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dhdunbar last won the day on August 20

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About dhdunbar

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    Ellensburg, WA
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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. dhdunbar

    Spirits Case Labels

    Multiple choice: (a) Very few people get audited. :-). (b) What an auditor looks at depends on the scope of the audit, which might not include looking at the case labeling :-). (c) The auditor may not care about case markings and uses independent judgement :-). (d) TTB has so many problems that it doesn't want to have to deal with minutia :-). (e) All of the above. Important - TTB gets to pick what it looks at when it visits. It gets to say what is important and what is not. For example, however obvious it may be, you do not get to decide if paying taxes is more important than putting a serial number on a gauge record. TTB can look at whatever it wants. It can cite "picky" violations. You just don't know what it will do. If you do your best to comply, TTB will see that. Trying matters to them.
  2. dhdunbar

    TTB Locks - 27 CFR 19.192

    You are asking for comments from persons who have had visits from TTB. I would like to hear that as well, but the lock requirement is generally not enforced because, in my opinion, it does not apply to entry doors, etc. Iy is meant to apply when you secure tanks with locks. I know of no instance in which TTB has taken exception to the lack of padlocks on doors. If you have locks that adequately protect your assets, then you will have locks that protect TTB's interest in the revenue. That said, if you secure a garage door with a padlock, I think it should be one of the type described in 19.192(f). Remember, I am not TTB and I do not pretend to answer for them. I speak only from my experience. If you want to know, ask TTB, but remember the adage about letting sleeping dogs lie.
  3. The issue of barrels has been central to arguments about whiskey since the Pure Food and Drug Act of 1908. Barrels were debated by congress when it passed the FAA Act, were the subject of hearings in 1936, 1939, 1947, and 1968 - that's off the top of my head and the years may be wrong - and now once again. If you want to argue convincingly, it would help to know that history. Look to what the Distilled Spirits Counsel says and be prepared to use or rebut that. The large producers do not have a unified agenda. Divergent economic interest have been central to the debates from 1908 forward. Interesting times. I really don't have the time to dig deeply into this. You guys may want to divide and conquer - get your heads together and divide up the research. Then put it all together into a cogent argument, if you can agree on what the answer should be, because I know of some craft distillers who hold that small barrel strategy is not the way to go and others think they need them to create cash flow. If someone wants to do the research, PM me and I will try to find the Treasury Decisions, etc that create the historical record of how TTB has arrived where it has.
  4. They are seeking comments. You should make comments. Radical changes can take place when issues are opened for examination, like, oh someone asks for a definition of "north coast" as used on labels of California wine and holy smokes suddenly you have vitacultrual areas. Stay alert and look at the comments that TTB receives. You can find them at: Docket No. TTB–2018–0007 at Regulations.gov. For me, this works as a direct link to the comments: https://www.regulations.gov/docketBrowser?rpp=25&so=DESC&sb=commentDueDate&po=0&D=TTB-2018-0007 There are only five comments to date. Here is one that specifically address barrel size: Comment The proposed rule for defining an "oak barrel" as having a capacity of 50 gallons is arbitrary and is unnecessarily restricting for defining categories. Spirits which have been in a smaller or larger cask can reasonably acquire the flavor and appearance of spirits in 50 gallon casks. Smaller producers use the smaller casks to produce spirits that are in line with the categories and opposition to their use is SUBJECTIVE and should not be a basis for rule making. Note that the comment includes the name of the person making it. I did not. But if you comment, persons will know. You can also sign up for notifications when new comments are received. I didn't do that. I think it will avalanche. Look for what the Distilled Spirits Counsel says when its comments hit the site.
  5. dhdunbar

    Changes to CFR

    It occurs to me that I've said a lot about what you might want to do, but not much about how to do it. My fault. To view the proposed rule and any comments related to this proposed rule, go to Docket No. TTB–2018–0007 at Regulations.gov. To comment on our proposals electronically, use the Regulations.gov comment form for Notice No. 176. To submit comments by mail or hand delivery, see the instructions in the proposed rule. You also may view the proposed rule as published in the printed Federal Register or as posted online at Federal Register 2.0. Here is a link to the Treasury Decision. https://www.gpo.gov/fdsys/pkg/FR-1968-01-26/pdf/FR-1968-01-26.pdf It is a slightly jaundiced pdf print of a microfilm copy. Those with access to HeinOnline can probably get a clearer copy, but at a subscription price, unless you have access to a library that subscribes to the service.
  6. dhdunbar

    Changes to CFR

    The NAS issue exposes the kind of battles that are going to take place. If you have an argument you want to make, making it here does no good. You need to submit a comment to TTB through the portal it provides to do so. That can make a difference. That is the message I am preaching. I don't have a dog in the NAS fight, so I don't personally care how TTB rules. For some people whiskey is a religion, for others it is a way to make a buck, and for some it is a way they can use religion to make a buck. I've had clients of each of those stripes and I don't make judgements. They are all valid, but maybe that is because I'm not religious about it, and maybe it is because I make a buck because some people are. I insert here, the mandatory smiley face, to say I'm jesting, but ... For me, personally, it is a matter of drinking Redbreast Irish whiskey - yes Roger, I turn to what I know I can rely on, which is the heart of your argument - when I drink whiskey and feel happy about it. But, If you want to comment effectively, you should know the history of the whiskey standards. Indyspirits, you are right, NAS does work for Scotch, and Roger, you are right, it works because the minimum age is build in and enforced. But how many of you know that the government has built a wall between American type whiskey, and Scotch, Irish, and Canadian products. It has officially held, "The mere desire to conform American regulations to those applicable in foreign countries is not sufficient justification for imposing the proposed limitation." At the same time, TTB - well the IRS at that time - addressed all sorts of whiskey issues beyond age. I refer all of you to Treasury Decision 6945. It is something anyone who wants to understand how the rules were written needs to read. Here are my summary notes, written for myself, on the age issue: First, the government argued that the proponents had not established a need for a minimum age requirement for “current domestic types of whiskey.” It argued, “There are no appreciable amounts of immature whiskies currently being sold.” It went on, “Although some whisky is being offered at less than two years of age, this is, in the main, corn whisky.” It goes without saying that the conditions then are not the current conditions. Whiskey less than two years old is now common. But the government then argued, “In any event, the present regulations protect the consumer by requiring all whiskies less than four years old to bear a true age statement.” Those requirements remain, and nothing I see in the public record indicates that TTB sees a need to revisit So, the last stated position would seem to be that, even if there are many whiskeys that are less than two years old on the market, the consumer is still protected by the required age statement. That, of course, presumes that bottlers are including the required age statement. And here is what the government concluded from all of that: "The proposal to establish a minimum age requirement for whiskies is rejected. It is preferable to permit the consumer an adequate basis for the selection of whiskies (even immature ones) than to limit his choice by banning them from the market. The mere desire to conform American regulations to those applicable in foreign countries is not sufficient justification for imposing the proposed limitation. We are, I think, well past the "mere desire to conform" argument. The argument that there are no appreciable amounts of what the government itself chose to call "immature whiskeys" being sold is certainly subject top challenge. I refrained for saying that it is absurd. The ability of TTB to enforce the age statement requirement to protect the consumer - which is the holy grail under which it marches, even if economic interests probably come to play a far greater role in the decisions it makes - is also subject to challenge. And, given those circumstances, I conclude that the bucket that carries the water of the consumer being best served by not requiring a minimum age, at least for bourbon, rye, wheat, and malt whiskey, leaks through as many holes as Swiss cheese. Roger sees, in that, a danger to the reputation of craft. I think most would agree. The locavore impetus that is driving experimentation, etc., is in no way guaranteed. So, if I had a horse in the race or skin in the game - chose your idiom - , I'd be asking, "How, given the history of the regulation, can you plug the damned holes? Chuck Cowdery once cautioned, for good reason, that writing regulations is not for amateurs. It is true, , but it should not prevent you from expressing your concerns and pointing out the need for those who write them to find solutions to problems that regulation, and the government's lack of enforcement ability, are creating. When it comes to the issues that affect small distilleries, TTB is the amateur, not you. They need your input.
  7. dhdunbar

    Changes to CFR

    If only it were so. I agree that a user fee can generate the funds needed to regulation. I also agree that the solution is trivial once you arrive at it. The catch is that TTB cannot charge fees that it is not authorized, by law, to charge. So the trivial solution is only trivial if the industry lobbies congress to authorize fees and congress does it, the idea of which requires a smiley face :-). Such a fee used to exist. "Once upon a time" there was something called a special occupational tax (there still is on some occupations), which was a fee that was paid to the general fund, but which worked to cover some of the costs associated with regulating an industry that wanted to be regulated, to protect against, say, persons who make the industry look bad by not putting an age statement on something that has barely rubbed shoulders with oak.. But it was a tax, so it was eliminated. Congress could also authorize imposing a fee for permits and registrations, etc. But again, TTB can't just do it. As I understand it, The FDA found itself in something of the same position with GRAS determinations. Niche players want to use all sorts of ingredients not heard of before. Think about the exotic gins that pop up with extracts from an obscure desert plant indigenous to a small area in upper wherever. The onslaught of applications for GRAS determinations was costly - too costly to sustain, since the FDA did not impose a fee to do the research required to declare an ingredient GRAS. So out of what I think was desperation, if nothing else, the FDA now lets persons declare ingredients GRAS on their own, but only if the persons conduct tests with the same rigor that the FDA would have done if it were doing them. I have no idea how that venture into self-regulation is going. Perhaps it is going better than TTB's unintended experiment in letting people self-regulate label claims, which Roger argues, if I may put words into his mouth, is akin to letting some people with drills punch holes in a ship that was lifting all on the rising tide of craft. I'm walking on the thin ice of political statements and controversy,. I know that. But when TTB undertakes a major revision to its labeling regulations, which will influence how it regulates label claims, for the foreseeable future, it becomes a political exercise. We may disagree on the issues, but if you want a say in how spirits are marketed for the next 20 years, now it is time to speak up. Major players have power, and they will use it, but if enough small businesses band together, they exert more power. Don't underestimate the pressure you can bring to the table on this.
  8. dhdunbar

    Spirits Case Labels

    Well, you give a lot of examples, but try this for the definitive answer 🙂: Sec. 19.483 Specifications for marks. (a) Basic requirements. A proprietor must place the marks prescribed by this subpart on cases, encased containers, and packages of spirits and denatured spirits so that they are: (1) Of adequate size to be easily read; (2) Of a color in distinct contrast to the color of the background; (3) Legible; and (4) Durably affixed. (b) Use of labels. A proprietor may use labels as the means for applying prescribed marks if the labels meet the requirements of paragraph (a) of this section. (c) Location. A proprietor must place the prescribed marks on one side of the case or encased container, or on the head of the package. Sec. 19.489 Marks on cases filled in processing. (a) Mandatory marks. Except for cases marked in accordance with Sec. 19.496, a proprietor must mark in accordance with Sec. 19.483 the following information on each case of spirits filled in processing (you bottle in processing and must put the bottles into cases: (1) Serial number in accordance with Sec. 19.490 (every case must be serially numbered, but I thnk many small bottlers miss this requirement); (2) Kind of spirits in accordance with the classes and types of spirits set forth in part 5 of this chapter (see 5.35 and 5.22); (3) The distilled spirits plant number where bottled; (4) Date filled; (5) Proof; and (6) Liters or proof gallons. (b) Export marks. In addition to the marks referred to in paragraph (a) of this section, the proprietor must include the marks required by part 28 of this chapter on cases removed for export, for transfer to any customs bonded warehouses, for transfer to foreign trade zones, or for use as supplies on certain vessels and aircraft. (c) Other marks. A proprietor may include other marks on cases filled in processing in addition to the marks prescribed under this section. Any additional marks must not interfere with, or detract from, the marks prescribed in this section. The proprietor may include other marks such as: (1) The name or trade name, and the location if desired, of the bottler, displayed with the word ``Bottler''; (2) For products distilled or processed by the proprietor, the proprietor's name or trade name, and the location of the distilled spirits plant, if desired, displayed with the words ``Distiller'' or ``Processor'', as applicable; (3) For products imported and bottled by the proprietor, the words ``Imported and Bottled By'', followed by the proprietor's name or tradename and location of the distilled spirits plant if desired; (4) For products bottled for a dealer, the words ``Bottled For'', followed by the name of that dealer; (5) Any material required by Federal or State law and regulations; and (6) Labels or data describing the contents for commercial identification or accounting purposes or indicating payment of State or local taxes. That should do it.
  9. dhdunbar

    Changes to CFR

    Roger raises an issue that should be addressed. No, not the specific issue of age statements, which does need to be addressed, but the issue of complicated regulations that are put into place, then not enforced because congress does not authorize the money. Some people take advantage of the lack of enforcement, while others muddle through without knowing they are doing anything wrong. We have lots of examples of how TTB employees can't understand the requirements. Can any of you tell me the difference between the standards of identity for all of the different types of whiskey? Can anyone reasonably expect that even an accurate statement of class and type is understood by more than a few in 1000 purchasers? it is an open invitation to do as you please. So, a person who constrains behavior to conscientiously comply with what is required can get hammered by those who don't. That is not a situation that calls for increased regulation. It calls for the kind of revisions that makes what is required enforceable within the budget that TTB can reasonably expect to receive. That, I think, is what Roger proposes when he says drop all age requirements if TTB is not going to enforce them. I'll propose, more modestly, since I think there is too much invested in "age" to expect that industry will abandon it, that when we look at the proposed revisions, we ask, does it make enforcement easier and can it be enforced. So, write a comment to the notice of proposed rule making and ask TTB, what are you going to do to enforce the changes you propose to make? Point out, in the context of public comments on these changes, that the regulations are irrelevant if they are commonly ignored. As to age statements on whiskey. Around 1968 there were hearings that addressed a minimum age requirement, among other issues. The IRS - at that time what is now TTB was a division of the IRS - declined to require one, because, it said, they required an age statement, so the consumer was adequately informed and as far as it knew, the age statement requirements were being followed. That was true, because the IRS had officers stationed in most DSP, and if they were not there permanently, they were there regularly, because the government held the keys to the storage tanks and barrel storage rooms. When the government gaugers, as they were known, were not busy with over-the-shoulder supervision, they had time to look at compliance in general, which they did. There were far fewer DSPs and much more active involvement. Plus, large distillers had a lot to lose, and on top of that, there was an ocean of aged product they were sitting on. Then, in 19890, the government withdrew and went to post-audit scheme. It withdrew gaugers from plants and gave the proprietors the keys. That still worked because the numbers were more in balance and the players had a lot to lose if they cheated. I say, with some confidence, that consumers could, at that time, rely on age statements and the lack thereof as an accurate representation of age.. But that was then and this is now. Reasonable reliance remained true until the number of breweries, wineries, and distilled spirits plant exploded. The balance shifted, for a number of reasons, toward a situation in which a bottler could get away ignoring the rules of age statements. Many have. As Roger points out, the consumer is hardly adequately informed when the requirement for an age statement is widely ignored. So, if the justification for not requiring a minimum age crumbles in the face of an inability to enforce it (not a lack of desire to, but a real limit on the ability to enforce), perhaps the solution is to require a minimum age. In the alternative, if TTB wants to rely on age statements on the label, and not simply pretend that the statements have meaning, then spend a years worth of product compliance budget looking for that violation and only that violation, then,m when found, require recalls and kick butt., Announce that next year, some other issue, which TTB is not going to disclose in advance, will become the focus. Say, the state of distillation, requirements, for example. But don't disclose that. Make persons wonder what will be next. Roger's note to TTB: "If a distiller has had their DSP for less than 48 months, and the label says "Distilled by" that distillery, do not approve an NAS label, and when notified of blatant illegal labels, send an enforcement letter to the DSP," opens a way of selecting where to look. I''m sure there are other ways to select ponds in which TTB is likely to catch fish if it dips its line in there. In summary, TTB needs to rely on voluntary compliance. As Roger points out, that does not work. So the first question is enforcement strategy. How does TTB enforce understandable regulations in a way that persons who will ignore them without an incentive to comply, are motivated to voluntarily learn what is required and do their best to make sure they do what is required.
  10. dhdunbar

    Changes to CFR

    One more example of the sort of change and then I'll shut up for the day; TTB is specifically seeking comment on whether the requirement that vodka be without distinctive character, aroma, taste, or color should be retained and, if this requirement is no longer appropriate, what the appropriate standards should be for distinguishing vodka from other neutral spirits.
  11. dhdunbar

    Changes to CFR

    Let me give you a taste of the sort of changes that TTB is contemplating making: The TTB regulations set forth certain rules for how age statements may appear on labels. TTB proposes to update therule, currently found in § 5.40(d), whichstates that age, maturity, or similar statements may not appear on neutral spirits (except for grain spirits), gin, liqueurs, cordials, cocktails, highballs, bitters, flavored brandy, flavored gin, flavored rum, flavored vodka, flavored whisky, and specialties, because such statements are misleading. TTB has seen recent growth in the number of distilled spirits products, such as gin, being stored in oak containers. However, the prohibition in the current regulations means that a producer cannot use age statements to inform the public how long its product has been stored in oak containers, and TTB has approved labels using terms such as ‘‘finished’’ or ‘‘rested’’ for these types of products. TTB believes that consumers should be able to make their own determinations on how the aging would affect the product, and that age statements would provide truthful information to consumers. Accordingly, TTB proposes to allow age statements on all spirits except for neutral spirits (other than grain spirits, which may contain an age statement). The revision appears at proposed § 5.74(e). Proposed § 5.74 incorporates and supersedes ATF Ruling 93–3, which exempts grappa from the mandatory age statement for brandies aged less than four years. Finally, TTB proposes to supersede Revenue Ruling 69–58, which deals with rules for age statements that have been incorporated in the regulations. Now, admittedly, I'm a wonk when it comes to regulations, but if you want to be able to say your gin has been stored in oak nine months, that is a meaningful change,not just an item of wonkish interest. It is time TTB laid to rest the rested in nonsense by finishing it in this way.
  12. dhdunbar

    Changes to CFR

    This thread has been open for over a day and the only response is by the one who posted originally. I need to scream this in capitals: GO TO THE POST AND WADE THROUGH THIS DOCUMENT IF YOU THINK ISSUES LIKE A STANDARD OF IDENTITY FOR WHITE OR UNAGED WHISKEY IS IMPORTANT ENOUGH TO WARRANT YOUR ATTENTION. This is a major revision. I confess I have not read it -I've just glanced. But that glance convinces me that it is worthy of the boldfaced, italicized, underlined and blown up font I chose for the above statement. You can make a difference. This is a notice of proposed rulemaking and it asks for comments. I intend to make mine and you should intend to make yours. If you belong to a state association, get them involved. Submit comments by the association and by the individual members. Make your voice heard. It is going to matter for years. I will try to summarize the main provisions, like "white whiskey" or a change to the standard for vodka, and post some comments here in a few days. But in the meantime, take the time to look at the provisions related to part 5- they start at page 60593. I may regret this, but if you have concerns, send me a personal message and as long as I am not buried, once I have had time to read the document, I'll try to respond. "
  13. dhdunbar

    Amendment to drop DSP Bond Time Line

    Well, I no sooner say "very, very few file notices of commencement and Falling Rock declares that he is a rare bird. Okay - Falling Rock - whatever they may say, they are looking for reports and returns for the whole of the period. Eventually, I predict, they will collect that pound of flesh, so if you want to avoid delay go back to the first month they approved your registration and start filling out forms. As you say, zero's. Don't put them in every cell or you'll end up in one with pads. The total of totals suffices to state, we did nothing!
  14. dhdunbar

    Amendment to drop DSP Bond Time Line

    Let's sort through this. The letter of commencement is just that, a letterhead notice. Here is the section of regulation that applies to persons who produce, .i.e, persons who distill, and only to persons who distill: Sec. 19.292 Notice of operations. A proprietor authorized to produce distilled spirits may not commence, suspend, or resume production operations at the plant without first providing written notice to TTB. Beginning operations. A proprietor must file a letterhead notice with the appropriate TTB officer before beginning or resuming production operations. A proprietor must not begin or resume operations before the time specified in the notice. Letterhead notice is a defined term. 19.1 - it is a letter on a company's letterhead or other piece of paper that clearly shows the company name from a company representative with signature authority. A letterhead notice does not require approval by TTB prior to the change. I would venture few do this. You can modify "few" with "very" and come closer to being correct. And then modify "very" with "very." TTB form 5110.34 is not longer available on TTB's website and as far as I know, permits on line has abandoned all notices. In the late 1990's, TTB allowed letterhead notices in lieu of the form, which is the source of the current section 19.292's notice provisions, which was introduced in the revision of 2011. Next. since it migrated to Permits Online, letterhead notices have all but died. If you search part 19, you will find more than a few references to them, for example, in the sections on changes to construction, to name one. But the NRC now treats them all as amendment to the registration. So there is the background on that. Now, the the issue here is the reports AND the tax returns for which TTB is asking. Here is the logic of the request. TTB's rule is simple. Sec. 19.632 requires monthly reports for all operations in which you are authorized to engage, with the only exception being the production reports (but not storage or processing reports if you are authorized to conduct those operations,) during periods when you have told TTB, by letterhead notice, under the provisions of 19.292, that you are suspending production operations. Very, very few do that, so reports are required for all months, without regard to whether you had transactions. Similarly, 19.234 requires that a proprietor must execute and file the tax return (TTB F 5000.24) for each return period, even when no tax is due for a particular return period. Note that submitting the reports and returns requires you to state, under penalties of perjury, that they are true and correct, etc. Deliberately false statements thereby become punishable as felonies (to be very carefully clear, the failure to submit them is not a felony unless it is done for the purpose of evasion of taxes that are owed, but lying on the form is felonious). Next, the bonding company is on the hook for unpaid taxes. Without operating reports, even those with all of those zeros, TTB has no idea what tax liability you might have incurred for which the bonding company is liable if you have not paid it. Without the tax returns, TTB does not know if you paid the taxes, if any, for which you are liable. So, before TTB allows you to terminate the bond, TTB wants you to file the reports and returns for the entire period since you were authorized to conduct operations. It then feels comfortable with the termination. That is a long winded explanation, but I always try to show how something fits into the scheme. That way, eventually, the logic of seemingly illogical requests may sometimes be made clear.
  15. dhdunbar

    Transfer in Bond Application Turnaround

    I think that may not be true, because amendments of different types seem to get different tracking numbers. Looking over my submissions, it appears that the permits online system assigns a number in the form 2018-TIB-00123 to transfers in bond; 2018-USP-00123 to changes in the post office address, etc., so that the middle three letters distinguish between the different types of amendments. If I can see that in the amendments I submit, then I think the specialists can see it at their end too. However, if it is true, and TTB specialists cannot tell whether an application is for approval of a transfer in bond, they also cannot see changes in powers of attorney, signing authority, post office address, additions of trade name, the addition of a new still, etc... Applications that take 15 minutes to approve, once in someones hands, can end up taking months. That's nuts and they can do something about that. I suspect the truth is something else. A couple of years ago, label approvals were taking something like 50 days to get processed, giving rise to general dissatisfaction because of seasonal products, the inability to plan marketing campaigns, etc. Because people took arms and complained, rather than suffer slings and arrows of outrageous fortune, as it were, TTB got an increase in its budget to specifically fund more specialists to handle labels. What could not be reasonable resolved internal was resolved by budget increase. The blood and turnip rule applies here. TTB's NRC is asked to do more (look at the increase in the number of businesses that are submitting new and amended applications) with less (apart from the earmarked funds for label approvals, TTB's budget in constant dollars has decreased since 2000). Notions of cutting government spending by 5% across the board can drive poverty into bankruptcy. Where that critical point is passed, no one can tell, but the notion of more with less will fail at some point. If it didn't, you could all operate your distilleries for 50% less than it is costing you now. If the specialists can't tell one amendment type from the other, that is a systemic problem that can be corrected internally. If they are nearing the critical point where things break, then the only solution is more people to do the job that congress requires them to do. Am I suggesting that you write your congressman saying, "Fund TTB so it can do the job you require it to do," like DISCUS and the Wine Institute and the Brewers Association did a few years ago? You bet I am. Congressmen will listen to constituent-waves, and there are a lot of you out there. There are more than 900 wineries, god only knows how many brewers, and more than a few dozen distilleries in Washington, where I live. If they all work in concert, that would be a wave that might move congress to give TTB the funds necessary to let you carry on your business. I'll guarantee you the flood will get your congressman's attention.