Essential Oils Off EU Imports Tariff List In Trade War Win For Fragrance Creators

Essential oils no longer on list of products slated for EU tariff increases effective 18 October, a win for US fragrance industry facing uncertainty in tumultuous global trade climate. Fragrancy industry, like dietary supplement manufacturers, still face higher tariffs on imports from China as next round of hikes is scheduled to start 15 October.

The fragrance industry expects to save more than $90m with the removal of essential oils from the total of $21bn in products imported from the European Union that the US planned to subject to a 25% tariff hike.

The US Trade Representative is increasing the tariff on some product categories to encourage the EU to remove certain subsidies for large civil aircraft. The change stems from a long-running dispute with some EU member states regarding enforcement of US rights in the World Trade Organization and EU aircraft subsidies, which USTR initially suggested cost the US $11bn per year.

Following a 2 October report from a WTO arbitrator, the USTR adjusted its target with the punitive tariff to match the $7.5bn total that the WTO suggested in value of goods per year, removing many of the originally proposed product categories, including essential oils, according to a 9 October Federal Register notice.

The Fragrance Creators Association took credit for the essential oils' removal from the list, maintaining the industry will save approximately $91.1m.

“This is a significant outcome for the fragrance industry, American jobs, and the economy – and one that prevents unnecessary cost increases for millions of consumers who use and enjoy scented products every day,” said the trade group on 9 October.

The industry may still face higher tariffs in trading with China as the country's trade reps are scheduled to meet with US officials 10-11 October. The fragrance and cosmetics industries are pushing for tariffs to be delayed until at least 2020. (Also see "Industry Braces For Holiday Tariff Impacts As US-China Trade War Continues" - HBW Insight, 12 Sep, 2019.)

The dietary supplement industry also will benefit from the USTR's change to the EU tariff-hike list as numerous firms include essential oils among the wellness products they market. However, US supplement firms also will be affected by the latest tariff hike on imports from China targeting around $250bn in products. The USTR has scheduled the increase to take effect on 15 October, and both the US and China plan additional tariffs on billions more in products to start on 15 December. (Also see "Full Plate Of Dietary Ingredients In Latest US Tariff Hikes On Chinese Imports" - HBW Insight, 31 May, 2019.)

Essential Oils Begin In Europe

FCA submitted comments to the USTR shortly after essential oils were proposed as a category for an EU import tariff increase in April. President and CEO Farah Ahmed testified at a 15 May hearing and FCA executives met with the USTR and, Department of Commerce officials and with members of Congress.

Ahmed focused on fragrance material sourcing challenges at the hearing. While affirming the group’s support for US manufacturing, Ahmed emphasized location in essential oils production, comparing the oils to grapes grown to make wine.

“The same holds true for essential oils; latitude, longitude, microclimate for example cannot be replicated in the United States or anywhere else for that matter,” she explained.

FCA member Erica Lermond, CEO of Oakland, NJ, firm Lermond Co., which provides essential oils to the flavor, fragrance, aroma therapy, cosmetic, control, and pet care industries, elaborated on Ahmed’s comments in testimony the same day, calling Europe-produced essential oils “irreplaceable” and noting some of those crops are not and cannot be grown in the US.

"Tariffs on essential oils precisely contradict the goal of sustaining US manufacturing," Lermond said. "Essential oils are agriculturally derived from regionally specific crops and alternative sourcing options do not exist. You simply cannot mimic the growing conditions found in Europe, the land, the microclimates, the weather, in any geographic region elsewhere in the world," she added.

Products still subject to the pending tariffs include aircraft, whiskey, liquor, wine, cheese, pork, dairy products and others from specific EU countries. Meanwhile, products initially proposed for the tariffs but escaped the final group also include seafood, handbags, apparel materials and clocks.

FCA said the Trump administration, the USTR and the DoC allowed the trade group to make its point of view clear. “Through these meaningful interactions, we were able to find common ground and, ultimately, ensure the needs of the fragrance industry and the American consumer were prioritized,” Ahmed said in a release.

The group says its advocacy for removal of tariff-related cost increases will continue, rooted in discussions with administration officials and through the Congressional Fragrance Caucus. The caucus, co-chaired by Reps. Bonnie Watson Coleman, D-NJ, and Barry Loudermilk, R-GA, “offers a bipartisan platform for Fragrance Creators members to interface with legislators on priority issues affecting fragrance.”

Prior to FCA’s Capitol Hill day in May, the caucus named Reps. Sanford Bishop, R-GA, and Jackie Walorski, D-IN, as its Legislators of the Year for their support, namely for a letter they sent to the Environmental Protection Agency asking it to approve more environmentally friendly fragrance ingredients.