Gov’t extends rum cover-over to 9 smaller producers
- The San Juan Daily Star
- 1 hour ago
- 3 min read
By THE STAR STAFF
Gov. Jenniffer González Colón announced on Monday the signing of agreements that will allow nine small and midsize rum producers to access the federal Rum Tax Cover‑Over program, expanding benefits previously limited to large manufacturers.
Economic Development and Commerce Department (DDEC by its acronym in Spanish) Secretary Sebastián Negrón Reichard, Puerto Rico Federal Affairs Administration Executive Director Gabriella Boffelli and Rones de Puerto Rico Program Director Carlos Herrero joined the governor for the announcement.
The move marks the first time in over 15 years that new producers have been added to the incentive program, which reinvests federal excise tax revenue collected on Puerto Rico‑made rum sold in the United States. Officials said the expansion corrects a longstanding exclusion and strengthens the island’s rum sector by broadening its production and export base.
“The Rum Tax Cover Over is a tool that allows Puerto Rico to reinvest the revenue generated by our own rum in the United States,” González Colón said. “We are ensuring that this mechanism is available not only to large producers but also to small distillers that for years have not benefited and are ready to grow, export and compete.”
The federal excise tax transfer rose from $10.50 to $13.25 per proof gallon in January 2026. Annual rum cover‑over revenues, currently around $400 million, are expected to approach $500 million. Puerto Rico’s rum industry supports roughly 800 jobs and produced 31.6 million gallons in 2025.
Access to the program for the nine companies covers at least 18 Puerto Rican rum brands across multiple categories and styles. Participating distillers include Destilería Coquí Inc., Caray LLC, Artesano Rum Corp., Laboratorio Clandestino Viequense Inc., Rincón Rum Inc., Rones Superiores de Puerto Rico & Compañía Inc., Sabor Boricua LLC, San Juan Artisan Distillers LLC and Trigo Corp.
“Our island is known internationally as the Rum Capital, producing nearly 70% of the rum sold in the United States,” Negrón Reichard said.
The DDEC secretary noted that small producers often face higher costs and barriers to international expansion.
“These agreements allow us to use an existing federal revenue source to support their entry into other markets,” he added.
Negrón Reichard said the industry recorded a net increase of about 800,000 gallons sold in 2025 compared with the previous year, reinforcing a trend of sustained growth.
The newly added producers will begin expanding into the U.S. market with initial placement in retail locations across eight Florida cities, one of the largest markets for Puerto Rican products. Distilleries from several regions of the island -- including Mayagüez and Vieques -- will benefit.
Herrero said the selection process focused on identifying distilleries with production capacity and a diverse portfolio to ensure Puerto Rican rum can occupy more shelf and bar segments.
“Aligning production with demand is key so emerging brands can sustain themselves outside Puerto Rico,” he said.
Under the agreements, funds may be used only for U.S. sales‑related activities including production, marketing, purchase of inputs and distribution expansion. The incentive is tied to commercial performance and is not a guaranteed subsidy.
The signing took place at La Casita de Rones, a promotional venue for Puerto Rican rum. Signatories included representatives from each distillery along with Negrón Reichard, Treasury Secretary Ángel Pantoja Rodríguez, Agriculture Secretary Irving Rodríguez Torres and other government officials.
The measure is part of a restructuring of the Rones de Puerto Rico Program launched in 2025, aimed at measurable commercial outcomes, expanded market reach and increased economic returns for the island.