Industry

Mass law marks achievement for direct-to-consumer shipping

Direct-to-consumer shipping advocates achieved a major milestone in 2014, as Massachusetts opened its "highly desirable market" for regulated, out-of-state shipments, according to an update report from ShipCompliant. Indiana, Maine, Arkansas, Michigan and North Dakota have also amended their shipping policies, particularly regarding licenses.

By Jane Firstenfeld November 13, 2014
Keeping up with Wine Shipping - ShipCompliant updates compliance professionals about rules for Massachusetts
 
Licenses for bonded wineries wishing to ship wine to Massachusetts will be $300 the first year and $150 each renewal year. Boulder, Colo.—Step-by-step, state-by-state, direct shipping to wine consumers continues to advance across the map. ShipCompliant’s ninth annual Direct Shipping Virtual Conference today addressed progress and pitfalls of changing regulations across the United States. Jeff Carroll, vice president of product for the Boulder-based supplier of online compliance tools, led the online session. Federal and state regulations and reporting hinder commerce with complex and sometimes conflicting multi-jurisdictional requirements and potentially costly fines. Within the wine and beverage industry, a sub-industry of compliance professionals continues to thrive: Wines & Vines’ online Buyers Guide currently lists 44 compliance services. Larger wineries may employ staff to track the minefield of regulatory and fiscal penalties, but for smaller operations it’s a difficult field to navigate. ShipCompliant’s goal is to ease the process with programs that simplify licensing, taxation and changing shipping laws.
According to Carroll, 45 states now allow direct-to-consumer (DtC) shipments of on-site orders purchased at the winery. Off-site wine orders placed through websites, email or phone can be shipped into 41 states. Regardless of the restrictions, most states require wineries to obtain permits, pay sales and excise taxes. Most limit the volume of wine shipped to any consumer (or address) within a year, and wineries without a brick-and-mortar license currently may ship to only 14 states. The biggest DtC news in 2014 was Massachusetts’ adoption of “a workable” DtC law. “Although it’s not the largest in population, Massachusetts is a highly desirable market” for wine shipping, Carroll said. “It’s an affluent, wine drinking state.” Bringing DtC to Massachusetts has been a long-sought and hard-fought goal of Free the Grapes! and California’s Wine Institute. A statement from Wine Institute president/CEO Bobby Koch in July lauded the new policy in the nation’s seventh largest wine market. “The new regulations have a ‘per winery/per consumer’ quantity limit of 12 cases annually, with which wineries can easily track and comply.” Koch noted. Carroll commented that once DtC is in place, “Shipments should flow quickly. It’s a big deal.” He predicted DtC shipments amounting to $70 million or more within three years, quickly surpassing sales to New Jersey and Maryland, which opened to DtC last year. Licenses for bonded wineries will be $300, with $150 renewals annually. Note that existing licenses will not carry over to 2015, and retailers are still prohibited from shipping, but any products that can legally be sold in Massachusetts (whether or not sold through distribution) are eligible for DtC. Unfortunately, instructions for permits are not yet available, although ShipCompliant had hoped to have them in hand today. Wineries should file immediately, Carroll said. “Permits might take up to four weeks to process, so be first in the queue.” One thing missing in the language of the Massachusetts law is a specification for “fleet licenses” allowing common carriers like FedEx and UPS to deliver. Licenses for individual trucks may amount to $100,000 for a given carrier, but Carroll said, “My guess is at least one is likely to do that.” Shipments may be delayed until Feb. 1 while the carriers sort it out, Carroll warned.
Other changes in the DtC landscape Indiana recently adopted a policy requiring e-filing of all shipping permits and payments. Rather than simplifying the paperwork, the system has run into some bugs: “Some people tried to file this month,” Carroll said, “but it’s a tricky process” that requires encrypting texts, sending two successful test filings and bank cooperation with e-payments. Some wineries reported the system does not (yet) offer secure protocols for Mac users, and Windows7 users also ran into roadblocks. Arkansas now allows limited shipping (one case per resident) from onsite purchases only. The onsite DtC license costs $25 and is available only by phone: (501) 682-1105. Maine has simplified its report-filing requirements: Once a winery has its license, annual vs. quarterly reports must be filed based on the original license date. Texas also has instituted annual filing of C-240 reports for wineries shipping less than 4,000 gallons; those shipping more must continue to file quarterly. Wineries with DtC permits to Michigan can now benefit from early filer or timely filer discounts. North Dakota now requires common carrier licenses and tracking numbers for every shipment. More than DtC Compliance involves following the rules for both federal and state agencies. Carroll briefly addressed a recent problem for some California wineries, which were participating in a charity event near Sacramento, Calif. Their use of social media to promote the event violated old “tied-house” regulations prohibiting cross-promotion, according to the state’s Alcoholic Beverage Control (ABC). Although tied-house regulations date to the end of Prohibition, and there is some question about their current application, “California is not the only state with these laws, which prohibit providing anything of value to retailers or wholesalers. It’s a good idea to avoid anything” that might conflict, Carroll advised. Social media has complicated the concept of cross-promotion, and the implications of First Amendment issues have yet to be decided. While wineries may list all their retail outlets online, for instance, singling one out may constitute a prohibited “exchange of value.” Meanwhile, the TTB continues to streamline requirements for COLAs (certificates of label approval), although not all states are in l ine with its changes. Florida, for instance, has demanded that wineries selling there obtain new COLAs for minor changes. If something similar happens to your winery, Carroll said.