Story by: Stephen G. Amato
In a bold and historic stroke, the Kentucky General Assembly passed a measure on April 2 that is viewed as a big leap forward for the Kentucky bourbon industry. HB 400, now on its way to the desk of Governor Matt Bevin, clears the way for Kentucky distilleries to ship their products directly to the homes of distillery visitors. In light of the booming numbers of tourists flocking to Kentucky distilleries, these provisions are seen as an important way to leverage the interest in Kentucky bourbon and spread the cheer.
HB 400 bursts the dam for direct shipping of alcohol in and out of Kentucky, opening up new avenues for distilleries to create brand loyalties with consumers. The provision is simple enough – visitors to distilleries may purchase alcohol and have it shipped to their homes inside or outside the state by the distilleries.
Additionally, those visitors can now participate in distillery-sponsored subscription or “club” programs, in which the distilleries can ship products to participants in regular intervals. Putting the potential boon into perspective, the Kentucky Distillers’ Association states that “…more than 1.2 million stops were made at Kentucky Bourbon Trail® and Kentucky Bourbon Trail Craft Tour® distilleries last
year, with 70 percent coming from outside Kentucky. More than 85 percent purchased a souvenir bottle during their trip.” Though souvenir package sales are currently limited to 4 ½ liters of distilled spirits per purchaser per day, under HB 400 that will increase to 9 liters on January 1, 2021.
All shipments under this legislation must originate during an in-person visit to the distillery or winery and all shipments must be through a common carrier with a license to deliver the alcohol to the jurisdiction in which the purchaser lives.
The shipments must be clearly marked with “Alcoholic Beverages, adult signature (21 years of age or over) required,” and the carrier must provide adult-signature- only service and check IDs when delivering. Common carriers that have been assigned a federal USDOT number do not have to display
state licensing numbers when delivering this alcohol. Out of state distilleries, wineries and small farm wineries holding Kentucky licenses may also now ship to Kentucky residents provided they follow the same rules as those producers in this state and are licensed similarly.
So as not to not compete with liquor retailers with these new privileges, the same direct shipment and subscription provisions that apply to distillers and small farm wineries will also apply to Kentucky quota package retailers, including volume limitations, provided that 80% of the gross monthly sales receipts of such retailers are from sales to Kentucky residents.
Finally, HB 400 recognizes as an emergency the current legal ambiguity around shipping alcohol, so these provisions will take effect immediately upon Governor Bevin’s signature, should he choose to sign it.
Shortly after the passage of HB 400, the legislature also passed SB 110, which was a response to the Kentucky Alcoholic Beverage Control Board’s attempt to deregulate the retail licensing system by eliminating the quota system. Late in 2017, the ABC proposed 804 KAR 9:051, which would have
repealed the regulations limiting the number of retail liquor licenses per jurisdiction. SB 110 codifies the quota liquor license system into statute, whereas it had previously existed largely by administrative regulation. The deregulation effort was championed by the Bevin administration as a free-market, anti- Red Tape measure. Opponents cited the long-standing system as a check and balance on the unfettered proliferation of liquor stores in Kentucky communities, and as necessary to protect the investments of small businesses who had relied upon the system to create and preserve wealth.
Stephen G. Amato is a Member of McBrayer, McGinnis, Leslie & Kirkland PLLC. Mr. Amato focuses his practice in the areas of hospitality law, employment law, civil litigation, and administrative law and is located in the firm’s Lexington office. He can be reached at [email protected] or (859) 231-8780, ext. 104.
This article does not constitute legal advice. We take a team approach to deliver effective counsel to all
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