And then Senator Borah went along and discussed the Clark distilling case and other Supreme Court cases under the Webb-Kenyon Act. I think, Mr. Chairman, if I might add, there will be some further testimony by Mr. Peyser and others on this particular matter. Senator MONDALE. Yes; I think that would be helpful because that is the central question. I do not think there is any doubt about the public policy favoring the free flow of commerce. That, as you point out, is one of the central points in the U.S. Constitution. The question is whether in adopting the 21st amendment the Congress intended a different result for alcoholic beverages. I think that is the issue we have to face. Senator CRANSTON. Mr. Chairman, I think the research indicates that it was never contemplated at the time the 21st amendment was considered and adopted that it would be used in this fashion and, that the purpose was to permit dry States to protect themselves against any alcoholic beverages coming in, but not to permit them or to permit any States to simply try to protect local industry by discriminatory acts. Senator MONDALE. Do you think it was intended for a State to decide, we are not going to have any booze in, say, California, but not to be able to say we will only have California booze Senator CRANSTON. Right. Senator MONDALE [continuing]. You have to do it uniformly? Senator MONDALE. I see. Very good. I appreciate your testimony, Congressman Sisk. Did you have more to say on this issue? Senator CRANSTON. No; thank you very much. Senator MONDALE. Thank you very much. Senator CRANSTON. I think he may have more to say. Mr. SISK. Mr. Chairman, I am going to ask unanimous consent that a very brief statement be made a part of the record in view of the fact that I do not want to take the time of the committee and be repetitious. Senator Cranston, I think, has done a very excellent job in presenting our position. I am here, of course, basically representing all 43 members of the California delegation in strong support of this legislation. This is a matter of course that we have worked on for quite a long while and, then of course as is indicated by the Senator, passed rather substantially during this last session. And of course we would hope that maybe your committee, in its wisdom, would look favorably on the legislation. Our main basis, really, in let us say rebutting some of the comments by the distinguished senior Senator from Arkansas, is the fact that the Court itself has said in cases where they have spoken, that in fact this is a matter on which they have, in essence, not ruled—that is, on this principle and therefore, have left it up to the Congress to legislate, if they see fit to legislate. Then, finally, again of course commenting a little further in connection with the debates that went on in connection with this matter, in particular the Senate debate at the time of the 21st amendment, seems at least to an objective view, to indicate that certainly there was no contemplation of any discriminatory actions being permitted in connection with the commerce clause, but simply the right of the State to remain dry or not to remain dry as they saw fit. And, therefore, in no sense was it to, in essence, permit discrimination. Senator MONDALE. That is very useful, Congressman. I appreciate those comments. If you have further materials you can submit for the record on the debate that bears on this question of what was intended by section 2 of the 21st amendment, I would certainly appreciate having it. Mr. SISK. I would be very happy to make a part of the record, any and all of the material that we used in the House side. I am sure that Mr. Peyser will give his statement. Senator MONDALE. Yes; we have your hearing record and we have the committee report from the Interstate and Foreign Commerce Committee. These materials are part of our official file on H.R. 2096. Thank you very much for a most useful contribution. [Mr. Sisk's prepared statement and a letter from Sen. Cranston follow:] STATEMENT OF HON. B. F. SISK, A U.S. CONGRESSMAN FROM THE STATE OF CALIFORNIA Mr. Chairman, it is indeed a pleasure to address the Subcommittee this morning, on behalf of the entire California Delegation, in strong support of H.R. 2096. Virtually identical in substance to legislation previously co-sponsored by every Representative from California, the present bill seeks both to reassert Congressional intent over legislation enacted many years ago and to prohibit the imposition of descriminatory burdens by individual states in the interstate commerce of wine. As you know, the early history of our country saw commerce inhibited by artificial trade barriers which were established by one state against products entering from another state. At the Constitutional Convention, the equitable regulation of interstate commerce proved a focal point in bringing together the representatives of diverse state interests and allowing them to perceive the national importance of eliminating undue hindrances to trade among the several states. Unfortunately, by a parochial misinterpretation of a section of the 21st Amendment, some states have chosen to impose arbitrary licensing, storage, and marketing regulations-in addition to discriminatory taxes on wine imported from another state while at the same time exempting locally-produced products from being subject to similar regulations. The vehicle for these discriminatory taxes is Section 2 of the 21st Amendment which reads: "The transportation or importation into any state, Territory, or possession of the United States for delivery or use therein of intoxicating liquors, in violation of the laws thereof, is hereby prohibited." The legislative history of this section, largely consisting of Senate debate, clearly indicates that the inclusion of Section 2 was merely intended as a safeguard to ensure that those states who desired to remain "dry" following the repeal of prohibition could do so. It was in no way to be a malleable mechanism for inhibiting the free flow of interstate commerce. The Report of the House Committee on Interstate and Foreign Commerce (No. 93-264) accompanying this bill and House debate preceding its passage have well documented instances of blatant discrimination against out-of-state wines. I am confident, as well, that succeeding testimony here today will further focus on the unfair dollar disparities which some states condone in connection with taxes, use of raw materials in wine production, license fees for distributors, and the like. Perhaps it should be noted that we in California do not discriminate against wine produced elsewhere. All wine, whether from France, Florida, New York, Arkansas or California, pay the same State excise tax. The local wine industry, of course, is of tremendous importance to California's economic health, yet we have enough faith in the quality of our product to send it to the marketplace on an equal footing with wines of other origins. This, in my judgment, is as it should be. For, aside from the economic factors involved with such discriminatory practices, we are a nation of United States and not merely individual economic entities. While some fears have been expressed with regard to possible ramifications of this legislation, H.R. 2096 does not seek to repeal the wisdom of Section 2 of the 21st Amendment. It does not force "dry" states to open their borders, nor does it eliminate state regulation of wine. Quite simply, H.R. 2096 seeks to halt the discrimination against out-of-state wine by some states which have miscon strued a Constitutional provision for parochial purposes. In an effort to correct this discrepancy, my colleagues in the California Delegation join me in vigorously urging your favorable consideration of this legislation. Thank you. UNITED STATES SENATE, DEAR COLLEAGUE: We are sending this letter to you as a member of the Finance Committee. Presently pending in the Committee is legislation (H.R. 2096) to prohibit any State from imposing discriminatory burdens on wines produced outside the State or from materials produced outside the State. The bill passed the House on September 11, 1973, by a vote of 248 to 152. The sole purpose of H.R. 2096 is to remove discriminatory tax barriers to the movement of wine in interstate commerce. The bill does not limit the power of a State to regulate the sale of alcoholic beverages or to prohibit the sale of alcoholic beverages. It only requires that a State act in an even-handed manner when it taxes, controls or regulates the sale of wine. We represent States which produce the major portion of American domestic wines. The "tariff walls" erected by some States against the produce of other States, we believe, seriously obstruct interstate commerce in violation of the Commerce Clause of the Constitution. The American Wine Industry now ranks as a major producer of high quality wines. During the years following repeal of Prohibition, when American wine growers were re-establishing their vineyards, discriminatory State taxation in favor of locally-produced wines may have had some limited value in fostering redevelopment of the wine industry. Today, however, the local shelters built through discriminatory taxation of out-of-state wines, serve no constructive purpose if, indeed, they ever did. Instead, discriminatory imposts on wines have obstructed the movement of a valuable commodity in interstate commerce in a manner reminiscent of the trade barriers that existed among the states in the days of the Articles of Confederation. Some may argue that the Twenty-first Amendment inhibits Congress from legislating to prohibit discriminatory State taxation of wine produced outside the taxing authority. We believe, however, that the original purpose of the amendment was to permit dry states to protect themselves from the importation of liquor rather than to permit liquor-producing states to erect trade barriers against out-of-state products. The Supreme Court in Heublein, Inc. v. South Carolina Tax Commission, 409 U.S. 275 (1972) has noted that . though the relation between the Twentyfirst Amendment and the force of the Commerce Clause in the absence of Congressional action has occasionally been explored by this Court, we have never squarely determined how that Amendment affects Congress' power under the Commerce Clause. We believe that Congress has the power under the Commerce Clause to prohibit a State from setting up a trade barrier in the form of taxes and regulations against wines produced outside the State or from materials produced outside the State. We believe that the strong Constitutional policy in support of free commerce among the States requires that Congress act to prohibit such barriers. H.R. 2096 is intended to accomplish that purpose and we hope that you will support the bill. Sincerely, ALAN CRANSTON. JACOB K. JAVITS. ADLAI E. STEVENSON III. JOHN V. TUNNEY. JAMES L. BUCKLEY. Senator MONDALE. Senator Packwood regrets that he cannot be here at this time. He sent a statement and we will print it in the record at this point. [Senator Packwood's prepared statement follows:] STATEMENT BY HON. BOB PACKWOOD, A U.S. SENATOR FROM THE I welcome this opportunity to discuss the legislation before the Subcommittee. H.R. 2096, the so-called "Wine Bill", proposes to eliminate discriminatory excise tax barriers that have been erected by some States in an effort to obstruct free interstate commerce in wine. Generally, I am convinced the measure has merit. This nation was founded on the principle that commerce among the States should not be restricted by any State, but that such legal regulation of interstate commerce as is necessary should rest solely with the United States Congress. According to the evidence that has been developed by the Staff of the Committee on Finance for use by this Subcommittee, this clearly is not the case with respect to the controversy before us. For one reason or another, many States have chosen to erect discriminatory barriers against the free trade of wine produced outside their respective borders. This condition, while of relative insignificance in comparison to other great issues facing the country today, must be faced and corrected by the Congress if we are to uphold our responsibility under the Constitution to regulate interstate commerce. This legislation is perfectly consistent with the principle that any State may choose to regulate the consumption within its borders of alcoholic beverages in keeping with the authority contained in the 21st Amendment to the Constitution. It occurs to me that the 21st Amendment was not ratified with the intent to subrogate the "interstate commerce" clause of the Constitution. Rather, it was simply to extend to provide for any State the opportunity to decide for itself whether or not it would prefer to restrict the sale of alcoholic beverages within its borders once general prohibition was repealed. The 21st Amendment does not extend to the States the authority to assume the responsibility of the Congress of the United States to regulate the flow of interstate commerce. Having said this, I should like to recognize the concerns expressed by Mr. Kenneth Underdahl, the Administrator of the Oregon Liquor Control Commission, and other State officials responsible for the operation of a State-controlled liquor dispensary system. Ken's concern is that the terms of H.R. 2096 will withdraw from him and his counterparts any authority to determine the extensiveness of the offering of wines for sale within their systems. I am convinced that this is an unfounded fear. This very question was addressed by the House Committee on Interstate and Foreign Commerce during its consideration of this bill last year. Chairman Staggers addressed this point during the House debate on H.R. 2096. I would ask that, at the conclusion of my remarks, the text of an exchange between the Committee Chairman, Honorable Harley Staggers, and Honorable Edith Green that deals specifically with the concerns expressed by Ken Underdahl and others. Finally, I would like to say just a word or two about my proposed amend ment to H.R. 2096. Briefly stated, my amendment #509 will make honest, law abiding people of an awful lot of unwitting violators of the federal tax law. Under present law, only heads of household are eligible to apply for and receive a permit to manufacture a limited quantity of wine for home consumption. Aside from the fact that this discrimination rankles an awful lot of unmarried people, not to mention spouses of a "head of household", we have a bit of a problem in the production and distribution of these make-wine-in-the-home kits that have cropped up on the market. Nobody has any idea of the number of people who have purchased such kits for themselves or their friends not knowing of the limitation contained in the law. My amendment will make it possible for any person of legal age to obtain a permit from the Internal Revenue Service for home manufacture of up to 100 gallons of wine. The present law provides that any head of household can manufacture up to 200 gallons for home consumption. My amendment will change the federal law [26 U.S.C. 5042(a) (2)] to read as follows: Subject to regulations prescribed by the Secretary or his delegate, any individual who is legally entitled to purchase wine in the State in which he resides may, without payment of tax, produce for private use and not for sale an amount of wine not exceeding 100 gallons per annum. I urge the Committee and the Congress to approve this change in the federal tax law as an amendment to H.R. 2096. [From the Congressional Record, Sept. 11, 1973] Mr. STAGGERS. Mr. Chairman, I yield to the gentlewoman from Oregon for a question. Mrs. GREEN of Oregon. I thank the distinguished chairman very much. Apparently, the administrator of the Oregon State Liquor Control Commission has raised some questions about this legislation, Mr. Chairman, and in a letter from the Governor's office, signed by an administrative assistant, Dale Mallicoat, it states: "This bill, among other things, would be very harmful to the operation of the OLCC retail stores. "It is our understanding that the measure would require a State-owned store, if it lists one wine, to list all 60,000 to 75,000 domestic wines. The warehousing, inventory, and control needs of such a law would be absolutely impossible to meet and thus would force wines out of the state-controlled stores." Mr. Chairman, my question is: Is this an accurate statement, and would this legislation indeed require them, if they listed one wine, to list 50 or 60 or 75,000 different wines? Mr. STAGGERS. I might answer the question in this way by reading from the report: "The only opposition to the legislation in the hearings was from representatives of the control States. They opposed the legislation as introduced on the grounds that it might be construed to require control States which stocked any brand or variety of wine to stock every wine which was tendered to it by supplier which could require such a State to stock as many as 40,000 brands of wine. In order to allay this concern even though it was believed to be without foundation, the Subcommittee adopted a revised section 3 which appears to the legislation herein reported." I will read that section: "SEC. 3. (a) Notwithstanding the provisions of section 2 of this Act, each State retains the right— "(1) to engage in the purchase, sale, or distribution of wine; and "(2) to exercise discretion in the selection and listing of wine to be purchased or sold by each such State." I think that answers the question very conclusively. Mrs. GREEN of Oregon. Most of the gentleman's answer was in regard to stocking of wines. It does not require, for the legislative history, any of the controlled liquor stores to list any wines or all of them? Mr. STAGGERS. No, it does not. Mrs. GREEN of Oregon. I thank the Chairman. Senator MONDALE. Our next witness is the Honorable John Heinz, Representative from Pennsylvania. Good morning, Congressman Heinz. STATEMENT OF HON. H. JOHN HEINZ III, A REPRESENTATIVE IN CONGRESS FROM THE 18TH CONGRESSIONAL DISTRICT OF THE STATE OF PENNSYLVANIA Mr. HEINZ. Thank you, Mr. Chairman. I am very grateful for the opportunity to testify before your commitee in support of H.R. 2096. As you probably know, Mr. Chairman, I am a member of the delegation from a so-called control State; namely, Pennsylvania. Because of that, I think it is all the more important to dispel any confusion that may exist over what this bill actually does. Many control States, I understand, have expressed some concern over the bill, both here on |