Ralph at Tuthilltown

As the ADI moves forward and pushes such issues as HR 777, of course we want an accepted definition which will set the criteria for distilleries which adopt a "craft" posture. The term "craft" has been hashed out here and the outcome was an acceptance of the term "micro spirits producer" and while that is accurate phrasing, it does not imply "craft" sufficiently to make a clear point to consumers and government agencies. I've been continuing to find the term which appropriately marries the terms "craft" and "art" and conveys the care and thought that goes into making fine beverage alcohol. My attention was recently drawn to (of all places) Wikipedia and the definition for the term "artisan". Here is the text of the Wikipedia definition of "artisan": An artisan (from Italian: artigiano) or craftsman (craftsperson)[1] is a skilled manual worker who makes items that may be functional or strictly decorative, including furniture, clothing, jewelry, household items, andtools. An artisan is therefore a person engaged in or occupied by the practice of a craft, who may through experience and talent reach the expressive levels of an art in their work and what they create. I believe this conveys the sense of a higher purpose to exercise of the craft of small distilling. And I propose that we modify the definition we have all accepted for small distilleries, changing the phrase "micro spirits producer" to "Artisan Spirits Distiller". Any comments? Remember, now that we are promoting HR 777, there will be a need to define the limits of the lower tier of FET classification for the small distillers. This group, ADI, is the only qualified group which can define their own efforts, so it is important we agree on a definition which we can set as a standard nationwide. R

Those of us who hold General Permits and State distilling permits know the fact of what is considered "distilling" and what is not, or we run the risk of being shut down. Arguments parsing out what is and what is not permitted are a waste of time. The Standards of Identity and other Federal regulations clearly define what is permitted and what is prohibited. Clearly mixing a cocktail is NOT considered "producing" a spirit; the taxes on the production are already paid and the product is legally acquired, otherwise every bar in the US would be exposed to prosecution and closure. I suggest avoiding getting sucked into useless debate on already well defined topics. If you have doubts read the law, or hire a high priced attorney to explain it to you.

There is no reference in the accepted definition which was discussed at length and accepted by the majority of producers as to what a "micro spirits producer" was "not". Here is the text which was accepted: Micro Spirit Producers make alcoholic beverage spirits using a variety of techniques and agricultural raw materials including but not limited to herbs, grains and fruit, which substantially change the character of the raw materials; up to 65,000 proof gallons of product per year produced in a single licensed DISTILLED SPIRITS PLANT premises. These techniques include, but are not limited to: infusion, distillation, blending, or other legal permitted means. There was substantial discussion and effort to be INCLUSIVE rather than exclusive in the definition. The only limiting factor of the text is the number, the maximum gallons per year agreed. No reason why we can not get along, even when we disagree. And Diversity is the overarching goal and the inevitable result of the proliferation of new small producers. We see it already. R

Perhaps some of you read the thread in which, over a two+ year period, the whole issue of "craft" vs "artisan" vs "micro" was discussed while we tried to nail down a definition to attach to what turned out to be HR 777, a bill to reduce Federal Excise Tax for small producers. Overall the consensus was that "craft" was too nebulous when applied to spirits producers, and had more to do with the nature of the way spirits production was undertaken, "craft" applies to knowledgeable application of a skill set for a utilitarian purpose. The final conclusion was based on what is most objective and that turns out to be a number, the final agreed maximum volume ended up at 65,000 proof gallons a year. A facility producing more than that amount became a factory according to the participants in the discussion. In fact, a Craftsman is a trained professional, a shop manager which could be the manager of a small or large operation. It is not limited to a "distiller" but also applies to for instance those who study and make use of botanicals infused into neutral spirit; the reason why the definition finally accepted did not center on the term "distiller". Instead, the definition was crafted to describe a "spirits producer", which could include a variety of "crafts" ending in an alcoholic beverage. WOODFORD RESERVE has every right to claim their products are "crafted"; it is crafted just on a large scale. It is up to the small distillers, the "farm" distillers and "micro spirits producers" to educate the consumer the differences among the different producers, the big guys who by number are the minority of the distilling community, and the micro producers who represent the increasing majority in that community, regardless the volumes produced by either. The small producer is the "underdog" when facing the major pit bulls of the industry out there in the marketplace, that is an advantage if one chooses to use that status advantageously. The public favors the underdog. Ponderous corporate production giants rarely suggest the "new" and "different", they go on doing what has and is still making profit at the least expense. For them experiments are expensive and risky to release; they will always follow the successful "new" and "different" directions of upstarts. Major corporate anti-risk mindset leads the large producers to enter the "diffusion curve", the S-curve of successful innovation, well after it has passed out of the initial introduction and adaption stages, only when success is nearly guaranteed by general acceptance and the risk of retooling and spending money on marketing is reduced to acceptable levels, when the curve is nearing its peak and flattening out, becoming more dependable. The small producers' ability to be nimble, experiment, test on a local and regional scale and their willingness to accept failure as a cost of progress puts them (us) at an advantage and in the vanguard; a position impossible for our big cousins who seem to, and perhaps believe they do rule the world. Stop worrying about what they are doing, it is a compliment, they are imitating us best they can, but they can not become us. Use your energy to teach the consumers THAT. R

Newly licensed distillers and those launching new product in New York take heart. At the request of Tuthilltown Spirits, State Senator Bonacic has introduced a bill which would amend NYS Alcohol Beverage Control law and permit holders of DD or Farm Distillery licenses to offer samples and sell NY branded spirits direct to consumers at Farmers' Markets, State and County Fairs. This direct access to consumers where they live is a fabulous opportunity to test new products or gain a consumer foothold when developing a brand. You can help. Holders of New York DD licenses should contact their State legislators and strongly urge them to get on board and support S-06426, the text of which is available at: http://assembly.stat...ummary=Y&Text=Y Get on the phone, write a "letter" (remember "letters", on paper, mailed and landing on someone's desk?) to your Legislators today. Additionally, in a meeting with three of the senior Executives at the State Liquor Authority, the question arose what we would do if we found our distillery successful and pushing up against the upper production limit of our two licenses (we hold both A-1 (limit 35,000 gallons per year production) and DD (permitting 35,000 gallons of production a year)), our total cumulative permitted production limit is 70,000 gallons per year. We responded that we'd apply for the larger production scale license which has no upper production limit. But the Chief Counsel of the SLA suggested it would be a more effective route to simply get the limits raised, noting also that the next tier license class did not permit a tasting room or sampling and sales to consumers at the distillery, which has become a strong part of our revenue stream. (I told him the Fed is considering HR 777, which bill calls for a two tiered system with the first 65,000 pg taxed at a lower rate than all production above that first 65K proof gallons.) He indicated he thought it would be reasonable to request the State amend the limit for the small distillers and raise it to that of the standard being considered by the Fed and accepted by ADI membership nationally. We have inquired at Senator Bonacic's office the possibility that this suggestion of an increased maximum production allowance be added to S-06426 so both changes carry through the process at once. By the way, that conversation came during a visit to our distillery, at our invitation of the three top officials at the State Liquor Authority to our distillery. The Commissioner, Dennis Rosen had invited me to visit in Albany to discuss needs of the small distillers in New York, to which I countered that he and his associates would should come visit our distillery and see how a small distiller operates and learn first hand what our needs and concerns are. Mr. Rosen readily accepted the invitation and a positive exchange of ideas and concerns followed in our tasting room. We consider it a strong step in the right direction, which we made certain they understood. We expressed our happy surprise at the free and open nature of the discussion and their willingness to listen and participate; we are of the firm opinion that no regulating body can function effectively when no one in the regulated industry trusts the regulating agency. They agreed and expressed their desire under the Cuomo Administration to help relieve some of the impediments and make it easier to be in business. They acknowledged the arcane and complex nature of the cobbled together liquor law, and that they are addressing a revision that would eliminate a great deal of the useless components and redundancies. We commented that one major improvement would be the leveling of the playing field in law, as among breweries, wineries and distilleries; it's all alcohol after all and the producers have more in common than not. The SLA team agreed. We're grateful for their time and the effort to come visit from Albany. I relate the details of the meeting here to make the point; times change, administrations change. An intransigent liquor authority or bad alcohol law are not permanent fixtures. You can influence and effect change, but you must act. Be smart and reasonable, be persistent but patient. The wheels of government grind on slowly, but they do grind on, stay with it. Don't focus your legislators' attention on alcohol; keep them attentive to the other benefits of a strong micro distilling industry: agriculture, jobs creation, tax revenue, tourism development, rural economic development, history. Ralph

Well I have to agree that DISCUS failed to anticipate the growth of artisan distilleries. My guess is that their members, all very large distillers with hundreds of thousands of gallons of aging stocks over three years of age felt it didn't affect them since all their goods met the qualification. But it was shortsighted on their part. I do, however blame the elder Bush's administration for failing to recognize the artificial trade barrier the EU was pushing that in reality meant the only "whisky" in the world upon which to base a definition was made in Ireland and Scotland. There are English distilleries who wish to export to the US their single malt whisky but are prohibited from doing so since the US law provides for exemptions from the "new charred oak barrel" rule for Scotch and Irish whiskies but not English whisky or any other kind for that matter. A bit over the top in exclusionary regulations, favoring Scotch and Irish made whiskies over all other whiskies made everywhere else in the world for import to the US. I think it's safe to say that most makers of whiskey or whisky agree that it is the product of distillation of a mash of fermented grain. R

Tuthilltown may sell its goods in the EU but we may not call them "WHISKEY" or "WHISKY" according to EU law; which is exactly the opposite of the allowance we give to Scotch and Irish Whiskys in the US which have a specific exemption in the law to allow them to call their products whiskey though they do not meet the US definition of whiskey. We are only pursuing quid pro quo, equal consideration for American Whiskey. Your second paragraph is not possible since international trade agreements already identify tequila as specifically Mexican, Scotch as made in Scotland (not Kentucky) and Cognac in Southern France specifically. Changing these accepted laws would be nearly if not impossible. But what we seek is a clear statement that American Whiskey is a specific class of whiskey made in America according to our Federal Regulations. R

Well done. Other distillers who see this should follow suit. Contact your lawmakers now. R

Carried in today's CRAINS NEW YORK BUSINESS Tariff levels are generally falling around the world, but U.S. companies still face significant “behind-the-border” barriers, which typically take the form of complex, burdensome regulations and standards. The story of Tuthilltown Spirits of Gardiner, N.Y., illustrates the challenges to U.S. producers that want to export their merchandise overseas. Ralph Erenzo and his partner, Brian Lee, run Tuthilltown Spirits, a Hudson Valley distiller with fewer than 20 workers. Tuthilltown makes Hudson Baby Bourbon—recently awarded a Double Gold medal at the San Francisco International Spirits Competition—from locally grown corn and uses special American Oak barrels in its innovative aging process, which takes less than six months to complete. When Mr. Erenzo decided to expand sales to the European Union, he learned that a product sold there as whiskey must have been aged for at least three years. Removing the word whiskey from Hudson Baby Bourbon labels in the EU raises Tuthilltown's costs and forces the company to rely on word-of-mouth to educate European consumers about its products. The EU's three-year aging requirement for whiskey essentially functions as a trade barrier that severely limits Mr. Erenzo's access to the EU market. Tuthilltown Spirits is far from alone. Over the past few years, problematic foreign regulations and standards have had a negative impact on critical U.S. sectors—from food and agriculture to financial services and information technology. President Barack Obama has made eliminating these obstacles to U.S. businesses a top priority. The administration is pursuing new tools to prevent such barriers from being erected in the first place, while also ensuring that U.S. and foreign regulators can continue to protect the environment, the workplace, and public health and safety. For example, we are working with the EU to promote better regulatory coordination, especially in emerging areas such as electric vehicles, energy efficiency and nanotechnology. Through the nine-country Trans-Pacific Partnership negotiations and the Asia-Pacific Economic Cooperation forum, we are seeking to enhance transparency in the development of standards and regulations, to reduce unnecessary differences in product regulation and to encourage better, more centrally coordinated regulation principles. We have also created cooperation councils to address unnecessarily divergent standards and regulations, which hamper trade within and from North America. Additionally, we are making efforts to strengthen the World Trade Organization as a forum for the president's goals. Tacking trade-related regulatory and standards issues is critical to increasing U.S. exports, boosting economic growth, creating more jobs at home and enhancing our country's competitiveness in the 21st century. Our efforts can make a big difference for businesses like Tuthilltown Spirits and enhance America's ability to build a more prosperous future. U.S. Trade Representative Ron Kirk is President Barack Obama's principal adviser and spokesperson on trade issues. A version of this article appeared in the July 11, 2011 print issue of Crain's New York Business.

Carried in today's CRAINS NEW YORK BUSINESS Tariff levels are generally falling around the world, but U.S. companies still face significant “behind-the-border” barriers, which typically take the form of complex, burdensome regulations and standards. The story of Tuthilltown Spirits of Gardiner, N.Y., illustrates the challenges to U.S. producers that want to export their merchandise overseas. Ralph Erenzo and his partner, Brian Lee, run Tuthilltown Spirits, a Hudson Valley distiller with fewer than 20 workers. Tuthilltown makes Hudson Baby Bourbon—recently awarded a Double Gold medal at the San Francisco International Spirits Competition—from locally grown corn and uses special American Oak barrels in its innovative aging process, which takes less than six months to complete. When Mr. Erenzo decided to expand sales to the European Union, he learned that a product sold there as whiskey must have been aged for at least three years. Removing the word whiskey from Hudson Baby Bourbon labels in the EU raises Tuthilltown's costs and forces the company to rely on word-of-mouth to educate European consumers about its products. The EU's three-year aging requirement for whiskey essentially functions as a trade barrier that severely limits Mr. Erenzo's access to the EU market. Tuthilltown Spirits is far from alone. Over the past few years, problematic foreign regulations and standards have had a negative impact on critical U.S. sectors—from food and agriculture to financial services and information technology. President Barack Obama has made eliminating these obstacles to U.S. businesses a top priority. The administration is pursuing new tools to prevent such barriers from being erected in the first place, while also ensuring that U.S. and foreign regulators can continue to protect the environment, the workplace, and public health and safety. For example, we are working with the EU to promote better regulatory coordination, especially in emerging areas such as electric vehicles, energy efficiency and nanotechnology. Through the nine-country Trans-Pacific Partnership negotiations and the Asia-Pacific Economic Cooperation forum, we are seeking to enhance transparency in the development of standards and regulations, to reduce unnecessary differences in product regulation and to encourage better, more centrally coordinated regulation principles. We have also created cooperation councils to address unnecessarily divergent standards and regulations, which hamper trade within and from North America. Additionally, we are making efforts to strengthen the World Trade Organization as a forum for the president's goals. Tacking trade-related regulatory and standards issues is critical to increasing U.S. exports, boosting economic growth, creating more jobs at home and enhancing our country's competitiveness in the 21st century. Our efforts can make a big difference for businesses like Tuthilltown Spirits and enhance America's ability to build a more prosperous future. U.S. Trade Representative Ron Kirk is President Barack Obama's principal adviser and spokesperson on trade issues. A version of this article appeared in the July 11, 2011 print issue of Crain's New York Business.

Remember Sharon, the USDA has recently acknowledged micro distilled products are considered by the USDA to be AGRICULTURAL PRODUCE and therefore protected on USDA rules and eligible for participation in international as well as domestic trade promotions. Make sure that point is made clearly. Thanks. R

Thanks for the warm welcomes back, all are greatly appreciated. You can get to the list of the WAYS AND MEANS COMMITTEE at: http://www.govtrack.us/congress/committee.xpd?id=HSWM But as Dick says the most direct route is your own Congressman and Senator. Get on their case. Take ten minutes out of your busy day and call their offices. Remember that Legislative Assistants are valuable to elected officials who rely upon their assistants for guidance and updates. Make friends with the Legislative Assistants and enlist their aid. Check with Michele at DISCUS: Michele Famiglietti, email: mfamiglietti@discus.org , she is organizing a letter for all distillers to sign onto for delivery to the Hill. Ask her for a copy and make sure you send it out. This ain't frivolous stuff, it will translate to thousands of dollars saved by you in Fed. Excise Tax payments. It also means recognition of the specialness of our growing craft by the Federal Government. I can't help myself, I'm perhaps pushy about this issue, but hell I hate to give in so let's get it done. R

Well truth be told my son is keeping me in line these days, insisting I stop trying to work so hard and simply get better. But it's hard to do. I just had a conversation with my contact at the US ITO who told me they contacted the UK, in particular the SWA and raised the issue, since the SWA is lobbying the US to accept all EU rules on alcohol as they are, the issue is that the SWA is insisting the US do what they will not do and their response was, rather than acquiesce to the US request for quid pro quo in the law, recognizing "American Whiskey", they would rather withdraw their requests of the US to accept their terms. Two developments mitigate their intransigence. One is that the Depart of Agriculture (US) has declared micro distilled spirits as "agricultural products of the US". They intend to participate in trade fairs in the EU with American spirits, but under current EU law no Whiskeys would be permitted which are aged less than three years so the new American whiskey makers may not participate unless you relabel your goods as "distilled grain spirits" rather than bourbon or rye whiskey; and Corn Whiskey is out for sure. The US ITO is communicating now with Dept of Agriculture to try to get they to begin to exert pressure on EU about the trade barrier EU definition of whiskey presents to the US. The US ITO has also heard from a British distiller of Single Malt Whiskey who may not export to the US because they are aging their goods in used bourbon barrels and are not exempt from that rule the way Scotch and Irish Whisky makers, by treaty with the US. So now the question for the Brits is "who is running their legal system, the government or the SWA?" This issue will add to the weight of our argument that the inequity in the agreement is discouraging international trade in order to protect only the members of the SWA and Irish Whisky makers. I'll keep you posted on the progress as it is reported to me. As for the question of "Craft". I've done quite a bit of research on this nebulous issue. My own conclusion is that "craft" is the knowledgeable use of skills to operate in our case a distillery. If we are taking it farther so it becomes "Art", that requires a leap from utilitarian value and mere knowledge to innovation, new ideas, beyond utilitarianism to become "more" than the final product, it is a mindset and requires action beyond craft. Neither is better or worse than the other. Not unlike the commonly held opinion in the art world that "fine art" is more desirable and a higher art practice then "illustration". One is without borders, without direction but for the mind and creativity of the artist. The other employs the considerable skill of the artist to create something which is not only beautiful but also meets the needs of the client. Ralph

Well I thought I was fully with it, but my first attempt at this post disappeared when I hit the wrong key. So here's the second go-around. I've been absent from ADI Forums for about six months as some of you my have noticed. Had a little car trouble in December that wound me up staring at the ceiling of the Albany Medical Center ICU for three months. Good news is of course I never did shovel an inch of snow this winter. But it did keep me out of commission for nearly six months. But I'm home now and writing mainly here to thank everyone who took the time to write me words of support and encouragement. Every good vibe I received was terribly gratifying and contributed to my determination to get through the difficulty and get back to work at Tuthilltown. Thank you, thank you all. And now business, HR 777 is in the hands of Maurice Hinchey, our NY Congressman. But he will need the support of a considerable number of other State's Congressmen and Senators to get it past committee and to the floor for consideration. Remember this law, when passed, will result in an 80% discount in your Federal Excise Tax, no laughing matter. Please get on the phone today and call your Congressman and Senator's offices. If they are not available to speak with you directly ask for their Legislative Assistant and bring HR777 to his/her attention and (politely) insist that the Congressman or Senator address the issue immediately. Remind them this is not about alcohol, it's about agriculture, tourism, economic development in rural areas; and about the return of one of the country's most traditional trades and the return of the relationship between the craftsman (small distillers) and local farmers. We're at a critical time. We've successfully introduced the bill, had it composed and have Congressman Hinchey sponsoring it. But he needs the additional support of other elected officials if it is to get past committee and the various and many review points. This is a major step forward and has been in the works with various members of ADI for a couple of years. When we started we were told the typical:"Oh that'll never get anywhere." We've proven that response to be false by studied work and sheer determination. Now it's up to the distillers. Contact your Congressman and Senator and get them working on HR777. And it's good to be back. Ralph Erenzo Tuthilltown Spirits

As I follow this discussion and pick through the various popular and obscure definitions of "whiskey", the EU is attempting to get the Federal International Trade Office to accept EU (read: SWA) definition laid down in EU law. That definition redefines American whiskeys, though it also recognizes Bourbon and Rye whiskeys as American spirits. The EU definition of "whisky" or "whiskey" stipulates a minimum aging period of three years in oak. No distinction is made between new or used oak, charred or uncharred. So the EU law contradicts itself by recognizing American whiskeys as unique to the US; but does not recognize them as "whisky" or "whiskey" for sale in the EU. We have proposed to the USITO they offer a compromise and invent a term for EU law which is : American Whiskey, not unlike the specificity of Scotch or Irish whiskys. This would mean no change in American law and open the EU market to all the new young whiskey makers who are eager to test their products in the EU, which at the moment and for years have thought of American whiskey as Jack Daniels or Jim Beam. Both venerable brands but certainly not representative of the variety of whiskeys coming from the many newer distilleries opening up now in the US. Ralph

The FET discount for small distillers bill proposes to classify all DSPs making 100,000 gallons or less as "small distillery". The FET discount applies to the first 65,000 proof gallons produced. All goods from 65,000 pg to 100,000 pg are taxed at the full FET rate. A facility which passes the 100,000 pg figure would then be reclassified as a "Tier 2" distillery, a big-guy and all that distillery's FET will be charged at the full rate, no more discount on the first 65K pg. And as Melkon notes, the first few thousand proof gallons may appear to be a walk in the park, but when you get up to and pass 30,000 proof gallons production rate it's a whole different ball game. In NY a distiller can hold both the A-1 and DD distillery licenses simultaneously and the 35,000 gallon per license maximums are cumulative, so the overall total permitted to the distiller with both licenses is up at 70,000 gallons. By way of perspective, Tuthilltown Spirits made a total of roughly 3,800 gallons in 2009. And we're working our butts off. The question of the upper limits of production dividing a "micro" from the big boys will remain debatable, but a decision had to be taken and the forum pointed the way during the period of discussion. It was not arbitrarily decided. All involved in the discussion were aware that scale is a major component of price; and that simple equipment upgrades can make an enormous difference in the final costs and potential output of a distillery. The question with which we struggled was "when does increase in scale change the nature of the small distillery?" And in the end it came down to "what is 'small' and what is 'big', and where do you draw the line? The line ends up most effectively drawn based on volume, for better or worse. And the number arrived at was 65K proof gallons. The main topic in this thread is how to leverage our own uniqueness and make the consumers aware we are NOT big alcohol and there's good reason to try our goods and pay the price of high quality NEW American whiskeys. The main response is, we should do it together. R

Okay folks, let's just un-twist the knickers and clear the air. The purpose of nearly two years of open discussion on this very site Forum on the topic of defining a category representative of the developing small distillery industry in the US was and remains to be INCLUSIVE of all the various expressions of small batch spirits. That does include a very broad range of goods, and certainly includes gin or any other GNS product that fits within the definition which was accepted at the last ADI conference. That definition specifically calls for the micro spirits producer to substantially change the character of the alcohol if they are starting with GNS. I support a single category of voting member, not distinguished by WHAT is produced, but by how much. It is the only neutral method of determining what "micro" means. A distillery can be a craft distillery or a micro distillery or a Scientologist-Gay-One Armed-Organic-pico distillery. Attempting to gain consensus on the defining characteristics of a small producer proved to be nearly impossible. It launched a rhetorical, philosophical discussion on the meaning of "craft" and "art" which pointed the debate in the direction of volume as a single overriding criteria. It was agreed (by me anyway) that the "craft" comes from close intimate contact with the production process and the product throughout the process by the maker. There are a growing number of folks who make infusions and cordials and such with great care, unique materials with singular character but started out as GNS; it was agreed there may be as much "craft" in these undertakings as making whiskey or brandy. The only divisions of membership, "categories" if you will, are between DSP holding members with the right of vote, and Non-DSP Associate Members without right of vote. This is proposed as a membership association representing small DISTILLERIES, licensed DSPs. There has been discussion on the concept of voting Affiliate Members like the cooperages or the Wholesalers. The Wholesalers have an organization. They don't need a vote on a Distiller's Board of Directors, though they should be heard and as an Affiliate Member they would be heard. But ADI is headed toward recognition as THE association of small DISTILLERS and in Fed law that means a DISTILLED SPIRITS PLANT permit holders (which includes producers of beverage spirit products starting with GNS). The only qualification for an ADI (or whatever the name ends up being after the transition) member to be recognized as a Micro Spirits Producer is the defining characteristics recognized by the Fed and the Industry Association. The DISCUS CRAFT DISTILLERY ADVISORY COUNCIL uses the figure 95,000 proof gallons as the upper limit. It is unfortunate DISCUS defined the category before getting a handle on the consensus of entire micro distilling community before setting that figure. (By our own humble calculations 95,000 proof gallons is one helluva lot of alcohol and among us here at TTown that seems more like a factory than a micro distillery, all things considered, but that's our opinion.) The bill being prepared to introduce to the Federal Congress that would discount the FET for Micro Distillers uses the figure proposed by the ADI definition, 65,000 proof gallons. The final determining factor will likely be, for all intents and purposes, the figure which is written into the Tax Code. That figure will be the baseline according to the Fed. It will trump all else when it comes to precedent at the Fed level. It will also mean an annual savings of over half million dollars in FET paid by some small distillers. Any additional "certifications" of programs or individuals or distilleries are secondary to the Fed determination. However, this is not to say there should be no other qualifying bodies out there improving the industry and recognized as such by their "certification" program. The issue of credibility is a shared responsibility among the various "certifying" groups and ADI. These groups should eventually seek "approval" by ADI. ADI should not be certifying distilleries, thereby becoming the arbiter of what is an "acceptable" distillery and what is not. This is not the mandate the ADI membership has set out for itself. If KOTHE or any other group wants to offer a certification course and issue a nice handsome label we can apply to our bottles, and they can sell the idea and make money while maintaining a high standard, great for them and good for the industry. But it is not an ADI certification and its value has yet to be determined in the marketplace. I have no objection to, and in fact would support a fee paid to ADI by the certifying organization for the privilege of acquiring ADI certification; but for this to be effective it would also mean ADI has the mechanism and criteria and a protocol for testing the organization and their program, which it does not. This is not the same thing as charging individual DSP members for the right (note the use of the term "right", as in "a right of membership") to put an icon on their label which says they belong to ADI, which is a statement in and of itself: "We are a Micro Distillery". By way of example, the AMERICAN MOUNTAIN GUIDE ASSOCIATION (AMGA)has a certification program for climbing guides. It is not a licensing necessity to be a climbing guide, one can take a course at any of a dozen or so schools across the US and qualify to get a State issued "climbing guide" license. The National Governing Body of American mountaineering is the AMERICAN ALPINE CLUB. It does not certify guides, but it recognizes the AMGA certification. It also recognizes the certification of other important mountaineering groups. But the AAC takes no part in the actual certification process of such as AMGA, leaving that to the groups who know it best, the Guides. And the AAC has a mechanism in place to certify those programs which seek its imprimatur. The same would seem to apply to our situation. The National Industry Association, in our case ADI should not be actually performing any certification, but merely qualifying the other groups in their ability to teach and certify the content and completeness of their programs and the quality of the instruction. The distiller who sees value in ADI, value which ADI and its membership must CREATE in the minds of the consumers, should be able to take advantage of the growing understanding by consumers about micro spirits products by touting their ADI membership with a logo on the label or some such icon representing ADI. But again, this value will be determined by the marketplace and how we educate the consumers. I can foresee no problems with adding a logo such as Melkon has proposed, and I quite like it, to our labels; at least not from a COLA point of view. It has potential to serve as the qualifying mark on the label which separates the micros from the Diageo products since it would be a trademarked icon and owned by ADI and anyone not qualifying as a "micro" producer would be prohibited from making use of it. And it will be up to us and all our other distilling cousins out there to educate the consumer what that means and why it's important, in the same way as any other private organization must do when establishing a reason for their existence. R

Sorry to disagree, and regardless what your inspector said, but this is simply an overcomplicated reading of a simple statement in the Fed Regs. There are a number of licensed DSP premises with homes on the same lot. TUTHILLTOWN SPIRITS is one example, and we had an inspector visit the property twice during our application process. There is simply NO prohibition against having a dwelling on the same parcel as the DSP premises. Period. Finito. And until some distiller is actually denied a permit and tests this in court, I suggest the topic be dropped, lest it invite challenge and create problems where there are none. And not to put too fine a point on it, Porter is, on my own reading of this section, putting the emphasis on the wrong syl-LAB-le. The way I would interpret this (and I'm no lawyer) to read (adding my own emphasis) "Distilled spirits plants shall not be located in any dwelling house, or in any shed, yard, or enclosure connected with any dwelling house, or on board any vessel or boat, or on premises where beer or wine is produced, or liquors of any description are retailed, or (except as provided in §19.133) on premises where any other business is conducted." Meaning, any shed, yard (defined portion of a property connected with a dwelling), or enclosure; any of which connected physically with a dwelling. This being to prevent someone setting up a still in their backyard, or front yard for that matter. The reading described in Porter's post would extend the "yard" to include all land on the same parcel upon which is a dwelling which would exclude all Farm Distilleries. It simply is not so. R

The issue of the actual title "micro" vs "artisan" has been well discussed in the forum over two years as we refined the definition to maintain the "smallness" without making the definition so narrow it stifles creativity. The term "artisan" does not imply "smallness" or "craft", it is a term of art which refers to a person with technical knowledge on the production of goods and could apply to the chief distiller at a Brown Forman plant as much as to any of the "craft" producers. And the term "craft" was decided to subjective and undefinable to be acceptable. It is not the job of the TTB to create a certification program, this is typically the job of the industry association. The way into Federal recognition is, as Melkon points out, to get the FET reduction bill in place which will, de facto, define the category, regardless the name attached to it. That qualification is the 65K proof gallons agreed among those involved in the discussion on the definition of our category. It is reflective of the general top figure in most of the States where they have small batch distillery licenses separate from the general distillery category. The number is arguable, but it was generally accepted and is the number used in the lobbying effort to get the reduced FET. It allows for growth without tripping over into the category of "factory". I can foresee no prohibition against noting membership in the Industry Association on a label, so COLA should be no problem. I'm not sure that charging for a sticker or a designation as "craft" or whatever is necessary. Once the ADI had undergone the changes hoped for and takes its place as THE representative Industry Association for the small distillers, the fact of membership qualifies the distillery as a Craft spirits maker and should be enough. It is the job of the new ADI Board and the members to promote the difference between Association members and the big producers. I see no benefit in further qualifying the membership, or breaking out certain members as more-crafty than others. We're either a membership organization of small distillers or we are not. The proposed qualification for a "micro spirits producer" and membership in the new ADI will be the permit and an operating licensed DSP; that pretty much covers it. And if a producer qualifies for the discounted FET rate, that qualifies that producer as "micro". R

Phoenix is correct. We bottle single barrels and sell the entire lot as a single batch, including the (emptied) barrel it was aged in. This is perfectly okay. Another alternative is to sell "whiskey futures", the right to purchase a particular barrel when it is taken out of oak and bottled, but we've no takers on that one yet. R

In New York, it is listed at the SLA site under ABC LAW. Here is the pertinent section: ((i) Retail sales by a licensed farm distillery may be made only to customers who are physically present upon the licensed premises and such sale shall be concluded by the customer's taking, with him or her, of the sealed containers purchased by the customer at the time the customer leaves the licensed premises; (ii) Such retail sales shall not be made where the order is placed by letter, telephone, fax or e-mail, or where the customer otherwise does not place the order while the customer is physically present upon the premises of the licensed premises; (iii) Such retail sales shall not be made where the contemplated sale requires the licensee to transport or ship by common carrier, sealed containers of liquor to a customer. © A licensed farm distillery may conduct upon the licensed premises consumer tastings of liquor manufactured by the licensee and from no more than three other class A, A-1, B, B-1, C or D distilleries, subject to the following limitations: (i) Only liquor manufactured primarily from farm and food products, as defined in subdivision two of section two hundred eighty-two of the agriculture and markets law, shall be used in the tastings; (ii) An official agent, servant or employee of the licensee shall be physically present at all times during the conduct of the consumer tasting of liquor; (iii) No consumer may be provided, directly or indirectly: (A) more than three samples of liquor for tasting in one calendar day; or ( with a sample of liquor for tasting equal to more than one-quarter fluid ounce; (iv) Any liability stemming from a right of action resulting from a consumer tasting of liquor authorized by this paragraph and in accordance with the provisions of sections 11-100 and 11-101 of the general obligations law, shall accrue to the licensee. (d) Notwithstanding any other provision of this chapter, the authority may issue a farm distillery license to the holder of a class A, A-1, B, B-1 or C distiller's license, a winery license or a farm winery license for use at such licensee's existing licensed premises. For the purposes of this chapter, the premises of the class A, A-1, B, B-1 or C distillery, winery or farm winery shall be considered the premises of the farm distillery. The holder of a farm distillery license that simultaneously holds a winery, farm winery or any class of a distiller's license on the same premises may share and use the same tasting room facilities to conduct wine and liquor tastings that such licensee is otherwise authorized to conduct. (e) Notwithstanding any other provision of law to the contrary, the holder of a farm distillery license may apply to the authority for a license to sell beer, wine and liquor for consumption on the premises in a restaurant operated on or adjacent to the licensed farm distillery. All the provisions of this chapter relative to licensees to sell beer, wine or liquor at retail for consumption on the premises shall apply so far as applicable to such application. This text is specific to the D, FARM DISTILLERY LICENSE and specific to NY State. (Sorry about the smiley faces, don't know why they appear, not my doing.) R

Small Spirits Makers' Equal Tax Act Source: American Distilling Institute Dec 16th Attention all Craft and Potential Distilled Spirits Producers: We're trying to change the taxes for small producers in the next two years. Please send: 1) your congress districts 2) your incoming congress people 3) and let us know if you're licensed 4) where you are located to James Day flaglerspirits@gmail.com Goal To help support the recent expansion and to encourage further growth of small U.S.-based spirits manufacturing by creating a reduced federal excise tax rate for small-scale distilled spirits makers that mirrors the current reduced tiers for small beer and wine producers. Background The distilled spirits industry has enjoyed a renaissance of local, artisan production of unique spirits over the last five years. Our numbers have swelled from less than 40 licensed makers in 2003 to more than 150 in 2008. Because of our efforts, consumers in America and abroad are beginning to experience innovation and quality in spirits similar to what took place with micro-brewers in the 1980s-1990s and independent winemakers in the 1970s-1980s. (Today, many of these brands - such as Sam Adams, Anchor Steam, Mondavi and Kendal Jackson - are not only trend leaders but also sizeable businesses.) What made the growth of small beer and wine makers possible - other than hard work and passion - was a reduced federal excise tax rate that allowed them to make and sell artisan products without the economies of large-scale production. Today, small-scale beer producers pay 39% of the full federal excise tax that medium and large producers pay. Similarly, small producers of average-proof wine (<14% alcohol) pay 18% of the full rate. To put this in context, small beer producers pay $0.02 vs $0.05 in federal excise tax per 12 oz can, while small wine producers pay $0.04 vs $0.21 per 750 ml bottle. By contrast, small spirits makers pay the full rate - $2.14 per 80-proof 750 ml bottle of spirits. Proposal Small-scale spirits producers need a similar reduced-rate federal excise tax structure to continue to innovate, create U.S.-based manufacturing jobs, support U.S. agriculture, support tourism through visitor centers and tasting rooms, and compete effectively in the marketplace with reasonably-priced handcrafted spirits. This differential is particularly critical as distribution channels for spirits consolidate and the economic downturn makes marketing handcrafted spirits more challenging. The undersigned propose the following structure to bring balance to small distilled spirits producers: Tier one/medium- and large-scale producers - 100% rate Tier two/small-scale producers - 20% rate Tier Two would rise or fall in relation to Tier One whenever excise rates are adjusted. ... For the full proposal email: Melkon Khosrovian melkon@modernspiritsgroup.com 213.949.3569 Modern Spirits LLC 168 W Pomona Ave

Not only is Congress not addressing a limit on the amount of the "cover over" funding returned to territories which can be used as incentives for companies such as Diageo, but: U.S. Senate approves rum cover over extension Source: V.I. Daily News By JOY BLACKBURN December 16, 2010 A measure that would keep federal rum tax rebates flowing to the territory at a rate of $13.25 per proof gallon was part of an $858 billion tax-cut bill that the U.S. Senate approved by an 81 to 19 vote Wednesday afternoon. The bill is expected to come back to the U.S. House of Representatives for a final vote by the end of the week, according to a prepared statement released by V.I. Delegate to Congress Donna Christensen. The provision is only a tiny part of the bill. If the measure passes, for every proof gallon of Virgin Islands-produced rum exported to the U.S. mainland, the federal government will continue to return to the territory $13.25 of the $13.50 in excise taxes it collects from the manufacturer. The territory used to get $10.50 back, but in 1999, Congress passed legislation that temporarily increased that rebate to $13.25 per proof gallon. That measure has been renewed several times since then, keeping the rate at $13.25. The extender was up for renewal again this year, and has been volleyed back and forth between the U.S. House and Senate, attached to various bills. If passed, the rum coverover extender would be retroactive for all of 2010 and would also cover 2011, said Monique Clendinen, a spokeswoman for Christensen. The rum coverover extender had been routinely approved in the past, but has come under increased "public scrutiny and congressional challenge over the last two years after the Virgin Islands government inked deals with Diageo and Fortune Brands to use coverover proceeds as part of 30 year deals for the expansion of production capabilities on St. Croix," the release states. Bills - one sponsored by Puerto Rico Resident Commissioner Pedro Pierluisi, Puerto Rico's non-voting member of Congress, and the other proposed by Sen. Robert Menendez of New Jersey - seek to limit how territories can use their rum tax revenues. "I am pleased that our rum coverover extension is closer to passage," Christensen said in the release. "While there are certain provisions of the overall tax package that I oppose, feel could be improved upon and which I have worked with the Congressional Black Caucus and others to amend, a tax cut package is expected to pass the House and with it, all tax extenders to include our coverover. This is decidedly good for the economy of both Puerto Rico and the U.S. Virgin Islands."

Not to put too fine a point on it, "Neutral Spirits" and "Vodka" are NOT the same thing in the CFR SOI. Neutral Spirits is the "Class", "Vodka" is a type. And in fact Vodka appears in the definition in the SOI as MORE neutral than Neutral spirits definition. Also, note that "neutral spirits" aged in oak are in the "Neutral Spirits" class though clearly a grain spirit aged in oak will not be "neutral". Note: (a) Class 1; neutral spirits or alcohol. “Neutral spirits” or “alcohol” are distilled spirits produced from any material at or above 190° proof, and, if bottled, bottled at not less than 80° proof. (1) “Vodka” is neutral spirits so distilled, or so treated after distillation with charcoal or other materials, as to be without distinctive character, aroma, taste, or color. (2) “Grain spirits” are neutral spirits distilled from a fermented mash of grain and stored in oak containers. And note also in the quote above from the SOI, no mention of "nearly", it says "without distinctive character, aroma, taste, or color" (my emphasis added). And I have to agree with Guy, "odorless and etc." are hard to qualify. Anyone distilling apples to vodka knows that the end result is simply not the same as rye to vodka or potatoes to vodka. The differences are subtle, but they absolutely exist.

Yes, it happens all the time in big corporate machines dealing with governments and millions of dollars. But to me, that is what separates the "craft" or "micro" producer from the industrial producers. The sole goal of the major corporate producer is "profit". For many of us building our distilleries and our brands of course profit is important, but it is not the only motivating factor. I like to believe our operation is also moral and not out screw anyone just so we can make a profit. I doubt that discussion ever comes up around the board room at Diageo.