BILL NUMBER: S5437A

SPONSOR: MURPHY
 
TITLE OF BILL:

An act to amend the alcoholic beverage control law, in relation to
establishing a primary American source of supply for liquor and wine
sold in this state

 
PURPOSE:

This bill would require that all wine and liquor sold in the state be
received from a primary American source of supply.

 
SUMMARY OF PROVISIONS:

Section one amends subdivision 35 of section 3 of the alcoholic beverage
control law to add two new subdivisions, 23-a and 23-b.  Subdivision
23-a defines "primary American source of supply" to mean (a) a manufac-
turer or liquor or wine if such liquor or wine can be secured directly
from the manufacturer by a distributor in the United States, or (b) if
              

the liquor or wine cannot be secured directly from the liquor or wine's
manufacturer by a distributor in the United States, another manufacturer
or bottler, or its legally authorized exclusive agent, from whom the
liquor or wine can be secured by a wholesaler or distributor in the
United States and is the source closest to the liquor or wine's manufac-
turer in the channel of commerce. Subdivision 23-b defines "private
collection" as applied to wine or privately held wines means bottled
wine that (a) was purchased at retail or auction, (b) was owned by a
non-licensed person for at least two years with proof of purchase, and
(c) is at least five years old if it is white or rose wine, and at least
ten years old if it is red wine, port or sparkling wine.

Section two amends the alcoholic beverage control law by adding a new
section 116-a. Subdivision one requires a manufacturer of a liquor or
wine at the time the same become suitable for wholesale or retail sale
shall designate the primary American source of supply and such primary
American source of supply shall file a registration application with the
authority on forms provided by the authority.  Each brand of such liquor
or wine shall be individually listed on such registration. A wholesaler
shall designate one primary American source of supply for each brand of
liquor or wine the wholesaler sells in this state.

Subdivision two establishes that the authority shall only register only
one primary American source of supply for any single brand of liquor or
wine. The manufacturer or bottler may register a new primary American
source of supply and cancel the registration of the former primary Amer-
ican source of supply by filing a new authorization with the authority
not less than forty days before the new authorization becomes effective.

Subdivision three establishes that a primary American source of supply
shall file with the authority the names of authorized wholesales for
each brand of liquor or wine sold in this state. If the primary American
source of supply is a wholesaler, it may list itself and other whole-
salers as an authorized wholesaler of the brand. The filing of a whole-
sale price posting, in accordance with section one hundred one-b of this
article, listing the names of the authorized wholesalers shall be deemed
compliant with this requirement. The authorized wholesalers may be
changed at any time at or prior to the time a wholesale price posting is
to be filed pursuant to such section. If the primary American source of
supply does not list any authorized wholesalers, any licensed wholesaler
may purchase the liquor or wine from the primary American source of
supply and sell the brand in this state.

Subdivision four states that except as set forth in subdivisions seven
and eight of this section, no one shall ship or cause to be shipped into
the state, or shall any wholesaler or retailer in this state receive,
any liquor or wine unless the primary American source of supply for such
liquor or wine has filed an application for registration as the primary
American source of supply, the application has been approved by the
authority, and the brand is purchased from the primary American source
of supply or an authorized wholesaler.

Subdivision five states a wholesaler in the state shall not purchase,
receive or be in possession of liquor or wine unless the wholesaler
obtained it directly from a registered primary American source of
supply, a designated representative if the primary American source of
supply is outside this state, or an authorized wholesaler.

Subdivision six states that nothing in this section shall be deemed to
prohibit subsequent intrastate sales transfer, and invoicing of a brand
of liquor or wine between authorized wholesalers of that brand.

Subdivision seven states that a wholesaler may bring liquor or wine into
the state if the wholesaler certifies to the satisfaction of the author-
ity that the brand of liquor or wine comes from a manufacturer or bott-
ler that cannot, or has not and will not appoint a primary American
source of supply.

Subdivision eight states the section will not apply to: (a) a brand of
liquor or wine owned exclusively by one retailer and sold at retail
within this state exclusively by such retailer; or (b) a product
purchased by a wholesaler or retailer in accordance with section eight-
y-five and ninety-nine-g of this chapter consistent with the rules,
regulations, order and advisories established by the authority.

Subdivision nine establishes the authority to perform such acts,
prescribe forms and make rules, regulations, orders and advisories as it
may deem necessary or proper to fully effectuate the provisions of this
section including, but not limited to, establishing a format for record-
ing the primary American source of supply and its designees.

Section three establishes the effective date.

 
JUSTIFICATION:

The proposed legislation would amend several provisions of the Alcoholic
Beverage Control ("ABC") law to create a "primary American source of
supply" of liquor and wine for distribution and sale of alcoholic bever-
ages in New York State. The legislation would direct the manufacturer or
owner of a liquor or wine to designate the primary American source of
supply and to file a registration application with the authority. The
enactment of a primary source law would provide greater accountability
for all wine and liquor distributed and sold in New York State.

Under a primary American source statute, wholesalers may only buy wine
and liquor directly from the brand owner or manufacturer. The primary
source is the manufacturer of liquor or wine, or the source closest to
the manufacturer in the channel of commerce from whom the product can be
secured by New York wholesalers. Under New York State's current statuto-
ry framework, there is no restriction on wholesalers seeking sources of
wine and liquor other than from the direct primary source. These non-
primary sources encompass importers from other nations. This proposed
primary source legislation would make it unlawful for any wholesale
licensee to purchase wine or liquor from other than the primary source
of supply in the United States. The legislation requires brand owners,
distributors, owners, and retainers to keep and complete accurate
records of the sales chain, the size, and brand of products. These
provisions would also increase tax collections and ensure the integrity
of the products.

According to the New York State Law Revision Commission-the oldest
continuous agency in the common law world committed to law reform
through legislation-primary source laws give a state precise excise tax
assessment and collection. A study conducted by American Economics Group
estimated approximately $39.3 million additional tax collections annual-
ly. The New York State Law Revision Commission also asserts that a
primary source law, which would identify all wholesalers able to
distribute a manufacturer's brands, would decrease the potential for
lost revenues from inaccurate reporting.  Moreover, according to the
Commission, "By far the most compelling reason to impose a primary
source law or system involves the protection of the public's health and
safety." Both brand owners and industry professionals have voiced
concern that without a primary source law, a brand owner would not be
able to assure the purity and integrity of the product.

 
LEGISLATIVE HISTORY:

2017: S5437

 
FISCAL IMPLICATIONS:

Increase in tax revenue for the State.

 
EFFECTIVE DATE:
This act shall take effect on the ninetieth day after it shall have
become a law; provided, however, that effective immediately, the addi-
tion, amendment and/or repeal of any rule or regulation necessary for
the implementation of this act on its effective date are authorized and
directed to be made and completed on or before such effective date.