Control State News December 28, 2017 UT: Record-Breaking Sales at Utah Liquor Stores Before Please visit NABCA’s new website at Christmas www.nabca.org OR: Central Oregon Now And Then SAVE THE DATE

NC: ABC Chairman visit Cherokee Nation Registration Is Now Open for the Legal Symposium! Visit www.nabca.org to register. License State News MARCH 18-20, 2018 25th Annual Symposium on Beverage MA: Mass. alcohol laws need massive rewrite, task force Law & Regulation at the Crystal Gateway concludes Marriott in Arlington, VA. NM: New law allows alcohol sales after midnight this Join government, legal and industry professionals for a symposium that offers the Sunday, New Year’s Eve chance to hear the latest on legal issues TN: Appeals Court Upholds Ruling That Cleveland Does Not related to alcohol beverages. Session topics currently planned include Here Comes the Have To Share Liquor-By-The-Drink Sales Tax Proceeds With Judge, The Lens of Time: 1st versus 25th Bradley County NABCA Legal Symposium, Trade Practices: A Civil Matter? plus many others. Watch for International News registration materials in the coming months! Continuing Legal Education (CLE) credit is United Kingdom: Three million people to give up alcohol in available for many states. For more January information, go to www.nabca.org.

Finland: Breweries scrambling to fill grocery shops’ shelves APRIL 11-13, 2018 with stronger beers Alcohol Policy 18: Evidence To Action - Building an Evidence-Based Social Movement Industry News Renaissance Arlington Capital View Hotel, Arlington, Virginia. For additional information World’s Most Valuable Liquor Maker Will Raise Prices of Its on hotel, important dates and more, please Popular Moutai Drink by 18% visit the AP18 Conference website. AP18 Registration Now Open!

Daily News APRIL 30–MAY 1, 2018 2018 RRForum National Conference - hosted TTB Updates to the Semi-Annual Regulatory Agenda by the Michigan Liquor Control Commission Excise Tax Relief for Breweries, Wineries and Distilleries and will be held in Detroit. Temperance is the new craft beer for drinks groups NEW! MAY 21-24, 2018 81st Annual Conference will be held at the Arizona Biltmore, Phoenix, AZ. Theme: Bridging Divides; For more information, visit www.nabca.com website.

JULY 18-20, 2018 8th Biennial Northwest Alcohol & Substance Abuse Conference Riverside Hotel, Boise Idaho The Pre-Conference Sessions are on Wednesday. The official conference kicks off Thursday morning. Visit NorthwestAlcoholConference.org for more information.

NABCA Daily News Update (12/28/2017) 2

NABCA HIGHLIGHTS

Native American Nations & State Alcohol Policies: An Analysis

Sunday Alcohol Sales (July 2017)

Alcohol Technology in the World of Tomorrow - (White Paper) The Control State Agency Info Sheets. Please view website for more information. NABCA Survey Database – now available for members on the website.

www.NABCA.org

NABCA Daily News Update (12/28/2017) 3

CONTROL STATE NEWS

UT: Record-Breaking Sales at Utah Liquor Stores Before Christmas Sales at Utah state liquor stores broke an all-time record on the Friday before Christmas.

U.S. News December 27, 2017 SALT LAKE CITY (AP) — Sales at Utah state liquor stores broke an all-time record on the Friday before Christmas. The state Department of Alcoholic Beverage Control says there were more than $3.78 million in sales on Dec. 22 at the state's 45 state liquor stores. That broke a record for the highest dollar sales but also the highest number of bottles sold, with 354,654 bottles of wine, beer and liquor being purchased. The last record was set last year two days before Christmas. The numbers exclude sales of beer that contains less than 4 percent alcohol by volume, which can be purchased at grocery and convenience stores.

OR: Central Oregon Now And Then Distilling and moonshining in the high desert

Source Weekly By Scott Stuemke December 27, 2017 Today, small batch distilling is creating a niche for award-winning spirits—but distilling in the high desert has been happening for more than 100 years. When asked about his impetuous knack for creating fine libations, one local distiller says it's about making great spirits. The key is "local grains, water and passion." Way back when, another necessary ingredient was moxie. Moonshining was a common practice by local settlers around the turn of the 20th Century. Homesteaders capitalized on the demand and remoteness of the high desert to operate small, crude distilling plants. A simple mash of grain, sugar and water was the foundation for the 'shine. Distilling was accomplished by evaporating alcohol from the mash. The can and coil had to be made from copper, as using any other metals would react with the alcohol and poison the liquor chiller. This practice went unregulated until liquor control measures were enacted through the influence of the Anti-Saloon League and Women's Christian Temperance Union. These measures were enacted by the Oregon legislature in 1908, with enforcement left up to the counties. Alcohol went unrestricted until 1914. Local enforcement, dwindling liquor supplies and mounting prices forced men who made the skull popping-brews into hideouts in the land of caves and juniper berries. The Volstead Act, or the National Act, created the 18th Amendment in 1919. The amendment prohibited the production, sale and transport of intoxicating liquors. It didn't, however, define "intoxicating liquors" or provide penalties, and didn't specifically prohibit the use of intoxicating liquor. At the time, 1 out of every 7 gallons of liquor in the U.S. was , and it was believed that a billion dollars was lost in revenue every year. The isolated Central Oregon plateau led to the creation of the Dry Squad, or Prohibition Enforcers. These Dry Squads were members of the Bureau of Prohibition, and "Revenoor Action" accounted for more law enforcement than any other more actions in the high desert than anywhere else in Oregon. So-called "revenoors" were Prohibition agents, granted wide powers to search for and seize alcohol. The Dry Squads supposedly protected innocent citizens against bandits while searching for contraband on the highways. Dry Squads scoured the high desert in search of moonshiners running illegal operations that consisted of "dugouts," usually an excavated shelter covered with logs, tar paper and dirt and a catchment for rain and snow. Shiners used large cellars to house a still and mash barrels. The dugouts usually employed hatches to let out the mash fumes. Some bold individuals even pursued

NABCA Daily News Update (12/28/2017) 4 moonshining in their basements. Confiscated stills were commonly displayed on Bend's Greenwood Avenue, next to the jail, and later hacked up. Officials spilled the contraband onto the streets while the thirsty looked on. In 1926, a gunfight erupted in the junipers, 45 miles southeast of Bend, during the search for an unregistered still. Revenuers removed a window from the "dugout" and found 10 barrels of brewing mash. To catch the culprits, they hid for 18 hours. Vayle Taylor, a 25-year-old resident of the Ewing Ranch and member of the so-called "Bear Creek Gang" was killed in an "accidental shooting" during the stakeout near the Crook and Deschutes county lines. In the end, authorities found just one quart of alleged moonshine. County officials and state men broke up the stills and set fire to the "dugout" and the adjoining shelter. The officers were later exonerated. The remaining members of the Bear Creek Gang set out to get the revenuers, setting their sights on dynamiting the Congress Apartments in the Whiskey Flat area, a westside neighborhood where Scandinavian immigrants lived. The intent was to kill the prohibition officer, A.P. "Buck" Marriott and family. The story is that a barking dog thwarted the placement of more explosives, so the gang only managed to fire a blast that involved 20 to 30 pounds of TNT and dynamite. An entire box could have killed all occupants of the apartments, but as it stood, there were only minor injuries and major property damage. Prohibition led to corruption and was repealed by the 21st Amendment in 1933, but moonshining revived anyway, due to the mounting prices of liquor. The people who bucked Prohibition where equated to those involved in the Boston Tea Party. Today, the distillery scene has come out of the shadows, and people can visit several small batch distilleries here in the high desert, producing award-winning spirits including whiskey, vodka, gin, cordials—and yes, even moonshine.

NC: ABC Chairman visit Cherokee Nation Smoky Mountain News Written by Admin December 27, 2017 North Carolina Alcoholic Beverage Control Commission Chairman Zander Guy met with Principal Chief Richard G. Sneed and other representatives of the Tribal Council of the Eastern Band of Cherokee Indians during a Dec. 4 visit to Cherokee. “The North Carolina ABC Commission and the Tribal ABC Commission share common goals of revenue, control and service for the benefit of the people within our jurisdictions. As we find more opportunities to work together, I hope our relationship will continue to be strong and positive,” said ABC Commission Chairman Guy after the meeting. In addition to meeting with Sneed and other leaders, Guy toured Harrah’s Cherokee Casino Resort and reviewed the various security measures in place at the facility to prevent sales to underage or intoxicated guests. The North Carolina ABC Commission ships approximately 6,000 cases of spirituous liquor to the Tribal ABC Commission annually. The Tribal ABC Commission is in charge of regulatory oversight of all alcohol within the Qualla Boundary of Western North Carolina.

LICENSE STATE NEWS

MA: Mass. alcohol laws need massive rewrite, task force concludes Boston Globe By Dan Adams, Globe Staff December 28, 2017 The price of beer, wine, and liquor in Massachusetts would increase, but unpopular restrictions on the sale of alcohol would go away, under a radical proposed overhaul of the state’s byzantine booze laws that’s expected to be unveiled by a government- appointed task force Thursday. The proposals include increasing the state’s excise taxes on beer, wine, and liquor by about 50 percent and banning discounts for package stores and bars for buying bulk quantities from wholesalers. If the measures are enacted, the companies could pass some or all of the new costs onto drinkers, while the state would reap tens of millions of dollars in additional revenue. NABCA Daily News Update (12/28/2017) 5

But the task force also recommends relaxing rules that annoy shoppers and businesses alike, saying that the state should abolish the limit on the number of alcohol licenses grocery store chains can hold, allow bars to accept out-of-state photo IDs, and permit brew pubs to sell beer through other retailers. The group also proposed making it easier for business to obtain all-alcohol licenses while limiting the issuance of beer-and-wine- only permits. That could lead to more establishments that sell hard liquor, rather than just beer and wine. While most of these measures would need approval from the Legislature, they nonetheless represent the most extensive official rethinking of alcohol rules in Massachusetts since many were put in place at the end of Prohibition in 1933. “Massachusetts appears to be experiencing a moment of openness to reform of liquor licensing laws, and a rejection of the status quo in situations where the 1933 laws no longer make sense,” the task force said in its report, acknowledging the modest loosening of rules governing the sale and shipment of alcohol in the state made by the Legislature recently. The task force was convened in January by State Treasurer Deborah Goldberg, who oversees alcohol regulations, following a series of scandals and controversies in the industry. She gave the group free rein to design a “21st-century” system of regulation and appointed seven lawyers and state officials who have no connections to the alcohol business. Businesses, lawyers, public health advocates, and others who advised the task force through working groups were surprised by the scope and depth of its final recommendations, although many declined to comment in detail until they could study the report, which has several hundred pages. One provision would ease the prohibition on alcohol producers, distributors, and retailers owning other licensed businesses outside of their segment of the industry. That would allow, for example, a producer to own up to 10 percent of a retail or distribution company. But with so many of the recommendations needing either legislative approval or new regulations from the state’s Alcoholic Beverages Control Commission, Bob Luz, president of the Massachusetts Restaurant Association, noted that “we’ve got a long row to hoe.” “For all the work that the task force and working groups put in, they don’t have the power to simply change anything,” Luz said. Officials in Goldberg’s office said the treasurer may move quickly to push for less controversial improvements, but is likely to take more time to develop legislation for the more complex proposals. They said she might also recommend that others not be adopted. Among the more controversial proposals are the excise tax increases, which will probably draw backlash from different quarters of the alcohol industry. Massachusetts has among the lowest alcohol excise taxes of any state, which are levied at the wholesale level, on a per-gallon basis. For beer, the task force recommends increasing the tax to 16 cents a gallon, from 11 cents; to 82 cents a gallon on wine, from 55 cents; and to $6.07 a gallon on liquor, from $4.05. The changes would boost annual alcohol tax revenue to about $125 million, from $83 million. The task force also tried to resolve a longstanding battle between beer wholesalers and brewers over distribution rights. Current law essentially binds brewers and other alcohol producers to their distributors in perpetuity after a trial period unless they can prove the wholesaler meets one of several conditions, such as failing to “exercise best efforts” to sell their products. The task force recommends relaxing those requirements. “The task force agrees with . . . the need for significant franchise law reform and clearly defined parameters to govern the relationship between brewers and distributors,” said Rob Burns, president of the Massachusetts Brewers Guild, an industry group that represents makers of craft beers. Public health advocates deluged the task force with comments, demanding higher prices, fewer alcohol outlets, larger fines for selling to minors, and other measures they say would discourage — which they say costs the state billions of dollars. For example, the fine for selling to a minor is $2,000 per offense. The task force recommends increasing that to about $2,900, to adjust for inflation. In another example, the current fine for using a false identification card to obtain alcohol is $300. It would go to $1,250. The task force endorsed many of the proposals by health advocates, including one that would ban discounts from wholesalers to bars and liquor stores, which would partially rob chains such as Total Wine of their size advantage over mom-and-pop package stores. NABCA Daily News Update (12/28/2017) 6

The task force would also outlaw loyalty cards and other discount programs for consumers, saying they tend to increase alcohol consumption. “On balance, the threat to small business coupled with the public health and safety dangers posed by discounted sales outweigh the minimal consumer benefit,” the task force wrote in its report. Representatives of owners of small package stores had also backed these restrictions. But Total Wine, which has been lobbying the state to allow such programs, issued a rebuke. “Responsible consumers of beer, wine and spirits should have access to valuable discounts, retailer coupons and loyalty programs like customers in virtually every other segment of the retail sector,” the company said in a statement. Under the proposal, a portion of the money reaped from higher fines and taxes would go toward public health initiatives. Another portion would help beef up the chronically under-funded ABCC, so it could more quickly process license applications and hire 30 additional enforcement officers. Currently, the ABCC has just 15 investigators, or one for every 800 alcohol retailers, far below the national average of one for every 261 bars, restaurants, and liquor stores. The task force declined to address the controversial quota system that caps the number of alcohol retailers in most Massachusetts cities and towns. That pleased both public health advocates and existing retailers, who fear that additional competitors would undermine the value of their licenses. Another measure would require applicants for new retail alcohol licenses to submit an analysis of how the addition of another outlet would affect the health of the surrounding community. “We’re happy to see some recognition of the importance of outlet density,” said Amy Turncliff, a neuroscientist who cochairs the MetroWest Substance Abuse Prevention Alliance. “There’s an acknowledgment that health and safety considerations are important.” But the task force went against health advocates by also suggesting changes that would make it easier to find and buy alcohol, including allowing more grocery stores to sell alcohol. Under current state law, grocery chains can have only seven alcohol licenses, with that number increasing to nine in 2020.

NM: New law allows alcohol sales after midnight this Sunday, New Year’s Eve KRQE News 13 By Madeline Schmitt December 27, 2017 ALBUQUERQUE, N.M. (KRQE) – As midnight approaches on New Year’s Eve, you may want to thank the state legislature for keeping the party going. Normally, bars have to close early on a Sunday night, but not this coming weekend. Depending on where you go, the countdown to 2018 will not be ruined by the bartender yelling out “” before midnight. It doesn’t happen often, but this year, New Year’s Eve falls on a Sunday, and if you’re familiar with New Mexico alcohol laws, you know it can’t be served or sold after midnight on Sundays. “We do our last call 30 minutes before we close, so we would have done it at 11:30 p.m. and kicked everybody out at five till 12:00 a.m,” Chris Hurtley, General Manager of Spectators in the Northeast Heights, said. What you might not know, however, is that earlier this year state lawmakers passed a bill, which Gov. Susana Martinez signed off on, that allows establishments with the proper license to stay open until 2 a.m. Monday when New Year’s Eve falls on a Sunday. The bill was sponsored by Rep. Jim Trujillo, D-Santa Fe. For the most part, this applies to clubs, breweries and bars, like Spectators and Nob Hill Bar and Grill. “We get to stay open. It helps us, it helps our patrons. That way they’re not scrambling to find somewhere to go at 10 minutes till midnight,” Hurtley said. “New Year’s is a big holiday, especially for these local places. This is how we thrive, is on holidays like this,” Mikayla Nowell said, who works at Nob Hill Bar and Grill.

NABCA Daily News Update (12/28/2017) 7

Both establishments say the new law is good for business, it’s just a matter of getting the word out. Nowell said Nob Hill Bar and Grill is posting reminders to its social media accounts, along with relying on word of mouth and people who might be in the area Sunday night. Spectators has signs on its doors letting patrons know. If you do decide to take advantage of the new law, you can also take advantage of a free ride. In Bernalillo County, use the code “ABQNYE17” to get up to $10 off an Uber ride that begins or ends in Albuquerque. There is one major catch to this new law, however. If you live in a town or one of New Mexico’s 11 counties that does not allow the sale of alcohol on Sundays, it does not apply. The next time this law will be applicable is New Year’s Eve 2023.

TN: Appeals Court Upholds Ruling That Cleveland Does Not Have To Share Liquor-By-The-Drink Sales Tax Proceeds With Bradley County The Chattanoogan.com December 27, 2017 The Tennessee Court of Appeals has upheld at ruling that the city of Cleveland does not have to share liquor-by-the-drink sales tax proceeds with Bradley County. The Appeals Court said, "This is one of four separate actions currently before this Court with the common issue of whether the version of Tennessee Code Annotated § 57-4-306(a)(2)(A) in effect prior to the July 2014 amendment of that statute required a municipality governed by its own liquor-by-the-drink referendum and operating its own school system to share one-half of its liquor-by-the-drink tax revenue with the county in which the municipality was located when the county had not enacted a liquor-by-the-drink referendum. "The county commenced the instant action by filing a complaint requesting declaratory judgment of its asserted right to a portion of liquor-by-the-drink tax revenue collected within the municipality. Upon subsequent competing motions for summary judgment, the trial court granted summary judgment in favor of the municipality, finding that the municipality was entitled to keep all liquor-by-the-drink tax monies distributed to it by the Tennessee Commissioner of Revenue. "Upon the county’s motion to alter or amend, the trial court reserved judgment on the issue of whether the municipality was entitled to the local political subdivision’s portion of the liquor-by-the-drink tax revenue for sales that took place at private clubs within the municipal limits of the municipality prior to the municipality’s 2002 passage of its referendum authorizing liquor-by- the-drink sales. Following consideration of a motion for summary judgment on this remaining issue filed by the municipality and a response filed by the county, the trial court again granted summary judgment in favor of the municipality, dismissing the county’s complaint in its entirety. "The county has appealed. Determining that the municipality was not required under the applicable version of the statute to share its liquor-by-the-drink tax revenues with the county, we affirm the trial court’s judgment." Chancellor Jeri S. Bryant in July 2015 rulined that the city of Cleveland is entitled to keep all funds collected since city voters approved “liquor by the drink” in the Nov. 5, 2002 election. Bradley County Schools sued the city for taxes owed based on the school board’s interpretation of state law. The city of Cleveland distributed the liquor by the drink tax to Cleveland City Schools. Chancellor Bryant stated in her ruling that the tax receipts were to be paid “to the local political subdivision, which has passed the referendum, thereby allowing the city to keep all the funds raised by this tax.” A similar referendum was defeated by Bradley County voters to allow “liquor by the drink.” She acknowledged that the city has operated its own kindergarten through 12th grade school system separate from Bradley County Schools and that the Tennessee Department of Revenue paid distributed funds to the city from the tax codified in Tennessee Code Annotated 57-4-301. Chancellor Bryant wrote in the five-page order that both parties agreed on the facts, but it was the interpretation of Tennessee Code Annotated 57-4-301 that was disputed. The city and county agreed that the first 50 percent of the tax went to the general fund of the state pursuant to state codes. The other half were to be "expended and distributed in the same manner as the county property tax for schools is expended and distributed," in this case, to the city or town where the tax is collected. NABCA Daily News Update (12/28/2017) 8

The city took the position that TCA §57-4-301 did not apply to the county because the county never authorized liquor by the drink. She said, "TCA §57-4-103(a)(l) states in part, "… (t)his chapter shall be effective in any jurisdiction which authorizes the sale of alcoholic beverages for consumption on the premises in a referendum ... . This court agrees that the county defeated the referendum and, therefore, has neither rights nor responsibilities under TCA §57-4-101. It is therefore, ORDERED, ADJUDGED and DECREED that the Defendant's Motion for Summary Judgment is hereby granted. The city is entitled to keep all funds collected pursuant to TCA §57-4-301.” The county argued that a 2014 amendment declared the legislature's original intent was to require the municipality to distribute consumption tax proceeds to the county in which the municipality lies, regardless of whether the municipality operates its own school system. “This court disagrees,” the chancellor wrote. “The 2014 Amendment to TCA §57-4-306 rewrote 306(a)(2) and provided a one- year timeframe that allowed the county to share in the collection of the taxes based on the average daily attendance of the students in the city system with the remaining amount to be distributed to the county trustee for the county school system. After July I, 2015, the proceeds pursuant to 306(a)(2) reverted back to the old language. The court finds this is an indication that the original language was intended to only allow funds to be paid to the local political subdivision which has passed the referendum thereby allowing the City to keep all funds raised by this tax.” The Bradley County Board of Education and Bradley County versus the City of Cleveland was heard March 2, 2015, in Chancery Court for Bradley County. Cleveland Attorney James F. Logan represented the county and Douglas S. Johnston Jr., Nashville, represented the city. This was the second dispute over tax distributions between the city and county in recent years. Bradley County Schools was ordered in November 2012 by the Appeals Court to repay $1.422 million to the city. That legal entanglement began after Cleveland voters approved increasing the city sales tax rate by .5 percent on March 10, 2009.

INTERNATIONAL NEWS

United Kingdom: Three million people to give up alcohol in January The Caterer December 28, 2017 Some three million people in the UK are expected to give up alcohol next month, putting further pressure on pubs and restaurants. According to a YouGov poll, commissioned by charity Alcohol Concern, over 3.1 million people are planning to do Dry January and ditch alcohol for a month. The poll of 2,086 members of the public found that those between the ages of 35 and 54 were most likely to give up alcohol for heath and financial reasons, with 7% saying they planned to give up booze. Those in Northern Ireland were most likely to abstain (10%), followed by drinkers in the North East (8%). Alcohol Concern chief executive Dr Richard Piper said: “Alcohol is the biggest cause of death, ill-health and disability for people aged 15-49 in the UK – but these tragedies are all totally avoidable. Dry January is growing year-on-year as more people across the country decide to take control of their drinking and reap the benefits, both in how they feel now and for their future health.” For pubs and restaurants it means further pressure in 2018 on top of the wage and food inflation that has cut profits this year. The campaign is endorsed by Public Health England, which said that Dry January was based on sound behavioural principles and that it helps re-set drinking patterns for weeks or even months. Two-thirds of those who attempt Dry January make it through the month without drinking.

NABCA Daily News Update (12/28/2017) 9

Finland: Breweries scrambling to fill grocery shops’ shelves with stronger beers Helsinki Times By Uusi Suomi December 27, 2017 Finnish breweries are scrambling to deliver stronger beers and ciders to the shelves of grocery shops by 1 January, reports Kauppalehti. “It’s a massive adjustment and hassle no matter where you look,” Rami Aarikka, the managing director at Laitilan Wirvoitusjuomatehdas, commented in an interview with the commerce-oriented newspaper on Wednesday. “Shops will have a rather limited selection when it comes to brewery products stronger than the current ones at the start of January,” he predicted. The Ministry of Social Affairs and Health revealed last week that grocery shops will be allowed to retail beverages with an alcohol content of a maximum of 5.5 per cent as of the beginning of next year. Aarikka estimates that the lack of a transition period will benefit large breweries due to their larger stocks of products. The introduction of stronger beers and other alcoholic beverages to grocery shops is also expected to further intensify the competition for space on the shelves of grocery shops. Kauppalehti predicts that beverages that do not end up in the shopping baskets of customers will soon have to make way for products in higher demand. “Breweries’ ability to react quickly to changes will become more important next year. No one knows yet how consumers will react to the new situation. I believe that next year will be particularly colourful,” said Kalle Järvinen, the managing director at Hartwall.

INDUSTRY NEWS

World’s Most Valuable Liquor Maker Will Raise Prices of Its Popular Moutai Drink by 18% Bloomberg By Daniela Wei December 27, 2017 Shares of Kweichow Moutai Co. gained the most since mid-2015 after the world’s most valuable spirits maker said it will raise the price for its signature drink for the first time in five years. The Chinese state-owned company announced Thursday an average 18 percent increase across its product line as it holds an annual conference with dealers at its headquarters in Guizhou province. Moutai confirmed that the factory-gate price of the group’s core baijiu product, Flying Fairy, will rise to 969 yuan ($148) per bottle from the current 819 yuan. The brand accounts for more than 90 percent of the listed company’s revenue. The company’s shares gained 8.2 percent in Shanghai on Thursday, the most since July 2015 and closing just short of an all-time high. Other Chinese liquor makers also rallied Moutai is catching up with Chinese rivals that have been raising prices this year. The company, which has seen pressure from state-run media because of its soaring market valuation, emphasized in April that prices should be based on affordability for mass customers, and that the group would take action to stabilize market prices and wouldn’t pursue excessive profits from the business. Moutai’s signature grain liquor, which has traditionally been the drink of choice among the country’s elite, has found widespread popularity among China’s middle class as they embrace a more affluent lifestyle. Moutai said Thursday it expects liquor sales volume to grow 34 percent in 2017 from a year earlier, while profit will rise about 58 percent this year. Soaring Valuation The company’s stock has more than doubled in 2017, reaching a record in November. That prompted China’s Xinhua to say last month the runup has been too fast, sending the stock tumbling as much as 14 percent. It has been climbing back during December, and Thursday all but erased those declines.

NABCA Daily News Update (12/28/2017) 10

Rival Wuliangye Yibin Co, the nation’s second-largest liquor maker by market value, has lifted retail prices three times this year. Chinese baijiu maker Sichuan Swellfun Co, owned by Diageo Plc, also had an increase in July, China’s official Xinhua News Agency reported. Moutai is raising the factory-gate price of its products. It also sets a resale price of 1,299 yuan, but bottles routinely go for more than 1,500 yuan online and through its dealers, as China’s improving economy is boosting demand for high-end liquors. In addition to increasing prices, Moutai is looking to grow by expanding beyond its core liquor operations. Chairman Yuan Renguo said in an interview with Bloomberg this month that the group is planning initial public offerings for three businesses by 2020, including its e-commerce unit. It is also pushing ahead into financial services.

DAILY NEWS

TTB Updates to the Semi-Annual Regulatory Agenda The National Law Review By Marc Sorini, Partner December 27, 2017 Last week in its regular newsletter, Alcohol and Tobacco Tax and Trade Bureau (TTB) announced updates to the Fall edition of the semi-annual Unified Agenda of Federal Regulatory and Deregulatory Actions (Regulatory Agenda). Like other federal agencies, TTB uses the Regulatory Agenda to report on its current rulemaking projects. In the updated agenda, a few new items have been added, and many expected publication dates of Notices of Proposed Rulemaking (NPRMs), Advanced Notices of Proposed Rulemaking (ANPRMs) and Final Rules have changed. As always, readers should recognize that TTB rulemaking moves very slowly, and the Agency often does not meet the aspirational dates published in the Regulatory Agenda. The updated Regulatory Agenda lists the following projects of interest: Wines, Distilled Spirits and Malt Beverages 1. The reform of TTB’s labeling and advertising regulations for all three commodities, on the Regulatory Agenda for years, now indicates that TTB will publish an NPRM on the subject in September 2018. 2. Three new entries propose separate NPRMs to “modernize and streamline” the application requirements for permits and/or registrations required by breweries, wineries and distilleries. The Regulatory Agenda identifies September 2018 as the expected publication date for these proposals. 3. Final regulations (a “Final Rule” in Administrative Procedures Act parlance) implementing the relaxed bonding requirements for smaller excise taxpayers, enacted by Congress in the Protecting Americans from Tax Hikes Act of 2015 (PATH Act), are expected in April 2018. Wines 4. The Regulatory Agenda reports that an NPRM to eliminate most standards of fill for wine containers is expected in December 2017 (a slippage in timing seems very likely with this proposal). 5. TTB re-opened the comment period on its proposal to allow additional treatments for producing wine, first published in November 2016. The reopened comment period ends on January 9, 2018. 6. An NPRM concerning the labeling of certain flavored wines is expected in April 2018. 7. TTB reopened the comment period on its proposal to add new grape varietals to the approved list of varietals for American wines. The reopened comment period closed on December 11, 2017, and the Regulatory Agenda does not indicate a future action after that date. 8. A Final Rule implementing the PATH Act’s amended “hard cider” definition is expected in April 2018. An “Interim Final Rule” already implements the requirements of the Act on a temporary basis. 9. TTB now expects to publish in April 2018 a “Supplemental” NPRM on its proposal to allow wine labeled with a single-state American Viticultural Area (AVA) to be finished in an adjacent state. NABCA Daily News Update (12/28/2017) 11

10. TTB’s proposal to harmonize its Internal Revenue Code wine labeling regulations (codified in Part 24 of TTB’s regulations) with its Federal Alcohol Administration Act labeling regulations (confided in Part 4 of the regulations) remains on the agenda. The reopened comment period for this NPRM closes on January 9, 2018. 11. The Regulatory Agenda identifies December 2017 as the publication date for a planned NPRM on permitting wine labels to include information on fortification of the wine with wine spirits. 12. TTB proposes to amend its winemaking regulations to permit the use of molasses as an ingredient in wine. The NPRM publication date is listed as December 2017. Distilled Spirits 13. A new item indicates that TTB expects to publish an NPRM to eliminate most standards of fill for distilled spirits. The latest agenda lists December 2017 as the expected publication date. 14. A new item in the latest Regulatory Agenda proposed an ANPRM to explore a possible expanded definition of “oak container” for purposes of the distilled spirits standard of identity (class/type) and age statement rules. The Agenda indicates a possible publication date of the ANPRM in April 2018. 15. TTB expects to publish a Supplemental NPRM on combining Distilled Spirits Plant monthly reporting into a single form. This proposal, first addressed in a 2011 NPRM, is expected to result in a Supplemental NPRM published in September 2018. Non-Beverage Alcohol 16. TTB expected to publish an NPRM related to its long-anticipated project to allow manufacturers of non-beverage products to self-certify that their products qualify for excise tax drawback. The expected publication date is set for September 2018. * * * It bears repeating that the dates listed in the Regulatory Agenda and published above should be treated as aspirational.

Excise Tax Relief for Breweries, Wineries and Distilleries McDermott Will & Emery By Arthur J. DeCelle December 26, 2017 This post does not constitute tax advice. It summarizes changes in alcohol beverage excise tax laws to assist industry members in planning to implement the changes. Excise tax calculations and liability must be determined for each taxpayer based on numerous variables. The new tax law formerly referred to as the Tax Cuts and Jobs Act of 2017, provides a temporary reduction in alcohol beverage excise taxes for US brewers, winemakers, distillers and beverage importers. Temporary tax relief is available for beer, wine and spirits removed from a US manufacturing facility or released from Custom’s custody after January 1, 2018, and prior to December 31, 2019. Several provisions of the new law will require the Alcohol and Tobacco Tax and Trade Bureau (TTB) to quickly promulgate new regulations. The new law also modifies existing sections of federal excise tax laws so that commonly owned manufacturers and importers get “one bite at the apple” for each beverage category (beer, wine and distilled spirits). Groups of related breweries, wineries or distilleries are treated as a single taxpayer. A modified version of the “controlled group” rules in the Internal Revenue Code is used to determine whether breweries, wineries or distilleries are commonly owned. The general approach is that taxpayers with ownership interests greater than 50 percent in more than one facility must aggregate the worldwide production volume to calculate the volume of eligible for the reduced tax rates. Additional language treating certain entities as a “single taxpayer” will require guidance from TTB. In addition to the controlled group rules, brewers in other countries must formally designate the US importers that will receive the benefit of the reduced tax rate. Basic excise tax computations vary significantly for beer, wine and spirits, requiring detailed calculations for each taxpayer and each beverage category.

NABCA Daily News Update (12/28/2017) 12

• Beer is taxed at a standard rate on the number of 31-gallon barrels produced by each brewer or controlled group of brewers. • Wine is taxed under at a standard rate per gallon on a sliding scale at rates that vary based on alcohol content and the type of wine. • Distilled spirits are taxed on a standard rate per “proof gallon” produced, and the actual rate for each product is based on the alcohol content. Excise tax relief in the new legislation is not permanent. Even the best crystal ball cannot predict the political and economic landscape in two years. Manufacturers and importers must keep in mind the fact that the pre-2018 rates will apply again beginning in 2020 unless Congress extends the temporary excise tax rates. The table below summarizes the changes in rates.

Excise Tax Rates and Credits for Calendar Temporary Excise Tax Rates and Credits for Beverage Years 2017 and 2020 Calendar Years 2018 and 2019

• US brewers and importers (and controlled • Brewers and importers (and controlled groups): groups) with volume exceeding 2 million barrels: • $16.00/barrel for the first 6 million barrels produced or imported. • $18.00/barrel (Barrel = 31 • US brewers (and controlled groups) producing Beer US gallons) less than 2 million barrels: • US brewers producing fewer than 2 million barrels: • $3.50/barrel on the first 60,000 barrels. • $7.00/barrel on the first 60,000 barrels • All volume produced above the 6 million barrel threshold is taxed at $18/barrel.

• Wines lower than 14% alcohol by The alcohol content ranges for two wine tax rates volume (ABV): are changed as follows: • $1.07/gallon • Wines lower than 16% alcohol by volume • Wines above 14% and below 21% ABV: (ABV): • $3.57/gallon • $1.07/gallon • Wines 21 and 24% ABV: • Wines above 16% and below 21% ABV: • $3.15/gallon • $3.57/gallon • Champagne and other naturally • No other alcohol content criteria for wine tax Wine sparkling wines and ciders: rates changes. and • $3.40/gallon • The tax credit previously available to small Hard Cider domestic wineries is modified and made • Artificially carbonated wines and available to each winery and importer (and ciders: each controlled group). • $3.30/gallon • Credits are provided based on various • Hard cider (still) wine: production thresholds for wine up to a total of 750,000 gallons per calendar year: • $.226/gallon • $1.00/gallon on the first 30,000 • A $0.90 credit is available for the first gallons; 100,000 gallons removed by a small winery producing not more than • $0.90/gallon on the next 100,000 250,000 gallons in a calendar year. gallons; and NABCA Daily News Update (12/28/2017) 13

• The credit is reduced by 1% for each • $0.535/gallon on the next 620,000 1,000 gallons above the 100,000 gallons. gallon threshold produced by a • Credits are adjusted for various production winery (and controlled group) up to thresholds for hard cider: 250,000 gallons in each calendar year. • $0.062/gallon on the first 30,000 gallons; • The credit for hard cider is $0.056/gallon • $0.056/gallon on the next 100,000 gallons; and • $0.033/gallon on the next 620,000 gallons.

• The first 100,000 proof gallons produced or • Distilled spirits: $13.50/proof gallon imported: • A proof gallon is a gallon of distilled • $2.70/ proof gallon spirits at 50% ABV. The actual rate is • The next 22,130,000 proof gallons produced adjusted for spirits products above Distilled or imported: and below 50% ABV. For example a Spirits distilled spirits product containing • $13.34/proof gallon 40% ABV is $10.80/gallon. • All other production or imports are taxed at • A credit is provided for any wine and the standard $13.50/proof gallon rate. flavor content in distilled spirits. • Credits for wine and spirits content remain available.

Temperance is the new craft beer for drinks groups Nasdaq By Carol Ryan, Reuters December 28, 2017

(The author is a Reuters Breakingviews columnist.)

LONDON, Dec 28 (Reuters Breakingviews) - With a teetotaller in the White House and strong demand for low-alcohol tipples, moderation is having a moment. Greater health awareness and restrained consumption among young drinkers mean volumes of low- and no-alcohol beer will expand five times faster than traditional drinks in 2018. It's a new source of growth for global companies as the craft beer craze loses its froth. Growing health consciousness is a factor. The same trend that has prompted consumers to reject processed foods has also led them to imbibe less. Concern that drunken antics will go viral on social media may be another reason why so-called millennials are proving more disciplined drinkers than their parents. Drinks companies are tapping into that restraint. Global volumes of low-or-no-alcohol beers will grow by 4.9 percent in 2018, compared with less than 1 percent for alcoholic drinks, Euromonitor forecasts. Big companies are eager for a slice of the action, as well as the sheen of responsible drinking. While non-drinkers once had to content themselves with a rather sad selection, booze-free choices increasingly look and taste like the real thing. Diageo recently bought a stake in Seedlip, a maker of alcohol-free distilled spirit set up by a teetotaller fed up of boring drinks options. Budweiser owner AB InBev wants a fifth of its global beer volumes to be low in alcohol by the end of 2025.

NABCA Daily News Update (12/28/2017) 14

The development is welcome as craft beer increasingly becomes a victim of its success. Production volumes in the United States in the first half of 2017 were up 5 percent, just a third of the growth rate two years ago. That's bad news for the more than 5,200 U.S. microbreweries that have sprung up to cater to demand for authentic brews. Bigger companies will avoid the hangover by going after the sober.

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