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Cablegate: Macau Follows Hong Kong Lead and Eliminates Wine and Beer

VZCZCXRO6138
RR RUEHCN RUEHGH
DE RUEHHK #1553 2350036
ZNR UUUUU ZZH
R 220036Z AUG 08
FM AMCONSUL HONG KONG
TO RUEHRC/USDA FAS WASHDC 1417
RUEHC/SECSTATE WASHDC 5605
INFO RUEHBJ/AMEMBASSY BEIJING 2483
RUEHCN/AMCONSUL CHENGDU 1345
RUEHSH/AMCONSUL SHENYANG 3788
RUEHGH/AMCONSUL SHANGHAI
RUEHGZ/AMCONSUL GUANGZHOU 1335
RUEHIN/AIT TAIPEI 0001

UNCLAS HONG KONG 001553

TOFAS 12
SIPDIS

FAS/OA YOST, MILLER
FAS/OCRA/ABRANSON
FAS/OFSO/AO/NORTH ASIA/BREHM
FAS/OTP
BEIJING FOR AG MINISTER-COUNSELOR
CHENGDU FOR AG ATTACHE
SHENYENG FOR ATO DIRECTOR
SHANGHAI FOR ATO DIRECTOR
GUANGZHOU FOR ATO DIRECTOR
TAIPEI FOR AG CHIEF

E.O. 12958: N/A
TAGS: ETRD EAGR HK CH

SUBJECT: MACAU FOLLOWS HONG KONG LEAD AND ELIMINATES WINE AND BEER
TAX; DUTY ON SPIRITS REMAINS

1. (U) SUMMARY: On Monday August 25, Macau will terminate its 15
percent CIF duty and join Hong Kong as members of the extremely
limited club of tax-free importers of wine and beer. Macau's move
will greatly simplify the transshipments of wine and beer between
the two vibrant Special Administrative Regions. For beverages
exceeding 30 percent alcohol, Macau's "Consumption Tax" of 10
percent CIF value plus 20 Macau Pecatas (about US$2.58) per liter,
will remain in force. U.S. exports of wine and beer to Hong Kong
and Macau have exploded in the wake of Hong Kong's tax elimination
and the booming casino industry in Macau. U.S. wine and beer
exports to Hong Kong exceeded $8 million in the first half of 2008,
132 percent above 2007 levels. For Macau, January - June exports
approached US$3 million, an astonishing 1,576 percent increase.
Post projects both Hong Kong and Macau wine imports will continue to
soar through at least 2009. END SUMMARY

2. (U) Pressured by the relentless stream of glowing international
publicity Hong Kong has enjoyed since it eliminated its excise taxes
on wine and beer in February 2008, Macau authorities are following
suit. As of Monday August 25, Macau will terminate its 15 percent
CIF duty and join Hong Kong as members of the extremely limited club
of tax-free importers of wine and beer. Macau's move will greatly
simplify the transshipments of wine and beer between the two vibrant
Special Administrative Regions. While both Hong Kong and Macau are
part of China, each is a separate customs territory distinct from
Mainland China. Traders are rejoicing nearly as much in the
elimination of the paperwork requirements as they are in the
elimination of the excise tax.

3. (U) However, like Hong Kong, Macau is leaving in place its import
tariff on spirits. For beverages exceeding 30 percent alcohol,
Macau's "Consumption Tax" of 10 percent CIF value plus 20 Macau
Pecatas (about US$2.58) per liter, will remain in force. By
contrast, Hong Kong assesses an excise tax on spirits of 100
percent. (Note: Traditionally called a "sin tax" as it is most
commonly imposed on alcohol and tobacco, an excise tax is a levy on
the value of a domestic or imported good at the factory door.
Import tariffs apply only to imported items, and typically are
charged on the value of the product plus the cost of
transportation.)

4. (U) U.S. exports of wine and beer to Hong Kong and Macau have
exploded in the wake of Hong Kong's tax elimination and the booming
casino industry in Macau. According to U.S. Customs statistics,
U.S. wine and beer exports to Hong Kong of over US$8 million in the
first half of 2008 are running 132 percent above 2007 levels. For
Macau, January - June exports approached US$3 million, an
astonishing 1,576 percent increase. At least some of the increase
is likely due to the tens of millions of Chinese tourists who visit
Hong Kong and Macau, and can legally carry two bottles back to the
Mainland where import and value added tariffs on all alcoholic
beverages remain high.

5. (U) Despite this impressive growth, the U.S. is the fourth
largest wine supplier to Macau, with just 3 percent of the market.
France dominates the market with a 78 percent share, followed by
Portugal with 9 percent, and Australia with 5 percent.

6. (U) Post projects both Hong Kong and Macau wine imports will
continue to soar through at least 2009. For U.S. wine and craft
beers especially, the elimination of the tax, booming tourism, the
weak dollar, and a sophisticated population with relatively high
disposable income create an historic opportunity for growth. Post
encourages interested U.S. exporters to contact the Agricultural
Trade Office at post for detailed information and advice on selling
product to these markets.

DONOVAN

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