BILL ANALYSIS                                                                                                                                                                                                    Ó



                                                                  AB 573
                                                                  Page  1

          Date of Hearing:   April 13, 2011

                   ASSEMBLY COMMITTEE ON GOVERNMENTAL ORGANIZATION
                                 Isadore Hall, Chair
                    AB 573 (Chesbro) - As Amended:  March 31, 2011
           
          SUBJECT  :   Alcoholic beverages: wine exports and returns.

          SUMMARY  :   Allows a holder of a beer and wine wholesalers 
          license and an off-sale retail license, who only sell wine to 
          return wine they have exported from the state.  Specifically, 
           this bill  :  

          1)  Provides for the return of wine exported out of state, to be 
          returned in the same manner by a holder of a beer and wine 
          wholesaler's license and an off-sale retail license that sells 
          only wine, as specified.

          2)  Makes technical, non-substantive changes to the Alcoholic 
          Beverage Control Act (Act).

           EXISTING LAW  

          1)  Establishes the Department of Alcoholic Beverage Control 
          (ABC) and grants it exclusive authority to administer the 
          provisions of the Act in accordance with laws enacted by the 
          Legislature.

          2)  Permits a licensed winegrower, who in the course of business 
          exports wine from California to another state, to subsequently 
          return to his or her licensed premises all or any portion of 
          that wine in private vehicles owned or under the control of the 
          winegrower, subject to certain tax provisions.  

          3)  Establishes a beer and wine wholesaler license.  Authorizes 
          a beer and wine wholesaler licensee to obtain an off-sale beer 
          and wine license, but limits sales to those accepted via mail, 
          telephone, or computer and prohibits operations conducted from a 
          retail store open to the public. 

          4)  Provides that a licensed winegrower, who obtains a wine 
          direct shipper permit, as described, may sell and ship wine 
          directly to a California resident, for personal use, under 
          specific conditions. Knowing violation of these provisions would 
          be a misdemeanor.








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          5)  Existing law, known as the "tied-house" law, separates the 
          alcoholic beverage industry into three component parts of 
          manufacturer, wholesaler, and retailer.  The original policy 
          rationale for this body of law was to prohibit the vertical 
          integration of the alcohol industry and to protect the public 
          from predatory marketing practices.  Generally, other than 
          exemptions granted by the Legislature, the holder of one type of 
          license is not permitted to do business as another type of 
          licensee within the "three-tier" system.
           
          FISCAL EFFECT  :   Unknown

           


          COMMENTS  :  

           Purpose of the bill  :  According to the sponsor of this bill, the 
          Family Winemakers of California, current law allows a licensed 
          winegrower, who in the course of business exports wine from 
          California to another state, to subsequently return to his or 
          her licensed premises all or any portion of that wine in his/her 
          private vehicle. Over the past several years, hundreds of 
          virtual wineries holding a combined Type 17 and Type 20 license 
          have sold wine for use out of state.  AB 573 fixes a technical 
          problem within the ABC Act, so this specific license can bring 
          their wine back into the state under the same provisions as a 
          winegrower.  Section 32175 of the Revenue and Taxation Code will 
          still apply to any wine returned.

           Background  :  Presently, ABC issues two licenses to facilitate 
          Internet retail sales: a beer and wine wholesaler/Type 17 
          together with an off-sale beer and wine/Type 20.  Current law 
          requires the holder of a wholesale license to operate as bona 
          fide wholesaler "in good faith".  This means that they must sell 
          to retailers other than themselves.

          Related legislation  :  AB 623 (Williams) of 2011, creates a new 
          limited off-sale retail wine license to sell wine via the 
          Internet, direct mail, or the telephone.  (Pending in Assembly 
          Appropriations Committee)

           Prior legislation  :  SB 118 (Chesbro), Chapter 157, Statutes of 
          2005.  Provides that a licensed winegrower, who obtains a wine 








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          direct shipper permit, as described, may sell wine and ship wine 
          directly to a California resident, for personal use, as 
          specified.  Also, eliminated the requirement that an unlicensed 
          adult apply and be issued a permit to receive a shipment of 
          wine, as described.   

          AB 611 (Cortese), Chapter 394, Statutes of 1994.  Encourages the 
          adoption of reciprocal wine shipping privileges in other states 
          to improve fairness and equality for small, family vintners and  
                 winegrowers of California by authorizing this formula for 
          the direct shipment of wine to an individual in this state.
           
          REGISTERED SUPPORT / OPPOSITION  :   

           Support 
           
          Family Winemakers of California

           Opposition 
           
          None on file
           

          Analysis Prepared by  :    Eric Johnson / G. O. / (916) 319-2531