Category Archives: Laws & Rules

The TTB Issued a Ruling Regarding “Wine” Growlers

Laws & Rules, OLCC, TTB, , , ,

The TTB issued a ruling yesterday regarding “wine” growlers that should be of particular interest to Oregon licensees because it conflicts with Oregon law.  Oregon passed legislation in 2013 that made it legal under state law for most on- and off-premises licensees to sell growlers of malt beverage, wine and cider.  The OLCC has created an FAQ detailing this law change.  The Ruling is particularly important to any licensee that is currently selling wine growlers without a TTB taxpaid wine bottling house approval.  The OLCC could charge such licensees with permitting unlawful activity for such sales.  Permitting unlawful activity is a category III violation under Oregon law and is subject to the OLCC’s escalating penalty schedule.

The Ruling.  In short, the TTB Ruling has held that the “filling of growlers with taxpaid wine for the purpose of consumption off of the premises is an activity that may be conducted lawfully only by a qualified taxpaid wine bottling house” (emphasis added).  You can view the Ruling here.

Growlers are increasingly popular.  Growlers are increasingly popular with brewers and consumers.  Many, but not all, states allow certain licensees to sell growlers.  States are also increasingly enacting laws that allow brewers and other licensees to sell growlers.  In addition, advocacy groups are pushing to allow the sale of growlers in more states and to expand the privileges in states that already allow growler sales.  This Ruling could substantially impact the continued growth of this trend, particularly for wine and cider growlers.

What is a growler?  A growler is a container used to store, transport and dispense beer.  Growlers are typically made of glass or ceramic materials and have a mechanism for securely closing the container.  Growlers often hold 64 ounces, but can hold more or less than that.  A properly sealed growler can maintain the freshness of beer for a week or more.  The term “growler” is thought to date back to the late 19th century when fresh beer was carried from the local pub to one’s home using a galvanized pail and the sound that the CO2 made when it escaped from the lid as the beer sloshed around sounded like a “growl”.  Consumers can typically bring their own growler to a retailer, or purchase a growler from the retailer at the time that it is filled.

Growlers and federal law.  The TTB has issued formal guidance regarding beer growlers that clarifies that beer growlers are allowed.  The TTB’s Ruling on wine growler explains that federal law is different for the various alcoholic beverage commodities: malt beverage, wine and spirits.  Accordingly, the fact that beer growlers are permitted under federal law does not necessarily mean that they are permitted for other commodities, such as wine.

More on beer growlers.  The TTB makes a distinction between when a growler is a bottle or a large glass.  The determination turns solely on how the growler is filled.  If a growler is filled in advance of sale, it is a bottle.  If a growler is filled at the time of sale, it is a large glass.  The distinction is important because a growler that is considered a “large glass” is not subject to Federal labeling requirements and “bottles” are.  The TTB’s Ruling on wine growlers makes a similar distinction.

For those of us who were looking forward to the wide availability of wine growlers, this Ruling is disappointing.

 

Washington Distillers May Have Reason to Celebrate this Legislative Session.

Laws & Rules, WSLCB, ,

Washington distillers may have reason to celebrate this legislative session. House Bill 2364 and its companion Senate Bill 6226 are making their way through the legislative process with much support and little opposition.  To follow the bill, click here.

The bills would achieve the following:

  • Increases the annual spirits production limit for craft distillers from 60,000 gallons to 150,000 gallons.
  • Eliminates the three liter per day per person limit on the sale of spirits by a craft distiller for off-premises consumption.
  • Authorizes a craft distillery to charge customers a fee for spirits samples of 1/2 ounce or less served to them on premises.
  • Authorizes any licensed distillery to: sell spirits of its own production for consumption off the premises; contract with, and sell spirits to other licensed distillers and manufacturers; and provide for free, or for a charge, spirits samples of 1/2 ounce or less to customers on the premises, subject to a daily maximum of two ounces per person per day.  Samples will likely be restricted to unaltered samples by rule–no mixed samples.
  • Authorizes special occasion licensees to pay for spirits immediately following a special occasion event.
  • Authorizes a special occasion licensee to charge reasonable booth fees to a distillery participating in the event.

These changes are good news for both distillers and craft distillers.  Craft distillers would be able to produce more spirits before being required to become distillers and will be able to (but not required to) charge for samples for guests at the distillery premises.  Distillers would be able to offer samples to guests at the distillery premises–a privilege that they currently do not have and that hampers their ability to market their product.

Age Verification Equipment: Should You Agree to Use It to Resolve an OLCC Violation?

Compliance, Laws & Rules, OLCC, , , ,

Age Verification Equipment (“AVE”): Should You Agree to Use It to Resolve an OLCC Violation?

The AVE Option. ORS 471.392 allows the OLCC to use AVE as a tool to reduce underage drinking and helps licensees demonstrate that they are responsible business owners. OAR 845-009-0140 allows a licensee to purchase and use AVE in lieu of a civil penalty or suspension for a first sale to a minor or failure to verify age violation. If a licensee did not select the AVE option for a first violation of this type, the OLCC may give a licensee the option to buy and use AVE to partially offset a civil penalty or suspension for a second violation. A licensee can only use this option one time at a particular licensed location.

Process for Selecting the AVE Option. The licensee must notify the OLCC within 15 days of receiving a Notice of Violation of their intention to get and use the AVE. Licensees must be using the AVE within 30 days of receiving the Notice of Violation. Licensees should carefully review the Notice of Violation and diligently follow the instructions listed in the Notice.

AVE Is For Life. Going forward, the licensee must use AVE at every point of sale used to sell alcohol, and the equipment must be used at each point of sale as long as the licensee owns the business. Failure to use the AVE equipment can result in an aggravated penalty for future violations of this type and possible removal from the Responsible Vendor Program. There is no process for eliminating this requirement from a liquor license other than a change of ownership at the location. In other words, a licensee is agreeing to use the AVE at the location as long as the licensee operates at the location and is subject to aggravated penalties for any subsequent violations if the AVE is not appropriately used. In addition, the licensee will need to pay for upgrades or otherwise insure that the AVE meets the OLCC’s standards for the same time period.

AVE Equipment. The AVE must meet all of the following standards:

(a) The equipment must trigger an age verification process or the equipment itself must verify the age. In either case, the equipment must indicate to the licensee or employee if the customer is of legal age to purchase alcoholic beverages;

(b) The equipment must have a memory function and must be capable of producing a hard copy printout of the results of any verification transaction within the last seven days, either directly from the equipment or through a computer;

(c) The equipment must be able to perform the age verification function for identification from all states in the United States, via either the equipment reading the identification automatically or manual entry of the information; and

(d) The equipment must have the capacity to be updated or upgraded.

Final Verdict. Licensees should carefully consider whether or not AVE is right for them and their business. And, even if using AVE at the business makes sense, licensees should determine whether it makes sense to be permanently bound to using AVE going forward. The short term benefit of an elimination or reduction of a sanction may not outweigh the potential long term burdens of complying with the AVE requirement. Determining how to respond to an OLCC violation requires careful deliberation. Even if settlement is the right option, the details of the settlement matter. In addition, when determining how to respond to an OLCC violation, it is essential to consider the longer view. AVE may not be the best option for all licensees. Understanding your options, what to expect going forward, and how best to ensure future compliance is essential to your business’s continued success when operating in the heavily regulated alcohol regulatory environment.

OLCC Rulemaking: OBWDA Seeks Modest Increase in Allowance for Supplier Provided Bins and Racks

Laws & Rules, OLCC, , ,

The Oregon Beer & Wine Distributors Association recently initiated OLCC rulemaking to increase the allowed cost for a bin or rack provided by an alcohol supplier to an Oregon licensed retailer. Oregon’s tied house laws prohibit alcohol suppliers from providing bins or racks to retailers absent an exception. The proposed rulemaking increases the allowed cost from $100 to $200. While such as increase may appear steep at first glance, increases to the cost are fairly infrequent due to the time and resources required to go through the rulemaking process. As anyone who buys things knows, costs are always going up. This change makes sense because it will allow suppliers the reasonable opportunity to promote their products by providing quality bins and racks to Oregon retailers subject to the existing requirements and safeguards.

The comment period ends on January 6, 2014. You can find the petition and related information here.

OLCC Rulemaking: Proposal for Biennial Liquor Licenses Makes Sense

Laws & Rules, OLCC, , , , ,

ORLA’s proposal for biennial liquor licenses makes sense. The Oregon Restaurant and Lodging Association recently proposed a rule change that would give Oregon licensees the option to obtain a liquor license with a two year term, rather than a one year term. This is a good idea and makes sense because it will result in time and administrative savings for both licensees and the OLCC. The licensing fees are the same in either case. The fee for a biennial license would simply be double the fee for an annual license.

The rule change has a safe guard that would prevent certain licensees for which the local government recommended against renewing their license from obtaining a biennial license. In addition, local governments, citizens, and anyone else negatively impacted by a licensee’s operation can always reach out to the OLCC or local law enforcement with their concerns.

The comment period for this proposed rule change is December 26, 2013. For more information, click here.

OLCC Rulemaking: Spirits Tastings at Additional Locations for Oregon Distilleries

Laws & Rules, OLCC

OLCC Rulemaking: Spirits Tastings at Additional Locations for Oregon Distilleries

Oregon House Bill 3435 amended ORS 471.230 to allow a distillery licensee to conduct tastings at its annually licensed premises as well as up to five other premises it owns or leases. The bill takes effect on January 1, 2014. The OLCC is in the process of amending OAR 845-005-0431 to account for this statutory change. For a distillery licensee with multiple retail locations in Oregon that it can show it has exclusive use and possession of, this represents a great opportunity to showcase and sell their distilled products at additional locations.

OLCC Initiates Rulemaking Regarding Licensing “Food Carts”

Laws & Rules, OLCC

OLCC Initiates Rulemaking Regarding Licensing “Food Carts”

The City of Portland sued the OLCC after it issued an annual liquor license to Cartlandia and the OLCC failed to move forward on rule making to imposed additional restrictions on the licensing of “food carts”. The OLCC has never licensed a “food cart” itself. Rather, the OLCC has licensed an exterior area adjacent to a food cart, just as it licenses an exterior area adjacent to a brick and mortar bar or restaurant. The OLCC has carefully reviewed the proposed operations of food cart applicants and imposed operational restrictions on them on a case-by-case basis.

Now, the OLCC is seeking to move forward on rules that would standardize the licensing requirements and operational restrictions on food carts, or, as the rule describes them, as “outdoor areas that do not abut a licensed building.”

In short, the OLCC will not issue a license and may cancel an existing license for a food cart if:

• Such alcohol service is not an authorized use per the local jurisdiction or lease;
• The outdoor area fails to quality for a minor posting III (meaning that the area is not a drinking environment and thus minors are allowed at all times); or
• The applicant or licensee fails to define the boundaries of the area, describe how it will control the area, fail to show how it will supervise the area or fail to adequately confine the area.

In addition, the rulemaking will impose additional operational requirements on food cart operations:

• A patron will not be allowed to possess more than two containers of alcohol at a time;
• A patron will not be allowed to bring alcohol to or remove from the licensed area;
• Amplified music will not be allowed from 10:00pm to 7:00am;
• Alcohol service will not be allowed from 10:00pm to 7:00am;
• The applicant or licensee will need to show how it will control the outdoor area; and
• The area must be appropriate for a minor posting III.

The rulemaking also applies to the patios of bars and restaurants and requires the following for such areas, but allows the applicant or licensee to show good cause that outweighs the denial basis:

• Such alcohol service is not an authorized use per the local jurisdiction or lease;
• The outdoor area does not abut the licensed premises;
• The applicant or licensee fails to define to the boundaries of the area or fails to show how it will supervise and control the area;
• The applicant or licensee will allow amplified entertainment in the outdoor area between 12:00am and 7:00am.

While the intentions motivating this rulemaking are likely well intentioned (and may be related to a mutually acceptable resolution of the lawsuit between the OLCC and Portland), removing the discretion from the OLCC in determining whether to license a “food cart” and what operational restrictions may be appropriate given the facts and circumstances at hand seems ill advised. A food cart operation may very well be able to operate effectively, responsibly and in compliance with Oregon law after 10:00pm, as an example. To date, I am not aware of any major compliance problems associated with alcohol service at a food cart.

Third Retail Innovations Workgroup to Meet this Morning (October 24th) at the OLCC

Laws & Rules, OLCC, Privatization

The OLCC is hosting its third “Retail Innovations” workgroup meeting later this morning. The group is made up of key interest groups and stakeholders in the alcohol beverage industry in Oregon and nationally. The purpose of the group is to discuss issues broadly related to modernizing and/or privatizing the OLCC. I will be providing a more detailed review of the first three meetings over the weekend.

The agenda for today’s workgroup is here.

Eleven New AVA’s are Proposed for the Paso Robles Viticultural Area

Laws & Rules, TTB, ,

The Paso Robles American Viticultural Area Committee has submitted eleven petitions to the TTB for the creation of 11 new AVA’s within the Paso Robles viticultural area.  The local wine industry group consists of 59 members that own or manage over 10,000 acres of vineyards within the proposed area.  Comments are due on or before January 21, 2014.

For more information, click here.

Rulemaking Regarding Prohibited Interests for OLCC Commissioners and Staff

Laws & Rules, OLCC

Commission staff are recommending changes to OAR 845-004-0001 regarding the prohibited interest set out in ORS 471.710(2) applicable to OLCC commissioners and staff.  The primary substantive change is to expressly set out the exemption for the food and beverage industry commissioner.  The other proposed changes are primarily to clarify the nature of the prohibitions, the disclosure requirements, and process for addressing such prohibited interests.

Generally speaking, the rule achieves its stated goal and ensures that the Commission and its staff will continue to safeguard the public and fulfill the Commission’s other regulatory interests without being subject inappropriate interests.

For more information about this rulemaking, click here.