HB 34-SALES BY WINERY LICENSEE  CHAIR ELLIS announced HB 34 to be up for consideration. REPRESENTATIVE LEDOUX, sponsor of HB 34, explained that it allows wine to be shipped from a place in Alaska to another place in Alaska. Currently, Alaskans can only receive shipped wine from out of state. She said that Kodiak has two wineries and visiting Alaskans are not able to order its product. 2:18:22 PM CHAIR ELLIS asked why this is needed. CHRISTINE MARASIGAN, staff to Representative LeDoux, explained that people never thought that Alaska would be a hub of wine production and the language in the law was an unintended mistake. Specialty wines have become a niche industry with value added products in Kodiak. 2:21:45 PM SENATOR HOFFMAN noticed the legislation wouldn't allow shipments to dry villages and asked how that would be enforced. MS. MARASIGAN replied that she wasn't totally sure, but as with people who ship liquor, there is a list of communities that don't allow it. You simply don't ship to them. SENATOR HOFFMAN asked again how that is enforced if someone wants to make profit more than follow a community's wishes. 2:23:18 PM DOUG GRIFFIN, Director, Alcoholic Beverage Control Board (ABC), said that in terms of enforcement, the Board would share its list of dry communities with wineries on the ABC website. They do provide some oversight over wineries. The biggest penalty would be taking away the shipping part of their business, which would be a death knell. He thought the wineries would be conscientious, because rural villages are not their market. Also, he remarked that specialty wines are a national trend. 2:25:48 PM SENATOR HOFFMAN said he understands rural villages aren't their targeted market, but even if they are talking about specialty wine, they would be considerably cheaper than bootlegged products. He asked how that is being handled for wineries outside the state of Alaska. 2:28:51 PM MR. GRIFFIN replied that the ABC Board doesn't regulate outside wineries right now, although the legislature could choose to give it that power. Some states prohibit shipments from out of state wineries, but allowed instate wineries to ship instate. That practice was struck down by a Supreme Court decision in 2005. He said the Board works with the state troopers to do the best job they can with policing the bootlegging problem - with mixed results. He said the Kodiak winery wants to operate under the law and that could theoretically be a problem, but they would police it the best they could. SENATOR BUNDE said under the current system if the wineries sold to an alcohol retailer, then the wine could be shipped to a community and the same kind of enforcement would be in existence. 2:29:25 PM MR. GRIFFIN replied that is correct if the retailer is one of the 19 package stores that have permission to ship by written order. The shipping quantities are limited, however, just as package stores have quotas on how much they can ship on a monthly basis by written order. SENATOR BUNDE asked if there are 19 package stores that can ship would this bill would add another 8 wineries. MR. GRIFFIN replied that is correct. SENATOR HOFFMAN asked if package liquor stores use common carriers like Northern Air Cargo and Alaska Airlines, but the wineries would ship through a completely different means of transport like UPS and others that are harder to monitor. MR. GRIFFIN replied the wineries could use UPS or any of the others, but they can't legally use the U.S. Mail. So, they would have to form some type of a relationship with a delivery company, which could be a common carrier. SENATOR HOFFMAN asked if the common carriers normally have a minimum weight limit of 100 lbs. and it doesn't make financial sense to ship that way. UPS can ship smaller parcels. MR. GRIFFIN said he was correct. SENATOR STEVENS said he likes the fact that this bill attempts to level the playing field in that out-of-state wineries can now ship in, but it doesn't truly level it because outside wineries don't have to comply with our laws. A local one would. This local winery is putting itself on the line if it makes the mistake of shipping to a community that is dry. So, the state is still asking more of in-state wineries. 2:33:23 PM CHAIR ELLIS asked Mr. Griffin if he anticipated the ABC Board providing the do-not-ship list or was it up to each winery to get it. MR. GRIFFIN replied the Board is pro-active. Every time there is a change, it sends that list to the 19 package stores that sell by written order. These wineries would be added to the list; but it would take a few days. 2:34:35 PM CHAIR ELLIS asked if under existing state statute the ABC Board has the authority to punish wineries that ship to the do-not- ship list. MR. GRIFFIN replied that a regulation is already in place that allows them punitive authority, but they would probably have to add these wineries to the category, which could be done by regulation. The Board would also want to provide adequate due process by having at least one fair hearing before taking away someone's rights to ship by written order. CHAIR ELLIS asked him to find out for sure that he has the authority now. 2:36:40 PM SENATOR BUNDE asked if there is a state law that an out of state winery would be subject to in terms of shipping to a dry village. MR. GRIFFIN replied that out of state wineries aren't totally immune from the long arm of the law. Some provisions in federal law allow states to go after wineries that violate the state's laws. He never uses them, but they are there. The State of Florida, for instance, prosecuted someone in another state for shipping wine to a customer in Florida (a felony) working with the U.S. Attorney General. CHAIR ELLIS said if there is a fear among a lot of people that under-aged folks would order alcoholic beverages through the Internet and there would be no checking of ages. He asked Mr. Griffin to remind them of requirements for proof of age when the orders are placed. MR. GRIFFIN replied that hadn't been addressed other than very generally under Title 4 that deals with providing alcohol to someone who is not 21 years of age. This issue is a nationwide controversy. He thought that DHL, UPS and others since they are in the delivery business, have safeguards in place to make sure that it is accepted and signed for by someone over 21 years of age. He didn't know if that was impeccably enforced, but he hadn't received any complaints about it in Alaska. SENATOR STEVENS pointed out that they are talking about high quality wines from niche market wineries. There are only nine of them in the state and their wines are very expensive - maybe $40 a bottle. An under-aged kid would probably not have the palette or the money to order it. They need to keep perspective on this. 2:43:47 PM SENATOR BUNDE said he was afraid the economic argument wouldn't work, because there is proof that some people in some parts of Alaska will pay $200 - $300 for very cheap spirits. 2:44:32 PM REPRESENTATIVE LEDOUX wrapped up by reading a quote from a Supreme Court case on minors drinking. The staff of the FTC found that of the 26 states currently allowing direct shipments, none of them reported increased access to wine by minors. CHAIR ELLIS said he would keep the public hearing open and that he would hold HB 34 for a further hearing. There being no further business to come before the committee, he adjourned the meeting at 2:46:20 PM.