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dhdunbar

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dhdunbar last won the day on November 6

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About dhdunbar

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    Retired from ATF and began consulting for DSP's in 2012. When I'm not working, I like to head outdoors. That can mean simply sitting on the deck reading. Regulation bores me. Helping others deal with it does not.

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  1. It is not necessarily a red tape nightmare. It may be; it may not be. But even if it does require jumping through hoops, control over imported plant materials can help to protect against importing invasive species that wreak havoc on the environment, diseases that can decimate domestic crops , and foods that can harm those who consume them. Some red tape is the cost of that protection.
  2. [[Page 457]] That could be. I just don't know. You got my curiosity up, so I went onto the internet. It appears that USDA may play a role in determining what you may and may not import. Probably Customs too. So you've got an alphabet soup - USDA - USCBP - FDA -TTB But to add more letters to the soup - GRAS is certainly an issue. If the plant material you have in mind isn't GRAS, whether you can import it is moot.
  3. I'm not sure what you are asking. Forage is not the issue. Whether you forage or purchase an ingredient does not matter. Whether it comes from Estonia or Brooklyn does not matter. What matters is the ingredient, botanical or not. What matters is whether TTB can document that FDA has determined that the ingredient is GRAS at the concentrations you propose. Not all botanicals are on the FDA list of ingredients that are generally recognized as safe (GRAS) for use in foods (alcoholic beverages are foods under FDA rules). Nightshade leaps to mind. There is no single FDA list of ingredients that FDA has determined to be GRAS. FDA gave up on making its own determinations years ago. They allow self-certification, but the conditions for self-certifying are stringent. The person who self-certifies must do so using the same sort of rigorous guidelines the FDA would use if it were still self-certifying. If you can't afford to hire an attorney to advise you about that, you can't afford to make the tests necessary. That is a kind, not mocking answer. It is the plain truth. That's been on the forum before, I think. So you are stuck with the lists that do exist. See: https://www.fda.gov/food/generally-recognized-safe-gras/fdas-approach-gras-provision-history-processes. I'm not competent to comment beyond that reference. Call the FDA for further guidance. You must disclose all botanicals on your TTB formula and TTB will check what it knows to be GRAS. If it does not know that what you propose to use is GRAS, then it should, by its rules, not approve the formula you submit. If you want to know if TTB can find your ingredient on an FDA list, call the formulations division. Leave a message. My experience is that they will call back in a day or two.
  4. No. You may not operate a wholesale business on someone else's DSP premises. You may not operate any business on someone else's DSP premises. The prohibition is not alcohol specific.
  5. Old discussion. But, I'll offer old knowledge in response. When I knew, and I have no reason to think things have changed much, the price to a liquor store, or to a chain, was usually lower than the price to a bar (assuming we are talking call items and not well) because the bar bought in limited amounts. Really big buyers, who could afford to centrally warehouse, got even better prices, because of quantity discounts no retailer who did not centrally warehouse could purchase. Plus, if they warehoused, they could take advantage of post offs to buy at the right time. Or in some states get direct delivery, going around the wholesaler tier completely., Price structure based on quantity meant that it was sometime (if not often) cheaper for a small purchaser (bar or neighborhood liquor store that stocked bottles, not cases) to buy from someone like Costco than to buy from the wholesaler. In fact, in at least one market with which I was familiar, the wholesalers, who really served as a merchandising service, not a sale organization, prefered that small retailers go to large retailers to buy and set prices designed to encourage just that. I'm answering this in the hope that someone who knows more about current conditions than I do can fill me in on the situation now, but I know that as recently as the Washington conversion from state monopoly to privatized distribution, given the quantity discount rules, central warehousing rules, and direct sales rules that Costco got into the bill, those persons who bought small liquor store licenses went broke fast. With the advent of distribution systems that allow just in time delivery, so that a chain can ship a case of whiskey in the nightly restocking of a store from a central warehouse, small became increasingly untenable. i'd like to hear comments on this from those who know more than I do.
  6. This thread began with a subject line "TTB stopped our production due to high proof." It dates 2016, so I’m going back a ways to discuss the issue of being told to stop. I think the issue of gauging has been covered by many of the persons who have commented. I’ll only add that TTB has a proposal, the new section 5.65(c), that will provide an over proof tolerance as well as the existing under proof tolerance. The final rule is due out in March. Now, I’ll turn to what I really want to talk about. I quote the opening to this thread in full. “Ok, so curious if any other small facilities have had this issue. QUICK BACKGROUND: We filed for a new permit since we wanted change owners, father to son(we've had this small distillery for 20 years). As ttb came out to do there investigation they took 2 bottles to sample. We were told both bottles were at 81 proof not 80. Although we sent samples to another TTB certified lab and they gave us a reading of 80.23. Our inventory was only about 15 cases. Again we're a small distillery and we only bottle 6 to 12 cases at a time. Basically bottle when we need to. So end result the TTB investigator told us to stop all operations until the new permit is complete which will take another 2 months at least because we were over proof and that didn't match our labels of 80 proof. We have one major account we can't afford to lose Again, that statement dates to 2016, so I’m more than a bit late in commenting, but the atmospherics of TTB’s recent public statements and behaviors tells me that what I have to say is relevant today. I will accept that this happened, but I can't imagine that the agency would have backed up the employee out of whose mouth it spewed. Or can I? No agent has the authority to tell you to stop operations. Period. They can advise you that what you are doing is in violation of the law and that any further violations - which they would then have to prove - may be considered willful, but no agent may demand, on their authority, that you stop. I will underline the word "no." No government agent - go as high in the hierarchy as you might like - has that authority to do so on their own say. If any government agent asserts that they have that authority, ask them in a polite way, to cite the source form which the authority flows. I'm not an attorney, so consult one if this ever happens to you, but my advice is that you ask the agent to please put the cease and desist order in writing so that you can show it to your attorney. If the agent has a lick of sense, that will put an end to the demand. Next, I never thought I would need to say this, but if such an officious (I've got to watch my choice of nouns here) personage happens to darken the halls of your DSP, politely tell the agent that you certainly want to comply with any lawful order, but that you want to talk to your attorney before making any further statements. Look to John Hinman's advice at https://www.beveragelaw.com/booze-rules/investigator-5fnb4564-2754l85-7g42123fd-zfg9e-pxewb-9fajj. He was addressing talking with TTB agents who are asking about trade practices, but when things get serious, like an instruction to shut down, I'd apply the same rules. Now, I'm not arguing that you thumb your nose at a demand that you stop, because a permit may have terminated by operation of law as a result of circumstances other than the allegation that the two bottles of spirits that TTB tested were over proof. If there is a change in proprietors, which may have been the case in the situation described, the old proprietors permit terminates at the time of the change. Unreported changes in actual or legal control can also result in the termination of a permit. If the permit has terminated - which is a finding that is subject to review through an established process in which TTB is given great deference - the provisions of law that apply to moonshining kick in. So, I'm not advocating a "screw you" TTB approach. But, if the permit has not terminated by operation of law, TTB may not tell you to stop operations until they go through the formal hoops necessary to suspend or revoke the permit. Again, suspension and revocation require formal action. The provisions of the Administrative Procedure Act and part 71 of TTB's own regulations apply. They apply because congress sought to restrict employees and agencies from acting in arbitrary ways and throwing imagined weight around. " Formal action” - underline that too - formal action requires a formal order issued to you to show cause why your permit should not be suspended, revoked or annulled; an opportunity for hearing before an administrative law judge; the right to appeal the administrative law judge's decision to the Administrator of TTB, and the right to appeal the administrator's decision to federal court. Usually it also involves an opportunity for an informal conference seeking to resolve the matter before going down the hearing rabbit hole in a waste of time and money. In any case, that is one hell of a long way from some agent having authority to say "Cease and desist" all operations because our lab says you had two bottles over proof. Next, the lab results on the two bottles over proof are evidence only that the two bottles the agent took and submitted were over proof. No inference to more violations can be drawn. TTB would have to look at the records for the bottling of those two bottles to say anything more. If the record did not support the conclusion that more than two bottles were over proof, then TTB has no evidence that anything more than two bottles were over proof. The two bottle cap also applies to collecting excise taxes on the spirits on which you did not pay tax. They can assess for two bottles, nothing more. If you don't have the required gauge record, the required bottling tank record, and the required proof and fill check records, TTB can cite you with recordkeeping violations, which are grounds for possible action, but they still don't have any proof of more than two bottles being over proof. TTB has routinely ignored such findings in the past. If you doubt my word on that , look at TTB's failure to act on its market basket sampling program, where it repeatedly found over proof bottles and did nothing. Further, they may not - the difference between "may" and "can" sometimes becomes important because they can say whatever words spew out of their mouth, but - they may not tell you to cease operations because of recordkeeping violations unless (1) they first allege that you willfully violated the law and (2) that finding then is sustained throughout the formal, hearing, appeal process which is your due. TTB may not simply rip a permit off the wall, put it in their pocket, and walk away, until such time as they finally get around to taking formal action, whenever that may be. That is the effect of an oral demand of the sort you received. And that is why you have the protection of the Administrative Procedure Act. Many years ago, I was instructed by ATF’s senior management to tell a person, who was operating as a wine wholesaler without having applied for a permit, that he was “violating the law and that any further violations would be considered willful.” Now, he had paid federal occupational taxes, which are no longer collected, and had a state license, but he didn’t know he needed a permit. I told him I wanted to see him with his attorney. I then delivered the message as instructed. He asked, “Are you telling me I must stop.” I said, truthfully, “I do not have the authority to do that.” His attorney said, “He is telling you to stop.” I told the attorney, “That may be, but before you advise your client to stop, you call the manager who told me to deliver the message and have him tell you to tell your client to stop.” After I left, he made the call, and I heard not one word more. This I know; the miscreant continued to sell high end French wines to restaurants who had put it on their wine list only after a promise that he could deliver a continuing supply; the permit was nevertheless approved; and I heard no more about telling people that future violations would be considered willful." But those were saner times.
  7. How it is designated depends on when it acquires the flavor. I'll do a strippiong run myself. Bare bones without reasons. Production by original distillation - It is a speciality item if you do it by original distillation. It is not rum. That requires a statement of production procedure for the specialty item. You bottle it as a specialty item. You need to get a formula too - preCOLA evaluation - because TTB will require that before it will approve a label for the specialty item. Production by Redistillation in the Processing Account. If you first make rum. . You must have a statement of production procedure to make the rum. You include a rum statement of production procedure on your registration You make the original distillation according to the statement of production procedure. You get to decide when the original distillation is completed. If the stripping run makes a product that conforms to the standard as rum, you can designate it rum after the stripping run. You make the production gauge based on the quantity you have in the strippping run. You designate it rum. You then transfer the rum out of the production account and into the processing account. You redistill the stripping run rum, in the processing account, over the apple flavor. That changes the class and type. it is no longer rum. If it otherwise meets the standard for flavored products, it has become apple flavored rum. If for some reason it does not meet the standard, you have a specialty product. Since you change the class and type, you need a formula to do this. The formula satisfies the requirement for pre-COLA evaluation.. I'll add that if you make a specialty item, the required statement of composition could become a challenge. It is not rum with apple flavors (that is apple flavored rum under the standard). Statements like "Spirits distilled from sugar with added apple flavor" seem not to be too appealing on the label. I think I'd opt for a way to make apple flavored rum. The stripping run strategy you propose seems possible, as long as the stripping run yields something you can call rum. I think you'd just have to get it over 40 ABV and distill it from nothing but cane sugar..
  8. I'll add something to what HedgeBird says. What TTB requires depends on how you make the purchase. The rules for changes in proprietorship and changes in control, which control what you must do, are in §1.42-1.44. For example, assume that you buy, as a new LLC,, the assets of an existing entity that is conducting business as a DSP. Your LLC takes over the business. The old LLC is out the door. TTB will call this a change of proprietorship. Your LLC needs to make original application. The assets that you buy do not include the permit, because any sale, lease, or other transfer of a permit from one entity to another results in automatic termination, under law and without any need for further action by TTB, of the permit at the time of the sale, lease, or transfer. Sale, lease or transfer by or from one entity to another = Poof., The permit vanishes and the registration is no longer in effect... Those rules result in a simple proposition. The succeeding entity must start over, period. It cannot operate on the sellers permit. So your application goes into the new application pile along with all the other applications. Time saved until you can operate = 0. Lesson - if you go this route, apply well in advance of the sale or make the sale effective on TTB's approval. However, if you you buy the entity from its owners (which means you acquire both the assets and the liabilities, so talk to your attorney), say you purchase all the membership interest in an LLC from the members, then you must immediately give TTB notice of a change. If, within 30 days of the change, you file an amended application showing the change in control, you can continue operating on the approved permit until TTB approves the application for a change in control. The permit remains issued to the same entity with different principals on record with TTB. That is a seamless transition, but it comes at the cost of acquiring those perhaps bothersome liabilities. Now let's talk about moves. HedgeBird is right about changes of location. If you buy out the members' interest, and continue to operate as the same entity, you can't pick up and move the permit without first obtaining TTB's approval. The issue is not whether the move is to a different state. Yes,s if you move to a different state, you will need to file an original application, as HedgeBird says. I do not find this requirement in the regulations (§§ 1.41 and 19.118). It appears in the FAQ's and appears to be policy. But TTB gets to make the rules. Still, by provision of those sections of regulation, any move, even on from one room to another within the same building, requires that you apply to amend the registration and permit. I've not observed that TTB approves moves within a state any faster than it does new applications, but it could be they do. The sample size is so small, and the other variables carry so much weight, that I think one would be hard pressed to reach any conclusions about how long things will take either way. For planning purposes, I'd allow more time than TTB's average time to approval in either case (remember that an average says some take longer and some take less) and I'd be less concerned with how long one way takes when compared to the other than to how one way fits the business plan better or worse than the other.
  9. Your question has some learning points. If you are producing this product by original distillation over mash, you do not submit a formula to cover the production processes. Instead, you submit a statement of production procedure (§19.77). You do that by amending your DSP registration and you must wait for TTB approval of the amended registration before you distill the product (§19.121). So, let's say you make it by original distillation. You distill the wash over the flavoring. After the distillation is complete, you make the production gauge (§19.304) and identify the spirits by kind (§19.305 ). But what do you call it and where do you enter it on the production report? Part 19 is specific (§19.487); you determine the kind based on the standards of part 5. Let's say that you are using a sugar wash and you distill it at less than 190 proof. If the distillate were not flavored, you would designate it rum. But it is not rum because you've given it apple flavor. Rum does not have apple flavor. Rule out rum. So is it, instead, apple flavored rum? That seems logical, but it can't be apple flavored rum because the standard for flavored products requires that you add flavor to an existing spirit (§5.22(i). For the product to be apple flavored rum you would need to add apple flavor to rum,. But in this case, you have no existing rum to which you add flavor, not one drop. So, since what you have created does not conform to and standard of identity in §5.22, you are are left with but one choice; it is a specialty item (§5.35) and should be reported as such in column (k) of the production report. Now, if you add the apple flavor to an existing rum, you do so in the processing account according to an approved formula ( §5.27). You need the formula because you are changing class and type. You start with rum and end up with flavored rum. The specialty item and the flavored item may be organoleptically indistinguishable, but they would have different label designations. Situations like this challenge credulity. Who but those who create such complicated rules could care? Because of the way the law is written, the rules that govern designations are intended to prevent a bottler from deceiving a consumer. But I surmise, based on too many years of experience, that the government did not create the sort of rules I'm discussing here in the interest of the consumer. Does the consumer care if two products that taste the same must have different identities under some set of rules in which they consumer has no interest? That is a rhetorical question. So there are some learning points about statements, formulas,standards, and designations, but here is the learning point I'm really reaching for in all of this: I'd argue that Industry brings things like this on itself when members seek to gain a marketing perch. If you want simple rules that are easy to follow and so serve the interests of consumers who don't have the time to waste or inclination to engage in wonkish exercises like this,, be careful what you ask for. If you are not, the result can be head scratching complication worthy of a Philadelphia lawyer; the sort of things that leads to a "you've gotta be kidding" response. One final note. Even though you are not required by either part 5 or part 19 to have a formula for the product when you make it by original distillation, by policy, TTB requires that, for speciality items, as well as flavored product, you submit a formula before they will approve the label. They call that pre-COLA evaluation. So, even though I said that you conducted the original distillation under a statement of production procedure, unless TTB changes its policy, you will also need to file a formula before it will issue a label approval. You will need both the statement and the formula. That TTB will require a formula before granting label approval iis assured if they follow their own policy. That they will get excited about a lack of a statement of process is not assured. If you have a formula, the lack of a statement of production procedure, if they catch it, is likely the sort of thing they would tell you to correct, before moving on to things they deem more important than that.
  10. This is a technical question I'm not competent to answer. What I do know - the gauge required will only be affected by the total solids in what you are gauging. The regulations ignore flavors that are added by evaporation - consider, for example the gins that are produced by distillation over aromatics and botanicals - or the addition of eligible flavoring. You can find the limits on solids content in §30.31 of the gauging manual. TTB's website has a link to regulations at the bottom of the page.. I'll let others say what solids you might expect to be present in the spirits produced as you described.
  11. John: I took a quick look. You distribute through licensed wholesalers. See https://www.mass.gov/service-details/different-types-of-alcoholic-beverage-state-licenses-abcc for the types of licenses. The wholesaler can only buy from a person who holds a certificate of compliance, so to sell to a wholesaler you would need to hold a certificate of compliance. See https://www.mass.gov/how-to/apply-for-a-certificate-of-compliance-abcc for details on the ceretificate.
  12. Thatch asked me if he could post this. I agreed. But my comments to him went out with an appended - "I ain't no accountant." I'm not.
  13. Thatch - you need to get an accountant to answer this. Three-tier, etc, is irrelevant. I suggest that you look at the cash flow. It would seem that the state buys it and pays you for it at the agreed upon price (income) ,; then it resells it to you, at wholesaler, which would be a purchase you make for sale at retail (expense); then you resell it to the customer at the tasting room (income). But I don't know squat. It's just a hunch.
  14. TexCF' link is to an informative analysis of the court'rs ruling. Before becoming too joyous, read it. It is straightforward and not so dense that you need a law degree to understand what the decision does and does not do. Nothing in the case involved interstate shipments. It involved licensing only. Nothing struck down the three-tier system, although, the article points out, it did not "unquestionably" support the legitimacy of the system as the Granholm decision on wine shipments did. As to the "dissolution of the pathetic money sucking 3-tier system" being "being next to go." the article goes on to discuss, briefly, two cases the challenge bans on interstate shipments. They are based on the fact that they discriminate by allowing intrastate shipments while banning interstate shipments. The article then points out the obvious fly in that ointment, statting "Even if the outcome of these cases is that state laws are found invalid, it will not necessarily mean that these states will allow out-of-state retailer direct shipments. Upon a court ruling that a state’s laws are discriminatory and unconstitutional, the state could decide to rectify the issue by “leveling down” to prohibit all retailer alcohol shipments to consumers, from both in-state and out-of-state retailers. As such, the law would apply equally to all retailers regardless of location, so it would not be discriminatory. “Leveling down” to remove all retailer alcohol shipping privileges would likely be unpopular with consumers, but it may find support from some segments of the alcohol industry. Thus, this outcome remains a possibility even if litigation challenging laws prohibiting out-of-state retailer shipping is successful." So, the warning aboutt throwing the baby out with the bathwater applies. So does the adminitipon about being careful what you wish for. This is not for amateurs and I am an amateur, but I suggest that you understand what your state legislature is likely to do before throwing your support behind efforts to allow interstate shipments. I'd also suggest, again as an amateur, that unless you've got a lot of marketing money just laying around waiting for a place to land, you spend your marketing dollars and time pursuing consumers much closer to home. I also recommend that you consider how locavore sentiments make small enterprises possible. Is your version of Irish whiskey really better than Redbreast 12 year old? Next, why would I, a Washington resident, buy spirits from a small California distiller, when I can support small local distilleries that are producing every bit as good a product? Why would I join a California distillery's club when I can join a local distillery's club? Why would I buy a Mississippi whiskey instead of Redbreast? Finally, there are many small producers who do not hold that wholesalers are pathetic money suckers. Yes, there is the argument that a wholesaler does not have nearly the investment in equipmentment, etc, that a producer does, and that they should not be entitled to the same profit margins,. But they have, or should have, expertise that you probably do not. Consider the consequences of bypassing the supply chain. If, by making direct shipments, you eliminate wholesalers and brokers and retailers who hand sell your costly product too, you become the marketer and incur the marketing costs in any market that you might seek to enter. You also lose focus. You have to spend time developing marketing strategies instead of managing costs and creating products. What is that worth to you? Are the small wholesalers who gain you traction in another state really only bloodsuckers? I think you might want to consider how you can be a more effective partner with the wholesaler/broker, with each focusing on what each knows best. But I'm an amateur and it ain't my dollars on the line..
  15. Equivalency. I think it is probably easier to win a tax fight than a blue law fight. As a long ago college student who ended up, let's just say, throwing more than caution to the wind out of a car window, I can attest to the truth of getting just as drunk on beer as rum. But rum carries the demon monicor, both in temperance cartoons and public perception. Wine carefully cultivated the notion that it is food. Wine cultivated an image - people don't drink wine to get drunk and if they do, then local governments will legislate against the sale of Mad Dog in areas where the homeless congregate. But wine is otherwise refinement. Jesus turned water to wine. He didn't invent the whiskey sour. And beer was the beverage of the country music songs, salons and frat parties, beaches in summer and, well you get the idea, it was everybody's beverage, the stuff of good times. So, I think you are not doing battle with a reality; you are doing battle with perceptions and in with spirit's symbolic association with social "depravity." Warning - Don't underestimate the power of symbols. Think of the reaction to what is perceived as desecration of the flag. I need say no more than that. Misconceptions that get tangled with symbols do not give way to rationale argument. You can argue that spirits should be equivalent to wine because ... going on to list a string of rational arguments the should bludgeon the lingering Pilgrim ethos - I've got at least five lines back to the Mayflower so I'm taking one my own heritage here - that we've not yet managed to shake. You can argue as rationally as you can, but at some point you reach an impasse. Logic be damned - in all likelihood your appeal will not make a dent in the attitude of those who are convinced otherwise by, well, their common sense. Appeals to common sense are appeals to what Einstein called our prejudices at the age of 18. I place no faith in my common sense. It is what I have to challenge the most. Ask, "Why do spirits websites make me affirm I'm of legal age." Ask, "Who's checking and what does that accomplish?" Ask about voluntary bans on spirits ads on TV? Ask, "Why did distillers, and other producers, seek to regulate the production and distribution of alcoholic beverages?" Think about whether, coming out of prohibition, the alcohol industry sought regulation because bit loved it or it wanted cover? Think SEC; think FDIC. Do self and governmental regulation play symbolic rolls that make things possible or at least make more draconian rules less probable?. I think you will not get spirits the same legal status as wine until you deal with the socially innate perceptions. I think your tasting rooms help with that. I think the promotion of cocktails as an accompaniment to food helps with that. I think locavore helps. I think getting people to buy into what you are doing, to feel they are participating with you - what I've elsewhere called the "Cheers Factor" - helps. Familiarity does not necessarily breed contempt and I'm in water far over the head of any claim I can make to expertise. but i think the more people learn about your industry, the less power symbolic notions of demon rumh old. Symbols lose power when people become more familiar with the thing itself, in your case with your spirits. That tells me "breed familiarity" is a good way forward for you. But that's only common sense, right?
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