USA

American Whiskey Gets a Partial Tariff Reprieve

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The Trump Administration’s ongoing tariff wars have roiled the American drinks industry, hurting producers of both beer and whiskey. Canada and Mexico’s retaliatory whiskey tariffs were recently lifted, but as the Chicago Tribune reports, producers are still concerned about European markets:

American whiskey producers feeling the pain from the Trump administration's trade disputes have gotten a shot of relief with an agreement that will end retaliatory tariffs that Canada and Mexico slapped on whiskey and other U.S. products.

The whiskey industry hailed the arrangement to ease trade tensions among the North American allies and said it hopes it's the first of several rounds of good news on the trade front. Distillers have suffered shrinking exports since the last half of 2018 due to tariffs in some key markets.

President Donald Trump last Friday lifted import taxes on Canadian and Mexican steel and aluminum and delayed auto tariffs that would have hurt Japan and Europe. In return, the Canadians and Mexicans agreed to scrap their retaliatory tariffs on U.S. goods, including American whiskey.

But U.S. whiskey makers still face significant trade hurdles in the European Union, the industry's biggest export market…

Read more here.

Congress Tries (Again) to Allow the Post Office to Ship Alcohol

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Shipping alcohol is notoriously complicated in modern day America. This is especially odd given that, uh, everything else in the universe seems to be a mere 2-day-shipment away. While private carriers and individuals states have complicated rules around alcohol shipping, the United States Postal Service forbids it from being shipped at all. A determined member of Congress is trying once again to fix this anachronistic ban:

The USPS Shipping Equity Act (H.R. 2517) was introduced by Congresswoman Jackie Speier (D-CA). She said the bill would end the Prohibition-era restriction that prohibits the Postal Service from shipping alcohol.

“In 2016, California was America’s top destination for the direct shipment of wine, yet consumers and manufacturers are prohibited from using the U.S. Postal Service to ship or deliver these everyday products,” Speier said…

This is not the first time Speier has made this effort. In fact, it’s not the third.

Her bill was last introduced in 2017 but failed to advance. It was also introduced in the two sessions of Congress prior to 2017. She obviously really wants to see the Postal Service start shipping alcohol, but there historically has been little interest in Congress to pass such a law. Maybe the fourth time is the charm?…

Read more at FedSmith.com.

Why Are Dry Counties Still a Thing?

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We focus a lot here at DrinksReform.org on the many, many inane alcohol laws around the country. But we shouldn’t lose focus of perhaps the most absurd, no-way-this-is-true-in-2019 alcohol rule of them all: There’s still places in America where it is straight up illegal to have booze. Drinks writer Wayne Curtis has a fun piece for The Daily Beast on dry countries:

The population of Beaver County, Oklahoma, is 5,315 and deeply divided. In a vote last year to determine whether alcohol sales should be made legal—it’s been a dry county for more than a century—the wets initially prevailed, voting in legal liquor by a scant five votes. But then the provisional ballots were tallied. And…the prohibitionists carried the day. So Beaver County remains alcohol-free. It is the last and only county in Oklahoma where you can’t buy a legal drink…

“Dry counties” exist as a sort feral anachronism—like phone booths and video stores. They appeared in response to perceived social or economic need, and when those needs dissipated, they were left behind, like flotsam from a flood nobody remembers. We are a nation that’s pretty good at building laws, and pretty lousy at dismantling them.

And so dry counties persist—today an estimated 18 million people are unable to buy a legal drink where they live. Mostly these persist in the south, and a map of dry counties overlaid with one of the Bible Belt, not surprisingly, shows considerable overlap. (Although the penchant for dryness fades as you get closer to the Gulf of Mexico.) The states with the most dry counties are Kentucky, Arkansas and Tennessee. Fact: you can still get arrested for possession of alcohol in some dry counties, as a 69-year-old man in Culliman, Alabama, learned recently…

Read more here.


Congressional bill would eliminate excise tax on Kombucha

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Kombucha traditionally has small amounts of alcohol in it, which can make it a tricky case for federal excise taxes on alcohol if it rises above 0.5% alcohol by volume. A U.S. Senator recently introduced legislation to help protect the drink from these taxes, according to Bend Bulletin:

A measure in Congress would help kombucha manufacturers by eliminating excise taxes on their products that contain more than 0.5% alcohol.

The bill, introduced by U.S. Sen. Ron Wyden, D-Oregon, raises the limit on alcohol by volume for kombucha to 1.25% and makes the product exempt from excise taxes imposed on alcoholic beverages like beer…

Kombucha is a fermented product, created when sugar and yeast are combined. When kombucha is not kept cold, it continues to ferment, raising the alcohol level above 0.5% and making it subject to the excise tax, said Amelia Winslow, director of project management at Kombucha Brewers International, a nonprofit trade association.

“Commercial kombucha producers work hard to control their processes to achieve compliance,” Winslow said. “However, if there are gaps in the cold chain during distribution, authentic kombucha, which is a living food, can go slightly above this 0.5%.”

It doesn’t make sense to tax kombucha for exceeding that threshold, Winslow said…

Read more here.

Where Did All The Bars and Taverns Go?

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This post was written by R Street Institute President Eli Lehrer.

Growing up in Chicago, I saw bars as a neighborhood institutions. Some served hot dogs or pizza puffs, but most were pure drinking places. As an adult, I’ve lived in Virginia, which requires all establishments with liquor licenses to have kitchens and derive at least 45 percent of sales from food and thus has no bars per se. Washington, D.C., where I’ve worked for 21 years now has a “tavern license” for places that want to emphasize drinks. But few exist. The Washingtonian magazine’s list of the Best Bars in Washington, D.C.includes only five District-located places that are bars without significant food menus. Indeed, many of the best known “bar” hangouts in the city like the Front Page and Union Pub have extensive menus. So, why?

Many obvious reasons don’t survive scrutiny. High D.C. rents can’t stop taverns alone since they thrive in places with even higher rents like San Francisco. Food produces another revenue and potential profit stream, of course, but that’s so everywhere. The non-family demographics of the city are similar to those of Manhattan, much of the Bay Area, Chicago’s North side, Seattle and dozens of other places with thriving bar scenes. And the idea that young professionals don’t like bars per se seems incorrect: alcohol use tends to decrease with age and people without families have more time to hang out at bars after work.

Instead, transience, immigration patterns and institutions seem to explain the District’s lack of bars. First transience. More  than 60 percent of the population of the District was born elsewhere and that percentage has risen in recent years. Only places with big retirement communities have as many transplants. Strong neighborhood institutions like taverns which must differentiate by vibe rather than menu (serving beer requires little skill and simple cocktails are hard to differentiate) aren’t going to thrive in places where people move.

The nature of immigration also matters. While D.C. did once attracted many people from Ireland, home to the world’s best-known pub culture, the city’s historic Irish neighborhood, Swampoodle now exists only in a park’s name. Modern D.C. attracts relatively few immigrants and the group of new arrivals most prominent as hospitality entrepreneurs--Ethiopians--come from a country with a large Muslim population and thus little bar culture.

Finally, the District’s unique Advisory Neighborhood Commissions (ANCs) present a barrier with their de facto veto over new liquor licenses. This makes taverns’ entire business subject to an additional obstacle. My colleague Nick Zaiac points out that for an ANC member (each of whom represents about 2,000 people) helping to block a bar might add political capital in a way that it wouldn’t for a council member representing a larger district.

Bottom line: D.C.’s culture and its institutions just aren’t friendly to taverns. And this probably isn’t going to change.





Prohibition was Repealed Almost 90 Years Ago, but Congress is Still Praising its Progeny

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Written by R Street’s Jarrett Dieterle and cross-posted from R Street Institute.

At a time when confidence in Congress—and really all of Washington, D.C.—remains at an all-time low, congressional representatives seem more determined than ever to make Americans cynical. Perhaps nothing illustrates this more than a recent resolution concerning alcohol regulation that several legislators recently introduced. The resolution, which is ultimately toothless, seeks to “recognize … 85 years of successful State-based alcohol regulation.” Not only is the resolution a complete waste of time, it also fundamentally misunderstands the role regulation has played in the modern evolution of the alcohol industry.

As far as one can divine from its fluffy language, the resolution appears to operate primarily as a cheerleading vehicle for the three-tiered system of alcohol regulation. The system, which traces its heritage to the immediate aftermath of Prohibition, requires that each link in the alcohol distribution chain—producers, wholesalers and retailers—remain legally separate entities.

This mandate may seem unremarkable at first blush, but its importance cannot be overstated. Consider that everyday conveniences such as Apple Stores—in which Apple acts as both the producer and retailer of its goods in stores nationwide—are impossible in the alcohol space. The three-tiered system also lies at the heart of many antiquated and nonsensical alcohol laws that remain on our books today. For instance, notoriously silly laws like Indiana’s warm beer law (which forbids gas stations from selling refrigerated beer) and laws prohibiting the shipment of spirits to consumers are vestiges of the three-tiered system that have never been cleared away.

The theory behind the three-tiered system, as the congressional resolution itself notes, is to prevent vertical integration in alcohol markets. In other words, the aim is to thwart large producers from exercising direct control over distribution in a way that could lead to monopoly behavior. While fears about monopolies are hardly unsurprising—after all, several 2020 presidential candidates have already claimed they want to “make antitrust cool again”—these concerns are totally unsubstantiated in the modern alcohol marketplace.

We live in an unprecedented time in modern history when it comes to what we drink. The array of different spirits, beers, wines and ciders is seemingly endless—and only grows by the day. Consumers are also becoming more locally focused and selective, meaning that the chances of a few large industry players cornering the drinks market are less realistic than ever. Simply put, consumers want more options, not fewer. Such a fragmented marketplace makes monopolistic behavior tricky, if not impossible.

Instead of waxing poetic about the supposed virtues of an anachronistic system of regulation, politicians should be focusing on how to modernize and overhaul alcohol laws across the board. Some laws surrounding alcohol are certainly necessary—no one wants to legalize driving under the influence, for example—but the vast majority of alcohol rules have no connection to health and safety. Citizens are not made safer by laws that prohibit the sale of cold beer in gas stations or forbid them from having booze shipped to their door. (After all, if we can find a way to send prescriptions via mail, we can do the same for alcohol.)

To be fair, politicians frequently spend much of their time grandstanding. But if they’re going to do so, they should at least grandstand for something that makes sense.

C. Jarrett Dieterle is the director of commercial freedom at R Street Institute and the editor of DrinksReform.org.


The Constitutional Issues With TTB's Proposed Alcohol Labeling Rules

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Late last year, the Alcohol and Tobacco Tax and Trade Bureau (TTB) issued a proposed rulemaking to reform regulations surrounding the advertising and labeling of alcohol products. Marc Robertson of the Washington Legal Foundation writes for Forbes about the constitutionally suspect parts of the agency’s proposal:

TTB’s efforts to streamline the rules and finally recognize long-standing First Amendment precedents are welcome. But parts of the proposed rule do not adequately protect the commercial speech rights of alcohol-beverage producers and consumers. We’ll focus here (as WLF will in its forthcoming public comment) on the prohibition of statements on labels or in advertisements that are disparaging, false, misleading, obscene, or indecent…

While the TTB’s proposal would prohibit false speech (unprotected under the First Amendment), it also targets truthful commercial speech that may tend to mislead or offend consumers. This provision accords the TTB a great deal of latitude to subjectively judge alcohol producers’ speech. While there is bound to be discretion and subjective review of any agency regulation, the TTB’s prohibition of certain disparaging statements or indecent labels or advertisements goes too far…

In addition to the constitutional concerns with its vague, subjective standards for alcohol labels and advertisements, the TTB must consider the message such paternalistic rules sends to state beverage control boards, which also review alcohol product labels. Such regulators have taken aim at craft beer names like “Dirty Bastard,” “Backwoods Bastard,” and “Raging Bitch,” as well as label images like a cartoon frog with its middle finger extended. Some of those decisions were successfully challenged under the First Amendment, but states would be better off helping their local businesses than forcing them into lawsuits…

The whole article is well worth a read here.

Effort to Lower BAC Level Spreads to More States

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Last year, Utah became the first state to lower the blood-alcohol limit for drunk driving from .08 to .05. Utah’s change was followed by a report from the National Academy of Sciences, calling for more states to follow suit. Now, several states are considering .05-level legislation, including Michigan, California, and New York. The OC Register’s editorial board weighed in one why a lower limit could be counterproductive:

Many people drink less while out at pubs or restaurants to avoid getting stopped for DUI. Such arrests can lead to jail stays, costly legal bills and the loss of one’s driver’s license. People who actually are impaired deserve those harsh punishments, but we fear that reducing the legal limit will mainly ensnare people who might not be impaired. The goal should be removing drunks from the road, not arresting non-drunks.

National Highway Traffic Safety Administration data show that 92 percent of alcohol-related fatalities involve a driver with a BAC of 0.10, according to Jackson Shedelbower of the American Beverage Institute. This confirms other information we’ve seen: the main drunken-driving dangers come from a relatively small group of heavy drinkers, not from people who have had a glass of wine or two with dinner…

We fear that lowering the BAC will simply make it easier for police agencies to set up checkpoints and then issue press releases about the growing number of drunken drivers that they have removed from the road. Yet it’s better to divert scarce resources to programs and policing efforts that capture the real scofflaws…

Read the rest here.

As Beer Market Matures, Many Regulatory Obstacles Remain

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As the craft beer movement has continued to explode in recent years, some analysts have warned that the market is becoming over-saturated. R Street’s Jarrett Dieterle has argued that in the context of a saturated market, it’s even more important to eliminate restrictive government-imposed barriers that hurt producers; after all, the market providers enough pressure without harmful (and needless) external hurdles being layered on. Food policy expert Baylen Linnekin recently sounded a similar warning in an article for Reason.com:

While the market for craft beer is still growing, the rate of growth has slowed considerably in recent years. Brewers Association chief economist Bart Watson last year said the craft beer industry his group represents is showing signs of "deceleration."

I'm confident the industry's growth can continue. But here's a caveat: craft brewers also continue to face their share of outside obstacles, chiefly in the form of state laws that hinder growth and profitability…

 I'm generally optimistic about both the industry and trends in state laws in the decade or so I've been writing about the industry. But I'm also frustrated by the slow pace of change and by seeing the same tired arguments…

Craft beer is a highly competitive, innovative, and important industry with boundless potential. In the end, though, the industry can only go as far as lawmakers will allow.

Linnekin’s whole article is well worth a read.

The DrinksReform.org team has also previously interviewed Linnekin on the absurdity of America’s alcohol laws.

Why Being a Brand Ambassador for Booze Is Harder in Control States

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Nearly everything is more difficult for alcohol producers and consumers in control states. That also extends to perhaps unexpected parts of the drink industry, such as brand ambassadors. Liquor.com interviewed several veteran brand ambassadors about the difficulties of operating in control states:

Being a liquor rep or brand ambassador can be a rewarding career. Knowing the ins and outs of a product or brand, spending time on the road visiting key accounts and building relationships with bartenders and owners are all key aspects of the job. But working in control states adds another level of complexity and challenge to the business of promoting a spirit, especially in stricter states that impose numerous regulations on how to sell alcohol…

Primarily, control states act as a single distributor for alcohol, selling directly from state-controlled liquor stores to bars and consumers and prohibiting bartenders from placing orders with anyone else. Building that relationship with bartenders, whether you’re the ground team working in that state, or a national rep who makes the occasional stop in, is key, even more so in control states when checking back in is an essential step.

“One difference in a control state is that you can’t always be closing, because there’s a disconnect between pitching products and educating, and the actual purchase,” says [Rocky] Yeh. “They can’t just take an order on the spot. It means there needs to be a lot more follow-up but in a way that’s not nagging.”…

Read the whole feature here.