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Questions About How A Natural Disaster May Affect Your Licensed Business?

Wildfire news in Hawaii and Canada combined with Hurricane Hillary’s impact on Southern California has many of us thinking about disaster preparedness. Do you have questions about how a natural disaster may affect your licensed business?

On Friday, August 18, 2023, the California Department of Alcoholic Beverage Control (“ABC”) emailed a timely Industry Advisory about disaster-related alcohol laws to its subscribers. It has not yet posted the Advisory to its website, though it has previously published similar Advisories. Here’s a plain-English summary that highlights what you need to know.

1. After a fire or natural disaster, damaged businesses can temporarily relocate, transfer licenses to new locations, or surrender licenses.

When a licensed premises suffers property damage because of a fire or natural disaster, the ABC permits the business to relocate for up to six months while it makes repairs – but only to locations within 1000 feet. The ABC has discretion to extend the time for temporary operations for periods of 60 days. The licensee must file an application with the ABC. There is no fee for the application. (Cal. Bus. & Prof. Code § 24081.)

Although the August 18, 2023 Industry Advisory states the ABC has discretion to extend the 1000-foot distance limit for the temporary location, the ABC has since acknowledged that was an error. It does not have discretion to extend the distance, only the 6-month time period. (Cal. Bus. & Prof. Code § 24081.)

Licensees who want to transfer businesses for longer periods of time or farther away from the original licensed business can apply to the ABC for a license transfer. If the new location is in the same county, then the ABC will waive its $780 transfer fee. Licensees can ask to transfer back to the original location without having to pay fees if they transfer back within 18 months. (Cal. Bus. & Prof. Code § 24082.)

Regardless of whether a fire or disaster has occurred, if a retail licensee closes for more than 15 days, or closes permanently, then California law requires it to surrender its license. Surrendered licenses can be reinstated upon request so long as there has been no change in business ownership and the premises still has the same required qualifications (such as kitchens for licenses required to run restaurants). (Cal. Bus. & Prof. Code §§ 23100; Cal. Code Regs. tit. 4, § 65.)

2. Licensees don’t need ABC permission to change storage locations for alcohol.

Licensees can store tax-paid wine and beer anywhere in California. They don’t need ABC permission. If wine is stored in bond, licensees do not need ABC approval to transfer it to another facility, but taxing authorities (BOE, TTB) may have other requirements.

Licensees can store distilled spirits only on licensed premises located in the same county as the licensed business (often type 14 public warehouses). With ABC permission, licensees can also store distilled spirits in private warehouses located in the same county as the licensed premises. Licensees do not need ABC approval to transfer distilled spirits from one location to another. (Cal. Bus. & Prof. Code § 23106, Cal. Code Regs. tit. 4, § 76.)

3. Retail licensees can ask alcohol suppliers to exchange damaged alcohol products, but suppliers have discretion.

California law allows licensees to exchange alcoholic beverages that have deteriorated in quality or have damaged containers. The exchange must be for the identical quantity, brand, size of container, and item. Suppliers have discretion on how to respond to requests to exchange. The ABC must approve the exchanges. (Cal. Bus. & Prof. Code §§ 23104.1(e), 23104.2(e)(1), 23104.3.)

California law does not permit alcohol producers or wholesalers to replace alcoholic beverages lost or broken because of natural disasters. Suppliers can’t credit retailers for lost products. Retailers should file claims for lost goods with their insurers.

When licensees surrender licenses, the ABC permits their suppliers to pick up alcohol products and credit accounts. Businesses with surrendered licenses can also ask the ABC for permission to sell leftover stock to other licensees. Similarly, if the ABC allows, insurers can take possession of products damaged by fire and sell them to other licensees. (Cal. Bus. & Prof. Code §§ 23100, 23104, 23104.2(c), Cal. Code Regs. tit. 4, §§ 65, 79(c).)

4. After a natural disaster, beer manufacturers and wholesalers can help retailers in limited ways.

Within three months of a natural disaster, beer manufacturers, beer wholesalers, and their employees can give, rent, lend, or sell equipment, fixtures, and supplies other than alcoholic beverages to retailers whose equipment, fixtures, or supplies were lost or damaged because of a natural disaster. The retail premises must be in an area the California Governor declares is a disaster zone. (Cal. Bus. & Prof. § 25511; 27 C.F.R. §§ 6.41, 6.43.)

Although the ABC's August 18, 2023 Industry Advisory states any manufacturer or wholesaler can provide help to retailers, this privilege is limited to beer manufacturers and wholesalers and their employees. Federal law prohibits wine and spirits manufacturers and wholesalers from providing similar assistance.

5. The silver lining is -- if disaster strikes, at least you can delay any pending disciplinary hearings.

If your licensed business is in a declared disaster zone, then the ABC will freeze any pending accusations against your license. Gee, thanks ABC!

This informational piece, which may be considered advertising under the ethical rules of certain jurisdictions, is provided on the understanding that it does not constitute the rendering of legal advice and does not form an attorney-client relationship. You can unsubscribe from future messages by replying “unsubscribe” to this message.


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