Tablas Creek can now ship to Connecticut and South Dakota! Why did it take so long?

In 2021, I wrote a Wine Shipping State of the Union, in which I broke out the 50 states and the District of Columbia into seven tiers based on the cost and convenience for a winery to ship to that state's consumers. If this isn't something you follow, you might be surprised that it can vary so much from state to state, but blame the 21st Amendment, which repealed Prohibition. That Amendment, intended so that states that wished to remain "dry" could do so, gives states broad leeway to regulate the sale of alcohol within their borders, and this has meant that no two states are alike in the licensing, fees, reporting, and restrictions that they've put in place.¹

Each winery makes a different calculation as to which states are worth the costs of doing business there. Some smaller wineries only ship to their home state, but most wineries with significant direct-to-consumer business ship to most of the 33 states that I put in my tiers I - III. There are another 12 states (my tiers IV - VI) in which shipping is possible for most wineries, if they're willing to absorb the costs and jump through the right hoops, and 6 to which it's essentially prohibited (my tier VII). At the time, we shipped to 8 of those 12 in tiers IV - VI. I am pleased to announce that we've done the work to add two more shipping states to our list: Connecticut and South Dakota. Our new shipping map:

What do South Dakota and Connecticut have in common? They're both states with label registration requirements. You might think that the federal label registration that we have to go through to sell our wines in America would be enough, but these two states have seen a potential revenue opportunity, and ask any winery that wants to sell its wines in that state to individually register each label with the state government. For South Dakota, it's $25/year for registering the first label and $17.50 for each subsequent label, paid to the South Dakota Secretary of Revenue. For Connecticut, it's $200/label, with each registration lasting three years and being transferrable across vintages, as long as you don't change the varietal mix or need a new federal label approval.

A quick look at our online order form will show our challenge: we currently list 34 different wines, and if you count different sizes and vintages there are a total of 51 different products listed. Each vintage of our blends is a little different, and we believe that it is important that our labels reflect that. All that leads to a lot of additional expense and hassle for the states which require us to register labels. The biggest reason that we haven't worked with those two states to date has been our worry that something will slip through the cracks and we'll get in trouble for sending wine we aren't registered to sell, as well as the burden this places on our back-office team. But I'm generally a believer that we need to do everything we reasonably can to make our wines available to the customers who want to buy them, even if the costs of doing so are high. So, we've jumped through these hoops² and I'm pleased to announce that customers from Connecticut and South Dakota who wish to order wine or sign up for one of our wine clubs can now do so.

That said, I still hope that these two states see reason and realize that the amount of revenue that these registration requirements bring in is a drop in the bucket of their state's budget. I don't know how it compares to the amount that they have to pay staff to administer the programs, but I'm guessing it's a wash. And like most state protectionism, it's ultimately the state's citizens who lose by paying higher prices and having less selection. 

The next state in our sights is Alabama. The state legislature there passed a shipping law in 2021, but it included some unworkable provisions that needed to be ironed out by the state ABC board, mostly owner citizenship and residency requirements that were unworkable for wineries with foreign partners like us. It appears that's been done. Stay tuned. Meanwhile we've at least found a work-around for Alabamans: while we can't ship to private homes or businesses yet, we can ship orders to a state ABC store for pickup. If this is something you'd like to try, please give us a call. 

Every time I dive into the arcana that is our alcohol regulatory framework, it drives home the wisdom of the founding fathers in including the Commerce Clause into the US Constitution. This clause prohibits state interference in interstate commerce, which means that the producers of most products don't have to hire compliance companies or dedicate staff members to making sure that all the different licenses, reports, and remissions are done properly. That clause is probably most eloquently explained in the 1949 Supreme Court decision H.P. Hood & Sons vs. Du Mond:

"Our system, fostered by the Commerce Clause, is that every farmer and every craftsman shall be encouraged to produce by the certainty that he will have free access to every market in the Nation… Neither the power to tax nor the police power may be used by the state of destination with the aim and effect of establishing an economic barrier against competition with the products of another state or the labor of its residents."

We may not be close to "free access to every market in the Nation"... but at least we've increased the number of those markets from 41 to 43. Number 44 is on the horizon. That's something to celebrate.

Footnotes:

1. If you'd like to get involved in the push for more open direct shipping laws, the nonprofit Free the Grapes, on whose board of directors I serve, has information, resources, and templates for contacting state representatives. 
2. Thank you to the Wine Institute for intervening with Connecticut to help us overcome the largest hurdle: that because we sell our wine wholesale through Vineyard Brands (an importer with a wholesaler network in all 50 states) instead of directly to a wholesaler there, the state needed to make accommodation for the same winery to have its labels registered by two different companies. Until recently, this wasn't possible.

Assessing the 11 Paso Robles sub-AVAs after their first decade

In September of 2013, the TTB published a notice of proposed rulemaking that gave a preliminary stamp of approval on the Paso Robles wine community's proposal to subdivide the Paso Robles AVA into 11 new sub-regions. I celebrated this milestone with an article on this blog where I laid out why I thought it was such an important development for our region. It's worth remembering that at the time there was some resistance to the proposal as being disproportionately complex given that up until that point everyone had used just the single overarching Paso Robles AVA. I tried to summarize why I thought it was important:

These new AVA's will be a powerful tool for wineries to explain why certain grapes are particularly well suited to certain parts of the appellation, and why some wines show the characteristics they do while other wines, from the same or similar grapes, show differently. Ultimately, the new AVA's will allow these newly created sub-regions to develop identities for themselves with a clarity impossible in a single large AVA.

The proposal was ultimately approved in October of 2014, and we started using our own sub-AVA (the Adelaida District) on the labels of our estate wines with the 2014 vintage. Our Patelin de Tablas wines, which are sourced from several of the sub-AVAs, continued to use the umbrella Paso Robles AVA. Of course, there was no requirement that wineries use these sub-AVAs. From my conclusion of that 2013 blog:

Wineries who wish to continue to use only the Paso Robles AVA are welcome to. And many will likely choose to do so as the new AVA's build their reputation in the market. Not all the AVA's have a critical mass of established wineries, and it seems likely that a handful of the new AVA's will receive market recognition first, while the reputation of others will take time to build. But I believe that it will be several of the currently less-developed areas that will benefit most in the long term, through the ability to identify successful winemaking models and build an identity of their own. We shall see; having a newly recognized AVA is not a guarantee of market success, just a chance to make a name for yourself.

All this came back to me last week when I fielded a call from veteran writer Dan Berger, asking my thoughts on the success of the AVAs given that most of the big Cabernet producers he sees haven't been using them. To my mind, that's neither here nor there, since those producers are typically large enough that they're sourcing grapes from multiple sub-AVAs and therefore can only use the umbrella Paso Robles AVA anyway. And there are exceptions even to this, most notably Daou, which uses the Adelaida District AVA on all its estate wines. But it did make me wonder the extent to which the different AVAs were appearing on labels and therefore being presented to consumers as a point of distinction. 

The best way to measure this would be label approvals from the TTB, but I don't think there is a way to search their publicly available database by AVA. Origin, sure... you can search, for example, by California. But not by Adelaida District. But there are proxies available that can give a good indication: the major publications to whom wineries submit thousands of wines each year. So I dove into the review databases at Wine Enthusiast, Wine Spectator, and Vinous. Because each publication receives and reviews a different subset of the wines that are produced, I've included a summation of all three, with the number of reviews that a search for each sub-AVA produces for vintages since the new AVAs were announced. The total for the Paso Robles AVA (reviews that don't list a sub-district) is at the bottom:

Paso Robles Wines Reviewed, by AVA, 2013-2022 vintages
	Wine Enthusiast	Wine Spectator	Vinous	Total	% of Total
Adelaida District AVA	611	249	773	1633	16.8%
Willow Creek AVA	427	261	674	1362	14.0%
Templeton Gap AVA	154	26	115	295	3.0%
Santa Margarita Ranch AVA	49	33	38	120	1.2%
Geneseo District AVA	34	5	55	94	1.0%
El Pomar AVA	45	2	40	87	0.9%
Paso Robles Highlands AVA	44	9	27	80	0.8%
Estrella District AVA	28	2	49	79	0.8%
Creston District AVA	8	0	25	33	0.3%
San Miguel District AVA	5	0	14	19	0.2%
San Juan Creek AVA	0	0	0	0	0%
Paso Robles AVA	3531	709	1691	5931	60.9%

So, nearly 40% of all the wines reviewed by these publications carried one of the 11 new AVAs on their label. Is that surprising? I'm not sure, but I do think it's an encouraging sign that the producers here think that the AVAs are or will become meaningful in the marketplace. When you figure that many of the rest of the wines (like our Patelins) weren't eligible for one of the sub-AVAs, the clear implication is that most Paso Robles wineries are using the smaller, newer designations when they can. Even J. Lohr, whose founder Jerry Lohr was quoted in Dan's article as saying "We’re not selling our Cabernets based on the sub-appellations," has used the El Pomar AVA on at least three wines, the Adelaida District on at least three others, and the Estrella District on yet three more.

And yet, while all the new AVAs except San Juan Creek have appeared on labels, it's worth considering why more than three-quarters of the wines that use the sub-AVAs are coming from the Adelaida and Willow Creek districts. Some of that is the profile of the wineries who have settled in these two AVAs, which include many of Paso Robles' highest-end producers often making dozens of small vineyard-designated bottlings each year. Willow Creek wineries -- including Saxum, Denner, Epoch, Caliza, Paix Sur Terre, Thacher, and Torrin -- and Adelaida District wineries -- including Daou, Alta Colina, Adelaida Cellars, Law, Villa Creek, and Tablas Creek -- account for a much more significant percentage of the wines reviewed in these databases than they do the percentage of production within the broader Paso Robles AVA. The choice that these high-profile wineries have made to put their AVAs on their labels encourages their neighbors to do the same.

Will the other districts -- many of which have more planted vineyard acres than Adelaida and Willow Creek -- eventually catch up? I'm not sure. As long as much of that acreage is going into wines whose production is measured in the hundreds of thousands or millions of cases, and therefore being sourced from multiple sub-AVAs, maybe not. But I've always thought that some of the AVAs with the most to gain are ones like El Pomar and Creston whose cooler climates and higher limestone soil content makes them more akin viticulturally to the more prestigious regions to the west, but whose location on the east side of the river tends to get them lumped in with warmer, sandier regions like Geneseo and Estrella to their north.

Paso Robles AVA map from the Paso Robles Wine Country Alliance website

Ultimately, time will tell whether more of the 11 Paso Robles AVAs join Willow Creek and the Adelaida District as something that people look for on their labels. Meanwhile I think it's healthy that Paso Robles as a region remains centered in people's awareness. Although in Dan's article Gary Eberle implies that the decision to advance a conjunctive labeling law -- which requires that Paso Robles be used on the label alongside whatever sub-AVA is used -- was a controversial one, I don't know any producer here who opposed it. It's a good thing that the recognition for Paso Robles continues to grow even as people start to understand what makes the different parts of the broader AVA unique. And promoting Paso Robles isn't incompatible with also building recognition for the diversity within it -- in fact, doing so will help consumers understand why the wines that they love have the character that they do, and give them guidance for how to further explore this region.

What it comes back to, for me, is that the science for subdividing the Paso Robles region is pretty conclusive. This morning's Paso Robles agricultural forecast, as an example, shows different weather stations within the region recording high temperatures yesterday ranging from 74.2°F to 92.9°F, low temperatures yesterday morning ranging from 42.9°F to 55.7°F, and heat accumulations for the growing season from 1533 growing degree days to 2510. Vineyards in Paso also vary by elevation (between 600 feet and 2400 feet), rainfall (between 7 and 30 inches annually) and soils (a dozen major soil types encompassing everything from high pH calcareous to low pH alluvial and loam).

The roughly 60 local vineyards and wineries who together commissioned and funded the Paso Robles AVA proposal -- which included both Gary Eberle and Jerry Lohr -- agreed, as a region, to bring scientists in from UC Davis and Cal Poly, and to defer to their findings as to where the lines should be drawn between the different AVAs. We knew at the time that this would likely mean that there would be AVAs drawn that didn't have a critical mass of wineries yet to help spearhead that sub-AVA's recognition. And we decided that this was OK. If the lines were drawn in the right places, over time, the AVAs that were capable of doing so would achieve recognition in the marketplace. Back in 2015, I laid out in a blog why the wisdom of this decision would only play out over time. A decade in, I think that we're well on our way.

Unpacking a Potential Wine Scam

A little more than a decade ago, I got a scam email that was a fairly sophisticated attempting to cheat us out of thousands of dollars in shipping charges. I posted it on this blog, breaking down why it was a scam and what would have happened had I followed through, and heard from dozens of other members of the wine community that they'd received the same email and in researching its validity ended up at my blog. In a few cases I heard from people on the verge of wiring money to the fraudsters. And as versions of that scam email kept circulating over the subsequent decade the blog, I and other commenters kept updating the details until it became a kind of evolving archive of scam attempts and the names that the scammers were using. 

So, in that spirit, I'm sharing the following scam email I received a couple of weeks ago:

From: TONY NOVICK [mailto: [email protected]]
Sent: Thursday, April 27, 2023 10:51 AM
To:
Subject: TOUR

Dear Sir/Madam,

How are you? I hope this mail meets you well and in good health. I"m writing to make an inquiry.

I am one of 20th members in a private wine club in the United Kingdom that we call "TERROIR ELITE CLUB". 20 of us are going to visit your place and we are staying in a house around your area.

From there we will travel around and see different places and especially we are going to see some wineries, estates, cellars, Vineyards, breweries, distilleries, Museums and extra virgin oil facilities so we wonder if it's possible to visit your facility on FRIDAY, 25TH OF AUGUST, 2023 and maybe taste some of your wines, beer, spirits, extra virgin oil or any other of your regional products?

However, We are also free to undertake in any other kind of tours, guided tours, visits, leisure experiences or adventurous activities.

If you will be available on the requested date, urgently send us your quotation and total cost for the 20 persons coming to your facility for "TOUR" or "VISIT" on FRIDAY, 25TH OF AUGUST, 2023.

Finally, if our date is not suitable for you, get back to us since our date of visitation is still flexible.

Thanks in advance

Yours Faithfully,

Mr. Tony Novick.

ADDRESS: 33 Great Queen St, London
WC2B 5AA,
United Kingdom
EMAIL: [email protected]

NB: All replies and correspondence to be forwarded to "[email protected]
"

As I did last time, I'll break down why it's tempting, what gives it away as a scam, and what might have happened had I followed through.

Why it works
Like most scams, the note plays on a winery's desire to believe that their profile is high enough that people they don't know will search them out. And we do get inquiries to visit from people and groups that we don't know all the time. Getting 20 visitors who are members of a private wine club in the United Kingdom seemingly offers a pretty good chance of a substantial sale. And unlike many scams the written English in the email is believable. Not flawless, but believable. And there's no hard ask here... no request for money or banking information, nothing even that seems suspicious. That might encourage someone to reply, thinking that they have little to lose and allowing the scammers to make further contact with someone they know is potentially interested.

Why it's a fake
First, there is no mention of the name of the winery or even more suspiciously the town or region in the letter. If you're going to try to reach out to Tablas Creek to schedule a visit, wouldn't you mention Paso Robles in the note? Second, it's pretty clear they're casting a wide net. They're interested in visiting not just cellars, estates, wineries, breweries, and distilleries, but Museums? Apologies to our adorable Pioneer Museum, but no one comes to Paso Robles to go to museums. And also open to other sorts of "tours, guided tours, visits, leisure experiences or adventurous activities"? Stretches credibility. Third, there was no visible "to:" address, and my address was in the hidden "bcc:" field, presumably because this was sent to many hundreds or thousands of emails hoping one or more would bite. Fourth, when I plug the address that Mr. Novick gives into Google Maps it returns a barbershop, Ted's Grooming Room. Fifth, the return address is a yandex.com address, a Russian domain not widely used in the UK. And sixth, how many people named Tony Novick are likely to have their actual email be "[email protected]"?

What would happen if I followed through
There is a tremendously informative Facebook post by Bacchus Winery in Virginia, from January of 2020. They share a nearly identical letter, though at that time it was purportedly from a Gabriel Dawney, and the name of the club was "Bacchus Klaus". Bacchus's owner replied to the note quoting a modest tasting fee and received a check for more than £3,500, or over $5,000: 

In his notes, he reports that if he'd deposited the check he'd have given routing information to the fraudsters. I don't think that's right, especially if (as I'm sure is the case) the check is fraudulent. Instead, what seems likely is that the purported visitors would ask that the overpay be returned to them in some non-cancellable form like a wire transfer or a Western Union payment. If the business resists, they would likely become more and more insistent and eventually threatening about repayment. When your bank rejects the fraudulent check, you'd be out whatever you'd refunded for their "overpayment". The fraudsters, probably in Russia given their email address, face little risk of enforcement.

It's not clear that there's anything that the American authorities can do about this. Relations between the United States and Russia are far from cordial at the moment, and a report of petty crime is unlikely to be pursued, let alone lead to any action against perpetrators. Plus, email addresses are easy to spoof, and at relatively small sums law enforcement usually doesn't even bother to try. So, Tony Novick, or Gabriel Dawney, or whoever you are, you'll have to make do without a visit to our winery, estate, cellar, vineyard, brewery, distillery, and/or museum. Seller beware.

Petitioning the TTB to recognize Muscardin: the 14th and final Chateauneuf du Pape grape in the Beaucastel Collection

This week we are filing a petition to recognize Muscardin for use as a grape variety name on wine labels in the United States. The petition, ready to go out today, includes a letter of support from the Assistant Director of Foundation Plant Services, excerpts from four esteemed reference books on wine, the grape's Wikipedia entry, the original 1936 declaration and the current statute that regulate the Chateauneuf-du-Pape appellation, the entry in Pierre Galet's seminal ampelography Cépages et Vignobles de France with its translation, and even the Beaucastel poster that includes lithographs of the thirteen grape varieties. I hope it's comprehensive enough:

Why, you might ask, do we need to petition to use a grape name on our label? It's because all alcohol labels need to be approved before use by the Alcohol and Tobacco Tax and Trade Bureau (TTB), a division of the Department of the Treasury, and if you use a grape variety name on your label, that (or those) need to be grapes that the TTB recognizes. The regulation setting up this framework was adopted in 1996 by the BATF (the precursor to the TTB), with a clearly stated purpose:

These regulations are intended to provide specific and accurate labeling of grape wines labeled with grape variety names. They are intended to prevent consumer deception by eliminating misnamed grape variety names, and by eliminating the use of many synonyms for prime grape names. They are expected to aid in the identification of grape wines by consumers and to make labels easier to understand through the use of more meaningful labeling terms. Finally, ATF believes these regulations will enable consumers to be better informed about wines and the grape varieties used to produce them. 

That 1996 regulation included a list of 251 recognized grape names, 20 grandfathered synonyms (such as Shiraz for Syrah, Fumé Blanc for Sauvignon Blanc, and Pinot Grigio for Pinot Gris), and 61 grape synonyms whose use was to be phased out within a few years. It also included a mechanism by which any interested party could petition to have the list of grape names amended to add new varieties as they were imported or developed. The criteria for approval are clearly laid out:

1. Any interested person may petition the Director for the approval of a grape variety name. The petition may be in the form of a letter and should provide evidence of the following—
   
   1. acceptance of the new grape variety,
   2. the validity of the name for identifying the grape variety,
   3. that the variety is used or will be used in winemaking, and
   4. that the variety is grown and used in the United States.
2. For the approval of names of new grape varieties, documentation submitted with the petition to establish the items in paragraph (a) of this section may include—
   
   1. reference to the publication of the name of the variety in a scientific or professional journal of horticulture or a published report by a professional, scientific or winegrowers’ organization,
   2. reference to a plant patent, if so patented, and
   3. information pertaining to the commercial potential of the variety, such as the acreage planted and its location or market studies.

This will not be the first petition we have submitted. Back in 2001, my dad petitioned for the recognition of Grenache Blanc, Counoise, and Picpoul Blanc. In 2012, he sent in petitions for four more: Bourboulenc, Picardan, Vaccarese, and Terret Noir. All those were approved, along with 89 others, and are now on the list of the 347 grapes allowed on American wine labels. With this Muscardin petition, we're hoping to make it 348. 

Muscardin's journey to this point has been a long and challenging one. The field cuttings we took from Beaucastel of the seven grapes we imported in 2003 were all found to have virus, and while Terret Noir and Clairette Blanche were released in 2009 after one round of virus cleanup, it took Picardan (released in 2012) two rounds, Bourboulenc, Vaccarese, and Cinsaut (released in 2015) three rounds, and Muscardin four separate rounds of cleanup by the experts at the Foundation Plant Services station at UC Davis. This meant that we didn't get vines to propagate until 2018, and the first buds weren't available to graft until 2019. We grafted five surplus rows of Grenache Blanc over to Muscardin that summer, and got our first small crop -- enough to make just 30 gallons, or one half-barrel -- in 2021. That wine was pale but spicy and red-fruited, with a minty/herby/juniper note, good acids, and nice saltiness on the finish. It was appealing enough that we felt it should go into our Le Complice. It became a part of the blend in June of 2022 and has been sitting in foudre since then. Now that we're getting ready to bottle and label it, the grape needs to be approved.

What do we expect to get from Muscardin? It's more of a hope than an expectation. Muscardin is rare enough in France that there's not a lot of literature on it. When I wrote the Muscardin entry in my Grapes of the Rhone Valley blog series, it turned out that there wasn't a lot of information available, perhaps unsurprising given that Muscardin's total footprint was less than 50 acres worldwide. It was first recognized in 1895, and was included in the list of approved Chateauneuf-du-Pape grapes when the appellation was established in 1936. The best explanation of its value that we've been able to turn up is a great quote from Baron Le Roi of Chateau Fortia that John Livingstone-Learmonth recounts in his 1992 book The Wines of the Rhone: "You know, we would be better off here if we replaced the Cinsault with the Muscardin. The Muscardin doesn't produce a lot, makes wine of low degree and spreads out over the soil, preventing tractors from passing freely between the vines, all of which combine to put people off it. But I believe that it gives a freshness on the palate and helps the wine to achieve elegance." From the one vintage under our belts, that use -- to provide freshness and elegance -- seems like one worth more exploration. 

It's always been our goal to plant and vinify all sixteen grape varieties in the Beaucastel vineyard. This includes the thirteen "traditional" Châteauneuf-du Pape grapes, plus Viognier and Marsanne (allowed in Cotes du Rhone and found in the Coudoulet de Beaucastel section of the property) and Grenache Blanc (covered under the "Grenache" entry but not counted in the tally of thirteen). Now that we're able to take this last step with Muscardin, a foundational goal of my dad's is finally within reach. Hey, it's only taken 34 years.

Why is Glass Recycling in the United States So Dismal?

Glass is a product with clear advantages. It's made from a readily-available and non-toxic source (sand). It's exceptionally stable and nonreactive, and so provides a terrific vessel for containing products like wine that you might want to store for decades. And it can be melted down and reused without any degradation of its quality, so it's a perfect product for recycling. And yet, in the United States, it's recycled less than a third of the time. This fact is one of the main reasons we've been exploring alternative packaging like the bag-in-box that we debuted for our Patelin de Tablas Rosé earlier this year. But it doesn't have to be this way. Other countries recycle a much higher percentage of their glass than we do here. I found our depressingly low rate of glass recycling eye-opening enough that I have spent a fair amount of time over the last few months researching why. The conclusions say a lot about what our society and industry values right now. I'm guessing and hoping that this information might be eye-opening for you as well.

Before we start investigating why, a quick review of the facts. According to the EPA, in the United States our glass recycling percentage is 31%, and non-recycled glass represents about 5% of the waste that goes into American landfills each year: 7.6 million tons of glass annually. Our recycling rate is less than half of that in Europe (74% overall) and one-third of the best-performing countries like Sweden, Belgium, and Slovenia (all over 95%). And it's actually worse than those numbers appear, since a significant percentage of the glass that is collected and classified as "recycled" in the United States is in fact crushed up and used for road base rather than melted down and used to make new glass.

The stakes are significant. Recycling glass has positive impacts not just on the waste stream, but on energy use and greenhouse gas emissions. According to the Glass Packaging Institute, making new glass containers from recycled glass saves between 20% and 30% of the energy, roughly 50% of CO2 emissions, and offsets a greater-than 100% requirement for inputs, compared to working from raw materials. What's more, according to a 2017 survey by the Glass Recycling Coalition, 96% of Americans want and expect that glass be included in their recycling options.

So why, if waste glass is a usable commodity, if consumers expect to recycle it, and if doing so saves on cost compared to working from raw materials, isn't the picture here better? The consensus among experts is that it boils down to three main factors.

• The most widely adopted recycling system in the United States is problematic for glass. Single-stream recycling, in which glass, plastic, and paper are co-mingled in a single bin for pickup and transport to a materials recovery facility (MRF), is overwhelmingly the most common community-sponsored recycling system in America. It is convenient for households, who can toss all their recyclables in one place, and for solid waste companies, who can pick them up with one truck. However, while plastic and paper are unlikely to be damaged in the collection process, glass is fragile and often shatters in the collection process, becoming difficult to sort and also contaminating the other recyclables. Plus, single-stream recycling systems encourage “wish-cycling” where consumers throw nonrecyclable products like light bulbs, plastic bags, soiled cardboard, and Styrofoam into their bins figuring that it’s better to over-recycle than to throw away something that’s recyclable. Doing so adds cost to the recycler and sometimes leads to it being less expensive to send loads to the landfill than pay the cleaning and sorting costs. By contrast, multi-stream recycling systems, in which glass, paper/cardboard, and plastic are placed in different receptacles and collected separately, bypass the MRF entirely and can usually go straight to a processing facility. The downside of these systems is that they cost more for the municipality and solid waste companies, and there is often not the political will to pass along these costs to taxpayers. But the difference is outcomes is stark: just 40% of the glass that goes into single-stream recycling systems ends up getting recycled, compared to 90% from multi-stream recycling systems.

• The United States is big. There are roughly 400 MRF facilities around the country. But there are many fewer glass processing facilities, which turn recycled glass containers into cullet, or usable fragments often sorted by color: just 63 nation-wide, in 30 states. There are even fewer glass manufacturing facilities: just 44, in 21 states. Processing facilities are often far away from population centers where glass is collected and MRFs built. Glass is heavy and bulky, which means that the transportation costs from MRF to processing facility can, absent other incentives, raise the price of the cullet that results high enough to outweigh the savings from using recycled glass.
• Transparency is low, both pre- and post-consumer. First, from the post-consumer end. Most people don’t know what happens to their recyclables once they’ve been collected. Consumer surveys show that residents overwhelmingly want their communities to recycle, and reasonably assume that if they do their part their municipality will take care of the rest. But municipalities have little incentive to report on what happens after the recycling is collected. Do you know where your town’s recyclables are sorted? Or what percentage is sent to the landfill? Do you know whether the process makes or loses money for the community? I didn’t. And communities, which have largely chosen a recycling system that gives consumers a false sense of effectiveness, don’t have the incentives to make this information easy to find. Second, from the pre-consumer end. Have you ever seen a wine label display the recycled content of their glass? I don’t think I have. That’s an indication that wineries don’t think that their customers care about this information, or at least don’t care enough to displace other content in what is valuable and scarce label real estate. And bottle suppliers don’t seem to think that wineries care about this information. We pushed our glass supplier TricorBraun to get us bottles with the highest-possible percentage of recycled glass. Our antique green bottles are made with between 60% and 70% recycled material, and our flint (clear) bottles made with 35-50% recycled material. That’s the most that’s available for domestically-produced wine bottles. But that information isn’t easy to find. If you look at TricorBraun's selection of Burgundy-shaped bottles, each listing includes information about their weight, base diameter, color, neck size, height, punt height, mold number, capacity, finish, and style. But there’s no information on the bottle’s recycled content. That’s surely an indication that bottle suppliers either don’t see this as a point of differentiation or don’t have recycled content widely enough available for the resulting information to be worth sharing. And wine isn’t unique. Glass containers, whether for beverages, food, or household products, don’t typically disclose the amount of recycled content. All this makes it difficult for a consumer to make informed purchasing decisions. 

So what’s the way forward here, for consumers and wineries? I see a few possible avenues that could help.

• Wineries: ask your bottle brokers and manufacturers about the recycled content of the bottles you buy, and demand bottles with as high a recycled content as possible. It’s clear to me that bottle producers and brokers are not sufficiently focused on increasing the recycled content of their products. If that’s the case, it’s because it isn’t being asked of them by their customers. Wineries of all sizes, but particularly larger ones, have significant market power. We’re not a large winery, but we will still buy something like 350,000 bottles this year. The larger the winery, the more power you have to move the needle. And for wineries who are a part of organizations like International Wineries for Climate Action (IWCA) and committed to achieving meaningful carbon footprint reductions by 2030, increasing the recycled content of your glass bottles should be a piece of the solution you’re pursuing, along with reducing the weight of those bottles and exploring alternate packaging. Because the glass bottle accounts for more than half the carbon footprint of the average California winery, it also offers the most important target for improvement. 
• Sustainability certifiers: Add a recycled glass component to your winery metrics if you haven’t already. Most California wineries are a part of a sustainability program. But at least our local program (SIP Certified) doesn’t appear to have any mention of using recycled glass in your bottles in its protocols. I have my issues with sustainability programs, which I’ve shared at length here and elsewhere, but they remain a powerful tool in incentivizing the high percentage of wineries who participate in them to make incremental positive changes. (And wineries, if you’re a part of a sustainability program that doesn’t include anything about this, ask them why.)
• Consumers: Ask the wineries that you patronize about the recycled content of their bottles. If you have a direct relationship with any wineries, reach out to them directly. Wineries are unusual consumer products in that most do have direct relationships with many of their customers. But if you don’t, ask your local retailer. If they don’t know, they can ask the distributor. The more people along the supply chain who are inquiring about this information, the more pressure there will be on bottle suppliers to use more recycled content, the more market there will be for recycled glass, which will make it more attractive for communities to recycle their waste glass rather than sending it to the landfill.
• Everyone: Push your communities to be more transparent about the outcomes of their recycling programs. This is particularly important if you’re a part of a single-stream recycling system. If the recyclables are being sorted and used at a high rate, that’s great. But it’s likely not. If not, push for multi-stream recycling, or at least better education on why materials aren’t being used. Is it because of contamination? If so, encourage your community to share information about the costs of “wish-cycling”. Is it a cost decision? Find out what it would take to implement a multi-stream recycling program. There are real challenges here, particularly with the market for recycled commodities still developing. But the status quo, where local governments are quietly misleading their citizens about the efficiency of their recycling programs, isn’t viable.

We know that we can do better, because European countries have shown the way, typically with a combination of multi-stream recycling (to produce good supply) and industry mandates for recycled content (to ensure that there is demand). Neither of those are impossible here; they're just a question of focus and political will. Yes, distances are shorter in Europe; the more densely populated continent means that the shipping costs between consumer collection and glass processing are less. But that’s an incremental difference. If there were more demand from consumers and beverage producers, there would be more recycled glass products available. And that would create a positive feedback loop that would encourage better recycling decisions at the community level.

Photo modified from the original on Wikimedia Commons by user Ecovidrio

We can do the same, or something similar, here. Let’s get to work.

The ROC Logo - Coming Soon to a Label (and Shelf) Near You

This week, we bottled seven varietal whites from the 2021 vintage. These included some of our stalwart varietal bottlings (Viognier, Picpoul, and Grenache Blanc), some rare grapes where our varietal bottling is one of the only ones in the world (Bourboulenc, Picardan, and Clairette Blanche), and one blend, our Cotes de Tablas Blanc. We'll be releasing them one or two at a time over the next few months, so if you're on our mailing list, be sure to keep an eye on your emails. The septet:

I am super excited to have these wines in bottle, both because it was clear to me in this year's bending trials that 2021 has a chance to be a truly memorable vintage, and because we've been so short on white wines that many people's favorites are sold out on our website and we had to suspend our white wine tasting flight for a while until last month's bottling of the Patelin de Tablas Blanc gave us the bare minimum. So the wines will be incredibly welcome, especially as some of our early-in-the-year white wine releases like Vermentino and Roussanne start to get scarce.

But that's not the reason I'm writing a blog about them. I'm doing that because they're the first wines we've bottled to carry the twin logos of CCOF Organic Certified and Regenerative Organic Certified™ (ROC™):

We've written a lot here, directly and indirectly, about why we're so excited about the Regenerative Organic Certified program. If you haven't yet read Viticulturist Jordan Lonborg's piece Introducing Regenerative Organic Certified (ROC): Farming Like the World Depends on It go do that now. But it boils down to the fact that we think that the ROC program provides a framework for how agriculture can be a part of the solution to big-picture societal problems like resource scarcity, climate change, biodiversity loss, and inequality. It's a game changer, with a broader focus than organic (though with the same government-enforced rigor), less tied up in mysticism than Biodynamics (though many of the soil health protocols of ROC come from Biodynamics), and much more rigorous than sustainability certifications (which typically permit at least the limited use of chemicals like RoundUp).

ROC's combination of rigor and breadth is why we think that for the first time it's worth jumping through the hoops to put a seal on our labels. Although we've been farming organically since our inception, and been certified since 2003, we never before put an organic seal on our bottles, mostly because in order to use the NOP seal you can't add any sulfur in winemaking, which makes fermentations prone to volatility and reduces the wine's ability to age. Yes, there's an exception where you can say "made with organic grapes" but that's never felt particularly satisfying; if you want the deep dive, I talk about why in some detail on the blog here and here. And although we've been farming Biodyamically since 2010 and got our certification in 2016, we've never put a Biodynamic seal on our bottles, mostly because of the restrictions on winemaking, most notably the prohibition of any acid additions, which can be necessary to ensure proper fermentation and bottle aging in a warm climate like Paso Robles.

But ROC feels different enough from anything that's come before that we decided this was a certification worth displaying. So we've been spending the last few months figuring out how to navigate a process that involves approvals from the ROA (who runs the ROC program), CCOF (our organic certifier), and the TTB (which oversees federal label approvals). Because the ROC program is so new, and because the NOP standards treat alcohol differently than other foodstuffs, we've been breaking new ground. And it turned out that because the ROC logo contains the word "organic" written out, we needed also to include the seal of our organic certifier and the text "Made with organically grown grapes certified organic by CCOF" to be compliant. I'm not sure I would have wanted to do that without the ROC logo, but I'm totally fine with them both in conjunction. The final result: 

Many of these first seven wines are only going to be sold at the winery. But the 2021 Cotes de Tablas Blanc will start to go out to wholesalers as soon as next week. So there's a chance you could see it on a shelf, or on a table at a restaurant, as soon as this summer. And it's just the beginning. As the rest of our estate wines from 2021 get bottled, they too will carry these two seals. We're hoping that they spark interest and start conversations. Wine label real estate is precious space; you only have a relatively few square inches to tell people what you and your wine are all about. We're proud to dedicate a piece of that space to this effort.

Fruit Snacks, Organic Wine, and the Dilemma of "Made With"

This Welch's Fruit Snacks box is a great example of why I find the US National Organic Program (NOP) wine standard problematic. Seem like a leap? Bear with me.

These fruit gummies say “Made With Real Fruit”. And they are! But also a lot of other stuff, like corn syrup, artificial flavors, and Red 40. The phrasing "made with" is pretty clear in this case. This product contains real fruit. It's (in this case) the first ingredient, though it doesn't need to be. But the clear implication is that there are other ingredients. And there are, 17 in all, in these fruit snacks. 

So, why, if you look on a shelf in the "organic" section of your local wine shop or supermarket, do most of the wines there say “Made With Organic Grapes” on the label? After all, based on American labeling laws, the implication is that there’s other stuff in there, maybe even things that aren’t grapes. But it's one of the only options for wines, as dictated by the NOP standard.

This disconnect comes down to a long-standing (and in my opinion overblown¹) fear of sulfites. Sulfur has been used for centuries in winemaking because adding it in small amounts slows the process of oxidation and inhibits the action of vinegar-causing bacteria. But as I wrote early this year, how this got added to and then maintained in the organic regulations is a quirk of history and marketing from an unusual coalition of anti-alcohol interests, natural wine purists, and sulfite-free wineries: all parties with a vested interest in making organic wine hard to achieve.

Most other countries set a limit for sulfites for organic wines around 100ppm. That seems reasonable to me. But not the NOP. If you add any sulfites at all you can’t call your wine organic. You can't use the NOP organic seal. Instead there is a specific line in the NOP standards that says "Any use of added sulfites makes the wine only eligible for the “made with” labeling category; may not use the USDA organic seal." There is a specific meaning to the "Made With" claim in the NOP organic regulations. It's for products that are at least 70% but less than 95% organic. Think pasta sauce "Made With Organic Tomatoes" but including non-organic onions, spices, etc. By contrast, the "Organic" standards require that 95% or more of the finished product be from organic sources. Those products can use the organic seal. A wine from an organic vineyard with 100ppm sulfites is 99.99% organic. But it's not eligible for the organic seal. 

This may seem an esoteric worry. But the fact that American organic wine is forced to be sulfite-free makes many of them short lived and unstable. That implies to consumers that organic farming makes unreliable wine and reduces incentives for wineries to farm organically. It's probably not a coincidence that the percentage of wine grapes in California has lagged that in France, Spain, and Italy. It also makes American organic wine  less competitive with international organic wines. That's at least three clear negative outcomes.

Supporters of the NOP standards (and wineries who have built a market with sulfite-free wines) say that wineries should embrace the “Made With Organic Grapes” phrasing. But one look at that fruit snacks box should make it clear why that option comes with its own baggage.

Footnote:

1. Why overblown? Many people attribute to sulfites the "red wine headache" that is more likely a sensitivity to histamines, found naturally in grapes. Sulfite allergies can be serious, but such sensitivities are very rare, and usually manifest in respiratory symptoms. It is (purportedly) for people with these sensitivities that wines that add it carry a “Contains Sulfites” warning. But given that there are many other products including including dried fruit, frozen potatoes, frozen shrimp and many condiments that contain much higher sulfite levels and don't have to carry a warning label, I don't find that particularly convincing.

Prohibition's legacy and the marginalization of organic wine

Introduction
Prohibition may have ended nearly 90 years ago, but its legacies remain, often hidden, in the way that wine and other alcoholic beverages are marketed and sold in America. I've written about the unintended consequences of the 21st Amendment which repealed Prohibition and as a side effect carved out an exception to the Commerce Clause that has made every step forward in the fight for direct shipping a battle between actors in the winery, wholesale, and retail spheres. Another effect is that because there is an express prohibition in the federal standards from any statement that might "suggest a relationship between the consumption of alcohol, wine, or any substance found within the wine, and health benefits or effects on health" a winery can't talk in advertising or on their website about the studies that show links between red wine and heart health.

Understanding the NOP Standards
One consequence of Prohibition's legacy is in how wine is treated by the National Organic Program (NOP) standards. The organic labeling standards, as written for most products, contain four levels of organic purity. In descending order:

• 100% Organic
  • All ingredients, processing aids, and facility must be certified organic
  • Can use the organic seal 
• Organic
  • All agricultural ingredients must be certified organic, but up to 5% of non-organic, non-agricultural ingredients are allowed
  • Can use the organic seal
• Made with Organic
  • At least 70% of ingredients must be certified organic
  • Must state the ingredients that are organic ("made with organic apples")
  • Cannot include USDA organic seal anywhere or represent finished product as organic
• Specific Organic Ingredients
  • For use of organic ingredients in a non-organic product. Does not need to be certified.
  • Organic can only be used in ingredients list and not on front panel
  • Cannot use the organic seal or state organic anywhere other than the ingredients list.

How Wine Is Treated Differently: Cue Strom Thurmond
Wine is a pretty easy product to measure, as it's typically more than 99% grapes and winemaking additions (yeasts, nutrients for that yeast, acid, and an amount of sulfur measured in parts per million) are minor in volume. More natural-leaning wineries like us don't add yeast or nutrients at all. And yet, the organic regulations put a unique hurdle in front of wine: "Any use of added sulfites means that the wine is only eligible for the 'made with' labeling category and may not use the USDA organic seal." Because we add sulfites in the winemaking process, the highest tier that we can qualify for is the "Made with Organic" tier.

Pause for record scratch here. What?

Before I go further, I want to acknowledge that there are people with serious sulfite allergies and sensitivities. I have found various government estimates that between 0.2% and 1% of Americans have sulfite sensitivities to one degree or another. That's not an insignificant number, although most sensitivities are mild. The most serious sulfite allergies can cause asthma or even in rare cases anaphylaxis, although these reactions are extremely rare. It is in theory for those people that wines have to carry a "contains sulfites" declaration on their label. Whether this declaration (which has led a lot of people to attribute to sulfites unrelated symptoms such as the "red wine headache") is wise is the topic for another blog. In any case the presence of sulfites already has to be declared. But sulfites, in and of themselves, are not inorganic... except according to the NOP standards, when they're used in wine. 

Why turns out to be a legacy of prohibition. In an article for the Tribune Newspapers, Bill St. John recounts the influence of then-Senator Strom Thurmond, segregationist, teetotaler and avowed opponent of alcohol, whose "crowning achievement" was a warning label on alcohol whose purpose was "not to inform but to frighten". That is how the "contains sulfites" labeling requirement ended up in the regulations of the BATF (now TTB) rather than the FDA. There are many common food products that contain higher concentrations of sulfites than wine (including dried fruit, frozen potatoes, frozen shrimp and many condiments) but none of them are required to declare a warning like this. Only alcohol.

Why the Standards Haven't Evolved
According to Geoffrey Jones and Emily Grandjean's working paper for Harvard Business Review Creating the Market for Organic Wine: Sulfites, Certification, and Green Values, the standard we have today is a result of two things: the stigmatization of sulfites in alcohol, and economic protectionism. When a coalition of wineries and organic farming advocates got together in 2012 to propose adopting the same standards used in Europe and most of the rest of the world (a 100ppm cap on sulfites for organic wines, as opposed to the 350ppm cap for "conventional" wines) a handful of wineries making sulfite-free wines, most notably Frey Vineyards, pushed back. The NOP board sided with that group.

In the conclusion to his article Reds, Whites, and Sulfites: Examining Different Organic Wine Regulation Practices in the United States and the European Union in the Northwestern Journal of International Law & Business, author Ryan Puszka points out that the health difference between the American and world standards is negligible:

"For all ecologically and nearly all health concerned purposes, the penalized winemakers produce an identical product to certified wine producers from completely organic grapes. The logical foundation of the current NOP scheme and resulting disenfranchisement, then, is substantiated by flimsy health claims about extremely marginal cases that thinly veil an economic desire to narrow competition in the market."

So, there's a coalition of anti-alcohol interests, natural wine purists, and sulfite-free wineries who have banded together to make the "Organic Wine" status hard to achieve in the United States. Why should we care? Because having the standards written as they are means that organic wine is unlikely to ever be more than a niche product. And having organic wine no more than a niche product means that grapes -- which are one of the easiest crops to farm organically -- are going to be farmed organically a lot less widely than they should be. And that should concern us all.

To understand why, it's helpful to know what sulfites are doing in winemaking. After all, sulfur is a mineral, and a perfectly legal thing to put on an organic vineyard, used for its antimicrobial and antifungal properties. On vines, it's a common tool to keep mildew from spreading. In winemaking, it discourages the action of yeasts and other bacteria. Put in too much and your wine won't ferment. But in small amounts, it allows fermentation yeasts to proceed while inhibiting the action of vinegar-causing bacteria and other spoilage processes. It also absorbs oxygen, protecting a wine from oxidation as it ages in barrel or bottle.

Implications on the Reputation of Organic Wine
As you might expect from my list of sulfur's properties, many of the early organic-labeled sulfite-free wines were unstable and short-lived. The ones that were shelf-stable tended to have been highly fined and filtered and otherwise processed in a way that tended to make them unexciting. And those early impressions of organic wines have lingered in the marketplace. To this day, wineries like us dread being put on the "organic wine" shelf, because fine wine drinkers tend to avoid it, assuming it's aimed at people for whom the organic seal is more important than the wine quality.

The "made with organic grapes" option might seem like an equally good substitute, but it hasn't gotten much traction either. I'd speculate that this is for three reasons. First, there's that lingering doubt because of the many flawed or mediocre organic wines about whether organic grapes is actually a good thing. Second, the NOP clearly intends that the classification be a lesser one that implies that there are things in there that are not organic, and maybe not even grapes. Think "Pasta Sauce, made with Organic Tomatoes". The implication is clear that there are things in there that aren't organic, and aren't tomatoes. Third, you can't use the organic seal. As it was intended to be, the seal is the shorthand for certified organic. You can put extra words on your label, but there are always lots of words. The seal stands out.

Why We Should Care: Less Organically Farmed Land
If there's not a great reason to put yourself into the organic classification you're eligible for, wineries would be excused for not bothering to go through the work and expense of certifying themselves organic. And that's what's happened: according to Jones and Grandjean, in 2017 organic acreage represented only 2% of vineyard land in California, and had actually declined 10% since 2013.

To be sure, some of the prime grape acres have let their organic certification lapse but have adopted Biodynamic certification, which requires the same elimination of chemicals in the vineyard but allows a limited (under 100ppm) addition of sulfites in the winery. Biodynamics, which also incorporates elements of biodiversity and soil microbial health, has garnered a reputation as a farming method adopted by some of the world's greatest vineyards. Of course it also comes with elements that speak of cosmic energies and cycles of the moon, which tends to limit its audience a bit.

Many other vineyards are being farmed organically but not certified. I talk to vintners all the time who have chosen that path. And of course sustainability certification have proliferated. But I don't think that either of these are ideal outcomes. Someone who does not have to be audited for a certification is more likely to hedge, and it's difficult to know how many of these vineyards would actually be able to pass an organic certification. Verification matters. And as for sustainability certifications, they do a good job on breadth, asking wineries to look at things that neither organics nor Biodynamics addresses, like renewable energy, water use reduction, or wildlife passthroughs. But, by and large, sustainability certifications fall short on rigor. Most allow the use of Roundup and many chemical pesticides. You can make a legitimate critique that many are little more than greenwashing.  

In any case, it is a failure of the national organic standards that they have left air in the room for these other approaches to proliferate. Ryan Puszka's conclusion on this is scathing:

"Furthermore, the no-added sulfite NOP standards disincentivizes U.S. and European winemakers from attaining organic certification, as they may not deem the “made with organic grape” certification worthwhile in light of the high costs associated with certification. Moreover, this confusing system renders wine labels even more indecipherable than they already are, requiring customers to know the different international standards of “organic” and “made with organic . . . “. The net result is consumer confusion and economic inefficiency. All of these issues undermine the legitimacy of national organics programs."

What Comes Next
For us, the failures of the existing certifications are another reason we're excited to embrace Regenerative Organic Certification. There is a carve-out in the TTB's application of the NOP standards that a wine that farms their grapes organically, produces the wine in an organic-certified facility, and uses less than the international standard (100ppm) of sulfites can't use the NOP seal but can use the seal of their certifier. The good folks at CCOF have a useful document explaining the rules, which contains the below image:

The Regenerative Organic Certification (ROC) logo will be treated similarly. Thankfully, ROC is following the international organic (and Biodynamic) standard and allowing ROC labeling on wines that are made from Regenerative Organic Certified grapes, produced in an organic certified facility, and use no more than 100ppm of sulfites.

So, while you won't see a USDA Organic seal on a bottle of Tablas Creek any time soon, we're hopeful that starting in 2021 you'll see the ROC logo on our bottles. And together we can help put one last legacy of Strom Thurmond to bed. 

Wine Shipping State of the Union, 2021 Edition

Six years ago, I wrote my own State of the Union, Wine Shipping Edition, breaking down the 50 states and one district into tiers based on how expensive and difficult it was for us to send wine into each. Casual wine lovers might be surprised to know that not only are there some states to which we are prohibited from shipping wine, but that each state to which we can ship has its own laws, permits, fees, and reporting requirements. Managing this morass takes specialized software and still a big chunk time for one of the members of our accounting team, so it's far from the uniform, frictionless open market that Section 8 of the US Constitution promises:

"The Congress shall have power to lay and collect taxes, duties, imposts and excises, to pay the debts and provide for the common defense and general welfare of the United States; but all duties, imposts and excises shall be uniform throughout the United States;"

I mentioned in my post from 2015 that diving into the arcane details of these state laws only highlights the wisdom of the founding fathers and generations of Supreme Court justices in prioritizing the Commerce Clause, which protects the federal government's exclusive role in regulating interstate commerce. The 21st Amendment, which repealed Prohibition in 1933, as a side-effect sheltered states from the Commerce Clause's requirement to maintain an open, fair market for all players. This means that the wine market provides a glimpse into what a world absent the Commerce Clause might look like. We should all be thankful that most products we might want to buy don't have to face a similar regulatory nightmare. Our current map:

Below you can find an updated summary of what the world of DTC (direct-to-consumer) wine shipping looks like, from a winery's perspective, as we enter 2021, with states broken down into tiers based on the cost and ease of doing business there.

One thing that has changed since 2015 is that the playing field has been made harder to summarize by the rise of "economic nexus" statutes, driven by the 2018 Supreme Court ruling South Dakota v. Wayfair, Inc. This ruling said that states could require out-of-state companies to collect and remit sales taxes, whereas previous rulings had held that states could only comply tax collection and remittance from companies with a physical location (a "nexus") in that state. In practice, this has meant that states have begun to implement transaction thresholds, above which wineries have had to remit state (and sometimes local) taxes, but below which they don't. That annual threshold has tended to be somewhere around 200 shipments or $100,000. For us, we're over that threshold in places like Colorado, Illinois, and of course California, but not in Iowa, DC, or Minnesota (though we're getting close). So, the numbers below reflect the conditions for a winery of our basic size and profile. I've noted the states with current or upcoming economic nexus laws with asterisks (*) below, with some explanatory notes.  

Tier I: The no-brainers (AK, DC*, MN*, MO*)

• Right now, there are three states and the District of Columbia that have neither permit fees nor significant reporting requirements. Thank goodness for them! But, 4 of 51 isn't a great percentage. All of the others make it more difficult or expensive to ship wine to customers who want it. It's also worth noting that the permit-free status of these states is a holdover from pre-Granholm conditions and it's unclear that continuing without required permits is constitutional. DC and Minnesota are "economic nexus" destinations. If you're large enough to trigger those thresholds, bump them up to Tier II. Missouri will join them as a nexus state next year.
• Total percentage of US population: 4.02%
• Total number of reports required annually: 2
• Total permit fees: $0

Tier II: Inexpensive and/or fairly easy (CA*, FL, ID, IA*, KS, MA, ME, MD, MI, MT, NC, ND, NY, OH, OR, WA, WI)

• There are an additional seventeen states with permit fees of $200/year or less and modest reporting requirements (0-24 times per year). These states include some big ones like our home state of California, Florida, New York, Oregon, and Washington, but even for the smaller ones, the number of orders that a winery would need to fill in order to pay for the annual investment is very reasonable. You'll notice that most of the major wine-producing states fall into this tier. The two states with potential nexus-triggered reporting include Iowa (a small enough market that most wineries won't hit the nexus threshold) and California (where wineries who are based here likely already have the infrastructure in place). If you're an out-of-California winery selling here, or a winery big enough to trigger Iowa's nexus status, they'd both probably move to Tier III. 
• Total percentage of US population: 46.93%
• Total number of reports required annually: 178 (10.5/state avg.)
• Total permit fees: $1,225 ($72/state avg.)

Tier III: Moderate expense or requirements (AZ, CO*, GA, IL*, IN, NV, NH, NM, PA, TX, VT, VA)

• Once you get to the next tier of twelve, a small winery would be excused for starting to run cost-benefit analyses before springing for the permits.  Some permits start to get expensive in this tier, like Illinois' $350/year or Vermont's $330/year. Others are less expensive, but have difficult reporting requirements, like Georgia and Nevada (36 reports/year each). Colorado would be in Tier II except for the nexus requirements, which are pretty arcane. If you're small enough not to trigger the statute, move it down a tier. Illinois is probably Tier III even if you don't trigger the nexus, with separate excise tax reporting required for the city of Chicago. But even with their added challenges and expense, there are some pretty large-population states in this tier, and most wineries choose to ship to all or nearly all of them.
• Total percentage of US population: 30.72%
• Total number of reports required annually: 289 (24/state avg.)
• Total permit fees: $2,063 ($172/state avg.)

Tier IV: Difficult or expensive enough to be a real question (HI, NE, SC, WV)

• At this point, we get to four small states with difficult requirements, to the point that it's not worth it for many wineries to bother. Permits cost as much as $500/year (Nebraska) and $600/two years (South Carolina). West Virginia charges $250/year and requires the submission of 36 reports. And Hawaii requires you to get separate annual permits from each county, at a total cost of $324, and to submit 25 reports. With limited rewards, these costs tend to feel disproportionate.
• Total percentage of the US population: 3.14%
• Total number of reports required annually: 78 (19.5/state avg.)
• Total permit fees: $1374 ($344/state avg.)

Tier V: Compliance Headaches (KY, OK, SD, TN, WY)

• This next tier of five states aren't hugely expensive, but each has at least one unusual requirement. These include South Dakota's requirement that you register every label you're planning to ship into the state at a cost of $25/label/year, Oklahoma's prohibition from using fulfillment houses (so everything must be shipped from the winery location), and very low per-person or per-household import limits: 1 case/month and 3 cases/year maximum per person in Tennessee, and 4 cases/year per household in Wyoming. I could have added Minnesota in here as well, with its 2 cases/customer/year limit, but it's otherwise so easy (no permit, no reporting) that I left it in Tier I. Kentucky is the newest state to pass a direct-shipping law, and is still working out the kinks. It will probably end up in Tier II, but for now, it's like Oklahoma and not allowing wineries to use fulfillment houses, instead requiring that they ship only from their winery. A headache. 
• Total percentage of the US population: 5.10%
• Total number of reports required annually: 68 (13.6/state avg.)
• Total permit fees: $550 ($110/state avg.)

Tier VI: Extremely Difficult/Expensive (CT, LA, NJ)

• Connecticut is a shipping state for many wineries, but its expenses and challenges are significant. First, it's a costly permit, at $315/year, and requires 36 reports to be filed annually. Second, you must register each label you propose to sell in the state at a cost of $200/label, renewable every 3 years. At Tablas Creek, we sold 28 different wines direct last year (different wines, not different vintages). That would require a $5600 investment, adding $1866 to the already-considerable annual $1295 cost of permit and reporting. And finally, you can't have different label registrants for wholesale and direct sales. So, if you're like us and sell our wines to our Connecticut distributor through an agent (ours is Vineyard Brands) we couldn't register the same wines ourselves for direct sale.
• Louisiana, at $400 and 36 reports/year, would be the most expensive state in Tier IV even if it didn't add the extra hurdle of requiring you to choose between selling a wine direct and selling it through wholesale. But it does, and that pushes it over the edge for us. There used to be more states with "distributor exclusivity" requirements like this, but Louisiana is the last one left.
• How does New Jersey make direct shipping difficult? Let me count the ways. The permit is the country's most expensive at $938 and there are 29 reports to submit annually. There is a significant bond wineries have to post. There are registration fees of $150 per partner per year, an issue for a winery like ours owned by two families, each with several owners. Receiving a permit means that we have established a nexus with the state of NJ and are liable for paying an annual corporate income tax of at least $500. Plus there's a capacity cap of 250,000 gallons (around 100,000 cases) to ship that we fall under, but many wineries don't.
• Total percentage of the US population: 5.18%
• Total number of reports required annually: 101 (33.7/state avg.)
• Total permit fees: $1653 ($551/state avg.)

Tier VII: Almost entirely prohibited (AL, AR, DE, MS, RI, UT)

• Three states (Arkansas, Delaware, and Rhode Island) allow a winery to ship with few hurdles and minimal reporting requirements if a customer purchases wine at a winery, but won't allow the same customer to order wine by phone or email from home. The logic written into the laws is typically couched in the guise of ensuring that only of-age buyers can purchase, but given that common carriers routinely check ID's in the 40+ states that allow direct shipping, it doesn't pass critical muster and is better understood as local protectionism.
• Three other states (Alabama, Mississippi, and Utah) allow customers to order wine from a winery, have it shipped to a state-licensed store, where taxes are collected, and then the wine released to the customer. It's slow and expensive, because it requires the customer to request and complete a state "special order" permit before shipping, and while the taxes aren't massive in Alabama, they're a whopping 88% in Utah. Mississippi's permit program is brand new, and may not be workable as initially published. In all three cases, the process is cumbersome enough that the Wine Institute still lists the three states as "prohibited".
• Total percentage of the US population: 4.92%

Every winery has a different breaking point. For us, it comes in the middle of Tier V. We've decided that 41 states (everything in Tiers I-IV, plus Tennessee and Wyoming) warrant the expense of the annual permits and the reporting. Kentucky will come on line soon to be our 42nd, and I'm going to take another look at South Dakota now that we have a full team in our accounting department. That leaves 8 states that we either can't ship to, or have found that the requirements to do so are unreasonable. At what cost? Shipping to the 43 "shipping" states in Tiers I-V costs a total of $5,212 in permit fees plus the time and expense of preparing and filing 615 reports each year. Figure an hour for each report, at $25/hour ($15,375) for a total expense of $20,587. But for that cost, we can ship to 89.9% of the US population. Available tools (like SOVOS ShipCompliant and Avalara) provide a savings over the labor of preparing the many individual reports and are indispensable for wineries looking to ship to a broad swath of states, but still come with a cost.

Why are there some states that have made it so difficult or expensive that they're choosing to give up the state income that direct shipping would provide? The reasons vary, but mostly fall into one of two camps. Either they're making it difficult for religious or cultural reasons (think the deep south, or Utah) or they've crafted their laws in a way that protects distributors from as much competition as possible. This occurs because alcohol distributors (which are all state-licensed) see direct shipping as a threat to their businesses and are also some of the largest donors to state legislative campaigns.

So, while wine in America is not sold in a free and open market, most of that market is at least accessible to most wineries with some effort and expense. And if we're a long way from the Supreme Court's 1949 ode to the Commerce Clause of the US Constitution in H.P. Hood & Sons vs. Du Mond, the relevant text of which is below, we're at least making incremental progress:

"Our system, fostered by the Commerce Clause, is that every farmer and every craftsman shall be encouraged to produce by the certainty that he will have free access to every market in the Nation… Neither the power to tax nor the police power may be used by the state of destination with the aim and effect of establishing an economic barrier against competition with the products of another state or the labor of its residents."

Notes

1. If you're interested in diving into the state-by-state regulations, the Wine Institute's Direct Shipping Laws for Wineries page is a great place to start.
2. Thank you to Jeff Carroll, GM of Avalara for Beverage Alcohol for his feedback on this topic and particularly for his explanation of the growing challenge that economic nexus laws will pose.
3. If you'd like to get involved in the push for more open direct shipping laws, the nonprofit Free the Grapes, on whose board of directors I serve, has information, resources, and templates for contacting state representatives. 

No, 100% tariffs on European wines won't be good for California wineries

[Editor's Note July 21, 2020: These potential 100% tariffs, which would have crippled the wine wholesale infrastructure in the United States had they been established, were tabled for six months in January. Those six months are up, and they're back on the table. All my arguments from below are still at least as true as they were then, and the health of the wine wholesale ecosystem is shakier than it was then because so many restaurants are closed due to Covid-19. I strongly encourage all American wine lovers to contact your elected officials in Congress as well as the Office of the US Trade Representative. Comments need to be submitted by July 26th. You can do so from this link. And thank you.]

This morning, I submitted comments to the Office of the US Trade Representative, in opposition to the threatened 100% tariffs on European wines that could be imposed as soon as February of 2020. While I believe in an open market and am (like most of the people I know who work for domestic wineries) a lover of wines from around the world, it wasn't for that point. I am convinced that these tariffs would have severely disruptive effects on the whole system that has been legislated to provide a pathway between wine producers, like us, and the consumers who eventually want to buy the wines.

I'll share my comment, and then add some additional thoughts at the end of the blog.

December 23, 2019

I am writing to you to argue against the proposed 100% tariffs on European wines. As a partner in and General Manager at a California winery that just celebrated its 30th anniversary, it might seem surprising that I would opposed these tariffs. But I believe that the net effect that they would have on California wineries would be negative.

We sell about half our production direct, and half through a network of state-licensed wholesalers. This distribution system is mandated by law and known as the “3-tier system.” A producer like us cannot sell directly to restaurants and retailers in other states, and our ability to sell directly to consumers, while growing, is still restricted. So, our success is dependent upon the health of this distribution network. None of the 50+ distributors that we work with represents exclusively domestic wines; all have a diverse portfolio including wines that will be impacted by the proposed tariffs. Many get the majority of their business from European wines. For those distributors, the proposed tariffs amount to a death sentence. Sales will fall, in most cases dramatically, impacting their ability to represent our wines. In my experience, distributors react to the loss of a major supplier (a similar impact to these tariffs) by attempting to source new wines for their portfolio, rather than by selling more wine from their existing suppliers, many of whom are unable to increase production in the short term. If they do look for wines from other parts of the world, they will inevitably be distracted by the massive task of finding these new producers, integrating them into their portfolio, and educating their sales team on their new items. That will mean less focus for us, not more.

What’s more, the rising number of “franchise” laws, currently affecting wine sales in about 20 states, means that we don’t even have the freedom to leave a distributor who isn’t performing well (or isn’t able to maintain their sales team and delivery schedule because of a market disruption) to find another who could do a better job. In nearly half the country, if the work of our legally-mandated representatives is impacted by these tariffs, we have no recourse. Beyond the impact on wineries and distributors, other related businesses will be caught in the crossfire. Restaurants are famously low-margin businesses anyway. Increasing the costs of their wine programs will push some out of business, further reducing outlets for our wines. Wine retailers, too, including both independent and chain outlets, will be forced to source different wines (which comes with its own costs) or double the costs of their inventories. And American consumers will be faced with higher costs and fewer choices for products that they would like to buy, leaving less disposable income in their wine budgets.

Why wouldn’t the wine community just switch its sources to other, non-tariff countries? Wine is not a commodity, where a customer can simply swap in a wine, even one made from the same grape, from one part of the world for another and expect them to be comparable. Wines are products inextricably tied to the place in which they are produced. And the disruption of 100% tariffs on wines from the world’s oldest wine regions would have cascading impacts that would reach deep into a whole network of American businesses, investors, and consumers.

Even those of us who make wine in California.

Respectfully,
Jason Haas
Partner & General Manager
Tablas Creek Vineyard
Paso Robles, California

I'm not sure that most consumers realize how little option wineries have to get their wines to markets around the country. In most cases, it is neither practical nor legal for us to sell to restaurants and retailers directly. So, we have relationships with distributors in each state. These distributors are licensed by their state to purchase wine from suppliers (domestic wineries like us, and importers of wines from other countries) and to then in turn sell those wines to restaurants and retailers. Restaurants and retailers are licensed to sell the wines to customers. While a string of court decisions and state law liberalizations have allowed us to ship wine directly to consumers in many states, nearly a third of what we sell to consumers for home consumption, and essentially 100% of what we sell to restaurants, passes through these various distributors. 

Every one of the 50+ distributors who sells our wine also sells wine from countries around the world. Every one. There is no such thing, in my experience, as a domestic-only distributor. And for many of these distributors, a majority of their sales comes from European wines. These distributors would be devastated by tariffs that would slow that segment of their business to a trickle. Distributor salespeople, who are paid by commission, would see an immediate decline in their standard of living. Distributors would likely result by cutting sales staff and increasing the number of accounts each salesperson called on, reducing their ability to interface with accounts and sell the other wines in their portfolio.

But would there be a larger piece of the pie for California wineries? Not much of one, I don't think. At the low end, the likely substitute for European wines would be wines from other New World countries, like Chile, Argentina, and Australia, all of which do better in the under-$15 segment than American wineries. At the high end, there is really no substitute. An Oregon Pinot Noir isn't going to smoothly replace a Grand Cru Burgundy, nor is a California Nebbiolo going to replace a Barolo. High-end wines aren't commodities produced by formula from specific grapes, that could be grown anywhere. The places that they come from are inseparable from the wines' identities. My guess is that at the high end, there would be a period where restaurants and retailers scavenge inventory from warehouses around the country, and then sales would just decline as people wait and hope the tariffs are rescinded. In the middle? I'm not sure. There might be a few additional opportunities for wineries like us, but I doubt that these would amount to a net positive given the disruption in our distribution network.

What's more, I think there's every likelihood that European countries would retaliate with tariffs on American goods, including wines. While export markets aren't a huge piece of our business, they've been growing in recent years, and European countries like Germany, Denmark, Sweden, and France have been leading that growth. I would expect that piece of our market to disappear, as has our Chinese market since that particular trade war began a few years ago.

All of these economic costs are bad enough. The human costs would be worse. While our business would likely be OK, thousands of American jobs at restaurants and distributors would be at risk. The American consumer, who enjoys the world's most dynamic wine market, would see increased costs and decreased selection. And the cost to the European farmers and winemakers, many of whom have been farming their lands for centuries, would be heartbreaking.

What can you do? Submit a comment in opposition to the proposed tariffs:

• By January 6th: comment on the tariff related to France’s Digital Services Tax (specific to French goods)
• By January 13th: comment on the retaliation over Airbus subsidies
• Write your elected representatives; the NAWR put together form letters you can modify to your US Representative and US Senator.

Will it matter? There's no way to know. But the more voices they hear from, the better the chance.