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Interstate Shipping Issue Looms Large Again As States Take Strict Enforcement Measures

December 12, 2017

For years, retailers have shipped quietly into non-reciprocal states that were lax in enforcement, but lately there have been some tough crackdowns on interstate shipping. In January, Illinois lawmakers made it a felony to deliver wine into their state. Other states began threatening to confiscate wine in transit and levy major fines on shippers. Earlier this year, FedEx and UPS announced they were ending wine deliveries to all states except the 14 where shipping is legal. And then Amazon announced it would drop its Internet wine sales.

The shift has reduced the revenues of key retailers around the country. Daniel Posner, the owner of Grapes the Wine Company in White Plains, New York, derived 50% of his revenues from interstate shipping. “I have a staff of 12, and I’m facing layoffs and changes in the amount of space I lease,” says Posner, who’s also the president of the National Association of Wine Retailers (NAWR).

In suburban Chicago, Johnson Ho, owner of high-end retailer Pantheon Wine Shoppe, recently got a letter from liquor control authorities in Maine threatening to confiscate any wines he ships there in future. He once did big business sending holiday gift bottles out of state. Now he has closed down virtually all shipping, cutting off nearly a third of his revenues. “If you lived in Maine and wanted Romanée-Conti or Petrus, you came to somebody like me,” says Ho. “There wasn’t much sold there by in-state retailers. But I can no longer serve those clients.”

Meanwhile, the 38-store Binny’s Beverage Depot chain has shut down all out-of-state shipping. “I believe in free markets and the free flow of goods and services across state lines,” says Binny’s owner Michael Binstein. “Everybody loses, including Binny’s and its customers, when we get away from the gospel of free enterprise.”

Auction houses sell wine through retail licenses, and Devin Warner, president of Chicago Wine Co., says he’ll now focus on Illinois and legal state bidders. Jeff Zacharia, the president of Zachys in Scarsdale, New York, thinks non-U.S. bidders might now gain the upper hand, and he’s hoping to persuade New York lawmakers to legalize reciprocal shipping next year. Zachys recently acquired a retail license in Washington, D.C. He and other retailers may try to buy up licenses in other states to expand their reach again. “We’re exploring all options,” Zacharia says.

Meanwhile, merchants face continued resistance from wholesalers. Craig Wolf, president and CEO of the Wine & Spirits Wholesalers of America (WSWA), argues that states have been lax in their enforcement for too long. “The law in most states doesn’t allow retailers to ship, and the states are now taking their responsibilities seriously,” says Wolf. “If retailers want to ship direct, they have the right to go to state legislatures to have the laws changed.”

The NAWR is attempting to do just that. It has helped introduce a bill in Massachusetts to overturn the state’s ban on shipping both in and out of state, and expects more open-shipping bills in New York, Connecticut, Rhode Island and Alabama soon. A court case challenging no-shipping laws in Texas went down to defeat, but cases in Illinois and Michigan are being pursued by retailers—who ultimately hope to get a new U.S. Supreme Court decision.

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