A winegrape's optimal ripeness represents a small window of opportunity for grower and winery alike. Often that window is just too small to complete unfinished negotiations or resolve disagreements over the condition of the grapes and other vital matters.
Wineries can minimize problems during and after crush by understanding their rights and obligations and by planning ahead. Now is the time to make sure the proper licenses, contracts, and procedures are in place.
Obtain the Required Licenses
In some states, licenses are required not just to operate a winery. New York and California are two of the states where additional licenses are needed for the purchase of grapes.
Most California wineries are aware that purchasers of grapes here are required to obtain a state Processor's License. Here are some things you should know also:
- For full compliance with the Processor's Law, a license should be obtained before negotiations with growers commence.
- Aside from sole proprietors or partners, each individual who negotiates for the purchase of grapes must also he licensed as an Agent of the processor.
- The annual license fee is based on the anticipated dollar value of purchases. In addition, processors must contribute a sum (currently $125) into a common trust fund established to partially reimburse growers if licensees default. Only "Cash Buyers" are exempt from this contribution, but in the wine business they are few and far between. (To qualify as a cash buyer you pay for the grapes at the time of delivery in coin or currency only — even cashier's checks don't fulfill this requirement).
- California law provides stiff penalties and possible imprisonment for operating a business without the proper license. Generally, however, when a tardy applicant voluntarily complies, the processor is simply required to pay double the license and the trust fund fees for the current license year. As a matter of practice, the penalty fee is waived if no money is currently owed to growers. An additional Dealer's license is required if grapes are purchased and resold.
- No processor's license is required for the purchase of juice, unless crushing the grapes was a condition of purchase imposed upon the grower. Wineries may not realize that purchasers of grapes grown in other states, such as Oregon and Washington, must also obtain a Perishable Agricultural Commodities Dealer's License from the PACA Branch of the U.S. Department of Agriculture. The annual cost is $300.
Plan for Good Grower Relations
Many of the disputes handled by the California Department of Food and Agriculture arise from rejection or down-grading of grape loads because of the presence of rot, MOG, mold, raisining, or other undesirable characteristics. Problems can be minimized by these preventative measures:
- Write the standards you will apply in judging the grapes into your grape purchase agreements. Be specific about acceptable limits and actual penalties for exceeding those criteria.
- If a load arrives that does not meet your standards contact the grower immediately. Advise him what actions you propose, to give him the opportunity to agree or find another home for the load if he prefers.
- You must have an official inspection report signed by a state or local official to justify any unilateral rejection or downgrading of the grapes. If you have no oral or written agreement from the grower supporting the adjustment you wish to make, contact the County Agricultural Commissioner or the CDFA Winegrape Inspection Service.
- Keep good records. Many disputes are caused by simple accounting problems.
- BATF labeling standards require wineries to maintain exact records of wine composition. It is permissible to accept loads of grapes from vineyards planted to mixed varietals, but the winery is required to record the varietal mix accurately. Percentage composition can be estimated by making a vine count, taking into consideration relative productivity of the various grape types. BATF requires wineries to resolve all uncertainties "in favor of the consumer," i.e., any potential error should result in a decreased varietal percentage. The harvest season is chaotic enough without any preventable hassles. A little planning and forethought can eliminate many problems before they arise.
Note: Application forms for a California Processor's License can be obtained from the Market Enforcement Branch, Department of Food and Agriculture, 1220 N Street, Room A-454, Sacramento, CA 95814. Application forms for a PACA license can be obtained from PACA Branch, U.S. Dept. of Agriculture, 300 West Congress Street, Box FB3O, Tucson, Arizona 85701.
Forgiveness in Compliance
At Compliance Service of America, we handle compliance work for many wineries. Over the years we have learned some lessons about handling our mistakes that we hope will help you handle yours. Here are a few things every compliance person needs to remember whenever some unforeseen snafu darkens your doorway:
- In compliance, a perfect score is impossible. The rules are far too numerous and complex for any mortal to get through a career in compliance with a perfect score. So don't paralyze yourself with the fear of making a mistake. Dealing with mistakes is just part of the job.
- Since some mistakes are inevitable, you have nothing to feel guilty about. Most regulators will work with you on fixing a mistake, and your boss or partners will be understanding if they realize that perfect compliance is impossible to achieve. (If they don't, show them this article.) Paranoia only makes any mistake much more difficult to correct. Self-forgiveness is essential in any nearly impossible undertaking.
- Remember that almost all compliance mistakes can be fixed. It's not over until it's over. So when something goes wrong, maintain a constructive attitude. The chances are excellent that you can work out a solution. Sometimes it's appropriate to simply tell the regulators what happened, and follow their advice. Other times you may want to correct the mistake without calling attention to it. If a situation seems particularly sticky, or you want to get feedback from the regulators without contacting them directly and revealing your identity, an independent professional can help you.
- Use memory aids — a lot. A mind is a terrible thing to waste, and to try to remember endless compliance information — from requirements to deadlines — is a waste of a good mind. Here's how to keep your mind free for higher functions: A. Write down everything you learn. Take good notes, and write down your source and the date you got the new information. B. Create a good reminder system. If you use ShipShapeTM, you're one of the lucky ones, because it will keep track of your license expiration dates, create a reporting to do list which is updated every time you change a price or add a product, and makes forms and letters automatically. But, any computer with some inexpensive calendar/alarm software and a little input from you, can be brilliant at remembering calendared events. Take a big load off your mind and put that load where it belongs: on a computer!