Tariffs and Alcohol Production Contracts: The New Trade Landscape
Since early 2025, U.S. alcohol manufacturers have found themselves on the frontlines of a fresh wave of trade disruptions. With the “Liberation Day” tariffs, core inputs such as cans, bottles, grain, labels, barrels are seeing their prices rise. For producers using imported goods, relying on contract production, or alternating proprietorship relationships, these cost shifts are no longer theoretical.
Craft alcohol manufacturers operate on thin margins and often lack leverage in global supply chains. For years, flexible terms and handshake understandings filled the gaps. But in today’s trade environment, producers need to tighten up their contracts. This starts with how manufacturers manage tariff risk.
Force Majeure Provisions are Usually Inapplicable
It’s a common misconception that rising costs from tariffs are a “force majeure” event. They’re not. Force majeure covers “acts of God” such as hurricanes, pandemics, and labor strikes; the kinds of events that make performance impossible. Tariffs, by contrast, just make performance more expensive. Courts generally do not excuse a party from paying or performing because of an unfavorable cost shift. Unless your force majeure clause expressly covers tariffs or government duties (and most don’t), you’re on the hook. This is why producers need a different set of tools, and that comes through good contract drafting.
Tighten up Your Contracts
To keep your margins intact and your relationships healthy, you need proactive language that deals with tariffs head-on. Many producers are now reworking their contractual agreements like alternating proprietorships and contract production deals—to include specific language that allows for tariff surcharges. These provisions enable the host producer or manufacturer to pass on new tariffs as a separate line item. Other agreements use broader “change in law” provisions to trigger pricing adjustments if newly enacted duties or government actions materially alter production costs. These mechanisms function quite differently from general hardship or material adverse change (MAC) clauses. While hardship clauses typically permit renegotiation in response to unforeseen circumstances, they often lack enforceable standards. Without clear financial thresholds or defined triggers, a court may still enforce the original pricing. By contrast, tariff surcharges and change-in-law provisions directly allocate costs and give parties a reliable structure for managing increases without creating ambiguity.
Even simple contractual language can go a long way. For instance, a sentence reserving the right to apply a “tariff surcharge equal to any new or increased import duties imposed after the effective date” keeps pricing transparent and ensures both sides know where they stand. Likewise, a well-drafted change-in-law clause can provide a formal mechanism for renegotiating terms in response to legislative or administrative actions—such as executive orders or international trade measures—that impact the cost of inputs.
In the alternating proprietorship and contract brewing contexts, tariff risk deserves even more attention. These agreements often require the host to secure and purchase certain ingredients and materials used in production. That includes imported items like glass, barrels, malt, specialty grains, or fruit. If tariffs are imposed on these goods during the term of the agreement and the contract is silent, the host may be left to “eat” those additional costs. Sometimes these agreements allow only for annual cost increases. Given the volatility of the new tariff policies, that’s not a sustainable model. For this reason, these agreements should explicitly state that the host is permitted to pass along any new or increased import duties associated with ingredients or materials sourced on behalf of the tenant.
Tariffs may go up or down, but what shouldn't fluctuate is your contract’s ability to handle them. Rather than reaching for force majeure clauses ill-suited to cost increases, producers should plan ahead by including express surcharge rights, price adjustment mechanisms, and change-in-law protections. This way, if tariff rates spike again, your production doesn’t grind to a halt -- and neither does your profit margin.
Remember, well-drafted agreements don’t just assign risk; they preserve relationships. When the rules of trade change over a single tweet, the best defense is a well-drafted contract.
For information about national and state liquor law matters or general manufacturing and distribution advice, please contact our Liquor Law, Licensing, Manufacturing, and Distribution Practice Group: Liquor Law Department Chair Theodore J. Zeller III, Esquire; David C. Berger, Esquire, for Pennsylvania and New Jersey retail and manufacturing licensing; Anthony M. Brichta, Esquire, for federal manufacturing, distribution, formula, and labeling issues; or contact our office at (610) 391-1800.