Distillers Who Produced Hand Sanitizer Amid Shortage Won't Be Hit With $14K Fee, Says HHS

Craft distillers from across the United States will not face a $14,000 fee by the Food and Drug Administration (FDA) for making hand sanitizer amid the coronavirus pandemic, according to the Department of Health and Human Services (HHS).

When the coronavirus pandemic led to a large increase in demand for hand sanitizer in March, many distilleries worked to alleviate the product's shortage.

Over 800 distilleries switched from making spirits to hand sanitizer, according to the Distilled Spirits Council of the United States.

"If you were making sanitizer for your community at a limited capacity, this should not be something you have to deal with," Becky Harris, president of the American Craft Spirits Association (ACSA) told Reason when the fee was initially implemented at the time.

"It will be a slap in the face to make it through all of this and then get hit with this bill," Harris added.

The fee came as a result of a provision of the Coronavirus Aid, Relief, and Economic Security (CARES) Act that reformed regulation of non-prescription drugs.

Under the revised law, distilleries that produced hand sanitizer were classified as "over the counter drug monograph facilities." The CARES Act initiated user fees on those facilities to fund the FDA's regulatory activities.

"We recognize that this bill was not written specifically for the issue of sanitizer," said Harris. "The problem that we have right now is that [the fee] is going out to a whole lot of small businesses who are struggling in the pandemic."

According to an industry survey by the Distilled Spirits Council of the United States conducted in June, sale revenues for the craft distilleries were projected to decrease by more than $700 million in 2020.

"This unexpected fee serves to punish already struggling distilleries who jumped in at a time of need to do the right thing," said Distilled Spirits Council President and CEO Chris Swonger in a statement prior to the reversal from HHS.

Swonger then urged the "FDA to immediately waive the fees for distillers."

Long Island Distillery Manufactures Hand Santizer Amid
The Better Man Distilling Company pours the chemicals used to make hand sanitizer on April 01, 2020 in Patchogue, New York. Many U.S. distillers now face a $14K fee to the FDA for producing hand sanitizer. Photo by Al Bello/Getty Images/Getty

"The FDA appreciated the industry's willingness to help supply alcohol-based hand sanitizers to the market to meet the increasing demand for their products during COVID-19, and we are grateful for their effort," the agency said in a statement emailed to Newsweek on Thursday.

"We understand the concern that manufacturers have about the fees they are being asked to pay, especially from small businesses during this difficult time," the FDA continued.

The agency noted that the statute does not provide any waiver provisions for any specific category of manufacturer or for the deadline for assessing those fees. However, the FDA noted: "We stand ready to work with Congress on ways this can be addressed."

The FDA added that it has made information about the user fee program publicly available on its website since May.

"The implementation of this fee imposed by the FDA has been a concerning and sudden surprise for our community of small distillers, one we are working hard to address as urgently as is possible," Harris said in an emailed statement to Newsweek on Thursday.

However, later Thursday night, the Department of Health and Human Services said the FDA's action was not cleared by them. As a result, the HHS directed the FDA to stop enforcing 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," Brian Harrison, HHS chief of staff, told Newsweek.

Updated January 3, 2021,12:31 PM ET: with updated comment and a revised headline to reflect a change in the decision to impose a fee on distillers.