Direct Shipping Legal to 80% of U.S.

But wineries' increased marketing freedom comes at a cost

by Tina Caputo
Wine Institute's Steve Gross
Napa, Calif. -- Wine Institute's Steve Gross told a gathering of more than 150 vintners last Friday that the move from reciprocal shipping to permit systems in many states has opened up more of the country for direct sales. "You can now ship to 80% of the adult population, if you jump through the right hoops," said Gross, the trade group's director of state relations.

States that have recently switched, or are planning to transition to permit systems, include California, Colorado, Hawaii and Missouri. Though the permit systems are more complicated than reciprocal shipping agreements, they've resulted in greater access to consumers in more states, he said.

Jumping through these regulatory hoops can involve paying numerous permit fees in individual states, tracking the amount of wine sent to individual households, and submitting multiple reports to government agencies. Many states have imposed capacity caps, which limit the amount of wine that may be shipped to each household or individual. This can be tricky in states like Indiana, which set a limit on the amount of wine a household may receive from all wineries combined. Wineries sending shipments to a given household have no way of knowing how much wine the household already received from other sources, making it hazardous to do business in such states.

Gross warned vintners that sending wine directly to consumers in certain states--including Alabama, Arkansas, Maryland, Mississippi, Pennsylvania and Utah--is never legal. "If someone tells you they can ship to consumers in any of those states, I'd like them to come to me and explain how," he said. Working within the three-tier system is the only legal way to do business in these states, he added.

His remarks came during a direct shipping compliance seminar held July 13 at the Marriott Hotel. Hosted by ShipCompliant, provider of automated wine shipping compliance services, the seminar also featured presentations by Lou Bright, general counsel for the Texas Alcoholic Beverage Commission (TABC); Kathie Mullally, Benson Marketing Group; and Jeff Carroll, product manager for ShipCompliant.

Shipping to Texas

In an often-humorous presentation, Lou Bright, of the TABC, told attendees that Texas welcomes shipments from out-of-state wineries--as long as they're operating within state laws. Bright outlined various types of violations that will incur the wrath of the TABC, including "sins" like shipping without a permit. "We call that bootlegging," he said, "and we just get cranky about that."

Deliberately giving false information on a permit application is another no-no. "It really is bad to lie to your government," Bright said. In fact, it's a felony in the state of Texas. TABC officials monitor the reports submitted by wineries to make sure they match those of the carriers that made the deliveries. They also run regular sting operations to ensure that wine isn't being delivered to minors. Punishments for violations range from permit suspensions to hefty fines. "We're in the deterrence business," Bright said.

Electronic Compliance

Benson Marketing Group's Kathie Mullally outlined best practices for e-mail and web compliance, including adherence to the CAN-SPAM Act of 2003, which was designed to stamp out e-mail spam, and "child protection" acts that forbid messages about alcohol, drugs, pornography and tobacco from being sent to minors. (For details on the regulations, visit registrycompliance.com.)

For winery websites, Mullally recommended practices such as age verification before allowing visitors to enter a site, as well as age verification at the time of purchase through electronic services such as IDology or ChoicePoint.

Jeff Carroll, product manager for ShipCompliant, advised wineries to run "real-time compliance checks"--available through electronic services like ShipCompliant--before completing a sale. This will help ensure that the winery is charging accurate sales tax and that current regulations allow the shipment of wine into that particular state.

When a real-time compliance check is not feasible--such as in a busy tasting room--Carroll recommended having customers fill out a form that includes a checklist for age verification and a clerk's signature. Obtaining date-of-birth information is a "must" for online sales, he added.

"There's a lot to know and it changes quickly," Carroll said, "but you can do it."
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