In what the Distilled Spirits Council of the U.S. described as a “shocking turn of events,” the Food & Drug Administration announced it was imposing a $14,000 fee on distilleries and other facilities that produced hand sanitizer during the Covid pandemic.
The only way to avoid the fee is to stop producing and selling hand sanitizer and to de-register in the FDA eDRLS system today, DISCUS said.
“This incredibly frustrating news comes as a complete shock to the more than 800 distilleries across the country that came to the aid of their local communities and first responders. This unexpected fee serves to punish already struggling distilleries who jumped in at a time of need to do the right thing,” said DISCUS President/CEO Chris Swonger.
“While this fee may be a rounding error to a large pharmaceutical company, this will be disastrous to small distilleries who stepped up to help produce this critical product – it will quite literally bankrupt some struggling businesses. We are urging FDA to immediately waive the fees for distillers who are producing hand sanitizer on a temporary basis to help combat the pandemic, pursuant to the FDA’s temporary policy.”
The FDA made the surprise announcement in a Federal Register Notice (FRN) titled “Fee Rates under the Over-The-Counter Monograph Drug User Fee Program for Fiscal Year 2021.”
These fees are being levied under a newly established “OTC monograph drug user fee program,” which has established fees on OTC monograph drug facilities, as well as OTC Monograph Order Requests (OMORs) for FY 2021. The FDA has stated that these fees also apply to facilities, including distilleries, that produced hand sanitizer under the temporary policy during Covid-19.
The fees impacting distillers are a $14,060 Monograph Drug Facility Fee and $9,373 Contract Manufacturing Organization Facility Fee. The fees for FY 2021 are due on Feb. 11, 2021.
“Everyone was totally blindsided by FDA’s announcement and as a result, craft distillers across the country are scrambling to understand and respond. Given all that’s happened in 2020, the timing of this news could not be worse. The $14,000 fee being assessed could certainly put many of these small family owned businesses out of business,” said Phil McDaniel, CEO of St. Augustine Distillery and Chair of the DISCUS Craft Advisory Council.
The fees were authorized by the “Coronavirus Aid, Relief & Economic Security (CARES) Act,” passed March 27, 2020, as the inital surge of Covid-19 was overwhelming hospitals and first responders, many of whom were left with inadequate or no supplies of hand sanitizer, even as bodies of deceased victims were being stacked into refrigerated trucks because funeral homes were unable to process them quickly enough.
An OTC monograph drug is a nonprescription drug without an approved new drug application. The fee will apply to both domestic and foreign businesses that made hand sanitizer.
The FDA was required by the CARES Act to publish the notice not later than the second Monday of May. The FDA did not immediately respond to a request why a notice that should have been published in early May was not published until the last day of the year.
Tariffs apply to wine, spirits
In a separate action, U.S. Trade Representative announced additional tariffs of 25% on sparkling and still wines produced in France and Germany, and spirits from distilling grape wine or grape brandy.
In a statement, DISCUS said it was “extremely disappointed that the U.S. has announced it will impose more tariffs on additional categories of imports of EU distilled spirits in connection with the civil aircraft subsidy disputes, including certain Cognacs and other non-grape brandies.
“These tariffs not only harm EU spirits producers, they also disrupt and negatively impact the entire U.S. hospitality industry supply chain. Hospitality businesses and our consumers, as well as producers, wholesalers and importers of distilled spirits are collateral damage in a dispute wholly unrelated to the drinks business.
“These tariffs are continuing to have a devastating impact on our businesses, which are also suffering due to the closings of restaurants, bars, and distillery tasting rooms because of the COVID-19 pandemic. We continue to urge the EU and the US to negotiate an agreement that will end the excessive and unwarranted tariffs on distilled spirits across the Atlantic without any further delay.”
This story is developing and will be updated.