Friday, June 19, 2009

Comments on Excise Tax Increase

Family Wineries of Washington State is an organization representing 85 small wineries in Washington, as well as numerous affiliate and business members within the wine industry. We are focused on promotion of and advocacy for small wineries. We are writing to express concern over the recent proposal to increase alcohol taxes on wine for the purpose of funding health care reform.

The proposal to raise the tax per proof gallon of alcohol to $3.50 represents, depending on the tax class of wine in question, an increase of more than threefold over the current rate. Worse, since all of our members qualify for the Federal “Small producer tax credit” the actual increase for wine under fourteen percent alcohol by volume would be more than fifteen fold, assuming the small producer credit remains in place. This is an economic hit that small wineries are particularly unable to sustain in the present credit and business climate.

We are further concerned that, given the many studies showing positive rather than negative health benefits deriving from the moderate consumption of wine, the proposal to place wine taxation squarely in the category of alcoholic beverages more subject to abuse, represents bad public policy.

We support the Committee’s goal of attaining health insurance coverage for all Americans, but we believe that such an enormous burden must be shared as broadly and fairly as possible among all taxpayers for this effort to be successful.

Comments on Pre-Proposal 09-09: Internet Sales and Home Delivery

The following comments were submitted to the Liquor Control Board in response to their request for input regarding proposed rulemaking on issues surrounding direct shipment to consumers. Note the word "proposed". As noted in the text, we believe that some of the proposed areas for consideration are alarming, do not represent present concerns, and have not been specifically authorized by the Legislature. We will keep you posted as this rulemaking process procedes.

Family Wineries of Washington State is an organization presently representing over 85 small Washington Wineries. Many of our members are self distributed and virtually all rely on direct to consumer shipments for a significant part of their income, and consequently for their economic viability. We are therefore extremely concerned about the scope of this proposed rulemaking.

We are first concerned with one aspect of the background offered to justify the need for this proposal. It is suggested in the background section of the issue paper that the 2007 US Supreme Court decision “Rowe, Attorney General of Maine v. New Hampshire Motor Transport Association et al.” calls into question the State’s ability to regulate delivery of wine by common carriers. However, importation of alcohol into any State in violation of the laws thereof is prohibited by section 2 of the Twenty First Amendment to the United States Constitution. It is not reasonable to assume that the Rowe decision regarding the regulated substance tobacco supersedes the constitutional authority granted to states regarding the regulated substance alcohol. We are concerned that, to the extent this rulemaking is being predicated on such an assumption, it is unnecessary and may be somewhat alarmist.

Our second concern relates to the section of the issue paper regarding “other public safety measures to be explored” specifically:
  • restricting when alcohol may be delivered to residential addresses;
  • restricting the amount of alcohol that may be sold or delivered at any given time;
  • requiring that a delivery person works directly for the licensee; and
  • verifying and documenting the legal age of the person who purchases and/or accepts the delivery.
With regard to the first two points concerning timing and quantity of delivery, we would expect the Board to request evidence that these are presently issues raising problems in practice before proceeding to rulemaking. In the absence of such evidence, these two points would appear to invite regulations in search of actual problems to justify them.

The third point regarding requiring delivery by a winery employee is extremely disturbing. The elimination of a winery’s ability to ship to consumers via common carrier would be a devastating economic body blow to small wineries in already difficult economic times.

We do believe the final point regarding age verification to be an appropriate area of concern for rulemaking. We believe that both the statutory authority and the potential for adverse impacts are sufficiently existent for the Board to consider rulemaking on this point. We further believe that the information systems and technology are already in place to accommodate such regulations if they are drafted with reasonable care to work within the limits of such technologies.

Family Wineries of Washington State stands ready to offer input to the Board on sensible regulation of age and identity control for direct to consumer shipment of alcohol to consumers. Should the Board wish to expand the scope of the proposed rulemaking significantly beyond this issue, we feel it would be appropriate to seek direction to do so from the Legislature.

WSLCB References

Notice for Comment
Background Issue Paper

Monday, June 15, 2009

Comments on Proposed Amendments to Advertising Rules in WAC 314-52


As a matter of policy, FWWS maintains that public safety regulation of dangerous consumption of alcohol can and should be kept separate from economic regulation of alcohol manufacturers, importers, distributors and retailers. In fact, as FWWS has repeatedly testified before the Washington State legislature, the LCB’s regulation of private economic activity detracts from the LCB’s efforts to protect the public from the dangers of abusive consumption of alcohol. Regulation of private economic activity wastes scarce LCB resources that would be better used to protect public safety. Regulation of private economic activity also limits the economic growth of the Washington wine industry (which is an important state industry) and should therefore be pursued only when there is a clear public safety reason to do so. FWWS recognizes that the most difficult area to implement the distinction between beneficial public safety regulation and unnecessary economic regulation is advertising. FWWS supports reasonable restrictions on advertising that will have clear public safety benefits. In this regard, we appreciate the LCB’s effort to reduce the verbiage and eliminate many of the arcane restrictions in the existing advertising rules. However, the current proposal goes too far, is overbroad, will have unintended consequences, will unnecessarily hamper promotion and sale of Washington wine (an important state agricultural product), is unconstitutional, and is not necessary. As discussed below, FWWS will not support the proposed regulations without substantial revision to better balance protection of public safety with promotion of a legal and vital Washington state product. Our specific comments follow:

WAC 314-52-005 Purpose and application of rules.

WAC 314-52-005(1). The proposed revisions to the purpose of the regulations reflect a conceptual error that is repeated throughout the proposed regulations. The proper goal of the advertising regulations, and in fact the proper goal of all LCB regulation, is “to prevent the misuse of alcohol” as stated in the first part of the proposed new language. FWWS supports this goal. However, reducing youth exposure to alcohol advertising and marketing is not a goal, rather it is a means to an end (that end being protecting public safety by preventing the misuse of alcohol). If everyone always drank in safe, moderate amounts, there would be no public safety need to prohibit young people from drinking alcohol. For instance, minors are permitted in Washington State to drink alcohol at home with their parents and at church because there is little public safety concern in these circumstances. It is because alcohol can and is abused by some members of society that the state has banned the sale of alcohol to minors as a means to achieve the end (goal or purpose) of protecting public safety from abusive consumption of alcohol. Therefore, the second part of the proposed new language is not a legitimate purpose or goal and should be deleted. Other specific examples of this conceptual error are found elsewhere in the regulation as discussed below. The effectiveness of the regulations would be improved, and the unnecessary (and probably unintended) consequences of the regulations would be reduced, if this distinction between means and end was kept in mind while drafting the next version of the proposed regulations.

WAC 314-52-015 Mandatory statements.

WAC 314-52-015(1)(f). As written, the regulations prohibit reference to “any athlete” and “any athletic achievement.” Is the state going to ban advertisements of Greg Norman’s wine? Mario Andretti’s wine? Almost anyone can be considered an athlete, including many winemakers in Washington State whose names are proudly placed on advertisements for Washington State wine. Chateau St. Michelle used to claim in advertisements that their winemaker liked to climb mountains. Would that advertisement be illegal? This proposed regulation should be substantially limited or deleted.

WAC 314-52-015(1)(g). As drafted, the proposed expansion of the prohibition of advertisements depicting children to prohibition of advertisements depicting persons “under twenty-one years of age” is overbroad and will unduly (and unconstitutionally) restrict the promotion of Washington State wine. One cannot think of an effective advertisement that would be appealing to a thirty year old that might not also be appealing to a twenty year old.

WAC 314-52-015(1)(h) and (i). The proposed prohibitions on advertisements that imply “that consumption of alcoholic beverages is fashionable or the accepted course of behavior” or associate alcohol “with social achievement” are perhaps the most objectionable provisions in the proposed regulations. The fact is that Washington wine is fashionable. The fact is that drinking Washington wine is an accepted course of behavior. The fact is that Washington wine is associated with social achievement. Medical doctors tell us that wine has public health benefits. The governor of Washington State and the members of the Liquor Board all drink Washington wine in public. Surely these social achievers are fashionable and pursuing an accepted course of behavior? These provisions should be deleted.

WAC 314-52-015(2). There appears to be an error in this proposed provision. The provision should apply to “advertisements” not “labels.” To FWWS knowledge, the LCB is not proposing to amend the labeling regulations at this time. If the LCB does intend to amend the labeling regulations, please let FWWS know as we would have many additional comments.

WAC 314-52-030 Liquor advertising prohibited in school publications.

An exception should be provided for elementary and secondary school fund raising events. These events are targeted to adult donors. Small Washington wineries are regularly asked to contribute wine to such events and such events are an important source of funding for public and private schools.

WAC 314-52-040 Contests, competitive events, premiums and coupons.

WAC 314-52-040(1)(a). For the reasons discussed above, the second reference to “persons under twenty-one years of age” should be changed to “children.” It will be impossible in practice to distinguish a prize targeted at a twenty year old from one targeted to a twenty-one year old.

WAC 314-52-070 Outdoor Advertising.

WAC 314-52-070(2). This new provision may be well intentioned but is overly broad. Many existing signs at small family wineries are over six hundred square inches. Six hundred square inches equates to a sign that is only 24 by 25 inches in size. Many existing highway signs must be larger than this to be legible. At a minimum, exceptions should be provided for the primary winery signs on the winery building or tasting room, directional signs, “winery open” or “winery closed” signs, “adopt a highway” signs and similar signs.

From conversations with members of the prevention community, we understand that the concern is not with wineries with multiple signs, but with retailers who plaster their buildings with beer advertisements. The proposed regulation could be easily fixed by changing the word “sign” to “advertisement” in the definition of “outdoor advertising” and throughout the provision. It’s advertisements, not signs, that are the problem. The language “trade name and room name signs” should be deleted from subparagraph (1). Washington wine is not evil. Wineries need to be able to show people where they are located and promote their products.

WAC 314-52-070(5). This new provision also appears well intentioned but overly broad. The current requirement that the school or church must object should be retained. If it is not retained, many existing wineries will be in violation because they located their facilities near schools or churches without objection. (Believe it or not, not every church or school thinks that alcohol is evil or that wineries are a threat to children.) Similarly, the objection requirement should also apply for playgrounds or athletic fields. Will wineries currently located within 500 feet of playgrounds and athletic fields be forced to close? At a minimum, there must be an exception for existing wineries and other industry members and for situations where a new school, church, playground or athletic field chooses to locate near an existing winery.

Another way to fix this provision would be to change the definition of outdoor advertising in subparagraph (1) from “signs” to “advertisements” as suggested above.

WAC 314-52-113(2)(b) and (d). For the reasons discussed above, the references to “persons under twenty-one years of age” should be deleted. It will be impossible in practice to distinguish an “inflatable” or “costumed individual” appealing to a twenty year old from one appealing to a twenty-one year old.

WAC 314-52-120. Sponsorship of public and civic events.

WAC 314-52-120(3). The connection between “giveaways” and sponsorship of public and civic events held in public areas is not clear. All public and civic events are held in public areas. Many wine festivals occur on public property. Some small wineries like to give away items of nominal value such as T-shirts and corkscrews at such events. If a giveaway is otherwise legal and appropriate, why can’t it be given away in a public area? Subparagraph (3) is ill conceived and should be deleted. At a minimum, an exception should be provided for events holding a special occasion license.


In conclusion, FWWS supports reasonable restrictions on alcohol advertising to meet the legitimate public safety goal of reducing dangerous drinking. However, as described above, the current proposal goes far beyond limiting alcohol abuse and unduly interferes with commercial speech that is important to the marketing of a valuable Washington State agricultural product. As a wine producing state, Washington’s advertising rules should be a model of balance between promoting public safety and promoting economic growth. The proposed regulations are not balanced and should be substantially revised as suggested above.

WSLCB References

Notice for Comment
Drafted Proposed Language

Thursday, June 11, 2009

Food Safety Enhancement Act of 2009

A member of the FWWS Board received a post from the Yahoo Small Winery group regarding the Food Safety Enhancement Act of 2009. In a nutshell, the proposed legislation suggests a $1000 fee to cover the fee of an annual federal inspection of any winery. We encourage you to write your federal representatives using the below template:

I represent a small commercial winery in your district – *NAME OF WINERY* in *CITY*, WA. I wish to comment on the draft bill being titled, "Food Safety Enhancement Act of 2009".


Under 21 USC 350d, wineries are considered "food facilities" and are presently required to register with the FDA. We have no objection to registration, even though no human pathogens have been identified in commercial wine. Registration has been a simple process, with no fee involved.

We also have no objection to being inspected by another agency, even though we are already subject to inspection by the state LCB and the Federal TTB. However, the draft bill referenced above proposes a $1000 annual fee for the registration, ostensibly to cover the cost of annual inspections.

To Gallo or Hormel, etc., that fee is pocket change, and in fact, would not even cover the actual expenses of the inspection. But to a small winery such as ours (producing only *NUMBER GALLONS* gallons a year) it would consume a large percentage of what little profit we make on a bottle of wine. It constitutes 2 to 3 times the combined federal and state excise taxes! And just imagine the effect on the local “Mom & Pop” producers of jams and relishes who sell at local stores and Farmers Markets. Such a fee would put them out of business.

There are currently many small wineries in your district for which a $1000 fee will either inhibit growth or possibly precipitate shutdown. Certainly, the fee would be an additional barrier to entry for any start-up winery.

We agree that protection of the nation's food supply is critical, especially considering the recent problems with tainted beef, spinach, and peanut butter, but including wineries in such a program is misguided and unnecessary, and places an unfair and disproportionate burden on small wineries.

We urge you to recommend that small "food facilities" such as small wineries be exempt from the $1000 annual fee, proposed in the draft legislation.

Thank you for your consideration,


You can find your representatives at Simply fill in the template from above and submit your email to your reps.

Thanks to Dan Strickland from New River Winery in Lansing, NC for creating this template and posting.

Tuesday, June 2, 2009

Law Seminars International - House Bill 2040

Comments of Family Wineries of Washington State President Paul Beveridge on House Bill 2040

The following comments were provided by FWWS President Paul Beveridge during a June 2, 2009, tele-seminar sponsored by Law Seminars International:

Thank you Corbin. The specific detailed comments of Family Wineries of Washington State on the new law are contained in the written materials that are provided on the Law Seminar International's website and the FWWS website. As you will note from our written comments, we are very disappointed in the bill. We see it as three steps backward described as two steps forward. But rather than discussing in detail our specific concerns with the new law, I would like to make a general comment as a winery owner.

I would like to ask a central question: Is Washington wine a good thing? Would the world be a better place if more people drank Washington wine? I think how you answer this question determines where you come out on this new law and other wine law reform legislation. As a winery owner, am I a pillar of our agricultural economy in Washington who should be supported and promoted by the State? Or am I an evil drug dealer who should be discouraged and controlled?

In Washington, our wine laws were largely written after the close of prohibition when we had no wine industry in this state. The existing statute treats me like a drug dealer and requires the Liquor Board to meddle in my private economic affairs with little corresponding public safety benefit. The new law does little to change this presumption. It continues a legislative policy of economic regulation that has little to do with public safety or preventing alcohol abuse. Rather, it expands economic regulation because that regulation benefits a few (and by a few I mean a few established wineries and a few large distributors). It benefits these few at the expense of the many (and by the many I mean small wineries and, most importantly, wine consumers). It claims to provide a few new exceptions to these onerous economic regulations, but it does not do a very good job of drafting the exceptions, actually repeals some former exceptions, and in fact dramatically increases the Liquor Board's role in economic regulation. It continues the Kafkaesque presumption that unless an economic activity is expressly permitted in the statute, it is prohibited. That's no way to help promote an important state industry.

Perhaps the best (or actually worst) example of the unnecessary and counterproductive expansion of the Liquor Board's regulatory power over private economic activity is the supposed relaxation of the tied house rules on cross ownership between industry tiers. Presumably, this would allow restaurants and hotels to partner and invest with wineries. Presumably that would be a good thing. Perhaps we would get more good restaurants and places to stay in wine country. However, the new law giveth with one hand and taketh away with the other. It gives the Liquor Board the unprecedented power to cancel private contracts after they have been consummated if there is "undue influence" or "an adverse impact on public health and safety." Any person may file a complaint - even after the contracts have been signed and even after the buildings have been constructed. Who is going to make substantial investments with this cloud of uncertainty hanging over their head?

Another example is the supposed relaxation of the moneys' worth restrictions to allow wineries to give knick knacks to their retail customers. But the law does this in such a poorly drafted manner that it threatens a winery's longstanding right to give such "branded promotional items" directly to consumers. It means I may no longer be able to give my best customers a t-shirt or corkscrew when they purchase a case of wine. That's one step forward and two steps back.

I am pleased to hear today that the Liquor Board is going to interpret the new law in ways that may blunt some of its more onerous economic restrictions. However, the fact remains that this new law does little to move Washington wine law into the 21st century. We still have a Liquor Board that is statutorily required to limit competition and the economic growth of Washington wineries. The new law strengthens the regulation of private economic activity at the expense of local industry, agriculture, innovation and consumers. You can rest assured that Family Wineries of Washington State will be back at the legislature again next year seeking more meaningful change.