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Gov't shutdown brews trouble for craft beer industry

By Christian Hill | October 17, 2013

Even though the Alcohol and Tobacco Tax and Trade Bureau is resuming operations, breweries are preparing for a backlog of label approvals.

Local beer lovers should raise a pint for a quick end to the federal government shutdown.

There was no beer shortage looming, but a long-running closure could have affected the release of new and seasonal beers produced by craft brewers including Ninkasi and Oakshire breweries in Eugene, OR, USA.

The shutdown closed the little-­known federal agency that regulates and taxes the nation’s breweries, wineries and distillers. The Alcohol and Tobacco Tax and Trade Bureau, an arm of the Treasury Department, must approve new breweries, beer labels and recipes that use nontraditional ingredients such as coffee and chocolate to ensure that they comply with federal law.

A notice on the bureau’s website informed visitors during the shutdown that no employees were available to respond to inquiries and that the agency had “directed employees NOT to report to work and they are prohibited by federal law from volunteering their services during a lapse in appropriations.”

The furlough had left local breweries wondering whether they’d be able to release their canned and bottled beer to market as planned.

Nigel Francisco, Ninkasi’s chief financial officer, said it had ten labels for new and seasonal beers ready to submit, but the shutdown forced those into a “holding pattern.” The brewery could take a financial hit if those labels aren’t approved by early January, he said.

The shutdown ceased “nonessential” functions of the government, Francisco said, but the bureau’s approval “is an essential function for us to get product to market.”

At the time, Francisco said, “It’s frustrating that it came to this level, but I’m confident that something will happen in short order.”

Travis Hanson, Oakshire’s chief financial officer, said the brewery was ready to file paperwork for one label for a seasonal beer to be released this winter, but it recognized that there’s little it can do about the situation.

Hanson said the brewery is fortunate because it received approvals to update the look of its labels within the past three months.

“Now, looking back, we’re lucky we did it,” he said.

Tony Magee, owner of Lagunitas Brewing Co. in Petaluma, CA, USA, was far less diplomatic about the situation on messages he posted on Twitter this week.

“(Expletive) Feds are gonna shut down the already incompetent gov while hundreds of small breweries, including us, have labels pending. Nice.” That was followed with: “Wanna regulate? Perform or get out of the way.”

The shutdown started on Oct. 1 after Congress couldn’t come to agreement on stopgap legislation to continue funding the government, known as a continuing resolution, because of deep divisions between the Republican-controlled House and Democratic-led Senate over the health care law.

After 16 days, the shutdown came to an end just minutes before a midnight deadline when the government’s ability to borrow money would have expired, according to the New York Times

Even though the Alcohol and Tobacco Tax and Trade Bureau is resuming operations, it doesn’t mean it’s business as usual for craft breweries. It typically takes more than a month, sometimes longer, for label approvals under normal government operations, so breweries are preparing for a backlog.

The breweries were quick to note that even with the closure, the federal agency continued to collect taxes on the beer.

This story originally appeared in The Register-Guard, a Eugene, OR-based newspaper.