UK: Good News For Scotch Whisky Exporters!

In our inaugural issue of Scran and sIPs, we conducted a Client Q&A with the Tomatin Distillery Co. At the time, the 25% tariff imposed by the US government was cited as one of the biggest challenges of 2020 alongside the COVID-19 pandemic.

Thankfully, six months later, we are now happy to rejoice with our clients and colleagues in the Scotch whisky industry as the tariffs imposed by the US have been suspended. Our colleagues at the Scotch Whisky Association, Lindesay Low (Deputy Director – Legal) and Adam Bowie (Head of Trade – Americas) have kindly provided comments which put the US market and the effect the tariffs had on the Scotch whisky industry in context:

Trade barriers in US

Scotch Whisky has been exported to the US for over 150 years – the United States is our largest export market by value, worth over £1bn in 2019.

The 25% tariff on Single Malt Scotch Whisky exports to the US was in place for over a year, in which time the industry lost over £500 million in exports to our biggest market. The effects of the tariff compounded the impacts of COVID and Brexit on the industry, and smaller Scotch Whisky producers, many of which only had single malt in their product portfolio, were hit particularly hard. The tariff caused Scotch Whisky to lose market share in the US, a highly competitive market which could take years to rebuild even now that the tariff has been removed.

However, there are also a number of additional hurdles – both administrative and legislative – for Scotch Whisky companies wishing to export products to the United States. Label approval processes and customs fees can add cost and complexities for distillers, as well as taxation and regulation variations between states. In addition, it can be difficult to navigate e-commerce regulations in the US, in order to sell products direct to consumers online. In some cases, this is because whisky cannot be traded across state lines, unlike wine which can move freely between states. However, some challenges have also been overcome, including the recent approval by the TTB of 70cl bottles which can now be sold in the United States. This approval came as a relief to many distillers, as it brought down additional costs in exporting to the market.

US protections

Scotch Whisky has robust protection in the United States, being seen as a distinctive product of Scotland, and the industry has the ability to prevent anyone selling Scotch Whisky which is not an authentic product. Under current legal protections, the SWA is able to enforce our rights through the courts using the laws of consumer deception and unfair competition, if we believe that someone is selling fake Scotch Whisky in the US. In addition, the Alcohol and Tobacco Tax and Trade Bureau (TTB) includes Scotch Whisky as a recognised Scottish product within their regulations.

The SWA is currently in the process of applying for a certification trademark for Scotch Whisky in the United States which would provide additional protection by holding products sold as Scotch Whisky to certain standards: in this case, a Scotch Whisky brand would need to have been registered with HMRC in order to be approved.

The United States will always be an important export market for Scotch Whisky, and the SWA will continue to work with our member companies, with our sister trade associations in the US, and with legislators and regulators, to ensure a fair playing field for Scotch Whisky producers wishing to export.

In addition to the protection afforded to Scotch whisky through measures to ensure the authenticity of products sold under the label on the US market, whisky distillers also rely heavily on trade mark protection in order to ensure the distinctiveness of Scottish brands and to tackle counterfeiters.

The US is known to be a comparatively litigious territory and with the market opening up to Scottish produce again, this is a good time to take a closer look at the US trade mark system and the ways in which it differs from practices in the UK and the EU.

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