Italian Wine Benefits from US Duty “Grace”

You may assume that shipping an Italian wine from Italy to another country is a fairly simple process in 2021.

And in many ways, it is.

Today, we have online stores that allow people to order products quickly and easily. We have technology in place to track those orders and more robust logistical infrastructure ready for transporting products from country to country.

However, there’s an aspect of importing Italian wines, or any product, that is often forgotten about.

Duty.

You can think of duty as an import tax. It’s a sum of money that must be paid for a product from one country to enter another. And it’s with duties that we see some complexity added to the importing process. 

Why?

The added cost has to go somewhere!

In some cases, the importer can absorb the cost themselves, especially if they’re selling high-value goods at a high margin. In other cases, the importer may pass the duty costs onto the consumer, which means you end up buying products for more than you would buy them in their native countries.

It’s an unfortunate, though inevitable, aspect of selling products globally.

But what it means is that any changes a country make to their duties, or import taxes, has an impact both on the importer and their consumers. As duties increase, it becomes harder for the importer to sell their products overseas.

And that’s why the news coming out of the United States about duties and Italian wine in 2021 is so important.

What’s the News?

Towards the end of 2020, many in the industry expected the United States to levy additional duties against Italian wine as part of an ongoing dispute between Airbus and Boeing. Since October 2019, the dispute has resulted in the United States levying additional taxes on products from Europe.

Why is this so important to the Italian wine industry.

The United States is currently the biggest purchaser of Italian wine in the world. Millions of bottles get shipped over to American stores, restaurants and individuals every year. And in the wake of the pandemic, the idea of duties increasing, and thus adding to the cost of transporting Italian wines to the largest market for them, was one that had many producers worried.

As we approached the end of 2020, many believed that it was Italian wine’s turn to feel the wrath of the duty increase. The industry braced itself for the impact higher duties would have…

But the increase never came!

Instead, the United States instituted a grace period on Italian wine duties that mean the rate will stay at the current one of 25% for the foreseeable future. And what’s more, 160 members of the United States Congress are currently lobbying to scrap this fee as well.

What Does This Mean for the Italian Wine Industry?

There is no way to see this as anything other than great news for the Italian wine industry.

On the most basic level, the grace period means that the industry will face no extra costs for importing wines to the United States, at least for the foreseeable future. Many producers that were hit particularly hard by the pandemic will welcome this news as it means they’re able to continue offering value to their customers without worrying about the impact that increased duties will have on their offerings.

For consumers, it’s also excellent news. 

As mentioned, many importers tend to build the money they pay in duties into the cost of their products. As a result, higher duties often lead to higher prices for consumers. And the result of this is that consumers either pay more for their Italian wines or they simply don’t buy them at all. But with this grave period, consumers can expect to pay similar prices to what they’ve paid over the last couple of years, without worrying about pandemic-stricken wine producers trying to cover a higher duty fee.

But perhaps the extent of the benefits is best summed up by President Confagricoltura Massimiliano Giansanti when he says:

“This is great news because the tightening of duties would have placed an additional obstacle on the way to the full recovery of the Italian agrifood system after the health emergency.” 

“It is also important to note that the United States has formally expressed its willingness to negotiate an agreement with the EU that will put an end to the dispute that has lasted more than ten years on public aid to the Airbus and Boeing groups.”

What About the Future?

This is where things may get a little more uncertain.

On the one hand, we have the point that Giansanti makes about the United States expressing a willingness to negotiate in the future. In an ideal future, these negotiations would lead to a relaxing of the current duty rate, which is still quite high, allowing Italian producers to make higher profits while providing better services to their clients.

However, we can’t discount the fact that there has recently been an election in the United States that has led to the ousting of Donald Trump.

The decision to offer a grace period on Italian wine came from Trump. With Biden in office, the possibility exists that he may reverse this decision or take a different approach when negotiations do occur.

Still, we’re cautiously optimistic about the future.

It seems that the dispute that led to higher duties on European goods in the first place is one that all parties want to try and steer clear of. And if that’s the case, an easing of duties in the future could lead to a more profitable relationship between Italy and the United States.

So, customers in the United States need not fret about paying more for their Italian wines than they should. With this grace period, we have producers who are in a better position and consumers that don’t have to grapple with potentially higher prices, at least for the foreseeable future.

There is no indication of just how long this grace period will be. But as importers ourselves, we’re delighted to see this action being taken and hope for further relaxing of duties in the future.