Dear FWWS Member,
You will probably recall that with your help FWWS was able
earlier this year to defeat a sweeping change in State winery licensing laws.
This proposal which would have created an entirely new and unprecedented
category of “non-producer” was shown to the industry 24 hours before its first
legislative hearing. This proposal confused brand ownership with premise
ownership, premise ownership with premise licensing, and production with
manufacturing. Unfortunately some bad ideas, like zombies, are hard to kill and
this bad idea threatens again.
While we are fully prepared to continue to fight this
fundamentally misguided proposal, we are concerned that a number of you have
expressed sympathy with one aspect of the proposal that we believe is
misleading, unfair and generally a head fake;
namely that a “Winery” as opposed to a “Non-producer” must actually
“produce by fermentation” at least 200 gallons of wine annually on a rolling 2
year average.
Let us say right up front that we completely understand the
underlying sentiment this provision addresses. Specifically that those who
don’t put their hands on at least a ton and a half or so of grapes every other
year aren’t, in our opinion, “Real Winemakers” for whatever that’s worth, and
whatever that means. The devil, or perhaps we should say zombie, is in the details
of “for whatever that’s worth and whatever that means.” We believe it is vitally important that FWWS
members are in solidarity in their opposition to this concept as well as the
remainder of the misguided “Non-producer” proposal which, as we hope you will
come to understand by taking the time to read and consider the following
discussion, accomplishes nothing beyond putting financial stress on the
smallest wineries and misleading consumers. Please read on, if you dare...
Please remember that we value your input and in fact this
posting is in response to such input.
The best way to continue this discussion is to make a detailed response
to this posting. We look forward to
hearing from you.
Happy Halloween and best wishes for a successful conclusion
to the 2012 harvest!
Discussion of the “What is a winery?”
or “Minimum Fermentation” proposal
The current federal regulatory
situation.
·
A winery must have a “Basic Permit” to make
wine. This can be as a bonded winery,
bonded wine cellar, or tax paid wine bottling house. The Feds do not make a distinction as to who
may “call themselves” a winery.
·
A Bonded Winery, probably the most common form
of winery Basic Permit must “produce” “more than zero gallons” of wine (federal
policy specifically recognizes one gallon as “more than zero”), at least every
other year. “Production” is defined as either the creation of wine by
fermentation or any change in the tax class of the wine so created. The most
obvious and common of these tax class changes would be blending across the 14%
alcohol threshold.
·
The TTB does not require that wine sold under a
winery’s brand be produced on the winery’s owned premise. In fact, the only reason that the federal
government is concerned about where such wine is “produced” is to correctly
apply the ninety cent per gallon federal “small producer’s tax credit” and to
be sure that this credit is earned, and is not applied twice to the same wine.
·
Current
Washington State
·
The
winery licensing statute grants “Domestic wineries” what the LCB considers
“special privileges” (e.g. tasting rooms, direct wholesale privileges, direct
to consumer shipping etc.) which apply
to wine of their “own production.” Arguably the term “production” is
unnecessary and manufacturing would serve equally well since Washington
·
The State’s working
definition of “wine of its own production” is based on a Memo from the
1990s memorializing a discussion between the State Attorney General’ office and
WSLCB licensing staff. This Memo suggests that production must include
“Crushing, aging in bulk, or bottling“ (notice that the word “fermentation
does even appear in this working
definition).
·
Deceiving the public through false labeling
claims is already specifically prohibited by State law.
·
There is no limitation on the use of custom
crush by wineries.
Situation if “Non
Producer” proposal is enacted:
·
Creates new category of “Non-producer”
·
Defines wine “production” as synonymous with
“Fermentation” and only fermentation
·
Introduces the unprecedented concept of a
minimum production requirement (by fermentation, and substantially above the
federal minimum) for all wineries.
·
Production requirement for Domestic Wineries
would be raised from the prevailing federal standard applied to Bonded Wineries
of “more than zero gallons” to a new standard set at a minimum of 200 gallons
on a rolling 2 year average (by fermentation only).
·
Custom crush would be disallowed for wineries
“producing” below the new threshold. These wineries would now be categorized as
“Non-producers” and presumably prohibited by rulemaking from using the term
“winery” on their label or enjoying the many so called “privileges” of being a
full-fledged winery.
·
Wineries meeting the minimum threshold for
production through fermentation could continue to make unlimited amounts of
wine under custom crush arrangements. Same as the current situation.
·
There are numerous other bizarre aspects of the
proposal including a prohibition on wineries importing bulk wine from out of
state (currently permitted if the wine is appropriately labeled). Even more
bizarre is that such importation would be allowed by “Non-producers.” This and other aspects of the proposal are
beyond the scope of this discussion.
Discussion and FWWS
Objections to the Proposal
We believe that the “what is a winery” licensing concept
accomplishes nothing beyond disadvantaging the state’s smallest wineries,
confusing manufacturing with production, and misleading the public with regard
to, for lack of a better description “wine authenticity.”
Disadvantaging the smallest wineries:
Currently a winery can literally meet the requirements for
compliance with their federal basic permit in a broom closet, assuming said
closet has plumbing and climate control.
More to the point, virtually every winery in the state can meet the
federal standard in a corner of their tasting room and then make their wine in
a custom crush facility. The proposed change would require that all wineries
must purchase a “bricks and mortar” facility large enough to ferment 200
gallons of wine. Otherwise the change in
law has virtually no effect. Imagine if California
Confusing Manufacturing with production.
“Production” is a term that the federal government uses to
define an activity eligible for the small producer’s tax credit. The state has
no need of such term since it has no such tax credit. Winemaking is simply
“manufacturing.” Linking the manufacturing of a product to ownership of the
facility is nonsensical. What matters is who owns the product (the brand) how
they sell it and, as far as the consumer is concerned, whether they execute
well. Consider Apple again. Their iPhones are made by entirely by others.
Do consumers care? Does their home State of California
Deceiving the Public
Presumably some
proponents of the minimum fermentation requirement believe that some people
without any crush facility “aren’t really making wine” because their wine is
made at a custom crush facility. If so,
how is it different than what the largest wineries do? How do we know if this hypothetical small
winemaker isn’t haunting the crush facility on a daily basis like an anguished
spirit? Even if they only make cursory
visits to the crush facility how is this any different than the Seattle
business tycoon who “always wanted to be in the wine industry,” buys an Eastern
Washington winery, never gets their
hands dirty and visits only for media events?
So let’s assume a small winery without a crush facility is
labeled with the odious title of “non producer” under the proposed licensing
scheme. What should the public take away from this? That if they buy wine from a “real winery”
they are somehow buying authentic wine made by the hands of a real
winemaker? And how are the millions of
gallons of wine made by the state’s
largest wineries more authentic than 199 gallons of wine actually made
by hand (or foot) of a real person? Is
the big commodity produced wine “real wine” because the owner of the brand
fermented more than 200 gallons of wine?
Conclusion
We believe there is no problem that needs to be fixed. It’s already illegal to say anything
misleading on a wine label. The proposal
as conceived does nothing to provide regulatory clarity (far from it) and
discriminates against the business practices of the smallest wineries while
doing nothing to curtail the identical practices by large wineries.
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