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Published May 19, 2010, 12:00 AM

Wineries wary of federal legislation

Online sales are the fastest-growing segment of business for the Maple River Winery in Casselton, N.D.
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By: Tracy Frank, INFORUM

Online sales are the fastest-growing segment of business for the Maple River Winery in Casselton, N.D.

Greg Kempel, who owns the winery and Maple River Distillery in Casselton, said wine shipping has grown so much because there are thousands of boutique wineries around the country and even liquor stores with large selections don’t have room to carry wine from every winery.

So winery owners are watching what happens with proposed federal bill HR 5034. Some worry the Comprehensive Alcohol Regulatory Effectiveness Act of 2010 could end direct shipping of wine and other forms of alcohol to some states or make it harder to take legal action to try to reduce direct-shipping restrictions.

The bill was introduced by Rep. Bill Delahunt, D-Mass., in April and is now in the House Committee on the Judiciary.

It gives each state or territory primary authority to regulate alcoholic beverages, but the bill states that those regulations may not discriminate, without justification, against out-of-state producers of alcoholic beverages in favor of in-state producers.

Rep. Earl Pomeroy, D-N.D., said states have traditionally been the regulating sources of alcohol sales and he favors leaving the states in charge.

“I think they’ve done a good job,” Pomeroy said. “I don’t think we need everything regulated out of Washington.”

The bill was initially crafted by the National Beer Wholesalers Association, which said it will keep wine from minors, limit alcohol consumption and ensure states control sales, according to The Associated Press.

Kempel said his winery ships hundreds of packages a year and he’s never had trouble with it being shipped to anyone under age because no one under 21 can sign for the package.

Paul Pisano, general counsel for the National Beer Wholesalers Association, said its members would benefit by strengthening long-standing liquor laws, but the law’s main intent was to clarify liquor laws that have become muddled.

In 2005, the U.S. Supreme Court ruled states can’t discriminate between in-state and out-of-state wineries in direct shipping to consumers. That prompted more lawsuits as wineries and brewers sought access to markets in states that had been closed to them, the AP said.

Pomeroy said in light of court rulings, the legislation is necessary, “but we’re trying to pass a bill just to say let’s keep things the way they are.”

The National Association of Attorneys General sent a letter, signed by 39 state attorneys general including North Dakota Attorney General Wayne Stenehjem and Minnesota Attorney General Lori Swanson, asking Congress for help with “the growing threat facing our states from unprecedented legal challenges that seek to eliminate our ability to regulate alcohol.”

Free the Grapes, a nonprofit trade association that represents thousands of wineries and seeks to remove restrictions in states that prohibit consumers from buying wine directly from wineries and retailers, calls the bill a monopoly power grab “that is a direct threat to legal, regulated winery-to-consumer shipping now working successfully in 37 states.”

The ability to ship wine not only benefits small-business owners like Kempel, but is also a great revenue source for states, he said.

This past weekend, tourists from 15 states visited the Casselton winery, and if they like the wine, they’ll reorder and have it shipped to their homes, Kempel said.

“That’s where our growth is coming from, people who have been in North Dakota touring and they fell in love with our wine and they keep ordering it,” he said. “We’re not going to have enough wine to sell in all 50 states, but this is a way for us to bring revenue into the state and it’s another way of exporting agricultural products.”

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The Associated Press contributed to this report Readers can reach Forum reporter Tracy Frank at (701) 241-5526

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