Paso Robles distiller owed $14,000 fee for COVID hand sanitizer. Then he pushed back
A Paso Robles distiller attracted national attention after the U.S. Food and Drug Administration tried to levy a $14,000 fee on his company for making hand sanitizer — resulting in efforts that led the agency to stop collecting the money.
Aaron Bergh, president and distiller of Calwise Spirits Co., turned to making hand sanitizer in March 2020 as a way to help the community and keep his business afloat during the early days of the COVID-19 pandemic.
“I didn’t make a killing on it,” Bergh said. “But it was enough to bring my furloughed employees back to work.”
Calwise, Krobar Craft Distillery and other alcohol producers throughout the country manufactured sanitizer with the cooperation of the FDA, as it was in short supply during the beginning of the coronavirus outbreak.
The federal agency issued special temporary guidelines and said it wouldn’t take action against businesses that made their own sanitizer due to the shortage.
Calwise made about 5,000 gallons of sanitizer, which allowed Bergh to hire additional employees and make a profit to help carry his business through a coronavirus-related lockdown. The company had stopped making sanitizer by June, when demand had mostly dried up, Bergh said.
Distillers making COVID-19 hand sanitizer surprised by federal fees
On Dec. 29, Bergh unexpectedly received an email from an industry advocate informing him the FDA was charging distilleries large fees for hand sanitizer production. In Calwise’s case, the fee was $14,060, which would have wiped out Bergh’s holiday profit, he said.
The FDA released a statement on Dec. 27 saying the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) included a stipulation that it would assess and collect fees from “over-the-counter monograph drug” producers that registered with the agency, such as sanitizer manufacturers. The agency released the fee amounts on Dec. 29.
Distilleries still registered with the FDA to produce hand sanitizer by Dec. 30 would be charged fees for 2021, as well.
“The fee was purely a surprise to everyone,” Bergh said.
Distilleries throughout the country faced the hefty fees, and the American Craft Spirits Association pushed back against them.
“ACSA is of the opinion this program was unintended for small businesses who temporarily stepped up to produce hand sanitizer to help communities in a time of need,” the industry organization said in a Dec. 31 statement. “We will continue to advocate on your behalf as we also know most distillers were startled by the hefty user fee due in such a short time.”
Bergh was especially frustrated by the fees, noting that Calwise had made hand sanitizer for the FBI and the U.S. Department of State only to face a sizable fee from another federal agency.
“For me, it was an especially hard slap to the face because we’d provided these federal agencies with hand sanitizers,” he said.
Paso Robles alcohol producer, community members lobby against FDA
Bergh was vocal about his dissatisfaction about the FDA fee facing Calwise.
“I was afraid I was going to blow the whistle on this thing and it was going to fall on deaf ears because people were celebrating the holidays,” he said. But national media outlets including Fox News and Reason Magazine picked up the story.
USA Today and Food and Wine Magazine also published stories of distillers around the country startled by the large amounts of money they now owed the government.
Bergh said community members told him they would make calls on his behalf and help him pay the fee if the FDA didn’t back down.
“I was just overwhelmed and just inspired by the amount of support that came from the community,” he said.
Health and Human Services tells agency to cease enforcement
On New Year’s Eve, the U.S. Department of Health and Human Services (HHS) said the agency would direct the FDA to cease enforcement of the fees.
“Small businesses who stepped up to fight COVID-19 should be applauded by their government, not taxed for doing so,” Brian Harrison, HHS chief of staff, said via Twitter. “I’m pleased to announce we have directed FDA to cease enforcement of these arbitrary, surprise user fees. Happy New Year, distilleries, and cheers to you for helping keep us safe!”
Bergh said he removed his company from the FDA’s registry of alcohol producers manufacturing hand sanitizer, and doesn’t plan to make any more hand sanitizer — especially since there’s no guarantee the agency won’t charge the same fees next year.
Bergh said in a news release the FDA hasn’t yet said it will follow through on the HHS’s fee retraction, and he wondered whether distillers will be charged for selling their remaining supplies of hand sanitizer.
“I think the result of this story is proof that people can make a difference at the grassroots-level,” Bergh said in the release. “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.”
This story was originally published January 5, 2021 at 9:57 AM.
