Tequila lovers' favorite beverage may be under attack. Or at least it may have trouble getting to the US from Mexico.
The US liquor industry is crying foul over a proposed Mexican government regulation that would require all tequila sold in the US to be bottled in Mexico.
Boosted by the popularity of tequila shots and margaritas, tequila has been the fastest growing liquor in America in recent years, with sales nearly doubling over the past decade.
Of the tequila consumed in the US, 83 percent is shipped in bulk from Mexico and then bottled in US plants.
Under the proposed Mexican regulation, all bulk shipments would be banned and the tequila would have to be bottled in Mexico before it was shipped to the US.
The Distilled Spirits Council of the US complained Wednesday that this rule, if allowed to take effect, would raise costs for consumers and threaten jobs in US bottling plants.
"This proposal could have a grave effect on consumers worldwide through higher prices, fewer choices and the significant potential for serious product shortages," said council president Peter Cressy.
He said the proposed regulation would violate rules of the WTO and commitments made by Mexico when it joined the US and Canada in the North American Free Trade Agreement (NAFTA) in 1994.
The rule, being proposed by the Mexican Bureau of Standards, is scheduled to be formally published for public comment in October and could go into effect in January. As written now, bulk shipments would be allowed to continue for one year to allow companies to modify their distribution networks.
Mexican supporters of the proposed change argue that it will allow for better monitoring of tequila quality.
Salvador Behar, trade counsel for the Mexican embassy in Washington, said the proposed rule is simply an effort "to protect the honesty of tequila. We are concerned that the measures now in place are not working properly."
But Frank Coleman, a spokesman for the Distilled Spirits Council, said protecting the quality of tequila shipped in bulk has not been a problem. He said the standards are strictly monitored by Mexico's Tequila Regulatory Council.
Coleman said US bottling plants for tequila were operating in four states -- California, Arkansas, Missouri and Kentucky. Cuervo, the most popular brand of tequila sold in the US, is distributed by Diageo North America, headquartered in Stanford, Connecticut.
Mike Griesser, vice chairman of McCormick Distilling Co of Weston, Missouri, which distributes Tequila Rose and Tarantula Azul, said the US industry is hoping the Bush administration will bring up the dispute when NAFTA trade ministers hold their next meeting Oct. 7 in Canada.
Griesser said the Mexican effort runs counter to worldwide practices in the liquor industry, in which various types of liquor are shipped in bulk for bottling in the country where the sales will take place.
"Suddenly the Mexican government decides that the only way you can have authentic tequila is to bottle it in Mexico," said Griesser, who contended the real reason for the proposed regulation was to create more jobs in Mexico.
The dispute over shipping regulations for tequila is the latest in a series of trade fights between the US and Mexico.
According to figures from the US industry, tequila sales rose to 7.2 million 12-bottle cases last year and represented 4.7 percent of all US liquor sales last year. The US is Mexico's biggest market for tequila, consuming more than 50 percent of the country's exports last year.
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