Archive for October, 2007
Doyle uses veto on Wisconsin budget bill
October 26th, 2007
There was a flurry of activity this week in Wisconsin related to DTC shipping and self-distribution. You will recall that last month a host of onerous shipping provisions were included in the House version of the budget. These proposals would have repealed the existing reciprocal shipping statutes, replacing them with an entirely unworkable and exorbitantly expensive permit system. Just this week, we were able to amend the language related to DTC shipping in the final budget package to an acceptable package that would have allowed for a reasonable permit fee, as well as a 12-case per consumer limit (up from the 3 case original proposal). Unfortunately, the local wine industry was unable to secure a fix to the language banning self-distribution, which remained in the final budget. Early this morning, Governor Jim Doyle vetoed the entire section dealing with alcohol statutes, saying
“While the changes to the distribution system included in these sections may help address some concerns with sales of alcohol to minors, they also may have stifling economic effects on the small wineries around the state, forcing them out of business…While I am vetoing these provisions, I support the concept of a three-tier distribution system. The language included in the bill, however, does not adequately address the needs of small entrepreneurial wineries…”
Wine Shipping Permit System Passes via Badger Budget Bill
October 25th, 2007
Governor Jim Doyle is expected to sign into law Senate Bill 40, the Wisconsin Budget Bill that passed both chambers of the state congress on Tuesday. Within an amendment to the budget bill are provisions that would strike the existing reciprocal statutes for direct shipping and insert language that creates a permit system for wineries from any state. If signed by Governor Doyle (which could happen “within days“), the budget bill would take effect seven days later.
As of today, Wisconsin is one of only three states, including Iowa and New Mexico, that have reciprocity requirements for wine shipping. Oregon and Illinois also recently passed legislation that removes reciprocity and creates permit systems that will take effect on January 1st and June 1st, respectively. Wisconsin currently only has an official reciprocity arrangement with the state of California. Because of this, wineries in other states technically can not ship into Wisconsin.
The new law would establish an annual volume limit:
No individual in this state may receive more than 108 liters of wine annually shipped under authority of the section. Each individual shall be responsible for compliance with this annual limit.
and a tiered permit system:
(a) For a permittee that ships more than 90 liters of wine annually to individuals in this state, $100.
(b) For a permittee that ships not less than 27 liters nor more than 90 liters of wine annually to individuals in this state, $50.
(c) For a permittee that ships less than 27 liters of wine annually to individuals in this state, $10.
See our previous post for background on this bill. Key changes from the original version passed by the Senate make this bill much less onerous.
Jim Barbuti joins as panelist in fourth Shipping Compliance Virtual Seminar
October 24th, 2007
Don’t miss out on the fourth installment of our quarterly Shipping Compliance Virtual Seminar on Friday, October 26th sponsored by ShipCompliant and Wine Business Monthly. Panelists include:
- Steve Gross, Director of State Relations, Wine Institute
- James H. Barbuti, Liquor Commission Examiner – New Hampshire State Liquor Commission
- Jason Eckenroth, President, Six88 Solutions
- Jeff Carroll, VP Compliance, Six88 Solutions
Only 150 out of 500 spots remain in this FREE virtual seminar.
Click here to learn more and to reserve your spot.
If you are already registered for the seminar, please send your questions in advance by completing our pre-seminar survey.
Indiana Clarifies Shipping Rules – Wine Institute Recommends Member Wineries Begin Shipments
October 15th, 2007
The Indiana Alcohol and Tobacco Commission, in response to a series of inquiries from Wine Institute’s Regional Counsel Nino Ciaravino and our local counsel John Keeler, today clarified their position with regard to an enforcement component of that state’s direct-to-consumer shipping statutes. Originally passed in March of 2006, Indiana’s DTC shipping statute contained provisions which had prevented WI from recommending that our winery members obtain the required permit and begin making shipments. A recent court ruling in Indiana removed one area of confusion that had related to an initial on-site visit requirement, as well as a potentially restrictive limitation for those who have a wholesaler in the state. An additional part of the law dealing with aggregate consumer case limits was more problematic and was not addressed by the courts. This requirement says that a consumer may receive no more than 216 liters (24 cases) of wine in any calendar year. This aggregate limit applies to multiple winery sources – rather than the more traditional quantity limits used in other states which limit that amount any one winery may sell to any individual consumer. Since there is no mechanism under Indiana’s statute for a winery to know if, in fact, a consumer has exceeded their 216 case limit from other sources, we have recommended wineries not make shipments until we could clarify that their winery licenses would not be in jeopardy.
Mr. Keeler, on behalf of the Wine Institute, met with the members of the Indiana Alcohol and Tobacco Commission, along with their staff, and presented our concerns. Subsequently, the Commission has agreed to the following outline for a winery to ship into the state and avoid any violation of the statutes: “…[T}he Commission, until further notice, [agrees] not to take enforcement action against the holder of a direct wine seller’s permit for violation of I.C. 7.1-3-26-14 (annual limit on wine received by a consumer), provided that: (1) the holder of the direct wine seller’s permit has not directly shipped in excess of 216 liters within the calendar year to the particular Indiana consumer; (2) the direct wine seller has no actual knowledge that the particular consumer has received in excess of 216 liters within the calendar year; and (3) at the time of the sale transaction, the consumer represents to the direct wine seller that the sale will not result in the consumer receiving in excess of 216 liters in the calendar year.”
With this very important clarification, Wine Institute is now in a position to recommend to our members that they proceed with obtaining the required permit in order to begin servicing their Indiana customers. Wineries should ensure that their order-taking procedures are modified to accommodate the special requirements outlined above in order to obtain the required assurances from the consumer that they are in compliance with Indiana’s rules. We thank you for your patience while we worked through these important details. We will be posting the necessary permit applications and background materials on our website in the next few days. For further information, please contact State Relations at (415) 356-7518.
Is the retail to consumer shipping battle headed to the Supreme Court?
October 15th, 2007
The issue of direct shipments by retailers to consumers has become a very hot topic of late. As of today, retailers can ship to less than half of the number of states to which producing wineries can ship. The Specialty Wine Retailers Association is fighting hard with both legislative efforts and litigation to open more states for retail to consumer shipments. The heated battle in Illinois, where out-of-state retailers recently lost the ability to ship to consumers under HB 429, raised national awareness to this issue.
The fundamental question is whether the decision in Granholm v. Heald that said states must treat in-state and out-of-state wineries evenhandedly should also apply to in-state and out-of-state retailers. R. Corbin Houchins recently made two posts (September 18th and October 5th) that do an excellent job of highlighting the legal questions that come into play when attempting to extend Granholm to retailers. In his October 5th post, Mr. Houchins indicates his disagreement with the reasoning of the recent and important Arnold’s Wines v. Boyle opinion, which upheld discrimination against out-of-state retailers in New York.
There is a very interesting recent article, with substantial background materials for lawyers who do not practice in the subject area, on FindLaw.com titled “The Fight Over State Laws Favoring In-State Alcohol Purveyors: Do Such Laws Violate the Dormant Commerce Clause?” that also examines the important ruling in Arnold’s Wines. This article is definitely worth reading.
The Court has had to examine the intersection between the dormant Commerce Clause idea and the Twenty-First Amendment a number of times. Two years ago, in the seminal case of Granholm v. Heald, the Court appeared to send a message that while the Twenty-First Amendment may indeed empower states in some ways, it does not trump the anti-discrimination, anti-balkanization norm of the Commerce Clause.
The federal district judge in the recent Arnold case in New York properly acknowledged the importance of Granholm. Nevertheless, the judge held that Granholm’s ban on state discrimination against out-of-staters applied only to state laws regulating producers of alcohol, not laws (such as the one at issue in the recent New York case) that regulated wholesalers or retailers.
The New York judge’s interpretation of Granholm is, I believe, in error.
The Arnold’s Wines case will likely impact current (Texas, California) and future (Illinois?) cases in the battle over retail to consumer shipments and could possibly end up in the Supreme Court, where a favorable decision could potentially open the legislative floodgates for retailers as Granholm did for wineries in 2005.
