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Non-Alcoholic Beer Regulation 101

As part of the general move to better-for-you beverages, non-alcoholic (NA) options have been and will likely continue to be on the rise. However, how NA is treated, or not treated, as “beer” has significant impact on its potential route to market. The below summarizes the overall treatment of NA beer under US federal law, as well as examples of restrictions on direct-to-consumer (DTC) shipments imposed by certain states.

FEDERAL TREATMENT OF NA BEER

  • Tax Treatment: The Alcohol and Tobacco Tax and Trade Bureau’s (TTB) regulations define “beer” as a fermented beverage containing 0.5% or more alcohol by volume (ABV) and brewed or produced from malt, wholly or in part, or from any substitute for malt. (See: 27 C.F.R. § 25.11.) The regulations refer to a malt beverage containing less than 0.5% ABV as a “cereal beverage.” (See: 25.11.) Because NA beer contains less than 0.5% ABV, TTB will not treat it as a “beer” under the Internal Revenue Code (IRC), and accordingly it will not be subject to federal alcohol excise taxes in the United States.
  • Formula Requirements: Once a process is developed for an NA malt beverage and prior to production, a formula must be submitted and approved by TTB. If an NA malt beverage is “alcohol-free,” TTB policy is to require submission of laboratory testing results.
  • Labeling: The Federal Alcohol Administration Act (FAA Act) regulates malt beverages, regardless of their alcohol content, if they meet the Act’s requirements of containing some malted barley, some hops (or hop parts or products) and having been subject to fermentation. An anomaly exists because the FAA Act’s definition of “malt beverage” does not include any minimum or maximum threshold of alcohol content. Because nonalcoholic and alcohol-free beers are produced like conventional beer and then de-alcoholized, they fall under TTB’s labeling and advertising jurisdiction. Several regulations specifically address such products. (See: 27 CFR § 7.71.)
  • FDA Requirements: The Food and Drug Administration (FDA) requires NA beverages that are not malt beverages under the FAA Act (beverage without malt and hops or an unfermented beverage) to be labeled in accordance with the Food, Drug, and Cosmetic Act (FD&C Act), Fair Packaging and Labeling Act (FPLA) 15 U.S.C. §§ 1451-1461, and the Nutrition Education and Labeling Act 21 U.S.C. §§ 343-350. (Click here for more information.) These statutes and the FDA regulations require a full ingredient list and nutritional facts label. If an NA beverage without malt or hops or an unfermented beverage is being considered, a full explanation of the FDA requirements will be needed to develop a compliant production, labeling and marketing plan. The FDA has industry guidance on labeling and formulation of “dealcoholized beer.” (See: FDA CPG Sec. 510.400, updated Nov. 2005.)
  • Production Process Issue: If the production process for an NA beverage includes removal of alcohol from beer through reverse osmosis or other processes that separate alcohol from the other components of a beverage, the process may be considered distilling operations, which will require a federal basic permit for a distilled spirits plant. (SeeATF Ruling 85-6.)
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Eighth Circuit Strikes Down Multiple Missouri Alcohol Beverage Advertising Laws

In another blow to the constitutionality of alcohol beverage laws, the Court of Appeals for the Eighth Circuit struck down on First Amendment grounds a number of Missouri’s alcohol beverage advertising laws on the basis that Missouri failed to meets it burden to demonstrate that such laws both advanced the state’s substantial interest and were narrowly tailored to achieve that interest.

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What to Know About FDA’s Recent Statements on CBD

Last week FDA issued a public release on CBD titled, “What You Need to Know (And What We’re Working to Find Out) About Products Containing Cannabis or Cannabis derived Compounds, Including CBD.”

The FDA document does not break much new ground, though it emphasizes again FDA’s concern with the safety of CBD, some of which comes from FDA’s review of the CBD-based epilepsy drug Epidiolex. FDA does not believe it has enough information about certain aspects of CBD, such as what happens if someone takes CBD daily for sustained periods. In addition, FDA specifically identifies as a potential harm the use of CBD with alcohol because of the increased risk of sedation and drowsiness, which can lead to injuries. FDA, in addition to issuing this document, sent 15 warning letters to companies marketing CBD products that FDA views as unapproved drugs primarily because of the drug like claims made for such products.

FDA appears to be on a path toward considering a regulation to allow the marketing of CBD in conventional foods or as a dietary supplement. This approach will likely take a long time—perhaps some 2-4 years—absent legislative changes that do not appear likely in an election year. In the meantime, FDA continues to view putting into interstate commerce a food to which CBD has been added or to market CBD as or in a dietary supplement as a violation of the Federal Food, Drug, and Cosmetic Act (FD&C Act).




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Learning from Recent Trademark Cases

Recent cases offer lessons for brewers navigating the often-tricky obstacles surrounding the selection, use and enforcement of trademarks. Whether a brewery is choosing a logo or naming a new beer, the latest decisions highlighted in this article underscore the importance of doing due diligence when it comes to trademarks.

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Originally published in The New Brewer, September/October 2019.




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Court Dismisses Challenge to TTB’s Rejection of Health Claims on Vodka

In August, the US District Court for the District of Columbia issued its final decision in Bellion Spirits, LLC v. United States, Civ. No. 17-2538 (JEB). The Bellion case was brought by spirits company Bellion Spirits after the Alcohol and Tobacco Tax and Trade Bureau (TTB) refused to approve a series of health claims advanced by Bellion in connection with its vodka products. According to Bellion, the infusion of its vodka with a compound called NTX will mitigate the damage alcohol inflicts on human DNA. (more…)




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FDA CBD Docket Closed, Agency to Soon Provide Status Report

The Food and Drug Administration (FDA) has increased its efforts to follow through on its commitment to provide guidance to stakeholders on the regulatory landscape for products containing CBD. On May 31, 2019, the FDA held a public hearing to obtain scientific data and information about the safety, manufacturing, product quality, marketing, labeling and sale of products containing cannabis or cannabis-derived compounds. Following the hearing, the FDA established a docket to allow the public to submit additional comments, research and information to the Agency. The docket closed on July 16 and received nearly 5,000 comments. On July 12, FDA Chief Information Officer and Principal Deputy Commissioner Dr. Amy Abernethy confirmed via Twitter that the Agency is “expediting its work to address” questions surrounding CBD and plans “to report on [its] progress around end of summer/early fall.” Due to the significant number of comments to the docket, it remains to be seen whether FDA will provide any material development that impacts the regulation of CBD products beyond a progress report on its review of the docket.




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Winds of Change Blowing for Craft Brewers

For those who follow developments in the law and craft brewing with equal passion, every year has its share of substantial issues. This year has been no exception, with a pending Supreme Court case; a substantial upswing in federal trade practice enforcement activity; a massive rewrite of US Tax and Trade Bureau (TTB) labeling and advertising regulations; and prospects for extending the biggest cuts in the excise tax on beer since the repeal of Prohibition.

As these developments play out over the next year, we may see changes translate into the marketplace. Find out what you can expect.

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Originally published in The New Brewer, May/June 2019.




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TTB Spring 2019 Updates to Semi-Annual Regulatory Agenda

The spring edition of the federal government’s semi-annual Unified Agenda of Federal Regulatory and Deregulatory Actions (Regulatory Agenda) has been published. Like other federal agencies, the Alcohol and Tobacco Tax and Trade Bureau (TTB) uses the Regulatory Agenda to report on its current rulemaking projects.

The Regulatory Agenda provides glimpses into TTB’s policy focus and aspirations. But, readers should recognize that TTB rulemaking moves very slowly, and the Agency often does not meet the aspirational dates published in the Regulatory Agenda.  (more…)




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FDA Releases Warning Letters to CBD and Hemp Oil Companies

Last week the Food & Drug Administration (FDA) made public three new warning letters to Cannabidiol (CBD) and hemp oil product companies sent by FDA and the Federal Trade Commission (FTC). FDA has previously targeted cannabis product companies.

The new warning letters are consistent with FDA Commissioner Scott Gottlieb’s recent statements that the FDA will go after manufacturers of CBD products that make health and wellness claims that FDA views as egregious. For example, the CBD companies in question allegedly marketed their products for Alzheimer’s disease, fibromyalgia, inflammation, skin conditions, autoimmune disorders, anxiety, cancer pain, PTSD and depression, to name a few symptoms. These companies are making food, dietary supplements, and cosmetic products, as well as products for pets (CBD for dogs). (more…)




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Washington Court of Appeals Upholds Multi-Million Dollar Fine for 5-Hour Energy Advertising Claims

On March 18, 2019, the Washington Court of Appeals upheld a trial court’s decision that three advertising campaigns for 5-Hour Energy® made by Living Essentials, LLP and Innovative Ventures, LLP (collectively, Living Essentials) violated the Washington Consumer Protection Act (CPA) by making deceptive advertising claims.

Living Essentials makes and markets the energy drink 5-Hour Energy®. The three advertising claims at issue involve claims about the efficacy of the drink. Living Essentials claimed or implied that: (1) 5-Hour Energy® was “Superior to Coffee” (Superior to Coffee claim); (2) decaf 5-Hour Energy® was effective “for hours” (Decaf claim); and (3) 73 percent of doctors would recommend 5-Hour Energy® (Ask Your Doctor claim). The trial court found all three advertising claims in violation of the CPA. It also assessed a civil penalty against Living Essentials of $2,183,747 and awarded the State $1,886,866.71 in attorney fees and $209,125.92 in costs. The court of appeals affirmed.

Living Essentials argued on appeal that the trial court (1) erred by adopting the Federal Trade Commission’s (FTC) prior substantiation doctrine; (2) that the prior substantiation doctrine violates article I, section 5 of the Washington State Constitution and the First Amendment to the United States Constitution; (3) that Living Essentials’ claims were mere puffery which did not require substantiation; (4) the trial court applied the wrong standard for necessary substantiation; and (5) the trial court erred in concluding that Living Essentials’ Ask Your Doctor claim was deceptive. Living Essentials also challenged the trial court’s penalty and award of attorney fees. (more…)




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