Calwise Spirits Co. Owner Aaron Bergh Credits Support from Media and Public for Decision Reversal But Warns the Dust Has Not Settled
PASO ROBLES — Following immense public backlash, the Department of Health and Human Services (HHS) has ordered the Food and Drug Administration (FDA) to reverse its decision to impose a last-minute $14,060 tax on emergency manufacturers of hand sanitizer.
Back in March 2020, when the COVID-19 pandemic hit the U.S., there was an extreme shortage of essential medical supplies such as face masks, hospital gowns, and hand sanitizer. In response, the FDA issued an emergency declaration that allowed distilleries to produce hand sanitizer.
“The FDA’s announcement was set to wipe out our holiday-season profit,” said Aaron Bergh, a Paso Robles-based distiller, and owner of Calwise Spirits Co. “Because the people rallied around us and spoke out, we found ourselves the recipients of a New Year’s miracle.”
As with hundreds of other distilleries throughout the country, Bergh converted his distillery into a hand sanitizer manufacturing facility overnight. In 6 weeks, he produced 5,000 gallons of hand sanitizer and prioritized distribution to medical workers, first responders, and public servants at the frontlines of the pandemic. Orders for pallets of sanitizer were coming from agencies and companies hundreds of miles away from his distillery – including the FBI, Department of State, and California Office of Emergency Services.
“Some of my hand sanitizer was donated. The rest was sold at a fraction of the market price. My goal was to get as much out as I could, at as low of a price as I could, while being able to bring my furloughed employees back to work. The hand sanitizer business saved me from bankruptcy – but I didn’t make an enormous profit.”
Whether a distillery produced 5 gallons or 5 million gallons doesn’t matter – all would have owed the FDA the $14,060 flat fee by Feb. 11. Even if the distillery donated every single drop of hand sanitizer, they would have been required to pay the $14,060 flat fee. In addition, if distilleries did not cancel their FDA facility registration by Dec. 31, 2020, only three days after the FDA’s announcement, they would have assessed an additional $14,060 fee for continuing operations in the year 2021.
Even though Bergh saw the announcement on Monday, Dec. 28, he didn’t understand that it applied to his operations until Tuesday night, when he received clarification in an email from the Distilled Spirits Council of the United States, the top public advocacy group for the spirits industry.
“Per the FDA Over-The-Counter Monograph User Fee Program (OMUFA) webpage, these fees do apply to facilities that manufacture or process hand sanitizers under the Temporary Policy for Preparation of Certain Alcohol-Based Hand Sanitizer Products During the Public Health Emergency (COVID-19) Guidance for Industry,” wrote Chief Legal Officer and Corporate Secretary Courtney Armour.
A month ago, Bergh was contacted by an FDA inspector who audited his hand sanitizer production records. Bergh learned that many other distilleries in his state were receiving random audits as well. “I respect and appreciate the FDA’s efforts to keep the public safe by making sure people aren’t marketing defective products. I would have understood if they were following up on complaints but selecting random law-abiding distilleries to visit during the resurgence of the toughest wave of the pandemic and business closures is unreasonable.”
Bergh said when the FDA inspector asked specific questions relating to the value of the hand sanitizer that was being made. “I thought it was odd he wanted to know how much I made, how much I sold it for, and the value of the hand sanitizer I still had on-hand. Now it seems to me that they were trying to assess how big the pie was so they could determine how big of a slice they could take.”
However, following immense public backlash, the Department of Health and Human Services (HHS) announced on Monday, Jan. 4, that they have ordered the FDA to reverse its decision to impose a last-minute $14,060 tax on emergency manufacturers of hand sanitizer.
“The FDA’s announcement at the beginning of this week was set to wipe out our holiday-season profit,” Bergh said. “Because the people rallied around us and spoke out, we found ourselves the recipients of a New Year’s miracle.”
When Bergh received the news, he spoke out to several news publications, and the story went viral. It soon gained coverage in every mainstream media outlet. It attracted the attention and rage of concerned citizens and even some members of congress. After roughly 24 hours, the HHS announced it was taking action to prevent the FDA from enacting the fees.
Even though the HHS has ordered the FDA to retract the fee, the FDA has not yet stated its intentions to follow through, according to Bergh. For distillers, there are still many questions that remain to be answered.
“Although the fee is supposed to be waived for 2020 operations, it appears distillers will still be charged if they continued operating past Jan. 1, which includes selling any current inventory. Are distillers that deregistered to avoid fees going to have to take a loss on their current inventory that is now rendered unsellable?” Bergh questions.
HHS Director Brian Harrison’s statement asserts that leadership was unaware of the plan to enact the exorbitant fee and would have never authorized such an action.
“Perhaps Director Harrison did not authorize this, but it’s clear that someone in a high-ranking leadership role at the HHS or FDA did,” says Bergh.
For now, it looks like distillers can rest easy knowing they don’t have a $14,060 bill to pay and can focus on the more pressing matters that the new year will bring.
“I’m grateful the Distilled Spirits Council of the United States and American Craft Spirits Association were tirelessly advocating on our behalf with the federal government. I think the result of this story is proof that people can make a difference at the grassroots level. Ultimately, this would not have changed without the outcry and support from the general public. Thank you to all who stood up for small businesses like us – your voices were clearly heard.” Bergh shared.
About Calwise Spirits Co.
As one of the youngest master distillers in the world, proprietor Aaron Bergh has created a line of premium spirits that embody the essence of the Golden State. Visit CalwiseSpirits.com
