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US/S KOREA: Whiskey distillers count down to free trade deal

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US whiskey producers should begin to benefit from their country's free trade agreement with South Korea within a month. 

The two countries announced yesterday (21 February) that the deal will take effect on 15 March. From that date, South Korea will cut its 20% import tariff on Bourbon and Tennessee whiskey, according to the US Distilled Spirits Council (DISCUS). Brown-Forman's Jack Daniel's is produced in Tennessee.

Over the next five years, South Korea will also cut tariffs on other spirits imported from the US, as well as grape brandy and wine. However, whiskey and Bourbon account for three quarters of US spirits exports to South Korea, by value.

"The Korea free trade agreement represents an extraordinary growth opportunity for US spirits exporters," said the outgoing CEO of DISCUS, Peter Cressy.  "Korea is the sixth largest whiskey-drinking country in the world, and the agreement will significantly level the playing field for US producers," he said.

DISCUS plans to up its promotion efforts in the country from next month and the trade deal will help it compete more effectively with European spirits. As of July last year, South Korea began phasing out tariffs on spirits such as Scotch whisky and Cognac following a free trade agreement with the European Union.    

As part of that deal, South Korea agreed to recognise the names of certain spirits, such as Scotch, as a protected designation of origin. Similar protection will now be extended to both Bourbon and Tennessee whiskey, under the US deal.

Despite South Korea's position as the world's tenth largest spirits market, with a retail value of US$3.89bn in 2011, sales of US spirits remain relatively low, according to DISCUS. Sales totalled US$8m in 2011, which still represents growth of 156% over the last decade but is a long way behind the top export markets for US spirits. For example, sales of US spirits in the UK have doubled in the past ten years, to $138.2m in 2011. 


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