Conference Clarifies Direct Shipping Issues and Processes
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The day was divided into two segments. The morning featured experts who discussed relevant legislation, litigation and marketing, and included a session with an official of the California Alcoholic Beverage Control board who clarified some issues that have snagged many wineries.
In the afternoon, two tracks developed, one a users conference for existing customers; the other information for potential customers. The day also featured a tradeshow where Six88 and its partners showcased their products.
After an introduction by Jason Eckenroth, president of Six88, Steve Gross, director of state relations for the Wine Institute described the history of direct-to-consumer shipping regulations, outlining the move from none, to easy reciprocal statutes, to the present system of permits required by most states that allow shipping.
Recent activity of interest includes:
Effective July 1, 2008, Georgia liberalized its permit to allow 12 cases from any winery, removing the exclusion of wineries that have Georgia distributors and the 50-case maximum to any consumer from all wineries.
Illinois transitioned to a permit system effective June 1, 2008.
In Nebraska, the revenue from a $500 shipping permit funds Nebraska's wine industry.
New York now requires electronic filing of reports.
North Dakota expanded legal shipping from one to three cases per month, effective Aug. 1, 2007.
Ohio passed a direct shipping bill with a production capacity cap (since raised to 250,000 gallons annually) effective Oct. 1, 2007.
The Oregon direct shipping bill took affect Jan.1, 2008.
West Virginia replaced reciprocity with permits, effective July 1, 2007.
Wisconsin converts to permits effective Oct. 1, 2008.
Many problems remain in state rules, however. Some include size caps for wineries of 20,000 to 250,000 gallons, typically just above any local wineries; unrealistic consumer aggregate limits; exclusions of wineries that have wholesalers; requirements to order on-site; local registration, which may trigger franchise taxes; varying local sales tax requirements; extensive background checks; bonding requirements; label and brand registration; monthly and no-activity reports; high permit fees, and age verification and spam requirements. Many of these rules have been instituted to discourage direct shipping.
Gross said that a number of states don't allow any legal direct-to-consumer shipping (other than through the three-tier system) in spite of what shippers claim in wine regions. These states are Alabama, Arkansas, Maryland, Mississippi, Pennsylvania (pending license process) and Utah. Wine critic Robert Parker has a permit that allows him to receive wine, however.
Because the laws are confusing, Gross suggested consulting wineinstitute.org/shipwine, which is maintained with ShipCompliant help, to ensure the information is current.
Two other speakers were attorney Tracy Genesen of Kirkland & Ellis, who is suing Massachusetts and is involved in other suits by advocacy groups; and Jeremy Benson, who heads Free the Grapes and Benson Marketing and discussed direct marketing compliance and best practices.
The morning's final speaker was Matthew D. Botting, from the California Dept. of Alcoholic Beverage Control, who talked primarily about subtle and little-understood issues.
Prime among them are the so-called "virtual wineries," which Botting said don't exist. Companies that have wine made under their brands by "02" wineries have 17/20 permits for combined beer and wine wholesalers and wine retailers. They aren't, therefore, wineries.
As retailers, they can take orders by phone, Internet or catalog, and they must be a bona fide wholesaler. They have limited opportunities to provide tastings of their wines, although recent legislation has eased this for some charitable functions.
On that subject, the Wine Institute's Gross noted that these companies are considered retailers under state direct-to-consumer shipping statutes and thus can only ship into some states--and with considerable restrictions. The legal states currently include Alaska, California, District of Columbia, Louisiana, Missouri, North Dakota, Nebraska, New Hampshire, New Mexico, Nevada, Oregon Texas (pending litigation), Virginia, West Virginia and Wyoming.
Botting also pointed out that wineries can't offer "free" shipping or any other product or service of significant value. They can include it in the price, however.
And he pointed out that if wineries have complaints about the laws, they should take them up with their legislators, not with him.
This process works. In California, State Senator Pat Wiggins and Assemblywoman Noreen Evans have been vigorously working to amend many laws annoying to both consumers and the industry.
For a complete Wrap Up including videos of the presentations, visit shipcompliant.com.