Dear Client: 

Yesterday, supplier trade groups sent a letter to Senate Majority Leader Mitch McConnell and Senate Minority Leader Chuck Schumer, urging for quick economic relief for distillers. 

“Across the United States, our member distilleries are doing their part to help prevent the spread of COVID-19 and ensure the health and safety of their workers and the public. However, because of the necessary measures being undertaken, including the closures of restaurants, bars, and tasting rooms, many distillers will soon need to lay off employees and delay or reduce production. Many may even be forced to close their doors permanently,” per the letter signed by the presidents of the Distilled Spirits Council, American Craft Spirits Association, the New York State Distillers Guild and the Kentucky Distillers’ Association. 

The entire supply chain is being impacted, including farmers, glass bottle makers, truck drivers, etc., they write. 

The associations outline “four critical components” to aid distillers: 

• Provide federal excise tax relief
• Ensure robust no- and low-interest loan assistance
• Seek the suspension of tariffs on distilled spirits
• Create an industry stabilization fund

“As Congress moves swiftly to provide economic relief to affected businesses, we urge you to remember the important role of distilleries in your home states and across the country and their inextricable link to the hospitality, restaurant, tourism, and retail industries.” 

Several craft distillers say relief is necessary to continue operating their businesses. “I am certain that without significant, immediate intervention, and a long-term commitment to assistance, we will face a devastating future,” says Chris Montana, owner and head distiller for DuNord Craft Spirits.

Lawmakers are already working on a coronavirus stimulus package which could pass Congress as early as next week. 

“Ultimately this package will likely total somewhere in the range of $1.5 trillion once Democratic and Republican priorities are incorporated,” according to Henrietta Treyz, director of economic policy at Veda Partners, reports MarketWatch. It will likely include billions for hard-hit sectors such as airlines as well as a new loan program.

WSWA CHIEF URGES GOVERNORS TO KEEP ALCOHOL RETAIL LOCATIONS OPEN

Nearly every state has issued some kind of social distancing measure to mitigate the spread of COVID-19 and “flatten the curve,” many of which included shutting down bars and restaurants. 

Earlier this week, Wine and Spirits Wholesalers of America chief Michelle Korsmo sent a letter to all 50 US state governors, urging them to keep local alcohol retail locations open. 

“If closures of these stores across localities or states occur inconsistently, there is an increased chance that people will travel interstate or among localities to find an open store with available supply, increasing risk of spread among communities,” Michelle writes. “Closing down regulated stores for consumers to access alcohol will likely encourage black market activity – specifically, illicit products and illegal, unlicensed, and untraceable sales and shipments from unknown locations to consumers.” 

Rather than close alcohol retailers, Michelle suggests permitting curbside pickup, allowing retailer employees 21+ to deliver alcohol and enabling restaurants to offer alcohol along with food orders for takeout or delivery. 

“WSWA is ready to offer more extensive guidance, if desired, regarding practices that will ensure market needs are met, jobs are secure, and black market/ unlicensed liquor sales are not given an avenue to thrive.”

Fortunately, most states do seem to be taking that route by allowing carryout and delivery services to continue.  

Just last night, Texas Gov. Greg Abbott issued a new waiver that allows closed bars and restaurants with mixed beverage permits to deliver beer, wine as well as mixed drinks to consumers, reports Eater. 

To stay up on the latest state measures, the Wine Institute has put together a frequently updated and detailed list of such closures here. 

RESTAURANTS SEEK GOVERNMENT RELIEF 

Similar to distillers, the National Restaurant Association is also looking for relief thanks to the recently implemented shutdowns and restrictions due to COVID-19. 

Early forecasts suggest that the restaurant industry will sustain a $225 billion loss as well as eliminate between 5 million and 7 million jobs over the next three months, per the trade group. 

“We are revising our business model to provide meals in different ways, takeout, delivery, safety-enhanced dine-in, but the majority of our restaurants do not have this capability today. As the restrictions continue, we are facing economic headwinds that will lead many restaurants to shut down operations, lay off workers, and end service in our communities,” says evp of public affairs Sean Kennedy. 

In a letter to Congress, the NRA proposes direct relief to help restaurants cover operations and pay employees; loans and insurance protections for small businesses; and other tax measures. 

“Taken together, these proposals will ensure that restaurants have increased liquidity and access to necessary financing to help the industry and its employees recover,” says Sean. 

TTB ISSUES GUIDANCE FOR DISTILLERS MAKING HAND SANITIZER 

As previously reported, distillers are producing hand sanitizer in an effort to do their part to help combat the COVID-19 pandemic. 

Yesterday, the Alcohol and Tobacco Tax and Trade Bureau issued guidance on hand sanitizer production. If you’re a distiller who’s producing or looking to produce hand sanitizer, here’s what you need to know.  

The acting TTB administrator “has found that it is necessary or desirable to waive provisions of internal revenue law with regard to distilled spirits, and therefore is providing certain exemptions and authorizations to distilled spirits permittees who wish to produce ethanol-based hand sanitizer to address the demand for such products during this emergency.” To wit: 

• The TTB is exempting AFPs and DSPs from the requirement to obtain additional permits or bonds to manufacture hand sanitizer or supply ethanol for others to manufacture. 
• Hand sanitizer products are not subject to federal excise tax. However if made with undenatured alcohol, federal excise tax applies. 
• All DSPs manufacture hand sanitizer products consistent with World Health Organization (WHO) guidance, which means comprised of denatured and undenatured ethanol, glycerol and hydrogen peroxide. 
• Industrial alcohol user permittees may also use denatured ethanol to manufacture hand sanitizer consistent with the same formula above without obtaining approval. 

Several distillers —both large and small— have already announced hand sanitizer is in production. 

As mentioned above, distillers must pay full federal excise tax if they use undenatured alcohol to produce hand sanitizer. Last night, the Distilled Spirits Council issued a statement that they’re working with Congress and the Trump Administration to ease such tax regulations. 

“We want to thank our regulatory partners at the Tax and Trade Bureau for working with us to cut through the red tape so we can quickly help fill this need in our country,” says DISCUS chief Chris Swonger. “We appreciate Congress’ efforts to work with us and the Tax and Trade Bureau to make this important change regarding the federal excise tax and hand sanitizer production. The distilled spirits industry is already facing difficult times with tariffs and the shutdown of bars and restaurants. Distillers are members of the community and want to help, but forcing them to pay taxes on the hand sanitizer is just plain wrong.” 

COVID-19 FROM IMPORTERS’ PERSPECTIVE 

The National Association of Beverage Importers president Robert Tobiassen wrote in to share what’s happening from the importers’ perspective.  

“Importers of beverage alcohol are facing unique and expanding challenges today in the marketplace not faced by other businesses.  The retaliatory tariffs in the Airbus trade dispute, the delays in receiving refunds from CBP under the Craft Beverage Modernization Act when money is desperately needed by these businesses more than ever before, and now the disruptions of the coronavirus/COVID-19 both in the supply chains of the countries they import from and in the United States in protecting and keeping safe their workers and the financial support of their families.  Suspension of the retaliatory tariffs with the EU would significantly aid importers who are local companies, with local employees, and supporting local communities. 

NABI is keeping its Members informed literally daily of trade developments in the ever-evolving issues of concern to the import industry arising from the coronavirus/COVID-19.  These range from continuity of operations at TTB and CBP to guidance given to customs brokers and freight forwarders on State and local “shelter in place” orders. Both bureaus have been wonderful in their outreach efforts to share information.  TTB have given us updates in telephone calls and CBP holds update status conference calls on trade and cargo. NABI Members can tell us of any disruptions in their supply chain, port clearance and entry filings, and regulatory labeling issues that NABI, in turn, can raise with CBP and TTB. NABI coalitions with many trade associations representing the alcohol industry and the trade, transport, and logistics industry in information sharing.  We all need to work together to find solutions in these very disruptive times.”

EARTHQUAKE IN UTAH SHUTS DOWN STATE LIQUOR STORES

Several Utah state-owned liquor stores are shut down temporarily, but not because of the coronavirus.

Yesterday morning, a 5.7 magnitude earthquake hit outside of Salt Lake City, UT, damaging the Utah Department of Alcoholic Beverage Control’s warehouse and a few stores in the area. The agency has temporarily closed the warehouse and stores to assess damage, according to NABCA.

So far, the only damages reported have been bottles falling from shelves and a broken sprinkler line at the warehouse, but the locations will remain closed until inspectors are sure the buildings are safe.

No injuries were reported by DABC employees.

Until tomorrow,
Sarah

“Plodding wins the race.” – Aesop    

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