An Overview of U.S. Wine Law
Wine law is a system of laws and regulations that governs the production and distribution of wine. Sources are different levels of the government (federal, state, and local) and multiple areas of the law such as alcohol beverage law, trademark, contracts, land use, agriculture and international law among others.
In the U.S., wine law as part of alcohol beverage law, is widely influenced by the “Prohibition" era. From 1919-1933 alcohol beverage production was constitutionally stopped by the 18th Amendment to the US Constitution that went into effect on January 16, 1920. The Amendment was repealed in 1933 by the 21st Amendment. Section Two of the 21st Amendment gave States the power to regulate the importation and use of alcohol within their boundaries.
US wine laws can be separated into four categories:
1- Laws that govern viticultural practices (cultivation of vines and growing of grapes). The federal government regulates geographic area designation and harvest and vintage dates on wine labels. State governments control marketing and distribution of farm products (like grapes) through a licensing system.
2- Laws related to wine production: these are laws that protect public health, prevent fraud and tax the activity. For example, federal laws control cellar treatment, classification of wines and viticultural areas among other things. They also protect consumers from labeling fraud.
3- Laws related to international trade of wine: in this category we find laws that regulate wine import/export, multilateral and bilateral agreements, and other regulations produced by international organizations and wine trade groups to facilitate the international commerce of wine.
4- Laws related to the general wine market: these are both state and federal laws that govern the distribution and marketing of wine. The U.S. alcohol beverage market works amid a three-tiered distribution system. States regulate their markets using “control" or “open" methods.
The Federal Three-Tiered System is a structure of manufacturers, wholesalers and retailers that must be utilized in order to distribute alcohol beverages. This means that alcohol has to move through a chain to reach the consumer. Manufacturers must sell to wholesalers, wholesalers to retailers, and retailers to consumers. The three-tier system may vary from state to state, but is regulated by state and federal tied-house, antitrust, and state franchise laws.
Control or Open States
States use “control" or “open" methods to regulate the alcohol beverage market.
Control States: control wholesalers and retailers that distribute alcohol beverages. Some states own and operate all wholesale and off-sale retailers and require licensing of individuals to operate on-premise sales (e.g., restaurants). Other states allow winemakers to sell directly to wholesalers when they obtain a proper license. Control states also generally exercise control over prices and mark-ups.
Open States: regulate the alcoholic beverage industry by requiring private individuals to obtain a license to distribute and sell alcoholic beverage and by enforcing state laws. The state qualifies persons and premises in order to grant or deny licenses. Suppliers must also obtain federal permits if they want to engage in interstate commerce.
The above information is provided for informational purposes only and does not constitute legaladvice.