Within the three-tier system that governs how alcohol is sold and distributed within the United States, importers are considered a type of supplier. As such, they are largely regulated like domestic producers, meaning they must distribute through wholesalers, who will sell to the retailers, where customers will finally be able to purchase the importer’s products.
However, importers are not entirely like other suppliers, and they have their own additional hoops to jump through. With that in mind, we’ve compiled some helpful information relating to how beverage alcohol importers are regulated in the U.S.
As with other suppliers, importers are required to be licensed by the various regulatory agencies that govern the jurisdictions they will operate in. At the federal level, this means getting an Importer’s Permit from the Tax and Trade Bureau (TTB), and complying with the tax remittances required under federal law. Importer’s permits can be submitted on the TTB website. To qualify, importers must “maintain and staff a business office in the United States,” though having a commercial arrangement with an existing importer eliminates the need for this license.
Getting the appropriate license is also the first step when distributing into a new state. These licenses are unique to each state and a state may require an importer to hold multiple licenses, if they are selling different product types.
Importers should also keep in mind that distribution rules differ for beer, wine and spirits in each location. Don’t assume that every state has the same regulations surrounding three-tier compliance. For every jurisdiction you distribute into, there may be a whole new set of laws that must be followed.
Much like getting a domestically produced beverage to market, obtaining a Certificate of Label Approval (COLA) is a key step for importers. This is how importers demonstrate to federal regulators that their product labels and packaging comply with regulations set by the TTB. Obtaining a COLA is a key first step in getting individual products to market, as Customs will reject any entry without label approval.
Distributor information is often required for state regulators to better understand how alcoholic beverages are sold. As importers are not the actual producers of their product, it’s pertinent to have all proper authorizations and contracts on hand to prove that your products are being sold legitimately.
Additionally, most states have their own registration requirements that must be met before products can be sold within their borders. Whether you are making your first foray into the three-tier system or are looking to expand operations into another state, ensuring accurate brand label registration will help you maintain compliance and let you bring products to market faster.
For importers dealing with the product registration puzzle, it is essential to maintain good records of Primary American Source (PAS) letters. These letters are issued by the actual manufacturer and make it clear that you are considered the owner of the imported product in the U.S., and thus legally authorized to sell it. Many states restrict wholesalers from distributing alcohol obtained from anyone but the manufacturer, the PAS or an authorized brand owner. Having the proper documentation to prove you are authorized to sell an imported product and to direct its distribution within the U.S. is therefore vital to smooth label registrations. Understanding each state’s requirements and having the necessary documentation can make the overall process much easier and quicker to get through.
What about direct-to-consumer shipping for importers?
Direct-to-consumer (DtC) shipping of alcohol gets a lot of attention these days, most of it along the lines of “how do I do that, too?” However, almost all state DtC permissions are restricted to domestic producers or retailers, which makes it difficult for importers to take part in DtC shipping. This is especially true for businesses licensed solely as importers. However, there are some situations—albeit very limited — where importers can conduct DtC shipping.
In some states, importers can obtain a retail license in addition to their importer license, and ship to states that permit DtC shipping by retailers. But state tied-house restrictions on holding licenses in multiple tiers at the same time often make this unavailable to importers. Additionally, many of the states that would permit an importer licensee to get a retailer license would also require them to open a physical store and offer inventory to walk-in customers, which could be an additional barrier.
In the end, while being an importer is not unlike otherwise being a supplier, there are additional hurdles to cross and other restrictions to keep in mind. The best advice for any importer is to talk to your attorney. Direct, specific legal advice is critical for an importer to understand what your obligations are and will be as well as what legal restrictions there are to contend with.
Learn more about how Sovos ShipCompliant can help with your three-tier distribution or DtC shipping compliance by speaking to our experts.