Monday, January 31, 2011

Unified Wine and Grape Symposium

By Michael Kaiser

I just returned from the 2011 Unified Wine and Grape Symposium in Sacramento, California.  Once again, a very impressive and important event for the American wine and grape industry.  It is always a good opportunity for WineAmerica to connect with current winery and SAC members and develop some new contacts. 

The WineAmerica staff is going to be traveling quite a bit more in the next few months and we hope to see a lot of our current members and make more new connections as we continue to grow our membership this year. 

Here is where the WineAmerica staff will be in the coming months:

Jennifer Montgomery, Director of Political Affairs and Grassroots will be attending the Midwest Wine and Grape Conference in St. Charles, MO from February 4 -7.  She will also be attending the Cold Climate Conference in Minneapolis, MN from February 17-19.  Jennifer will also be at Wineries Unlimited in Richmond, VA from March 29-31.

Cary Greene, Chief Operating Officer and General Council will be attending the Oregon Wine Industry Symposium in Eugene, OR from February 21-23. 

Michael Kaiser, Director of Communications and Regulatory Affairs will also be attending Wineries Unlimited.  Michael will also be attending License to Steal in Geneva, OH from April 12-14 and the Pennsylvania Wineries Association Meeting in State College, PA from April 18-20.

We hope to see many of you at these various events.

Sunday, January 23, 2011

TTB Updates Rules for Approval of American Viticultural Areas

By Michael Kaiser

On Thursday, January 20 the TTB released updated rules on the approval process of American Viticultural Areas.  Essentially the process for approval is the same.  The applicants will still need to file a petition with the TTB with significant evidence to support the establishment of a new AVA.

The TTB issues a notice of proposed rulemaking in November 2007 requesting comment on the establishment of new rules.  Most notably, the TTB implemented a "grandfather" clause that would have allowed the use of geographic brand names even if the winery in question was not sourcing their grapes from the AVA in question.  This has been dropped in the final rule.

TTB decided against imposing specific minimum acreage size or vineyards density for new AVAs.  They did stress that the grape-growing in the proposed region be of sufficient scope.

The TTB is still stressing their ultimate authority to deny AVA applications and to require more specific information from petitioners.  They did not go as far enough to constrain the approval of smaller viticultural areas embedded with larger viticultural areas.

WineAmerica will have a more in depth analysis of this final rule after the Unified Wine and Grape Symposium next week.

To read the final rule please visit this website:  http://edocket.access.gpo.gov/2011/pdf/2011-1138.pdf

Thursday, January 20, 2011

TTB Announces Notice of Proposed Rulemaking Proposing 57 New Approved Grape Variety Names

Today the Alcohol and Tobacco Tax and Trade Bureau issued a notice of proposed rulemaking that would add 57 new grape names to the approved list of grape variety names.  


TTB is seeking comments on the grape names proposed to insure accuracy. They would like to hear from wineries that may want to use the names on their wine labels.  The majority of the grape names proposed are hybrid grapes.  


The grape names have been proposed by growers and winemakers in each case.  Some of the names are already allowed pending formal approval by the TTB.  The list of approved grape names has not been updated since 2002.  


Here is the link for the Notice of Proposed Rulemaking.  TTB is seeking comments until March 21, 2011.


TTB Notice of Proposed Rulemaking on New Grape Names




U.S. Wine Industry Consumer Direct Sales Survey


VinQuest™ 2011 - the U.S. wine industry's annual survey of consumer direct sales trends at the country's 3500+ bonded wineries.

Qualified representatives of any U.S. winery may participate in this survey by clicking here.
Your participation will benefit the entire wine industry.

In return for your time, all winery participants who complete this survey will receive a free copy of theVinQuest 2011 Research Summary -- a $149 value.

All information provided is completely confidential and will be used only to identify industry averages and important sales trends affecting U.S. wineries.

Thank you for your participation in this project.

For more information on the VinQuest research project, please click here.

Friday, January 14, 2011

We are headed to Grand Junction, Colorado next week for VinCO 2011 : Wine Business, Enology, Viticulture, & Horticulture. Cary Greene and Michael Kaiser are featured speakers at the event and WineAmerica Insurance will have a booth at the trade show. 

http://www.caveonline.org/content/VinCO-2011

Thursday, January 13, 2011

Recordkeeping & Reporting Reminder

We’re in the season for sending in quarterly and annual Reports of Wine Premises Operations (TTB form 5120.17) and TTB Excise Tax Returns (TTB form 5000.24) again, so we thought it would be a good time for a brush up on TTB recordkeeping and reporting requirements.  As an arm of the Treasury Department, TTB functions principally to protect and collect federal revenue.  Recordkeeping and reporting are their primary tools for carrying out this function.

TTB welcomes being contacted by phone and email.  They want to work with wineries to ensure they have the tools to comply with agency recordkeeping and reporting requirements.  This is important in that over the past few years, TTB has begun auditing wineries with greater frequency.  The audit teams seem to have become more aggressive, in recent years, in identifying errors in recordkeeping and reporting.  Things that might have gone unnoticed in past audits have now become the source of fines and penalties.  This can be frustrating, especially for wineries that have operated relatively incident free for many years.  Compromises between $10,000 and $50,000 are no longer uncommon for smaller wineries.

Bearing this in mind, it might be advantageous to take a look at your TTB compliance practices, particularly with respect to TTB recordkeeping and reporting.

What are the basic small winery reporting requirements?
Wineries must file both Reports of Wine Premises Operations (TTB form 5120.17) and Excise Tax Returns (TTB form 5000.24).

Operations reports (5120.17s) must be filed either monthly, quarterly, or annually, depending on your expected production and excise tax liability.  In accordance with TTB regulations, the default position is that wineries must file monthly reports.  Wineries that have less than 60,000 gallons of wine on hand at any given time (bulk and bottled), and who pay less than $50,000 in excise tax annually are eligible to file quarterly operations reports.  Wineries that have less than 20,000 gallons of wine on hand at any given time (bulk and bottled), and who pay less than $1,000 in excise tax annually are eligible to file annual operations reports. 
“Eligibility” does not mean that you can automatically file quarterly or annual reports.  Wineries are obligated to explicitly notify TTB of whether they intend to file operations reports by calendar quarter or calendar year.  Wineries can do so either by using a letter notice before commencing operations for a given year, or by indicating their intent in the Remarks section of form 5120.17 (Section X).  According to form 5120.17, operations reports are due “by the [15th] day after the end of the report period,” i.e., after the end of the calendar quarter or calendar year.  For a basic tutorial on 5120.17, go to http://www.ttb.gov/wine/new_guide.shtml.

The operations report is not particularly difficult to fill out but you must do so carefully and ascertain that you have good justifications for each and every entry.  You must report every drop that comes into your bond: either through bond to bond transfers, through production of wine, or even through volume increases resulting from sweetening or fining.  You must justify that you have that volume of wine in inventory (bulk or bottled), or that you removed it from bond (as a taxpaid removal or bond to bond transfer).  There are some allowances for evaporation or other losses, but ordinarily bulk and bottled losses must be recorded.  You must be able to trace back all of your entries to winery records.  Remember that the auditor does not spend every day in your winery and does not understand shortcuts you might take.  So make your recordkeeping as transparent and direct as possible.

Excise tax returns (5000.24s) are generally filed either semi-monthly (twice-monthly except September when three returns are filed) or quarterly depending on the winery’s expected and previous annual tax liability.  In accordance with TTB regulations, the default position is that wineries must file semi-monthly returns. 

Wineries that are eligible to file quarterly 5120.17s (less than $50,000 in excise tax) and that were eligible to file quarterly 5120.17s the preceding year (less than $50,000 in excise tax) may choose to file quarterly 5000.24s.  Under certain conditions, wineries eligible to file annual 5120.17s (who pay less than $1,000 in excise tax) may also be permitted to file annual 5000.24s.

For further information about eligibility for annual excise tax filing, contact TTB’s National Revenue Center (“NRC”).  If you choose to file on a quarterly basis, the last day for paying excise tax and filing returns is the 14th day after the end of the calendar quarter.  According to TTB regulations, annual excise tax forms together with tax payment are due “within 30 days after the end of the calendar year.”  For a basic tutorial on form 5000.24 go to http://www.ttb.gov/forms/helpful_hints500024.shtml.  The TTB website has a page that summarizes all filing due dates for excise tax returns: http://www.ttb.gov/tax_audit/fed_ex_tax_due.shtml.  This is particularly helpful for semi-monthly excise tax filers given the complexity of filing deadlines.
Remember, to avoid fines and penalties it is critical that reports have an original signature from a winery representative with appropriate signing authority (approved TTB form 5000.8), and that reports are filed prior to mandatory deadlines.

What are the basic small winery recordkeeping requirements?
TTB regulations require wineries to retain all excise tax returns, operations reports, and records for not less than three years.  Winery records mandated by TTB include all “wine transaction records” (recorded in either wine gallons or liters) – a broad term that covers essentially any record that verifies any operation or production activity on the winery premises.  These records include: (1) bottling operations records; (2) taxable and non-taxable removal records; (3) label information records (varietal, vintage, appellation of origin, analytical data, date of harvest); and (4) records of any material or operation appearing on 5120.17s (including date of receipt, quantity received, name of party received from, date of use).  In each case, records should be clear and complete enough that TTB auditors can verify every activity on the winery premises for the past three years upon examination.

Remember, TTB auditors have only a few days to conduct a review and make an assessment.  Clarity and thoroughness make their job easier.  While no doubt a chore to maintain, transparent records and reports are items TTB is likely to remember.

Thursday, January 6, 2011

Date Change for the 2011 Wine and Grape Policy Conference

The 2011 Wine and Grape Policy Conference that was scheduled from March 20 - 23, 2011 has been rescheduled to May 8 - 11, 2011. 

As previously announced, the Conference will be held at the Phoenix Park Hotel on Capitol Hill in Washington, DC.

The annual Wine and Grape Policy Conference in Washington, DC is an important opportunity for members of WineAmerica and Winegrape Growers of America to discuss and evaluate Federal policy issues of interest to our industry, and to communicate our stances directly to Members of Congress and the Administration. These meetings play an important role in the critical process of relationship building, which is central to our mission of favorably influencing policy outcomes. It is also a great opportunity for wine industry leaders from across the country to network with each other in formal and informal settings.

The Conference is being rescheduled due to a change in the 2011 Congressional Calendar. In early December, when the Congressional Calendar was published, it came to our attention that the House of Representatives would not be in session the week of March 21.  Traditionally, March is one of the busier months for Congress, so when we set the dates for the meeting last April we anticipated that the House would be in session as it historically has.  In order for us to have a successful conference, Congress needs to be in session.  We always have at least one Member of Congress speak at the Conference, and the only way for our Congressional visits to be truly productive is for Members and their staff to be present.  Additionally, the Taste the Wines of America reception has seen increased attendance from Members of Congress in the last few years, and we would like for that to continue.

If you have already booked a room at the Phoenix Park Hotel it has been automatically transferred to the new dates.  If you would like to book your room now the hotel has set up a weblink for easy booking.  It is:  https://gc.synxis.com/rez.aspx?Hotel=17379&Chain=5388&arrive=5/7/2011&depart=5/11/2011&adult=1&child=0&group=14571.  Additionally, you can book your room by phone.  Call the hotel at 202-638-6900 or toll free at 800-824-5419 and reference the Wine and Grape Policy Conference or use Group Code 14571 to reserve your room.  We anticipate Conference Registration to start April 1. 

If you have any questions about the 2011 Wine and Grape Policy Conference contact Michael Kaiser at mkaiser@wineamerica.org or at 202-783-2756.  We hope that you will join us in May for this very important meeting. 

Preliminary Agenda

Sunday, May 8

11:00 am – 5:00 pm:     WineAmerica Executive Committee Meeting

2:30 pm – 5:00 pm:      WGA Meeting

5:00 pm – 7:00 pm:      WineAmerica/WGA Welcome Reception

Monday, May 9

8:00 am – 5:00 pm:       Policy Meetings and Guest Speakers

Tuesday, May 10

8:00 am – 11:00 am:     Concurrent WineAmerica/WGA Board Meetings

11:00 am – 5:00 pm:     Congressional Visits

6:00 pm – 8:00 pm:      Taste the Wines of America Wine Reception

Wednesday, May 11

8:00 am – 11:30 am:     State Associations Council Meeting

11:30 am – 5:00 pm:     Additional Congressional Visits






Tuesday, January 4, 2011

Fall 2010 Unified Agenda of Federal Regulatory and Deregulatory Actions

By Michael Kaiser

Twice a year the Federal Government publishes what is known as the "Unified Agenda of Federal Regulatory and Deregulatory  Actions" or simply the "Unified Agenda".  This document contains the the regulatory agendas for all Federal agencies.  This obviously includes TTB. 

The TTB plans on doing quite a bit of regulatory activity in FY 2011.  Back in 2007 the TTB put out a notice of proposed rulemaking that would require a serving facts statement be placed on alcohol beverage labels.  WineAmerica submitted comments (authored by former WineAmerica President Bill Nelson and myself) against this proposal.  It is our understanding  that this rulemaking has been finished for quite some time, but has not had the final approval from the Department of Treasury.  Clearly over the past few years the Department of Treasury has had more pressing issues to deal with, however the TTB anticipates a final ruling on "serving facts" sometime in FY 2011.  TTB also anticipates having a final rule adopted on mandatory allergen labeling.  If completed this year this rule will take effect on the same date as the serving facts regulatory changes. 

According to the Unified Agenda, TTB will also do the following in FY 2011:

In FY 2011, TTB will continue to act on petitions for the establishment of new American viticultural areas (AVAs) and for the modification of the boundaries of existing AVAs. TTB also will seek Departmental publication approval of a number of other wine labeling rulemaking documents for public comment in FY 2011, including a notice of proposed rulemaking to adopt new label designation standards for wines now generally described as "wine with natural flavors," and an advance notice of proposed rulemaking seeking comments on a petition requesting that the regulations be amended to limit the use of American appellations to wines produced entirely from U.S. grapes.

All of this is in the planning stages currently, we do not know if any of this will be completed as anticipated.  Obviously this could mean big changes for wine labeling in this country if these rules are finalized this year.  WineAmerica will work with our members to implement these proposed changes once (and if) they are finalized.  If you have any questions about this, or any other TTB related matter please feel free to contact me at mkaiser@wineamerica.org. 

Monday, January 3, 2011

Why Freeman v. Corzine Is Important, and Why Your Tasting Room, Event and Festival Privileges Are Constitutional


By Cary Greene

Wines & Vines recently posted a somewhat confusing piece about the Third Circuit’s recent Freeman v. Corzine decision and we wanted to clear up why WineAmerica believes this decision is important and how we think wineries should respond.

The Freeman decision doesn’t justify rewriting existing state winery laws, or rethinking long-held beliefs about the state of alcohol beverage regulation.  As wineries, we still need to advocate for thoughtful state policy approaches that better allow us to reach consumers since the existing distribution system doesn’t accommodate many of our products all that well.  We also need state legislatures to understand that adding flexibility to the three-tier and control systems is wise policy when deployed carefully.  At the same time, Freeman will require us to better defend the hard-fought privileges wineries have sought and won throughout the past three decades.

In the run up and aftermath of Granholm v. Heald, our industry’s state legislative focus has been mainly directed toward direct-to-consumer shipping.  While we still have our work cut out for us making sure that direct shipping laws work effectively, we have much to be proud of with respect to our achievements on shipping.  But direct-to-consumer shipping is a discrete policy issue and the constitutional defenses are relatively straightforward—evenhanded interstate shipping for all wineries promotes consumer choice and gives small wineries a profitable method for selling in interstate commerce.  When dealing with the privileges threatened by Freeman, we have to contend with a much broader set of policy choices and a far more technical constitutional defense.

Without question, Freeman represents a substantial threat to the status quo with respect to winery tasting room, self-distribution, event and festival privileges, among others.  The decision puts at risk a menu of winery privileges that are principally offered to local winery licensees, but not out-of-state producers.  These privileges also tend to be crucial to winery profitability in a way that even direct-to-consumer shipping is not.  While many wineries choose to make interstate shipping part of their business model, nearly all wineries rely on their tasting rooms, winery events, farmers market sales and state wine festivals—the raw components of agritourism—for their continued existence.

These privileges can and must be preserved in their current form. 

If the current equilibrium is suddenly thrown into disarray, as the Freeman decision has done in New Jersey, the headwinds are likely to be severe.  Not because states don’t want to see their local wine industries continue to thrive: most if not all do.  But if the menu of local winery privileges is suddenly revisited whole-cloth—tasting room, and self-distribution, and restaurant, and event, and festival, and farmers market, and other local privileges—and the state is told they must offer these privileges to both in-state and out-of-state wineries, the process of picking and choosing and horse-trading with local wholesalers and retailers will be agonizing.  Maybe local wineries will keep their tasting rooms, but lose their ability to host concerts and weddings.  Whole categories of choices that wineries currently use effectively to keep their businesses afloat could disappear if the logic of Freeman goes unopposed.  Wineries must take the threat posed by Freeman seriously and develop a sense of the countervailing arguments that justify and constitutionalize their tasting rooms and other local winery privileges.

The Freeman court found it unconstitutional to offer tasting outlet and self-distribution privileges to local wineries exclusively because “[i]n-state wineries are…allowed to skip the first two tiers—wholesalers and retailers—while out-of-state wineries must involve both of these tiers in order for their wine to reach consumers.”  In other words, Freeman concludes that in-state winery tasting room outlet and self-distribution laws are intended to insulate local wineries from competition.

So why is Freeman’s ‘paint-by-numbers’ approach to constitutional law wrong?  Why are tasting room privileges offered on an un-evenhanded basis so different from direct-to-consumer shipping privileges that the Supreme Court has found must be offered evenhandedly?

The problem begins with Freeman’s faulty premise that tasting room outlets are protectionist.  As Freeman itself acknowledges, there are occasions where state laws serve “a legitimate local interest” that cannot “be served as well by available non-discriminatory means.”  That is exactly the situation here.

Unlike direct shipping, tasting room privileges are functionally different in the hands of in-state and out-of-state businesses:

When operated by local wineries, tasting rooms are essentially farm stands—they promote of local agriculture; they promote the regions agricultural potential; they promote the preservation of local rural landscapes.  These are their “legitimate local purposes.”

On the other hand, when operated by out-of-state producers, tasting rooms are in reality wine bars with on- and off-premise sales.  Their natural competition isn’t local wineries.  It’s local retailers.  For this reason, offering out-of-state wineries tasting room privileges—the available non-discriminatory alternative—doesn’t rectify the apparent discrimination identified by Freeman, it creates a market advantage for local retailers that happen to be out-of-state wineries.

This approach to constitutionality may require a bit more texture than that acknowledged by the Third Circuit in Freeman, but we believe it more accurately reflects how local winery privileges play out in the real world.  The context of winery direct-to-consumer shipping is different than the context for tasting room and other local winery privileges.  Wineries must learn to articulate that difference or else face the risk of losing the privileges that allow them to maintain their viability.

Launch of the WineAmerica Blog

With the new year, we’re transitioning to a new format that we hope will allow us to communicate more easily with our members.  We also hope that by transitioning to a blog, it’ll be easier to find our old postings.  Wineamerica.blogspot.com together with our new Facebook page, will help us simplify our currently somewhat clumsy communication system of newsletters and ezines delivered via email.  WineAmerica members will also be able to post comments and questions on the blog.  We look forward to hearing your feedback.