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Letter to The Honorable Ron Kirk, Ambassador United States Trade Representative

Letter

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Date:
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Today, U.S. Senator Charles E. Schumer announced that he is pressing Canadian and American officials to commit to launch negotiations to eliminate restrictive Canadian wine taxation policies that put New York wineries at a competitive disadvantage. Canadian tourists spent a whopping $933 million shopping in Western New York in 2011, but wine sales at Niagara County and Western New York wineries are undermined by onerous Canadian taxes and fees assessed on New York wines purchased by Canadian residents returning from travel in the U.S. In contrast, when New York tourists travel to Niagara-On-The-Lake in Canada, the United States does not impose high taxes on wine upon return, which affords Canadian wineries a huge business opportunity.

During a personal meeting with Canadian Ambassador Gary Doer in April, the Ambassador requested that Schumer help advocate for the Canadians to be invited to join the Trans-Pacific Partnership (TPP) trade negotiations. In that same meeting, Schumer secured a commitment from the Ambassador that if Canada joined Trans-Pacific Partnership (TPP) negotiations, the Canadian government would launch formal talks to terminate Canada's restrictive wine taxation policies. Elimination of Canada's anticompetitive wine tax practices would provide a massive boost to winery and tourism businesses in Niagara and across western New York and the Rochester-Finger Lakes region.

Canada is expected to formally join the TPP talks later this year. Schumer is urging the Canadian Ambassador to make good on his personal commitment to negotiate a resolution of the wine tax disparity in the context of TPP talks. Schumer also has asked U.S. Trade Representative Ron Kirk to commit to specify elimination of high wine taxation barriers as a TPP negotiating objective. It is estimated that some Niagara wineries business would double if the Canadian tourists that already visit the Niagara Wine Trail could bring New York wine back to Canada without being hit with huge taxes and fees.

"Niagara wineries are missing out on barrels of business because of burdensome taxes on Canadian customers who visit New York wineries. That is why I've secured a commitment from Canadian leaders to address this restrictive wine tax in new trade negotiations, and am urging the Canadian government to fulfill this commitment and uncork potential for winery businesses in Niagara and across Upstate New York," said Schumer. "In April, I met with Canadian Ambassador Gary Doer and he agreed to work with Administration officials to eliminate barriers to equitable cross-border commerce in wine, if Canada joined key trade talks. Canada is now expected to join these talks, and I am urging the United States and Canada to formalize that personal agreement to eliminate Canada's high wine tax that discourages Canadian tourists from buying New York wines and act as a barrier to business growth at Niagara wineries."

Schumer noted that wine purchased by Canadian residents returning from day or weekend travel to the U.S. is subject to a series of onerous federal and provincial taxes and fees. These charges can easily add up to 50 to 150 percent of the value of the wine -- which means Canadian visitors, more often than not, come to taste New York wines but not to buy.

Today, Schumer joined leaders of the western New York wine industry, vineyard owners and members of the Niagara Wine Trail - a group of 16 historic and award-winning wineries located between the Niagara Escarpment and Lake Ontario - at Freedom Run Winery in Lockport, NY in Niagara County to announce renewed efforts to eliminate restrictive Canadian wine taxation policies that put New York wineries at a competitive disadvantage. Many of the vineyards in the region are family-owned small businesses that have garnered local, national and international recognition for their high quality wines. Wine Spectator rated Larry Manning, Niagara Wine Trail's vice president who hosted the event at his family-run vineyard, as one of New York's top makers of red wine. Schumer was also joined by Oscar Vizcarra, Niagara Wine Trail's president, who owns Becker Farms and Vizcarra Vineyard, a fifth generation family operation near Gasport, NY. Jim Bittner, president of the Niagara County Farm Bureau, and owner of The Winery at Marjim Manor also appeared in support of Schumer's push to increase competitiveness between in Canada and Niagara County.

"At Freedom Run Winery we are always looking for ways to expand our business. By allowing Canadians to bring back some of our wines duty free, I am confident we could see a huge growth in sales. I am excited that, thanks to Senator Schumer's efforts, this important issue is now one step closer to being resolved," said Larry Manning.

"As the President of the Niagara Wine Trail I am well aware of the impact that the Canadian tax issue has had on our area wineries. This is an issue we have been working on for years and is a top priority for our wine trail and our region. Through Senator Schumer's efforts we are finally seeing real progress towards a solution that will help our entire tourism industry and in particular our local wineries," said Oscar Vizcarra.

"Creating a level playing field with both free and FAIR trade in wine tourism will be a boost for the entire international region, leading to broad growth and more visitors to the US and Canadian wine and culinary destinations. Arrowhead Spring Vineyards looks forward to the opportunity to sell wine to Canadian tourists, just as Canadian wineries have been allowed to sell to US tourists free of duties and tariffs. I want to thank Senator Schumer for securing a commitment from the Canadians to address this issue," said Duncan Ross owner of Arrowhead Spring Vineyards.

At Schumer's request, USTR Kirk has raised the issue of Canada's protectionist wine taxation policies with Canadian counterparts. However, to date, there has been on measurable progress on eliminating the wine tax disparity between New York and bordering Canadian provinces. Because of high taxes and fees, Canadian tourists come to taste New York wines, but not to buy. Schumer is asking USTR to adopt as a specific negotiating objective the elimination of inequitable wine taxation practices that are impeding cross-border commerce. Schumer also is requesting that both USTR and the Government of Canada commit to begin formal negotiations on this issue at Canada's first TPP negotiating session later this year.

The state's wine industry has proved to be one of New York's most resilient. In each of the past 10 years the New York wine industry has experienced 10-15% annual growth. The retail value of all this production is estimated to be $1.1 billion annually, which is a figure that is likely to rise because New York's growers are increasingly producing higher value wine. This 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 $6B boost to the state's economy every year. Overall, the industry directly employs 36,000 people in New York. New York State is the third largest producer of wine by volume in the country, with over 200 million bottles produced annually, 255 wineries statewide, $420 million in sales, and 15,000 employees.

Canada will formally join the TPP negotiations later this year. The TPP negotiations were launched in 2009. Currently, the negotiations include Australia, Brunei Darussalam, Chile, Malaysia, New

Zealand, Peru, Singapore, and Vietnam, as well as the United States. Canada and Mexico have been invited to join the negotiations and are expected to formally do later this year.

Copies of Sen. Schumer's letters appear below:

July 2, 2012

The Honorable Ron Kirk

United States Trade Representative

600 17th Street, NW

Washington, DC 20508

Dear Ambassador Kirk,

I write today to bring to your attention restrictive Canadian wine taxation policies that undermine economic growth in upstate New York and put New York wineries at a competitive disadvantage. As the United States prepares for Canada's formal entry into the Trans-Pacific Partnership negotiations, I respectfully request that USTR commit to specify elimination of high wine taxation barriers as a TPP negotiating objective.

As you know, U.S. residents returning from a short visit to Canada are permitted to bring two bottles of wine duty free into the United States. Canada allows no commensurate duty exemption. In fact, wine purchased by Canadian residents returning from day or weekend travel to the U.S. is subject to a series of onerous federal and provincial taxes and fees. These charges can easily add up to 50 to 150 percent of the value of the wine -- which means Canadian visitors, more often than not, come to taste New York wines but not to buy.

Mr. Ambassador, you and I have spoken previously regarding Canada's protectionist wine taxation policies, and I appreciate that you have raised the issue with your Canadian counterparts. However, to date, there has been no progress on eliminating the wine tax disparity between New York and bordering Canadian provinces. The status quo is not acceptable.

I understand USTR is beginning a 90-day consultation period with Congress to solicit views on U.S. negotiating objectives with respect to Canada. I respectfully request that, during this period, USTR meet with my office to discuss the issue of Canada's protectionist wine taxation policies. My expectation is that the United States will adopt as a specific negotiating objective the elimination of inequitable wine taxation practices that impede cross-border commerce.

The TPP negotiations present a unique opportunity for the United States and Canada to come to an agreement to terminate provincial wine taxation schemes that discourage Canadian tourists from buying N.Y. wines, undermine N.Y. wineries' economic growth, and provide Canadian wineries with a huge tax advantage. Elimination of anticompetitive wine tax practices should be a U.S. priority, and I respectfully request that USTR commit to begin formal negotiations on this issue at Canada's first TPP negotiating session. In a separate letter, I have asked the Ambassador of Canada to the United States, Gary Doer, to make the same commitment.

While I welcome the inclusion of Canada in the TPP talks, I expect the United States and Canada ultimately to come to a formal agreement to eliminate barriers to equitable cross-border commerce in wine before TPP negotiations wrap up. New York wineries must have the opportunity to compete on equal footing with their Canadian competitors.

Thank you for your attention to this matter. Please contact Stacy Ettinger in my office to schedule a time to discuss the issue of Canada's protectionist wine taxation policies.

Sincerely,

Charles E. Schumer

United States Senator

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