Despite American president’s threat to remove Hong Kong’s special trade privileges, the city’s American wine importers and promoters remain undeterred by the news, counting on the city’s 2008 wine tax policy to insulate itself from the ongoing US-China tensions.
On May 29, American president Donald Trump announced that the US would revoke special trade privileges for the territory, after his administration concluded Hong Kong is “no longer autonomous from China” following Beijing’s decision to introduce a new national security law.
The formal announcement from Trump would essentially spell an end to the 1992 US-Hong Kong Policy Act, which guaranteed that the US would treat Hong Kong differently from the mainland in terms of trade and economic matters so long as it considers the “One Country, Two Systems” intact.
Although the revocation of Hong Kong’s preferential trade status still lacks clear details except references on customs and visa application, it nonetheless creates uncertainties to the city’s business.
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For Hong Kong’s sprawling wine community, it raises fears for the city’s US$62.8 million American wine exports when China and the US have been mired in prolonged trade war for over two years. Previously Hong Kong has been excluded from rounds of punitive tariffs China slapped on the US, thanks to the 1992 act.
At the moment, China slaps closes to 100% taxes on American wines due to the two countries’ prolonged trade war, which is twice of the normal 46% taxes on imported wines.
However, based on key industry leaders interviewed for the article, the city’s wine trade remains hopeful that American wines destined to Hong Kong will manage to dodge a bullet, thanks to the city’s zero wine tax policy.
In 2008 Hong Kong government adopted a landmark policy to remove all taxes on wine, jump-starting a wine boom in the city, which eventually made it the wine capital of Asia.
Speaking of the possible impacts on wine, Fifi Kirstein, managing partner of Golden Gate Wine, an American wine specialist that has been importing American wines since 2004, remains sanguine about American wine’s prospects in the city.
“At this stage this is unclear, but I doubt it,” she said when asked by Vino Joy News if the 100% tax will apply to Hong Kong, “There is no tax paid to exported wines to Hong Kong from the US. When importing wine to Hong Kong, the wine is subject to 0% tax – so unless Hong Kong changes the import regulations – US wine will not be subject to the same tax as China.”
Debra Meiburg MW, a native Californian and longtime Hong Kong resident, agrees and dismisses the fear, citing the 2008 wine tax elimination policy.
“The revocation of trade privileges with Hong Kong will not directly impact the United States’ wine industry in Hong Kong. We have no tariffs on any wines entering the market,” she explained, who also represents Napa Valley Vintners in Asia, a nonprofit trade association of 550 Napa members.
“This is a policy put in place by the Hong Kong Government, not a special bi-lateral (i.e. revocable) agreement with USA. All wine duty was abolished, no matter what the origin,” she stressed.
However, the Master of Wine cautioned the sanctions on trade would affect government funding on promotion of American wines in Hong Kong. “We could see reduced USA government support of wine trade delegations or a reduction of “matching funds” set aside to assist less-known USA regions to build their market presence in Hong Kong. Thus far though, the largely self-funded organisations like Napa Valley Vintners remain committed to the market for the foreseeable future,” she analyzes.
Additionally, the more severe impacts from US’ removal of Hong Kong’s trade privileges will be on the financial sector, which could have a knock-on effect on wine collecting enthusiasm. “Should the wider sanctions greatly impact Hong Kong generally — especially the financial sector, then we might see less eagerness to build local wine collections,” she warns.
The US currently ranks as Hong Kong’s fourth biggest wine supplier behind France, Australia and the UK. Last year, Hong Kong imported a total of US$62.8 million worth of American wines, a year-on-year growth of 28.5%, according to data released by the Hong Kong government.
Compared with mainland market, where American wine exports were effectively clipped by the punitive tariffs, American wines also enjoy higher popularity here in Hong Kong where its market share stands at 7.1% as opposed to China’s less than 2%.
We also reached out to the government-funded California Wine Institute, the trade organisation representing the biggest wine producing state in the US, as well as US’ leading wine producer Jackson Family Estates which owns over 40 different wine brands. Both declined to comment.