ALCOHOL LAW ADVISOR
ALCOHOL LAW ADVISOR
Regulatory and Distribution Law Updates for the Alcohol Industry
ALCOHOL LAW ADVISOR
Regulatory and Distribution Law Updates for the Alcohol Industry
Alcohol and Tobacco Tax and Trade Bureau
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TTB Issues Ruling on Formulas for Beer

by and | Jun 6, 2014 | ,

On June 5, 2014 the Alcohol and Tobacco Tax and Trade Bureau (TTB) issued TTB Ruling 2014-4, exempting from TTB’s formula  and pre-import approval (PIA) submission requirements beer made with dozens ingredients as well as beer subjected to wood aging processes.  TTB now finds these ingredients and processes to be traditionally used in the production of beer.  The Ruling stems from a Brewer’s Association Petition filed with TTB in 2006 with the assistance of McDermott Will & Emery.  As the Ruling explains, TTB initially rejected the petition, but with continued industry interest and additional fact-finding the TTB has reversed its position.  The Ruling includes an attached list of exempted ingredients and processes, as well as examples of acceptable label designations.

Materials that brewers (including for imported or PIA beer) can now use without the need for a formula include:

  • Fruits:  Apples, apricots, blackberries, blueberries, cherries, cranberries, juniper berries, lemons, oranges, peaches, pumpkins, raspberries and strawberries.
  • Spices:  Allspice, anise, pepper/peppercorns, cardamom, cinnamon, clove, cocoa (powder or nibs), coriander, ginger, nutmeg, orange or lemon peel or zest, star anise and vanilla (whole bean).
  • Other Ingredients:  Brown Sugar, candy (candi sugar), chili peppers, chocolate, coffee (beans or grounds), honey, maple sugar/syrup, molasses/blackstrap molasses and lactose.
  • Wood Aging:  Allows aging beer with plain barrels, woodchips, spirals or staves, as well as those previously used in the production or storage of wine or distilled spirits.

Ingredients

TTB determined that ingredients including honey, certain fruits, certain spices and certain food ingredients are part of the traditional beer making process.  Industry members remain responsible for ensuring that all ingredients are suitable for food consumption in compliance with applicable Food and Drug Administration regulations and standards.  TTB notes that when using brown sugar, candy (candi) sugar, maple sugar/syrup or molasses/blackstrap molasses in the fermentation of a beer, the beer label is not required to refer to these ingredients.  Instead, the label may identify it as a “beer,” “ale” and so forth.

Wood Aging

The Ruling finds that the process of aging beers in barrels (or with woodchips, staves or spirals from those barrels) that were used previously in the production or storage of wine or distilled spirits is a traditional process.  This finding does not apply to the use of woodchips soaked or infused with wine or spirits for the sole purpose of making beer.  Moreover, brewers must ensure that the use of previously-used barrels or chips will not add any “discernible quantity” of wine or distilled spirits to the beer.  Labels do not need to state that the beer was aged in these types of containers.

Labeling

TTB determined that the use of the ingredients listed in the Ruling will no longer require a statement of composition on the label that distinguishes between the exempt ingredients added before or during fermentation and those added after.  A brewer or importer now has the flexibility to label the products in accordance with the trade understanding, and the precise wording is left up to [...]

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TTB Permits Online Now Fully Electronic

by | Apr 18, 2014 |

The Alcohol and Tobacco Tax and Trade Bureau (TTB) announced that starting on April 28, 2014 industry members will no longer be required to submit original paper copies of bond and power of attorney forms with electronic applications.  Recent changes to TTB’s regulations and Permits Online program will allow electronic receipt of these forms and other required documentation within the Permits Online system.  TTB hopes that this change will not only encourage industry members to take full advantage of the Permits Online system, but also improve application turnaround times as there will no longer be a delay between submission and TTB’s receipt of the paper forms.  Access TTB’s Permits Online Customer Support.



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Proposed FDA Labeling Revisions Would Impact Wines Below 7 Percent ABV and Certain Non-Malt Beers

by and | Mar 17, 2014 | ,

On March 3, 2014, the Food & Drug Administration (FDA) published a Notice of Proposed Rulemaking (NPRM) that, if and when finalized, would make important changes to the labeling of all foods subject to FDA’s primary labeling jurisdiction.  While most alcohol beverages fall under the primary labeling authority of the Alcohol and Tobacco Tax and Trade Bureau (TTB), wines below 7 percent alcohol by volume (ABV) and beers containing no malted barley or no hops fall within the scope of FDA’s primary labeling authority.

The NPRM seeks to adjust FDA’s labeling and related rules to address certain concerns about the American diet, particularly the so-called obesity epidemic.  As such, it aims to increase and improve the amount of labeling information about critical attributes like calories and the addition of sugars to food.  FDA’s proposed regulations would:

  • Put a greater emphasis—with larger and bolder type—on calories.  FDA believes the number of calories is especially important to maintaining a healthy weight.
  • Place greater emphasis on the number of servings per package and amount per serving.
  • Delete the requirement to list calories from fat; however the quantity (in grams) of total, saturated and trans fat will still be required.  FDA has shifted its focus to the type of fat rather than the total amount of fat.
  • Require the amounts of potassium and Vitamin D on the label, but not the amounts Vitamins A and C.
  • Update certain serving size requirements. These updates would reflect the reality of what people actually eat, according to recent food consumption data.
  • Update Daily Values for various nutrients.  In addition, the Percent Daily Value (%DV) would shift to the left of the Nutrition Facts label.  FDA says it wants to help consumers visually and quickly put nutrient information in context.

Significantly, the NPRM expressly addresses the subject of wines below 7 percent ABV and beer falling within FDA labeling jurisdiction in its proposed rules for added sugar labeling.  As noted above, a proposed regulation would require the mandatory declaration of added sugars as a line item in the familiar Nutrition Facts label required by current regulations.  That declaration would include any brown sugar, corn sweetener, corn syrup, dextrose, fructose, fruit juice concentrates, glucose, high-fructose corn syrup, honey, invert sugar, lactose, maltose, malt sugar, molasses, raw sugar, turbinado, sugar, trehalose and sucrose.  And because (according to FDA) no scientific means permits the measurement of added sugars (as distinguished from sugar intrinsic to the food), the NPRM proposes a new record-keeping requirement to document the addition of sugars to foods subject to the labeling rule.

Fermentation, of course, consumes sugar as yeast converts that sugar into alcohol (and other byproducts like CO2).  The NPRM acknowledges this fact, but indicates that FDA does not possess adequate information to assess the degradation of added sugars during the fermentation of wine and beer.  FDA asks commenters to provide information on this issue.

Notwithstanding FDA’s apparent lack of information on the subject, it proposes a specific regulation for beer and wine (plus [...]

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Impact of Government Shutdown

by | Sep 30, 2013 |

With the possibility of a government shutdown fast approaching, it is important to note that this will affect operations at the Alcohol and Tobacco Tax and Trade Bureau (TTB).  TTB falls under the U.S. Department of Treasury and as a result the processing of all formula and COLA submissions will cease during the shutdown.  In addition, TTB specialists will not be permitted to contact industry personnel or respond to any inquiries.



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TTB Can Assert a Plethora of Penalties That Are Stated In the Internal Revenue Code

by and | Sep 9, 2013 |

As part of its audit of taxpayers’ excise tax compliance, the Alcohol and Tobacco Tax and Trade Bureau (TTB) may impose several different types of financial penalties stated in the Internal Revenue Code (IRC).  Indeed, TTB can impose more than one penalty with respect to the same excise tax liability, and the total combined effect can reach a maximum exposure of 65 percent of the amount of tax due.

Failure to File, Failure to Pay and Failure to Deposit Penalties

1.  Delinquency Penalty

Generally, if a taxpayer files a late excise tax return or fails to file the return at all, the IRC imposes a delinquency penalty under IRC section 6651(a)(1) that is based on the net amount due on the return.  For any failure to file a return, the penalty is 5 percent of the amount of such tax for the first month of the failure, with an additional 5 percent for each additional month or fraction thereof during which such failure continues, up to a maximum of 25 percent of the amount of such tax.  For purposes of calculating the penalty, the “mailbox rule” does not apply, and instead, the penalty runs from the due date of the return until the date TTB actually receives the late return, and not the date of the return was mailed by the taxpayer.  If TTB deems the failure to file timely or not file at all was the result of taxpayer fraud, the penalty is increased to 15 percent for each month or fraction thereof, with a maximum penalty equal to 75 percent of the amount of tax due.

2.  Failure to Pay Tax Penalty

Additionally, if a taxpayer fails to pay the amount shown as tax on an excise tax return, on or before the date prescribed for payment of such tax IRC section 6651(a)(2) imposes a penalty of 0.5 percent of the amount of tax shown on the return for each month or fraction thereof during which the taxpayer fails to pay the amount due.  The failure to pay penalty, however, may not exceed 25 percent of the amount of tax due.

A taxpayer can also be subject to a failure to pay penalty under IRC section 6651(a)(3) if the taxpayer does not pay the amount of assessed tax, within 21 calendar days from the date of notice and demand.  This period is shortened to 10 business days if the amount assessed and shown on the notice and demand equals or exceeds $100,000.  The amount of the penalty is 0.5 percent of the amount stated in the notice and demand for each month or fraction thereof during which the tax remains unpaid.  This penalty may not exceed 25 percent of the amount of tax due.

3.  Failure to Deposit Penalty

Generally, taxpayers must make timely deposits of excise taxes when they reach a certain dollar amount.   IRC section 6656 imposes a penalty for a taxpayer’s failure to make timely deposits of excise taxes.  [...]

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Alcohol Advertising in Digital Media, Part 2: Federal Regulation

by | Aug 22, 2013 | , , ,

This past year brought examples of federal regulation and oversight of social media.  Both illustrate the general policy concerns of federal agencies that regulate alcohol beverage advertising.

TTB Industry Circular 2013-1, reviews the application of TTB regulations to beer, wine and spirits advertising in social media and other forms of digital advertising.  TTB’s primary concerns are the clear disclosure of the company responsible for an advertisement and prohibiting communication of false and misleading information.   The circular makes clear that TTB’s advertising regulations apply to digital advertising, including user-generated content.  Helpful references are provided to key sections of TTB advertising regulations for beer, wine and spirits.

FTC 2012 Special Order (FTC Matter No. P104518) requested a broad range of information on advertising expenditures and practices from companies in the alcohol beverage industry to make sure that they comply with the Federal Trade Commission Act and voluntary industry advertising codes.  The FTC has broad authority to prohibit and take enforcement action against advertising that is deceptive or unfair.  FTC officials have long maintained that this authority empowers the agency to limit exposure of persons under the legal drinking age to alcohol beverage advertising content in all media.  The Special Order requested information about online and social media activity at pages 4-6 and 9-10, and companies should recognize that advertising content, planning documents and placement information may be requested in similar special orders in the future.



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TTB Modifies Mandatory Information for Wine Labels

by | Aug 16, 2013 | ,

The Alcohol and Tobacco Tax and Trade Bureau (TTB) recently amended its regulations regarding the mandatory labeling requirements for wine.  Effective August 9, 2013, TTB regulations (27 C.F.R. § 4.32) no longer require that the alcohol content appear on the brand (front) label.  The alcohol content may now appear on other labels for wine products.  Of course, those other labels must be affixed to the container as required by 27 C.F.R. § 4.38.



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Alcohol Advertising in Digital Media, Part 1: Overview

by | Aug 15, 2013 | , ,

Tremendous opportunities exist for advertising brands, events and other promotional activities in digital media, which includes traditional web sites, social networks and integrated advertising platforms.  Properly executed marketing efforts provide great flexibility to reach and interact with adults of legal drinking age on a range of devices.  “Properly executed” is the key, particularly in digital media where campaigns can go from the conceptual stage to dissemination to millions of consumers in a matter of days.

Many professionals in the rapidly evolving media landscape grew up in a culture of free expression unparalleled in human history and several generations removed from the post- Prohibition mindset that inspired existing restrictions on alcohol advertising.  Those who are anxious to use their creative talents in alcohol beverage advertising campaigns must become familiar with unique federal and state laws governing alcohol advertising as well as voluntary industry codes.  Failure to take basic compliance measures can result in a devastating delay or removal of an innovative app, social network site or geo-targeting plan.  In addition to the loss of a key part of a campaign, government enforcement actions can result in penalties and reputational damage.

  • At the federal level, the Alcohol and Tobacco Tax and Trade Bureau (TTB) and the Federal Trade Commission (FTC) regulate alcohol beverage advertising.  Both agencies have shown recent interest in online and social media.
  • Each state has alcohol beverage and consumer protection statutes and policies.
  • Several industry trade associations and many digital media outlets have self-regulatory codes or unique rules that apply to content and placement of alcohol beverage advertising.

Basic principles of government regulation and industry self-regulation include societal concerns over issues such as alcohol abuse and potential appeal of advertising content to underage audiences.  The power of digital media triggers additional issues such as privacy and data security.

The next three parts of this series will address federal regulation, state regulation and industry self-regulation.



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Recent TTB Announcements Effecting Label and Formula Applications

by | Jul 29, 2013 |

Several recent Alcohol and Tobacco Tax and Trade Bureau (TTB) announcements impact label and formulation applications.

First, as of March 8, 2013, TTB revised the turnaround times for labeling and formulation applications.  TTB’s current goals are to review label applications within 30 days and formula applications within 45 days of receipt.  It is important to note these timeframes are goals for processing times.  Year to date (as of July 26, 2013), TTB has received 89,338 Certificate of Label Applications (COLA) alone.  Due to the volume of label and formula applications, industry members are experiencing longer turnaround times and we would advise that you budget 20 days for malt beverage label applications and 45 days for wine and distilled spirits label applications.  Formula applications are being returned between 60-75 days.  Though these timeframes are outside of TTB’s stated goals, they are within the prescribed 90 days permitted by 27 C.F.R. § 13.21(b).

Second, effective July 1, 2013, TTB has revised their industry room hours for walk-in submissions and visits.  The new hours of operations are Tuesday, Wednesday and Thursdays:  10:00 AM to 11:00 AM and 1:00 PM to 2:00 PM.  The industry room is now closed on Mondays and Fridays.  Industry members may continue to schedule appointments outside of the industry room hours.



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