BEER DISTRIBUTORS PICKING UP BREAKAGE AFTER DELIVERY TO A RETAILER – TTB OPINON
Below is the clarification on the application of the consignment rules that are set forth in the Federal Alcohol Administration Act (FAA Act) as to the exchange/return of product breakage.
Pursuant to section 27 U.S.C. 205(d) it is unlawful for an industry member to sell or offer to sell alcoholic beverages to a trade buyer on consignment, or under conditional sale, or with the privilege of return or on any basis other than a bona fide sale. However, there is an exception for products that are returned for a bono fide commercial reason.
Merchandise returns for ordinary and usual commercial reasons which do not constitute a consignment sale are found at 27 CFR 11.32-11.46. They are:
- Error in delivery
- Defective product
- Product unlawful to sell
- Termination of retail business or wholesale franchise
- Change in product
- Discontinued product
- Seasonal dealer
With exception to the termination of a business and seasonal dealers, the exceptions are not dependent on the retailer actions. They are things that occurred beyond the retailer’s control. Breakage, on the other hand, is something that happened only at a specific retailer and the supplier or manufacturer had no control over it. Therefore, breakage is not exempt from the consignment sales rules.