Source: https://www.federalregister.gov/documents/2001/11/26/01-29361/hard-cider-semi-generic-wine-designations-and-wholesale-liquor-dealers-signs-97-2523
Timestamp: 2017-09-23 02:43:36
Document Index: 309169162

Matched Legal Cases: ['§\u20094', '§\u2009194', 'art 24', 'art 24', '§\u20094', 'art 4', 'art 24', '§\u200924']

Federal Register :: Hard Cider, Semi-Generic Wine Designations, and Wholesale Liquor Dealers' Signs (97-2523)
A Rule by the Treasury Department and the Alcohol, Tobacco, Firearms, and Explosives Bureau on 11/26/2001
58938-58944 (7 pages)
01-29361
https://www.federalregister.gov/d/01-29361 https://www.federalregister.gov/d/01-29361
Since the IRC regulations concerning wine labeling appear in 27 CFR 24.257, we amended that regulation to incorporate the wording of 26 U.S.C. 5388, concerning the use of semi-generic wine designations. Additionally, we incorporated the standards of identity for wines under 27 U.S.C. 205 by reference in this section. Finally, we placed a cross-reference to this new rule in § 4.24.
The use of semi-generic designations on wine labels was the subject of two comments. Peter M. Brody of Ropes & Gray, writing on behalf of the Institut National des Appellations d'Origine (INAO) objected to “entrenching” the U.S. policy of allowing use of the names champagne, chablis, burgundy and sauternes, on wines made outside France. Jean-Christophe Paille, Counselor for Agriculture of the Ambassade de France aux Etats-Unis, made the same objection. However, these objections were to the underlying statute and not to the regulatory changes made as a result. Therefore, we are adopting the language of the temporary rule in this final regulation.
Section 1415 of Public Law 105-34 repealed the requirement for wholesale dealers in liquor to post signs identifying their premises and made conforming changes to sections of the law which referenced that requirement. In the temporary rule, ATF amended the Liquor Dealers' regulations by removing §§ 194.239 through 194.241, which relate to this requirement. This change received no comments, so we are adopting the language of the temporary rule in this final regulation.
In the temporary rule, ATF added a definition of hard cider to the wine regulations and made other changes to the wine production and labeling regulations. In associated Notice Number 859, ATF invited comments on the definition of hard cider established in the temporary rule. We noted there were numerous traditional ways of making fermented cider, some of which Start Printed Page 58939may not fit the definition of hard cider provided in the temporary rule. We invited comments, including citations of standard references on cider making, on whether adjustments to the definition of hard cider are warranted.
a still wine (same)
derived primarily from apples or apple concentrate and water primarily from apples or apple concentrate and water (apple juice, or the equivalent amount of concentrate reconstituted to the original brix of the juice prior to concentration, must represent more than 50 percent of the volume of the finished product)
containing no other fruit product containing no other fruit product nor any artificial product which imparts a fruit flavor other than apple
containing at least one-half of 1 percent and less than 7 percent alcohol by volume (same)
(no provision) having the taste, aroma, and characteristics generally attributed to hard cider, and sold or offered for sale as hard cider and not as a substitute for any other alcohol product.
We interpreted the statutory phrase “derived primarily from apples or apple concentrate and water” to mean that apple juice, or the equivalent amount of concentrate reconstituted to the original brix of the juice prior to concentration, must represent more than 50 percent of the volume of the finished product. We note the Washington State definition, supported by ten commenters, does not Start Printed Page 58940contain a requirement for a minimum percentage of apple juice, as we did in our temporary rule. When we set a threshold for apple juice content as part of the regulatory definition of hard cider, we did so in an effort to implement the statutory requirement that hard cider be made “primarily from apples.” Although one commenter stated that he believed 95% apple juice should be the minimum, we recognize that one traditional method of making hard cider involves diluting apple wine (approximately 12% alcohol) with juice, concentrate and water, or other non-alcoholic ingredients to a final strength of 6 to 7 % alcohol. We also consulted dictionary definitions of the word “primarily”, which yielded synonyms such as “mainly” “chiefly,” and “for the most part.”
Other commenters did not discuss fruit flavors in general, but said they believed some pear juice should be allowed in cider. Jean-Christophe Paille, Counselor for Agriculture of the Ambassade de France aux Etats-Unis, noted that French regulations authorize the use of pear must in apple cider “for purpose of gustative quality.” Nicholas Bradstock of the National Association of Cider Makers (NACM, representing UK cider makers) and Jeffrey House of California Cider Company expressed the view that perry (wine derived from pears) should be given equal tax treatment with cider since the two products are so similar. Only one commenter, Brian Black of Black & Fagan Cider Co., supported the complete prohibition on other fruit flavors, saying “wine coolers exist for that category.” Representative Neal, in his March 17, 1998, letter to ATF, supported the idea of fruit flavored ciders, but noted the need for a distinction between an eligible product marketed as cider and ineligible products marketed as “a fruit flavored wine cooler which was produced with an apple wine base.”
Once fermented, eligible hard cider may not be altered by the addition of other fruit juices, flavor, or other ingredient that alters the flavor that results from the fermentation process. Thus, for example, cider fermented Start Printed Page 58941from apples, but which has raspberry flavor added to it prior to bottling and marketing to the public, will not be eligible for the 22.6 cents-per-gallon tax rate.
Although we did not address other wine ingredients in the regulatory language of the temporary rule, we asked in the notice if the prohibition on “other fruit products” should be interpreted to restrict use of authorized wine treating materials or sugars that were derived from fruits other than apple. We noted that some wine treating materials, such as tannin or citric acid, may be derived from fruit other than apples. Mr. Daniels of Green Mountain Cidery, Stephen Swift, Export Manager of Matthew Clark Brands, Ltd., Paul Thorpe of E. & J. Gallo Winery and Mr. Bradstock of NACM, expressed support for continued acceptance of citric acid and sugars as wine treating materials and not as fruit additives. Mr. Thorpe noted that, despite their names, “citric” acid and “fructose” sugar may be derived from sources other than fruit. Scott Benson, an independent cider distributor, said he thought if fruit flavored ciders were not eligible for the cider tax rate, then citric acid and fruit derived sugars should not be allowed in cider, either. After reviewing these comments, we have decided not to restrict the use of approved wine treating materials in cider. We believe it would be impractical to make a distinction between fruit derived wine treating materials and the same materials derived from other sources, unless there were other circumstances that indicated the producer was using these materials as flavorings. Used as directed in 27 CFR part 24, authorized wine treating materials would not impart a fruit flavor to wine. However, we note that some ciders are made under approved formulas rather than under the rules for production of natural wine in subparts F and L of part 24. In approving such formulas, ATF may allow the use of wine treating materials at a level beyond the amount necessary to stabilize or adjust the acidity of a natural wine. While there is no limit on the amount of wine treating materials that may be used in a formula wine, hard cider may not contain treating materials in amounts sufficient to impart a fruit flavor other than apple and still be taxed as hard cider. For example, if a cider contained more citric acid than the amount allowed under subpart L, and was labeled as “citrus flavored,” the product would be classified for tax purposes as a still wine under 14% alcohol by volume rather than a hard cider. As we will discuss in more detail in the background material on labeling, we will allow the use of the term “hard cider” on labels of products that do not belong to the “hard cider” tax class, as long as other information on the label allows us to determine the tax class.
Draft cider is one of the oldest categories of alcoholic beverages in North America. Back in Colonial times, nearly every innkeeper served draft cider to his or her patrons during the long winter. In fact, through the 19th Century, beer and draft cider sold equally in the United States. Start Printed Page 58942
Recently, draft cider has made a comeback in the United States and around the world. Our tax law, however, unfairly taxes draft cider at a much higher rate than beer despite the two beverages sharing the same alcohol level and consumer market. This tax treatment, I believe, creates an artificial barrier to the growth of draft cider. Our legislation will correct this inequity.
Specifically, we proposed to remove the amendment we made to § 4.21(e)(5) of the FAA Act wine labeling regulations. Part 4 only applies to wines that contain 7%-24% alcohol by volume. As amended, that section prohibited the use of the term “hard cider” on any wine with 7% or more alcohol by volume. We intended to avoid confusion between these higher alcohol wines and wines in the new hard cider tax class by this prohibition. After reviewing the comments, we find this precaution unnecessary. We believe, since hard cider with 7% or more alcohol by volume will be marked with the alcohol content, it will be easy to distinguish the product from a lower-alcohol hard cider eligible for the hard cider tax rate. Therefore, we will allow use of the term “hard cider” on products over 7% alcohol by volume. Second, we are amending the IRC marking requirements in part 24. When the new tax class of hard cider was established, we amended the labeling rules to substitute the phrase “hard cider” for the word “wine” to identify the tax class. On IRC wine labels, no single item of information gives the tax class. On conventional wines, the word “wine” and the alcohol content (modified by the word “carbonated” or “sparkling” if either applies) identify the tax class.
To address these concerns, we proposed several changes to 27 CFR 24.257. First, we proposed to adopt the minimum and maximum type size requirements of 27 CFR 4.38 because they are already in use by the wine industry for higher alcohol products. We did not propose to specify placement of information required in § 24.257. Products with 7 percent or more alcohol by volume will still be subject to the FAA Act rules covering placement.
We proposed to remove the requirement that the word “wine” or the words “carbonated wine” must be “part of the brand name or in a phrase in direct conjunction with the brand name.” Information on the kind of wine may be anywhere on the label. We also proposed to add some alternative labeling terms to reflect the industry practice of calling products “cider” instead of “wine” on these labels. We did not propose to require or restrict the Start Printed Page 58943use of words such as “draft”, “fermented” or “hard” to identify products in the tax class of hard cider. We proposed, where the words on the label leave doubt as to the tax class, that cider makers must include a reference to the tax class by section of the law. For example, hard cider must contain more than 50 percent apple juice. If a cider contains less than 50 percent apple juice, it is taxed as a still wine under 14 percent alcohol by volume, but it may still be called cider. In order to make it clear that this cider is taxed at $1.07 instead of $0.226, we will require that the label show “tax class 5041(b)(1) IRC” or an equivalent phrase. This wording is similar to the wording of 27 CFR 25.242, on marking nontaxable cereal beverages. We requested industry and consumer comments on these proposals.
In response to Notice No. 881, ATF received four comments. Roger Daniels of Green Mountain Cidery wrote to support the proposed changes, but objected to use of specific examples in the proposed rule that used the temporary rule's definition of hard cider, which they believe should be changed. Since we have not changed the definition, we have retained the examples. Mr. Daniels also reiterated his request that we clarify when FAA Act labeling rules apply and when they do not. We have amended the final rule to include this information. We have also added a reference to the Health Warning Statement, which is required for any alcohol beverage over 1/2 percent alcohol, including cider. Richard G. Burge of Wyder's Cider supported our proposal to allow more open use of the word cider, but objected to our proposal that the tax class should be added to the label. He said the added tax information “is not meaningful to the consumer and can be confusing.” Mr. Bradstock of NACM said: “Ciders qualifying as Hard Cider for tax purposes might be described in other terms, * * * and if the tax class is not clear from the manner of labelling [sic] then this might be confirmed by quoting the tax class on the label * * * with or without a supplementary declaration of hard cider.” Stephen Swift of Matthew Clark Brands, Ltd., a cider maker from the U.K., wrote to express support for the NACM comment.
Accordingly, the temporary rule amending chapter I of title 27, Code of Federal Regulations, which was published at
End Authority Start Printed Page 58944 Start Amendment Part