TRAVERSE CITY — The U.S. Food and Drug Administration on Tuesday notified distillers who made hand sanitizer in 2020 that they each owed a fee of $14,060. Late Thursday, the Department of Health & Human Services withdrew the scheduled fee.
“These alarming and sudden payments will no longer be due on February 11, 2021,” a Thursday evening email from trade organization American Craft Spirits Association told distillers across the nation.
Tuesday’s announcement of the unexpected fee shocked distillers from coast to coast.
“It’s an unusual timing and request, in our opinion,” Traverse City Whiskey Company owner Chris Fredrickson said Thursday before the fee was withdrawn.
Local distilleries swiveled last spring from making drinkable spirits to producing hand sanitizer to help slow COVID-19 infection. They donated much of their hand sanitizer to front-line workers, particularly early in the pandemic when national supplies were short.
Distilleries that produced hand sanitizer in 2020 include Northern Latitudes Distillery in Lake Leelanau, Iron Fish Distillery in Thompsonville, Central Lake-based Mammoth Distilling, Traverse City Whiskey and Grand Traverse Distillery in Traverse City.
A provision in the CARES Act updated regulation of non-prescription drugs. Another segment of the CARES Act created user fees to help fund the FDA. Tuesday, the FDA unveiled its new fee structure for organizations that produce over-the-counter drugs. Hand sanitizer is classified as an over-the-counter drug.
Distillers hoped the planned $14,060 charge also came as a surprise to the lawmakers who crafted the CARES Act.
“The guidance that we’re getting is that this might be unintentionally impacting craft distilleries. But nonetheless, the rule has been issued,” Richard Anderson, one of the four owners of Iron Fish, said Thursday morning. “It’s unclear, so there’s confusion in the market.”
Distillers received an email Wednesday night from the ACSA saying it would seek to clarify the situation.
“ACSA is communicating directly with the FDA to determine under what circumstances the fees are applicable. Moreover, we are taking all steps to advocate for a waiver for those distilleries who produced hand sanitizer on a temporary basis and have no plans to continue to manufacture and sell into 2021,” the message stated.
The association encouraged distillers who don’t plan to produce hand sanitizer in 2021 to “IMMEDIATELY de-register with the FDA” to avoid another annual billing.
“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 message stated. “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.”
Thursday’s follow-up message from the association said its efforts had succeeded.
“We are truly a community of craft distillers — who collectively sounded the alarm with legislators and local news outlets as ACSA worked around the clock to speak to regulators here in Washington — and that is more evident than ever tonight as we receive this news,” CEO Margie A.S. Lehrman said in the email.
The owners of Iron Fish had no idea they might face such a big fee.
“It is crazy,” Anderson said Thursday morning. “As a craft distillery, we’ll need to delist with the FDA and close down any retail hand sanitizer business that we’re serving — today. We were never really in that business to begin with — we were doing it as a community service.”
Other distilleries may remain in the hand sanitizer business.
“We haven’t made a decision one way or another,” Fredrickson said Thursday afternoon.
Distilleries that make hand sanitizer in 2021 could be required to pay the $14,060 annual fee. The latest mailing from the ACSA included a reminder for members who don’t plan to make sanitizer in 2021 to de-register by the Thursday deadline.
We were “doing this as a community service and making sure there’s supply available,” Anderson said. “I think that supply is getting normalized. We were happy and proud to play a role when there was a national shortage.