HHS announces action to protect distilleries from surprise $14K fee

The Department of Health and Human Services (HHS) on Thursday said it is taking action to prevent distilleries that produce hand sanitizer during the pandemic from being hit with an unexpected $14,000 fee.

The move comes two days after the Food and Drug Administration (FDA) said that any distillery that had switched to producing hand sanitizer during the pandemic this year would owe thousands of dollars in fees, and could be charged twice if they do not cease production immediately.

Many craft-brewing distilleries switched production to non-consumable alcohol in response to the COVID-19 pandemic and a shortage of the product’s availability in the spring.

HHS officials said they first became aware of the fees this week and held an emergency meeting in response. They later instructed the FDA not to collect the fees.

“Small businesses who stepped up to fight COVID-19 should be applauded by their government, not taxed for doing so. 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!” an HHS spokesman said in a statement provided to The Hill.

FDA officials previously told USA Today that the policy does not allow distilleries to be exempted from the fee, or provide a deadline for when the fee should be assessed.

“We stand ready to work with Congress on ways this can be addressed,” an agency spokesperson told the newspaper earlier this week.

Phil McDaniel, chair of the DISCUS Craft Advisory Council, told Forbes that distilleries had been blindsided by both the timing and size of the FDA’s notification, which states that dues must by paid by mid-February.

Under the now-voided rule, distilleries would have been forced to shut down production of hand sanitizer on Thursday and notify the federal government of their change in status in order to avoid paying the same fee in 2022 as well.

“Given all that’s happened in 2020, the timing of this news could not be worse. The $14,000 fee being assessed could certainly put many of these small family owned businesses out of business,” he said.

“Everyone was totally blindsided by FDA’s announcement and as a result, craft distillers across the country are scrambling to understand and respond,” McDaniel added.

Updated at 6:52 p.m.