05.18.15

SCHUMER: DISTILLERIES LIKE BLACK BUTTON DISTILLERY IN ROCHESTER ARE FORCED TO WAIT OVER 200 DAYS TO GET BASIC APPROVALS TO EXPAND THEIR BUSINESS; WHILE DISTILLERIES & CRAFT INDUSTRY ARE GROWING NATIONALLY BY OVER 50%, FEDERAL DISTILLERY INSPECTORS—WHO APPROVE REQUESTS—HAVE BEEN CUT BY 10%; SENATOR CALLS FOR MORE INSPECTORS TO REDUCE BACKLOG THAT IS COSTING DISTILLERIES, INDUSTRY MILLIONS

Schumer Says Cuts in Federal Alcohol Inspectors Put Rochester & Other NY Distilleries Directly At Risk; Delays Cause Losses to Producers Trying to Get Off The Ground or Expand; Inspector Is Responsible For Auditing And Reviewing All Requests Like Bond Approvals, New Product Labels, Recipes and Operating Licenses; It Is Very Common For Some Approvals To Be Delayed up to Hundreds of Days  

Schumer Says Increasing The Amount Of Federal Alcohol Inspectors Should Be A Main Priority; An Outside Monitor Is Essential To Maintaining The Safety Of Products Made By Distilleries, But Should Not Stand In The Way Of Preventing Distilleries From Growing Their Business 

Schumer: Distilleries Are Prevented From Expanding Business Because Feds Can’t Keep Up With Growing Industry 

 

Today, at Black Button Distillery in Rochester, U.S. Senator Charles E. Schumer pushed for funding needed by the Alcohol and Tobacco Tax and Trade Bureau (TTB) to hire additional federal inspectors to review and approve now-delayed permit applications needed by  distilleries, breweries, and wineries to open, expand, and sell their products. Schumer said that TTB inspectors are in charge of auditing and reviewing requests such as bond approvals, production licenses, recipe formulas, product labels, and more that are critical for New York distilleries, breweries, and wineries to open and expand their operations. However, Schumer said the current shortage of federal inspectors means distilleries can wait for hundreds of days to have their requests approved. According to industry data, the licensed beverage industry has grown by 53 percent since 2007, while the number of inspectors has decreased by 10 percent. In New York State alone, since 2012, the number of breweries has increased more than 100% to 207 breweries. The number of distilleries has grown to 87 and wineries to over 400.  Schumer said the growth in the industry TTB regulates has stretched the federal agency to its limits and has led to huge backlogs in bond, permit, recipe and labeling applications companies need to get off the grown or expand.

Schumer pointed to Black Button Distillery in Rochester as an example of a company that is being held back from expanding due to a lack of TTB inspectors. Schumer said Black Button has been waiting for over 70 days for TTB to approve a $100,000 bond required to open a new warehouse to age their bourbon and free up space to install new production equipment. While the bond was awaiting this approval, Black Button received an automatic form letter from TTB advising that if the federal agency does not receive a new bond request within 90 days, the agency would consider the distillery in violation of the law and required to cease operations. Schumer said if TTB had enough inspectors they would see the company has filed for a new bond already, and should not be at risk of having their operations closed and should, conversely, be able to expand.

“Craft breweries and distilleries throughout Rochester and Upstate New York pour local products and jobs into our economy, which is why we must make sure their exciting growth is not choked off by bureaucratic red tape and delays caused by their federal regulators. In order for these local craft distillers like Black Button to expand and create more good-paying local jobs, we need the federal Alcohol and Tobacco Tax and Trade Bureau to be more efficient with providing the necessary approvals on recipes, labels and licenses producers need to get products out of the barrel and onto the shelf. But right now that is nearly impossible because the number of TTB inspectors has been cut while the number of craft distilleries has increased. The excruciating wait times that result are not only delaying business expansion but even putting some start-ups in jeopardy,” said Schumer. “That is why I am calling on federal appropriators to provide $5 million in additional funding to hire these inspectors and clear the backlog of requests. It is high-time we make it easier on our distillers and brewers to get these critical approvals so they can really begin to tap into their full potential.”

Schumer explained that TTB has lost 10 percent of its staff since 2007, and currently has about 500 employees, while the number of number of wineries, breweries and distilleries in the country has grown by 53 percent. Schumer said this discrepancy means that while there are increasing requests for the bond approvals, production licenses, recipe formulas, and product labels associated with new these breweries and distilleries, there is less staff to review and audit the requests. TTB is responsible for reviewing over 100,000 labels and thousands of formulas each year. This shortage of TTB inspectors – which are needed to review and approve each request – is resulting in excruciating wait periods for these businesses, many of which are small family-owned businesses, looking to expand and create good-paying, local jobs. Schumer said TTB’s inadequate funding has limited the agency’s ability to complete these reviews in a timely manner and has resulted in a dramatic increase in the average processing time for permits and labels. As of March 2015, the average processing time for a brewery’s permit to operate was 115 days and similar backlogs exist throughout the agency. Schumer said this is far too long for the many businesses that rely on securing these permits in order to expand and produce new recipes, and could even threaten the overall operation of some businesses.  For comparison, the New York State liquor authority's processing time for operating permits is only 38 days. 

These delays cause real and opportunity-cost loss to producers in New York and across the country. As a result, Schumer said increased funding is needed to ensure that TTB has the personnel needed to conduct its responsibilities as the primary regulator of the expanding licensed beverage industry. Increased funding would allow TTB to increase staff in order to match the growth of this emerging license beverage industry as well as upgrade technology and web-based systems to boost efficiencies and reduce delays and backlog. That is why Schumer is pushing for an additional $5 million in the appropriations bill for TTB enforcement activities, which would include hiring additional inspectors.  This funding increase is a top priority of the twelve leading industry associations that represent the nation's craft distilleries, breweries and wineries. Schumer said that with this additional funding TTB would be able to both improve the processing time for labels and permits and better support the industry. In addition to approving the requests it receives every day, TTB is tasked with protecting U.S. producers from counterfeit beverages and advising the U.S. industry on a range of trade issues to promote U.S. exports. Schumer said the current lack of TTB staff has diminished the agency's ability to protect the industry from any bad actors.

Schumer highlighted a local Rochester company, Black Button Distilling, to show how these wait times are impacting real businesses. Currently, Black Button is waiting on the approval of two formulas for new products and the approval of three labels. The company needs all of these before they can sell their product. In addition, Black Button is waiting for approval on a $100,000 surety bond and a permit to open a new warehouse to age their bourbon. Schumer explained that, in July 2014, Black Button purchased a $50,000 surety bond and applied to TTB for approval of the bond. However, after nearly nine months passed without TTB approving the bond, the company was growing production at such a rate that, by March 2015, they actually needed a $100,000 bond.  By March 2015, Black Button purchased a $100,000 bond from their insurance company and submitted both a revised application to TTB to approve the new $100,000 bond and an application to expand into a new warehouse to age their bourbon.  This bond approval is a prerequisite to TTB approving Black Button’s other application to rent and open the new bourbon aging facility. However, TTB sent Black Button back a form letter in April 2015 stating that TTB’s files show the bond is set to expire in 90 days and, unless another request is submitted within that time period, Black Button will be required to shut down.

Schumer said if TTB had enough inspectors they would see the company has filed for a new bond already, and should not be at risk of having their operations closed. Conversely, Schumer argued, the distillery should be able to expand. Schumer said this kind of red tape and bureaucracy could cause businesses like Black Button, which are looking to expand, play by the rules and create jobs, to lose a substantial amount of profits. Schumer said this lack of federal inspectors could therefore thwart business growth across New York in this burgeoning industry and can be solved with more federal funding directed at hiring inspectors for approvals and auditing as well as enforcement activities.  Today, Schumer is also sending a letter to TTB Administrator John Manfreda to expedite consideration and approval of Black Button's pending approvals in order to move forward with its expansion this summer. 

Schumer was joined by Jason Barrett, owner and Head Distiller of Black Button Distilling; Jim Begley, owner of O’Begley Distillery in Pittsford, NY; Paul Leone, Executive Director New York State Brewers Association; and Dan Western, co-owner of Lost Borough Brewery in Rochester, NY.

“TTB delays are significantly inhibiting our ability to grow the overall craft distilling, beer, and wine industry as well as our specific business,” said Jason Barrett, Owner and Head Distiller of Black Button Distilling. “We are at a critical point in our company life cycle and currently do not have the space to grow.  For over 9 months we have been awaiting TTB approval to expand with an additional warehouse to age our bourbon and make room to install new production equipment that has already been bought but cannot be shipped until we have space to put it.  This is a top priority for us and while we operate in full compliance with TTB regulations it is frustrating when nine months can pass between when you start seeking new approvals and when you hear back because TTB is stretched too thin.   I appreciate Senator Schumer’s support of the wine and craft alcohol’s industry’s call to fully fund the TTB  to reduce lengthy approval delays, bring in more tax revenue for the treasury, and better safeguard consumers from fraudulent or damaging alcohol claims.”

  

A copy of Senator Schumer’s letter to federal appropriators and his letter to TTB Administrator Mangefrida on behalf of Black Button appears below:

Dear Chairman Boozman and Ranking Member Coons:

As you move forward with the Fiscal Year 2016 Financial Services and General Government Appropriations bill, we respectfully request that you provide funding of $106,439,000 for the Alcohol and Tobacco and Tax and Trade Bureau (TTB) for FY2016. This would be a $5 million increase above the Administration’s FY2016 request. The additional $5 million should be direct appropriations for enforcement activities under the Federal Alcohol Administration (FAA) Act. 

TTB’s inadequate funding has resulted in a dramatic increase in the average processing time for permits, formulas and bonds. The timely approval of products and operations is needed for the many wineries, breweries and distilleries attempting to expand or being production. TTB is responsible for efficiently reviewing over 100,000 labels and thousands of permits and formulas each year. However, as of March 2015, the average processing time for a brewery’s permit to operate was 115 days and similar backlogs exist throughout the agency. These delays cause real and opportunity-cost loss to producers in New York and across the country, many of which are small family owned businesses with limited financial resources, which support good-paying, local jobs. 

TTB is also responsible for protecting U.S. producers from counterfeit beverages and advising the U.S. industry on a range of trade issues to promote U.S. exports. These important functions help support the job-creating licensed beverage industry and deserve adequate resources.                                                                                                           

Increased funding is needed to ensure that TTB has the personnel to conduct its responsibilities as the primary regulator of the expanding licensed beverage industry. Rising costs in payroll, infrastructure, information technology and travel have left TTB with no alternative but to reduce its staff levels. At the same time, the industries that TTB advises, protects from predatory trade practices and approves for operation have grown significantly. Since 2007, TTB’s workforce has shrunk by 10%, while the number of wineries, breweries and distilleries in the U.S. has increased by 53.1%.

Increased funding would allow TTB to increase its staff to match the growth of our emerging licensed beverage industry. With just a small amount of additional funding, TTB would be able to both improve the processing time for permits, formulas, bonds and labels and better support the U.S. industry. 

Again, I respectfully urge your support for $106,439,000 in TTB funding, with $5 million in funding tied to expanding enforcement-related activities under the Federal Alcohol Administration (FAA) Act. This funding would reflect the increased economic activity of the licensed beverage industry.

Sincerely,

Charles E. Schumer

United States Senator

Dear TTB Administrator Manfreda, 

I write to request your assistance to expedite consideration and approval of two submissions by Black Button Distilling in Rochester, New York that are vital for the businesses continued operation and expansion.  Specifically Black Button is awaiting approval of a new larger $100,000 Surety Bond submitted to TTB in early March, 2015 and approval of its application to Add Non-Contiguous DSP Premises submitted on February 2, 2015. 

Together the approvals are required in order for Black Button to rent a new warehouse to store barrels of their bonded bourbon as it ages.    The company is at a critical juncture and does not have adequate space at its production facility to grow without the use of this additional warehouse.  By moving the barrels now stored in the production facility to the new warehouse, Black Button will free up space to install new equipment including a new Still and 4 new Fermenters to increase their production and grow this family-owned business.  The equipment has already been purchased but delays in gaining TTB approval is preventing the company from having the equipment shipped and installed. 

Originally on July 25, 2014, Black Button purchased a then-larger $50,000 surety bond and applied to TTB for approval of the bond. However, after nearly nine months passed without TTB approving the bond, the company was growing production at such a rate that, by March 2015, they actually needed a $100,000 bond and the additional warehouse.  So on February 20, 2015 Black Button submitted the Non-Contiguous DSP Premises application in order to occupy the new warehouse and by in March 2015, the company purchased a new larger superseding $100,000 bond from their insurance company and submitted a new application to TTB to approve the new $100,000 bond.  Unfortunately, instead of receiving approval of the new $100,000 bond, Black Button received notice on April 2, 2015 that TTB finally approved the original application for the $50,000 bond submitted nine months earlier instead of the superceding $100,000 bond which is the one that should have been approved.

I appreciate your attention to this matter.

Sincerely,

Charles E. Schumer

United States Senator

 

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