Tuesday, November 22, 2011

Joint Farm Bill Proposal Hits a Wall as Super Committee Fails

By Jennifer Montgomery

Late last week, we were advised by Agriculture Committee staff that the Chairs and Ranking Members of the House and Senate Agriculture Committees had reached a tentative agreement on a 2012 Farm Bill proposal to be submitted to the Super Committee for consideration in the deficit reduction deliberations. Senate Agriculture Committee Chairwoman Debbie Stabenow (D-MI) and Ranking Member Pat Roberts (R-KS), had been working alongside House Agriculture Committee Chairman Frank Lucas (R-OK) and Ranking Member Collin Peterson (D-MN) to proactively come up with a Farm Bill proposal to cut $23 billion dollars out of the agriculture budget over the next 10 years. WineAmerica, along with other members of the Specialty Crop Farm Bill Alliance, had been working to try to ensure that critical specialty crop programs were protected as much as possible during this process.

While we did not see any legislative language at that time, some information on specialty crop programs was released. Under that tentative proposal, priority specialty crop programs would have faired well, under the circumstances:  

·        Blocks grants would have been funded at $70 million per year (up from $55 million).
o       They included a multi-state component that will be used to enhance multi-state projects.
o       They added acres to the calculation of how funding would allocated to each state.

·        The Pest and Disease Title would have been funded at $60 million for the first two years and $65 million thereafter (current is $50 million).
o       It would have rolled the Clean Plant Network into section 10201 of the Pest & Disease Title.

·        It would have provided $400 million over 10 years for the Specialty Crop Research Initiative (SCRI) and would have protected the baseline for those 10 years, so the program would not have been truncated.

·        The Value-Added Producer Grant program would have received $15 million in mandatory money, which is the current funding level in the 2008 Farm Bill.

But in light of the collapse of the Super Committee’s efforts, this proposal is not on the table and the general expectation is that the 2012 Farm Bill will now be written and considered in regular order, the way previous Farm Bills have been developed.

Given the hard work and bi-partisan cooperation that went into the creation of the proposal, WineAmerica considers it to be a good first step and it is hoped that it will serve as the foundation of the upcoming Farm Bill process – whatever that process turns out to be.

Monday, November 21, 2011

DTC Wine Symposium Expands to San Francisco, January 18-19, 2012

Once again, WineAmerica is a sponsor of the successful Direct to Consumer Wine Symposium, the annual summit on wine direct marketing and sales. We encourage your marketing teams to attend.

Organized by vintners, for vintners, the fifth annual summit will take place at the Stanford Court Hotel in San Francisco on January 18 (evening) and January 19 (day). 

Speakers from within and outside the wine industry will address topics such as:
·        Branding in the Digital Age (Keynote)
·        State of the States: What to Expect in 2012
·        Taking Your Wine Club to the Next Level
·        Using Video to Boost Sales
·        How to Improve E-commerce Campaigns
·        Training Tasting Room Staff, A to Z

The summit is an important fundraiser for the co-presenters, Free the Grapes! and Coalition for Free Trade. We have worked with these groups and other associations to increase the number of legal states for winery shipment from 17 to 38 in the last decade. Their focus on PR and litigation, respectively, has played an instrumental role, complementing industry representation in state capitols and Washington D.C.

There are several new components for the 2012 event:
  •  DTC Winery Check Up:  This results of this research project, which aggregates DTC sales performance for 120+ wineries along 18 separate metrics, will be presented January 19.
  • Video Contest: The Steering Committee will recognize outstanding achievement in video production by naming and promoting three winning winery promotional videos. 
  •  January 18 Evening Social Mixer: A short presentation will be followed by a wine reception and mixer for registrants and sponsors at the Stanford Court.  
Early registration pricing for the evening social mixer ($75) and full day of programs ($375) ends December 12. The Stanford Court Hotel’s reduced rate of $209/night expires December 18. View the program and register at www.dtcwinesymposium.com.

Friday, November 18, 2011

WineAmerica Supports Federal Bill Allowing USPS to Deliver Wine to Consumers

November 18, 2011

The Senate recently introduced S. 1789, the “21st Century Postal Service Act of 2011.”  The bill includes a provision—section 404—that would modify federal law to allow the shipping of wine by the U.S. Postal Service (“USPS”).  As a longtime advocate of winery direct-to-consumer shipping, WineAmerica supports this important provision, with qualification.

WineAmerica believes in fair markets and competition in the sale and distribution of wine.  For years, there has been a growing mismatch between the state-based legal distribution system adopted in the wake of Prohibition and the wine market, particularly as it relates to small wine brands.  See, e.g., Federal Trade Commission, Working Paper No. 304, State Regulation of Alcohol Distribution: The Effects of Post & Hold Laws on Consumption and Social Harms (Sept. 2010).  Direct-to-consumer shipping has proven highly effective both from the standpoint of allowing consumers to find and purchase the wines they want, and of providing regulators the ability to collect taxes and prevent underage consumption.  See, e.g., Comptroller of Maryland, Direct Wine Shipment Report (Dec. 2010).

Common carriers such as FedEx and the UPS have secured licenses, permits or approvals to deliver wine directly from wineries to consumers in at least 38 states.  State laws typically mandate:

(1)         that packages containing wine include a shipping label indicating their contents; and
(2)         that common carriers obtain the signature of an adult on delivery.

State laws may also require common carriers:

(1)         to file wine delivery reports; and
(2)         to refuse receipt of shipments from businesses that do not follow state legal requirements.

These tools ensure state regulatory control over wine deliveries.  E.g., id. at 66-69.

Section 404 of S. 1789 would allow “a licensed winery” to ship via USPS “in accordance with the law of the State, territory, or district of the United States where the addressee or a duly authorized agent takes delivery.”  Wineries would gain the ability to ship through USPS to consumers, provided they followed state shipping laws with respect to licensing, tax payment, and regulatory control.

We fully support the laudable goals of section 404 of S. 1789 because the provision would give wineries and consumers greater access and choice with respect to the delivery of wine, subject to state shipping law.  We believe, however, that the legislation contains several technical ambiguities that must be clarified before passage.  They are:

·             USPS must be subject to the same state requirements that bind other common carriers, including license applications and the power of states to rescind delivery authority; and
·             The definition of “wine” used in section 404 should include all wines produced in accordance with the Internal Revenue Code (26 U.S.C. § 5041(a); 27 C.F.R. § 24.10) rather than the more limited definition provided in the Federal Alcohol Administration Act (27 U.S.C. § 211).

In its current form, section 404 represents a significant step forward for winery and consumer choice, but before WineAmerica can fully support the bill, without qualification, the language must be fixed to account both for state legal obligations and for the products produced by U.S. wineries.

WineAmerica will continue to support efforts that simplify and improve winery direct-to-consumer shipping laws, and hope that Congress will see fit to pass this important legislation with the suggested changes.

Thursday, November 17, 2011

WineAmerica Co-Hosting Wine and Shellfish Reception on Capitol Hill Tonight

Tonight WineAmerica, the Wine Institute and the East Coast Shellfish Growers Association are co-sponsoring a white wine and shellfish reception for the Congressional Wine Caucus and the Congressional Shellfish Caucus.  Traditionally this has been an event that only served California wine.  For the first time WineAmerica is providing wine from the East Coast for this event.  Special thanks to the Virginia Wine Marketing Board, the Long Island Wine Council, Fox Run Vineyards (NY), Priam Vineyards (CT), Boordy Vineyards (MD), Black Ankle Vineyards (MD), Sugarloaf Mountain Vineyard (MD) and Knob Hall Winery (MD) for donating wine for this event.

The following East Coast wines will be served with select wines from California, provided by the Wine Instutite

Priam Vineyards Chardonnay
Priam Vineyards Gewurtztraminer

Black Ankle Vineyards 2010 Viognier
Boordy Vineyards 2010 Reserve Chardonnay
Knob Hall Tryst White Blend
Knob Hall 2010 Vidal Blanc
Sugarloaf Mountain Vineyards 2010 Chardonnay

Finger Lakes, NY
Anthony Road Wine Company 2010 Pinot Gris
Anthony Road Wine Company 2009 Riesling
Fox Run Vineyards Arctic Fox White Wine
Fox Run Vineyards 2010 Chardonnay
Miles Wine Cellars 2010 Chardonnay
Miles Wine Cellars Ghost White Wine

Long Island, NY
Bedell Cellars 2008 "Taste White" White Wine
Palmer Vineyards 2009 Pinot Blanc
Scarola Vineyards 2009 "Capella" Chardonnay
Sparkling Point 2007 Brut Sparkling Wine
Waters Crest Winery 2010 Sauvignon Blanc
Wolffer Estate 2010 Classic White

Barboursville Vineyards 2009 Viognier
Breaux Vineyards 2010 Viognier
Gray Ghost 2009 Chardonnay
Jefferson Vineyards 2010 Chardonnay 




Thursday, November 10, 2011

2011 Fall Board Meeting in Boise

By Michael Kaiser

The annual WineAmerica Fall Board of Directors and Membership meeting has come and gone once again.  This year we visited the Snake River Valley in Southwest Idaho.  The Snake River Valley is Idaho's first American viticultural area and is home to the largest concentration of wineries and vineyards in the state.  The meeting itself was held at Hotel 43, a boutique hotel in Downtown Boise.  This year we had attendees from Maryland, Nebraska, Idaho, Michigan, Colorado, California, Washington, Missouri, Oregon, Virginia, South Dakota, New York, Tennessee, Texas and Ohio. 

The WineAmerica Board of Directors discussed a wide range of new association initiatives this week, and there will be more news on those initiatives as they progress.  The WineAmerica Board and the State Associations Council also held various policy discussions ranging from the reauthorization of the Farm Bill to continuing to fight the so-called CARE Act (HR 1161).

On Monday night, the Idaho Wine Commission hosted an informal welcome reception, sponsored by the Southwest Idaho Tourism Association for the meeting attendees.  Six local wineries were featured at the reception:  Williamson Orchards and Vineyards, Cinder Wines, Bitner Vineyards, Huston Vineyards, Woodriver Cellars and Fraser Vineyards.  The group then enjoyed a dinner at Fork Restaurant in Boise featuring local ingredients and wine. 

Tuesday after the Board meeting ended we visited Bitner Vineyards (owned and operated by WineAmerica Board member Ron Bitner and his wife Mary) and then went to Ste. Chappelle Winery (the largest in the state) for a catered dinner and wine pairing.  An enjoyable ending to a productive day.

The dates and location have been determined for the 2012 Fall Board of Directors and Membership Meeting.  The meeting will be in Sonoma County, CA from November 12 to 14, 2012.  The exact location has yet to be determined. 

Friday, November 4, 2011

TTB Issues Notice of Proposed Rulemaking to Allow Vintage Dating on Country of Origin Wines

The TTB has issued a Notice of Proposed Rulemaking to allow the use of vintage dating on a wine labeled with a country appellation of origin, such as "American".  The official TTB summary is as follows.

The Alcohol and Tobacco Tax and Trade Bureau proposes to amend its wine labeling regulations to allow a vintage date to appear on a wine that is labeled with a country of origin.  The proposal would provide greater grape sourcing and wine labeling flexibility to winemakers, both domestic and foreign, while still ensuring that consumers are provided with adequate information as to the identity and quality of the wines they purchase.  

WineAmerica advocated for this rulemaking last year, below is an excerpt of an article we published in January 2010 regarding this issue:

The Alcohol & Tobacco Tax & Trade Bureau (TTB) has long prohibited wines with a country appellation of origin from including a vintage date. It is one of the many technical blips that we live with in alcohol beverage regulation that doesn’t seem to matter much until it affects your business. Like many other technical rules with somewhat mysterious origins, inertia has largely kept this vintage date prohibition alive. It’s time to seek a reevaluation.  

There’s a strong case to be made that “American” and other country appellation wines should be permitted to utilize vintage dates. The reasons largely relate to how vintage dates are used in the market. Often, vintage dates are thought of as shorthand for whether wines need aging, are ready to drink, or are over the hill. They also promote product transparency and lot identification, shelf management tools that protect producers and allow consumers to more clearly identify wines they like. In addition, allowing vintage dating for American appellation wines would encourage the further development of wine industries in nontraditional winemaking states that have occasional need for out-of-state fruit.

There are few, if any, policy justifications for TTB’s restriction against country appellation vintage dating. As was stated eloquently in comments to TTB several years ago, “[w]ith the exception of the luxury-priced wine market where a particular vintage is often celebrated for its uniqueness, nearly all other wine consumers, both domestically and abroad, have specific style and quality expectations that are consistent from purchase to purchase.” Change to Vintage Date Requirements, 71 Fed. Reg. 25748, 25750 (May 2, 2006).

Likewise, the vintage date restriction often has unintended consequences. Some countries restrict use of varietal labeling except in instances where a wine bears a country appellation. This means that many foreign wineries selling in the U.S. are forced to choose between vintage labeling and varietal labeling. Under the current regulations then, foreign wineries are being punished for the practices of their domestic regulators.

Prohibiting vintage dating for country appellation wines can also carry a false connation. It can give the misimpression of product uniformity from year-to-year—that a wine is in a “house” style produced from several vintages—when that is not in fact the case. Similarly, the restriction can be misleading in the way it creates consumer confusion. If a particular varietal wine is ordinarily a vintage product, consumers may not understand why the same varietal wine, produced by the same winery, is suddenly non-vintage. Simply put, the prohibition on vintage dating can unfairly mark a wine as inferior or unfamiliar.

WineAmerica is encouraged to see that the TTB has proposed this rulemaking and will be submitting comments in support of the change.  We encourage our individual members to do the same. 

The TTB is seeking public comments on the proposal from today until January 3.  To view the full notice and submit comments follow the link below.

Notice of Proposed Rulemaking on Vintage Dating

TTB Issues Final Approval of New Grape Variety Names for American Wines

The TTB has issued their final ruling on proposed grape variety names for use on domestic wine labels.  The TTB's statement on the ruling is below, as is the link to the final rulemaking.

This document adopts, as a final rule, a proposal to amend the Alcohol and Tobacco Tax and Trade Bureau regulations by adding a number of new names to the list of grape variety names approved for use in designating American wines, and to include in the list several separate entries for synonyms of existing entries so that readers can more readily find them.  These amendments will allow bottlers of wine to use more grape variety names on wine labels and in wine advertisements.

Effective Date: This final rule is effective November 28, 2011.

Read the Final Rule

Wednesday, November 2, 2011

Understanding the California ABC’s New Advisory for Wineries and Third Party Providers

Our friends and WineAmerica Supplier Member ShipCompliant have written a great analysis of the new advisory put out by the California ABC on "Third Party Providers". 

Understanding the California ABC’s New Advisory for Wineries and Third Party Providers

November 1st, 2011
By Jeff Carroll - VP of Compliance, ShipCompliant

The proliferation of “Third Party Providers” (TPP) within the wine industry has been significant over the past two years. Known otherwise as “Third Party Marketers”, “Third Party Advertising Agents” and “Marketing Agents”, they represent a new sales channel for suppliers whether in the form of “flash sales” or multiple product offer websites.

However, anybody that has operated as a TPP in California has done so under a great deal of uncertainty ever since the issuance by the California Department of Alcoholic Beverage Control (ABC) of an advisory in June 2009 that questioned the degree to which TPPs and wineries utilizing their services were acting in accordance with the laws and regulations of California. Most of that has changed with a new advisory letter issued today by the California ABC that provides clear guidance on how wineries and TPPs can work together.

This article lays out the key concepts every licensed seller (wineries and wine retailers) should understand and adhere to in order to work with non-licensed TPPs in a compliant fashion. We see this new advisory by the California ABC as a critical new document that will have a big impact for wine suppliers, consumers, and advertisers alike.


Criteria #1: Placement & Pricing
What the Advisory says: “all sales transactions involving Third Party Providers must ultimately be conducted by and under the control of a licensee. This includes decisions concerning the selection of alcoholic beverages to advertise or offer for sale, the pricing of those beverages, and the ultimate acceptance and fulfillment of the sales transaction.”
Best Practice: When engaging a TPP, the licensed seller should monitor how their products are being represented, and should also communicate to the TPP an allowable price (or price range) for advertisement to the consumer. Sellers should also communicate to the TPP the states in which they are licensed to ship so the TPP can filter products by the consumer’s state and also show the list of available states for each seller.

Criteria #2: Transparency
What the Advisory says: “The licensee responsible for the sale must be clearly identified and must ultimately control the transaction, including any decisions concerning acceptance or rejection of such orders.”
Best Practice: TPPs should clearly show to the consumer, prior to checkout, the name of the licensee for the transaction. For example, “This product is sold and shipped by Winery A, Sonoma, CA”. The licensee name should also be presented to the consumer on any generated consumer invoices.

Criteria #3: Acceptance
What the Advisory says: “The licensee responsible for the sale must be clearly identified and must ultimately control the transaction, including any decisions concerning acceptance or rejection of such orders.”
Best Practice: A good mechanism for ensuring acceptance is a batch email that is sent out on a periodic (daily or semi-daily, for example) basis. The email would contain the order request information and details, and the seller would have the opportunity to reject or accept the orders by responding to the email, or clicking on an accept/reject button. If a comprehensive compliance check has already been run against the seller’s shipping license, then the seller would likely not have many reasons to reject the requests.

Criteria #4: Fulfillment
What the Advisory says: “Licensees must also be responsible for, and must control, the fulfillment of orders and the shipment of alcoholic beverages from the licensees’ licensed premises or other authorized shipping point (such as a licensed public warehouse).”
Best Practice: Following the acceptance process, the seller then provides instructions for releasing the order to fulfillment. Licensees should ensure that the wine is shipped either from their licensed premise, or a licensed warehouse. The wine is then shipped, and a shipping notification is sent back to both the seller and the TPP. Following shipping notification, payment is captured.

Criteria # 5: Payment and Disbursement
What the Advisory says: “The control of funds from a transaction involving the sale of alcoholic beverages constitutes a significant degree of control over a licensed business. As such, while a Third Party Provider may act as an agent for the licensee in the collection of funds (such as receiving credit card information and securing payment authorization), the full amount collected must be handled in a manner that gives the licensee control over the ultimate distribution of funds. This means that the Third Party Provider cannot independently collect the funds, retain its fee, and pass the balance on to the licensee. The Third Party Provider should pass all funds collected from the consumer to the licensee conducting the sale, and that licensee should thereafter pay the Third Party Provider for services rendered.”
Best Practice: At the time of transaction, payment is authorized, but not captured. Following shipment notification, payment is captured, and funds settle either directly to the seller, or into a trust account that is controlled by the seller. The funds can then be disbursed to the parties (for advertising fees, fulfillment fees, technology fees, etc.) from the control of the licensed seller.

The new criteria for licensees working with TPPs is a paradigm shift that will work its way through the industry over the next few months. However, we believe that as licensed sellers and TPPs understand the change and put in to place mechanisms to insure they are operating compliantly, the new rules will help both TPPs and licensed sellers operate with certainty, at least in California.

It is important to understand that this new criteria only applies to licensees in California. However, California’s regulatory system often acts as a benchmark for regulators in other states and we will be watching closely to see how other states react to this collaborative effort between the ABC and the working group of industry experts it established to provide recommendations on the issue of TPPs in California. It should be noted that this new CA ABC advisory was issued today in the midst of a meeting of the National Conference of State Liquor Administrators (NCSLA) meeting in San Francisco. So, regulators in most states are now well aware of the new California advisory and the process they used to come to the solution.

In the end, what’s important for licensees working with TPPs to understand is that it is the licensed seller (the winery or retailer) that is ultimately responsible for the actions of the Third Party Provider, which makes it in the best interests of the licensee to be sure the TPP understands these new rules and that they are in compliance with them.