NC distilleries that made hand sanitizer stunned by democrat proposed $14,060 federal fee

[Leroy N. Soetoro]

https://www.newsobserver.com/news/local/article248221505.html

Jonathan Blitz was shocked when he learned Thursday that the Durham
distillery he co-owns, Mystic Farm and Distillery, would have to pay a
$14,060 fee to the Food and Drug Administration.

The FDA was assessing the fee to hundreds of distilleries like his that
pivoted from producing spirits to hand sanitizer to make up for the
shortage when the coronavirus pandemic swept across the country in March
and April.

In a notice published this week, the FDA said it was authorized to collect
the fees under the Coronavirus Aid, Relief, and Economic Security or CARES
Act that provided help to businesses, governments and individuals hurt by
the pandemic. Distillers like Blitz never saw it coming.

“As soon as I saw that number, it was shock first. Second was panic. How
are we going to pay it?” Blitz said in an interview. “How much sanitizer
do you have to be selling a month to make it worth paying $14,000 plus
dollars every year?”

An outcry from distillers and their trade organizations reached leaders of
the Department of Health and Human Services, which includes the FDA. They
issued a statement late Thursday saying the fee would not have to be paid.

“This action was not cleared by HHS leadership, who only learned of it
through media reports late yesterday,” the statement said.

The statement said the department had ordered the Federal Register notice
to be withdrawn, “meaning these surprise user fees will not need to be
paid.”

“Small businesses who stepped up to fight COVID-19 should be applauded by
their government, not taxed for doing so,” Brian Harrison, HHS chief of
staff, said in the 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!”

That announcement was hailed by the American Craft Spirits Association and
its president, Becky Harris of the Catoctin Creek Distilling Company in
Virginia.

“We are incredibly grateful to HHS for opening a dialogue with us, and
look forward to working more collaboratively together in 2021 with FDA to
ensure our members are treated fairly for the challenges they face to
support their hometowns via hand sanitizer production in the wake of
COVID-19,” Harris said in a written statement.

COST OF PRODUCING HAND SANITIZER
In April, at least 35 distilleries in North Carolina were making hand
sanitizer, said Carol Shaw, the executive director of Distillers
Association of North Carolina.

Many of the distilleries that pivoted to producing hand sanitizer have
struggled, Shaw said, including Dock Porters Distillery in Charlotte,
which has since closed and lost its lease.

For Mystic, hand sanitizer production took over the entire facility, Blitz
said. All the tanks were used to produce hand sanitizer, forcing the
company to stop making its usual product, whiskey, for five months. The
business will feel the impact of the pivot in 2023 or 2024 when it would
be selling that whiskey, Blitz said.

The company has started producing whiskey again. Blitz said had the FDA
told him about the fee before it started making hand sanitizer, he would
have set aside the money to pay it or “not entered the business in the
first place.”

Pete Barger, owner of Southern Distilling Company in Statesville, said he
spent a lot of money to produce hand sanitizer, including hiring waiters
and waitresses who had been laid off. He invested in capital and worked to
meet FDA requirements for hand sanitizer, he said.

When he first saw the fee, he thought to himself, “Thank God it’s not
$100,000,” he said. “But at the same time, that’s a lot of money for a
small company where that (hand sanitizer production) is not the focus of
what they do day in and day out.”

‘THESE FEES CAME OUT OF NOWHERE’
Durham Distillery began producing hand sanitizer in April, said its
president and CEO Melissa Katrincic. She was “incredulous” when she first
heard about the fee, she said.

Distilleries were in a unique position to produce hand sanitizer because
of their equipment and alcohol, Katrincic said. Durham Distillery donated
hand sanitizer to local restaurants, bars, first responders, health care
workers and shelters, she said.

Not only did distilleries have to halt production of spirits, they also
had to follow FDA guidelines and get approval, as well as source the
plastic containers to hold the hand sanitizer.

Katrincic sat on the national task force for hand sanitizers for the
American Craft Spirits Association, the industry trade group. They worked
with businesses across the industry to make sure they were putting out met
FDA requirements and kept people safe, she said.

“These fees came out of nowhere,” Katrincic said. She said if she knew
about the fee, she would have informed distillers about it through the
task force.

“They shouldn’t be charging this in the first place,” she said. “If we’re
called to the carpet again … we have to start making hand sanitizer again,
why would we?”



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