The federal government shutdown had a negative impact on the North Bay’s wineries, distilleries and breweries, with producers who need label approvals from the Alcohol and Tobacco Tax and Trade Bureau (TTB) facing the most serious financial consequences. Beverages without a label approval cannot be released for sale.
With the government shutdown set now to be lifted, at least until Feb. 15, producers expect to have to continue to wait, allowing the TTB to work through a 36-day backlog of applications. The agency continued accepting applications for approvals through its website during the shutdown.
“We can’t be sure how long it will take the TTB agents to process through the now huge queues of formula and certificate of label approval (COLA) applications. I won’t be able to predict (the date of) our releases until I have those approvals in hand. I still expect that to be a few months from now,” said Ashby Marshall, owner and distiller at Spirit Works Distillery in Sebastopol. Spirits Works Distillery submitted several new labels to TTB before the shutdown.
Jeremy Grenert, marketing director for Bear Republic Brewing in Cloverdale, said his company hopes to be “towards the front of the line” for label approval. Bear Republic submitted several new beers for approval before the shutdown.
“We understand that TTB will be very busy going through applications for approval once they get back to work, so we are prepared to be a little behind on a release or two. We are happy the government will be open again,” said Grenert.
Brian Hunt, owner of Moonlight Brewing Company in Santa Rosa, said the shutdown impacted his company’s ability to market a beer co-produced with Petaluma-based Lagunitas Brewing Company.
“We submitted a crude label for a springtime Bock, and now we’re stuck with it. We wanted to create a better design, but (during the shutdown) we (were not able to) submit it to TTB (for a timely release),” said Hunt.
Hunt was also concerned that the shutdown resulted in an additional three-week backlog to Moonlight Brewing’s relationships with its regulators.
“I am afraid that the morale of these people will have plummeted and these are people we need to feel proud of what they do. That is now gone,” said Hunt.
John Trinidad, an attorney with Dickinson, Peatman & Fogarty, a Napa law firm that has producers as clients, said he hoped TTB can commit the necessary amount of staff to efficiently work through the backlog of COLA, formula and basic permit applications resulting from the shutdown.
“I understand that the Wine Institute and other alcohol beverage trade organizations have been in contact with TTB to that end,” said Trinidad.
BEVERAGES IN LIMBO
Trinidad said all types of alcoholic beverage producers which did not get a label approval before the shutdown could not sell unapproved products. While distilleries and breweries are not bound to a harvest schedule, many wineries bottle rosés between the end of January and late February. They are set to bottle certain whites in the spring.
“2018 reds are not going to be bottled for a while, so they’re safe for now. If you’re an established winery which has been operating for a few years, you have no need to get a new COLA approval (as long as) you’re only changing the vintage date on the approved label. It’s the wineries that are releasing their inaugural rosés and whites which may have to…delay their anticipated release dates,” said Trinidad.
Shutdown may mean an increase in legal expenses
The federal government shutdown may result in alcoholic beverage producers spending more on legal services this winter and spring. Since many producers cannot release their beverages by the expected date, they may need the services of attorneys to re-negotiate contracts.
“A change in bottling schedule may impact other contractual relationships, such as a distribution agreement, or delay planned marketing around anticipated wine release dates,” said John Trinidad, attorney with Dickinson, Peatman & Fogarty, a Napa law firm.
David Balter, also an attorney with Dickinson, Peatman & Fogarty, said it is unlikely that an alcoholic beverage producer could successfully sue the federal government for damages allegedly incurred due to the shutdown.
“First, there are procedural issues such as the requirement that a claimant file a claim form prior to any litigation, jurisdictional issues (i.e., one might be required to sue in the Federal Court of Claims in Washington, D.C.,) and, of course, (a producer would have to) prov(e) the factual nexus between the shutdown and the claimed damages. (These) are required to be proven with specificity, e.g. no estimated damage claims. Finally, governmental agencies have broad immunity for tort claims arising out of the exercise of their discretionary powers,” said Balter.