Regulatory Compliance for Makers

Q&A with LibDib Compliance

October 26, 2018

Regulatory Compliance for Makers: A Q&A with LibDib’s Senior Compliance Lead

It’s time for a blog about everyone’s favorite topic–regulatory compliance! Well, before pushing snooze, let me tell all Makers out there that you probably should keep reading. I’ll address some of the most common compliance-related questions LibDib fields from Makers, with the hope of guiding you toward the path of compliance…and keeping you on the straight and narrow.

So what is compliance, anyway? Well, it all stems from the repeal of Prohibition and the creation of the three-tier system by the federal government. However, the feds created the hierarchy and then ultimately left it up to the states to create their own regulations and laws regarding alcohol production, transportation, sales, and consumption within the three-tier system (even allowing state or even local governments to ban or severely restrict alcohol sales). This means the only guaranteed common denominator across the country is this notion of multiple tiers–the production/supply tier, the wholesale/distribution tier (often referred to as the middle tier), and the reseller/consumer sales tier. Everyone in each tier needs to follow the federal, “home state” (this is the state where your company is based), and interstate commerce regulations that apply to their tier — and that’s compliance. It is making sure all of those i’s are dotted and t’s are crossed.

As your distributor (yes, LibDib is the middle tier), we have our own set of regulations that guide our operations and are specific to wholesalers. Makers, you also have your own set of specific regulations which you need to be sure to follow. This blog post is meant strictly as an overview–addressing the questions which are asked most often–and is not meant to be taken as legal advice.

Here are a few of our most Frequently Asked Questions:

Q: I’m an importer of foreign products with a Federal (TTB) import license in the state where I am located. Why are you asking me for a Home State License?  

A: Because you need one. Just because you are licensed by the TTB to import alcoholic beverages, it does not mean you have all authority to sell or otherwise “deal” in the alcohol industry. Most states have a licensing/registration requirement for businesses who make or import alcoholic beverages, and all states are different — what LibDib needs to see is your state’s equivalent of the federal permit. This licenses you as an alcohol company in your home state. This isn’t always an authorization to sell your product, but it very well could be (again, every state is different). As the  distributor, LibDib requires our Makers to prove that they are fully licensed at the state and federal levels before we can greenlight anyone to do business on our platform. We encourage you to call the agency which oversees alcohol beverage licensing in your state, and/or to work with a licensing consultant or attorney to determine the best course of action as a viable, fully-licensed, alcohol-based import business.

Q: I contract with XYZ Distillery (or Winery) in another state (or in my same state). I have a federal (TTB) wholesale permit in my home state. Is this what you mean by Home State License?

A: No. In order to be paid and to legally store and resell the alcohol that another producer makes (for you/with you) under your brand name, you still need to be licensed by the federal government and by the state in which your business is located. Now, in different states, this requirement can look different, but you need to be aware that your home state, meaning where your business is located, probably has a requirement for you to be licensed. And in some states you might also need a license in the state in which the distillery/winery is located. Again, as the distributor, our role and expertise is not to determine which type of license(s) you need. We can tell you what we need before we can do business together; however, we will always suggest that you consult with state agencies, a licensing consultant, or attorney to determine the best course of action for your business.

Q: How do I fill out this out-of-state shipper application? Can you just tell me how I should answer this one question on the form? I was told I could get a marketing permit in NY but I’m hung up on this one question can you help me with my online application?

A: (Almost) every Maker’s business entity and permitting needs are unique. The state regulatory agency which has created and required the license or permit is the best place to go for advice and will provide information specific to your situation and the regulations. As your distributor, LibDib cannot help you complete license or permit applications. It’s like asking us to build Ikea furniture. We are not the experts. Specific questions regarding forms should be directed to 1) your compliance consultant, 2) your attorney, or 3) the agency that created the form. Don’t be afraid to reach out to the state agencies directly. Most regulators want to help you. And chances are that if they hear from enough applicants that a form or an online application is confusing, the more likely they are to make changes as needed.

Q: Can LibDib store my product and ship it/deliver it for me?

A: In most cases, no. With few exceptions, our business model (with far lower margins than traditional distribution) relies on our Makers shipping their own product either to the account or to one of our distribution partners’ warehouses (where required by law). You will need to contract with common carriers and follow LibDib’s Safe Shipping Guidelines so that bottles arrive intact to their destination. Sample shipments will need to be labeled accordingly. We will tell you what and where to ship to be compliant. The rest is on you.

Coming from the supplier side myself, believe me when I tell you, I know where you Makers are coming from. We recognize that most of our Makers are smaller companies who may be new to the industry or to three-tier distribution, and that you may have questions. But the first thing to recognize is that we want to act as your distributor. We can’t also act as your compliance or business consultant. It’s in your best interest to let us do our job as the middle tier — which involves helping you process orders  from new accounts, garner repeat orders from existing accounts, and allowing you to legally get your products into the hands of consumers, compliantly and efficiently via the the three-tier system. Oh, and we have created some pretty cool high-tech tools to help you in the process.

While LibDib isn’t in the business of Maker compliance, we have friends that can help! We are happy to provide referrals to our favorite industry partners so full compliance is within reach….and we can work together to sell product, fulfill orders and create more business opportunities for small Makers everywhere!

If you have questions about the contents of this blog, or another matter in the exciting world of alcohol beverage compliance, please feel free to contact me directly at Jen.hamm (at) libdib.com.

Jennifer Hamm

Senior Compliance Lead