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Product Returns, Breakage; Replacement Of Damaged Or Defective Products
To set the policy of the ILCC and establish the procedures by which distributors may accept product returns from retailers and replace damaged or defective product for a retailer.
The provisions of Section 5(d) of the Federal Alcohol Administration Act and Sections 11.31 through 11.39, 11.45 and 11.46 of the Federal Alcohol Administration Act Regulations prohibit the sale of alcoholic liquor products with the privilege of return for any reason other than for specific ordinary and customary commercial reasons that are below listed:
Subpart D ‑ Rules for the Return of Distilled Spirits, Wine, and Malt Beverages
Sec. 11.31 - General Section 5(d) of the Act provides, in part, that it is unlawful to sell, offer to sell, or contract to sell products with the privilege of return for any reason, other than those considered to be “ordinary and usual commercial reasons” arising after the product has been sold. Sections 11.32 through 11.39 specify what are considered “ordinary and usual commercial reasons” for the return of products, and outline the conditions and limitations for such returns. (b) An industry member is under no obligation to accept the return of products for the reasons listed in Secs. 11.32 through11.39. Exchanges and Returns for Ordinary and Usual Commercial Reasons
Sec. 11.32 - Defective products
Products which are unmarketable because of product deterioration, leaking containers, damaged labels or missing or mutilated tamper evident closures may be exchanged for an equal quantity of identical products or may be returned for cash or credit against outstanding indebtedness.
Sec. 11.33 - Error in products delivered
Any discrepancy between products ordered and products delivered may be corrected, within a reasonable period after delivery, by exchange of the products delivered for those which were ordered, or by a return for cash or credit against outstanding indebtedness.
Sec. 11.34 - Products which may no longer be lawfully sold
Products which may no longer be lawfully sold may be returned for cash or credit against outstanding indebtedness. This would include situations where, due to a change in regulation or administrative procedure over which the trade buyer or an affiliate of the trade buyer has no control, a particular size or brand is no longer permitted to be sold.
Sec. 11.35 - Termination of business
Products on hand at the time a trade buyer terminates operations may be returned for cash or credit against outstanding indebtedness. This does not include a temporary seasonal shutdown (see Sec. 11.39).
Sec. 11.37 - Change in product
A trade buyer's inventory of a product which has been changed in formula, proof, label or container (subject to Sec. 11.46) may be exchanged for equal quantities of the new version of that product.
Sec. 11.38 - Discontinued products
When a producer or importer discontinues the production or importation of a product, a trade buyer’s inventory of that product may be returned for cash or credit against outstanding indebtedness.
(Not from Sec 11.38) In this case, the term “trade buyer” in Sec. 11.38 does not include “retailer.” A licensed retailer is not permitted to return product to a licensed wholesaler or producer because the wholesaler lost rights to distribute the product.
Sec. 11.39 - Seasonal dealers
Industry members may accept the return of products from retail dealers who are only open a portion of the year, if the products are likely to spoil during the off season. These returns will be for cash or for credit against outstanding indebtedness.
Exchanges and Returns for Reasons Not Considered Ordinary and Usual
Sec. 11.45 -Overstocked and slow moving products
The return or exchange of a product because it is overstocked or slow‑moving does not constitute a return for “ordinary and usual commercial reasons”.
Sec. 11.46 - Seasonal products
The return or exchange of products for which there is only a limited or seasonal demand, such as holiday decanters and certain distinctive bottles, does not constitute a return for “ordinary and usual commercial reasons.”
It is the policy of the ILCC that unless there is a bona fide business reason for replacement of damaged or defective product when delivered, the product may not be replaced free of charge to the retailer. The Commission follows the federal guidelines on acceptable reasons for replacement.
If the product is damaged while in the retailer’s possession, generally, the distributor may not accept the return of the product.
- Distributors may not accept the return of alcoholic liquor products as “breakage” if the product was damaged after delivery and while in the possession of the retailer. The distributor may replace damaged cartons or packaging at any time.
- Under no circumstances may the distributor furnish replacement product to a retailer if the product was broken as a result of handling by the retailer, its agents, employees, or its customers.
- If the product has been damaged prior to or at the time of actual delivery, the distributor may exchange an equal quantity of identical product or accept a return for cash or credit. If identical product is unavailable, the exchange will be permissible for similar type product.
- If the product has been damaged prior to or at the time of actual delivery, the distributor may exchange the product within a reasonable time after delivery. It is the Commission’s position that fifteen (15) days is a reasonable time, from the date of delivery, within which such time the retailer shall notify the distributor of the damage and request the return of the product.
- A distributor is under no obligation to accept a return or make an exchange for any product. A distributor who elects to make an exchange of product or return of product for cash or credit in accordance with the policy does so at its sole discretion.
- Nothing in this Trade Practice Policy shall prohibit the exchange of deteriorated product that includes product near or beyond the manufacturer’s expiration or ‘code’ date. Such exchanges must be made on a non-discriminatory basis for an equivalent volume and product. All exchanges of deteriorated product must be clearly documented on distributor invoices.
- It is a violation of this policy for a retailer to hold on to retailer damaged containers in order for them to be exchanged or returned as “out of code.”
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