Source: http://www.alcohol.law/digest/archive/ttb
Timestamp: 2019-04-20 13:08:18+00:00

Document:
On January 1, 2018, adult use cannabis became legal in California, raising questions for many alcoholic beverage licensees about their ability to hold cannabis licenses and to sell or serve cannabis products on their alcohol licensed premises. The Department of Alcoholic Beverage Control (“ABC”) responded to several of these questions on January 18, 2018, by way of an Industry Advisory. First, the ABC confirmed that there is nothing in the ABC Act or the Medicinal and Adult-Use Cannabis Regulation and Safety Act (“MAUCRSA”) that prohibits ownership in both alcohol and cannabis related licenses. However, licenses cannot be held at the same location and the premises need to be sufficiently separated so that a person going to a licensed cannabis establishment will not be required to pass through a licensed alcohol establishment and vice versa. The ABC also clarified that cannabis cannot be sold or consumed on ABC licensed premises and that infusing alcohol with cannabis products is strictly prohibited.
Contact one of the attorneys at Strike & Techel if you have questions about cannabis under MAUCRSA or the ABC Act.
Last week, the President signed into law sweeping alcoholic beverage excise tax reform as part of the Tax Cuts and Jobs Act of 2017 (the “Act”). These alcohol excise tax changes originated in the Craft Beverage Modernization and Tax Reform Act, and were incorporated into the larger $1.5 trillion tax overhaul. The new law is scheduled to take effect on January 1, 2018. The law sunsets at the end of 2019, but with the possibility that the changes might be extended if successful. The TTB is working on guidance and the form revisions necessitated by these fast-approaching excise tax changes, and expects to issue more information in the coming weeks.
Spirits: The tax rate for distilled spirits will be reduced from $13.50 a proof gallon to only $2.70 on the first 100,000 gallons taxably removed during each calendar year, and to $13.34 on additional gallons up to 22,130,000.
Beer: Beer excise taxes will be reduced from $18 a barrel to $16 a barrel on a brewer’s first 6 million barrels, with the small producer tax payment halved to $3.50 a barrel on the first 60,000 barrels for those brewers producing less than 2 million barrels.
Wine: All wine producers will now benefit from a tax credit on the first 750,000 gallons produced by the winery and taxably removed during each calendar year. The tax credit is $1 on the first 30,000 gallons removed, $0.90 on the next 100,000 gallons, and $0.535 on the next 620,000 gallons. There is a proportionate tax credit for qualifying hard cider. All producers will be eligible for this tax credit, including sparkling wine producers. The base tax rates are also affected by this reform, and there are reductions in the tax rates for certain types of mead, low alcohol grape wines, and still wines with 14.1% ABV to 16% ABV.
As well as reducing excise taxes, the new law also removes the requirement to capitalize interest costs incurred and allocable to stock during the ageing period for alcoholic beverages in income tax assessments. Bond transfers also change, with transfer of beer to be allowed between bonded facilities held by different licensees, including by pipeline, and transfer of packaged distilled spirits in bond between bonded facilities will be allowed, which is currently limited to bulk distilled spirits. The Act also has provisions limiting reduced tax rates among controlled groups, including foreign producers, and has extensive provisions regarding the assignment by a foreign producer of the right to reduced tax to importers. Both of these items, and likely others, will require implementing regulations, which should follow soon in the new year.
With passage of the Act last week, industry members should assess operations and the current payment of excise taxes—especially if not all excise taxes are paid directly—to be able to maximize the benefits available over the two year span of these excise tax changes. If you have any questions about how the Act might affect your business, contact one of the attorneys at Strike & Techel.
In January 2017, the federal laws on alcoholic cider were revised to expand the definition of what constitutes “hard cider” and to revise its federal tax rate. We posted about those and other developments in the “hard cider” arena here and here.
Included in those changes to the law was a requirement, to be effective starting January 1, 2018, that the statement “Tax class 5041(b)(6)” appear on any hard cider removed from wine premises or Customs custody for which the “hard cider” tax rate is claimed. However, on December 5, 2017, the TTB published a temporary rule, delaying the new labeling requirement until January 1, 2019. Until the new effective date, the tax class statement continues to be optional.
Along with the labeling delay, the TTB has also decided to reopen the public comment period, providing an opportunity for the public to make additional comments over the next two months regarding both the delayed labeling requirement and other “hard cider” regulatory amendments.
For more information regarding hard cider licensing and regulatory requirements, contact one of the attorneys at Strike & Techel.
Most of what consumers know about the alcoholic beverage products they buy comes from their interaction with the label, so it is important to get it right. The Alcohol and Tobacco Tax and Trade Bureau (TTB), which regulates the labeling of most beverage alcohol products, recently released their annual alcohol beverage sampling program results, highlighting the most common compliance issues with drinks labels in the marketplace. Every year, the TTB conducts a random survey of alcoholic beverage products available for sale to the public. They select a range of brands across the distilled spirits, wine and malt beverage categories, and crosscheck the information on the label against the beverage in the bottle (or can, or alternative packaging). In 2015, well over a third of the distilled spirits and malt beverages surveyed were non-compliant (at 62 out of 154, and 61 out of 158 respectively), and just under a quarter of the wines were non-compliant (at 34 out of 138).
Many of the products in the market were found to have labels that were different from the certificates of label approval (COLAs) that the TTB had issued for those products. The TTB has worked hard in the last few years to balance its limited resources against ever increasing numbers of COLA submissions, and has published a long list of allowable changes that can be made to approved COLAs. However, some changes still require a new COLA. Some of the information on the label can be changed or removed, the shape and color can be altered, and statements and graphics can be moved, but it is difficult to add anything new without getting a new COLA.
Leaving aside COLA compliance, however, far and away the biggest issue identified by the TTB was related to the alcoholic content claims of the products surveyed. Each category of alcoholic beverages has some room to maneuver with the stated alcohol content. In particular, wine and malt beverages have greater tolerances, because the regulations recognize that they are products which can and often do continue to evolve in the bottle. However, even with these permitted tolerances, over 20% of the samples had a stated alcoholic content that was non-compliant. A table wine between 7% and 14% alcohol by volume (ABV), is allowed to be up to 1.5% either above or below the stated alcoholic content on the label (provided the wine remains in the same tax class, below 14%). Wine with over 14% alcohol can still be up to 1% over or under the stated amount. Malt beverages can be up to 0.3% different from the labeled ABV, either higher or lower. In contrast to the permitted variations for wine and beer, distilled spirits are not allowed to contain any alcohol over the stated ABV. The regulations reflect TTB’s view that there is no reason why distilled spirits should not be able to be accurately proofed upon completion of production. Spirits are allowed a small 0.15% tolerance below the labeled amount, which reduction is only to recognize possible losses during bottling. The proofing and gauging of distilled spirits is key to the TTB’s principal aim of protecting the revenue, and is directly linked to how much tax is paid by the producer. The TTB offers a range of resources to help producers and bottlers with that process, and it is important to ensure that care is taken when your product is labeled.
For any questions related to labeling of beverage alcohol, contact one of the attorneys at Strike & Techel.
On December 18, 2015, President Obama signed into law the Protecting Americans from Tax Hikes Act of 2015 (“PATH Act”) (LINK). The PATH Act provides for changes to the definition of “hard cider,” which will bring valuable tax rate changes for some makers of cider and perry. Currently, “hard cider” is defined as a “still wine derived primarily from apples or apple concentrate and water, containing no other fruit product, and containing at least one-half of 1 percent and less than 7 percent alcohol by volume.” 26 U.S.C. § 5041(b)(6). Because the current definition of hard cider states that the wine must be still, the definition excludes ciders with carbonation in excess of 0.392 grams of carbon dioxide per 100 milliliters. 26 U.S.C. § 5041(a). The current definition also excludes perry, which is wine made from pears. Finally, the alcohol content of many wines made from cider apples ranges from approximately 5% to 8.5% alcohol by volume, and cider products with more than 7% alcohol do not meet the current hard cider definition.
Contains at least 0.5% and less than 8.5% alcohol by volume.
For more information on cider and perry, see our July 29, 2015 blog post “Comparing Apples and Pears” (LINK), and contact one of the attorneys at Strike & Techel for further guidance.
The Alcohol and Tobacco Tax and Trade Bureau (TTB) has further expanded the list of ingredients used in the production of beer that are exempt from the formula requirements of 27 C.F.R. § 25.55. On December 17, 2015, the TTB issued Ruling 2015-1, Ingredients and Processes Used in the Production of Beer Not Subject to Formula Requirements (LINK), which modifies and supersedes Ruling 2014-4. Ruling 2014-4 exempted 35 ingredients from formula approval requirements, including ingredients such as honey, chocolate, cherries, oranges, allspice, and clove. Ruling 2015-1 now exempts more than 50 additional ingredients from the formula requirements, including ingredients such as tea, oyster shells, jasmine, rosemary, grapes, and figs. A complete list of ingredients used in the production of beer that are exempt from formula requirements is located in Attachment 1 to Ruling 2015-1 (LINK).
Ruling 2015-1 also clarifies the TTB’s position regarding extracts, essential oils, and syrups. These preparations may contain alcohol or other ingredients, and thus are not exempt from formula requirements. For example, although vanilla, spearmint, and strawberries are included on the list of exempt ingredients, the use of vanilla extract, essential oil of spearmint, or strawberry syrup would still trigger the formula requirements of 27 C.F.R. § 25.55.
Ruling 2015-1 was issued in response to an ongoing conversation between the TTB and the Brewers Association, which has been petitioning the TTB since 2006 to expand the list of exempt ingredients. The most recent Brewers Association petition was submitted on September 30, 2015, and Ruling 2015-1 exempts all of the ingredients requested by the Brewers Association in that petition, with the exception of licorice, juniper branches, pluot, spruce leaves, squid ink, and woodruff. The TTB declined to adopt licorice as an exempt ingredient due to Food and Drug Administration (FDA) regulations regarding that ingredient. The TTB declined to adopt the remaining ingredients at this time because it did not find that the available data established that these ingredients are “traditional” in the production of beer. Although the TTB did not exempt all the ingredients requested by the Brewers Association, the TTB is open to future petitions from brewers regarding additional ingredients that brewers believe should be exempted from formula requirements. A procedure for such a petition is located at 27 C.F.R. § 25.55(f).
Contact an attorney at Strike & Techel today with any questions about beer regulations or formula requirements.
Craft beer continues to be all the rage in California and across the country. With the increase in demand for local craft beers, we’ve been getting a lot of questions about how to get licensed as a brewery in California. The California Department of Alcoholic Beverage Control (“ABC”) issues three primary license types that permit beer production, including Beer Manufacturer licenses (Type 1), Small Beer Manufacturer licenses (Type 23) and the increasingly popular On-Sale General Brewpub license (Type 75). The license privileges of each type of brewery license vary, and the brewpub license is a good choice for brewers that primarily want to operate a brewpub or microbrewery restaurant rather than sell their beers for consumers to drink off the brewery’s premises.
A Type 75 brewpub license authorizes the sale of beer, wine and distilled spirits for consumption at a bona fide eating place, which essentially requires that the facility be a restaurant with its own kitchen that serves meals. The ability to sell distilled spirits as a brewpub is a privilege that many find attractive in deciding between brewery licenses. Type 1 and Type 23 breweries may, but are not required to, operate bona fide eating places, but they are limited to beer and wine, and cannot sell distilled spirits. Additionally, beer, wine, and distilled spirits restaurant licenses (i.e., Type 47 On-Sale General for Bona Fide Public Eating Place) are often extremely expensive as the number of licenses issued is limited per county based on population. There is no cap on the number of Type 75 licenses that can be issued, so the Type 75 license can be an attractive option for businesses that want to sell distilled spirits, although all Type 75 licensees must meet certain brewing requirements.
Brewpubs must produce at least 100 barrels of beer per year and can produce no more than 5,000 barrels of beer per year. That production cap is substantially lower than the production allowances for Small Beer Manufacturers (less than 60,000 barrels per year) and Beer Manufacturers (60,000 barrels per year or more). Additionally, a Type 75 brewpub premises must have brewing equipment that has at least seven-barrel brewing capacity. The ABC has recently been looking into the brewing equipment of Type 75 licensees and enforcing against brewpubs that aren’t actually brewing beer or don’t have the requisite brewing capacity.
• Cannot make sales from the brewpub premises for off-premises consumption. This means that a brewpub cannot sell bottles, cans, growlers or other containers for consumption away from the brewpub.
• Can sell beer produced by the brewpub to California licensed wholesalers.
• Must buy all wine, distilled spirits, and beer not produced by the brewpub from a licensed wholesaler or winegrower. Note that brewpubs cannot buy or sell beer or other alcoholic beverages from other brewpubs or retailers.
The initial fee for a brewpub license is currently $12,000, which is more expensive than most California license types. The annual fee is determined by the population where the brewpub is located, and varies between approximately $500 and $1,000 per year. Additionally, local rules where the brewpub is located may require additional permitting or other approvals before the brewpub can operate. Lastly, all breweries, including brewpubs, must obtain a brewery basic permit from the Alcohol and Tobacco Tax and Trade bureau, the federal agency that regulates alcoholic beverages. There is no fee for the federal permit, but a bond is required.
Contact one of the attorneys at Strike & Techel if you have any questions about starting a brewery!
Louisiana recently changed its system for label registration, and all labels previously registered with the state must be re-registered in the new system by the end of 2015.
Louisiana is one of many states that requires label registration before alcoholic beverages can be sold in the state. Until recently, Louisiana’s Department of Health and Hospitals handled the registration process, but as of August 2015, the label registration function is being handled by Louisiana Alcohol and Tobacco Control (ATC), the state’s alcohol beverage regulatory agency. The move should create a more efficient registration system, and allows the same agency that enforces alcoholic beverage laws to oversee the label registration process, which is consistent with how registration works in nearly all other states that have a registration requirement.
Labels must now be renewed annually, and all labels currently registered in the state must be updated with the ATC by December 31, 2015. Importantly, label registration can be completed online here. When a licensee with a valid Louisiana license number submits a label with an approved Certificate of Label Approval (COLA), the registration process is complete with no need to wait for further approval. Additionally, the price to register labels has been reduced from $27 per label to $5 per label.
Call one of the attorneys at Strike & Techel if you have any questions about label registration in Louisiana or other states.
Congratulations! You have your alcohol license and you are now in business. Don’t forget though, applying for and getting your license is not the end of your regulatory responsibilities – you also have ongoing reporting obligations. If anything changes in your business, e.g., if you get new investors, or some investors leave, if you appoint a manager, if your officers or directors change, or if you move or open a new location, you must report it to the licensing authorities. Depending on the nature of the change, it may even be deemed a license transfer and may require the same type of paperwork that was involved in getting your license in the first place.
A winery in Northern California recently found this out the hard way after it failed to update its federal permit when there was a change of ownership, with shares in the business being moved into a trust. The Alcohol and Tobacco Tax & Trade Bureau (TTB) discovered this fact during a routine audit and took disciplinary action. The winery settled the matter by submitting an offer in compromise of $3,000, for failing to meet its reporting and tax obligations, which was accepted by the TTB. You can find out more HERE.
An industry member’s reporting obligations should not be taken lightly. If you make any changes to your business, you should report them as soon as possible. In California and under the federal regulations, you have thirty (30) days to report such changes and failure to do so may expose your license to disciplinary actions like the one described above.
If you have any questions about reporting or licensing, please contact one of the attorneys at Strike & Techel.
Mostly in our practice at Strike & Techel we work with clients making fairly traditional alcoholic beverage products, albeit with new flavors, production methods and quality drivers. These classic alcoholic beverages are distilled spirits, wines and beers, subject to regulation by the Alcohol and Tobacco Tax and Trade Bureau (TTB). More and more, however, we are called upon to work with alcohol products that fall outside the TTB’s jurisdiction, either because they don’t meet traditional definitions, or because they simply aren’t classified as beverages.
Products that do not fit within TTB jurisdiction are subject to Food & Drug Administration (FDA) labeling requirements. Under TTB rules, wine must contain at least 7% alcohol, and beer must be malt-based. Because of these restricted definitions, common examples of drinks that are subject to FDA rules are wine coolers and ciders below 7% alcohol, and beers that aren’t made with malt. Any beers made with other grains, like sorghum, rice or wheat (usually to be sold as “gluten free” products), are under FDA rules. These beverages do not need to obtain label approval, as a standard alcoholic beverage would, but must comply with FDA rules on labeling, to avoid in-market audits for violations. In December 2014, the FDA finally published its guidance for industry on the labeling of non-malt-based beers, which had been in draft form since 2009 (LINK). It helpfully goes through all of the FDA labeling requirements that apply to such beers. These are the same requirements that apply to any FDA-regulated alcoholic beverage, including many ready to drink (RTD) beverages, as discussed in our recent blog post (LINK). Among the key distinctions from standard alcoholic beverage labeling are that the label must include an ingredient list and a nutritional statement.
As well as regulating alcoholic beverages, FDA also regulates certain non-beverage alcoholic products. These are products which are consumed – often as cocktail ingredients – but which are not classified as beverages by the TTB because they have been deemed “unfit” for beverage purposes under TTB regulations. Common examples of these products are bitters and other alcohol-based flavorings. Attaining non-beverage status is a goal rather than a failure for these products because products eligible for non-beverage status are exempt from payment of federal excise taxes and they can be sold by retailers without an alcoholic beverage license. Products with a lot of sugar or other flavorings or ingredients that serve to make them more palatable as beverages may not make the cut as non-beverages and would remain subject to excise taxes and TTB label jurisdiction.
TTB and FDA classifications of alcoholic products have significant implications on the way they are labeled, taxed and sold, so it is important to submit these products for TTB review before bringing them to market.
For more advice on alcoholic beverages and non-beverages, contact one of the attorneys at Strike & Techel.
The general rule for excise tax reporting for alcohol producers is that returns must be filed semi-monthly (i.e. twice a month). A special exception to that rule allows a small producer, who does not reasonably expect to be liable for more than $50,000 in excise tax in the year, to file quarterly returns. Each small producer is required to make a choice of whether to file quarterly or semi-monthly, with that choice impacting the bonding requirements for the production facility. The less frequent the excise tax payment, the higher the required bond amount. Very small wineries currently benefit from even longer reporting and tax deadlines. Wineries that expect to pay less than $1,000 in wine excise taxes in the coming year may file excise tax returns annually. Operations reports may also be filed annually if the winery doesn’t expect to produce more than 20,000 gallons of wine in any one month in the calendar year.
Now, under recent guidance from the Alcohol and Tobacco Tax and Trade Bureau (“TTB”), small brewers will be forced to file returns quarterly rather than semi-monthly. This change will affect around 90% of licensed brewers. With the mandatory quarterly filing, the required bond is set at a flat $1,000 amount (previously, the bond for a brewer paying $50,000 in excise tax would have been $5,000 if filing semi-monthly, and close to $15,000 if filing quarterly). A brewery filing quarterly tax returns must also file a quarterly report of operations. To further lessen the burden of reporting for both brewers and TTB employees, the information required in the reports has been revised, with two sections removed. To see the full guidance, click here.
In addition to the TTB changes for small breweries, there is also a bill pending in the Senate that could reduce the compliance burden for all small producers. It would exempt small breweries, wineries and distilleries (i.e. not liable for more than $50,000 in excise tax in the year) from all current bonding requirements and would allow any small producer – not just small wineries—owing less than $1,000 a year to file annually. The proposal passed the Senate Finance Committee on February 11, 2015, and is awaiting consideration on the Senate floor. It has not yet been introduced in the House.
If you have any questions about brewery, winery or distillery operations reporting or taxes, contact an attorney at Strike & Techel.
Each year, the Alcohol and Tobacco Tax and Trade Bureau (TTB), conducts a random sampling of alcoholic beverages, known as the Alcohol Beverage Sample Program. TTB agents purchase alcohol products from retail stores and take them back to the TTB lab for review. The survey identifies compliance issues with the tested beverages, including incorrect alcohol content levels, and Certificate of Label Approval (COLA) discrepancies. The TTB recently released the results of their 2014 review, finding 139 out of 450 total products sampled to be non-compliant.
The most commonly identified issue was mislabeled alcohol percent by volume (ABV), in which the ABV stated on the label was either above or below the actual tested alcohol content. In distilled spirits products, 42 of the 190 beverages sampled were found to contain an ABV over the advertised content, while 14 products contained a lower ABV than advertised. Aside from misleading the consumer, incorrect ABVs can lead to regulatory action from federal tax authorities if the actual alcohol content would place the product in a different tax class.
Another common compliance issue was a discrepancy between the product’s label information and the information listed on the product’s COLA. When a bottler or importer applies for label approval with the TTB, they are issued a COLA and their product’s label must match the information provided on their COLA application (with the exception of some limited information which can be changed without a new COLA). Of the 139 non-compliant products, 40 had labels with missing or added information that did not match their approved COLA.
Other prevalent compliance issues included no COLA for the product, errors in the mandatory government warning message, and incorrect statements of class or type of alcohol. Possible TTB actions in response to incorrectly labeled products could include monetary fines and other regulatory penalties, and at a minimum, would require that the non-compliant labels be corrected. To see the full results of the sample program, click here.
Last week, the TTB issued an Industry Circular on the issue of tie-in sales, which are illegal under the Federal Alcohol Administration Act (FAA Act) and 27 C.F.R. § 6.72. Tie-in sales occur when a retailer is forced to purchase a product (which it may or may not want) in order to get the product that it wants. Tie-in sales include combination sales in which one or more products may only be purchased in combination with other products.
- A retailer must purchase a certain amount of regular distilled spirits, whether bottled or cased, in order to be allowed to purchase distilled spirits in a special holiday container or packaging.
- A retailer must purchase ten cases of Winery X’s Merlot from a wholesaler in order to purchase ten cases of Winery X’s Chardonnay.
- A retailer must purchase an industry member’s pre-mixed alcohol beverage specialty product (for example, strawberry daiquiri) in order to purchase a certain amount of their regular distilled spirits case goods. In other words, the regular distilled spirits products are not sold separately but only in combination with the specialty product.
- A retailer is required to purchase a two-bottle package containing one each of a winery’s Merlot and Chardonnay in order to get the Merlot. The Merlot is not available for purchase separately.
- A retailer must purchase a slow moving wine in order to purchase a distilled spirit that is in heavy demand. The distilled spirit is not available for purchase separately.
The take-away point is that each alcoholic beverage item needs to be available for purchase separately. It is still permissible to package alcohol products together or with other consumer goods, subject to state and federal restrictions, but the alcohol components should also be available separately. For additional information on the rules applicable to combination packs, contact one of the attorneys at Strike & Techel with any questions.
Currently, distilled spirits plants (DSPs) are required to complete and file operational report forms, which can number up to seven per month. The TTB has proposed eliminating the current forms and replacing them with two new report forms (TTB F 5110.77 and TTB F 5110.78) in order to streamline the reporting process and reduce costs. According to the TTB’s research, DSPs currently submit an average of 28.4 operational reports per year. The TTB notes that certain data within the required reports is not analyzed or used. Moreover, the increased use of alcohol as a fuel and the growth in artisanal distillers has resulted in many new DSPs and the corresponding burden on TTB to process the paperwork from these DSP has grown tremendously. If the proposal is approved, one report would be used for operations involving spirits for beverage use, while the other would handle reporting on industrial use spirits. Additionally, DSPs that submit quarterly tax returns could switch to quarterly operational reporting, as opposed to the current monthly reporting requirement. The comment period for this proposed revision runs through February 3, 2012, which is right around the corner. The full text of the proposal can be found here.
There were a number of new viticultural areas, commonly referred to as AVAs, approved by the TTB late this year, as well as an expansion of certain AVAs and several new proposed areas for which comments are due in early 2012. A summary on the latest activity is below. The TTB designates viticultural areas in order to allow vintners to more precisely describe the origins of their wines and so that consumers may make purchasing decisions with such specific origination information in mind.
Russian River Valley (California) – The Russian River Valley AVA, located in Sonoma County, California, was expanded by 14,044 acres.
Northern Sonoma (California) – The Northern Sonoma AVA, also located in Sonoma County, California, was expanded by 44,244 acres.
Coombsville (California) – The Coombsville AVA in Napa County, California covers 11,075 acres. The area is within the Napa Valley and North Coast viticultural areas. The Coombsville AVA is nearly identical to the previously proposed Tulocay AVA, which the TTB withdrew from consideration in June 2008.
Fort Ross-Seaview (California) – The Fort Ross-Seaview AVA in Sonoma County, California embodies 27,500 acres. The area is within the Sonoma Coast viticultural area, which in turn is within the North Coast viticultural area.
Naches Heights (Washington) – The Naches Heights AVA in Yakima County, Washington covers 13,254 acres. The Naches Heights AVA is within the Columbia Valley viticultural area located mainly in central and southern Washington, although a small portion of northern Oregon is also included within the Columbia Valley AVA.
Inwood Valley (California) – The TTB has proposed creating a 28,298-acre Inwood Valley AVA in Shasta County, California. Comments on the proposal must be received by February 3, 2012.
Middleburg Virginia (Virginia) – The TTB has proposed creating a 198-square mile Middleburg Virginia AVA located in the northern Virginia counties of Loudoun and Fauquier. Comments on the proposal must be received by January 9, 2012.
New Grape Variety Names – Thanks TTB!
In February we posted about The Alcohol and Tobacco Tax and Trade Bureau’s proposed rule to add new names to the approved list of grape variety names that can be used to designate United States wines. The original post is available here. The TTB has completed its rulemaking process and the revised rule will go into effect November 28, 2011, the Monday after Thanksgiving. More than 50 new names were added to the list, including some popular well known varietals like Grenache Blanc and Grüner Veltliner. To aid in locating information within the new and lengthy list, the TTB also included synonyms for a number of entries. Full details on the revised rule are available here.
Trigged by a petition from the European Commission, the Alcohol and Tobacco Tax and Trade Bureau (TTB) has proposed revisions to the current vintage date requirements in order to allow vintage dates to appear on wine that is labeled with a country as the appellation of origin. Currently 27 CFR 4.27(a) defines vintage wine as “wine labeled with the year of harvest of the grapes,” and in order to include a vintage wine identification the wine “must be labeled with an appellation of origin other than a country (which does not qualify for vintage labeling.)” The original reasoning behind such a requirement was to ensure that customers can easily ascertain information about a wine’s quality and identity. The European Commission’s petition did not take issue with that underlying goal, but rather argued that some of its member countries are smaller than states within the United States. The practical effect of the vintage date rule thus essentially means a wine from California labeled with a “California” appellation can include a vintage date while a wine from the country of Austria, which is about half the size of California, cannot include a vintage date if the wine is labeled with “Austria” as the appellation.
The TTB will be taking public comment on the proposed rule through January 3, 2012. The full rulemaking notice is available here.
Alcohol Beverage industry members may soon hear from the TTB if their websites do not contain a responsible advertiser statement and other information that is mandatory on all alcohol advertisements. Industry member websites are considered advertisements subject to these requirements, and recently the TTB has been independently investigating websites for compliance. If the mandatory information is not present on a website’s homepage, the TTB has begun sending letters to industry members requiring compliance and a confirming response to the TTB.
The federal requirements vary slightly depending whether the alcohol being advertised is beer, wine, or distilled spirits, but in general all alcohol advertisements are required to contain a responsible advertising statement that includes the permittee’s name and address, as well as statements regarding the class and type of alcohol.
Industry members – check your websites and other advertisements and make sure they contain all mandatory information! If you have any questions about these requirements, the attorneys at Strike & Techel are available to help.
The TTB recently announced new guidance on personalized labels, which supersedes its prior guidance in TTB G 2010-1 from April 7, 2010. The guidance provided in 2010 did not allow changes to artwork or graphics on a personalized label without resubmission of the label for approval. The TTB has relaxed its view and now will allow changes to graphics and artwork on personalized labels without requiring application for a new certificate of label approval (“COLA”). Names, event dates and salutations can also be changed without applying for a new COLA, as was previously allowed under the 2010 guidance. Personalized labels are for use with targeted customers or clients for things like weddings and grand openings. They are distinct from private labels, which remain subject to the standard COLA requirements and require resubmission for a COLA when label artwork is changed.
In order to obtain this flexibility on personalized labels, such preference must be indicated on the initial COLA application and the information that may change must be described. The label must still contain all standard mandatory label information. When issuing the COLA approval for personalized labels the TTB will include a qualification stating that the COLA covers the label and any changes in “graphics, salutations, congratulatory dates and names, and artwork to personalize the label as indicated on the application.” The new guidance is available here. If you would like to discuss COLA applications, please feel free to contact any of the attorneys at Strike & Techel.
People, especially in the San Francisco Bay Area, are often concerned about genetically modified organisms or bioengineering in their food. Given the fervor, does it make sense for suppliers to assume the concern extends to alcoholic beverages and label accordingly? While some manufacturers may want to highlight that their products are “GMO free” or “GM free,” the Alcohol and Tobacco Tax and Trade Bureau’s (TTB) current policy prohibits such labeling. Producers of non-alcoholic beverages have a little more latitude regarding GM labeling: The FDA’s position is that special labeling of bioengineered or genetically modified foods is not required, but manufacturers may voluntarily label their foods with such information. Additional information on the FDA’s position is available here. The TTB tends to be very cautious in allowing new types of information on alcohol labels and often prohibits any reference whatsoever until they have had the opportunity for careful review and can provide guidance in the proper manner of presenting such information. This has been true in the context of organic labeling and with respect to nutritional information (e.g., calories, fat, carbs, etc.). So we can expect that the TTB will weigh in with some direction on how GM-related statements can be offered in the future, but for now, they cannot be used on alcoholic beverage labels. Be sure to keep the TTB’s position in mind before submitting a certificate of label approval with any “GMO” related terms or references.
We Want COLAs! When Do We Want Them? NOW!
While patience is a long standing member of the virtue list, it’s not always easy. But a little patience goes a long way when dealing with regulatory compliance matters like certificate of label approvals (COLAs). The Alcohol and Tobacco Tax and Trade Bureau (TTB) began accepting COLA applications online several years ago, which reduced the processing time for new COLA applications to just a few days. In their ongoing efforts to streamline their processes for industry members, the TTB began accepting formulas and permit applications online as well. More recently, the TTB announced a streamlined approval process along with the end of expedited review (previously discussed here and here). Notwithstanding these efforts, the volume of COLA applications has continued to swell with processing times becoming progressively longer. To help people estimate their wait time the TTB is now providing average COLA processing times through its website (the information is in a chart on the upper right hand side of the page) or by phone (dial 1-866-927-2533, press 4 for malt beverages and distilled spirits labels and 6 for wine labels). Given government budgets cuts and increases in label approval applications, it seems likely that the days of getting labels approved in four or five days are not likely to return. The federal labeling regulations allow the TTB to take up to 90 days to approve a COLA application. 27 C.F.R. § 13.21(b) (2011). Processing times currently are much shorter than that, but industry members should plan accordingly and allow at least 30 days for label approval through COLAs Online. The attorneys are Strike & Techel are available if you need assistance with TTB regulatory matters, including COLAs.
Records of bottled or packed wine.
If you would like assistance with a TTB audit or help with TTB compliance matters, please feel free to contact the attorneys at Strike & Techel.
The Alcohol and Tobacco Tax and Trade Bureau (TTB) has updated the Certificate of Label Approval (COLA) form used to apply for label approval. The application, which is form TTB F 5100.31, now requests information about any grape varietals listed on a proposed wine label. Additionally, the COLA form has been updated to consolidate items needed for a pre-COLA evaluation, which is required for some products. The application form now consolidates these requirements into a “formula” field. The new COLAs online application system will also be updated to reflect these changes, but for the present time, COLAs filed electronically will not be required to include grape varietals.
Apparently, the TTB doesn’t agree that “anything goes” in Vegas. Just ask Diageo, Pernod Ricard, Moet Hennessey, Bacardi, Future Brands, and E. & J. Gallo Winery. According to the TTB, these companies allegedly violated the FAA’s tied-house “slotting fee” restrictions. A slotting fee has nothing to do with slot machines (good guess), but instead is anything of value a supplier provides to a retailer in exchange for favorable product placement. The TTB’s allegations included “that the companies collectively furnished nearly $2 million in inducements” with the purpose “to obtain preferential product display and shelf space (also known as slotting fees) at Harrah’s Hotels and Casinos.” In an industry guidance circular released shortly before the announcement of the offers in compromise, the TTB reminded industry members that while providing promotional items etc. to retailers might be legal in some contexts, doing so as an inducement for better product placement was a violation of FAA tied-house laws in general and slotting fee prohibitions specifically (at least when the elements of interstate commerce, exclusion of other brands, and, in the case of malt beverages, similar state law are present).
Under the terms of the offers in compromise, none of the companies admitted to any wrongdoing and collectively paid out $1.9 million in fines - the largest set of offers in compromise ever accepted by TTB for trade practice violations. Jackpot.
QUALIFICATIONS: TTB has not reviewed this label for type size, characters per inch or contrasting background. The responsible industry member must continue to ensure that the mandatory information on the actual labels is displayed in the correct type size, number of characters per inch, and on a contrasting background in accordance with the TTB labeling regulations, 27 CFR parts 4, 5, 7, and 16, as applicable.
The official reason TTB has given for making the change in procedure was to reduce the time wasted in the COLA process due to image distortions in submitted electronic files. The good news is that the label approval process should be faster with this new policy in place. But the flip side is that the importers and bottlers submitting COLA applications bear greater responsibility for ensuring the labels are in compliance with the labeling regulations. In addition to reserving the right to reject non-compliant labels, TTB also has the power to revoke COLAs it has previously issued, so non-compliant labels that obtain an approval still could be rejected – even after being applied to bottles. The associated costs and logistics problems of a COLA revocation make it important to continue to pay close attention to the minutiae when creating new labels.

References: § 5041
 § 5041
 § 25
 § 25
 § 25
 § 6
 § 13
in fine