TTB Newsletter May 11, 2011 Special Edition

TTB Accepts $1.9 Million to Settle Violations of the Federal Alcohol Administration Act

Dear FWWS Member,

When the subject of the state's tied house restrictions on wine trade are debated, opponents to reform of these prohibition era laws often object by citing the potentially negative trade practices that could result in their absence. During the recent debate over Initiative 1100, which would have done away with these restrictions at the state level, opponents raised the specter of all sorts of disastrous results, including retailers extorting gifts from wineries and the infamous "slotting fees," or charging of rent for shelf space. FWWS pointed out at the time that all these undesirable trade practices would remain illegal under federal law even if the much broader state restrictions were eliminated.

The linked recent TTB circular shows not only that we were correct in our assessment of federal law, but further that these laws have teeth and that the federal government is serious about enforcing them.

As we move the debate forward and attempt to make progress in tied house reform through legislation such as our voluntary craft winery proposal, we hope that this information will give you confidence in defending the position that, despite the claims of those who favor the status quo, the sky will not fall if Washington State’s over-broad and unduly restrictive tied house laws are eliminated in favor of the much more fair federal tied house rules.

The FWWS Board

Kent Cornucopia Days Wine Tasting

Hello Family Wineries,

We have exciting news! We have been asked to organize a wine tasting event for the Kent Cornucopia Days street festival to run for three days in July: Friday, July 8th thru Sunday, July 10th. Our sales and tasting plan will be similar to the one we organized for the Enumclaw Chocolate Festival two years ago. We are hoping to have 20 FWWS wineries participate and expect to do a brisk tasting business during the festival. We are told the attendance approaches 250,000 people with most attending on the weekend. The event organizers are very excited about having wine tasting this year.

The event is organized and run by the Kent Lions Club and is an extremely big deal for them. The event is run as a charity fund-raiser and entertainment event for the city and the area with lots of food and crafts booths. The Lions Club is very happy to have us on board and has arranged for us to be located in a very attractive parking lot next to the park on Railroad Ave. This is the heart of the event and should give us good foot traffic.

Once again this will be a scrip sales event. Tasting prices will be at the discretion of the winery and will be split with FWWS. While we will also have a wine store for off-premise sales, the scrip sales should make this event substantially more economically attractive for wineries than a typical event with bottle shop only. More details on the event including scrip and wine shop setup will be forwarded later to participating wineries.

Please email us at board@familywineriesofwashington.org to reserve your place. Though by the time of the event charging table fees for special occasion events will likely be legal, we will not be charging a table fee. We may, depending on interest, charge a modest place-holding fee that would be fully refundable at the end of the event, assuming you participate for the full three days. Since this event will be open to FWWS member wineries only, certificates of insurance will not be required (the organization maintains festival insurance covering members at FWWS events as another benefit of membership).

This is an outdoor event, so we will also be providing tents to protect us from the sun.

Estimated run times for the event are Friday, 4:00-8:00 pm; Saturday, 1:00 – 8:00 pm; and Sunday, 1:00 – 6:00 pm.

More info to come as we get closer to the event.

HR 1161: The Great Constitutional Head Fake

Though we are acting locally in the battle for sanity in wine trade, this is what the opposition is doing nationally. Please write your congressional representative and Senators!

http://bit.ly/hhDcFX

Spring Safety and Regulatory Update Part Two

Licensing and Agent Requirements

There has been considerable confusion recently with regard to the licensure requirements for winery owners and employees when pouring or selling their wine. The locations in question include the following:

• Winery on-premise (at the licensed winery facility) tasting rooms
• Winery off-premise or secondary tasting rooms
• Special occasion licensed events
• Specialty beer and wine shops
• Restaurants with spirits/beer/wine licenses
• Restaurants/stores with beer/wine licenses
• Grocery stores falling under the new sampling law
• Your distributor’s premises
• Industry trade shows where wineries pour for licensees (distributors or retailers)

Here is what you need to know about your requirements for each location:

Class 12 Server’s Licenses obtained through “Mandatory” Alcohol Server Training (MAST)

Of the above locations, the only ones for which Class 12 permits are required for winery owners and employees acting for the winery are winery off-premise tasting rooms and grocery stores using the new sampling permit. Class 12 permits are not required at your on-premise tasting room. The requirement for such server permits at off-premise tasting rooms and grocery stores was specifically included in the laws enabling each of these programs.

FWWS has consistently drawn a line between liquor laws focusing on public safety, which we support and seek to make simpler and more effective, and liquor laws restricting trade in wine, which we generally oppose. Server training clearly falls in the first category. Similar to first aid and CPR training, it is difficult to see any downside of MAST for you and your employees at either your on-premise tasting room, or at special occasion events where we can help non-industry members of non-profit organizations understand the rules and hazards of pouring wine. The FWWS Board encourages you to take a mandatory alcohol server course. These are available from numerous private vendors and now are also available online. Information on MAST providers can be found at the following link:

http://bit.ly/hTCEmI

Class 8 permits

Class 8 permits allow winery owners and their employees to pour wine for licensees at trade shows which are not open to the general public. This permit appears to have been developed as a way of getting around the “money’s worth” prohibition in the liquor statute as well as the general prohibition on giving away alcohol for free in cases where admission is not charged. Since alcohol has a monetary value, and since there is no specific carve-out for trade shows (as there is, for example, for giving away a sample bottle of wine of each vintage), pouring wine for licensees is, in this case, an illegal gift.

This is yet another unintended consequence of the blanket money’s worth prohibitions in the statute. Our Craft Wineries proposal, which provides a comprehensive solution to the money’s worth issues, has faced consistent opposition from some in the industry. We will speak to the liquor Board in the coming months to explore their views on finding an alternative to class 8 permits for such trade shows. Most likely this would involve yet another “carved-out” exception to money’s worth restrictions. Given that trade tastings are vital to wine promotion, involve only licensees, and benefit all tiers of the industry, we do not see any reason that this would be a controversial approach to replacing the Class 8 permit, which serves no other purpose.

Agent’s Licenses

It has come to our attention that the WSLCB interprets current law to require that winery owners and their employees (exception: winery owners whose business is structured as a sole proprietorship) must obtain a WSLCB agent’s license to “canvass for, solicit, receive or take orders for” wine. Rather than confuse this issue with a discussion of the present interpretation, we will look to the near future. There is a provision in this year’s “omnibus” liquor law that specifically clarifies that winery owners are not required to appoint themselves or their employees as “agents” for the purpose of representing themselves in soliciting and taking orders for wine. This bill is presently on the Governor’s desk, and she is expected to sign it. We have clarified with WSLCB enforcement staff that, assuming this bill is signed as expected, the WSLCB does not intend to enforce the current interpretation in the interim before rules (WACs) are adopted to implement the new law.

We should point out that an agent’s license will still be required for non-employees who “canvass for, solicit, receive or take orders for” your wine - in other words for the sort of people and activities that many of you probably currently have agent’s licenses in place for.

Spring Safety and Regulatory Updates

Dear FWWS Member,

We have a fair amount of information to share with you regarding safety, regulatory, training and licensing issues. Since there are several topics to cover and the information is somewhat detailed, we will be breaking these topics up into several posts. This first post relates to the impending regulation of SO2 gas.

SO2 Regulation Update

The FWWS Board has been working proactively with the WSDA for over a year in regard to the inevitable regulation of sulfur dioxide used as a fumigant in wineries. We understand that WAWGG and other organizations have also been following this issue. We are presently working with WSDA staff in their pursuit of a grant to develop best management practices for wineries using SO2. Since we have a fair amount of information to share, and, more importantly, so that we don’t “bury the lead”, here are two important points:

1. What we are talking about here is gaseous sulfur dioxide used in fumigating barrels. All sulfur products except SO2 gas which are used in wine additions as an anti-oxidant or anti-microbial are Generally Recognized as Safe (GRAS) by the USDA and are not being considered for further regulation at this time. These other non regulated sulfur products would include Potassium Metabisulfite, Sodium Bisulfite, and Liquid SO2.
2. There are presently no formulations of gaseous SO2 that are “labeled” for use as a pesticide in Washington State so, at the present time you do not need to do anything specific for regulatory compliance. Obviously you should continue to use all appropriate and common sense worker protections measures such as protective clothing, proper ventilation and respirators (acid/gas or air supplied).

Background

Fumigants such as sulfur dioxide are regulated as pesticides under the FIFRA (Federal Insecticide Fungicide and Rodenticide Act). Compliance with this act within Washington State is administered by the Washington State Department of Agriculture. Factors used in considering labeling restrictions for a specific substance include such things as physical properties (i.e. SO2 gas is heavier than air), cumulative risk, effects on drinking water, and human health risks (an obvious concern with SO2 gas).

In 2007 the EPA determined in a Registration Eligibility Decision that regulatory rules for inorganic sulfites, which include sulfur dioxide, sodium bisulfite and potassium metabisulfite, could be re-issued, provided that label rules are followed and that products are properly labeled.

In February of 2010, WSDA issued an “Important Notice to Washington State Wineries and Sulfur Dioxide Use Fact Sheet”. This served as notice that further SO2 regulation was inevitable.

SO2 falls into 2 categories, pesticidal and non-pesticidal.

• Gassing barrels and corks to sanitize them or to control spoilage organisms is a pesticidal use and will be regulated.
• Additions to wine not using gaseous SO2 are GRAS (Generally Recognized as Safe) and are not being considered for further regulation.

Use of SO2 gas requires handlers to be trained in its use. If more than 2 ppm are present in the fumigation area air, use requires full face respirator with an organic vapor cartridge, SO2 impervious gloves, long pants and sleeves. If more than 10 ppm are present or if concentrations are unknown use of an air supplied respirator is required. This applies to all people in the fumigation area. This is all based upon the EPA registration and more specifically the one currently labeled SO2 pesticide available in California. WSDA staff is hopeful that any product labeled for use in WA might not be quite as restrictive regarding the supplied air respirator requirement.

At the present time there are no gaseous SO2 products that have label approval for use in Washington State so the WSDA is not presently enforcing regulation of its use. Inevitably this will change when a label approval is issued. At that time, those using SO2 gas will need to follow appropriate pesticide applicator licensing rules. This licensure will fall into two categories:

• A Private Applicator’s License will unfortunately be allowed for those using entirely estate fruit only. This license requires one exam. The rules require that the licensee be “available” during application. WSDA enforces this requirement in orchards, for example, by allowing the licensed supervisor to be available by cell phone.
• A Private Commercial Pesticide Applicator’s License will be required for all others. This requires two exams and includes a fumigation endorsement. The good news is that WSDA staff assures us that the test can often be taken at the same time and is not considerably more difficult. The rules here require that the licensee supervision must be within eye and ear shot of the application.

We have previously discussed with WSDA staff the fact that many wineries are not overly familiar with pesticide regulations and the desirability of WSDA developing best management practices which take into account the practical realities facing Washington wineries, methods, equipment, record keeping etc. WSDA recognizes that we are already a heavily regulated industry and that we all want to be in compliance. WSDA is actively seeking a grant from the specialty crop block grant funds to develop and implement such guidelines. The concept in the grant proposal envisions a three step process to be implemented over roughly three years:

• Step one: Compiling Information. On site testing. Setting parameters, researching methods and protective equipment and establishing BMPs.
• Step two: Presentation of BMPs to the industry.
• Step three: Implementation through technology transfer and technical assistance for individual wineries.

The FWWS Board has submitted a letter supporting this application and we will keep you informed of the progress.