Legal Issues in Importing Wine
Chuck Routh
Garvey Schubert Barer
th
18 Floor, 1191 Second Ave.
Seattle, WA 98112
crouth@gsblaw.com
(206) 464-3939
1. Customs
The amount of Customs duty assessed by Customs and Border Protection depends
upon the classification of the particular wine. A number of factors go into
determining the classification. For example the classification for red wine is as
follows: The applicable subheading for red wine is 2204.21.5030, Harmonized
Tariff Schedule of the United States (HTS), which provides for wine of fresh
grapes, including fortified wines: Other wine in containers holding 2 liters or less:
Other: Of an alcoholic strength by volume not over 14 percent vol.: Other…Valued
over $1.05/liter: Other: Red. The rate of duty will be 6.3 cents per liter.
The classification for white wine is as follows: The applicable subheading for
white wine will be 2204.21.5046 , Harmonized Tariff Schedule of the United
States (HTS), which provides for wine of fresh grapes, including fortified wines:
Other wine In containers holding 2 liters or less: Other: Of an alcoholic strength by
volume not over 14 percent vol.: Other…Valued over $1.05/liter: Other: White.
The rate of duty will be 6.3 cents per liter
Although red and white wines seem pretty straight forward and the rate of duty at
6.3 cents per liter easily understood, the classification can get more complex
depending on the level of alcohol, the size of the container, the value of the wine,
and most importantly, the type of wine. For example the classification of white
Tokay wine is as follows: The applicable subheading for the white Tokay wines
will be 2204.21.3000 , Harmonized Tariff Schedule of the United States (HTS),
which provides for Wine of fresh grapes, including fortified wine...Other wine...In
containers holding 2 liters or less...Other: Of an alcoholic strength by volume not
over 14 percent by volume: If entitled under regulations of the United States
Internal Revenue Service to a type designation which includes the name “Tokay”
and if so designated on the approved label. The rate of duty will be 8.1 cents per
liter. In addition, imports under this subheading are subject to a Federal Excise
Tax of $1.07 per wine gallon and a proportionate tax at the like rate on all
fractional parts of a wine gallon. Articles classifiable under subheading
2204.21.3000 , HTS, which are products of Hungary, are entitled to duty free
treatment under the Generalized System of Preferences (GSP) upon compliance
with all applicable regulations. However, the Federal Excise Tax of $1.07 per
wine gallon would still be applicable.
Sparkling wine or champagne has a duty of 19.8 cents per liter. Marsala wine is 5.3
cents per liter and sherry wine is 16.9 cents per liter. In all the classification of
wines has over two pages of fine print, with over a hundred different possible
classifications and levels of duty. In addition to the duty, there is also a Federal
Excise Tax of $1.07 per wine gallon and a proportionate tax at the like rate on all
fractional parts of a wine gallon for most wines. However if the alcohol level is so
high that the beverage does not qualify as wine but rather is considered spirits,
liqueurs or other spirituous beverages, it would be subject to a Federal Excise Tax
of $13.50 per proof gallon and a proportionate tax at the like rate on all fractional
parts of a proof gallon.
2. Bioterrorism Act
In 2002 Congress passed the Public Health Security and Bioterrorism Preparedness
and Response Act of 2002, in part as response to the threats of 9/11 and the anthrax
threats to Congress. The FDA was required to take steps to protect the public from
a threatened or actual terrorist attack on the U.S. food supply. To carry out some
provisions of the Bioterrorism Act, FDA established new regulations to require
foreign food facilities to register with the FDA and to give FDA advance notice on
shipments of imported food. Food was given a very broad definition, which
includes animal food, bottled water, and, of importance to this program, wine.
Domestic and foreign manufacturers or processors, packers and storage operations
are required to register with the FDA. In addition a foreign facility which performs
only a minimal activity such as labeling, is also required to register. If they hold
wine after the wine is bottled or otherwise processed, they must also register. All
alcoholic beverages which export to the United States are subject to the registration
requirement. Food contact substances are not required to register, thus suppliers of
bottles, corks, etc. are not required to register. A winery which only sells
incidentally to consumers from the U.S. and does not otherwise export wine to the
U.S. is not required to register with the FDA. However if they sell to a wholesaler
who then sells to the U.S., both would be required to register, even if the winery
was not aware that the wholesaler sold to U.S. customers. This is obviously a huge
burden on small foreign wineries which are trying to develop a market in the U.S.
If a foreign facility is required to register but fails to do so, wine from that facility
which is offered to import into the U.S. is subject to refusal and seizure by either
FDA or CBP. Registration can be done either by paper form or online, using the
form for registration. Instructions and access to the registration area is online at
http://www.cfsan.fda.gov/~furls/ovffreg.html#create . If there are a large number
of facilities to be registered, they can even be registered by CD-ROM. One of the
more expensive components of the registration process is the requirement that the
facility have an agent in the United States, with a name, address and phone number
where the agent can be reached in an emergency. There is also a requirement that
the information be updated, with the new names of the operator, wine maker, agent
in charge, or U.S. agent supplied to the FDA within 60 days after the change in the
registration information. If the facility goes out of business or comes under new
ownership the registration must be cancelled within 60 days using Form 3537a,
either online or by the paper registration process. For more information, see
http://www.cfsan.fda.gov/~lrd/imports.html .
Registration of facilities is a problem, but that is only a small part of the problem
for the importer of wine. There must be a prior notice to the FDA of every single
shipment of wine into the United States. Virtually the only exclusion to the notice
requirements is the individual arriving in the U.S. with the wine which they are
bringing for their own personal or family use or use by friends. The notice must be
submitted no less than 2 hours if sent by road, 4 hours if by air or rail, 8 hours if by
ship and before the wine is shipped if sent by mail. There is a special FDA Prior
Notice System Interface for submitting the notice electronically via the Automated
Broker Interface/ Automated Commercial System (ABI/ACS). Unless the wine
comes by mail or is hand carried, the ABI/ACS system must be used. It is typically
done by the Customs Broker. If the proper notice is not given in a timely manner,
the wine is subject to administrative detention. The FDA has been slowly
implementing the administrative detention procedures but has indicated that they
will be clamping down on a failure to give the proper notice.
3. Trade Agreement with the EU.
The Agreement between the United States and the European Community on Trade
in Wine was initialed in Washington, DC on September 14, 2005. In summary, this
Agreement provides for:
recognition of each other's existing current winemaking practices;
a consultative process for accepting new winemaking practices;
the United States limiting the use of certain "semi-generic" terms in the U.S.
market;
the EC allowing under specified conditions for the use of certain regulated
terms on U.S. wine exported to the EC;
recognizing certain names of origin in each other's market;
simplifying certification requirements for U.S. wine exported to the EC;
defining parameters for optional labeling elements of U.S. wines sold in the EC
market.
Once the European Council of Ministers approves the Agreement, the United
States and a representative of the European Community will sign it. The
Agreement goes into force upon signature. This means that the Agreement is not in
effect until it has been signed by both the U.S. and the EC. The EC hopes to obtain
Council approval of the Agreement in the near future.
EC natural grape wine will be exempt from the new wine certification
requirements of the Miscellaneous Trade and Technical Corrections Act of 2004
after the Agreement is signed. Initialing of the Agreement is not sufficient to
exempt EC wine from the certification requirements.
Once the Agreement is signed, the U.S. will seek legislative changes to limit the
use of 16 semi-generic names, as well as Retsina, to EC wine. Under the terms of
the Agreement the new rule will grandfather existing uses of these semi-generic
names on non-European wine but prohibit new brands from using these names on
non-EC wine.
If you have questions regarding either the Agreement between the United States
and the European Community on Trade in Wine or the Miscellaneous Trade and
Technical Corrections Act of 2004, you can contact the International Trade
Division at 202-927-8110 or at ITD@ttb.gov.
Q and A’s on US/EC Wine Agreement
1. Does the Agreement address all wine trade issues between the United
States and the European Community?
1. No. This Agreement is the first phase and while it does address a
number of issues between the two parties other important issues
remain and will be addressed in future negotiations.
2. What are the major provisions of this Agreement?
1. The U.S. will seek legislative changes to limit the use of 16 semigeneric names, such as Chablis and Sherry, to wine that originates in
the EC. Existing uses of these names on non-EC wine will be
permitted to continue.
2. Once the changes are made, the EC will accept all current U.S.
winemaking practices, including those that are not currently
approved for use in the EC and those for which they have been
granting temporary derogations. The Agreement also establishes a
process for both parties to approve new winemaking practices.
3. What are some of the current US winemaking practices that were
previously not accepted by the EC?
1. Lactic acid
2. Malic acid
3. Reverse osmosis for alcohol reduction
4. Reverse osmosis for removal of off flavors
5. Electrodialysis for tartrate stability
6. Ion-exchange
7. Spinning Cone Column
8. Fluid milk
9. Half and half
10. Lysozyme
4. What are the semi-generic names?
1. Burgundy
2. Chablis
3. Champagne
4. Chianti
5. Claret
6. Haut Sauterne
7. Hock
8. Madeira
9. Malaga
10. Marsala
11. Moselle
12. Port
13. Rhine
14. Sauterne
15. Sherry
16. Tokay
17. Under the terms of the Agreement the rules that apply to the semigenerics will also apply to Retsina.
5. How will the U.S. wine industry benefit from the Agreement?
1. The Agreement provides a more stable environment in wine trade.
2. The EC will accept all existing U.S. wine making practices.
3. A process for accepting future U.S. wine making practices is
established.
4. U.S. wineries may continue to use semi-generic names on labels
bearing a brand name or a brand name and a fanciful name that
appears on a label that was approved prior to the effective date of the
Agreement.
5. The EC will recognize all requested U.S. names of origin.
6. U.S. wine sold in the EC may be labeled with certain terms that are
sometimes referred to as “Traditional Expressions.”
7. The EC import certification form (VI1) will be simplified, including
self-certification and electronic submission of the form (where
possible).
8. The U.S. will gain the ability to export to the EC wines over 15%
alcohol.
6. How will the EC benefit from the Agreement?
1. The U.S. will accept all EC winemaking practices.
2. EC wines will be exempt from new U.S. wine import certification
requirements.
3. There will be no new uses of the semi-generic names on non-EC
wine in the U.S. market.
4. The U.S. will recognize all requested EC names of origin.
7. When will the Agreement take effect?
1. Although most of the provisions of the Agreement will take effect at
the time of signing, two provisions (EC acceptance of U.S.
winemaking practices and U.S. limitation of use of semi-generic
names) will not take affect until the U.S. enacts legislation to change
the legal status of the semi-generic terms.
8. What happens in the interim? Won’t the current EC derogations for
U.S. winemaking practices expire December 31, 2005, and won’t the
provisions of the new U.S. wine certification law apply to EC wine
before then?
1. A “Bridge Agreement” has also been negotiated to cover the time
between when the main Agreement is signed and when the U.S.
Congress enacts legislation to change the legal status of the semigeneric names. Under the Bridge Agreement EC derogations for U.S.
winemaking practices shall be extended for up to five years and EC
wine will be exempted from the new U.S. wine certification
requirements for the same period.
9. When are the Agreement and the Bridge Agreement likely to be signed?
1. Following legal editing of the Agreement and translation in EC
official languages, the EC will present the Agreement for approval by
the EC Council. With approval by the Council, the Agreement can be
signed. We expect this process to occur in the near future.
10. What are the labeling terms sometimes referred to as “Traditional
Expressions” that the U.S. will be able to use on wine sold in the EC?
What are the conditions for use?
1. The terms are: Chateau, classic, clos, cream, crusted/crusting, fine,
late bottled vintage, noble, ruby, superior, sur lie, tawny, vintage and
vintage character.
2. Under the Agreement, when their use is restricted by EC regulations,
a U.S. winery may use them on wine in the EC provided the term has
been approved for use on a Certificate of Label Approval in the U.S.
(subject to EC trademark law).
3. These conditions shall apply for a period of three years and will be
extended for successive two year periods. During this time further
talks will be held to resolve differences.
11. How will the grandfathering of the semi-generics work?
1. Current U.S. law allows the semi-generic names to be used on nonEC wine so long as the true place of origin appears together with the
semi-generic name, for example “New York Champagne.”
2. As a result of this Agreement the U.S. will seek to change that law to
restrict the use of the 16 semi-generic names, plus Retsina, to wine
originating in the EC.
3. The exception will be that brands of non-EC wine that used the semigeneric name on a label appearing on a Certificate of Label Approval
that was approved at the time the Agreement is signed (or 90 days
post initialing of the Agreement, which ever is later) will be able to
continue to use the semi-generic term.
4. The grandfathering is tied to a brand name (or brand name together
with a fanciful name), and NOT to a brand holder. Thus if the brand
is sold, any subsequent owner may continue to use the semi-generic
name so long as the brand name does not change.
5. The semi-generic name may or may not be a part of either the brand
name or fanciful name. This is not the determining factor for whether
or not a brand will be grandfathered.
12. What is a brand name, and what is a fanciful name?
1. A brand name is the name under which the wine is marketed.
2. A fanciful name is a name used in addition to the brand name to
market the wine. An example is “Johnson - Bountiful Harvest” where
Johnson is the brand name and Bountiful Harvest is the fanciful
name. Frequently several fanciful names are associated with a single
brand name.
13. What is Retsina?
1. U.S. regulations define Retsina as grape wine fermented or flavored
with resin and do not place any restriction on its use based on the
origin of the wine.
2. Under the terms of the Agreement, the U.S. will take action to restrict
the use of the term Retsina to wine that originates in Greece.
3. As with the semi-generic names current uses of Retsina will be
grandfathered.
14. When will the next phase of negotiations begin? What will be covered?
1. Phase Two negotiations will begin 90 days after the main Agreement
is signed.
2. Topics that could be discussed in the next phase of negotiations
include:
3. Use of the semi-generic names.
4. The process for acceptance of new wine-making practices.
5. Certification requirements.
6. Names of origin.
15. What is the new U.S. wine import certification law?
1. Section 2002 of the Miscellaneous Trade and Technical Corrections
Act of 2004 requires that all imported natural wine produced after
2. December 31, 2004, be accompanied by an affirmed laboratory
analysis and a certificate from the government of the producing
country, stating that the practices and procedures used to produce the
wine constitute proper cellar treatment as defined in U.S. law.
3. Wine originating in a country with which the U.S. has an Agreement
establishing mutual acceptance of wine-making practices is exempt
from this new requirement.
4. This Agreement qualifies as such an Agreement.
16. Will EC wine be subject to the new U.S. wine certification requirement?
1. Section 2002 of the Miscellaneous Trade and Technical Corrections
Act of 2004 , states that natural wines imported from a country that
has an Agreement with the U.S. or that is a party to a multilateral
Agreement in which the U.S. is a party is exempt from the
certification, so long as the United States accepts that country’s
winemaking practices. Once the U.S. and the EC sign the Bridge
Agreement, EC wines covered by the main Agreement will be
exempt from the certification requirement.
4. Alcohol and Tobacco Tax and Trade Bureau (TTB)
The TTB (formerly the ATF) is the regulatory body for alcohol in the United
States. As such they regulate sales and production of wine, together with import of
wine for commercial use.
A. Importing wine for personal use.
The Alcohol and Tobacco Tax and Trade Bureau (TTB), regulates the importation
of beverage alcohol products into the United States for commercial use. Under the
Federal Alcohol Administration Act and the Internal Revenue Code of 1986, any
person engaged in the business of importing beverage alcohol products into the
United States for commercial use must have an importer's basic permit and obtain a
certificate of label approval.
When a person, or business, imports beverage alcohol products into the United
States on a one-time basis for personal use, the above requirements do not apply.
In some cases, individuals who import beverage alcohol products for personal use
on a repetitive or continuous basis, may be required to obtain an importer's basic
permit and possess a certificate of label approval for these imported shipments.
TTB and the U.S. Customs and Border Protection have concurrent jurisdiction in
the area of personal use importations of beverage alcohol products. As a practical
matter, it is usually the U.S. Customs and Border Protection and the district
director at the port of entry who decide whether or not a particular importation is,
in fact, for personal use only. In certain unusual circumstances, TTB may exercise
joint jurisdiction with Customs in making this determination.
If U.S. Customs and/or TTB decide that imported alcohol is for personal use, an
importer's basic permit is not required nor is it necessary to obtain the certificate of
label approval, however, all federal, state and local taxes must be paid. In addition,
other State, local or U.S. Customs requirements may apply. It should be noted that
some States prohibit the direct shipment of beverage alcohol products to
individuals. Anyone interested in importing alcohol for personal use should contact
their State liquor control agency. A list of State Liquor Control Boards is available
on the TTB web site.
If the beverage alcohol products are to be given away as personal gifts to friends,
neighbors, or relatives, etc., or are to be similarly distributed, the Federal
Government health warning label requirement is applicable. A gift of beverage
alcohol products connected with the solicitation of orders for, or the sale of, such
products constitute commercial use and can only be conducted by a federally
licensed Importer.
Finally, the determination whether or not a shipment is for personal or commercial
use cannot be decided solely on the size of the shipment but must be determined on
a case-by-case basis considering the circumstances surrounding the importation.
However, the size of the shipment may give rise to a question resulting in the need
for an investigation by Customs or TTB.
B. Importing wine for commercial use.
The Federal Alcohol Administration Act (the Act) requires that anyone who
imports beverage alcohol products (distilled spirits, wine, and malt beverages)
must first obtain a basic (Importer’s) permit. A person who has a basic permit to
import alcohol products may wholesale their imported products under an
Importer’s permit. The Act requires also that anyone who purchases beverage
alcohol products (distilled spirits, wine, and malt beverages) domestically for
resale at wholesale must first obtain a basic (Wholesaler’s) permit. A second basic
(Wholesaler’s) permit is required to purchase alcohol products domestically for
resale at wholesale. To get one or both permits, an applicant must maintain and
staff a business office in the United States and provide the Alcohol and Tobacco
Tax and Trade Bureau (TTB) with a completed TTB Form 5100.24 (5/2005),
Application for a Basic Permit under the FAA Act, and all necessary documents.
The applicant must have a TTB-approved permit in hand before engaging in
business.
The regulations governing the labeling and distribution of alcohol beverages can be
found in the Code of Federal Regulations (CFR), Tax and Trade Bureau Title 27.
Individual State requirements must be met in addition to those for the Federal
permit described above. Anyone planning to conduct operations within several
States should contact each State for information relative to its licensing
requirements.
Under the Internal Revenue Code, alcohol wholesalers must pay a Special
Occupational Tax in the amount of $500 if you intend to sell within the U.S. to
trade buyers such as distributors or retail dealers. However, if all the transactions
consist of exports (no domestic sales), you will be liable at the retail dealer rate of
$250, not the rate for a wholesale dealer. We also advise that State requirements
must be met in addition to those for the Federal permit described above. They
should contact each State for information relative to its licensing requirements.
C. Label Approval
The Federal Alcohol Administration Act requires importers of beverage alcohol
products to obtain certificates of label approval or certificates of exemption from
label approval (COLAs) for most beverage alcohol products prior to introducing
them into interstate commerce in order to ensure that products are labeled
according to Federal laws and regulations. You must also complete and file a preimport application to ensure proper tax classification and that the products are
manufactured according to Federal laws and regulations. The Advertising,
Labeling, and Formulation Division customer service team can assist you and your
client with questions on labels and formulation. The toll-free number is 1-866-927ALFD (2533).
You can register for COLAs both online and by paper. The TTB website for
COLAS is https://www.ttbonline.gov/colasonline/. You can also search for COLAs
at the public access site,
https://www.ttbonline.gov/colasonline/publicSearchColasBasic.do . A sample of a
COLA follows: