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Archive for the ‘General Rum Information’ Category
Sunday, March 3rd, 2013
Nearly one hundred years ago the US Congress initiated what has become to be commonly known as the Rum Cover Over tax. Without knowing anything about rum, the reader should understand that something is being covered over and the word tax should tell you that it involves money. If you drink rum in the US, it’s your money.
For the last 80 years or so, no one really talked much about this line in the congressional archives that gave money back to the US Virgin Islands according to the federal tax that was paid in the form of Federal Excise Tax on sugar cane spirits imports from that Caribbean territory.
Currently the Federal Excise Tax, or FET as it is known in the industry, on a 750ml bottle of alcoholic beverages at 80 proof, the standard bottle you’ll find on a liquor store or bar shelf is or 40% alcohol is $2.17. One liter and 1.75 liter bottles are taxed $2.89 and $5.06 respectively. Back in 1917, the US government agreed to give back to the US Virgin Island general fund, most of that tax, which was smaller in those days. Since the money came back to the USVI general fund, it could be used for whatever purpose the local governor thought best served his islands.
About 1957, Puerto Rico appealed to the fine folks in Washington for the same deal. And they confirmed what fine folks they are, by giving Puerto Rico the same benefits that their windward neighbors had been enjoying the previous 40 years. Bacardi was in the process of gearing up production in Puerto Rico and it wan’t long before the tax on that rum sold in the US brought considerable dollars back to the island. The Puerto Rican government recognized that by passing on some of the money that Bacardi and other distilleries on the island were generating to the distillers themselves in the form of marketing assistance that even more money would come south from Washington, D.C. And it did.
The rest of the tax money would go to the Puerto Rican general fund and go to build schools and buy lavish houses and yachts for those elected to disperse that money from the general coffers. In the Virgin Islands, the story is similar but names of the people and companies involved differ.
And then came Diageo. No. That isn’t exactly true. Diageo had been buying rum from Serralles since the late 20th century for their Captain Morgan brand rum after they acquired that brand from Allied Domencq. Historically, Diageo didn’t own their rum distilleries as Seagrams had in the last century. But as the Captain Morgan and other brands grew, Diageo began searching for a place to build a modern rum distillery. They were already buying rum from Venezuela – Pampero and Cacique, and Guatemala – Zacapa, but they wanted to build a distillery so they could more closely manage their production costs in a stable political environment. The decision of where to build was also influenced by the value of the concessions afforded them by the host country. Being a British company and since the British Virgin Islands are too small to accommodate a project of this size, Diageo went to the US Virgin Islands began the conversation about building on St Croix.
Rum production on St Croix dates back centuries, almost to the introduction of sugar cane to the Caribbean by Christopher Columbus to what he called the West Indies in 1493. Well, Chris, didn’t actually carry the sugar cane with his own hands, he was too busy for that, but he was the guy that got the Queen of Spain to finance his trip after successfully returning from a shakedown cruise the previous year. Sugar cane, was one of the plants he brought which he claimed he would use to start a new Spanish colony in the New World. Closer to the truth was that starting a Spanish colony would give the conquistadors a base from which to explore, or more accurately exploit, the riches of the New World.
By the 18th century, St Croix was a patchwork of sugar cane fields. Even today you can see the remains of sugar mills and distilleries from almost anywhere on the largest of the US Virgin Islands. Lacking a protected port like Charlotte Amalie on St Thomas, St Croix didn’t develop as the trading center but rather the agricultural center of the Virgin Islands.
In the last century only two distilleries remained until hurricane Hugo destroyed the Brugal distillery in 1989. Since that time the Cruzan distillery has grown through a number of acquisitions and takeovers as international companies recognized the quality of the rum produced and aged on St Croix. Everything changed a few years ago when the US Virgin Islands governor made a deal with Diageo to build a distillery not too far from Cruzan. But there was going to be a big difference, Diageo would get back half of the rum cover over tax money that it generated. Governments giving industries incentives to invest in their region is nothing new, but in this deal, Diageo would get back more than their cost of production for any sugar cane spirit sold in the US and thence taxed by Uncle Sam, their new favorite uncle.
And there was more, St Croix would help finance the construction of the distillery through bonds guaranteed by the money that would be generated by the new distillery. A match made in political heaven. Not many businesses get back more than their cost of production even before they get paid for their product.
Five hundred years after the Spanish sailed by what are now the Virgin Islands because they didn’t see the golden treasure they were looking for, it seems Diageo has found more than gold.
As you might expect, Puerto Rican rum producers cried foul because by their laws only a small percentage, less than 20% of the rum cover tax received by the Puerto Rican island government could go to the rum producers themselves. Another percentage would go to Rums of Puerto Rico, that promotes all of the rums from that island.
The owners of the Cruzan distillery also felt a bit slighted but were able to negotiate some low cost loans to they could modernize their facility and compete a bit more fairly with their new neighbor. Unlike Diageo, Cruzan depends on aging their rum, a process that ties up a lot of money and resources. But like Diageo, Serralles and Bacardi, Cruzan also sells a fair bit of fresh bulk rum to blenders and bottlers that use it for a myriad of products some of which don’t even have the word rum on the label.
But don’t think for a minute that this is just a local controversy between a couple of neighboring islands over an estimated $30 billion over the next 25 or so years. Almost every rum producer in the Caribbean has cried foul claiming Diageo and other US Caribbean rum producers are enjoying unfair advantages in what is supposed to be free and level market.
Most of the those people have forgotten the $5 million euros the EU spent a few years ago to promote Caribbean rum. But even if Diageo had orchestrated that promotion and paid the entire bill itself, it would have paled in comparison to this deal. There have been rumblings of misconduct by Congressmen, but that’s mostly died down as business as usual as there were more important issues during the last US presidential election. And there has been talk about a suit against the US in the World court. Who will finance such a court battle is yet to be seen. Every rum producer and rum producing country has their own interest and though unity is probably the only way such a challenge could succeed, the reality just isn’t that simple.
The Dominican Republic rum producers claim to be harmed by the Diageo rum cover over tax deal. The reality is that only rum sold for consumption in the US is subject to the rebates. And much of the rum produced on the Dominican Republic, less than 100 miles downwind from Puerto Rico, is distilled on Trinidad or Panama and then blended and bottled in a free trade zone on the south coast of the DR. The next time you pick up a bottle of rum, look for the country of origin of the rum, not just the country where the rum was produced.
The Dominican Republic government receives a lot of aid from Uncle Sam and many influential Americans including the Clintons vacation on the south coast of the DR. Although the blended and bottled rum market is important to the DR for employment, there are little to no alcohol tax paid in that country since the bottling industry operates in a free trade zone and most of those products are not sold on that island.
Historically, the West Indian Rum and Spirits Producers have failed to cooperate as a group to do much of anything. In 2000, they agreed not to adopt any best practices for their industry, so it seems unlikely that they will be capable of uniting on something even this important to them. In the bigger picture, this as an opportunity to differentiate between the rum that is being distilled and bottled by Diageo and that which has decades, if not centuries, of tradition. Certainly the Caribbean rum producers on Barbados, Trinidad, Panama, Jamaica, Antigua, St Lucia and others are justified in feeling that they are at a disadvantage, but they have so much more to sell in terms of authenticity and heritage if they wanted to be more transparent. It should be noted that the tax advantage is greatest for a company that is selling the cheapest, freshest rum. The price of an older, more expensive rum isn’t affected by the cover over tax nearly as much as a young, cheap rum. And as the rum market expands, imbibers are looking for better products with less regard to what even Diageo admits is a high fructose corn, flavored, sugar cane spirit.
There is a lot of uncertainty in the future of this controversy. (Don’t get me started on the corn subsidies that are destroying the health of livestock and the American population. Please). But there is one indisputable fact that is as clear as the words on this page. When everything thing is said and done, there will have been a lot more said than done.
Tags: Caribbean Rum Subsidies, Cover Over Tax
Posted in Caribbean Islands, Commentary, General Rum Information, Uncategorized | Comments Off
Monday, August 15th, 2011
There are a few things we have as Americans that only a few other citizens of the world can claim as their own. I’m not writing about redundant, dysfunctional government officials, or over-taxed citizens but that not-so-famous, not-yet-holiday known as National Rum Day. This year, the speculation continues to swirl on the blogosphere about the origins of this iconic day in our lives so I’ll throw my two cents in the ring and state for the record that National Rum Day was started as a marketing campaign for a Caribbean Rum by a talented, not-quite-on-Madison Avenue PR company.
Over the weekend I have been sent numerous links to articles about National Rum Day by writers and publicists. The last of these National Rum Day articles made it painfully clear that I needed to get to work.
Before you read any further, take a moment and try to name ten different rums and the countries from which they come. Got it? Now read on.
In no particular order, here’s a short list of rums to look for in anticipation of National Rum Day. I’m writing about these rums because by the time National Rum Day comes around next year, you may not be able to find them and you certainly don’t want to miss out on these rums.
Bacardi is the best known, and best selling, rum in the world. Originally from Cuba, today’s Bacardi rums have evolved since the family fled that four-letter island and are produced around the world. Change can be good, but like their Añejo, that used to be one of my favorites when it was produced in Puerto Rico, not all changes are necessarily regarded as better by the wider audience. Another Bacardi product is going to change so here’s some news you can use. Bacardi 8, sometimes erroneously called Bacardi 8-year-old, is going to change, if not go away entirely. The distillery where this rum was made was shut down a couple of years ago, but there’s still some Bacardi 8 to be found. When you find a bottle, look on the back label for the words, ‘Product of the Bahamas.’ That’s the one you are looking for. Good enough to sip, cheap enough to mix, Bacardi 8 will have your friends asking where you found that rum.
Variety is the spice of life and there are no more diverse spirits than those made from sugar cane. Flor de Caña has been making a variety of rums for more than a hundred years. From the crisp, tropical fruit and coconut notes found in their clear 4-year-old white rum to the dry, roasted nut and smoky oak finish of their 19-year-old rum, there is something for every taste in their offerings. But nothing lasts forever and Flor de Caña 5-year-old is going to be hard to find in some markets, particularly in North America. But don’t despair if you can’t find any Flor de Caña 5-year-old, reach for the 7-year-old and you’ll be glad you did.
Another suggestion for National Rum Day, and this one isn’t going away, is Santa Teresa Claro, the rum of the month for August, 2011. About as close as you will come to the old Havana Club three-year-old rum for which Havana Club is famous, Claro has a slight tint since it isn’t fully carbon-filtered as aging at least two years. Venezuela has one of the longest minimum ages for bottled rum in the industry. Can you name two other islands with minimum ages for bottled rum? There are a lot of recipes for daiquiris and Claro and Flor de Caña 4-year-old white bring unique qualities to this drink.
Another rum that’s going to go away, though it was hardly known by even many of those who sold it, comes, or came, from Barbados. Mount Gay Sugar Cane Rum, also bottled as Mount Gay Sugar Cane Brandy on Barbados was arguably, the best rum from Mount Gay. Mount Gay Extra Old Barbados Rum has been one of my favorites since I first tasted it in 1994, but their Sugar Cane Rum was only a couple of bucks more than their least expensive Refined Eclipse. In August of each year, Crop Over on Barbados is the annual celebration of the bounty of the island. Since this is the closest of the island celebrations to National Rum Day, it could have been, just might have been, someone working on the Mount Gay account that first coined this National Day, but like the secrets in every bottle of rum, some secrets are best when they remain secrets.
Other secrets should be shared, like how to best enjoy these and other rums. It is almost impossible to miss if you mix one of these fruit juices with rum and a bit of lime. Depending on your taste I suggest guava, pineapple, coconut water or those old standbys orange or grapefruit juice. If you buy your juice, make sure you are buying juice and not fruit drink. Look for 100% fruit juice in the label ingredients and not high-fructose corn syrup mixed with some fruit flavoring. Ginger Beer or high quality Ginger Ale is also one of my go to mixers that is sure to please.
If you’re more talented, or think you are, take a look at the recipes on this site and you’ll certainly get some inspiration. Experiment a little and you’ll be rewarded for your efforts. Substitutions are acceptable, but remember that the person that makes those great drinks for you at the best bars in the country has spent months, if not years, perfecting the drink they are serving you. Practice makes perfect.
What will I be drinking on National Rum Day? It’s a good bet that I’ll start with a ti punch and then move on to something with fruit juice in it and then I’ll probably end the night with something that has spent a decade or more in an oak barrel silently maturing in the tropics either with a couple of chips of ice or mixed in an old fashioned.
Posted in Caribbean Islands, Commentary, General Rum Information | 1 Comment »
Monday, November 16th, 2009
After reading about a white rum that was supposed to be aged 10 years it struck me that white rums aren’t white at all. No one I know would want to go near a white opaque rum. Clear rum should be called what it is, clear or transparent rum. Some, like Cruzan’s Light Rum is called light because it has a chardonnay hue. It also has a light character from the way it is made.
In Barbados E.S.A.Fields clear rum is called see-through. And if you can’t see through it, either you’ve been drinking too much rum. Or there is something else in the bottle.
All alcohol should be crystal clear when it comes out of the still. If it’s opaque, it’s a sure sign that there are fusel oils in the bottle and you shouldn’t be drinking it. When a friend in Grenada distills her rum, called hogo, she looks for the tell-tale grey hue on top of the jug and changes in viscosity to tell her when she’s not getting pure rum and is getting some fusel oils in her rum. At that point, it’s time to go home.
Most, but not all, of the clear rums we drink have been aged before being carbon-filtered to remove the color gained from the oak barrels while the rum was aging. Not all I say because some clear rums are bottled straight from the still, but even some of those are filtered prior to bottling to remove some of the sharp flavors that detract from what the distiller wants to put in the bottle. How can you tell whether the clear rum you’re drinking has been aged or not isn’t always simple though here are some indicators.
If the rum is clear and has an age statement on the label, it has been aged and then carbon-filtered. If the rum is imported from Puerto Rico, Venezuela or a few other countries, it has been aged and then filtered prior to bottling. If the rum is from the French islands, it hasn’t been carbon-filtered. They don’t carbon-filter any of their rum, though maybe they should think about it.
The color of one’s spirit is entirely a matter of personal preference and prejudice. Barbados is one of the few Caribbean islands where a significant percentage of the rum consumed by the local population isn’t clear. In the US and Europe many rum drinkers equate clear rum with a cheap quality spirit, but let me tell you that you owe it to yourself to try some of the aged clear rums that are being imported. You might even find your new favorite rum isn’t as dark in color as you thought it was.
The most common age for these clear spirits is one to two years, though some like Santa Teresa Claro and Cruzan’s Light Rum aren’t completely clear and retain a bit of color. The oldest aged clear rum that I’m aware of is Flor de Caña’s 4-year-old rum. I’ve read recently about some clear rums being aged up to 6 and as much as 10 years but the numbers just don’t add up.
When a distiller ages rum in a barrel in the tropics, he looses from 5-12% of the contents of that barrel each year. As Gary Nelthropp, master distiller at Cruzan Rum told me last week, after 12 years he’s got about 5 gallons left in a 45 gallon barrel. If you’re aging your rum more than 4 years, you can’t afford to sell it for less than your more expensive rums. And, in order to remove all of the color from that rum, you’ve had to carbon-filter it several times and that costs money as well as flavor. Contrary to what more than a few distiller has told me, carbon-filtering removes more than the color from the rum.
So what’s the point in aging a rum, say 5 years, and then carbon-filtering everything out of it. I’ve yet to taste a clear rum that has the smoky oak, vanilla and roasted nut flavors found in an old aged spirit, when I do I’ll change my mind. I’m looking forward to it. I haven’t tasted every clear rum in the world, but I’m looking forward to continuing the research.
Here are what the Ministry of Rum Forum members have to say about White, or Clear Rums.
Posted in General Rum Information | 1 Comment »
Monday, March 26th, 2007
As the author of the Ministry of Rum website and several books on my favorite spirit, I’ve been researching the rums of the Caribbean for more than 15 years. After working around the world building yachts, sailing and working on Southeastern Asian oil rigs, I set sail for the Caribbean from Florida in the mid 80s without a firm itinerary but like thousands of others before me I set sail with an eye to adventure and discovery.
It was a full moon party in the small island of Culebra in 1993 when my destiny was cast. As I raised my glass of rum to the full moon rising on the horizon to the east I was blinded by the moon’s light reflected by the prism in the bottom of my glass. As I lowered the glass from my lips I realized that although I loved the rum I was drinking I knew little about how it was made or what made the myriad of rums that I had been enjoying so enjoyable.
A few days later I set sail to head south through the islands toward Trinidad where I would spend the approaching hurricane season. Over the course of the next two years I compiled the text of Rums of the Eastern Caribbean. That was followed two years later by another edition of that book and a contract with a Chicago publisher for The Complete Guide to Rum which was later translated to German.
It was about that time that the internet became more than science fiction for most people who didn’t live on boats. The Ministry of Rum was first published on the internet in 1995 as a simple list of islands and their rums. The next website generation was designed by a friend who added a database so visitors could search for their favorites.
In 2005, I began the daunting task of learning PHP and mysql to build the website that has become the most credible source of information about sugar cane spirits on the internet.
Today I’m working hard as a sugar cane spirits importer and consultant to the industry I love. In addition to several sugar cane spirits festivals held around the country, I also work with a number of importers training their brand ambassadors on the intricacies of sugar cane production and the process of taking this tall grass and making it into the bottled spirits we enjoy.
If you have more questions, feel free to send me an email using the link at the bottom of this page.
All the best,
Edward Hamilton
Posted in General Rum Information | 1 Comment »
Sunday, January 28th, 2007
Wednesday, Feb 7th, I’ll be sharing my insights into what it takes to make good rum. Among the topics covered will be the basics of rum production from growing the sugar cane through fermentation, distillation, aging and bottling what have become some of the best spirits in the world.
Join me at The Forbidden Island for an evening of rum appreciation.
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Sunday, November 26th, 2006
We all have our favorite spirits, but when’s the last time you tasted your favorite spirit? Not in a cocktail, but unadulterated, neat at room temperature. Even if you don’t normally drink spirits neat you might be surprised how the taste of spirits change. On the other hand, if you can’t stand to drink your favorite libation neat, maybe you should widen your horizons.
I’ve been a fan of Cruzan rums ever since I first discovered these molasses-based rums in St Thomas a couple of decades ago. The first thing I noticed was that even their cheapest rum was significantly better than those from the 800 pound gorilla distiller a hundred miles to the west. Then towards the end of the last decade Cruzan launched their Single Barrel Rum which was a little too dry for my tastes. Up until that time, Cruzan Estate Diamond Rum was on my short list of favorites, but the Single Barrel Rum lacked some of the body of this new addition to the St Croix distiller’s lineup. About the same time, Cruzan was blending some of the best flavored rums in the Caribbean.
Over the last five or six years, I tried Cruzan’s Single Barrel Rum at various tastings and events and noticed that the blend had changed and had gained some of the body that had been lacking in the original blend. In August of this year, I tasted the Single Barrel again and following the taste of Ron Zacapa Centenario, Cruzan’s flagship rum had become sweeter and actually mimicked the award winning rum from Guatemala.
I’m not suggesting that change isn’t good, but don’t think that distillers aren’t working to make their products more attractive to consumers. In the 1980s Mount Gay Refined Eclipse had lost much of what had made that rum so popular. Fortunately, that blend has improved and is now much better (it lacks the raw, sharp bite typically found in young rums).
Considering rum is aged in used barrels and the raw material source also varies, it’s not surprising that my favorite distilled spirit changes. Distillers typically blend many barrels in an attempt to maintain consistency, but changes are part of any industry. And like many other products, distillers have been known to bottle different blends for sale in different market areas. But every distiller bottles its best rums at the distillery for the local market.
Posted in General Rum Information | 1 Comment »
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Rum Cover Over Tax
Sunday, March 3rd, 2013Nearly one hundred years ago the US Congress initiated what has become to be commonly known as the Rum Cover Over tax. Without knowing anything about rum, the reader should understand that something is being covered over and the word tax should tell you that it involves money. If you drink rum in the US, it’s your money.
For the last 80 years or so, no one really talked much about this line in the congressional archives that gave money back to the US Virgin Islands according to the federal tax that was paid in the form of Federal Excise Tax on sugar cane spirits imports from that Caribbean territory.
Currently the Federal Excise Tax, or FET as it is known in the industry, on a 750ml bottle of alcoholic beverages at 80 proof, the standard bottle you’ll find on a liquor store or bar shelf is or 40% alcohol is $2.17. One liter and 1.75 liter bottles are taxed $2.89 and $5.06 respectively. Back in 1917, the US government agreed to give back to the US Virgin Island general fund, most of that tax, which was smaller in those days. Since the money came back to the USVI general fund, it could be used for whatever purpose the local governor thought best served his islands.
About 1957, Puerto Rico appealed to the fine folks in Washington for the same deal. And they confirmed what fine folks they are, by giving Puerto Rico the same benefits that their windward neighbors had been enjoying the previous 40 years. Bacardi was in the process of gearing up production in Puerto Rico and it wan’t long before the tax on that rum sold in the US brought considerable dollars back to the island. The Puerto Rican government recognized that by passing on some of the money that Bacardi and other distilleries on the island were generating to the distillers themselves in the form of marketing assistance that even more money would come south from Washington, D.C. And it did.
The rest of the tax money would go to the Puerto Rican general fund and go to build schools and buy lavish houses and yachts for those elected to disperse that money from the general coffers. In the Virgin Islands, the story is similar but names of the people and companies involved differ.
And then came Diageo. No. That isn’t exactly true. Diageo had been buying rum from Serralles since the late 20th century for their Captain Morgan brand rum after they acquired that brand from Allied Domencq. Historically, Diageo didn’t own their rum distilleries as Seagrams had in the last century. But as the Captain Morgan and other brands grew, Diageo began searching for a place to build a modern rum distillery. They were already buying rum from Venezuela – Pampero and Cacique, and Guatemala – Zacapa, but they wanted to build a distillery so they could more closely manage their production costs in a stable political environment. The decision of where to build was also influenced by the value of the concessions afforded them by the host country. Being a British company and since the British Virgin Islands are too small to accommodate a project of this size, Diageo went to the US Virgin Islands began the conversation about building on St Croix.
Rum production on St Croix dates back centuries, almost to the introduction of sugar cane to the Caribbean by Christopher Columbus to what he called the West Indies in 1493. Well, Chris, didn’t actually carry the sugar cane with his own hands, he was too busy for that, but he was the guy that got the Queen of Spain to finance his trip after successfully returning from a shakedown cruise the previous year. Sugar cane, was one of the plants he brought which he claimed he would use to start a new Spanish colony in the New World. Closer to the truth was that starting a Spanish colony would give the conquistadors a base from which to explore, or more accurately exploit, the riches of the New World.
By the 18th century, St Croix was a patchwork of sugar cane fields. Even today you can see the remains of sugar mills and distilleries from almost anywhere on the largest of the US Virgin Islands. Lacking a protected port like Charlotte Amalie on St Thomas, St Croix didn’t develop as the trading center but rather the agricultural center of the Virgin Islands.
In the last century only two distilleries remained until hurricane Hugo destroyed the Brugal distillery in 1989. Since that time the Cruzan distillery has grown through a number of acquisitions and takeovers as international companies recognized the quality of the rum produced and aged on St Croix. Everything changed a few years ago when the US Virgin Islands governor made a deal with Diageo to build a distillery not too far from Cruzan. But there was going to be a big difference, Diageo would get back half of the rum cover over tax money that it generated. Governments giving industries incentives to invest in their region is nothing new, but in this deal, Diageo would get back more than their cost of production for any sugar cane spirit sold in the US and thence taxed by Uncle Sam, their new favorite uncle.
And there was more, St Croix would help finance the construction of the distillery through bonds guaranteed by the money that would be generated by the new distillery. A match made in political heaven. Not many businesses get back more than their cost of production even before they get paid for their product.
Five hundred years after the Spanish sailed by what are now the Virgin Islands because they didn’t see the golden treasure they were looking for, it seems Diageo has found more than gold.
As you might expect, Puerto Rican rum producers cried foul because by their laws only a small percentage, less than 20% of the rum cover tax received by the Puerto Rican island government could go to the rum producers themselves. Another percentage would go to Rums of Puerto Rico, that promotes all of the rums from that island.
The owners of the Cruzan distillery also felt a bit slighted but were able to negotiate some low cost loans to they could modernize their facility and compete a bit more fairly with their new neighbor. Unlike Diageo, Cruzan depends on aging their rum, a process that ties up a lot of money and resources. But like Diageo, Serralles and Bacardi, Cruzan also sells a fair bit of fresh bulk rum to blenders and bottlers that use it for a myriad of products some of which don’t even have the word rum on the label.
But don’t think for a minute that this is just a local controversy between a couple of neighboring islands over an estimated $30 billion over the next 25 or so years. Almost every rum producer in the Caribbean has cried foul claiming Diageo and other US Caribbean rum producers are enjoying unfair advantages in what is supposed to be free and level market.
Most of the those people have forgotten the $5 million euros the EU spent a few years ago to promote Caribbean rum. But even if Diageo had orchestrated that promotion and paid the entire bill itself, it would have paled in comparison to this deal. There have been rumblings of misconduct by Congressmen, but that’s mostly died down as business as usual as there were more important issues during the last US presidential election. And there has been talk about a suit against the US in the World court. Who will finance such a court battle is yet to be seen. Every rum producer and rum producing country has their own interest and though unity is probably the only way such a challenge could succeed, the reality just isn’t that simple.
The Dominican Republic rum producers claim to be harmed by the Diageo rum cover over tax deal. The reality is that only rum sold for consumption in the US is subject to the rebates. And much of the rum produced on the Dominican Republic, less than 100 miles downwind from Puerto Rico, is distilled on Trinidad or Panama and then blended and bottled in a free trade zone on the south coast of the DR. The next time you pick up a bottle of rum, look for the country of origin of the rum, not just the country where the rum was produced.
The Dominican Republic government receives a lot of aid from Uncle Sam and many influential Americans including the Clintons vacation on the south coast of the DR. Although the blended and bottled rum market is important to the DR for employment, there are little to no alcohol tax paid in that country since the bottling industry operates in a free trade zone and most of those products are not sold on that island.
Historically, the West Indian Rum and Spirits Producers have failed to cooperate as a group to do much of anything. In 2000, they agreed not to adopt any best practices for their industry, so it seems unlikely that they will be capable of uniting on something even this important to them. In the bigger picture, this as an opportunity to differentiate between the rum that is being distilled and bottled by Diageo and that which has decades, if not centuries, of tradition. Certainly the Caribbean rum producers on Barbados, Trinidad, Panama, Jamaica, Antigua, St Lucia and others are justified in feeling that they are at a disadvantage, but they have so much more to sell in terms of authenticity and heritage if they wanted to be more transparent. It should be noted that the tax advantage is greatest for a company that is selling the cheapest, freshest rum. The price of an older, more expensive rum isn’t affected by the cover over tax nearly as much as a young, cheap rum. And as the rum market expands, imbibers are looking for better products with less regard to what even Diageo admits is a high fructose corn, flavored, sugar cane spirit.
There is a lot of uncertainty in the future of this controversy. (Don’t get me started on the corn subsidies that are destroying the health of livestock and the American population. Please). But there is one indisputable fact that is as clear as the words on this page. When everything thing is said and done, there will have been a lot more said than done.
Tags: Caribbean Rum Subsidies, Cover Over Tax
Posted in Caribbean Islands, Commentary, General Rum Information, Uncategorized | Comments Off