Government Affairs: Congressional Majority Now Supports Tax Reform for Brewers and Importers; Trade Groups Urge Trump to Rethink Tariffs on Mexico

Alcohol producers’ efforts to make excise tax relief permanent reached another milestone today, as a majority of Congress now supports the Craft Beverage Modernization and Tax Reform Act (CBMTRA).

In a joint announcement, seven alcohol industry trade groups said a bill to permanently enact tax cuts for alcohol producers and importers now has 218 co-sponsors in the U.S. House of Representatives.

On Wednesday, Reps. Rosa DeLauro (D-CT), Hal Rogers (R-KY), Buddy Carter (R-GA), Andy Barr (R-KY), Richard Hudson (R-NC) and Josh Harder (D-CA) agreed to co-sponsor H.R. 1175.

Majority support in the House comes about one month after a majority of Senators pledged their support for a companion bill, S. 362.

As of press time, a total of 65 Senators have agreed to co-sponsor the bill that would make federal excise tax cuts permanent. Those cuts, which President Donald Trump signed into law as part of the Tax Cuts and Jobs Act in 2017, are set to expire at the end of 2019.

In an email to Beer Institute (BI) members Thursday, Jim McGreevy, the president and CEO of the trade organization, wrote that CBMTRA now has enough support in both chambers to pass if called for a vote.

“This level of bipartisan, bicameral support for a bill in a divided Congress is rare, but because of your help, we’ve been able to reach this level of support in record time,” he added.

According to the BI, the excise tax cuts create $130 million in annual savings for the beer industry.

The 2019 version of CBMTRA would lock in an excise tax rate of $3.50 per barrel (a reduction from $7 per barrel) on the first 60,000 barrels for domestic brewers producing fewer than 2 million barrels annually. The legislation also permanently sets the federal excise tax to $16 per barrel on the first 6 million barrels for all other brewers and beer importers, while maintaining the $18 per barrel excise tax for brewers producing more than 6 million barrels.

“We are grateful for the support from all those who have co-sponsored this important legislation and are hopeful that it can be enacted this year,” Brewers Association (BA) president and CEO Bob Pease said in a joint press release with the BI, Distilled Spirits Council of the United States, American Craft Spirits Association, Wine Institute, WineAmerica and the United States Association of Cider Makers.

Making excise tax relief permanent has been a “top priority” of the BA in 2019. During the annual Craft Brewers Conference in April, BA leaders solicited donations for the organization’s newly formed political action committee (PAC).

Earlier this week, in an email update to BA members, Pease wrote that “the launch of the Brewers Association Political Action Committee is now complete.”

Although details were scant, Pease noted that the Brewers Association PAC would accept personal contributions from employees of member breweries. However, federal election law prevents the organization from accepting corporate donations. The amount raised thus far is unclear, as the first reporting period for the PAC is July 15.

Nevertheless, Pease wrote that contributions would go to U.S. Congressional candidates “regardless of political affiliation, who understand and champion small and independent breweries,” as well as members of the Senate Finance Committee, the House Ways and Means Committee, and the Small Brewers Caucuses.

President Trump Reaffirms Plans to Impose Tariffs on Mexican Goods

Despite ongoing negotiations, President Donald Trump has reaffirmed plans to impose a 5 percent tariff on all goods from Mexico starting June 10.

The new escalating tariffs on all products from Mexico — 5 percent monthly until reaching 25 percent — were announced less than two weeks after the president lifted duties on aluminum and steel imports from Mexico and Canada. The newly proposed tariffs are intended to force the Mexican government to stop the flow of migrants into the U.S.

The tariffs would be yet another burden for a beer industry that has lost market share to wine and spirits companies. According to the BI, more than 360 million cases of Mexican beer are expected to be imported into the U.S. by the end of 2019.

On Tuesday, leaders from the BI, National Beer Wholesalers Association (NBWA), National Barley Growers Association and the Hop Growers of America sent a letter to President Trump expressing concern over the proposed tariffs.

“We urge you to engage with the Mexican government in a dialogue that avoids the

implementation of these tariffs in the coming days,” they wrote.

According to the letter, new duties on Mexican goods would cost U.S. brewers $374 million by the end of 2019, and as much as $1 billion annually. In June alone, that cost is estimated at $12.5 million. Additionally, the letter stated that Mexico is the largest export market for U.S. barley and the sixth-largest market for U.S. grown hops.

“Once that beer is imported into the U.S., it becomes part of an American supply chain that employs millions of Americans, including those employed by brewers and beer distributors,” the letter stated. “Additionally, we estimate Mexican beer imports account for over $500 million in American excise taxes annually.”

Aluminum Pricing Remains Under Fire

In a statement to Bloomberg, U.S. Commerce Secretary Wilbur Ross said the surge in aluminum pricing “does not seem to justify a huge increase in the Midwest Premium.”

“That premium was originally intended to cover transportation handling costs,” Ross told the outlet. “Those are not a function of the underlying price of aluminum. In addition, the Midwest Premium is now based on a survey of market participants, not actual trading.”

According to the BI, beer companies have been paying a tariff-loaded Midwest Premium on metal and cansheet made with 70 percent scrap.

Mary Ryan Named Acting TTB Administrator

The Alcohol and Tobacco Tax and Trade Bureau (TTB) today announced that long-time deputy administrator Mary Ryan has been named acting administrator of the federal regulatory agency. Ryan’s appointment comes nearly two weeks after the death of TTB administrator John Manfreda at the age of 73.

The TTB also announced that Daniel Riordan would serve as the TTB’s acting deputy administrator, in addition to remaining in his current role as assistant administrator for the Office of Headquarters Operations.

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