Wine Comments Dominate USTR Docket About Changing Airbus Product List or Hiking Tariffs

Thousands of people who either work in the wine industry or who enjoy drinking imported wines wrote to the Office of the U.S. Trade Representative between June 26 and July 26. In all, USTR received close to 30,000 comments on what to do about tariffs on European goods. USTR is considering changing the mix of products, either by putting products on the list that were spared last time, or by adding new products not considered last year. It's also considering increasing the 15% and 25% tariffs on EU goods (see 2006240017).

Of the items on the Airbus retaliation tariff list, aircraft was the first by value, at 39%; whiskeys and liqueurs were second, at 21%, and wine was third, at 17%. Aircraft and the hard liquor did not have tariffs before this action; wine was previously taxed at 0.7%.

A great many of the wine letters were form letters, beginning either: “As a hard-working employee in the U.S. Wine industry, I am writing to express my opposition to the proposed expansion of tariffs,” or “I am writing as a U.S. consumer of imported and domestic wines.”

Some wrote their own pleas, like Brett Palleson, owner of a wine importer called The Soil Expedition. He said, “Back here commenting, or a better word — BEGGING — for a [reprieve] from tariffs that will cripple my small wine import business. The 25% tariffs in France, Germany Spain, and the UK already have had major impacts on our business. Not to mention the effects of a WORLDWIDE PANDEMIC that is having an immense impact on our sales and growth to new markets.

But wines and liquor aren't the only goods that have been taxed at 25% since last October, in an effort to force the European Union to resolve the Airbus subsidy dispute in a way USTR finds acceptable. USTR did not respond to questions about the latest offer from the EU a few days ago (see 2007240057).

Michele Buster, co-founder of Forever Cheese, wrote, “These tariffs have been crippling. We are an American Family Company, in business for just over 20 years. Having focused on Italian, Spanish, Portuguese and Croatian Cheese, this represents over 75% of our business and it has been terrible, not just for us, but for all of the Americans here who love to eat these cheeses. With the Pandemic and the loss of jobs, it makes it triply hard for people to afford our products.”

Seth Cohen, from Ford Farm USA, asked why British cheese should be tariffed, given that Britain does not do protected designation of origin labels, “which is a major factor as to why our domestic dairy industry wants the tariffs in place (despite the fact that this is a Boeing-Airbus dispute).”

The UK Fashion and Textile Association trade group argued that the U.K. has repaid all the subsidies to aerospace, so no British products should be on the list. “The fashion and textile manufacturing sector in the UK is small and has nothing to do with either Boeing or Airbus and it is perverse to penalise industries that are so far removed from the cause of the dispute,” they wrote.

Some products are from EU countries that were not involved in the launch subsidies. The company that produces Royal Dansk Danish butter cookies -- sold in those famous metal tins given as gifts at Christmastime -- said that a large tariff now would be particularly devastating, since the period of fall to Christmas is 70% of sales.

“Germany, France, the United Kingdom and Spain are considered the principal architects of subsidies to the EU’s large civil aircraft manufacturer. Denmark has no commercial advantage or role within the European Community in encouraging subsidies to Airbus,” the company wrote. “Denmark does not have the political clout to influence an outcome of the dispute.”

Manufacturers who rely on German copper and brass told USTR that taxing their inputs would cause their customers to buy foreign components.

Ohio Screw Company CEO Jim Fetcko opened his comment by saying he didn't know if USTR would listen to those who oppose or support tariffs. He said a 100% tariff on the German copper his company uses would increase his costs by $500,000 and would most likely lead to its failure.

“We machine at least 120,000 Lbs. of Copper Rod annually and are very limited to supplier options,” he wrote. “These components are commercial and industrial electrical components that are essential to our national electrical grid and its function. These tariffs would almost certainly cause my customer Eaton Corp. to source these components” outside the U.S.

Christopher Galasso, director of quality assurance Mill-Max Mfg. Corp., said that his company also makes electrical connectors from copper and brass, and imports it from Germany. The company employs more than 180 people at an Oyster Bay, New York, factory. “There are no domestic sources for this material. Tariffs proposed for these materials will directly affect the cost of our products and give an unfair advantage to competitors located in Europe and China,” he wrote.

In the initial hearing on targets, employees of Airbus in Mobile, Alabama, told USTR that putting a high tariff on aerospace parts would result in American job losses. Aerospace parts ended up off the list, and airplanes were taxed at 10% rather than the 25% tariff on foodstuffs, wine and other targeted products. That was eventually increased to 15%.

A number of American Airbus employees wrote again this time.

Adam Ward, manager of the optical tasking team at Airbus Americas, wrote, “At this point in history, economies and industries are struggling, and these tariffs will have a bigger impact than normal, and much wider-ranging consequences that could impact thousands of jobs for years to come for an industry that plays a critical role in so many other important parts of life! Airbus plays [such] a crucial role in the aerospace industry that it must be supported in this critical time, not given additional financial obligations.”

Yusuf Siddiqui, who works in the defense and space division of Airbus Americas as an engineer in Fort Collins, Colorado, wrote, “Although I work in another branch of Airbus, what affects one part of the company here in the US undoubtedly will affect me, as the company operates as one large unit. Imposing tariffs will make it more difficult for the assembly plants in Alabama, Texas, and other states [to] compete effectively for airline business.” He said job cuts are already happening because of the economic conditions, and another tariff hike would be devastating.

There were some industries that were spared in October that are now fighting to stay off the list again, such as motorcycles and motorcycle parts.

Todd Sandoval wrote: “I own a motorcycle dealership in the United States that would be severely impacted by any increased duties targeting these products.” He said that due to COVID-19 shutdowns, he furloughed three of his 27 employees, but now he's been able to refill the positions. “An increased tariff on motorcycles, parts and accessories would surely hurt if not close our business, the market would not sustain such an increase in prices for the products we sell if these tariffs were to take effect.”