Brexit: Independence Day

After a long period of tug-of-war, the time has indeed come: On 31 January 2020, Great Britain officially withdrew from the European Union.

Of course, as connoisseurs of Scotch Whisky, we are concerned with the important question: What does the Brexit mean for Whisky and its availability in Europe? And the people of Scotland should also find this question significant. According to the Scotch Whisky Association (SWA), Scotch Whisky is the most important export good for Great Britain and accounts for 20% of all food exports. In 2017, 39 bottles per second were shipped from the UK, which represents an export value of 4.37 billion pounds (about 5.16 billion euros).

Now, the first step is the transition phase in which the UK and the EU must agree on a free trade agreement. Do the parties want close cooperation in the future, like between Switzerland and the EU, or a loose free trade agreement as it exists between Canada and the EU? This transition phase will continue until 31 December 2020 - very ambitious! One year is a short time to negotiate such a complex trade agreement. One small change we noticed even before the new elections, on the back of the bottle of the 12-year-old Glenkinchie. It says 'Imported by DBBV Molenwerf 12 in 1014 BG Amsterdam' in the Netherlands. Was this information already a precursor of the Brexit? The background is as follows: According to the Food Information to Consumers (FIC), Whisky bottles must bear a responsible address within the EU. If Great Britain leaves the EU and the Scottish address of the Glenkinchie distillery appears on the bottle, this is naturally no longer guaranteed. Therefore, the address of the importer who first imported the goods from outside the EU is now stated on the bottle and the packaging. Our suppliers are therefore - quite frankly - forced to change the address details on the imported bottles.

In Scotland, the voices calling for a new independence referendum are getting louder and louder. There has already been a referendum in 2014, in which Scottish citizens voted on whether to leave the UK or not. It was not just a question of 'independence or not independence'; it was also a question of how the country would be run in independence. The uncertainty regarding that question probably kept many Scots from voting for independence. The same thing happened in the British colonies when the question was 'rebellion or not rebellion?' Many people were against a rebellion, because the idea of staying in the British Empire sounded quite comfortable.

At the moment, our situation with Whisky in the EU is also comfortable. Once the negotiations are over, it could get uncomfortable. In the future, we can expect tariffs to be levied, because otherwise even more countries might get the idea of leaving the EU. And that is something the EU obviously wants to prevent. The EU will probably insist on duties on Whisky, while the UK will impose duties on German cars. Unfortunately, the Brexit is therefore a hindrance for our Whisky business and is thus deadly serious for us. In this situation, black humour and the view of the situation from the outside helps. In certain points, the British are even to be envied: Without the EU behind them, they do not have to waste time on the mammoth task of sticking to the FIC and the General Data Protection Regulation (GDPR).

High tariffs of 10-12% on Whisky could, in turn, provoke internal disagreements in the UK - after all, Whisky represents an annual export value of more than five billion Euros for Scotland. This is probably one of the reasons why Scottish citizens are demanding a new referendum on independence. The central government in London of course rejects this.

Well-known US Whiskey brands show that customs duties can also be skilfully avoided. The Whiskeys of the big American brands are not bottled until they reach Europe and therefore there is only a harmless 50-70 cents surcharge. Since the 'brand' on the label is only added with the bottling, the expensive duty on the valuable name is omitted.

If, on the other hand, the Whiskeys are bottled in the USA and then exported to Europe, the purchase price sometimes increases by 20-25%.

With Scotch Whisky, this is hardly possible. Because in order to be called 'Single Malt Scotch Whisky', they have to be bottled in Scotland. But does bottling in Scotland also mean that the label must be attached to the bottle in Scotland? If the bottles are labelled in Europe, the 'value' is created there as well. This means that the higher prices are only reached there. For without the label, a Glenkinchie could basically be any lower quality Whisky. And after all, you cannot blame anyone for trying to pay as few duties and taxes as possible. The fact that the Glenkinchie 12 has had a Dutch address on it now has another advantage for the importer: in the Netherlands, licensing a brand is tax-free. So, if the Whisky is exported to Holland, where the brand is based, the costs are even lower.

Admittedly: All of these complexities have relatively little to do with Whisky, but they do have an impact on our Whisky. If a duty of up to 10% is introduced, the prices for Whisky will increase a bit. As long as the duty remains below 5%, this is relatively insignificant. After all, looking back to the USA, the EU retaliatory tariffs on American Whiskey were partly absorbed by the producers, as they could afford it financially.

Unfortunately, we do not have a crystal ball and cannot see the future. What will really happen, we can only speculate. There might be some turbulences in the near future, so it can never hurt to stock up your Whisky supply!