We are pleased that our two priorities bills WWI helped craft, introduce, and are pushing have already been voted out of their committees of origin. These bills are HB 1416/SB 5394, our social media/website use modernization bill, and HB 1563 adding field trip and 18-20 year old internships in winery production areas allowances to the current Class 15 permit our higher educational viticulture and enology programs utilize now (commonly known as the “taste and spit” permit).
HB 1416/SB 5394: Concerning liquor licensees’ use of social media and website to promote events
HB 1563: Concerning liquor-related privileges of students enrolled in certain degree programs
We are now working on getting HB 1416 out of House, so the House can vote on the bills moving through the legislative process. SB 5394 and HB 1563 already moved out of their respective Rules committees, and we are optimistic the bills will be voted on by the full Senate and House within the next week or two.
Beyond these bills, there are a myriad of other bills introduced this session that either directly or indirectly impact our industry. For example, we are helping guide a bill through that puts in statute language allowing wineries to recork wine purchased onsite so a customer can take it home. This is a common practice in wineries now, but the bill exists because of an enforcement issue and a general sense that it’s better to have this important privilege spelled out within our domestic winery license.
Overall, the themes of this legislative session revolve around labor regulations, environmental impacts, and most importantly whether Senate and House leadership have the votes and the public support to raise taxes, create new taxes/fees, and what industries will be impacted. Alcohol taxes are often an “easy” target when these conversations heat up in Olympia, so we continue to be on high alert throughout the session.
As always, we will keep all of our members updated on this work!
HB 1389 is a bill supported by the national wholesalers that would require common carriers (like UPS/FedEx and local carriers) that ship alcohol to file monthly reports with the Liquor and Cannabis Board and Department of Revenue on all details (many very sensitive) of each shipment. WWI worked aggressively with the prime sponsor, Chair of the committee, and Republicans on the committee to alter the bill into something entirely different that might be more effective in getting at how we curb illegal alcohol entering our state. We are excited to share that we succeeded in amending the bill so our wineries’ ability to use common carriers to ship wine will not be harmed. As amended, the bill does the following:
• Removes the entirety of the underlying bill and directs the LCB to investigate illegal alcohol shipments made to Washington consumers and liquor licensees;
• Requires the LCB to include, as a part of its investigation, the extent of the illegal alcohol shipment problem in the state;
• Authorizes the LCB, if necessary, to: (1) work with stakeholders and determine the most effective means to address the problem; and (2) develop legislative proposals to stop illegal shipments of alcohol and enforcement against making such shipments; and
• Requires the LCB to submit a report with its findings to the Legislature by December 31, 2019.
We are excited to announce that the hard work of WineAmerica as well as the national beer and spirits associations led to the long anticipated re-introduction of the Craft Beverage Modernization and Tax Reform Act. The new bill will be known as the Craft Beverage Modernization and Tax Reform Act of 2019, or CBMTRA, and is the formal beginning of our united effort to make permanent the federal craft beverage excise tax reform our wineries are currently enjoying via signficant tax savings. The lead Senate sponsors are once again Senators Ron Wyden (D-OR) and Roy Blunt (R-MO). The lead House sponsors on the bill are Representatives Ron Kind (D-WI) and Mike Kelly (R-PA).
The bill includes all of the provisions from the amended two year version currently in place but set to expire 12/31/19. It makes all of the new credits permanent and includes an extra $15 million for the TTB. The language of the bill also retroactively fixes two of our three implementation issues from the last year. The new language will allow for credits to be taken on bond to bond transfers, which will eliminate the “alternate procedure” that was implemented by TTB last year to mitigate the issues with bonded wine cellars. Additionally, bulk wine transfers from winery to winery will be eligible for the credits. Because of the retroactive aspect of the bill, anyone that was forced to pay a higher tax due to the transfer issues will be able to see retroactive savings.
The bill as introduced does not correct issues with wine produced at a custom crush facility, but WineAmerica is working with the Washington Wine Institute and many other wine associations on strategies to amend this unfortunate error in the bill. Our lobbying efforts will ramp up immediately, and WWI leaders will be making several trips to Washington D.C. this year to help get this bill to the finish line. We will keep all of our members up-to-date as this work continues throughout this year.
Early this month the Trump Administration announced a new free trade agreement between the United States, Canada and Mexico. This new trade agreement replaces NAFTA with a new name “The United States-Mexico-Canada Trade Agreement” (USMCA) and includes significant changes to free trade between the three countries. Most importantly, this new trade deal results in trade doors remaining open for the American wine industry with our partner countries both to the North and South. There are many issues within the USMCA for wine that did not get resolved; however, one very significant issue did get resolved in this agreement that may be extremely beneficial for Washington wine sales; British Columbia grocery store shelves.
Contained within the new USMCA agreement is the removal of British Columbia’s discriminatory practice of only allowing BC wines on grocery store shelves. WWI, along with our partners in California and Oregon wine industries, and with the leadership of WineAmerica, pushed our Congressional leaders to have the United States take British Columbia to WTO court to resolve this issue. Assuming the USMCA trade agreement is ratified by all three countries, BC grocery store shelves will open up for non-BC wines on November 1, 2019.
To read the official letter of agreement between Canada on the United States on the “wine in B.C grocery stores” issue you can click here.
All wineries with 10 or more employees shipping wine direct to California consumers, including Washington wineries, must comply with the health warning statements required under California’s Safe Drinking Water and Toxic Enforcement Act of 1986, known as Proposition 65 (“Prop 65”). As of August 30, 2018, the new “safe harbor” warning regulations are in effect, and the previous 2008 warning regulations are no longer available as a safe harbor compliance option.
Specifically, the new regulations require a Prop. 65 Alcohol Beverage Warning to be displayed on winery websites before any sale to a California resident, on catalogs sent to a California address, and on or in packages containing direct-to-consumer orders sent to a California address.
(NOTE: if a winery is a party to a court-approved settlement known as a consent judgment, it can continue to use the warning language provided for in that consent judgment, but only for the specific products covered in the consent judgment. Additionally, if the winery opted into the 2014 Proposition 65 Consent Judgment negotiated by the Wine Institute, it may continue to use the existing Prop. 65 alcohol warning).
The new requirements that apply to wine sold direct to California consumers are as follows:
• Warning statement:WARNING: Drinking distilled spirits, beer, coolers, wine and other alcoholic beverages may increase cancer risk, and, during pregnancy, can cause birth defects. For more information go to www.P65Warnings.ca.gov/alcohol.
• The word “WARNING” must be in all capital letters and bold print.
• The warning statement font size must be at least equal to the largest font used for other consumer information on the product. In no case shall a warning appear in a type size smaller than 8 point font.
• The warning statement should be placed on or in the wine shipping container or delivery package.
• The warning statement must be readable and conspicuous to the recipient prior to consumption of the wine.
• If the wine packaging contains BPA, the new Point of Sale BPA Warning must also be included on the website and catalogs, and the new Point of Display BPA Warning must be included in or on direct-to-consumer shipments to California addresses.
For general guidance on the new Prop 65 rules, see this legal alert, and if you would like to speak to a Stoel Rives attorney for specific advice, contact Melissa Jones at (916) 319-4649 or email@example.com or Stephanie Meier at (206) 386-7546 or firstname.lastname@example.org.
In 2015 WWI worked with the Washington State Department of Licensing and the Washington State Patrol to come to an agreement that winery owners and their employees fall under the federal definition of “farmer” and therefore do not need to have a Commercial Drivers License while hauling their own grapes from vineyard to winery. Some important qualifications to this agreement are that wineries must still obey all traffic laws including not surpassing the 26,000 lbs maximum limit allowed as well as being a safe driver at all times.
If you are a current WWI member and would like us to send you the documentation we’ve created that will help you understand your rights under this exemption and how to talk to a State Trooper or other type of officer if pulled over, please send us an email at email@example.com.
UPDATE: (Thanks to the hard work of our national Association WineAmerica, TTB has agreed to extend the “alternate process” until 12/31/2019) As we reported in our March newsletter as well as direct email communication, the TTB released a notice (known as a circular) on March 2nd announcing that they are interpreting the new tax code in a way that prohibits bonded wine cellars (BWC’s) from taking tax credits, meaning all untaxpaid wine removed from a BWC will be taxed at the full rate. A winery that uses a BWC will now be forced to either cease usage of a BWC, or pay the full tax rate on their wine. In order for this to be “less burdensome” on small wineries, the TTB is allowing the credit to be applied to wine stored in a BWC until June 30, 2018 through an alternate paperwork process. As a reminder, The alternate process for claiming tax credits for wine currently in a bonded wine cellar (BWC) is done by the winery, not the BWC. The TTB is, for a limited time, allowing producing wineries to tax determine and tax pay, upon removal from bond, wine of their production stored untaxpaid at a bonded wine cellar (BWC), as if it were removed from the producing winery’s bonded premises. The full ruling, including how to utilize the alternative process for wineries, can be found by clicking on this link: https://www.ttb.gov/industry_circulars/archives/18-1.shtml
WWI is working with our national trade association WineAmerica on a myriad of solutions that range from TTB reversing their decision, to a short-term fix through extension of the “alternate process” for BWC’s to claim the tax credit for a winery, with a long-term fix through legislation the ultimate goal.
Do you have live and/or streaming music in your winery or tasting room? Have you been contacted by one or multiple music licensing agencies (BMI/ASCAP/SESAC) recently requesting that you purchase a license?
The world of music licensing is complicated and knowing if you need a music license is not simple nor straightforward. To make matters worse, the three national music licensing companies that own rights to all copyrighted music are communicating with our wineries in a very aggressive, negative manner that often ends with anger and frustration for all parties.
Recognizing that every member deserves to have a strong, dedicated resource helping them navigate the complexities of music licensing, WWI’s staff has become educated on the ins-and-outs of this issue and so far helped many wineries over the past year understand what they do (and equally importantly what they do not) need to do to make sure they are in compliance with federal copyright law.
So, if you have live and/or streaming/recorded music playing in your winery or tasting room and would like to make sure you are fully educated on how music licensing works and what you need/do not need in this arena, please don’t hesitate to contact us. Additionally, if you are contacted by any of these companies, do not hesitate to reach out to us and become educated so you do not allow them to intimidate or push you into purchasing licenses you may not need. Simply contact WWI at firstname.lastname@example.org.
Note: WWI does not provide legal guidance. However, we are happy to provide a list of local attorneys that may be able to assist you if you feel a legal interpretation of your music licensing situation is necessary.