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.