A Wine Enthusiast’s Step-by-Step Beginner’s Guide to Importing Wine
As a lover of all wines good and as a budding hobbyist and neophyte collector of Italian (Piedmont, Tuscany, and Umbria regions), French (Rhone region), Spanish (Murcia and Rioja regions), and Washington State (Columbia Valley) varietals, I can’t seem to get enough of the culture, industry personalities, and business mechanics of my new found passion. When Shapiro asked that I become more involved in the commercial pursuit of those who import this wonderful stuff, I gladly dove right in.
Shapiro has been handling wine entries for many decades, but over the past 10 months, it seems that through referral, reputation, and an overall appreciation of the Shapiro compliance persona, we have been working with an increasing number of clients who are importing wine for the first time. Here, I’m sharing with you key initial compliance steps as well as an overview of other relevant details/resources involved in becoming a wine importer.
Step 1: Get your compliance paperwork in order
After developing a solid business and marketing plan, gaining the adequate financing, and identifying and targeting the appropriate suppliers and customers (a gross oversimplification), it’s time to obtain the proper credentials to ultimately import this wonderfully delicious commodity.
Below are some of the critical and necessary licenses, permits, and documents that must be executed and in place prior to placing your first purchase order and/or importing your first shipment:
- EIN- Employer Identification Number: This is a prerequisite for getting a Federal import permit and also necessary for opening up a bank account for any entity other than a sole-proprietorship. An EIN can be obtained on-line fairly easily at the IRS website.
- Federal Importer Basic Permit: The first industry license required to be obtained and also the most important. The TTB (Alcohol and Trade Tax Bureau) requires that you have a letter from a winery willing to export to you before you can apply. The application and instructions can be found on the TBB website and takes about 60 days for processing under normal circumstances.
- Certificate of Label Application (COLAs) On-Line: Once an importer receives their Basic Permit, they should immediately apply for access to on-line submission of their Certificate of Label Application (COLA). This simple one page form is free of charge and takes approximately 30 days and is ready for the importer when they have labels to present.
- Home State Licenses: Each state can radically differ when it comes to their licensing requirements. I recommend you visit TBB’s Alcohol Beverage Control Boards web page to learn more about individual state licensing requirements.
- FDA Product Registration: As an importer, you’ll need the Food & Drug Administration (FDA) registration number from each supplier (which the suppliers should already have if they are already shipping to the U.S.) and for yourself as a company if you will be storing the wine at your own facility. This registration process is a free of charge service. More information may be found on the FDA’s Registration of Food Facilities web page.
- Broker Power of Attorney: In order to have a Customs broker act on the behalf of an importer, a Broker Power of Attorney must be executed by an officer of the company that will be looking to import. This relatively simple document is a requirement and a fairly easy step to complete in the initial compliance process. Note: Brokers can act on behalf of importers by clearing their cargo with U.S. Customs and Border Protection (CBP) as well as with other relevant government agencies such as FDA and Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), for example.
- Customs Continuous Bond: CBP requires that all formal entries be backed by a valid bond or surety. The validity of a Continuous Bond is 12 consecutive months from bond inception date. A Continuous Bond can be purchased from Shapiro, or typically from most Customs brokers.
Step 2: Determine/Understand your terms of sale
I know step 1 was exhausting in and out of itself but it’s critically important for an importer to understand their specific individual responsibilities when negotiating terms of sale with their suppliers. Below is an explanation of the most commonly used terms of sale for import wine transactions:
- Ex Works (Ex Cellar): Means that the seller delivers when he places the goods at the disposal of the buyer at the seller’s premises or another named place (i.e. works, factory, warehouse, etc.) not cleared for export and not loaded on any collecting vehicle. This term thus represents the minimum obligation for the seller, and the buyer has to bear all costs and risks involved in taking the goods from the seller’s premises.
- FOB: Means that the seller delivers when the goods are loaded on board a vessel at the named port of shipment. This means that the buyer has to bear all costs and risks of loss or damage to the goods from that point. The FOB term requires the seller to clear the goods for export. This term is valid for vessel shipments only. If the cargo is delivered to the carrier by the seller before the goods are loaded on board the vessel, then the FCA term should be used.
- CIF: Means that the seller delivers when the goods are loaded on board a vessel at the named port of shipment. The seller must pay the costs and freight necessary to bring the goods to the named port of destination BUT the risk of loss or damage to the goods, as well as any additional costs due to events occurring after the time of delivery, are transferred from the seller to the buyer when the goods are loaded onto the vessel. The CIF term requires the seller to clear the goods for export and to provide minimum insurance cover. This term is valid for vessel shipments only. If the cargo is delivered to the carrier by the seller before the goods are loaded on board the vessel, then the CIP term should be used.
For more information on INCOTERMS, please visit Shapiro’s resource page and download our printable 2010 Easy Inco Incoterm guide.
Step 3: Become a pro at figuring out your duties and taxes
Unlike most commodities, the value of the wine being imported has very little to do with the duty/tax calculation since it is determined primarily by liter/case. Below is a table reflecting the import duty and IRS Tax owed for most wines:
Here are some additional resources I recommend (in addition to those already listed):
- Wine Institute
- Wine Business Monthly
- Small Business Association
- Wine Spectator
- Wine Enthusiast
- Wine Advocate
- Cor.kz Wine Application (iTunes App Store)
In addition to the above resources, I’d also like to recommend Deborah M. Gray’s book, “How to Import Wine, An insider’s Guide.” Gray does a great job explaining the realities of getting a wine import business off the ground and covers everything from building a business model to purchasing, marketing, and supply chain strategies. I would say this is a must read for those considering getting into the business. Many of the resources listed above come directly from her book.
Do you have any tips to share? What lessons have you learned as a wine importer?
Until next time, Salut!
-- Colin Chapman
Director, Regional Commercial Development
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