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On November 7, the US Food and Drug Administration (FDA) published the latest in a series of industry draft guidance documents to help implement menu labeling and nutrient disclosure regulations applicable to chain restaurants (Draft Guidance).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.

America’s brewers, distillers and wineries cannot yet raise a glass to recalibrated federal excise taxes, but they got one step closer to be able to do that on Tuesday.

That is because the provisions of the Craft Beverage Modernization and Tax Reform Act (CBMTRA) (S. 236)—including the excise tax changes that would benefit America’s small brewers, distillers and wineries—have been included in Senate Finance Committee Chairman Orrin Hatch’s revised “Chairman’s Mark” to the Tax Cuts and Jobs Act that is now being considered by the Senate Finance Committee.

The inclusion of the CBMTRA is a very significant positive development for all producers of alcoholic beverages, but particularly for small brewers, distillers and wineries.

Sen. Rob Portman (R-OH) offered an amendment to include the CBMTRA to the Chairman’s “mark” to the underlying bill and Chairman Hatch agreed to that. Co-sponsors of Portman’s amendment included Sens. Bill Cassidy (R-LA), Johnny Isakson (R-GA), Pat Roberts (R-KS) and Dean Heller (R-NV). Continue Reading “Chairman’s Mark” Includes CBMTRA Provisions to the Tax Cuts and Jobs Act

Direct-to-consumer (DTC) sales of alcohol beverages have been a hot topic in the alcohol industry for the last two decades. The wine direct-shipping landscape has changed greatly over the past 15 or so years, most dramatically by the US Supreme Court’s decision in Granholm v. Heald. Today nearly evert state—plus the District of Columbia—allows wineries to ship wine across state lines directly to in-state consumers. The same cannot be said for spirits.

There are, however, a few avenues distillers may consider to get their products delivered to consumers around the country. Further, an initiative is underway to pursue litigation to secure DTC rights for spirits. Although it is far too early to speculate about the outcome of any such litigation, the current effort suggests the potential for interstate distiller-to-consumer sales in the coming years. Of course, lingering ambivalence toward spirits (as opposed to wine) by the public, lawmakers, and alcohol regulators makes the prospect for any legal change uncertain.

Read the full article.

Originally published in Artisan Spirit, July 2017.

In keeping with President Trump’s Executive Order (#13771) on regulatory reform, the Department of the Treasury recently published a Request for Information regarding its regulations. The Request covers those regulations administered by TTB under Title 27 of the Code of Federal Regulations.

The Request for Information provides an unusually-clear opportunity to propose reforms to reduce regulatory burdens on the industry. Comments are due on or before July 31, 2017.

Yesterday, the en banc (full) Ninth Circuit Court of Appeals issued the attached opinion in the case of Retail Digital Network v. Prieto, No. 13-56069.

As you may recall, the Retail Digital Network case concerns the legality of sections of California’s tied-house laws, California Business and Professions Code Section 25503(f)-(h), which prohibit manufacturers and wholesalers (and their agents) from giving anything of value to retailers in exchange for advertising their products.  Retail Digital Network (RDN), which installs advertising displays in retail stores and contracts with parties to advertise their products on the displays, sought a declaratory judgment that Section 25503(f)-(h) violated the First Amendment after RDN’s attempts to contract with alcohol manufacturers failed due to the manufacturers’ concerns that such advertising would violate these tied-house provisions.

The District Court found Section 25503(f)-(h) constitutional under a Ninth Circuit case from 1986, Actmedia, Inc. v. Stroh, in which the court upheld Section 25503(h).  Then in January 2016, a panel of the Ninth Circuit reversed, holding that Actmedia is “clearly irreconcilable” with the Supreme Court’s 2011 opinion in Sorrell v. IMS Health Inc.  The panel accordingly would have remanded the case to the District Court for further proceedings under Sorrell’s allegedly more restrictive First Amendment standard.  But the state requested an en banc (full court) rehearing, which the court granted.

Continue Reading En Banc Opinion Could Set Precedent for Tied-House Laws

Most brewers are at least somewhat familiar with federal and state laws regulating the interrelationships between members of the different industry tiers. The most well-known are the “tied house” laws, which prohibit or severely restrict brewers or beer wholesalers from owning retail establishments (and vice versa), and substantially limit the ability of brewers or beer wholesalers to provide money, free goods, or other “things of value” to retailers.

Until recently, the laws prohibiting consignment sales in the alcohol beverage industry received little attention. But in the past 18 months, the settlement of two federal investigations involving the beer industry’s biggest players has focused new attention on the subject. This article will explain consignment sale laws in an effort to prevent brewers from inadvertently violating them.

Read the full article.

Originally published in The New Brewer, May/June 2017.

US exporters of alcohol beverages to Canada will soon face stiffer competition from their European rivals. The Canada-European Union Comprehensive Economic and Trade Agreement (CETA) is expected to come into force by June 1, 2017, and Canadian duties on EU wines, beer and other alcoholic beverages will go to zero immediately. While tariffs on EU wine imports are already fairly low, products such as ciders will have their current duty rate reduced from 28 cents per liter to zero immediately. In fact, the European Commission is already extolling the expanded export opportunities for EU wine and spirit producers as a major selling point for CETA.

The US is expected to enter into formal North American Free Trade Agreement renegotiations with Canada and Mexico this summer. US alcohol beverage producers and trade associations should act now to ensure that the US negotiators protect US market access in Canada and otherwise promote their interests.

The USDA report and list of EU products that will receive duty-free treatment under CETA is available here.

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.