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Launch of Ukiyo Japanese Gin in US

PESTLE — Legal & Environmental

LEGAL

To import alcohol into the United States, it is necessary to go through the federal legal process managed by the TTB, followed by the regulations of the states we intend to import into.

• 1. Federal level - TTB (Alcohol and Tobacco Tax and Trade Bureau):
     • The TTB is the primary agency regulating alcohol imports into the United States.
     • The TTB is responsible for approving labels, formulations, and issuing import permits.

1. Importer of record:
   • • The foreign company Ukiyo cannot apply directly to the TTB. They are required to hire a U.S. importer holding a Federal Basic Importer Permit because the TTB only deals with entities that have a legal address and business license in the United States.
     • This is the first and most crucial step. This importer will be responsible for taxes, legal compliance, and all legal matters with the TTB. They will also be the party directly submitting all applications to the TTB and the individual states.
2. Formula Approval Dossier:
   • • The famous Ukiyo Gin contains natural ingredients including yuzu, mikan, sansho, and cherry blossoms... This is the standard for Ukiyo Gin. If the gin contains other substances, approval will be required for import.
     • Detailed description of ingredients: name, origin/source, and percentage of each component.
     • Production process: a description of the manufacturing steps from raw materials to the final product.
     • Provide FDA (Food and Drug Administration) information for the ingredients.
     • It is also necessary to provide a safety data sheet and usage warnings.
3. Label Approval (COLA – Certificate of Label Approval):
   • • The label must contain the following complete and accurate information:

• Brand Name: "Ukiyo Japanese Gin"
• Class/Type: "Gin"
• Importer Name and Address: Including city, state, and ZIP code.
• Origin: "Product of Japan" or "Made in Japan"
• Net Contents: In U.S. measurements (e.g., 750 ml, 1.0 L)
• Alcohol By Volume (ABV): (e.g., 40% alc/vol or 80 proof)
• Government Warning: Must be the exact verbatim warning required by U.S. regulations.
• Serial Number

1. Submit the Import Permit Application:
   • • The importer will submit an application for a Federal Basic Importer Permit (TTB F 5100.24) to the TTB.
2. Federal taxes: There are two main types of taxes:
3. Federal Excise Tax (FET):
   • • This tax is calculated based on:

• The type of alcoholic beverage (beer, wine, spirits)
• Alcohol content and volume.
  • • Calculation Method: Taxed per "Proof Gallon." One Proof Gallon is equivalent to 1 gallon of spirits (3.785 liters) at 100 proof (50% ABV).
    • Proof Gallon Formula: Number of gallons * (ABV / 50%) or Number of liters * ABV / (50% * 3.785)
    • Tax Rate for Distilled Spirits (> 40% ABV): $13.50 per Proof Gallon.
    • Specific example for Ukiyo Gin (a 9-liter case, assuming 42% ABV):

Number of gallons: 9 liters / 3.785 ≈ 2.38 gallons.

Number of Proof Gallons: 2.38 * (42 / 50) = 2.38 * 0.84 = ~2.0 Proof Gallons.

FET per case: 2.0 * $13.50 = $27.00.

FET per 750ml bottle: ~$27.00 / 12 bottles = $2.25 per bottle.

• • • When the alcohol enters a U.S. customs bonded warehouse, the importer with the Importer's Basic Permit must pay the federal excise tax. This tax must be paid before the alcohol can be released for sale on the market.

1. Customs duty:
   • • The import duty is based on:

• HS code (Harmonized System Code).
• Product type (beer, wine, spirits).
• Alcohol content, bottle volume, and country of origin.
  • • For Gin:
• Specific HS Code: 2208.50.0000
• Chapter 22: Beverages, alcoholic liquids and vinegar.
• Heading 08: Distilled ethyl alcohol (Spirits).
• Subheading 50: Gin and Genever.
  • • Duty Rate: According to the U.S.-Japan Trade Agreement (USJTA), goods from Japan are eligible for duty-free treatment.
    • To receive this preferential rate, Ukiyo Gin must provide proof of origin from Japan.

1. Other Applicable Fees:
   • • Merchandise Processing Fee (MPF): This fee is 0.3464% of the commercial value of the goods (based on FOB value), with a minimum of $29.22 and a maximum of $614.35 per entry. This is a standard fee for most imports.
     • Harbor Maintenance Fee (HMF): Applicable if goods are imported via sea ports, this fee is 0.125% of the commercial value of the cargo.
   1. State level:
      • After obtaining all necessary documents from the TTB, Ukiyo and the importer must register the product in each state where they intend to sell.
      • Each state has its own alcohol distribution laws, but there are two primary state models:
2. Control states:
   • • There are 17 control states, including major and potential markets such as Pennsylvania, Ohio, Virginia, North Carolina, Oregon, Washington, Michigan, and New Hampshire.
     • In these states, the government holds a monopoly on the wholesale distribution and/or retail sale of spirits (distilled spirits). The state establishes an Alcoholic Beverage Control Board (ABC Board) as the sole authorized wholesaler. Any importer/producer wishing to sell spirits within the state must sell their product to this ABC Board.
       • 1. Product Registration:
     • Similar to other states, you must submit an application to register the product and its label with the state's ABC Board.
       • 1. Listing Decision:
     • This is the critical step. The ABC Board will decide whether to list Ukiyo Gin in its portfolio of products allowed for sale in the state. This decision is based on:

• Available shelf space.
• Potential sales volume and profit for the state.
• The product's uniqueness and alignment with consumer demand within the state.

1. Presentation:
   • • The importer often must conduct an in-person presentation to the ABC Board to "pitch" their product. They must present the product's unique qualities, marketing plans, and reasons why the state should select Ukiyo Gin.
2. Ordering & Distribution:
   • • If accepted, the ABC Board will place orders directly with the Importer. All retailers (stores, bars) within the state that wish to sell Ukiyo Gin must purchase it from the ABC Board's warehouse.
3. License states:
   • • There are 33 license states, including major markets like California, New York, Florida, Texas, Illinois, and Nevada.
     • The state government does not sell alcohol but instead licenses private companies to act as Wine and Spirits Wholesalers. The importer must sign a contract with one or more distributors in each state. This distributor purchases the product from the importer and sells it to retailers.
       • 1. Find & Sign a Contract with a Distributor:
     • Ukiyo must find a distributor with a strong retail network, a good reputation, and enthusiasm for the product.
       • 1. Research State-Specific Label Requirements:
     • Some states (e.g., California, Florida) have their own label requirements in addition to the TTB's COLA (e.g., translating the government warning into Spanish).
4. Distributor Submits Product Registration:
   • • Typically, the Distributor will be the one to submit the product registration application for Ukiyo Gin to the state's alcohol regulatory agency, using their own business license.
5. Approval & Sales:
   • • Once the product is approved, the distributor can begin importing stock from the Importer and distributing it to stores and bars.
6. State Excise Tax:
   • • License State: The tax is imposed on the distributor or retailer.
     • Control State: The tax is imposed on the state itself (as the seller).
     • Calculation: The state excise tax is typically calculated per wine gallon or proof gallon of spirits.
     • Examples of Tax Rates: Rates vary significantly by state (examples from 2021 data):

• Kentucky had the highest rate ($3.23/gallon).
• Followed by Alaska ($2.50), and Florida ($2.25).
• Iowa ($1.75), Alabama, and New Mexico had equal rates ($1.70).
• The lowest rates were in California and Texas ($0.20).
  • • Regardless of how high the tax is, the economic burden is typically not borne by the supplier but is passed on to the end consumer, who pays it as part of the final price.

1. Sales Tax:
   • • The consumer pays this tax at the point of retail purchase.
     • Calculation: It is calculated as a percentage (%) of the final retail price.
     • Variation: The sales tax rate differs for each state and often includes additional local (county/city) taxes.
2. Income Tax & Other Fees:
   • • State Corporate Income Tax: This tax applies to the profits the Importer earns from selling Ukiyo Gin in that state. Each state has a different corporate tax rate.
     • Registration & Licensing Fees: These are a form of "indirect tax." These costs must be factored into the cost of goods sold.

ENVIRONMENT

Green supply chain:

• • • American consumers are increasingly concerned about sustainably sourced ingredients and environmental protection.
    • This includes using renewable energy at the distillery, utilizing recyclable packaging, and partnering with botanical suppliers who practice sustainable agriculture.

1. Production & Distillation:
   • • Renewable Energy: Ukiyo Distillery could use solar power or purchase green energy for its operations. This is a strong selling point.
     • Water Management: Water-saving distillation technologies or cooling water recycling systems should be implemented. Water is a key raw material, and its conservation is crucial.
     • Botanical Waste Utilization: After distillation, the spent botanicals can be repurposed as compost for local farms or animal feed, moving towards a "zero-waste" model.
2. Packaging:
   • • Glass Bottles: Use recyclable glass with a high recycled content. While the bottle design should be attractive, complex shapes that are difficult to recycle should be avoided.
     • Package Printing: Prioritize the use of paper and plant-based or bio-inks.
     • Plastic Reduction: Eliminate plastic or use biodegradable bioplastics.
3. Carbon Emissions Management:
   • • Ukiyo should not merely purchase carbon credits. Instead, they should collaborate with their distribution partners to fund meaningful carbon offset projects that align with the brand, such as:

• Funding mangrove reforestation in coastal regions to protect shorelines, which are critical ecosystems.
• Investing in renewable energy projects either in Japan or in the very U.S. states where their product is distributed.