Sonoma, Petaluma distilleries relieved after feds waive sanitizer fees

In the early days of the pandemic, hand sanitizer was flying off the shelves, and local distillers saw a need and a niche.

Americans scrambled to ensure good hygiene as COVID-19 grew more entrenched, buying hand sanitizer by the gallon. At the same time, unprecedented restrictions cramped or closed distillery tasting rooms.

Liquor distilleries had no shortage of alcohol and went to work making hand sanitizer — at Prohibition Spirits, co-owner Fred Growth oversaw the creation of cocktail-themed cleansers with smells like piña colada.

But this week, the U.S. Food and Drug Administration announced new fees under the $2.2 trillion CARES Act. That landmark piece of legislation in March, in addition to economic relief for workers, businesses and governments, included a new fee program imposing charges of more than $14,000 for distillers producing hand sanitizers, classifying such an operator as a “monograph drug facility.”

“I definitely don’t think it is fair,” Groth said. “We were basically asked to fill a need to help provide something for safety during the pandemic, and now they’re saying, ‘We’re going to charge you for helping out.’”

Fortunately for distillers like him, the Department of Health and Human Services announced Thursday afternoon it would intercede to block the fees.

“Small businesses who stepped up to fight COVID-19 should be applauded by their government, not taxed for doing so,” said Brian Harrison, chief of staff for the department, in a statement. “I’m pleased to announce we have directed FDA to cease enforcement of these arbitrary surprise user fees. Happy New Year, distilleries, and cheers to you for helping keep us safe!”

Groth, informed of the change, said it was “all good news.”

“Once again, the people have a voice and can make change happen,” he said.

Federal officials’ hurried end to the fees came after advocacy groups including the American Craft Spirits Association promised to seek waivers from the FDA, arguing on behalf of distillers who were temporary sanitizer producers and don’t intend to make it part of their full-time business.

The fees were to be due Feb. 12, according to the FDA, which did not respond to a request for comment and clarification Thursday. The fees’ purpose is to “support FDA’s (over-the-counter) monograph drug activities,” according to federal rules.

The American Craft Spirits Association, which advocates on behalf of distillers like Groth, sent out an urgent message to members Wednesday, a day after the FDA made the fees public. The association said it was “communicating directly with the FDA” and would seek waivers for “distilleries who produced hand sanitizer on a temporary basis and have no plans to continue to manufacture and sell into 2021.”

“ACSA is of the opinion this program was unintended for small businesses who temporarily stepped up to produce hand sanitizer to help communities in a time of need,” the association told members. “We will continue to advocate on your behalf as we also know most distillers were startled by the hefty user fee due in such a short time.”

The news of the fees’ waiver was cause for cheers from Jenny Griffo of Petaluma’s Griffo Distillery, which produces whiskeys, gins, a vodka and a cold brew coffee liqueur. Griffo said the pressure to produce hand sanitizer was so great in the early days of COVID-19 that she cut short a family vacation in March.

The revenue from selling hand sanitizer helped keep Griffo afloat, but she estimated the distillery gave away at least half of its stock, offering 8 ounces free to any front-line health care worker or high-risk individual. She remembers nurses from nearby Petaluma Valley Hospital visiting daily to bolster supplies with the distillery’s sanitizer. To her, word of the fees brought to mind an old adage: “No good deed goes unpunished.”

“It’s an absurd fee,” Griffo said.

Griffo said her distillery was positioned to absorb the blow of the fees if needed, though she was worried for other producers of spirits who may not be on sturdy enough financial footing.

“We’re not that vulnerable, but we know a lot of distilleries, our friends, that are just hanging on,” she said.

You can reach Staff Writer Will Schmitt at 707-521-5207 or will.schmitt@pressdemocrat.com. On Twitter @wsreports.