Tuesday, April 11, 2006

I, mint juleps

In the spirit of Leonard E. Read's I, Pencil, consider the thousand-dollar mint juleps that will be sold at the upcoming Kentucky Derby. With mint from Morocco, ice from the Arctic Circle and sugar from the South Pacific, it's a testament to specialization and world trade.

Which got me to thinking: How much does the U.S. interfere in the good natured desire to sell a $1,000 mint juleps at the Kentucky Derby? Enter the Official Harmonized Tariff Schedule of the United States, a 2716 page behemoth by our friends at the United States International Trade Commission, which outlines exactly which markets the U.S. chooses to get its fingers into.

Here's the recipe for mint juleps; water, sugar, mint, bourbon and crushed ice. My water bill goes to a government run agency. Sugar actually has its own chapter in the Tariff Schedule. Bourbon, as alcohol, has been excised taxed for years. Ice could be treated as water, though imported ice has a tariff level of .26 cents per liter (heading 2201.10.00 of the tariff schedule, for those keeping score at home, which seems to imply that ice for consumption is taxed while other ice is not).

Mint is an interesting story. As it turns out, there's a United States-Morocco Free Trade Agreement (UMFTA)-- remember, the mint for the thousand-dollar mint juleps is from Morocco. Now normally, as per 1211.90.40 of the Tariff Schedule, imported mint is taxed at 4.8% of its imported value if manufactured (crude or non-manufactured mint slides by Uncle Sam uncharged). But due to the UMFTA, manufactured mint from Morocco is duty free. So maybe we're observing some substitution effects, from other dutied mint to non-dutied Moroccan mint. Let's hear it for the United States government and their desire to let the Moroccan mint market persist unfettered.

I'm not sure if there's a better example of government inefficiency than the Official Harmonized Tariff Schedule of the United States.

(My favorite line concerning the UMFTA: "Originating goods under the terms of the United States-Morocco Free Trade Agreement are subject to duty as provided for herein.")

1 comment:

RS Gold said...
