Over the last century, the brewing and beverage industry have been leaders in economic development and innovation. Both industries employ hundreds of thousands of hard-working people, contribute billions to our economy, and rely heavily on aluminum as a sustainable and efficient container to deliver our refreshing beverages.
Unfortunately, due to the combination of recently imposed tariffs on imported primary aluminum and a complicated, obscure pricing system known as the Midwest Premium, the cost to manufacture beverage cans has increased dramatically. In 2018, following the introduction of tariffs, the Midwest Premium more than doubled.
America’s beverage industries paid an additional $458 million on the 2.33 million metric tons of aluminum purchased between March 2018 through July 2019. However, a recent analysis conducted by a leading economic firm shows that the U.S. Treasury only collected 16% of this sum totaling about $73 million.
Why? Under current law, there is no direct oversight authority by a federal agency over how the Midwest Premium is set. As a result, companies in the aluminum supply chain charge the Midwest Premium, a price which reflects the full tariffed price of aluminum, even on aluminum not subject to the tariff.
However, most of the aluminum sold in the United States comes from countries that are not subject to the tariff. In the case of aluminum can sheet, most is not subject to a tariff because it’s made from recycled scrap aluminum. Despite this fact, our companies are still charged the full “tariff-paid” premium, which has resulted in increased manufacturing costs for our local brewers and bottlers. Importantly, so long as the U.S. needs to import aluminum, even marginal amounts, from countries subject to tariffs, all aluminum, including scrap, will reflect that pricing premium.
Brewers and beverage makers are committed to providing good-paying jobs and are constantly innovating to meet consumer demands when it comes to making our refreshing beverages; however, the additional manufacturing cost of nearly half a billion dollars is jeopardizing this innovation.
We appreciate the commitment to our nation’s security and to ensuring a level playing field for American manufacturing. This administration has been focused on growing our domestic economy, and we applaud it for these efforts. All we ask is for administration officials and members of Congress to work together to provide some transparency into the complicated and volatile pricing system for aluminum.
Specifically, we encourage members of Congress to join the bipartisan coalition led by Reps. Al Lawson of Florida and Ken Buck of Colorado, along with Sens. Cory Gardner of Colorado and Tammy Baldwin of Wisconsin, in cosponsoring the Aluminum Pricing Examination (APEX) Act, commonsense legislation that would provide the Commodity Futures Trading Commission and Department of Justice the necessary authority to provide oversight over price benchmarking entities, including those that publish the Midwest Premium.
A little sunlight into how market participants assess and determine pricing would help us do business better and ultimately benefit U.S. workers and consumers.
Katherine Lugar is president & CEO of the American Beverage Association, the national trade organization representing the broad spectrum of companies that manufacture and distribute non-alcoholic beverages in the United States. Jim McGreevy is president and CEO of The Beer Institute, a national trade association for the American brewing industry, representing brewers of all sizes, as well as beer importers and industry suppliers.
