By DENNIS PHILLIPS
Special to the OBSERVER
A program geared to help New York wineries export wine could possibly see changes that U.S. Sen. Charles Schumer, D-N.Y., said would be detrimental.
Schumer last week announced he is urging the Treasury Department and the Department of Homeland Security to make a decision regarding withdrawal of the proposal by the Bureau of Customs and Border Protection and the Alcohol and Tobacco Tax and Trade Bureau that would change a program that provides a rebate for wine producers who export state wine. Under the program, any federal tax or duty that an American winery pays on wine imported from another country is refunded when that same entity exports American-made wine of roughly the same value. Current duties and taxes on wine imports total approximately $1.30 per gallon. Under the existing drawback program, the American winery gets a refund of these taxes and duties if they export a similarly valued bottle of state-made wine.
The refund is a significant incentive for companies to export wine overseas, and allows them to price those bottles more competitively, boosting sales and revenue for state wineries.
The incentive program is known as "substitution drawback'' because wineries are "substituting'' a U.S.-produced bottle of wine for an imported bottle of wine.
Schumer said as the third-largest wine selling state in the country, the proposed change would hurt the growing industry.
"(Wine production) is growing in every part of the state,'' Schumer said. ''The industry is growing stronger and stronger each year.''
Schumer said the state's wine industry has proved to be one of the most resilient. In each of the past 10 years, the state's wine industry has experienced 10 to 15 percent annual growth. The retail value of all wine production is estimated to be $1.1 billion annually, which is a figure that is likely to rise because state growers are increasingly producing higher value wine. The industry has a particularly powerful impact on New York's rural economy by increasing tourism at a rate of 4.1 million people annually and adding a $6 billion boost to the state's economy every year. Overall, the industry directly employs 36,000 people in New York.
Schumer said one of the main reasons the wine industry is so profitable is the substitution drawback program. He said any changes to the program would hurt state wineries chances of competing in foreign markets.
"We would like the (President Barack) Obama administration to withdraw its program and keep the law in place,'' Schumer said. ''We need to stop this ill-advised change before it comes law.''
Schumer also said he met with United States Trade Representative Ron Kirk to press him on another issue that is having a huge negative impact on New York's wine industry. State wineries are faced with an overwhelming disadvantage when Canadian tourists come to visit. Canada's border tax policies ensure that virtually no Canadian tourists will want to buy state wine because of duties and taxes of 80 to 100 percent of the cost. In other words, Schumer said a Canadian tourist that buys a $20 bottle of wine would pay an additional $16 to20 dollars to Canadian tax authorities in order to bring that bottle back into Canada for personal consumption. The U.S. does not impose the same taxes on its returning tourists as they are entitled to bring in two bottles of Canadian wine duty free. Schumer urged Kirk to raise the issue with his foreign counterparts to ensure a fair shake for New York's wineries. Kirk pledged to raise the issue with Canada.
"Additionally, removing the duty that Canada places on its citizens will help fuel explosive growth in the New York industry and I will pursue this until it is done,'' he said.
Schumer, along with nine other Senators from the top wine-producing states, wrote to Treasury Secretary Timothy Geithner and Secretary of Homeland Security Janet Napolitano to encourage them to withdraw the proposed regulations and retain the current drawback program.