Important Changes to Craft Beverage Modernization Act for Foreign Producers and Importers

October 31, 2022

Starting January 1, 2023, changes to the Craft Beverage Modernization Act (“CBMA”) will require foreign producers of beer,wine, and distilled spirits to register with the Alcohol and Tobacco Tax and Trade Bureau (“TTB”) before their US importers can take advantage of reduced tax rates or credits on the imported products. CBMA tax benefits are limited in quantity, and foreign producers may only assign a certain number of benefits to their US importers for each category of product imported.

Prior to 2023, US Customs and Border Protection (“CBP”) administered CBMA tax provisions for products imported into the US. Pursuant to the new changes to the CBMA, TTB will soon be responsible for administering CBMA tax benefits instead of CBP.

To take advantage of the tax credits, foreign producers must register with TTB using the online myTTB system; the current procedure of providing an authorization letter on the producer’s letterhead will no longer suffice. The registration process is fairly simple – the foreign producer is asked for basic information about the its business and ownership, its US Food & Drug Administration Food Facility Registration number, and to identify the foreign producer’s point of contact.

Once registered, the foreign producer will receive a TTB Foreign Producer ID, and an owner, officer, employee, or authorized agent of the foreign producer may assign the foreign producer’s tax benefits to its US importer. The US importer will need to provide the foreign producer’s TTB Foreign Producer ID to CBP during the Customs entry process, as well as when the importer submits CBMA import refund claim information to TTB. TTB will provide additional guidance on refund claims for US importers in early 2023.

TTB has already launched the foreign producer registration system. Additional guidance, including a user guide, can be found here.


California to Add Wine and Spirits to Recycling Bottle Bill

September 29, 2022

California will soon add wine and spirits to its container deposit program. Effective January 1, 2024, Senate Bill 1013 amends the definition of “beverage” in the California Beverage Container Recycling and Litter Reduction Act (“the Act”) to include distilled spirits, wine, sparkling wine, and wine from which alcohol has been removed. Spirits and wine containers have historically been excluded from this program. The revised Act also amends the definition of “wine and distilled spirit cooler” to include all wine and distilled spirit coolers, regardless of ABV.

The Act requires distributors to remit a redemption payment for every qualifying beverage container sold in California. The term “distributor” includes licensed alcoholic beverage wholesalers, manufacturers who sell beverages to California retailers (i.e., “dealers” under the Act), and importers who import beverages from out-of-state for sale to
California retailers or consumers. Wine direct shipper permittees also are subject to the new requirements and will need to register with the Department of Resources Recycling and Recovery (“CalRecycle”) as beverage manufacturers and distributors prior to shipping wine directly to California residents. The new law even authorizes the California Department of Alcoholic Beverage Control to suspend or revoke wine direct shipper permits for noncompliance with the Act. Importantly, tasting rooms are excluded from the “dealer” definition, and thus, containers used in tasting rooms are not subject to the new “dealer” obligations.

CalRecycle is required to deposit distributors’ redemption payments in the California Beverage Container Recycling Fund. Containers must be labeled with the California Refund Value, which is the amount paid to consumers when they recycle eligible beverage containers at certified recycling centers. The minimum refund value is 5 cents for containers
under 24 ounces, and 10 cents for containers 24 ounces or greater. The redemption payments and refund values will also apply to wine or spirits packaged in boxes, bladders, pouches, etc., which must meet postconsumer recycled plastic content requirements. These nonstandard containers, regardless of material, will have a refund value of $0.25.

The revised Act becomes effective January 1, 2024, so wine and spirits packages will be subject to the deposit at that time. However, wine and spirits labels will not have to display the California Refund Value labels until July 1, 2025, which gives producers an additional year to update their existing packaging. The revised Act also affords an extra two-years for wine and spirits manufacturers that deal in plastic boxes, bladders, pouches, etc., to comply with the Act’s postconsumer recycled plastic content requirements.


California Consumer Privacy Act… Noncompliance can be Costly

September 21, 2022

California Attorney General Bonta announced that Sephora, the cosmetic retailer, has agreed to pay $1.2 million to settle allegations that the company failed to comply with the California Consumer Privacy Act of 2018 (“CCPA”).

The Attorney General’s complaint asserts that Sephora failed to inform consumers that it was selling their personal information to third parties. Sephora also purportedly failed to process consumer requests to opt out of Sephora’s sale of their personal information. Specifically, the complaint alleges that Sephora neglected to honor opt-out requests that were submitted to Sephora via a privacy tool called a Global Privacy Control, which is a third-party browser-setting that automatically opts the consumer out of the sale of personal information on each website that the consumer visits.

Since Sephora sold consumers’ personal information to third parties, the company was obligated to alert consumers of its practices and to offer an opt-out option. Per the CCPA, the Attorney General provided Sephora with 30-days’ notice to cure its violations. However, Sephora failed to act within the statutory period.

As a result, Sephora agreed to a settlement with the California Attorney General wherein it will not only pay a $1.2 million fine, but it will: 1) update its online disclosures and privacy policy; 2) provide appropriate consumer opt-out options on its website; 3) modify its service provider agreements to comply with the CCPA standard; and 4) submit reports to the Attorney General regarding Sephora’s sales of personal information.

The Sephora case demonstrates that companies interacting with consumers in California must understand and comply with the requirements of the CCPA or risk significant monetary penalties for noncompliance. It’s important to dial-in CCPA compliance now, because on January 1, 2023, the CCPA will be amended by the California Privacy Rights Act, which will no longer include a 30-day opportunity to cure violations and stave off penalties.

Questions? Feel free to contact the attorneys at SKJ.


SKJ Welcomes Back Maddie Rowlett!

March 10, 2022

Strike Kerr & Johns is pleased to welcome Maddie Rowlett back to the firm as a regulatory compliance specialist. Maddie graduated UC Santa Barbara in 2013 and joined our team shortly after as a practice assistant, where she quickly realized her interest in the alcohol beverage industry. For the past five years, she has been working with Whole Foods’ legal team where her focus was on liquor licensing for retail grocery stores, alcohol regulatory compliance, land use & zoning, and new store development.

Her experience with Whole Foods and interest in Federal, State, and local liquor licensing for retailers and suppliers, as well as new and emerging trade practices, and alcoholic beverage policy and legislation will be a great asset to our team.

In her free time, Maddie enjoys trying new restaurants with friends, live music, traveling, and most recently exploring her new hometown of Chicago!


CA ABC Launches On-Premises Server Training Requirements This Summer

March 02, 2022

Beginning July 1, 2022, alcohol servers and managers at licensed CA restaurants and bars must hold a valid certification from an ABC-approved Responsible Beverage Service (“RBS”) training provider.

Originally scheduled to commence July 1, 2021, Assembly Bill 1221 (“AB-1221”) was delayed due to hardship and financial strain on the hospitality industry caused by the COVID-19 pandemic. The program’s intention is to educate servers on the dangers of over-serving and sale of alcohol to minors, with the overall goal to reduce alcohol-related accidents and improve local communities.

The new training and accreditation requirement applies to all alcohol servers and managers at CA ABC licensed on-premises establishments, including (but not limited to) some of the most common license types – restaurants, bars, tasting rooms, hotels, and stadiums:

- Type 41 On-Sale Beer & Wine Eating Place

- Type 42 On-Sale Beer & Wine Public Premises

- Type 47 On-Sale General Eating Place

- Type 48 On-Sale General Public Premises

Note that ABC’s definition of a server includes anyone who checks customer ID for purchase of an alcoholic beverage or entry to an on-premises licensed establishment, so the training requirement could include door security personnel as well.

The training and certification program is two-fold, with servers and managers required to complete the following within 60 calendar days from the first date of employment, or within 60 days of July 1, 2022, for current employees:

1) Complete an ABC-approved RBS training course

2) Pass an online ABC-administered RBS exam

Once the server has successfully completed the training and exam, the certification is valid for three years.

For ease of access, ABC has created an online portal where alcohol servers can search for approved training providers and take the online exam. Currently, exams are offered in English and Spanish, and the cost of the exam is $3.00, although training providers are authorized to charge an additional fee for their RBS program.

Licensees will also eventually be able to use the portal to confirm an employee’s certification and maintain online records, although this feature is still in development.

Enforcement of AB-1221 will begin September 1, 2022, and more information on the requirements can be found here.


California passes cocktails-to-go bill!

October 10, 2021

First the good news: on October 8, 2021, California Governor Newsom signed SB 389, which permits restaurants and some types of suppliers to sell for pickup mixed drinks, wine in single serving containers, and manufacturer-sealed containers of distilled spirits. SB 389 codifies California’s Covid-19 “cocktails-to-go” regulatory relief that has been in place since March 2020. Now the bad news: SB 389 does not allow all of the privileges permitted under the current regulatory relief, and most notably, it does not enable delivery of spirits, mixed drinks, or single servings of wine, and it is instead limited to pickup. The bill adds Section 23401.5 to the California Business & Professions Code, and will go into effect on January 1, 2022. The new law is set to expire at the end of 2026.

SB 389 applies to the following types of California ABC licensees, which must notify the California ABC prior to taking advantage of the new privileges: on-sale licensees with bona fide public eating places that have off-sale privileges (this includes primarily Type 41, 47, and 75 licensees that don’t have license conditions that prohibit off-premises sales); licensed beer manufacturers (Type 1 and 23 licensees); licensed wine manufacturers (Type 2 licensees); and, licensed craft distillers that operate bona fide public eating places at their premises of production (Type 74 licensees).

The above types of licensees will have the following privileges under new Section 23401.5: 1) licensees with distilled spirits off-sale privileges (applies primarily to Type 47, 74 (with bona fide eating place), and 75 licensees) can sell distilled spirits in manufacturer-prepackaged containers for pickup; 2) licensees can sell alcoholic beverages, except beer, not in manufacturer-packages containers (i.e., cocktails-to-go) provided several conditions are met, including the following:

  • The drink must be packaged in a container with a secure lid designed to prevent consumption without removing the lid, and the package must be clearly and conspicuously labeled to identify that it includes an alcoholic beverage;
  • Drinks must be sold in conjunction with a “bona fide meal” (ABC guidance as to what qualifies is available here), and only two drinks may be sold per meal ordered;
  • Wine not packaged in manufacturer-sealed containers must be sold in “single-serve containers” in one of the following sizes: 187ml, 200ml, 250ml, or 355ml;
  • Mixed drinks can include no more than 4.5 ounces of distilled spirits per drink;
  • The following warning language must be posted on the premises, online, or “in whatever manner is necessary to ensure that the consumer purchasing the beverages to which this section applies is given notice of this warning” - “Alcoholic beverages that are packaged by this establishment are open containers and shall not be transported in a motor vehicle except in the vehicle’s trunk or, if there is no trunk, the containers shall be kept in some other area of the vehicle that is not normally occupied by the driver or passengers. This does not include a utility compartment or glove compartment (See Vehicle Code Section 23225). Additionally, these beverages shall not be consumed in public or in any other area where open containers are prohibited by law.”

Orders for alcoholic beverages under SB 389 can be placed online, by phone, or in person, but must be picked-up by the consumer, and delivery is prohibited. Lastly, the new law gives the ABC discretion to impose conditions on licenses to limit or prohibit the sale of alcoholic beverages under the new law, and it includes a mechanism for licensees to challenge any such conditions.SB 389 adds California to the list of more than 20 states that have codified cocktails-to-go privileges that were first implemented in 2020 as part of various types of emergency Covid-19 relief for restaurants and other industry members. California’s Notices of Regulatory Relief (see here and here) that address cocktails-to-go expire on December 31, so the new law will allow cocktails-to-go to continue with no lapse. However, SB 389 does not extend all cocktails-to-go privileges, and most notably, delivery privileges will expire on December 31. Similarly, all other Covid-19 regulatory relief related to delivery will expire at the end of the year. For restaurants, that means delivery privileges will be limited to beer and wine in manufacturer-packaged containers, and any license conditions limiting off-sale and delivery privileges will go back into effect.

If you’d like more information about this law, contact the attorneys at Strike Kerr & Johns.


California Legislative Update for Wineries and Other Alcohol Manufacturers

October 05, 2021

California Wineries Can Now Operate Two Off-Site Tasting Rooms, Duplicate Tasting Rooms Can Sell and Deliver Wine in Consumer-Provided Containers, and Manufacturers Can Promote Donations Related to Alcohol Sales.

California Governor Newsom recently signed a series of bills into law that loosen restrictions on wineries’ duplicate tasting rooms and allow alcohol manufacturers to promote their charitable donations related to alcohol sales. The bills below become effective January 1, 2022. The following synopses address these recent changes:

SB 19 – Wineries Can Add a Second Duplicate Tasting Room:

California Type 02 winegrowers have traditionally been limited to operating a tasting room on their primary licensed premises, as well as one “duplicate” premises where the winegrower does not conduct winemaking operations. Per SB 19’s revisions to California Business and Professions Code section 23390.5(b), a Type 02 licensee can now operate two duplicate tasting rooms located off the winery’s primary winemaking premises - three tasting rooms in total. This bill is a welcome change for wineries interested in expanding their footprints within the state.

AB 239 – Duplicate Tasting Rooms Can Sell Wine in Containers Provided by Consumers:

Currently, wineries and brandy manufacturers are permitted to exercise most of their normal privileges at duplicate tasting rooms. However, there is an exception that expressly precludes wineries and brandy manufacturers from selling or delivering wine to consumers in “containers supplied, furnished, or sold by the consumer.” See Cal. Bus. & Prof. Code § 23390(a)(3). AB 239 deletes this exception and allows duplicate tasting rooms to fill bottles provided by consumers.

AB 1267 – Alcohol Manufacturers Can Promote Donations to Nonprofit Charitable Organizations:

Like most states, California does not allow industry members to influence alcohol sales by providing premiums, gifts or free goods in connection with the sale and distribution of their products. See Cal. Bus. & Prof. Code § 25600. There is an exception that allows alcohol manufacturers to make charitable donations; however, historically, manufacturers could not advertise those donations in relation to the sale of alcohol, e.g., “buy X product and we’ll donate $$$ to charity Y.” (Those types of offers are commonplace in California, but technically noncompliant, in the view of the California ABC.)

On October 8, 2020, California ABC suspended the prohibition on advertising charitable promotions and sales as a form of Covid-19 relief. See Sixth Notice
of Regulatory Relief (permitted the promotion of donations to “a bona fide charitable organization providing relief related to the COVID-19 pandemic”). AB 1267 takes ABC’s temporary relief one step further, and amends California Business and Professions Code section § 25600 to allow winegrowers, beer manufacturers, distilled spirits manufacturers, craft distillers, brandy manufacturers, rectifiers, and wine rectifiers to “donate a portion of the purchase price of an alcoholic beverage to a nonprofit charitable organization in connection with the sale or distribution of an alcohol beverage.”

Note that several limitations apply, and unless extended by the Legislature, this new law will sunset on January 1, 2025. The above-named manufacturers are permitted to advertise their charitable donations related to alcohol sales only if the following criteria are satisfied:

(i) The donation is only related to the sale or distribution of alcohol in manufacturer-sealed containers.

(ii) Promotion or advertisement of the donation does not directly encourage or reference alcohol consumption.

(iii) The donation does not benefit a retailer, or a nonprofit charity established for the specific purpose of benefiting the employees of a retailer, and the
advertisement or promotion of the donation, cannot, directly or indirectly, advertise, promote, or reference any retail licensee. See Cal. Bus. & Prof. Code § 25600(a)(3)(A)(i)-(iii).

If you’d like more information about new California laws, contact any of the attorneys at Strike Kerr & Johns.


Alabama Opens Up To Winery DTC (and Other DTC Updates)

June 09, 2021

Alabama’s governor signed a winery direct-to-consumer (DTC) shipping bill (HB437) into law on May 13, 2021, making Alabama the 47th state to allow winery DTC. The bill will become effective on August 2, 2021 and will allow wineries to ship up to 12 cases annually. Wineries wishing to ship DTC to Alabama consumers will need to obtain a direct wine shipper license for $200, renewable annually for $150, and pay all applicable Alabama sales and excise taxes. The new law allows the use of “wine fulfillment centers” for DTC shipments, provided the fulfillment center also obtains a license. Fulfillment center licensees must obtain a separate license for each facility they use to ship DTC into Alabama for an annual fee of $500 for the first location and $100 for each additional fulfillment center. Wineries, fulfillment centers, and common carriers involved in DTC to Alabama must each file a quarterly report providing certain details of those operations. HB437 also expanded wine franchise law protection throughout the state, which is perhaps less reason for celebration by wineries.

Tennessee Amends DTC Law to License Fulfillment Houses

The Governor of the State of Tennessee signed HB0742 on May 4, 2021, which will, among other things, allow wineries to continue to use fulfillment houses for DTC sales into the state. An earlier version of the bill prohibited the use of fulfillment houses but was amended to allow fulfillment houses to obtain a license and ship direct to Tennessee consumers on behalf of licensed wineries. The Tennessee fulfilment house license costs $300, renewable annually, plus an additional $50 fee for each additional fulfillment house location to be used to ship wine into the state. The license requirement is effective January 1, 2022; in the interim, wineries can continue using unlicensed fulfillment houses.

... and So Does Kansas

Kansas recently passed HB2137, which created a new license for fulfillment houses shipping wine DTC for wineries. The license costs $50 and is good for two years. The new law also imposes typical carton marking, record-keeping and reporting obligations. The requirement that fulfillment houses hold the new license was effective in May 2021, so fulfillment houses shipping wine DTC for wineries will want to apply for the new license as soon as possible.

Etc.

There are several other pending DTC bills in other states. Delaware may be the next state to enable winery DTC if pending bill HB210 passes. It was just introduced in May 2021, so it has a long way to go before it becomes law. Rhode Island also has pending DTC bills but both are currently on hold pending further study. A promising bill in Louisiana that would have enabled wineries to sell wines DTC that are also available through the 3-tier system passed the House but looked doomed to fail in the Senate and was withdrawn. There will no doubt be more to come on these bills and other DTC activity.

If you’d like more information about these laws or about DTC generally, contact any of the attorneys at Strike Kerr & Johns.

Alcohol.Law is published for general informational purposes only and is not intended as legal advice. Copyright © 2021 · All Rights Reserved · Beverage Law Group, LLP


CLOSE

Browse all tags: