THE NATIONAL POLICY BULLETIN FEBRUARY 2014

There are a number of issues we are following on our members’ behalf, with talking points, as well as a round­up of state issues from around the country. Please feel free to contact us with your questions and concerns.

FEDERAL Farm Bill: The Farm Bill was signed into law on February 7 after a two­year reauthorization process. Some of the highlights impacting the wine industry are:

● Specialty Crop Research Initiative – Mandatory funding is set for $80 million per year. For FY2014­2018, $25 million per year will be reserved to address emergency citrus greening research. Legislative language that addresses increased industry participation and prioritization for SCRI grant awards is included. ● Plant Pest and Disease Program – Includes mandatory funding of $62.5 million in FY 2014­2017 and $75 million in FY2018. Also includes a minimum of $5 million dedicated to the National Clean Plant Network. ● Specialty Crop Block Grants – Funding will include $72.5 million in FY 2014­2017 and $85 million in FY 2018. It also includes a multi­state program established and administered by USDA. The programs will focus on food safety, plant pest and disease, research, and crop­specific projects addressing common issues. ● Market Access Program (MAP) ­ Includes mandatory funding of $200 million per year, the same as the last Farm Bill. ● The Value Added Producer Grant program will receive $12.5 billion per year to assist farmers develop new markets.

Country of Origin Labeling: The issue could come to a head this month when the WTO holds a hearing on the labeling rules. A decision against the current rules could affect other industries if Mexico or Canada responds by imposing tariffs on American meat and poultry or other goods imported into their countries. Canada has put American wine on the list of commodities they are looking to retaliate against if US rules are not amended.

Immigration Reform: Odds of any kind of comprehensive immigration reform legislation passing this year are low. The House Republican leadership has said they will not take up the issue this year. It could be revisited in the new Congress next January.

GMO: The Grocery Manufacturers Association and several other food and biotech groups went public Feb. 6 with their coalition to push Congress to introduce a federal bill that would preempt state laws on labeling genetically modified organisms in food. Rumors of a GMA bill to quash state GMO labeling initiatives have been circulating for months. In early January POLITICO reported on a leaked draft of a document that revealed the trade group is seeking a measure that would preempt state law, require the FDA to give pre­market approval to GMO ingredients, set up a program for companies to voluntarily label foods as GMO­free and include GMOs in the definition of "natural" on labels. According to Congressional Quarterly, several groups have joined GMA in its effort, including the National Council of Farm Cooperatives, the National Corn Growers Association, the American Soybean Association and the Biotechnology Industry Association.

THE STATES

NEW YORK At­Rest: Pending legislation in New York may force alcohol distributors to store their product in state warehouses 48 hours before a delivery. S 3849 in the Senate and A 5125 in the Assembly. The bill was sponsored by Senate co­leader Jeff Klein. Supporters, including Empire Wine Merchants, Southern Wine & Spirits and the Teamsters union, argue the bill would create more jobs in the warehouse stocking job market. Opposers are calling it a “cork tax.” Wine dealers, especially small distributors who store their products in cheaper New Jersey warehouses, are unhappy with the change and say the forced warehouse relocation would result in a 1 to 2 dollar raise per bottle cost for consumers.

NORTHEAST Connecticut, Delaware, Maine, Maryland, Massachusetts, New Hampshire, New Jersey, Pennsylvania, Rhode Island, Vermont

MARYLAND (Maryland Wineries Association) Funding: The Maryland Wineries Association is fighting to get $50,000 of funding from the state that was allocated, then absorbed back into the state budget before it got to the commission.

Shipping: Bill S 287, back by Senator Zirkin, is in the legislature that would allow retailers to ship kosher wine to Maryland residents. There is also a bill that would pay liability on the server that over­served a customer.

PENNSYLVANIA Privatization: Pennsylvania’s push to privatization is headed in a positive direction, says House Majority Leader Mike Turzai. Details over the legislation draft remains under wraps but proponents hope to see a finalized bill sometime early this year. Meanwhile, the Pennsylvania Liquor Control Board has replaced retired former CEO Joe Conti with John E. Metzger.

SOUTHEAST Alabama, Florida, Georgia, Kentucky, Louisiana, Mississippi, North Carolina, South Carolina, Tennessee, Virginia, West Virginia

FLORIDA Beer & Spirits: Two bills in Florida pushed by craft breweries are under consideration by the Senate Regulatory Affairs Committee. The pair of bills push to allow breweries host free tastings and to sell 64­ounce reusable bottles known as growlers. While the former was passed, the latter was postponed due to a disagreement between craft breweries and distributors. Loopholes in the law would allow craft breweries to sell beer they did not manufacture at a disadvantage to distributors. Rep. Debbie Mayfield­R hopes to craft a new bill that will support breweries without upsetting distributors.

GEORGIA Winery Licensing: The state Senate in Georgia recommended the continuation of existing policies of locally regulated alcoholic beverage tastings and brewpubs. Senate Bill 303 proposed by Sen. Burt Jones­R would allow dry cities and counties to appeal directly to election superintendent to hold a vote rather than gathering signatures. This would allow retailers to hold tastings and sell “growlers­to­go.”

Wine Production: SB 286: Allows Georgia wineries to make fortified wine with an alcohol content of up to 24% ABV. Currently a percentage of 21% is the limit. The bill passed the Senate 48­5.

TENNESSEE Retailer Licensing: An amendment to last year’s Senate Bill 837 in Tennessee will allow the sale of wine in supermarkets passed House, now awaiting Senate approval. This largely follows a plan put forward by the state House of Representatives earlier this week. If the Senate passes the bill, the governor has already said he would sign the bill. The bill was sponsored by state Senator Bill Ketron.

Current law in Tennessee mandates that no beverage with an alcohol level higher than 6.5% can be sold in grocery stores. , with an average alcohol level around the 13% mark, under law, must be sold in liquor stores. After seven years of debate, senators agreed to legislation that would let voters in 49 counties decide as soon as this November to determine whether to allow wine on their grocery store aisles. Local governments hold referendums on whether to let supermarkets, big­box retailers and convenience stores in their jurisdictions sell wine. But retailers would not be able to start selling wine until July 1, 2016, a transition period meant to give liquor stores time to adjust to the shift in Tennessee’s liquor laws. No Sunday sales and wines would be marked up 20% over wholesale.

A second measure, House Bill 610, would establish procedures for local referendums on wine in grocery stores. A year ago, that bill was defeated by a single vote in the House Local Government Committee when Chairman Matthew Hill, R­Jonesborough, objected to its scope. On Tuesday, supporters stripped HB 610 to its bare essence and left out liquor regulations, now transferred to HB 47. The shift gave committee members cover to vote for wine referendums without embracing looser liquor laws outright.

The few differences between the two versions favored grocery stores and their allies. One provision says stores need to be only 1,200 square feet to sell wine — a threshold that brings in more convenience stores. Analysts for the state legislature estimate that about 2,000 stores in Tennessee could try to sell wine under that standard.

Another difference is the licensing fee grocery stores would have to pay annually to sell wine. The House version sets it at $2,000. The Senate would lower it to $850, the same amount liquor stores pay. Those differences could derail the legislation. But with the Senate version passing by a wide margin, backers said they are optimistic the House will approve a measure. Now that measure and HB 47 must go through the House Finance Committee. If they are approved there, the two bills could come up for votes on the House floor sometime in February.

GREAT LAKES Illinois, Indiana, Michigan, Minnesota, , Wisconsin

MICHIGAN (Michigan and Wine Industry Council) Retailer Licensing: BYOB Bill Signed by Governor Rick Snyder. HB 5046 amended Section 1021 of the Liquor Control Code of 1998 to authorize on premise licensees who wish to do so, to allow individuals to bring wine that was not purchased by the licensee into a licensed establishment for consumption. The law takes effect on March 1, 2014. The Michigan Department of Agriculture and Rural Development is working with the Michigan Liquor Control Commission to understand the Commission's interpretation of the law as it affects large events and trade events.

MINNESOTA Retailer Licensing: Minnesota state Rep. Jennifer Loon is pushing for a bill that will allow liquor stores to decide whether or not they will remain open on Sundays. Currently, stores are not legally allowed to be open. Liquor store owners say they are unsure whether or not this will help their sales while Loon states that the bill is more about putting more control back into constituents’ hands.

Beer & Spirits: A new bill in Minnesota proposes to repeal the state law that bans Sunday liquor sales and suggests allowing local municipalities to create their own rules. Governor Mark Dayton stated he did not oppose the bill and would sign it into law.

OHIO ( Producers Association) Industry Stats: Ohio faced some devastating winter damage in many of our across the state. Over the last 10 days, the association began collecting information around the state to get a clearer view of the damage extent. The researchers at Ohio State along with the Cooperative Extension agents are assisting in the collection of data. A clearer picture should emerge over the next couple of weeks.

WISCONSIN Regulation: Two bills with bipartisan support in Wisconsin would end restrictions on age limit and sampling in wineries and breweries. The bills would allow minors to go on tours of wineries without parental supervision, though they would not be able to participate in the tasting, and allow for wine to be tasted at food industry trade fairs. Supporters of the bill say that it is critical for the winery industry and would also help the local communities surrounding the wineries by seeing an influx of tourist traffic spending money on food, gas, and accommodations.

MIDWEST Arkansas, Iowa, Kansas, Missouri, Nebraska, North Dakota, Oklahoma, South Dakota, Texas

TEXAS ( and Grape Growers Association) Industry Infrastructure: On January 15, 2014, the Legislative and Regulatory Committee hosted the fourth Legislative Forum. Fifteen people attended from around the state. The purpose of the meeting was to discuss possible funding priorities for monies the industry might encourage the state legislature to commit for the further development of the industry.

ROCKY MOUNTAIN Alaska, , , Hawaii, , Montana, Nevada, New Mexico, Utah

ARIZONA ( Growers Association) Industry Infrastructure: The Arizona Wine Growers Association (AWGA) Legislative Committee has been working diligently with stakeholders to address many legislative issues facing the growing Arizona wine industry. The list of issues includes: defining production, extension of Series 13 license to allow satellite tasting rooms, alternating proprietorships, increase of production ceiling, increasing festival participation limits, and a farm stand license (allow limited tasting room with retail).

Winery Licensing: A consensus liquor bill, also known as an omnibus bill, Senate Bill 1397, was introduced by Senator Michael McComish on February 4. Wine industry items that received stakeholder support were included in SB1397. In anticipation of additional discussions about a production cap increase, the AWGA introduced placeholder legislation to adjust the cap to an unspecified amount.

The goal is to protect the majority of industry models operating today. However, some business models currently operating will have to make changes even if the effort is successful. Every winery license holder in the state of Arizona will be affected by the changes proposed.

Research & Grants: AWGA received a USDA Specialty Crop Block Grant in the amount of $25,000 to conduct a confidential survey of Arizona wine grape production in early 2014. The survey will determine acreage planted, productivity and of wine planted to establish a baseline for future reporting of the economic impact of the wine industry and reporting to USDA and related organizations. AWGA is partnering with NASS to conduct the survey. Upon completion, the information will be provided to the growers and the general public to enhance the profile of the growing wine industry.

COLORADO ( Industry Development Board) Winery Licensing: HB04­1034 passed the House Business Affairs committee a couple of weeks ago and is in front of the Finance Committee tomorrow. It is a bill that allows wineries to take advantage of the tax­paid bottling house premises allowed under federal rules.

Beer & Spirits: HB04­1038 was introduced: it would have allowed distillers to taste and sell the products of other licensed Colorado distillers in their tasting rooms just as wineries can with other CO wines. The bill faced stiff opposition and was killed by the sponsor in the first hearing.

IDAHO ( Commission) Winery Licensing: Senate bill 1253 has been introduced in the Idaho Senate that would allow a winery to continue production and certain operations in the event of a license suspension. Roger Batt (Legislative Educator) introduced the bill and Senator Curt McKenzie will carry the bill onto the Senate Floor. This new bill only covers production, not sales and distribution.

CALIFORNIA

Retailer Licensing: The Sonoma City Council will soon decide on whether or not new regulations will be needed to cap the number of tasting rooms in the city in order to preserve Sonoma’s historic character. Supporters of the regulation are concerned with the quickly growing number of wine bars and the threat of a wine­bar­monoculture, and the potential increase in incidents of drunk driving. Defenders of the tasting room industry argue that the increasing number is simply meeting consumer demands as well as providing a more unique experience that reflects the shifting culture.

Land Use: A new Zoning Ordinance draft for San Diego County strives to promote the local agriculture under the the provisions of Section 6910, otherwise known as the Wholesale Limited, Boutique and Small Wineries Section. Local wineries complain that the ordinance is too restrictive and costly, and would be destructive to their new industry.

Sustainability: Sonoma County Winegrowers has created a new 3­phase plan to become the nation’s first 100 percent sustainable wine region. The initiative will take five years to complete and will cover issues such as water management and community relations.

Land Use: Meetings are taking place in the Lodi appellation to more closely regulate winery marketing events. The growing wine tourist industry brings many tourists to popular winery destinations with marketing events that include wine, food, and, to the discomfort of close neighbors, loud music. New regulations will monitor noise control, the enforcement of rules on weekends, and may impose a moratorium on winery marketing events.

OREGON ( Winegrowers Association) Privatization: The Oregon State Legislature convened for a 35­day session on February 3. The Legislature is considering a hybrid liquor modernization bill put forward by the Oregon Liquor Control Commission that would allow liquor sales in grocery stores larger than 10,000 SF but would keep the state in the liquor business in an attempt to thwart a full liquor privatization ballot initiative in the fall by the grocery association. The bill has failed to gain the support of any major stakeholders and legislators remain unconvinced. The bill faces an uphill battle to passage.

WASHINGTON Recordkeeping & Reporting: Since privatizing liquor sales in 2011, Washington stores have seen an increase in shoplifting. The state government is concerned with underage and mentally ill drinking and is considering legislation that will force problem stores to tighten their security measures. By law, retailers do not have to report thefts, and many do not report their loss to authorities for competitive reasons. The proposed legislation pushed by Rep. Cathy Dahlquist­R and Christopher Hurst­D would not require mandatory reportings of numbers from all stores, but would focus on target stores. These retailers could be audited by the liquor board on thefts and be forced to add security or face a revoked license.