§ 30-16d — Alternating proprietorship agreements. Requirements. Regulations.

(a) For the purposes of this section: (1) “Alternating proprietorship agreement” or “agreement” means a written agreement between a host manufacturer and at least one tenant manufacturer under which the host manufacturer agrees to share permit premises with, or rent permit premises to, a tenant manufacturer for the purpose of producing alcoholic beverages; (2) “Certificate of label approval” has the same meaning as provided in 27 CFR 4.10, as amended from time to time; (3) “Host manufacturer” means a manufacturer who enters into an alternating proprietorship agreement with a tenant manufacturer and agrees to share permit premises with, or rent permit premises to, the tenant manufacturer pursuant to such agreement; (4) “Manufacturer” means the holder of a manufacturer permit issued under section 30-16 ; (5) “Permit premises” means the location where alcoholic beverages are produced under an alternating proprietorship agreement; and (6) “Tenant manufacturer” means a manufacturer who enters into an alternating proprietorship agreement with a host manufacturer and agrees to share permit premises with, or rent permit premises from, the host manufacturer pursuant to such agreement. (b) (1) A host manufacturer and a tenant manufacturer may enter into an alternating proprietorship agreement, provided: (A) If the host manufacturer is sharing permit premises with the tenant manufacturer pursuant to such agreement, the host manufacturer or tenant manufacturer shall be deemed to be in exclusive control and possession of those portions of the permit premises which such host manufacturer or tenant manufacturer is actively using to produce and store alcoholic beverages pursuant to such agreement. (B) (i) Each manufacturer shall separately hold title to (I) all ingredients, packaging supplies and raw materials that such manufacturer uses to produce alcoholic beverages pursuant to such agreement, and (II) all alcoholic beverages such manufacturer produces on the permit premises pursuant to such agreement until such alcoholic beverages are removed from such permit premises. (ii) All alcoholic beverages, ingredients, packaging supplies and raw materials described in subparagraph (B)(i) of this subdivision shall be conspicuously labeled in a manner that identifies the manufacturer who is in possession of such alcoholic beverages, ingredients, packaging supplies or raw materials. (iii) Nothing in subparagraph (B)(i) or (B)(ii) of this subdivision shall be construed to prohibit a tenant manufacturer from purchasing ingredients, packaging supplies or raw materials from the host manufacturer before the tenant manufacturer begins producing an alcoholic beverage pursuant to such agreement. (C) During all stages of the production process, each alcoholic beverage that a manufacturer produces pursuant to such agreement shall be maintained (i) separately from the alcoholic beverages produced by all other manufacturers pursuant to such agreement, and (ii) in a manner in which such manufacturer's alcoholic beverages are readily identifiable as such manufacturer's alcoholic beverages. (D) Each manufacturer who is a party to such agreement shall assume any risk of loss of an alcoholic beverage that such manufacturer produces pursuant to such agreement, and no tenant manufacturer shall return to the host manufacturer any alcoholic beverage that such tenant manufacturer produces pursuant to such agreement. (E) (i) Each manufacturer who is a party to such agreement shall (I) separately maintain control and responsibility over the alcoholic beverages that such manufacturer produces pursuant to such agreement as well as the production quantity of, and formula development and quality control standards for, such alcoholic beverages, and (II) ensure the independence of such manufacturer's brands, marketing, product registrations, sales and trademarks. (ii) Nothing in subparagraph (E)(i) of this subdivision shall be construed to preclude a tenant manufacturer from paying a host manufacturer for any service rendered by a host manufacturer's employee for the purpose of assisting the tenant manufacturer with any aspect of such tenant manufacturer's operations. (F) Each manufacturer who is a party to such agreement shall (i) maintain separate records concerning such manufacturer's production pursuant to such agreement, sales and any other matter required by other applicable law, (ii) file separate licensing, production and sales reports with federal and state authorities as required by other applicable law, and (iii) separately pay any tax due on the alcoholic beverages such manufacturer has produced pursuant to such agreement. (G) Each manufacturer who is a party to such agreement shall (i) be approved, licensed or qualified by the federal Alcohol and Tobacco Tax and Trade Bureau as required by federal law, (ii) be responsible for obtaining such manufacturer's (I) certificates of label approval, and (II) brand registrations from the department under section 30-63 , and (iii) label each alcoholic beverage that such manufacturer produces pursuant to such agreement with such manufacturer's business name and the address of the permit premises. (H) No manufacturer who is a party to such agreement may be owned by any person who owns any other manufacturer who is a party to such agreement, except if such manufacturers are producing different classes of alcoholic beverage. (2) Nothing in subdivision (1) of this subsection shall be construed to prohibit (A) multiple manufacturers from equally sharing the ownership or use of any permit premises, or (B) an out-of-state manufacturer from entering into an alternating proprietorship agreement with a host manufacturer as a tenant manufacturer, provided the out-of-state manufacturer applies for a manufacturer permit under section 30-16 . (c) The department may adopt regulations, in accordance with the provisions of chapter 54, to implement the provisions of this section.

Legislative History

(P.A. 23-50, S. 3.)