VZCZCXRO6138
RR RUEHCN RUEHGH
DE RUEHHK #1553 2350036
ZNR UUUUU ZZH
R 220036Z AUG 08
FM AMCONSUL HONG KONG
TO RUEHRC/USDA FAS WASHDC 1417
RUEHC/SECSTATE WASHDC 5605
INFO RUEHBJ/AMEMBASSY BEIJING 2483
RUEHCN/AMCONSUL CHENGDU 1345
RUEHSH/AMCONSUL SHENYANG 3788
RUEHGH/AMCONSUL SHANGHAI
RUEHGZ/AMCONSUL GUANGZHOU 1335
RUEHIN/AIT TAIPEI 0001

UNCLAS HONG KONG 001553 
 
TOFAS 12 
SIPDIS 
 
FAS/OA YOST, MILLER 
FAS/OCRA/ABRANSON 
FAS/OFSO/AO/NORTH ASIA/BREHM 
FAS/OTP 
BEIJING FOR AG MINISTER-COUNSELOR 
CHENGDU FOR AG ATTACHE 
SHENYENG FOR ATO DIRECTOR 
SHANGHAI FOR ATO DIRECTOR 
GUANGZHOU FOR ATO DIRECTOR 
TAIPEI FOR AG CHIEF 
 
E.O. 12958: N/A 
TAGS: ETRD EAGR HK CH
 
SUBJECT:  MACAU FOLLOWS HONG KONG LEAD AND ELIMINATES WINE AND BEER 
TAX; DUTY ON SPIRITS REMAINS 
 
¶1. (U) SUMMARY: On Monday August 25, Macau will terminate its 15 
percent CIF duty and join Hong Kong as members of the extremely 
limited club of tax-free importers of wine and beer.  Macau's move 
will greatly simplify the transshipments of wine and beer between 
the two vibrant Special Administrative Regions.  For beverages 
exceeding 30 percent alcohol, Macau's "Consumption Tax" of 10 
percent CIF value plus 20 Macau Pecatas (about US$2.58) per liter, 
will remain in force.  U.S. exports of wine and beer to Hong Kong 
and Macau have exploded in the wake of Hong Kong's tax elimination 
and the booming casino industry in Macau.  U.S. wine and beer 
exports to Hong Kong exceeded $8 million in the first half of 2008, 
132 percent above 2007 levels.  For Macau, January - June exports 
approached US$3 million, an astonishing 1,576 percent increase. 
Post projects both Hong Kong and Macau wine imports will continue to 
soar through at least 2009.  END SUMMARY 
 
¶2. (U) Pressured by the relentless stream of glowing international 
publicity Hong Kong has enjoyed since it eliminated its excise taxes 
on wine and beer in February 2008, Macau authorities are following 
suit.  As of Monday August 25, Macau will terminate its 15 percent 
CIF duty and join Hong Kong as members of the extremely limited club 
of tax-free importers of wine and beer.  Macau's move will greatly 
simplify the transshipments of wine and beer between the two vibrant 
Special Administrative Regions.  While both Hong Kong and Macau are 
part of China, each is a separate customs territory distinct from 
Mainland China.  Traders are rejoicing nearly as much in the 
elimination of the paperwork requirements as they are in the 
elimination of the excise tax. 
 
¶3. (U) However, like Hong Kong, Macau is leaving in place its import 
tariff on spirits.  For beverages exceeding 30 percent alcohol, 
Macau's "Consumption Tax" of 10 percent CIF value plus 20 Macau 
Pecatas (about US$2.58) per liter, will remain in force.  By 
contrast, Hong Kong assesses an excise tax on spirits of 100 
percent.  (Note: Traditionally called a "sin tax" as it is most 
commonly imposed on alcohol and tobacco, an excise tax is a levy on 
the value of a domestic or imported good at the factory door. 
Import tariffs apply only to imported items, and typically are 
charged on the value of the product plus the cost of 
transportation.) 
 
¶4. (U) U.S. exports of wine and beer to Hong Kong and Macau have 
exploded in the wake of Hong Kong's tax elimination and the booming 
casino industry in Macau.  According to U.S. Customs statistics, 
U.S. wine and beer exports to Hong Kong of over US$8 million in the 
first half of 2008 are running 132 percent above 2007 levels.  For 
Macau, January - June exports approached US$3 million, an 
astonishing 1,576 percent increase.  At least some of the increase 
is likely due to the tens of millions of Chinese tourists who visit 
Hong Kong and Macau, and can legally carry two bottles back to the 
Mainland where import and value added tariffs on all alcoholic 
beverages remain high. 
 
¶5. (U) Despite this impressive growth, the U.S. is the fourth 
largest wine supplier to Macau, with just 3 percent of the market. 
France dominates the market with a 78 percent share, followed by 
Portugal with 9 percent, and Australia with 5 percent. 
 
¶6. (U) Post projects both Hong Kong and Macau wine imports will 
continue to soar through at least 2009.  For U.S. wine and craft 
beers especially, the elimination of the tax, booming tourism, the 
weak dollar, and a sophisticated population with relatively high 
disposable income create an historic opportunity for growth.  Post 
encourages interested U.S. exporters to contact the Agricultural 
Trade Office at post for detailed information and advice on selling 
product to these markets. 
 
DONOVAN