By Karen E. Thuermer, AJOT In Hong Kong they’re raising their glasses and making toasts to what has become an increasingly popular wine industry. The United States is reaping the benefits. According to Hong Kong trade figures, the U.S. is the third largest wine exporter to the once British colony. (U.S. figures peg it as fourth, behind Australia.) The No. 1 exporter is France, and the United Kingdom, a surprising No. 2. “That’s because of UK auction houses,” says Hong Kong Commissioner for Economic and Trade Affairs Donald Tong in the Washington, DC office of the Hong Kong Economic and Trade Office. “The UK has always been among the top two auction centers for wine, next to New York. In 2011, U.S. wine exports to Hong Kong amounted to US$75.6 million, up 57 percent from 2010. In 2010, Hong Kong imported US$46 million of U.S. wine, up 15 percent over 2009. “Hong Kong is the third largest wine destination for U.S. wine,” says Commissioner Tong. Canada is No. 1, and the United Kingdom, No. 2. According to an annual survey for VINEXPO by International Wine and Spirit Research, Hong Kong has emerged as Asia’s wine drinking capital. In addition to being a vibrant local market, Hong Kong also serves as a gateway to other wine markets in the region, especially Mainland China. Commissioner Tong attributes this to Hong Kong’s prime geographical location, superior logistical infrastructure and sound legal and financial system. Surprisingly, while Hong Kong sits on the doorstep of one of the world’s most burgeoning markets, 81 percent of the wine imported stays within Hong Kong and 19 percent is re-exported. Another precarious figure is the one Commissioner Tong points out. The average consumer of Hong Kong drinks only six bottles of wine per year. While that’s up from five bottles per year in 2010, and consumption has doubled from 2006 to 2010, this means a lot of wine is being stock piled in wine cooling storage facilities trading houses. Hong Kong is home to a host of wine traders, including Berry Bros & Rudd, Moet Hennessy Diageo HK Ltd., Watson’s Wine Cellars, the Jockey Club, Altaya Wines, Margaret River for Asia Ltd., and Horizon Wine Cellars. Duties Removed Hong Kong was not always a wine drinking nation. But ever since the Hong Kong government decided to remove all duties on wine (and beer) in February 2008, the business has been skyrocketing. “It’s not the same for strong alcoholic beverages like whisky,” Commissioner Tong adds. Like all products in Hong Kong, wine is also not subject to value added tax (VAT) or general sales tax (GST). All totaled, these factors make Hong Kong one of the few tax free markets for wine in the world. This factor is highly noticed by wine exporters who are keen to make inroads in this market. According to auction house Acker Merral & Condit (Asia) Ltd, Hong Kong has now overtaken New York as the world’s largest wine auction center. Agreements, Promotions To help promote U.S. wine in Hong Kong, the federal government signed a Memorandum of Understanding (MOU) with Hong Kong in May 2010, to facilitate sales through promotion of U.S. wines and wine-related tourism, wine appreciation, investment in infrastructure and customs cooperation against counterfeits and smuggling. Shortly after, Oregon and Washington each also signed MOUs with Hong Kong. to promote sales of Northwest wines. With the agreement, Washington and Oregon wine distributors can participate in “a joint effort” to promote wine-related trade, tourism, investment and education, such as trade fairs and wine education seminars in Hong Kong. “In addition to promotion in Hong Kong, Hong Kong buyers and media will also be encouraged to travel to Oregon for similar efforts,” says the Oregon Governor’s Office in a press release. Mainland China and Hong Kong also signed an agreement in May 2010 that offers enhanced customs facilitation measures \. Called the Registration Agreement, this offers an expedited customs process that is expected to drastically