Direct Interstate Wine Shipments: Commerce Clause and Regulatory Chaos for Small Wineries

Article excerpt

I. INTRODUCTION

Imagine that you're out with friends or that special someone on a Saturday enjoying a glass of wine at the new local winery. You see an interesting flavor and decide to give it a try. It tastes wonderful and you know it'll make the perfect holiday gift for friends. You're dreams of an easy Christmas shopping season have come true until you go talk to the owner about shipping. He pulls out a chart and starts to talk about which state and or town they're in, as well as the volume to be shipped and if your friends have visited the winery before. If you're puzzled and confused, you're not alone. As an attorney I wondered, how can such a varied regulatory structure exist under the commerce clause? You can ship to one state, but not another. You can even ship only to certain zip codes or towns within a state. Then, you have to worry about taxes, licenses and volume limitations on a state by state basis. One writer summed up the situation perfectly saying that "when it comes to buying wine, or any other alcoholic beverage, Americans may as well live in 50 different countries - some relatively free and open, some so closed they resemble old-style dictatorships."1 Though the focus of this paper is on the commerce clause and regulatory chaos that wineries, especially small ones, are forced to navigate, interstate shipping issues can arise with other products, such as tobacco, firearms, food and wildlife. The direct interstate shipment of wine is different from these in the fact that the major regulatory hurdles are state based, whereas the others are largely federally driven.2

Taking a deep look into the regulatory difficulties the wine industry faces has become increasingly relevant due to the rapid growth of small wineries and increasing wine consumption in the United States. Nationally, the total number of wineries in the United States has more than doubled in the last 10 years, from 3,469 in 2002 to 7,881 as of early January, 2012.4 Even in California, a state already renowned for its wineries, the growth rate is nearly the same, growing from 1,704 wineries in 2002 to 3,364 in 2010. Perhaps the most explosive growth in the number of wineries is in my home state of Texas. In researching potential date night activities last fall, my wife and I were amazed to discover that there were now three wineries right in our "backyard" in the small village of Salado, Texas.5 According to Texas Alcoholic Beverage Commission (TABC) statistics, there were forty-six wineries operating in the state in 200 1.6 As of March 2012, there are 247 wineries; approximately a 500% growth rate over eleven years.7

As the numbers of wineries have grown nationally, the quantities produced have grown as well. In 2002, the United States produced roughly 551.7 million gallons of wine. By 2010, that number had grown to 677.5 million gallons equating to an increase of 23%. Taking California out of the equation, the rest of the United States has seen an increase of production from 60.4 million gallons of wine in 2002 to 71 million gallons in 2010. This increase of 17.5% over eight years is still substantial, but behind California's growth. It should be noted, however, that 2010 was not the record production year for the United States, as environmental conditions and other variables can impact the annual production.9 Taking into account these variables, general trends are most relevant versus single year snapshots. When you contrast nearly a 100% growth rate for wineries in the United States against a 23% growth in wine production, the conclusion can be drawn that many of the new wineries are "small wineries" most impacted by the current chaotic regulatory environment discussed below.10

II. FEDERAL IMPACTS - THE CONSTITUTION, THE COURTS AND CONGRESS

The starting point for the current regulatory framework in the direct shipment of wine is the commerce clause of the Constitution. Article I, Section 8 states, "Congress shall have power. …

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