by Jason Eckenroth - Founder and President, ShipCompliant

Compliance Checks: What, Where, When and Why

The term “compliance check” has become almost ubiquitous in the wine industry. But what exactly does it mean, and when should you run a compliance check?

The diagram above shows a typical workflow for direct to consumer wine orders. The entry point to the workflow can be a customer placing an order on the web via an eCommerce site, a customer visiting the tasting room (or on-premise retail store) and placing an order for direct shipment, a customer placing an order via phone, mail or fax, or a regularly scheduled wine club shipment. Keep in mind that the states don’t care where the order originated. Via reports from the common carriers (FedEx and UPS), they simply see a shipment that contains wine coming into their state, and that shipment should be compliant against all of the other shipments that are sent into the state as well. One of the problems for wineries and wine retailers is that they will commonly have two or more different systems for managing these four sources of direct to consumer orders.

A Consolidated Compliance Check

To solve the problem of disparate systems, wineries and wine retailers will run a consolidated compliance check at the time of transaction that aggregates orders from all of the different direct sources. This entails combining order data from the various systems either through a system integration, or by working with several data files at the same time. A thorough compliance check will use address validation techniques to determine the exact destination address, including the destination county and nine-digit (including zip+4) zip code.

Having this data will allow for accurate collection of destination-based taxes over all types of jurisdictions, and will also ensure that wine is not shipped to dry areas, which may be based on a city, county, or state definition. A compliance check should also determine if, at the time of expected shipment, all products in the shipments will belong to properly registered labels, brands, and licenses, based on the requirements of the destination. Every compliance check should account for all of the different variations of volume restrictions, which can be on per bottle, per shipment, per individual, per household, and state aggregate bases, to name a few. Additionally, some volume restrictions are applied to a calendar basis (per calendar month, for example), where some are applied to a rolling basis (every 30 days, for example).

Some states have prohibitions on distributor relationships when shipping wine products directly to consumers, and some states have requirements for distributor relationships that should be checked with each shipment. Finally, online age verification should be run on each order if the purchaser has not been previously checked, especially in the three states that require age verification (Michigan, Ohio, and Georgia). A thorough listing of the various compliance regulations can be found at the Wine Institute.

Real-Time Compliance

Real-time compliance occurs at the time the order is being placed by the customer, and the benefits are many. First, it allows for accurate collection of sales taxes, based on the destination jurisdictions. Also, when you have the attention of your customer, whether they are on the phone, in the tasting room, or on your website, you can make changes to orders to resolve any compliance exceptions that are caught. Doing this immediately, and before you charge the customer’s credit card, can lead to dramatic improvements in customer service. Furthermore, running compliance checks at the time of transaction puts the customer service in the hands of the marketing and customer service teams. If they want to accept and authorize all orders and have the customer service team follow up with the customers to resolve compliance issues, they can implement a “quarantine” strategy.

For wineries and wine retailers that do large volumes of direct sales, they may want to push resolution of some compliance issues to the customer in a very friendly, yet automated way (with proposed solutions) instead of relying on a large customer service team for follow up. One example solution for orders that exceed a state’s volume limitation is to suggest to your customer to split the order into a compliant shipment which can ship today, and the remainder which can ship at a pre-determined future date.

Check Before You Ship

Following the time of transaction compliance check, payment is typically authorized, but not accepted. Notwithstanding orders for wine “futures”, charging credit cards after confirmation that orders have shipped can simplify compliance workflows and reporting significantly. Many wineries and wine retailers will then run a final compliance check just prior to fulfillment. This is a good “catch-all” strategy for a number of reasons. In a common scenario, a tasting room may get very busy, and the winery will ask their customers to fill out a paper form for their shipping order. The pre-fulfillment compliance check would ensure that all orders are properly checked for compliance. Also, shipments are often put on hold because of fulfillment issues such as inventory problems or weather holds. Running a pre-fulfillment compliance check also allows you to handle almost all of the edge cases that arise when orders are taken at the end of the month, but shipped at the beginning of the next month because you have a much better grasp on the date that the orders will actually be picked up by the common carrier.

At the end of the process, the fulfillment department (or fulfillment house) ships the wine, the customer receives it, and everyone is happy. State reporting becomes an afterthought if the workflow handles order aggregation, and proper compliance checking. The wineries and wine retailers that do this well will also either maintain or improve their excellent levels of customer service along the way.

By Jason Eckenroth, Founder and President - ShipCompliant

Jason Eckenroth is the president and founder of ShipCompliant, a provider of software based compliance and reporting services for the wine industry. ShipCompliant tracks thousands of regulations throughout the US governing the sale and shipment of alcohol and provides this service on demand to more than 100 technology and logistics providers in the industry. ShipCompliant currently serves more than 850 wine brands operating in 29 states.

This entry was posted by admin on Thursday, July 31st, 2008 at 6:56 pm and is filed under Customer Service, Direct Sales. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Other Network Sites: Wine Ratings, Wine Prices & Reviews | Online Wine Videos | Wine Marketing & Wine Advertising

Advertisement