In the past three years, TTB has approved an increasing number of certificate of label approvals (“COLA”) for hemp-flavored vodka, from Mill Six’s hemp, white tea and ginger flavored vodka to Olde Imperial Mystic’s hemp infused vodka. Distillers have designed labels with green smoke-like images and psychedelic sixties-style lettering to hint at their cultural connection to marijuana. As more states have legalized recreational cannabis, distillers have been thinking more ambitiously about combining their distilling business with one or more aspects of the emerging marijuana business.

Read the full article.

Originally published in Artisan Spirit: Winter 2017.

It’s hard to deny that marijuana has a cultural connection with craft beer, or at least with substantial segments of the craft brewing community. Many craft brewers have signaled to their fans that they know a thing or two about the rituals and lingo of marijuana consumption. But with the legalization of recreational cannabis by several states since 2012, many brewers have been thinking more ambitiously about combining their brewing business with one or more aspects of the emerging marijuana business.

Read “Government Affairs Extra | Craft Beer and Marijuana.”

This article originally appeared in The New Brewer November/December 2017.

On November 7, the US Food and Drug Administration (FDA) published the latest in a series of industry draft guidance documents to help implement menu labeling and nutrient disclosure regulations applicable to chain restaurants (Draft Guidance).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. While the regulations will inevitably lead to a standardized portion of chain menus, the Draft Guidance does not inhibit traditional point-of-sale marketing materials, graphics and other creative elements in a menu or associated marketing materials.

Why has menu labeling taken so long?

  • Menu labeling and nutritional disclosure requirements for chain restaurants are mandated by Congress in the Affordable Care Act of 2010 (better known as Obamacare).
  • A four-year rulemaking process on menu labeling ended with publication of a final rule on December 1, 2014. That rule is unchanged as of November 2017, and is found at 21 CFR 101.11.
  • A protracted debate occurred over the complexity of the rule and practical issues for food retailers who are responsible for compliance.
  • In 2015, Congress enacted an appropriations bill, which included a “policy rider” ordering the FDA to not to spend money on implementation and enforcement of the final rule until one-year after publication of a guidance document. Because appropriations bills deal with funding and not substantive policy, Congress provided no additional guidance to the FDA to clarify issues raised in the rulemaking and public controversies surrounding menu labeling.
  • The FDA published a “final guidance document” on May 5, 2016, with a new compliance date of May 5, 2017. Controversy continued, and the FDA extended the implementation date again to May 7, 2018.
  • The November 2017 draft FDA guidance document discussed above could be revised again following the 60-day comment period.
  • The compliance date remains May 7, 2018 unless extended again by the FDA or delayed by additional Congressional action.

On September 29, 2017, the US Food & Drug Administration (FDA) announced a proposal to extend the compliance dates for the Nutrition Facts and Supplement Facts label final rule and the Serving Size final rule. For manufacturers with $10 million or more in annual food sales, the date will change from July 26, 2018, to January 1, 2020.  Manufacturers with less than $10 million in annual food sales would receive an extra year to comply—until January 1, 2021.

FDA’s proposal addresses only the compliance dates. The FDA is not proposing any other changes to the Nutrition Facts Label and Serving Size final rules.  While this rulemaking is being completed, FDA intends to exercise enforcement discretion with respect to the current July 26, 2018, and July 26, 2019, compliance dates. A copy of the public inspection version of the proposed rule can be found here.

Two consumer advocacy groups recently sued the Food and Drug Administration (FDA) for delaying the compliance deadline for the agency’s 2014 menu labeling rule for a fourth time. The menu labeling rule requires menu items offered for sale in restaurants with 20 or more locations to disclose nutritional information and the number of calories in each standard menu item. FDA and Congress previously extended or delayed compliance with the menu labeling rule three times in 2015 and 2016. Before the latest delay, the most recent “compliance date” for the menu labeling rule was May 5, 2017.

Continue Reading FDA’s Delay of the Menu Labeling Rule Challenged

On March 30, eight bills were introduced by senior members of Congress from both parties to legalize, regulate and tax marijuana. The bills were referred to at least five House Committees, as they address federal criminal law, taxation, banking, transportation, immigration, veterans’ affairs, access to federal benefits and other issues. The legislative activity follows establishment of the Congressional Cannabis Caucus in February. Leaders of the new caucus represent four of the eight states where voters have approved recreational use of marijuana by adults.

In the initial press conference held by Cannabis Caucus members and in statements explaining the new legislation, House and Senate members made frequent reference to laws regulating alcohol beverages. Bills introduced earlier in the current session of Congress also call for state-by-state regulation using language similar to the Section 2 of the Twenty-first Amendment, which authorized each state to regulate the delivery and use of “intoxicating liquors” within its borders.

The failure of national Prohibition of alcohol beverages is often cited as a rationale to legalize recreational marijuana use. Before proceeding toward wider legalization, policymakers should gain a deeper understanding of the history of Prohibition and the regulatory scheme that emerged after repeal. Government regulation is necessary in a complex and pluralistic society of 320 million, but effective marijuana regulation is a tall order.

Continue Reading Legal, Political and Practical Challenges in Regulating Recreational Marijuana

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.

On January 30, 2017, President Trump issued Executive Order No. 13771, entitled “Reducing Regulation and Controlling Regulatory Costs.” A link to Executive Oder 13771 appears here.  The Order provides:

  1. For Fiscal Year 2017 (which ends September 30, 2017):
    1. For each new “regulation” published for notice and comment “or otherwise promulgated,” the agency in question must “identify” two existing regulations to be repealed. Notably, the Order does not require the repeal to be concurrent with the publication or promulgation of the new regulation.
    2. For Fiscal Year 2017, each agency must ensure that the total incremental costs of all new and repealed regulations shall not exceed zero, unless otherwise required by law or as consistent with the advice of the Office of Management and Budget (OMB). The Order does not specify whether the costs in question represent costs to the agency, costs to the government or total societal costs. It also does not provide any guidance on how to calculate such costs.
    3. To the extent permitted by law, the costs of any new regulations shall be offset by the elimination of costs associated with at least two existing regulations. Once again, the Order provides no guidance on what constitute costs of a regulation or how to calculate such costs.
    4. The OMB is directed to provide agencies with guidance on how to implement the Order.
  2. Beginning with Fiscal Year 2018 (which begins October 1, 2017):
    1. The semi-annual Unified Regulatory Agenda for each agency must: (i) identify for each new regulation “that increases incremental cost,” two offsetting regulations; and (ii) provide an approximation of the total costs or savings for each new and repealed regulation.
    2. Each regulation approved by the OMB shall be included in the Unified Regulatory Agenda.
    3. Unless otherwise required by law, agencies may not issue new regulations that were not listed in the most recent Unified Regulatory Agenda.
    4. During the budgeting process, the OMB shall notify agencies of the total costs per agency that will be allowed in issuing and repealing new regulations for the upcoming fiscal year.
    5. The OMB shall provide agencies with guidance on implementing the Order’s requirements.

Executive Oder 13771 applies to each “executive department or agency,” but leaves a number of government regulatory functions outside of its scope. These include agencies involved in military, national security, and foreign affairs functions, as well as any government organization arising from the Legislative or Judicial branches. Nevertheless, the Order applies to a vast swath of the federal bureaucracy.

On its face, Executive Order 13771 could have a significant impact on the pace of federal rulemaking during the Trump Administration. The “two-for-one” requirement, in particular, appears to be a blunt instrument aimed at shrinking the Code of Federal Regulations. Moreover, the explicit requirement for cost estimates and “zero” total costs flowing from the rulemaking process plainly seeks to halt the growth and costs of the federal administrative state.

But the jury remains out on the practical impact of Executive Order 13771. Longstanding observers of the federal bureaucracy will, no doubt, recall that the Paperwork Reduction Act (1980), Executive Order 12866 (1993), the Paperwork Reduction Act of 1995, and other measures all failed to noticeably slow the growth or improve the functioning of the administrative state. In that spirit, President Trump’s Executive Order leaves many questions unanswered:

  1. Much hinges on the interpretation of “costs” referenced throughout the Executive Order. Does this mean the costs to the Agency, the entire federal government or society at large? And, particularly if “costs” are defined broadly, how will agencies and/or the OMB calculate such costs? The OMB presumably must arrive at answers to these fundamental questions.
  2. While a “rule” has a defined meaning in administrative law, a “regulation” does not. While the Order purports to define the term, as every lawyer in an administrative practice knows, individual “sections” within the Code of Federal Regulations are called “regulations” and come in many sizes. Does an agency satisfy the “two-for-one” rule by replacing two one-sentence regulations with a single ten-sentence regulation? The opportunities to “game” the Executive Order’s mandate seem endless.
  3. The Executive Order might not withstand a legal challenge. While the President yields broad authority over most administrative agencies, nothing in current law authorizes a “two-for-one” rule. While a full analysis is beyond the scope of this note, on its face the Order seems to push the boundaries of what a President can mandate by Executive Order.

Finally, the Executive Order may accelerate the unfortunate trend of agencies to make rules through informal documents instead of the notice-and-comment rulemaking process mandated by the Administrative Procedures Act. During the past several decades, many agencies have sought to shortcut the rulemaking process by asserting that any number of substantive rules are mere “interpretations” not subject to notice-and-comment. Too often, the legal costs and potential for relationship damage involved in challenging such rules outweighs the benefit of a challenge. (For example, how willing is a heavily-regulated brewery, winery or distillery to engage in protracted litigation with the Alcohol & Tobacco Tax & Trade Bureau?)  As a result, usually the regulated public tacitly accepts this subversion of Administrative Procedures Act requirements – requirements that flow directly from the Fifth Amendment’s requirement for Due Process of Law. By making formal notice-and-comment rulemaking even more burdensome, Executive Order 13771 will likely accelerate the pace of regulation by internet posting, bottom-drawer regulation, letter ruling and other means that do not provide the regulated public with notice and an opportunity to comment on legal requirements that will affect them.

In the end, then, President Trump’s Executive Order on Reducing Regulations leaves many important questions unanswered and, like other like-minded actions before it (e.g., the Paperwork Reduction Act), may not progress the objective of simplifying and reducing the federal bureaucracy.

The Food and Drug Administration (FDA) recently took two actions involving the use of the claim “healthy” on food labels. First, FDA opened a docket to solicit comments on whether, and if so how, to revise the criteria that must be meet in order for a food to bear the claim “healthy.” This reflects changes in public health recommendations for various nutrients since FDA first published the criteria for making “healthy” food labeling claims in 1993. For example, FDA’s view of healthy dietary patterns now focuses on food groups and the type of fat rather than the total amount of fat in a food. Food manufacturers can continue to use the term “healthy” on foods that meet the current regulations while FDA further considers any comments submitted.

Second, FDA issued Guidance announcing that it does not intend to enforce certain regulatory requirements for products that use the term “healthy.” Specifically, FDA says it will not take enforcement action against a food that bears the claim “healthy” but which does not meet the regulatory definition of low fat provided that: (1) The amounts of mono- and polyunsaturated fats in the food are declared on the label; and (2) the sums of mono- and polyunsaturated fats are greater than the total saturated fat content of the food. Similarly, FDA will not take enforcement action with respect to the current regulatory requirement that any food bearing a “healthy” claim contain at least 10 percent of the Daily Value (DV) of vitamin A, vitamin C, calcium, iron, protein, or fiber if, instead, the food contains at least 10 percent of the DV of potassium or vitamin D. These two changes reflect the most-recent dietary guidance.  For fat, the recommendations have shifted from limiting total fat intake to encouraging consumption of mono- and polyunsaturated fats. For mineral and vitamin content, potassium and vitamin D are now nutrients of public health concern, while vitamins A and C are no longer nutrients of public health concern.

A copy of FDA’s “Healthy” Guidance is attached here.

The US Food and Drug Administration (FDA) has issued this final rule detailing the criteria for concluding that the use of a substance in human or animal food is “generally recognized as safe” (GRAS).  By way of background, if an ingredient is GRAS, food additive petition is not required and FDA does not have to approve the ingredient before it can be used in foods.  FDA has been studying the existing process that currently results in a company conducting the GRAS assessment via a panel of experts and then either proceeding to immediately use the ingredient in foods, or submitting a GRAS affirmation petition to FDA before the ingredient is used in a food.

FDA’s new regulation provides the information FDA believes a company should have to make a GRAS determination or conclusion.  Manufacturers remain free to conduct their own GRAS evaluations and then proceed to incorporate the substance into food.  FDA’s final rule changes what had been a voluntary GRAS affirmation process into a voluntary “notification” process. Under this new process, if a company decides to use the notification process, the company conducts the requisite safety assessment and then prepares a notification submission to the FDA.  The contents of the notification submission are detailed in the regulation.  Once the voluntary notification had been submitted to FDA, the agency is supposed to respond within 180 days, though that can be extended for an additional 90 days (for a total of 270 days) before the substance can be included in a food, assuming FDA does not question the basis for the notifier’s GRAS conclusion.