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Notes on Wine Distribution v.32

The latest version of “Notes on Wine Distribution”, by R. Corbin Houchins, is now available. Release 32 includes updates on legislation, litigation and general discussions on available distribution channels for wine. This release includes substantial changes, including new sections on age and identity, facial neutrality, and logistical support services, as well as updates to state summaries in Arizona, Delaware, Kansas, Kentucky, Maine, Maryland, Massachusetts, Montana, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, Tennessee, Texas, Virginia, Washington, and Wisconsin. Read about these and other updates that affect the way wine is sold and shipped within the United States.

If you are at all interested in the shipping and distribution of wine, this is an excellent resource that is well worth reading.  You can view the most recent version of the document anytime by visiting the ShipCompliant Blog and clicking the link located under “Compliance Resources”, or by visiting CorbinCounsel.com and clicking on the home page link, “Notes on Wine Distribution.”

Click Here to View NWD Release 32

Siesta’s Over

On January 26th, the Fifth Circuit Court of Appeals ended the puzzling status of interstate retailing in Texas created by the lower court’s decision in Siesta Village Market. The district court had ruled that out-of-state retailers had a Commerce Clause right to sell wine to Texas consumers, but only wine that had been purchased from a Texas-licensed wholesaler.

The decision is another example of uncertainties resulting from the principal unresolved Granholm question: How does one reconcile the location-neutrality principle with the infamous North Dakota dictum to the effect that states may discriminate against out-of-state wholesalers? The Fifth Circuit’s answer, like that of the Second Circuit, is that Granholm extended Commerce Clause protection to wineries, but not to wholesalers or retailers, because national markets in the lower tiers would make it impossible for a state to protect the “traditional three-tier system.” As the Court of Appeals judge said about setting aside fundamental economic policy embodied in the dormant Commerce Clause to follow a judicial aside that was not part of the Granholm holding, “That language may be dicta. If so, it is compelling dicta.”

Post-Granholm litigation shows clearly enough that judges, though not bound to follow dicta, will elevate it to persuasive precedent when it coincides with their value systems. The values question is whether states’ asserted 21st Amendment right to maintain a privileged middle tier trumps the Commerce Clause policy against differential treatment of in-state and out-of-state economic interests. All one can say at this point is, “to be continued.”

by R. Corbin Houchins, CorbinCounsel.com

Siesta's Over

On January 26th, the Fifth Circuit Court of Appeals ended the puzzling status of interstate retailing in Texas created by the lower court’s decision in Siesta Village Market. The district court had ruled that out-of-state retailers had a Commerce Clause right to sell wine to Texas consumers, but only wine that had been purchased from a Texas-licensed wholesaler.

The decision is another example of uncertainties resulting from the principal unresolved Granholm question: How does one reconcile the location-neutrality principle with the infamous North Dakota dictum to the effect that states may discriminate against out-of-state wholesalers? The Fifth Circuit’s answer, like that of the Second Circuit, is that Granholm extended Commerce Clause protection to wineries, but not to wholesalers or retailers, because national markets in the lower tiers would make it impossible for a state to protect the “traditional three-tier system.” As the Court of Appeals judge said about setting aside fundamental economic policy embodied in the dormant Commerce Clause to follow a judicial aside that was not part of the Granholm holding, “That language may be dicta. If so, it is compelling dicta.”

Post-Granholm litigation shows clearly enough that judges, though not bound to follow dicta, will elevate it to persuasive precedent when it coincides with their value systems. The values question is whether states’ asserted 21st Amendment right to maintain a privileged middle tier trumps the Commerce Clause policy against differential treatment of in-state and out-of-state economic interests. All one can say at this point is, “to be continued.”

by R. Corbin Houchins, CorbinCounsel.com

Texas to Roll Out New Volume Limits

New rules in Texas should benefit Lone Star consumers, and also make life a little easier for wineries. On June 19th, Texas Governor Rick Perry signed into law HB 1084, which will take effect on September 1st, 2009. Under the new rules, three different volume limits replace the existing set of two limits for licensed shippers.

Currently, licensees may ship up to three gallons of wine within “any 30-day period”. This rule was perhaps the most difficult, and most commonly violated rule in a compliance check out of all state limitations. First, three gallons translates to just over 15 standard 750 mL bottles, whereas most states stick to a standard case or two-case limit. More importantly, the “rolling” 30-day period was very problematic to track for wineries that did not use an automated compliance solution. The majority of state volume limits are tracked on a calendar (month or year) basis, but this effectively created 365 different 30 day periods to track.

The new bill establishes three different volume limits for direct shipments to Texas:

  1. No more than nine gallons (46 bottles)  to the same consumer within any calendar month
  2. No more than 36 gallons (181 bottles) to the same consumer within any 12-month period
  3. No more than 35,000 gallons (14,721 cases) to  all Texas consumers annually

Although some coverage of the changes has highlighted a “tripling” of the volume limit (from 3 gallons to 9 gallons), the annual consumer limit actually stays the same at 36 gallons. According to the House Research Organization’s bill analysis,

Increasing from three to nine gallons the maximum amount of shipments to the same consumer within a month would acknowledge the unique seasonal requirements of wineries as well as the realities of Texas summers. Wine is a perishable product that spoils at temperatures above 75 degrees Fahrenheit, so many out-of-state wineries are reluctant to ship to Texas, especially during July and August.

CSHB 1084 would not increase the overall amount of wine that a winery or out-of-state shipper could ship to the same consumer per year. In fact, it would codify in statute the current limit of 36 gallons per year, which is based on the existing restriction of no more than three gallons per month. It simply would allow wineries to ship somewhat larger quantities of wine to Texas consumers during the cooler seasons of the year.

An Unfortunate Direct Shipping License Clarification in Texas

Wineries applying for a Texas Direct Wine Shipper’s Permit or renewing their existing permit must now pay a surcharge of $160 in addition to the $75 annual permit fee. Currently the Direct Shipper’s permit is renewed annually. However, beginning January 1, 2009 all Direct Shipper licenses will be valid for two years. Applicants will have to pay license fees and surcharges for 2 years totaling $470 when applying for a permit in 2009. The Texas Alcohol Beverage Commission added significant surcharges to a wide range of licenses affecting both in-state and out-of-state applicants.

Annie Bones, State Relations – Wine Institute

The Lone Star State: To File Monthly or Quarterly, that is the Question

As was reported earlier this week, the Texas C-240 Direct Shipper’s Report will change from a monthly to a quarterly return for orders shipped after September 1st. However, we’ve received a number of questions about how to report shipments for the month of August.

August is the last month that will require a monthly return, which will report shipments to Texas consumers only for the month of August. This report is due September 15th, and should include tracking numbers for each shipment. The newly updated quarterly frequency will commence on September 1, 2008, including orders shipped from September through November, and is due December 15th. Also, please note that the new quarterly frequency is based on Texas’ fiscal year (beginning September 1st), not on the familiar calendar year (beginning January 1st), therefore the quarterly reports will be due on the following schedule: December 15th, 2008; March 15th, 2009; June 15th, 2009; etc.