California wineries face higher costs due to tariffs on China's glass bottles

SAN FRANCISCO - The US-China tariffs dispute has impacted other parts of California's wine industry -- glass bottles, as the wineries are sourcing glass from new manufacturers to control costs.

"The glass from China has jumped up in price due to tariffs. Our production team is right now sourcing glass from other countries," said Michael Parr, vice-president of Wente Family Estates in Livermore, Northern California, over the weekend.

"We are going to walk away from glass manufacturers in China and looking now to other countries or in the Unites States," said Parr, who manages the international business for the oldest family-owned winery in California.

He said the other wineries also are doing the same thing: canceling glass orders from China and trying to find other glass producers locally or from Mexico.

In an escalation of the trade tensions, Washington on May 10 increased additional tariffs on $200 billion worth of Chinese imports from 10 percent to 25 percent, and has threatened to raise tariffs on more Chinese imports. In response, China raised additional tariffs on a range of US imports on June 1.

Most California wineries use bottles made in China, which are subject to tariffs from the United States and end up raising production costs, Stuart Spencer, executive director of Lodi Winegrape Commission, told Capital Public Radio in a recent report.

"The environmental regulations and cost of producing glass in California has shifted in production to China over the last 20 years," he told the media outlet. "And so, I think all wineries, regardless of size, are being affected by this as the cost of the glass continues to rise."

He said it's likely those costs are absorbed by the wineries, which cuts into profits.

Wente Vineyards is expected to release new wines in August or September. "If we want to get our wines onto the shelf, we need glass bottles to put them in," said Parr.

"I was told that the price will go up 18 percent per glass bottle from China. So that's high enough to warrant our reasoning for sourcing out new glass manufacturers," he said.

On the other hand, California's wine industry has lost revenues in the Chinese market because of the retaliatory tariffs from China. The US wines now face a total of 93 percent of tax and tariff rate in the market.

The industry saw a nearly 25 percent decline in exports to China by value last year, which was the largest contributor to the softness of Asian market, compared to the healthy growth rates of the prior two years, according to a recent report by the Wine Institute of California.

The organization has been urging the US administration to resolve the tariff dispute with China as soon as possible so that the wineries do not suffer a long-term market loss.