Most Marylanders are now aware of Governor Lawrence J. Hogan, Jr.’s March 23, 2020 Executive Order in response to the global coronavirus outbreak closing non-essential businesses, however, the Interpretive Guidance issued by the Governor’s Office of Legal Counsel makes clear the order does NOT require “alcoholic beverage stores and distributors, distilleries, and wineries” to close.

Additionally, in response to the earlier March 16, 2020 Order “restaurants and bars are subject to specific provisions of the Order, and are required to close (EXCEPT FOR CARRY-OUT, DELIVERY, AND DRIVE-THROUGH SALES).” [Emphasis added.]

That March 16 Order provides in relevant part,

All Restaurants and Bars are hereby closed to the general public, effective as of 5:00 p.m. on March 16, 2020, except that, to the extent permitted by applicable law, and in accordance with any social-distancing recommendations of the Maryland Department of Health food and beverages may be:

i.   Sold if such food and beverages are promptly taken from the premises, i.e., on a carry-out or drive-through basis; and

ii.  delivered to customers off the premises.

Other states, including Pennsylvania have closed liquor stores as nonessential businesses, so many may not have been aware of the economic opportunity in the two enumerated sections, permitting the sale of beer, wine and spirits for carry out and delivery across Maryland. And this is potentially huge while these businesses are otherwise indefinitely shut down by the government when in most instances these businesses were not previously delivering alcoholic beverages.

While state law has provided for delivery, nearly every Board of Alcoholic Beverage Commissioners in Maryland established a procedure to approve deliveries in their respective county. As a threshold matter, of course deliveries of beer, wine and spirits may only be made by a licensee in the county where they are licensed. But few bars and restaurants or even package good stores have taken advantage of the ability to deliver alcohol.

Now, some local jurisdictions are providing for expedited approvals to deliveries (especially in light of the fact that most Boards are not holding hearing during the emergency), including, in Baltimore County,

Temporary License Allowance for Delivery

Due to the COVID-19 pandemic, the Board is temporarily allowing Class A, B and D license holders to deliver alcoholic beverages to citizens in Baltimore County only. Be advised you must adhere to Rule 9—Delivery Outside of the Licensed Premises of the Board’s Rules and Regulations. To take advantage of this delivery privilege, you must send your request in writing to the Board for approval. You may send a formal request by email to liquorboard@baltimorecountymd.gov. Any establishment that has been penalized for service to minors in the past three years will not be considered.

The Anne Arundel County liquor board is also asking license holders that want to deliver or sell off premises to seek approval by emailing LQHAGN00@aacounty.org. The Montgomery County board of license commissioners approved a resolution to allow restaurants to sell beer and wine to go with a meal during this period. Businesses must apply for approval. Garrett County also requires application and approval and requires a signed for by the receiver of each delivery (described by some as burdensome).

Other jurisdictions, including Baltimore City, are interpreting that the Executive Order trumps their local rules and now authorizes delivery without any special application of approval, at least through the end of the emergency. The Howard County liquor board has passed a resolution authorizing restaurants, bars, breweries, wineries, distilleries, and liquor stores to deliver and carry out, but a “Class B licensee may only deliver alcoholic beverages as part of an order that includes food,” all subject to other modest requirements within the resolution. Frederick County is temporarily allowing carry out and delivery by restaurants, clubs, breweries and distilleries, including expressly mixed drinks in a sealed and wrapped container.

While facing major disruptions and unprecedented volatility in their businesses, some entrepreneurial restaurants have even lowered wine prices to compete with the usually lower priced packaged goods stores (.. at least one restaurant has “half price bottle of wine Wednesday” today).

And lest you question how large an opportunity this can be in Maryland, the Denver Mayor ordered liquor stores closed, only to reverse the order later the very same day after customers swarmed to stock up on beverages.

With no end date in sight, that bars, restaurants and alcoholic beverage stores may now offer alcoholic beverages for carry out and delivery may be a economic lifesaver!  The rules vary between local jurisdictions in Maryland. Law firms are also deemed an essential business, so we remain open and if we can access key information to help you understand, prepare and respond quickly to the significant legal and business challenges of delivery of alcoholic beverages related to COVID-19, we are ready to help you.

This post was updated on March 23, 2020.

The U.S. Trade Representative is reviewing a list of additional European goods, including Scotch whiskies and French wines, for 100% tariffs.

The proposed duty to be paid on this very large class of alcoholic beverages will have a huge dollar impact not only on American wine drinkers, but also on a wide breadth of American businesses. The USTR is inviting public comments with respect to the imposition of those price doubling additional duties on specific products of specific EU member states. You should consider commenting.

This dispute dates to October 6, 2004, when the United States requested the World Trade Organization settle disputes with the European communities (now the EU), France, Germany, Spain, and the United Kingdom (certain member States) concerning certain illegal subsidies granted by the EU and member States to the EU large civil aircraft domestic industry (i.e., subsidies to Airbus). The WTO ruled for the U.S. and after failed negotiations, in October 2019, the WTO supported a U.S. request to impose tariffs.

Some of those products are already subject to duties or proposed duties of 10% or 25%.

Then in early December, the USTR proposed tariffs in response to the new French digital services tax, on French wine, including Champagne, that had not been included in the October tariff. And later in the month the USTR proposed to impose tariffs on more products, from bed linens to helicopter parts, including levies as high as 100% on nearly all wine from the EU.

So yes, because the EU illegally subsidized Airbus prices two decades ago, American consumers in 2020 are going to pay double for sparkling wine including Champagne, and more.

Irish and Scotch whiskies are proposed for the duty as is Cognac. Nearly all “wine of fresh grapes” from EU countries is now included.

In 2020 when California sober is “out” and Washington drunk is “in” one might think Washington imposing tariffs on alcoholic beverages, while necessary foreign policy is bad domestic policy.

The USTR is inviting interested persons to comment on whether specific products of specific EU member states should be removed from the list or should remain on the list, and if a product remains on the list, whether the current rate of duty should be increased to as high as 100%. The specific list can be found at the comment link below.

The USTR is soliciting public comments, although few have been received from the domestic alcoholic beverage industry on “whether maintaining or imposing additional duties on specific products of one or more specific EU member states would cause disproportionate economic harm to U.S. interests, including small or medium-size businesses and consumers.” If you are an importer, distributor, retailer, restauranteur, or a wine lover, you may wish to comment.

To be assured of consideration, submit comments by January 13, 2020.

The General Assembly is Maryland’s legislative body. The legislature meets in regular session for 90 days each year beginning the second Wednesday in January to act on more than 2,500 pieces of legislation.

On sine die, when the legislature adjourned its 439th session at midnight on the 90th day, on April 8, 2019, a total of 864 bills and 2 resolutions passed both chambers. Most of the legislation enacted in that 2019 General Assembly session, including those bills involving matters of alcoholic beverages, were effective on October 1, 2019.

This is a compilation of the more than 60 new laws involving alcoholic beverages. You can read each of the bills highlighted below at General Assembly.

Savvy players in the alcoholic beverage industrial complex will find business opportunities to lead and profit in matters of beer, wine and spirits, including opportunities advantaged by these newly enacted laws.

Statewide Alcoholic Beverages Regulation

In Maryland, alcoholic beverages manufacturers and wholesalers are regulated by the State Comptroller’s Office, while alcoholic beverages retailers are regulated by local boards of license commissioners. House Bill 1052 (passed) establishes the new Alcohol and Tobacco Commission and transferring most of the staff, powers, and duties related to alcoholic beverages and tobacco from the Comptroller’s Office to ATC. The Governor vetoed the legislation, but the General Assembly overrode the veto during the 2019 session. The new ATC consists of five members appointed by the Governor with the advice and consent of the Senate.

In January 2017, the alcoholic beverage distributor Diageo announced plans to open a Guinness brewery in Baltimore County. At that time, the law regulating on-premises sales and sampling for Class 5 breweries limited the sale and sampling to 500 barrels of beer each year. In 2017 the legislature made significant changes the manner in which Class 5 breweries were regulated to accommodate Diageo. This year, Senate Bill 801/House Bill 1010 (both passed) further enhance the privileges associated with a Class 5 brewery license, a Class 7 micro-brewery license, and a Class 8 farm brewery license. Among other things, the bills increase to 5,000 barrels the amount of beer that Class 5 and Class 7 breweries may sell each year for on-premises consumption, allow Class 5 breweries to brew and bottle malt beverages at the locations described on their individual storage permits, authorize Class 7 breweries to brew up to 45,000 barrels of malt beverages each calendar year, and authorize certain Class 5, Class 7, and Class 8 breweries to self-distribute up to 5,000 barrels of their own beer through the use of a Class 7 limited beer wholesaler’s license. The bills also set the hours of sale for Class 8 farm breweries at 10 a.m. to 10 p.m.

Established in 1974, the Beer Franchise Fair Dealing Act regulates the agreements, franchises, and relationships between beer manufacturers and their distributors (wholesalers). Among other things, the Act prohibits a brewery from terminating a contract with a distributor without good cause. Senate Bill 704/House Bill 1080 (both passed) shorten the franchise agreement termination process for a brewery that produces 20,000 or fewer barrels of beer per year. Such a brewery must wait 45 days, rather than 180 days, after notifying a distributor of its intent to terminate or refuse to renew a beer franchise agreement before terminating the agreement. Additionally, such a brewery is authorized to terminate or refuse to continue or renew a franchise agreement without good cause and is no longer required to give its distributor an opportunity to correct a deficiency if that is the reason the agreement is being terminated. However, the bills require the brewery to compensate the distributor for the fair market value of the terminated franchise and establish an arbitration process if the brewery and the distributor cannot otherwise reach a compensation agreement.

Mead is a fermented alcoholic beverage made primarily of honey and water. Production of mead dates to 9,000 years ago. Mead is categorized as a honey wine for federal excise tax purposes. As a result, mead has historically been considered a wine in Maryland for regulatory purposes, even though State law is silent on the issue, and has been taxed accordingly. Senate Bill 596 (passed) reclassifies mead by expanding the definition of “beer” to include mead and applies the same alcoholic beverages tax rate to mead that is imposed on beer.

A Class 1 distillery license authorizes the establishment and operation of a plant for distilling any amount of brandy, rum, whiskey, alcohol, and neutral spirits at the location described in the license. A Class 1 distillery license also authorizes the license holder to conduct guided tours; serve samples; and sell up to 2.25 liters of products manufactured on the licensed premises, for consumption off the licensed premises, and related merchandise, to persons of legal drinking age who participate in a guided tour of the licensed premises.

House Bill 549 (passed) authorizes a local alcoholic beverages licensing board to issue an on-site consumption permit to the holder of a Class 1 distillery license. The permit authorizes the sale of mixed drinks made from liquor produced by the distillery and other non-alcoholic ingredients for on-premises consumption. A distillery may only use up to 7,750 gallons of its own liquor for this purpose each year.

In 2016 the legislature authorized the Comptroller to grant a distillery off-site permit to a Class 1 distillery licensee or a Class 9 limited distillery licensee. House Bill 551 (passed) increases the number of farmers’ markets and other events that a distillery or limited distillery may participate in using a distillery off-site permit. Specifically, the bill repeals the 5-event limit on the number of farmers’ markets for which the permit may be used, and authorizes the permit to be used to participate in up to 32, rather than 6, other events each year.

House Bill 666 (passed) generally combines the nonprofit beer festival permit, nonprofit wine festival permit, and nonprofit liquor festival permit into a single nonprofit beer, wine, and liquor festival permit.

In general, an individual may not consume an alcoholic beverage in public nor possess an alcoholic beverage in an open container in public. House Bill 88 (passed) establishes that consuming or possessing an alcoholic beverage in this manner is a code violation and a civil offense rather than a criminal misdemeanor. Under the bill, a violator receives a civil citation rather than being subject to arrest.

Local Alcoholic Beverages Legislation

Allegany County. Senate Bill 667/House Bill 866 (both passed) authorize the Board of License Commissioners to issue a Class D (on-sale) beer and wine arts and entertainment district license to a for-profit festival promoter for use at an entertainment event held in an arts and entertainment district in the county. In addition, the bills authorize the board to issue a Class L beer, wine, and liquor license to the holder of a manufacturer’s license. The Class L license authorizes the holder to sell or provide samples of beer, wine, and liquor produced by the holder or by another manufacturer’s licensee for on-premises consumption during the hours of sale applicable to the underlying manufacturer’s license.

Anne Arundel County. House Bill 770 (passed) authorizes the Board of License Commissioners to issue more than one Class B, Class H, or Class BLX license to an individual already holding an interest in a license of a similar class. The interest may be held, controlled by direct or indirect ownership, stock ownership, interlocking directors or interlocking stock ownership, or any other direct or indirect manner. However, the other license type and interest must not be for a franchise operation or chain store operation. Continue Reading More than 60 New Alcoholic Beverage Laws Create Opportunity in Maryland

The U.S. Supreme Court is likely to overhaul the state regulation of retail alcoholic beverage licenses when it decides whether the state of Tennessee may limit the granting of liquor licenses only to individuals who have resided in state for 2 years or more. Many states and even counties have similar suspect restrictions, including Maryland.

The debate about alcohol’s place in American society is as old as the country. The first President once denounced alcohol as “the source of all evil—and the ruin of half the workmen in this Country.” George Washington, Letter to Thomas Green (Mar. 31, 1789). But the second President “enjoyed a tankard of hard cider with his breakfast every morning.” Thomas R. Pegram, Battling Demon Rum 8 (Ivan R. Dee 1998). That dichotomy persists because alcohol is not an ordinary article of commerce; it is arguably both widely enjoyed and dangerously misused. Centuries of regulatory experience confirm that there is no right answer; every approach, ranging from laissez faire to absolute prohibition, comes with tradeoffs. Weighing them necessarily depends on difficult value judgments and conditions that vary from time to time and place to place. Because striking the right balance requires appreciation of local factors, it makes sense to leave the regulation of alcohol to state and local officials. In general, that is precisely what the U.S. Constitution does, but ..

The 21st Amendment of the Constitution ratified in 1933 ending Prohibition (.. which was created by the 18th Amendment) provides that “[t]he transportation or importation into any State, Territory, or Possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited.” U.S. Const. amend. XXI, § 2. 2.

The Commerce Clause of the Constitution provides that “[t]he Congress shall have Power . . . [t]o regulate Commerce with foreign Nations, and among the several States, and with the Indian Tribes.” U.S. Const. art. I, § 8, cl. 3.

And the offending Tennessee law provides, “No retail license under this section may be issued or transferred to or held by, to any individual: (A) Who has not been a bona fide resident of this state during the two-year period immediately preceding the date upon which application is made ..”

The issue as stated in the U.S. Supreme Court briefs is: Whether the 21st Amendment empowers states, consistent with the dormant commerce clause, to regulate liquor sales by granting retail or wholesale licenses only to individuals or entities that have resided in-state for a specified time.

The local Total Wine affiliate prevailed, overturning the limitation, at the federal District Court and that decision was affirmed by the Sixth Circuit Court of Appeals.

Betting on the outcome of a Supreme Court case is somewhere between divination and a guess. And the January 16th oral argument revealed no clear winner. There was general acquiescence that, if Total Wine was seeking to sell something else, for example milk, Tennessee’s limitation clearly would be unconstitutional, because it violates the Commerce Clause by discriminating against out of state applicants. The crux of the matter before the Justices, then, was whether the 21st Amendment trumps and permits the Tennessee law. It is probable the majority is unconvinced that states have complete latitude to regulate alcoholic beverages beyond the express language of the 21st Amendment, and Tennessee’s residency requirement is likely to fall.

 

A decision in the case is expected by summer in Tennessee Wine and Spirits Retailers Association v. Blair.

Adult Beverage Delivery Trending

The most popularly delivered alcoholic beverage product in the U.S. is Veuve Clicquot champagne.

Across the U.S. alcoholic beverage sales growth is decelerating, but still growing. That trend does not hold in Maryland where consumption was actually down last year for each beer, wine and spirits (.. with 19.054 gallons consumed per capita in 2018 down from 19.684 gallons consumed in 2017).

But there is a bright spot and a tremendous business opportunity in the retail sales of alcoholic beverages in Maryland.

Delivery!

It was recently widely reported that nationwide online alcohol delivery sales grew over 32% last year, increasing at an average rate of just about 3% month over month. There is no similar state specific good data on delivery in Maryland, but the trend line is similar.

Statistics in this arena are all over the board, including whether what is being tracked is sales by gallon versus dollar amount of sales. Consistently looking at sales by gallon, .. just over 50% of all online ordered deliveries are wine. Beer and spirits are within single digits of splitting the difference with nearly 25% each of deliveries.

It is reported the most popularly delivered wine, and alcoholic beverage product, is Veuve Clicquot champagne. Madame Clicquot, the French business woman who was very much a product of the French Revolution took over her husband’s wine business when widowed (veuve in French) at age 27 and developed a novel fermentation process still used today, died in 1866, but would be proud of the exports to America by the company that still bears her name. In a fun Maryland connection, Betsy Patterson Bonaparte, the Baltimore born first wife of Jerome Bonaparte, Napolean’s brother, was a known fan of Clicquot champagne.

Anecdotally, it is suggested that much of that Veuve Clicquot is gift giving and outside of personal consumption habits.

Bud Light was the most popular delivered beer. And Tito’s vodka was the most delivered spirit, actually representing nearly 3% of all deliveries.

The reported data does not purport any great difference in gender. That is, women purchase about 55% of alcoholic beverages that are delivered. Ages of those ordering for deliver skew a bit younger than sales generally, but again the variation, about 3 years younger, does not appear significant from a marketing perspective, although anecdotally it is suggested orders by app versus by telephone trend significantly younger (.. apparently older customers place their orders by telephone; possibly a landline).

Nationwide, supermarkets are poised to become the most important vehicle for alcoholic beverage deliveries (.. supermarkets currently represent 44% of wine sales and 25% of beer and spirits sales in the U.S.), but such will not be the case in Maryland where supermarkets are generally not permitted to sell adult beverages. Moreover, in Maryland where delivery can only be in the county where the packaged good retailor is licensed (not statewide as in nearly all other states), existing retailers are buttressed by the trend toward delivery.

In Maryland the market opportunity for delivery is with existing licensees and there is no good reason that the increase will not track nationwide statistics of more than 32% growth over last year.

As grocery stores and restaurants deliver exponentially larger quantities of food, beer, wine and spirits sales by delivery are only a step behind.

You cannot wait to deliver by autonomous vehicle or even drone. The market shift is happening now.

This is much more than only the impact that Amazon is already having on retail. Food delivery, in particular, is projected to grow by the double digits, at 12% per year, for each of the next five years. While grocery stores see some sales cannibalization, such has not been the case for restaurants, where more than 25% of consumers spend more on off-premises orders. But that many delivery sales do not include beverages, alcohol or otherwise, (.. despite that beverages provide high margins) presents a huge opportunity for increased sales.

And in Maryland that fast growing market for beer, wine and spirits delivery will, by law, be filled by existing alcoholic beverage license holders (i.e., Amazon Prime is not delivering beer in Maryland).

And this is not Homer’s dangerously wine-dark sea. Responding to that demand and after a change in state law, Alcoholic Beverages Article, § 3-506 et seq, that expressly provides for delivery, nearly every Board of Alcoholic Beverage Commissioners in Maryland now has a procedure to approve deliveries in their respective county. As a threshold matter, of course deliveries of beer, wine and spirits may only be made by a licensee in the county where they are licensed. This limiting factor is a huge boon to existing package good operations.

The rules vary from county to county. In Baltimore City, a licensee desiring to deliver alcoholic beverages must complete the Baltimore City Delivery Registration Application Form and receive a letter of authorization from the Board before deliveries may be made.

The City rule does not require a public hearing on the delivery request. But as a limiting factor, mimicking the 2015 state law “each delivery person shall be an employee of the licensee,” which arguably precludes the use of third party delivery companies? The rule also tracks the state enabling law expressly authorizing “delivery service upon request by customers through any mode of electronic contact (e.g. smartphone application, or internet on-line purchase, etc.).” Each delivery requires, “the signature of the intended recipient who is at least 21 years old, ..”

Baltimore County is currently proposing revisions to its rules, and its rules have historically been more limiting than other jurisdictions. A request for a letter of authorization to deliver requires that the licensees appear before the Board and demonstrate at a public hearing how staff will be trained to comply with the rule. The County requires an Alcoholic Beverage Delivery Form be completed for every delivery and maintained for a period of time (although that period of time is one of the rule changes pending).

In Howard County, similarly, licensees must appear before the Alcoholic Beverage Hearing Board for their letter of authorization from the Board to make deliveries. Delivery must be “made from the licensed premises by the retail license holder or an employee of the retail license holder” (.. again, parroting the state law). A delivery log must be kept that documents all retail deliveries in a manner similar to keg registration requirements.

Again, the rules vary between local jurisdictions in Maryland, but in each instance a licensee must obtain liquor board authorization in advance of making deliveries.

Local boards are also handling ordering through a third party differently. Despite the apparent limitation in state law, among the fastest growing businesses in this sector are those accepting orders by phone app and delivery by ..?

We first posted Delivery will Change the Alcoholic Beverage Industry in 2018 and we will follow up with more and additional posts on the all but explosive business opportunities of delivery.

It was recently widely reported that online alcohol delivery sales grew over 32% last year, increasing at an average rate of just about 3% month over month. None of those deliveries were by robot; not yet .. But, if you are not delivering alcohol to your customer, your competitor will.

On December 20, 2018, the Agriculture Improvement Act of 2018 was signed into law and among its most discussed provisions are those removing hemp from Schedule I of the Controlled Substances Act.

The Secretary of Agriculture and the respective USDA agencies are working to implement the provisions of the 2018 Farm Bill as expeditiously as possible. To allow for public input and ensure transparency, USDA determined to hear from stakeholders regarding their priorities, concerns, and requests.

The USDA’s Specialty Crops Program is conducting a listening session (by webinar) to solicit public comments on the sections of the 2018 USDA Farm Bill relative to multiple sections dealing with industrial hemp.

The listening session will be on March 13, 2019, and will begin at 12:00 pm EST and conclude by 3:00 pm.

USDA is drafting a regulation that will provide details on sampling procedures, testing requirements, licensing, compliance and other procedures that production facilities and overseeing agencies need to employ to receive a license from USDA. The 2018 Farm Bill requires each plan to include:

a practice to maintain relevant information regarding land on which hemp is produced in the State or territory of the Indian tribe, including a legal description of the land, for a period of not less than 3 calendar years;

a procedure for testing, using postdecarboxylation or other similarly reliable methods, delta-9 tetrahydrocannabinol concentration levels of hemp produced in the State or territory of the Indian tribe;

a procedure for the effective disposal of plants, whether growing or not, that are produced in violation of this subtitle; and products derived from those plants;

a procedure to comply with the enforcement procedures under subsection (e) of the Farm Bill;

a procedure for conducting annual inspections of, at a minimum, a random sample of hemp producers to verify that hemp is not produced in violation of this subtitle; and more.

You must register by March 11, 2019, to speak during the listening session and to provide oral comments during the listening session. Register in advance at https://zoom.us/webinar/register/WN_L2G9K7cXTkayQ2O1_0AP0g

The 2018 Farm Bill is remarkable because by removing hemp from Schedule I of the Controlled Substances Act it creates opportunities for hemp and its derived products, including hemp CBD oil.

DISCLAIMER: “Federal and state laws [should] be changed to no longer make it a crime to possess marijuana for private use.” – Richard M. Nixon, 1972. Despite that statement, be aware that possessing, using, distributing and selling marijuana are all federal crimes and may be state crimes. Beyond this disclaimer this blog post is not intended to give you criminal law advice or for that matter any legal advice.

Maryland only this past year repealed provisions of law applicable in specified counties that made it a criminal offense to knowingly selling or providing an alcoholic beverage to an individual with an intellectual disability or to an individual if a family member or guardian has given written notice to the license holder that the person is of an unsound mind.

It is difficult to understand how in modern times in Allegany, Carroll, Charles, Harford, Kent, Montgomery, Queen Anne’s, and Washington counties, an alcoholic beverages license holder or an employee of a license holder may not knowingly sell or provide an alcoholic beverage to: a habitual drunkard; an individual with an intellectual disability; or an individual if a family member or guardian has given written notice to the license holder or employee of the license holder not to sell or provide an alcoholic beverage to the individual because of the individual’s physical condition, intemperate habits, or unsound mind.

Generally, “knowingly” means the knowledge a reasonable individual would have under ordinary circumstances based on the habits, appearance, or personal reputation of an individual.

A violation was a misdemeanor.

Not only was the criminalization of serving someone with a disability a violation of the American with Disabilities Act, but also a violation of the U.S. Constitution and Maryland Declaration of Rights.

Senate Bill 461 passed the Senate and House of Delegates unanimously and with the Governor’s signature the bill took effect July 1, 2018.

In the final days of 2018 the President signed into law H.R. 5317 repealing the pre-Civil War prohibition on certain alcoholic beverage manufacturing on Indian lands.

I the parlance of the early 19th century the bill repeals a prohibition on creating or continuing a distillery in Indian country for manufacturing ardent spirits, when it almost cryptically provides, “Section 2141 of the Revised Statutes (25 U.S.C. 251) is repealed.”

The now repealed 1834 law was one of the Indian Trade and Intercourse Acts enacted in the 18th and 19th centuries. The law has its origins in legislation pursued by President Thomas Jefferson in 1802 banning all alcohol in Indian country.

The purpose of the 19th century laws was to regulate non-Indian interaction with individual Indians and Indian tribes on Indian lands. While the operation of the Trade and Intercourse Acts has been repealed or superseded by subsequent laws, several of them, including the one prohibiting distilleries on Indian lands, remained in effect through 2018.

The Indian Trade and Intercourse Acts reserved to the United States the exclusive right to acquire Indian lands and to regulate and restrict trade with tribes.

The early 19th century acts were intended to implement and enforce the terms of Indian treaties against “obstreperous whites, [and] gradually came to embody the basic features of federal Indian policy” to preserve peace on the frontier, including by imposed restrictions on the sale, exchange, or barter of spirituous liquors to Indians in Indian country.

Section 21 of that Act provides that if any person sets up or continues a distillery for the manufacturing of ardent spirits in Indian country, the penalty shall be $1,000 and the superintendent of Indian affairs shall destroy and break up the distillery.

Most of the 1834 law remained in effect until 1953 when Congress passed the last of six Indian termination acts to eliminate historical discriminatory legislation against Indians in the United States. Under the 1953 law, the production and distribution of liquor is permitted in Indian country subject to the laws of the State in which such acts or transactions occur, and subject also to tribal ordinances approved by the Secretary of the Interior.

Nonetheless, because the 1834 law imposing express restrictions on distilleries in Indian country remained in effect, there was a question whether a tribe may lawfully construct and operate a distillery on its reservation even though it may be permitted to build and run a brewery or winery.

The 1834 law expressly prevents any tribe from hosting a distillery project on its lands. While the law may have advanced a valid public policy goal in the mid 19th century, or not, it is not compatible with the modern policy of promoting tribal self-determination and economic diversification on Native American lands where existing laws provide reasonable regulation of liquor transactions.

The bill was especially supported by the Confederated Tribes of the Chehalis Reservation, which plans to construct and operate a distillery and restaurant on its lands. According to the Tribe, the project, part of a larger brewery, distillery, and restaurant project, will be wholly tribally owned and operated, with net profits going to the Tribe.

Last week the Baltimore County Board of Liquor License Commissioners issued a new Class B-ECF/DS alcoholic beverage license to the University of Maryland Baltimore County.

Despite that there were already 781 alcoholic beverages licenses issued for use in Baltimore County, this license is significant.

For those interested in inside baseball, this is an entirely new class of license. The Class B Education Conference Facility/ Dining Service beer, wine and liquor license was created by Senate Bill 1144 in the last General Assembly session authorizing the holder to sell alcoholic beverages for on-premises consumption from multiple designated outlets on the UMBC campus. So, yes, there will only be one of these licenses and it may only be issued for use on the UMBC campus. And as noted it was issued last week and alcohol flowed this past Saturday evening at the Inaugural Celebration for County Executive Johnny Olszewski, Jr.

While the opening of the new 172,000 square foot Event Center on the UMBC campus triggered the discussions that lead to this license, across the country, alcoholic beverages have been available to basketball fans who pay for fancy suites and premium seats, including in the Retriever Room at the UMBC venue. There has been a taboo on alcohol sales to most in attendance, in deference to the many underage college students in the bog room, but that has eroded across the country. While the NCAA is increasing the frequency of athletic events where alcohol may be sold, college campuses are also more than ever renting their venues for non traditional college uses as revenue sources.

In point of fact this Maryland bill was signed into law the same day a similar bill was signed in North Carolina allowing alcohol to be served at college sporting events.

But it is the non college athletic events that will be held in the new Event Center (.. think Harlem Globetrotters) that could only take place at a venue that sells alcoholic beverages, which events are necessary to produce the revenue required to retire the bonds that funded the building.

Which makes sense to many folks. But why was General Assembly action required? Simply put, despite that the legislature passed the largest bill in Maryland history, only 2 years ago in 2016, some 3,180 pages long, re-codifying the state alcoholic beverage laws, there was no law that authorized a license at a college campus in Baltimore County.

So, we worked with UMBC and crafted legislation modeled after the license law that exists in Prince George’s County for the University of Maryland College Park.

Historically, St. John’s College in Annapolis, the third oldest college in North America, served beer as far back as 1784. So beer on college campuses in Maryland is obviously nothing new.

And the need to seek relief in the state legislature also has application in the private sector. Some years ago we worked with a restaurant owner to create the new class of Towson Small Restaurant license in the General Assembly.

The value of liquor licenses has increased dramatically across Maryland in recent years, including because of shifting market forces that have resulted in the growth in numbers of restaurants, all of which portends the importance of a liquor license to many business justifying the time, inconvenience and expense of seeking a change in state law create a new license.