The Border Adjustment Tax on Coffee: Unintended Consequences?

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By William (Bill) Murray, CEO, NCA
@Bill_CoffeeAssn

The 2016 U.S. presidential election provoked deep passions across the U.S. that continue to be felt today, as the policy implications continue to unfold.

Last December, we took a first look at how coffee-related policies might be impacted by the election, while conceding that there was much yet to be discovered about the new administration.

Among the various initiatives under discussion by the new administration, a “border adjustment tax” potentially has huge implications not only for the coffee sector, but for every coffee drinker in the U.S. – more than 180 million Americans.

Most ironically, in the case of coffee a “border adjustment tax” could raise the price of everyone’s daily coffee, while not having the intended effect of “bringing jobs to America.”

Very generally, the so-called border adjustment is intended to encourage manufacturers to bring jobs back to the U.S. – but this wouldn’t work for coffee.

The idea behind the tax is that air conditioner manufacturers, for example, would lose the cost advantage of manufacturing overseas when they had to pay a 20% border adjustment tax. As a result, manufacturing jobs would return to the U.S.

In fact, the overwhelming majority of coffee is already “manufactured” here in the U.S. – i.e. cleaned, roasted, ground, packaged, and shipped. As demonstrated in the Economic Impact report NCA commissioned last year, coffee already contributes millions of jobs to the U.S. economy. And yet, since raw coffee is almost all imported to the U.S., for reasons having to do with climate and growing conditions, it could be subject to a border adjustment tax.

We think this could be catastrophic – an unintended consequence of the policy under discussion. It could not only increase the cost of America’s favorite beverage, but could very likely have a negative impact on jobs, the exact opposite of what was intended.

The NCA is taking these messages to Washington. This is why we’ve reached out to our members this week and asked them to give us information on the location of their facilities, and employment numbers. We’ll use this information to supplementing the data in our Economic Impact report with more specific, local data on manufacturing and jobs – so that federal lawmakers can better understand firsthand the potential impact in their own districts.

We’ll keep you updated as our work proceeds. In the meantime, if you’re an NCA member and would like to make sure that you’re getting the latest information, please contact Thrisha Andrews at  212-766-4007, or email info@ncausa.org.

Update: The Border Tax In the News

Border-adjusted Tax Not ‘Off the Table,’ Mnuchin Says

Why Americans Can’t Afford to Ignore the Border Adjustment Tax

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