We always recommend you regularly review your state liquor licenses to ensure you hold the correct licenses for your business needs. However, given recent feedback from California regulators, you may want to expedite such a review. We have learned that California is scrutinizing liquor licenses and enforcing regulations that prohibit licensees from obtaining licenses that could create tier violations.
California recently provided guidance on which industry members can hold a Type 13 Distilled Spirits Importer’s General license. As a reminder, a Type 13 license authorizes licensees to import and sell distilled spirits to other distilled spirits manufacturers, wholesalers, rectifiers and importers within the state. Historically, California issued a Type 13 license to out-of-state supplier-tier companies importing distilled spirits in their name. These companies would use licensed public warehouses for storage before distributing their products to authorized California licensees, such as licensed California wholesalers.
However, the California Department of Alcoholic Beverage Control (CA ABC) asserts that CA BPC § 23771 prohibits distilled spirits suppliers from holding a Type 13 license if they have any interest in manufacturing within or outside of the state. This prohibition applies to suppliers who manufacture distilled spirits outside of California or have a parent company that manufactures distilled spirits overseas. The state has said that these suppliers should hold a manufacturer-type license, such as a Type 5 license.
A Type 5 Distilled Spirits Manufacturer’s Agent license is frequently held by an agent of out-of-state distilleries or manufacturers who promotes the products and does missionary work for the out-of-state distillers or manufacturers. They can also solicit sales from licensed distilled spirits manufacturers, rectifiers or distilled spirits wholesalers and hold possession of distilled spirits in public or private warehouses. Although Type 5 licensees cannot import distilled spirits into California, they can sell distilled spirits to other Type 13 license holders who may import into the state.
While we have not seen proactive enforcement from CA ABC on this matter, the issue may arise when or if Type 13 license-holding companies renew a license or file a person-to-person transfer or premises transfer for a current license. CA ABC has indicated that Type 13 license-holding suppliers will not be penalized for holding an improper license; the agency will expect these suppliers to work with it to determine if they should hold a different set of licenses to meet their business needs.
If you have any questions about California ABC liquor licenses, please contact Alva Mather, Nichole Shustack, Alice Chung or McDermott’s alcohol team.