Ben Zerbe founded Paquera Mezcal to give small producers in Mexico an opportunity to sell their products in the United States. Today, Los Angeles-based Paquera works with five family producers in Oaxaca, Mexico, and its mezcal is available in more than 1,400 bars, restaurants and shops nationwide.
But the business, which has grown each year since its launch in 2018, hit a speedbump this fall during the government shutdown, when an obscure office within the Treasury Department suspended operations and furloughed 398 of its 459 employees. The office, known as the Alcohol and Tobacco Tax and Trade Bureau (TTB), is responsible for, among other things, enabling the bulk transfer of spirits within the U.S., approving the labels for new alcoholic beverages, and issuing permits for new distilleries and breweries.
“We need that office to be operating,” says Zerbe, who still has not been able to reach the office. “When no one’s there, we can’t do what’s called transfer bonds, meaning we can’t import bulk spirits and then transfer it to another licensed facility in the U.S. because no one in the office is there to approve it.”
TTB did not respond to Inc’s requests for comment, but according to its website, services have resumed. “While we are assessing the overall effect of the shutdown on our service levels going forward, we are working diligently to process applications and restore normal operations as quickly as possible,” the bureau said in a bulletin posted on Friday afternoon. It added that it would allow staff to work overtime to clear the backlog.
Ashley W. Brandt, an attorney at Tucker Ellis in Chicago who advises alcohol-industry clients, says he had six applications for wineries, distilleries, and breweries that were filed with the TTB prior to the government shutdown on October 1. In the past week, the agent in charge of one of the applications finally let him know the application was progressing.
“They’re doing the best they can with the staff they have,” says Brandt. “At the same time, I completely understand how hard this is going to be. I know there are plenty of new product innovations that got put on hold because of this.”
Even if the office quickly resumes its services, the spirits industry has faced more than a month of delays on crucial approvals in the run-up to the busy holiday season. “These lost weeks came at a pivotal time for the craft spirits industry, as the months of October, November, and December typically represent 30 to 40 percent of annual sales for many producers,” the American Craft Spirits Association wrote in a statement welcoming the end of the government shutdown. “New holiday releases, often key drivers of year-end revenue, were stalled in approval queues, delaying launches and straining small distilleries during their busiest season.”
Earlier this month, the founders of Song Dog Farm Distillery in Boyds, Maryland, told NBC News they were concerned they would not be able to roll out new cocktails and liqueurs for the holidays. Those beverages require TTB approval of both their labels and formulas. “It’s threatening to our business, and it’s disappointing to our customers,” David Harris, who owns the distillery with his wife, told the news outlet.
Zerbe of Paquera Mezcal estimates that he’ll experience about a 30 percent drop in short-term revenue. “It won’t tank our business,” he says. “But it hurts cashflow. It’s significant enough that it has caused some serious discomfort.” He adds that there’s not much small producers can do right now, besides comparing notes with each other and reaching out to customs brokers for the latest information. “The WhatsApp chats are going like crazy,” he says. “I literally talk to our customs broker almost every day.”
The delays at TTB come on top of an already challenging time for the alcohol industry. Alcohol consumption has dropped nationwide in recent years, causing ripple effects across the industry, as distributors, liquor stores, and bars and restaurants see their profits shrink.
New tariffs imposed by the Trump Administration have increased costs, shipping times, and uncertainty for importers. In March, after President Donald Trump threatened up to 200 percent tariffs on European spirits, the U.S. Wine Trade Alliance advised its members to halt all shipments to the U.S. And American whiskey brands faced consumer boycotts in Canada.
Zerbe says he’s been fortunate to not be affected by tariffs. Mezcal, which can only be produced in certain parts of Mexico, qualifies to be imported duty free under the U.S.-Mexico-Canada Agreement . He increased his imports at the start of the year because of the uncertainty over how tariffs might affect his business. But now, with that supply dwindling, Zerbe has mezcal sitting at distilleries in Mexico, awaiting the greenlight from TTB.
“For the spirits industry as a whole, this has been one of the hardest years, even more so than Covid,” says Zerbe. “It’s just so difficult to anticipate, calculate, and forecast what you need to grow and scale successfully.”
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Jennifer Conrad
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