Alcohol & Tobacco Tax & Trade Bureau Archives

Alcohol & Tobacco Tax & Trade Bureau

FDA Publishes Supplemental Guidance on Menu Labeling for Chain Restaurants

by Arthur J. DeCelle | Nov 20, 2017 | Advertising and Marketing, Food Safety and FDA, Import/Export, Legislation, Trade Practices, TTB COLAs and Formulas

On November 7, the US Food and Drug Administration (FDA) published the latest in a series of industry draft guidance documents to help implement menu labeling and nutrient disclosure regulations applicable to chain restaurants (Draft Guidance). FDA guidance documents are advisory in nature and represent the views of the FDA at a given point in time. Accordingly, guidance is subject to change, but is useful for developing a compliance plan for retail establishments covered by the menu labeling regulations. Changes are usually incremental and based on agency experience and input from regulated industry members.

The FDA established a 60-day period for comments on the draft menu labeling and nutrient disclosure guidance. The comment period ends on January 6, 2018.

The current compliance date for menu labeling and nutrient disclosure regulations is May 7, 2018.

Implementation of federal menu labeling and nutrient disclosures by chain restaurants is a study in modern American political and administrative processes. For those who already tried to comply with the formal FDA regulations and prior guidance, an explanatory note about delays in the administrative process appears at the end of this post.

Two sections of the Draft Guidance explicitly address alcohol beverages.

Guidance is offered for beer lists on menus and the discussion has broader application to wine and spirits products and cocktails that are standard menu items on chain restaurant menus.
Sources of nutrient information for beer, wine and spirits are also discussed to provide an alternative to expensive laboratory testing for each brand that a manufacturer offers.

The Draft Guidance also:

Includes several plain-language explanations of key terms in FDA regulations with useful distinctions between regular menu items and season or special items;
Displays a number of graphics designed to assist retailers with standardized formats to communicate calorie content of various foods to consumers and to distinguish menus from marketing materials;
Directs manufacturers and retailers to reliable sources and methods to prepare and display compliant nutrient disclosures; and
Provides information on presentation of mandatory standard menu notices alerting consumers to the federal government’s recommended 2,000 calorie diet and availability of nutritional information for standard menu items upon request to a server or manager at a retail establishment.

The FDA guidance and the formal regulations use subjective terms about legibility (e.g., contrasting, clear and conspicuous). Those terms aim to ensure that information is consumer-friendly, but they could lead to nuisance complaints from regulators. FDA regional personnel and local inspectors under contract with the FDA will monitor compliance with menu labeling regulations. Since chains will, by nature, have locations in multiple jurisdictions, consistency in enforcement poses a challenge to industry and government.

To mitigate regulatory risks, a conservative approach is advisable to mandatory disclosures. All aspects of calorie and nutrient disclosure should be reviewed by counsel or a knowledgeable compliance professional. The review should start with the manner used to ascertain calories and nutrients and continue through preparation and publication of new and easy-to-read menus and nutrient disclosures. [...]

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Category Management Practices

by McDermott Will & Emery | Sep 26, 2017 | Advertising and Marketing, Trade Practices

Today’s off-premises retail landscape is dominated by large chains that rely on practices generally known as category management to maximize the profitability of their stores. Some of the activities falling under the category management umbrella require close interaction between the retailer and the producers, importers, or distributors supplying them product. As a result of this interaction, the federal Alcohol & Tobacco Tax & Trade Bureau (TTB) last year issued a ruling indicating that industry members’ participation in category management activities could result in a violation of the tied-house provision of the Federal Alcohol Administration (FAA) Act and the TTB’s corresponding tied-house regulations.

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Originally published in The New Brewer, September/October 2017.

Implications of EU Ingredient Labeling Proposal for US Suppliers

by Arthur J. DeCelle | Mar 21, 2017 | Advertising and Marketing, Food Safety and FDA, Import/Export, Legislation, Trade Practices, TTB COLAs and Formulas

On March 13, the European Commission approved a report that calls on members of the alcohol beverage industry to develop a comprehensive self-regulatory system of ingredient and nutritional labeling for beer, wine, and distilled spirits. The Commission is composed of representatives of each member nation of the European Union (EU) with a range of administrative responsibilities and authority to develop and propose legislation for consideration by the European Parliament.

The European Commission characterizes access to ingredient and nutrition information as a right of EU consumers, and called on industry members to develop a self-regulatory proposal over the next year. Current EU policy on alcohol beverage labeling is analogous to US policy. The EU regulation on food labeling exempts alcohol beverages containing more than 1.2 percent alcohol-by-volume.

The European Commission proposal warrants careful attention by US alcohol beverage suppliers across all beverage categories. The initial industry response by European suppliers will likely start a lengthy process leading to new ingredient disclosures.

US regulations are largely based on the presumption that consumers have a working knowledge of ingredients in alcohol beverages. Alcohol & Tobacco Tax & Trade Bureau (TTB) and its predecessor agency considered and rejected mandatory ingredient labeling proposals several times since 1970s. TTB’s most recent assessment of ingredient and nutritional labeling of alcohol beverages was an advance notice of proposed rulemaking published in 2005 soliciting public input on the existing TTB policy. No further rulemaking activity followed the TTB inquiry.

Existing TTB regulations focus on disclosures of certain ingredients that pose unique health risks or allergic reactions. Industry members are permitted to disclose ingredients on a voluntary basis. A few alcohol beverages are subject to US Food and Drug Administration (FDA) regulations, which require comprehensive ingredient and nutritional labeling.

Many US products are exported for consumption in the EU. If a new system is adopted in the EU, producers in the US must provide ingredient and nutritional information to their customers overseas with no corresponding requirements in their home markets. EU suppliers are major players in the US market and may decide to voluntarily provide the same information to their American customers that they will ultimately have to provide in their home markets.

These dynamics will likely reinvigorate calls by consumer advocacy organizations and government agencies (e.g., Federal Trade Commission, Food and Drug Administration, and National Institutes of Health) in support of ingredient labeling of alcohol beverages in the US. In the current era of dwindling government resources, the European Commission’s call for an industry self-regulatory initiative provides an opening for a similar initiative in the US. Industry members and associations should monitor developments in the EU and consider appropriate responses directly to the EU initiative and to analogous proposals in the US.

An English version of the European Commission proposals is available here.

TTB Issues Ruling on Category Management under Federal Tied-House Statute

by McDermott Will & Emery | Feb 12, 2016 | Advertising and Marketing, Trade Practices

Today the Alcohol & Tobacco Tax & Trade Bureau (TTB) released TTB Ruling 2016-1 (Ruling), addressing category management practices. The Ruling seeks to clarify TTB’s position toward category management under the federal tied-house statute and regulations, which generally prohibit an alcohol beverage supplier or wholesaler from providing a “thing of value” to alcohol beverage retailers.

The federal tied-house statute and the TTB regulations implementing that provision require TTB to show both an “inducement” of a retailer leading to “exclusion” of competing products for TTB to find a tied-house violation. TTB regulations also list specific activities that are exceptions to the general rule that providing anything of value to a retailer constitutes an “inducement.” Those exceptions include shelf schematics. See 27 C.F.R. § 6.99(b).

Ruling 2016-1 recites the history of the shelf schematics exception and exhibits an element of “buyer’s remorse,” as the narrative suggests that TTB’s predecessor, the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF), discounted the possibility of abuses that TTB seems to believe are occurring today. The Ruling then makes it clear that TTB will strictly interpret the schematics regulation as applying only to the schematics themselves, and not “additional services.” Current category management practices often involve other activities not directly linked to the provision of shelf schematics, although these other activities (at least arguably) relate to developing, creating and updating shelf plans. Ruling 2016-1 lists the following examples of “additional services” that may prompt TTB scrutiny:

Assuming a retailer’s purchasing or pricing decisions, or shelf stocking decisions involving a competitor’s product;
Receiving and analyzing confidential and/or proprietary competitor information for a retailer;
Furnishing to a retailer market data from third party vendors;
Providing follow-up services to monitor and revise schematics that involve communicating with a retailer’s stores, vendors, representatives, wholesalers and suppliers concerning daily operational matters; and
Furnishing a retailer with human resources to perform merchandising or other functions, with the exception of stocking, rotation or pricing as permitted by TTB regulations.

Ruling 2016-1 does not provide significant guidance on when category management services may lead to the exclusion of competing products. Instead, the Ruling generally repeats and/or cites to TTB’s exclusion regulations, which were adopted in the mid-1990s.

In short, Ruling 2016-1 provides only modest specific guidance to the industry. It does, however, signal quite clearly that TTB will likely direct enforcement resources at current category management practices.

Labeling and Advertising Gluten-Free Beer

by McDermott Will & Emery | Jul 23, 2015 | Advertising and Marketing, Food Safety and FDA, TTB COLAs and Formulas

In the past decade, millions of Americans have converted to gluten-free diets. Originally a practice dictated solely by the medical needs of those who suffer from celiac disease, gluten-free has entered the mainstream. This article will explore the evolving and somewhat uncertain status of labeling and advertising beer as “gluten-free.”

Read the full article, originally published in the July/August 2015 issue of The New Brewer.

Buying and Selling a Craft Brewery

by McDermott Will & Emery | Feb 27, 2015 | Advertising and Marketing, Alcohol Excise Taxes, Distribution, TTB COLAs and Formulas

Few craft brew entrepreneurs contemplate selling their business when they first get started. Unlike, for example, the typical entrepreneur in the software industry, the craft brewers we know were inspired by the love of great beer, a spirit of adventure, and the romance of creating a small manufacturing business. But the life cycle of most businesses eventually requires at least the consideration of a sale or other transaction designed to both recoup the entrepreneur’s lifelong investment and transition the company to the next generation.

From the buy side, the craft beer business has never been hotter, with market share now approaching 8 percent by volume in the U.S. and margins that have gotten the attention of both big brewers and non-U.S. brewers alike. This article, published in the January/February 2015 issue of The New Brewer, will explore at a high level some of the issues involved with buying and selling a craft brewery.

Read the full article.

TTB Publishes Semi-Annual Regulatory Agenda with Plans and Goals for the Coming Year

by McDermott Will & Emery | Feb 9, 2015 | Advertising and Marketing, Alcohol Excise Taxes, Import/Export, Non-Beverage Alcohol, TTB COLAs and Formulas

Late last year, the Alcohol & Tobacco Tax & Trade Bureau (TTB) published its semi-annual regulatory agenda in the Federal Register. The agenda provides useful insights into TTB’s regulatory plans and goals for the coming year. As in prior years, however, observers should recognize that TTB often announces ambitious regulatory plans and deadlines that it does not meet.

TTB identified five priority projects for 2015. First, TTB wishes to update and modernize its regulations on the labeling and advertising of wine (Pt. 4), distilled spirits (Pt. 5) and beer (Pt. 7). In describing the initiative, TTB seems most interested in simplification and streamlining, not in the imposition of significant new labeling and advertising requirements. Second, TTB seeks to further de-regulate and streamline its oversight of denatured alcohol and rum, a move that could help the competitiveness of U.S. industrial operations that employ alcohol. Third, TTB wishes to amend its export and import regulations to harmonize them with the International Trade Data System (ITDS), thereby transitioning to an all-electronic import and export environment. Fourth, TTB hopes to implement self-certification of the formulas for flavors, extracts and other non-beverage products made with alcohol. Fifth, TTB plans to review its distilled spirits plant regulations (Pt. 19) in order to replace the current four monthly report forms required for reporting with two forms.

Leaving priorities aside, the semi-annual agenda reports on a number of rulemaking initiatives that should attract the interest of regulated industry members. This note will group the most significant based on the affected industry:

Multiple Alcohol Beverage Categories

TTB pledges to publish a Notice of Proposed Rulemaking (NPRM) to modernize its wine, spirits, and beer labeling and advertising regulations. As noted above, this is a 2015 priority item for the Agency.
TTB plans to issue an NPRM late in 2015 to explore whether to retain, revise or repeal the current standards of fill requirements for both wine and distilled spirits.
TTB plans to issue a Final Rule requiring the electronic submission of many applications, including those for original and amended basic permits.
TTB expects to issue an NPRM in April 2015 to amend its import and export regulations to make them compatible with ITDS. This is a 2015 priority item.

Wine Projects

TTB hopes to issue an NPRM on certain wine terms that were first raised to the industry in an Advanced Notice of Proposed Rulemaking published by TTB in 2010.
TTB plans an NPRM in July 2015 to propose authorizing additional treatments for use in winemaking.
TTB expects to publish an NPRM late in 2015 to clarify the labeling of certain flavored wines.

Distilled Spirits Project

TTB hopes to issue a supplemental NPRM late in 2015 to propose replacing the current four monthly forms filed by distilled spirits plant operators with two forms, thereby streamlining distillers’ reporting burdens. TTB views this project as a 2015 priority.

Non-Beverage and Industrial Alcohol Projects

TTB plans to issue an NPRM on the self-certification of non-beverage product [...]

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Tied-House Basics for Distillers

by McDermott Will & Emery | Sep 24, 2014 | Advertising and Marketing, Trade Practices

Tied-house laws and related trade practice restrictions rank among the most baffling legal issues faced by a newcomer to the spirits industry. While issues like distribution contracts, labeling requirements, trademarks and taxes all have parallels in other businesses, tied-house laws have few analogs outside the drinks industry.

This article, originally published in the Fall 2014 issue of Artisan Spirit, aims to provide a very general overview of these laws so a newcomer can at least spot potential issues.

Hard Cider for Brewers

by McDermott Will & Emery | Jul 15, 2014 | Advertising and Marketing, Distribution, Food Safety and FDA, TTB COLAs and Formulas

Hard cider has shown phenomenal growth in the past several years. With rising consumer demand, more and more craft brewers are entering this rapidly expanding market. Although hard cider is typically distributed and marketed like a beer product, the federal government and most states actually tax and regulate cider as a type of wine. Brewers contemplating the production of cider accordingly must carefully consider the legal issues surrounding cider production and distribution that distinguish cider from beer. This article outlines some of the most important (though certainly not all) of these issues.

This article was originally published in the May/June 2014 issue of The New Brewer.

Legal Considerations of Warehousing Spirits

by McDermott Will & Emery | Jun 27, 2014 | Alcohol Excise Taxes, Distribution, Import/Export

Warehouses aren’t exciting or sexy. In fact, they are usually boring to look at and think about. But a surprising amount of specialized alcohol beverage law surrounds the use of warehouses for the storage of distilled spirits.

This article, originally published in the Spring 2014 issue of Artisan Spirit, will briefly explore some of the basics.

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