The Players: Importers vs. Distributors
In the United States, the key players in the alcoholic beverage industry make up a three-tier system and this three tier system is the law in most states. With respect to wine, the top-tier of this system is the winery or manufacturer that is producing the wine. Foreign manufacturers often obtain an agent who represents and acts on the winery’s behalf within the United States. This agent, called an “importer,” is licensed and authorized to bring wine into the United States from the manufacturer’s foreign country in the course of trade. The “importer” therefore may be considered to stand in place of the winery when referring to the top-tier of the three tier system.
The wholesaler or distributor represents the middle-tier. The wholesaler/distributor is the person or business licensed and authorized to purchase wine from the importer for resale. The wholesaler/distributor transports the wine purchased from the manufacturer or importer and resells it to the bottom-tier; the “retailer,” which is a restaurant, liquor store, or bar.
Those desiring to “import” wine into the United States must first distinguish what they really want to be: just an “importer,” or an agent of the winery, or both an importer and a “wholesaler/distributor,” so they may actually sell the wine to retailers. Many “importers” are actually both: they act as the wholesaler/distributor as well as the importer for foreign wineries.
The Requirements For Becoming Just An “Importer”
An importer, not a wholesaler/distributor, has the following general responsibilities: communication with the foreign winery; receipt and forward of purchase orders; arrangement for delivery by ship or air from the foreign winery, either directly or through a freight forwarder; customs clearance once the wine arrives in the United States; arrangement for the transport from customs to a bonded warehouse near the port of entry; storage of the wine at the warehouse; selection of a wholesaler for distribution to retail outlets; and assistance with the promotion and sale of the brands. The importer, as the foreign winery’s agent in the U.S., therefore has a great deal of control over the brand and how it will be distributed within the U.S.
Legally, to import wine only, a person needs to obtain a license on the federal level, but generally does not require any license on the state level. The Federal Alcohol Administration Act (FAA) requires those wishing to import alcoholic beverages into the country to obtain an Importer’s Basic Permit from the Federal Alcohol and Tobacco Tax and Trade Bureau (“TTB”). To apply for the Importer’s Basic Permit, a person must attach a Letter of Intent with a foreign winery to his or her application. The letter, which must be signed by the foreign supplier and written on its letterhead, should be a statement by the supplier conveying its intent to supply the person with its wine. While this Letter of Intent is not binding on the parties, it is required by the TTB for the Importer’s Basic Permit to even be processed.
The TTB also requires a Certificate of Label Approval (COLA) for each unique product or each brand of wine being imported. Since each product must have its label approved before entering interstate commerce, application for COLAS should be done as soon as the Importer’s Basic Permit is obtained and the labels are ready.
Finally, in order to import wine from some foreign countries, a certification is required to show that the practices and procedures used to produce the wine in the manufacturer’s country, comply with the requirements of the Miscellaneous Trade and Technical Corrections Act of 2004. This Country of Origin Certification consists of a statement from the manufacturing country’s government regarding the results of lab analyses conducted on the wine and stating proper cellar treatment was employed. Many international trade agreements, however, have exempted most countries from this requirement. The list of countries exempted from the certification requirement are found at the TTB website.
What If An Importer Wants To Resell The Wine As Well?
Once processed and approved, the Importer’s Basic Permit allows import of wine, but it does not allow wholesale of wine. If an existing importer later wishes to become a wholesaler/distributor as well, so that he or she may resell the wine, then he or she must apply for the appropriate wholesaler’s licenses on the Federal and State level. For someone doing business in the state of Massachusetts, for example, this means the person should obtain a Wholesaler’s Basic Permit from the TTB and an Application For A Wholesaler’s License from the Alcoholic Beverages Control Commission (“ABCC”), in addition to his or her existing Importer’s Basic Permit. Having a licensed warehouse where the wine must come to rest after entry into Massachusetts and licensed trucks able to transport the wine to retailers within Massachusetts are also licensing requirements the wholesaler applicant should be cognizant of before desiring to obtain a wholesaler license.
An applicant for an Importer’s Basic Permit who also wishes to apply as a wholesaler/distributor at the outset of his or her business need not go through the process of completing each permit application and submitting supplementary documents for both. Instead, the applicant may check appropriate boxes on his or her Importer’s Basic Permit application and combine supplementary application documents, indicating intent to apply to be both an importer and wholesaler/distributor. This is an option only for those persons who will be importing to, and distributing from, the same location, whether that be a home office if distributing on a small scale, or a large warehouse if planning to distribute nationally.
Once in possession of a federal and a state license to both import and distribute wine to retailers, the person desiring to “import” wine in its classic sense is now ready to conquer one state at a time, or entire regions at a time depending upon the demand for the wine brand. Building that brand demand prior to having the brand distributed in the United States is a sophisticated process unique to the wine world, and an aspiring importer should be cognizant of this market’s peculiar pallet not just the importer’s pallet for wine.
© Law Offices of John P. Connell, P.C., 2013.
Succinctly and clearly outlined. A couple of other points, if I may:
FDA registrations by all wineries are required, and then Prior Notice (as it’s known) prior to shipping.
Importers may only distribute in a state in which they are physically located and have brick and mortar infrastructure. That usually means just one state, unless they have partners in other states with the requisite infrastructure. So, an importer can decide to remain importer and sell to all 50 states, or importer/distributor in one state and still sell to the remaining 49 states.
@deborahgraywine