Caribbean Rum Fight Could Result in WTO Complaint

A dispute over a controversial program in which some excise taxes paid on rum imports help U.S. rum producers threatens to bubble over into a complaint with the World Trade Organization (WTO), said the West Indies Rum and Spirits Producers Association (WIRSPA) in a release. WIRSPA represents the rum producers in the CARIFORUM, a group of 15 Caribbean countries, and the Dominican Republic.

The fight is over the "cover over" program, which allows for the U.S. Virgin Islands and Puerto Rico to receive a major tax rebate for excise taxes paid on rum imported to the U.S. mainland. WIRSPA said the U.S. territories in 2010 also received a rebate on 98 percent of federal excise taxes paid on the 3.1 million proof gallons of CARIFORUM rum sold in the U.S., amounting to $41 million in cover over revenue to subsidize competing production.

WIRSPA specifically objects to the recent contractual agreement between the U.S. territories and multinational rum producers. WIRSPA said the territories have recently started "ratcheting up the levels of incentives and subsidies which are offered to multinational spirits producers willing to relocate in their jurisdictions" and the "levels of support now available to multinational companies are not compatible with a fair market place and fly in the face of the WTO commitments which the US government has signed up to and its opposition to subsidies." According to WIRSPA, the new production capacity which is planned as part of the agreements is estimated to add the equivalent of 80% or more volume to the U.S. market at its current size. "Such massive increases in production capacity can only result in major distortions to the regional market and the demise of many rum producers in independent Caribbean countries which are not being subsidised," it said.

WIRSPA said the "Governments of CARICOM countries and Dominican Republic have formally agreed that this issue needs to be resolved and their representatives have begun the first stage of discussions with the US Government which if unresolved will lead to the formal filing of a WTO complaint."

Email documents@brokerpower.com for a copy of the WIRSPA release.