Office at work

[Ralph at Tuthilltown]

Carried in today's CRAINS NEW YORK BUSINESS

Tariff levels are generally falling around the world, but U.S. companies still face significant “behind-the-border” barriers, which typically take the form of complex, burdensome regulations and standards. The story of Tuthilltown Spirits of Gardiner, N.Y., illustrates the challenges to U.S. producers that want to export their merchandise overseas.

Ralph Erenzo and his partner, Brian Lee, run Tuthilltown Spirits, a Hudson Valley distiller with fewer than 20 workers. Tuthilltown makes Hudson Baby Bourbon—recently awarded a Double Gold medal at the San Francisco International Spirits Competition—from locally grown corn and uses special American Oak barrels in its innovative aging process, which takes less than six months to complete.

When Mr. Erenzo decided to expand sales to the European Union, he learned that a product sold there as whiskey must have been aged for at least three years. Removing the word whiskey from Hudson Baby Bourbon labels in the EU raises Tuthilltown's costs and forces the company to rely on word-of-mouth to educate European consumers about its products.

The EU's three-year aging requirement for whiskey essentially functions as a trade barrier that severely limits Mr. Erenzo's access to the EU market.

Tuthilltown Spirits is far from alone. Over the past few years, problematic foreign regulations and standards have had a negative impact on critical U.S. sectors—from food and agriculture to financial services and information technology.

President Barack Obama has made eliminating these obstacles to U.S. businesses a top priority.

The administration is pursuing new tools to prevent such barriers from being erected in the first place, while also ensuring that U.S. and foreign regulators can continue to protect the environment, the workplace, and public health and safety.

For example, we are working with the EU to promote better regulatory coordination, especially in emerging areas such as electric vehicles, energy efficiency and nanotechnology.

Through the nine-country Trans-Pacific Partnership negotiations and the Asia-Pacific Economic Cooperation forum, we are seeking to enhance transparency in the development of standards and regulations, to reduce unnecessary differences in product regulation and to encourage better, more centrally coordinated regulation principles.

We have also created cooperation councils to address unnecessarily divergent standards and regulations, which hamper trade within and from North America.

Additionally, we are making efforts to strengthen the World Trade Organization as a forum for the president's goals.

Tacking trade-related regulatory and standards issues is critical to increasing U.S. exports, boosting economic growth, creating more jobs at home and enhancing our country's competitiveness in the 21st century. Our efforts can make a big difference for businesses like Tuthilltown Spirits and enhance America's ability to build a more prosperous future.

U.S. Trade Representative Ron Kirk is President Barack Obama's principal adviser and spokesperson on trade issues.

A version of this article appeared in the July 11, 2011 print issue of Crain's New York Business.

[porter]

Tuthilltown should be able to sell it's product in any country it chooses. However, I have to raise the question of what gives us the right to dictate another country's standards of products. Don't you think the same problem applies to Cognac, Scotch, Tequila and others which can't be 'produced' under those names in the U.S. ? (Scotch has to be from Scotland, etc.)

Shouldn't the trade commission and the TTB get together to tell those other countries the US can now produce Cognac in California, Scotch in Kentucky, Tequila in Michigan, before they tell other countries how to determine what they can sell?

And what about this opening the door to the mega-producers to sell their swill for a fraction of the price they now sell it for, since they'll be able to produce and market 'whiskey' in countries where labor and grain prices are a fraction of the costs here.

Yes, the concept for opening up the trade for producers like Tuthilltown to take good advantage of sounds great. But there are other issues which go along with it that need to be looked at.

Not for or against the proposal, I just don't think from the initial posting that it addresses a deeper problem with the marketing of liquor in the US.

[Ralph at Tuthilltown]

Tuthilltown may sell its goods in the EU but we may not call them "WHISKEY" or "WHISKY" according to EU law; which is exactly the opposite of the allowance we give to Scotch and Irish Whiskys in the US which have a specific exemption in the law to allow them to call their products whiskey though they do not meet the US definition of whiskey. We are only pursuing quid pro quo, equal consideration for American Whiskey.

Your second paragraph is not possible since international trade agreements already identify tequila as specifically Mexican, Scotch as made in Scotland (not Kentucky) and Cognac in Southern France specifically. Changing these accepted laws would be nearly if not impossible. But what we seek is a clear statement that American Whiskey is a specific class of whiskey made in America according to our Federal Regulations.

R

[Denver Distiller]

Shouldn't the trade commission and the TTB get together to tell those other countries the US can now produce Cognac in California, Scotch in Kentucky, Tequila in Michigan, before they tell other countries how to determine what they can sell?

And what about this opening the door to the mega-producers to sell their swill for a fraction of the price they now sell it for, since they'll be able to produce and market 'whiskey' in countries where labor and grain prices are a fraction of the costs here.

Yes, the concept for opening up the trade for producers like Tuthilltown to take good advantage of sounds great. But there are other issues which go along with it that need to be looked at.

Respectfully, I think that you're missing what Ralph is saying. Right now, if you look at the TTB reg's for Cognac, Scotch, and Tequila, you won't see anything other than these beverages are produced in France, Scotch, and Mexico according to the laws of those countries. That's it. There aren't any qualifying statements. If France says it's Cognac, it's Cognac, and that's the end of it. If the TTB did what the EU is doing, then we could construct some arbitrary law like.... hey, it's not Scotch unless it's put into American barrels.... and Scotch distillers would be, rightfully, up in arms.

All Ralph is saying that this arrangement should be reciprocal, and the EU should accept that if an American Whiskey meets all American TTB rules to label it as whiskey, this whiskey should be immediately accepted by the EU. To do otherwise is protectionist, and unfair.

[cowdery]

What the SOI actually says about cognac is this: (2) "'Cognac', or 'Cognac (grape) brandy', is grape brandy distilled in the Cognac region of France, which is entitled to be so designated by the laws and regulations of the French Government." So it isn't just whatever France says it is.

Canada similarly defines whiskey as aged for a minimum of three years. Are Tuthilltown and others able to sell their young whiskeys in Canada as whiskey and if so, how?

[Denver Distiller]

What the SOI actually says about cognac is this: (2) "'Cognac', or 'Cognac (grape) brandy', is grape brandy distilled in the Cognac region of France, which is entitled to be so designated by the laws and regulations of the French Government." So it isn't just whatever France says it is.

Sure, it's just shade more than "whatever France says it is", but it still defers to the French "laws and regulations" are in regards to what Cognac is. The US definition most certainly doesn't contradict, or more importantly, narrow what the French Laws are regarding what is Cognac. It says, essentially, it's up to the French to define what Cognac is.

Seeing as how there's a long, long history of production and sales of whiskey here in America that's spent far fewer than three years in a barrel, I frankly find it insulting that the EU wants to define American Whiskey for me.

The number of years in the barrel that they're asking for doesn't bother me, per se, and I understand that they have that minimum with a nod toward guaranteed quality (such as it is).... it's that they aren't respecting our methods and laws that irks me, particularly when we're respecting theirs.

[cowdery]

Don't brush off the difference so easily. Take the SOI definition of cognac and fit into it, say, bourbon whiskey. In both cases, you have to go back to the base definition of the words "brandy" and "whiskey," respectively. We're not asking the rulemakers to make a place for a distinctive type of whiskey, we're asking them to redefine their base definition of whiskey. Don't get me wrong, I think the rules do need to be changed to accommodate the way these terms are understood in the world's largest distilled spirits market, but then again look at how "whiskey" is defined in another huge market, India.

It does us no good to pretend these things are simpler than they really are.

[delaware_phoenix]

I think it's great that there's folks who've grown well enough that expansion into European markets is a reality for them (or nearly so). A sign of maturity of the craft distilling biz, perhaps?

I don't know about anyone else, but just an equal chance at getting into stores in my own state would be great.

[Denver Distiller]

Don't brush off the difference so easily.

Certainly don't mean to, Mr. Cowdery. I'm just offended by the lack of reciprocity, and the lack of respect for our customs. Like all obstacles, there are ways around such silliness.

[cowdery]

Certainly don't mean to, Mr. Cowdery. I'm just offended by the lack of reciprocity, and the lack of respect for our customs. Like all obstacles, there are ways around such silliness.

I agree and, furthermore, I blame DISCUS for letting it happen in the first place.

[Ralph at Tuthilltown]

Well I have to agree that DISCUS failed to anticipate the growth of artisan distilleries. My guess is that their members, all very large distillers with hundreds of thousands of gallons of aging stocks over three years of age felt it didn't affect them since all their goods met the qualification. But it was shortsighted on their part.

I do, however blame the elder Bush's administration for failing to recognize the artificial trade barrier the EU was pushing that in reality meant the only "whisky" in the world upon which to base a definition was made in Ireland and Scotland. There are English distilleries who wish to export to the US their single malt whisky but are prohibited from doing so since the US law provides for exemptions from the "new charred oak barrel" rule for Scotch and Irish whiskies but not English whisky or any other kind for that matter. A bit over the top in exclusionary regulations, favoring Scotch and Irish made whiskies over all other whiskies made everywhere else in the world for import to the US. I think it's safe to say that most makers of whiskey or whisky agree that it is the product of distillation of a mash of fermented grain.

R

[Mr Beardy]

. Canada similarly defines whiskey as aged for a minimum of three years. Are Tuthilltown and others able to sell their young whiskeys in Canada as whiskey and if so, how?

To my knowledge, no, it isn't possible to buy unaged whiskey in Canada (spoken as a Canadian, but not one who has researched this extensively).

There is one Canadian-made 'white whiskey', made by Highwood Distillers in Alberta. They actually take the roundabout route of aging it in casks for three years, and then filtering it so thoroughly that all the colour is stripped out.

[Tupper Lake Distillery]

To my knowledge, no, it isn't possible to buy unaged whiskey in Canada (spoken as a Canadian, but not one who has researched this extensively).

There is one Canadian-made 'white whiskey', made by Highwood Distillers in Alberta. They actually take the roundabout route of aging it in casks for three years, and then filtering it so thoroughly that all the colour is stripped out.

Glenora distillery in Nova Scotia sells an unaged whisky called "Glennorra Silver".

http://www.mynslc.com/Products/PID-1012702

[Mr Beardy]

Glenora distillery in Nova Scotia sells an unaged whisky called "Glennorra Silver". http://www.mynslc.com/Products/PID-1012702

Interesting - I've looked at the distillery's site before, and there's no mention of that product - in fact their site says "Oak barrels are filled with the "New Make". Each barrel is numbered and stored in the warehouse for maturation. A spirit must age a minimum of 3 years in wood before it can be called a whisky" (http://www.glenoradistillery.com/smw.html)

So, while the Nova Scotia liquor board has the product catalogued under "Whiskey / Canadian (i.e. rye)", as far as I can tell, the distillery itself is not calling it "whiskey", just "silver".

Actually, it's probably "wronger" to classify that under "Canadian / rye" than under "whiskey", since Glenora makes an all-barley single-malt. One thing it does do is give me some reassurance, that liquor boards will be willing to put a whiskey that's legally not marketable as "whiskey" in with the whiskeys rather than relegating it to the wasteland of unclassified NGS + sugar + whatever.