By Jeff Cioletti
More than 200 distilled spirits producers from nearly all U.S. states paid a virtual visit to the nation’s capital for day one of the distilling industry’s two-day annual Public Policy Conference, co-hosted by the American Craft Spirits Association (ACSA) and the Distilled Spirits Council of the United States (DISCUS).
“We have reason to be extremely grateful for your participation and for your energy and enthusiasm for being here today,” ACSA CEO Margie A.S. Lehrman told the audience of virtual attendees. “This is our chance to raise our collective voices and to advocate on behalf of our industry. There are many exciting opportunities that we have in front of us.”
The main objective of the first day was to prime participants for meetings with U.S. Senators, members of Congress, and their respective staffs to address the industry’s top policy priorities. It’s ACSA’s and DISCUS’s first Public Policy Conference since passage of the item that topped the industry’s legislative to-do list for the better part of a decade: permanent federal excise tax (FET) relief through the Craft Beverage Modernization and Tax Reform Act (CBMTRA). After years of Congressional visits and both organizations’ tireless advocacy efforts, permanent FET relief was signed into law at the end of 2020—securing the $2.70-per-proof-gallon tax on the first 100,000 gallons of distilled spirits removed from bond. A certain, fatal tax hike was slated for January 1, 2021, had Congress not acted and the outgoing president not put his signature on it.
“Thankfully in December of last year, [less than] six short months ago, we were able to make CBMTRA a permanent reality,” said Chris Swonger, president and CEO of DISCUS. “The big reason for that is all of your active participation and engagement. It makes all the difference in the world.”
With permanent FET relief now the law of the land, spirits producers have been able to shift their focus to a number of new and ongoing public policy challenges, which they’ll address with legislators on Capitol Hill tomorrow over the course of more than 100 virtual meetings that have been scheduled. The priorities topping the agendas for tomorrow’s meetings relate to three areas: COVID-19 relief, trade tariffs and direct-to-consumer (DtC) shipping.
COVID-19 Relief
Distillers will be urging support for two bills in particular, the Restaurants Act (H.R. 793/S. 255) and the Fairness for Craft Beverage Producers Act (H.R. 1035).
Congress has already allocated $28.6 billion of relief for restaurants, bars and distilleries with tasting rooms through the Restaurant Revitalization Fund. But the federal government has already received more than 300,000 requests for relief since it opened on May 3, putting demand at more than double the existing funds. The Restaurants Act would add $120 billion in funds. The bill’s sponsor, Rep. Earl Blumenauer (D-OR)—a member of the House Ways and Means Committee—told distillers that he’s optimistic that, with their help, he’ll be able to secure those additional funds. “Given the level of demand, we simply have to replenish the fund,” Blumenauer said during a session introduced by Alison Leavitt, managing director at the Wine and Spirits Shippers Association (WSSA).
Blumenauer noted that he’s working with lawmakers on both sides of the aisle and plans to introduce bipartisan legislation in the coming weeks. “I deeply appreciate the partnership that we have had over the years,” Blumenthal told distillers attending the Public Policy Conference. “In the last 15 months you’ve probably faced the most challenges you have in a quarter-century. But you’ve proved to be nimble, resilient and focused.”
The Fairness for Craft Beverage Producers Act, introduced in February by Rep. Jennifer Wexton (D-VA), would enable distilleries to access a higher Paycheck Protection Program (PPP) loan amount than the previous maximum of 2.5 times their monthly payroll cost. When the program raised the cap for hospitality industry workers to 3.5 times their monthly payroll cost, distilleries were inadvertently excluded. Wexton’s bill seeks to correct that technicality.
Trade Tariffs
Trade tariffs have been a serious issue for U.S. distilled spirits producers since 2018 when the EU and the UK enacted retaliatory tariffs on American whiskey. “The 25% retaliatory tariff by the EU and the UK put American whiskey at a serious competitive disadvantage,” said Kelly Poulsen, vice president of federal government relations at DISCUS. “Since the tariffs were imposed in 2018, whiskey exports to the EU declined by 37% and to the UK by 53%.”
Some recent developments, however, have been somewhat encouraging. The EU and UK announced the temporary suspension of the 25% tariff on U.S. rum, brandy and vodka that was imposed as a consequence of the World Trade Organization Boeing/Airbus disputes. And, just a few weeks ago, the EU announced that it will not double the tariff on American whiskeys, as was previously planned, as a result of the steel and aluminum trade dispute. The tariff, which still stands at 25%, would have increased to 50%.
Earlier this month, Senators Tim Kaine (D-VA) and Todd Young (R-IN) sent a letter to U.S. Trade Representative (U.S.T.R.) Katherine Tai and U.S. Commerce Secretary Gina Raimondo urging the Biden Administration to work to remove retaliatory tariffs on wine and spirits. Young was on hand at today’s virtual conference to re-affirm his support for U.S. spirits producers.
“During my time in Congress, I quickly realized as I traveled around my south-central to southern Indiana district that your industry was playing a vital part in building up our communities and ensuring that there were jobs and destination places where people work and live and grow up,” Young said. “Your businesses also serve as a vivid example of America’s entrepreneurial spirit. The growth of the craft spirits industry over the course of the past decade just astonishes me.”
Young added that distilleries are “a tonic” for local communities and support allied industries like agriculture, including the revitalization of heirloom grains. He also tipped his hat to the way craft spirits producers stepped up last year to produce hand sanitizer at the height of the pandemic when their communities needed it most. It’s also one of the few industries, he noted, that inspires bi-partisanship at a time when such a notion is in short supply. “This is one place that is ripe for bi-partisan cooperation,” Young said. “When I go to a store to buy spirits it’s not clear whether the consumer next to me is a Republican or Democrat. ... We all enjoy distilled spirits and maybe it’s a way, no pun intended, to lubricate the work of the legislative process, starting to work around some of these issues with broad appeal.”
During their virtual visits tomorrow, distillers will be asking their Senators and Representatives to contact U.S. Trade Representative Tai, Secretary Raimondo and U.S. Agriculture Secretary Tom Vilsack to urge an immediate suspension of the EU and UK tariffs on American Whiskeys and a return to duty-free trade for distilled spirits.
DtC Shipping
Currently, DtC shipping is allowed in 10 states plus the District of Columbia and the COVID-19 pandemic only increased consumers’ demand to receive products shipped directly by their local distilleries. ACSA President Becky Harris, president and chief distiller at Catoctin Creek Distillery in Purcellville, Virginia, noted that on-premise sales at the distillery dropped 70% thanks to the pandemic. “When that happened, we were initially saying, ‘what are we going to be allowed to do?’” Harris recalled.
The Commonwealth of Virginia enacted temporary in-state DtC shortly after the pandemic began and Harris and other Virginia distilleries are hoping to get the state to make it permanent. DtC shipping is a privilege that the wine industry has enjoyed for more than 25 years, in 45 states, and demonstrated repeatedly that DtC shipping of alcoholic beverages is a safe, effective method of commerce.
Harris moderated a panel on DtC featuring Gary Friedman of online e-commerce platform Spirits 360, Alex Koral of compliance software provider Sovos, and Derrick Niemi of shipping giant UPS.
Just last week, Rep. Jackie Speier (D-CA) and Senator Jeff Merkley (D-OR) introduced the respective House and Senate versions of the USPS Shipping Equity Act, H.R. 3287 and S.1663, which would allow the U.S. Postal Service to ship beverage alcohol directly from licensed producers and retailers to legal-drinking-age consumers where DtC is permissible by law. If passed, it could be a significant step toward expanding DtC shipping for craft spirits.
Distillers tomorrow will be urging their Senators and Representatives to support the USPS Shipping Equity Act.
TTB Q&A
About a dozen officials from the U.S. Alcohol and Tobacco Tax and Trade Bureau (TTB) generously offered their time to address attending distillers and answer any TTB-related questions. The big theme of the discussion was "streamlining," as the regulatory officials discussed new technologies and protocols that will enhance efficiency of processes related to label approvals, permitting and filing and resolving claims.
“Certainly we recognize that it is more important now than it has ever been that we’re able to get folks into business and get their products into the market as quickly as we can,” said TTB Deputy Administrator David Wulf.
The ACSA/DISCUS Public Policy Conference reconvenes tomorrow morning with a full day of virtual Congressional visits.
