by Krista Walton

Wineries, distilleries, and breweries often want to send samples to out-of-state distributors to promote their product. While it would seem easy to ship a small sample to a potential buyer, there are several restrictions that apply. Federal regulations state that someone within the alcohol industry may give a sample to a distributor who has not purchased the brand within the past year. Each state has their own regulations regarding sending samples. Some follow the one year restriction as outlined by federal regulations, while others lengthen the time.

Federal regulations also provide size restrictions on how much of any brand may be sent to a distributor. Wine and distilled spirits have a limit of 3 liters per brand and beer or malt beverages have a limit of 3 gallons per brand. Federal law does allow larger samples if the product is not available in a size within the size limitations. If so, then the next larger size may be furnished. Most states have quantity limits that are much smaller than the federal regulations outline. Often the limit is 750 ml for wine, distilled spirits and malt beverages, but some states only allow 50 ml of the product to be sent for sampling.

Federal regulations do not have any other restrictions, but several states do. For example, several states require the samples to be labeled as samples and often require specific phrases to be clearly marked on the bottles. Other state regulations apply to who may consume the samples, who may transport the samples, and how records of each sample show be kept.

More often than not regulations pertaining to shipping samples are not clear and are hard to locate in the state’s liquor code.  The Compli team has diligently researched these regulations with our partners in the legal community so don’t hesitate to call or email us with specific questions toll free (877) 255-1440 and info@compli-beverage.com

For more information on federal regulations see Title 27 CFR Part 6.91 as seen here: http://ecfr.gpoaccess.gov/cgi/t/text/text-idx?c=ecfr&sid=6ce02a937c2464e842b699e05c4c20c3&tpl=/ecfrbrowse/Title27/27cfr6_main_02.tpl

by Sheri A. Robesky

Compli Beverage Compliance

AB 1649 was introduced to legislature on January 13th, 2010 and since has passed through the State Assembly twice with flying colors.  It was read to the Senate for the first time on May 3^rd, 2010.

About AB 1649:

California wineries continue to strive for improvement: making high quality wines, practicing sustainable farming and production, preaching responsible consumption practices, and marketing an unforgettable brand name.  Recent advancements in technology are refining the winemaking experience by leaps and bounds.  These advances include processes for  reducing the alcohol in high alcohol content wines.  When alcohol reduction processes are completed, a by- product is produced which is currently considered a ‘spirit of wine’. This a non-potable by-product of the wine fermentation process, but a distilled spirit none the less by CA ABC definition. CA ABC states that this by-product production merits a winery to secure an 04 Distilled Spirits license in addition to their 02 Producer license. Currently, fifty of the over 2700 licensed California wineries hold this Type 04 license, so they can legally reduce the percentage of alcohol by volume in their wines.  The licensing process is quite complex and requires a lengthy application and significant reporting on an ongoing basis.  All of this for an undrinkable product of the winemaking experience.

AB 1649 was introduced in order to change the ABC Business and Professional Code to allow winemakers to use these winemaking tools without having to obtain the distilled spirits license.

According to the bill’s sponsor, the Wine Institute, existing law authorizes a winery to produce the spirits of wine by-product, but the law is unclear whether or not the winery needs to obtain a Type 04 distilled manufacturer’s license to deal with this byproduct.  AB 1649 states a winegrower (winery) does not need to purchase a separate license when producing spirits of wine (byproduct of wine fermentation) provided the spirits of wine are blended into the wine produced by the winegrower, are sold to an industrial alcohol dealer, or are destroyed by the winegrower.

This bill is makes good business sense, further emphasizing Sacramento’s commitment to the wine industry as it relates to the California economy.

Below you will find more information regarding the specifics of AB 1649

http://www.aroundthecapitol.com/billtrack/analysis.html?aid=36960

by Taylor Maggelet

DON’T panic, DO write your representative,

DO your part to keep direct to consumer shipping safe & legal

Paso Robles, CA- With the release of House of Representatives Bill 5034 late last week, a panic of sorts has gripped many wineries and retailers (or at least the bloggers of those industries) with what appears to be another attempted power play by the influential wholesale alcohol lobbying effort in Washington, DC. And while HR 5034 may indeed pass, this winery compliance specialist strongly feels that, in the end, it will be a much more watered down version of the currently proposed bill, and will not present a sweeping change to current state laws on out of state shipping of wine.

That said the industry should not sit on its laurels in response to this latest assault on fair interstate commerce. While recent legislation in many states has overwhelmingly supported direct to consumer sales, we must be diligent in continuing to advance our cause though communication with our representatives, adherence to the various states’ laws regarding licensing and taxation, and making a commitment to ensuring safe and legal direct sales wherever possible.

This bill, sponsored by the National Beer Wholesalers Association, is designed to (1) reaffirm the 21^st Amendment, in which individual states, not the federal government, have the primary authority to regulate alcoholic beverage sales, and (2) recognize that alcohol is different than other consumer products (like sheet sets or books), and its sale should be regulated effectively. I don’t think anybody in the wine industry is arguing against the validity of either of these points.  So why do we need another federal regulation emphasizing a law that is already on the books, and of which nobody is fighting against? Don’t our federal legislators have bigger issues on their plates these days? (Oh I don’t know…Wars in Iraq & Afghanistan…Healthcare…mid-term elections, for goodness sake!)

The main reason the wholesalers are pushing this bill is to keep litigation out of federal courts, where the U.S. Constitution is king, so laws regarding volume limits, production caps, and the ability of retailers to ship are decided at the state legislature. These types of state restrictions keep many large wine producers from reaching their consumers directly, thus keeping them dependant on the wholesaler to get to market. The Wine & Spirits Wholesalers of America have been quoted as not wanting to overturn current state law, but simply do not want to allow challenges to those laws. But if these laws scream “UNCONSTITUTIONAL”, I have a problem with being told they are above challenge.

The Granholm decision of 2005 stated that the Commerce Clause of the U.S. Constitution (which enforces the equal treatment of all businesses regarding trade) takes precedence over the 21^st Amendment (which allows states to regulate their own alcohol sales). HR 5034 is attempting to switch that around, whereby the 21^st trumps the Commerce Clause. States could legally discriminate against out of state wineries, even ban out of state shipping, and that ban could be upheld, when challenged, if the state can show, in even a slight way, that the ban will contribute positively to the “promotion of temperance, the establishment or maintenance of orderly alcoholic beverage markets, the collection of alcoholic beverage taxes, the structure of the state alcoholic beverage distribution system, or the restriction of access to alcoholic beverages by those under the legal drinking age.” It puts the burden of proof on the plaintiffs (the wineries or retailers), on some incredibly debatable, subjective issues.

It is very important that wineries and wine retailers make every effort to abide by the current laws set forth by the individual states, securing the necessary licenses, remitting sales/use and/or excise tax, and reporting in a timely fashion. The days of “no strings attached” reciprocal shipping are gone and wineries need to play by the rules of each state to which they choose to sell and ship. Excellent services and software tools exist to assist even the smallest winery or retailer in this compliance process (I admit, our only plug!). Furthermore, any business selling wine direct to consumer needs to make a concerted effort to ensure their wine is being sold to legal adults. Use of age verification software, age verification gateways on websites, and clearly labeling all shipped boxes as alcohol, coupled with compliant shipping and accurate tax payments, will go a long way to proving that the current system is in fact promoting “temperance, the establishment or maintenance of orderly alcoholic beverage markets, the collection of alcoholic beverage taxes, the structure of the state alcoholic beverage distribution system, or the restriction of access to alcoholic beverages by those under the legal drinking age.”

The bottom line is that 37 states, plus the District of Columbia, already have tried and true laws on the books allowing direct to consumer shipping to varying degrees. If this bill does pass into law, odds are that these established DTC laws will not change or be challenged. States where direct shipping legislation is pending, like New Jersey, Massachusetts and Maryland, may decide not to allow DTC shipping after all. In the few states that still don’t have a direct shipping law on the books, like Florida, we might see direct shipping banned under this proposed law. Unfortunately, wine retailers stand to lose the most, with only a handful of states currently allowing direct shipping, many states may choose not to extend that privilege to retailers if this bill successfully passes.

Ours is a progressive, socially responsible and organized industry that can present a united front to the legislature regarding non-discriminatory interstate trade and the responsible direct sale of wine to Americans in every state.

So what can be done? It is not too late to voice your opinion to your representative. Please call or email them today: http://www.capwiz.com/freegrapes/issues/alert/?alertid=14948676

Rachel Dumas Rey, president of Compli Inc. (www.compli-beverage.com), will be on VinVillageRadio today at 4 PM Pacific Standard Time. (We apologize for the late notice, but were just informed ourselves that it was airing today).

VinVillageRadio is a product of the collaboration between Wine and Dine Radio and VinVillage.com. The one-hour program focuses on anything and everything about food and wine, and features interviews with the “Who’s Who” of the wine and food industries.

Today, Rachel Dumas Rey and attorney Lynn Carmichael, of Hinman and Carmichael, LLP (www.beveragelaw.com), discuss the difficulties a winery faces in staying compliant with the myriad of  laws and regulations that allow them to ship directly to their customers. They also discuss the breakthrough in direct shipping compliance that was introduced when Compli announced Licensing On Demand (www.directshiplicense.com), their direct ship licensing DIY website. Unlike similar “me-too” websites, Licensing On Demand allows a winery to download pre-filled forms and letters needed to obtain a direct ship license in the state of their choice. Just sign, attach a check and send it off!

Listen to Rachel and Lynn discuss direct ship licensing, the Licensing On Demand website, and much more on the  VinVillageRadio broadcast here.

If you have questions or comments about direct ship compliance (or anything else compliance-related…), we welcome them here!