Understanding brand ownership and self-production requirements
We’ve previously discussed how direct-to-consumer (DtC) shipping of alcohol has numerous requirements and regulations for producers and retailers. Everything from getting licensed to brand label registration details to age verification protocols must be considered. But what happens when an alcohol producer (e.g., a winery, brewery, distillery or cidery) wants to ship alcohol that they did not produce? Many states limit the brands that a DtC shipper can sell, with these “not of own production” (NOOP) rules restricting shipping alcohol that a licensee does not own.
Generally, producers should only sell what they’re authorized to sell, whether that be brands they produce themselves or those that they act as authorized brand dealers for. However, many DtC wine shipping laws were designed with the intention of enabling small wineries to enter a state’s market even if they were unable to access the state’s three-tier system. As such, it was often seen that DtC shipments would be limited to the “own production” of a winery. If a winery produces the wine, then it could ship it DtC.
This quickly becomes complicated by the fact that many wineries are not one house production facilities. Wineries can be part of large and complicated companies that operate under lots of names and brand labels manners. Additionally, many act as importers for foreign wines. This then butts up against the roughly 20 states that do have some kind of NOOP rule limiting what brands may be shipped DtC.
Different states have different alcohol production definitions, requirements
While not every state limits the brands that a DtC licensee can ship to their residents, each state that does has its own nuanced definition of what qualifies as “not of own production,” and what brands a producer can legally ship. Tracking these rules requires following the clear chain of ownership established from the party that was actually manufacturing it.
A major concern with NOOP laws is recognizing what entity will hold the necessary DtC license. Often, states with NOOP laws will require licensees to identify a specific address or location tied to an individual license. In the most strict NOOP scenarios, that state will say that only products produced specifically at that licensed premises can be shipped DtC. Even if that premises is under the same ownership as other facilities, it can only ship DtC what it produces.
Let’s say a winery has a production facility in Modesto, California but has facilities in other cities. What is considered “produced” by that winery? In that most strict interpretation, it is just the wine made at the main production facility. But another state could have a more lax approach to its NOOP law, allowing the company to hold a single DtC license for all their facilities and to ship everything they produce. Because these rules vary in how states interpret them, it’s important for producers to understand that level of nuance for each state in which they want to operate.
Some states interpret these regulations more broadly, allowing that “anything you own” can be shipped DtC. Essentially, you don’t have to be producing the wine to sell it. A licensed DtC shipper could sell brands that they import or redistribute. However, they must be the primary American source, or at least an authorized brand owner. If that same winery in Modesto imports wine from Chile, but acts as the importer of record and has its name on the Certificate of Label Approval (COLA) documents, it potentially could still ship the imported wine DtC, depending on how the state’s NOOP laws are written.
A unique consideration for breweries
While DtC shipping laws were first created for wine, we now have other product types entering the market. While most of the considerations for NOOP rules will apply equally to all wine, beer, spirits and cider, there are some unique scenarios for producing and distributing beer that could conflict with NOOP rules.
For example, beer collectives have become increasingly popular recently. In this scenario, brewers in different states will band together and agree to act as local distributors of each others’ beers. However well this might work for three-tier sales, it is very likely to be problematic if that collective begins to ship DtC as a single entity in states with NOOP laws. Brewers in a contract brewing relationship will need to watch out for similar NOOP considerations.
Overall, states wanted to ensure that alcohol producers are shipping only to the end consumer and are using the DtC model to shore up what that consumer might not be able to get through a state’s three-tier system. As such, many states do limit what you can ship to only what you produce. However, it is always important to understand each state’s individual reading of their NOOP laws so you know exactly which brands you can ship where.
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