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3 Operational Challenges Unique to Wine & Spirits Importers

Ned Blinick

Chief Product Officer

On the surface, Wine & Spirits (W&S) importers are really no different than importers from other industries. Sure, they need to deal with CBP for customs and duties, as well as Partner Government Agencies (PGAs) such as TTB and FDA, but many other importers also need to deal with PGAs. And yes, W&S Importers have some complexities like the requirement to calculate and pay excise taxes, but there are other industries that have similar requirements too.But there are a few dimensions that W&S Importers face that set them apart from most other importers and make their importing process more burdensome and costly.

  1. The number of suppliers - Wine producers tend to be small. With the rise of microbreweries and microdistilleries the beer and spirits industry is now reflecting a similar profile. The sheer number of suppliers that an importer is required to manage results in a high degree of complexity for the W&S importer. This is specifically evidenced during shipment where containers are often a consolidation of many POs from multiple suppliers. Given this type of scenario, the management of the import process - particularly with customs, FDA and TTB - is complex and expensive. It is complex due to the large amounts of information that need to be aggregated from each supplier/producer at the item level. It is expensive because you need to pay someone to manage this complexity - usually your broker.
  2. Multiple IORs - For larger importers, an added complexity and opportunity is to consolidate shipments using multiple IORs (Importers of Record). It isn’t unusual. From an importing perspective , it makes absolute sense to consolidate shipments to save money on transportation. From a logistics perspective, it creates a challenge since the various shipments are typically destined for different locations. Controlling the deconsolidation process is not something that ismanaged efficiently in most organizations.
  3. The requirements of the PGAs - W&S Importers deal with two main PGAs: TTB and FDA.
  4. For TTB, W&S Importers are required to ensure they have the appropriate COLA (certificate of label approval) for each product that is imported. The more products that are imported, the bigger the administrative challenge. Having the certainty of COLA registration is often compromised as the number of labels that need to be managed increases.
  5. The FDA requires that all Manufacturers, Processors, and Packers of any food (or beverage) be registered with the FDA. Managing the process every 2 years is often a daunting process and insuring your suppliers/producers are registered can be problematic. Additionally, from an operational perspective, making sure that prior notice is executed is not particularly visible. The issue for W&S Importers is the shear volume of producers they deal with. Again, the management and control over the FDA requirements often is complex and costly.
  6. The changing product mix - Wine importers face a changing product mix on an annual basis as the vintages change. More likely, the product mix is constantly in flux as an Importer responds to market demands and their supply position. If Australian shiraz is the big seller this summer, there is a likelihood that the Importer will need to procure additional Australian shiraz from additional . The non-repeatability of the product, in addition to the complexities of points 1, 2, and 3, above, create incremental complexities for the Import Operations team.

As complexity increases, it becomes more and more apparent that the better a W&S Importer is at managing these complexities, their competitive advantage drastically increases when compared to other W&S Importers. An Import Operation that is well managed is much more responsive, significantly more effective, and most importantly, dramatically less costly.So what does an effective import operation look like for a W&S Importer? It has an understanding and a process for dealing with at least these three elements:

  1. Account-related data - Of course every company should be managing their account-related data. But as discussed above, it is even more important for W&S Importers, as they are dealing with many more suppliers than most other companies. Plus, as a result of FDA requirements, there are certain data elements - like MID numbers - that need to be effectively managed. Although smaller companies might be able to cobble together a system on spreadsheets to manage this information, the larger the company gets, the more difficult it gets, and a better platform is required.
  2. Product-related data - Again, W&S Importers have a bigger challenge than most other companies. Not only does the W&S Importer have more products to manage than most other importers, it also has product-related information that needs to be captured to meet CBP and PGA regulations. Dimensions like color (for wine), alcohol content, type, TTB-COLA registrations, pack configuration, etc. are things that are not necessarily easily or well tracked.
  3. Transaction-related data - Each Purchase Order (PO) is the foundation for everything that is to follow, at least from an importing perspective. Some shipments might contain one PO, while other shipments might be multiple POs from multiple vendors. Some companies might have multiple IORs in one container. Regardless of the complications of your specific operation, the information contained in the PO forms the basis for the rest of the import process and impacts your purchasing, logistics, trade compliance, and warehouse teams. Having that data controlled and available for everyone in the supply chain is critical to having an effective import operation.

These three elements are not the exhaustive list when it comes to running an effective and efficient import operation. But it would be difficult to be effective without these three elements well managed. Getting a handle on one or all three of these data elements is the first step to building an effective import operation.How effective is your Import Operation? Want to learn how you can improve it? Visit us at www.3rdwave.co or drop us a line at solutions@3rdwave.co to learn more.