EXPORTING WHISKEY TO EU

[Ralph at Tuthilltown]

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 distillers 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.

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

Ralph Erenzo

TUTHILLTOWN

[Rickdiculous]

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