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Vintage dilemma: Varied state shipping rules hurt wineries

For The Associated Press

ROSEBURG ­ Kris Goodwillie keeps the list right nextto the cash register in her Callahan Ridge Winery tasting room.

The 10-page document lists alcohol shipping laws for each state, lettingher know which out-of-state customers can have wines shipped back to theirhomes and which can't.

Goodwillie, co-owner of Callahan's, is blunt in her assessment of theregulatory morass that governs direct-mail shipping.

It's a pain in the butt, she says. Most of our visitorscome from out of state, and they don't want to take the wines they buy backwith them. They want them shipped. But a lot come from states we can't shipto. So we have to tell them, `Sorry, we can't do that.'

Direct-mail shipping is the hot topic of conversation in vineyards andtasting rooms. Direct shipments are illegal in 24 states and regulated tovarying degrees in the remaining 26. In Kentucky, Georgia and Florida, recentlegislation makes shipping alcohol a felony. Oregon residents over 21 canlegally receive up to two cases of wine a month.

Henry Estate Winery owner Scott Henry calls the laws crazy.Not only are there state laws regarding shipments, Henry says, but alsolaws dictating the type and extent of advertising his company can conduct.

It's anti-free market, and it violates free speech. When it comesto alcohol, you have to throw out the Constitution, Henry says. It'snot just dollars and cents either. If I have a customer who lives in a stateI can't ship to and don't distribute to, they blame us. They feel like they'rebeing left out. I don't only lose the sale, but now I have a customer madat the winery.

Regulators, however, say alcohol is a potentially dangerous substanceand each state must have the ability to control its flow in accord withthe values and mores of state residents.

Liquor is not like tennis shoes, says Paul Williamson, aspokesman for the Oregon Liquor Control Commission. It's a drug, andif it's made available to someone under 21 or intoxicated, it can causemajor problems. Our primary concern is the potential for abuse.

The genesis of direct shipping laws dates back to 1934 and the ratificationof the 21st Amendment, which repealed Prohibition. The amendment also gaveeach state the authority to regulate the sale of alcoholic beverages withinits borders. The result is 50 states

with 50 wildly varying laws. California, for instance, has a completelyopen market, while Pennsylvania controls the sale of alcohol through statestores. Texas is perhaps the most restrictive state, with half of its countiesofficially dry.

While states for years have had laws on the books regulating direct shipping,due to the relatively small volumes involved and the difficulty in monitoringshipments, violations were generally treated with a wink and a nod.

Recently, however, a combination of factors has led to a nationwide crackdown.

Partly to blame is the popularity of the product and concurrent growthof the industry. Thirty years ago there were fewer than 100 wineries nationally;today there are more than 2,000. In Oregon alone the number of licensedwineries has skyrocketed from 38 in 1985 to 127. The American wine marketaccounts for nearly $14 billion in sales annually. It's estimated that directshipments account for roughly 5 percent.

The higher visibility of underage drinking combined with the nationalget tough on crime trend also has fueled the crackdown.

In addition, those shipping alcohol often elude sales taxes, and cash-strappedstate governments see millions of dollars slipping by.

But perhaps the biggest factor has been the explosion of wine clubs andmail-order wine retailers using the Internet to advertise and sell winesthrough the mail. Many blatantly disregard state shipping laws.

Even those who argue anti-shipping laws are necessary and proper concedeit's nearly impossible to stem the tide of mail shipments.

Paul Romaine is a lobbyist for the Oregon Beer and Wine Association,an industry group representing the state's alcohol distributors. His organizationis fiercely protective of current laws, and for good reason ­ the 250or so wholesalers and distributors nationally have a lock on alcohol distribution.Yet even Romaine admits buying through the mail saves money.

I live outside Portland, and most of the wine my neighbors buyis not bought from a store, he said. It's just cheaper to buyit through the mail.

However, Romaine stresses that the crackdown on direct shipping is necessaryto ensure alcohol does not fall into the wrong hands.

If the first word the public heard about it came from some kidwho bought alcohol through the mail and then had an accident or something,the public would go wacko, Romaine said. It's a bigger problemthan people know about.

Producers such as Henry scoff at that argument.

When I was a kid, I could get a bottle of wine or whiskey prettyeasily, Henry said. Do they really think some kid is going towait a week to buy an expensive case of wine? It's just an argument thrownup to get people worried, but it has no basis in fact.

Wine producers do agree that the problem of tax avoidance needs to beaddressed. However, Henry, whose winery ships about 100 cases of wine ayear but said he could easily double that were it not for the restrictions,said making felons of wine producers is not the answer.

Ideally all the states will get together and agree that shippingbetween states isn't a big problem, he said. Someone likes ourwine, wants to buy some and have it shipped to them. Why should that bea crime?