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
TTB COLAs and Formulas
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Avoiding Misleading Labeling

by and | Feb 8, 2017 | ,

Current conventional wisdom in the craft beer business holds that being local helps sell more beer. This has led many brewers to emphasize their local roots on their labels and in their marketing efforts. In some ways, the trend has a “back to the future” feel, as labels and marketing materials once again feature place names that often became the brand names for many of the first generation of craft brewers in the 1980s.

But the emphasis on place can come with a price: the prospect of legal hurdles, including lawsuits, over allegations that a brand name, label, or advertisement misrepresents the beer’s place of production. Legally this subject usually goes by the name “geographic misdescription,” itself a subset of false advertising law. How can brewers minimize their chances of becoming the target of a lawsuit or government investigation alleging that a beer’s labeling or marketing deceived consumers?

Read the full article, originally published in the January/February 2017 issue of The New Brewer.



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TTB Publishes a Federal Register Notice Adjusting the Civil Monetary Penalty under ABLA

by | Jan 17, 2017 | ,

On January 10, 2017, TTB published a Federal Register notice adjusting the civil monetary penalty imposed for violations of the Alcohol Beverage Labeling Act of 1988 (the ABLA). The ABLA requires the labels of alcohol beverages sold in the United States to bear the now-familiar Government Warning Statement. When first enacted, the maximum civil penalty for violations was $10,000 per day.

Under TTB’s latest inflation adjustment, the maximum penalty will stand at $20,111 per day, beginning with all penalties assessed after January 10, 2017. This new amount will apply even in cases where the underlying violation occurred prior to the effective date of the new penalty amount. View the full text of TTB’s notice here.



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TTB Changes Under the Fall Edition of the Unified Agenda

by | Jan 10, 2017 | , , ,

On December 23rd, 2016 the federal government published its Fall edition of the “Unified Agenda” – a bi-annual compilation of all ongoing federal rulemaking projects. Attached is a copy of the TTB detail from this latest Unified Agenda. As always, projected future publication dates should be viewed with a very healthy dose of skepticism.

TTB’s portion of the Unified Agenda identifies the following “priority” items:

  1. Final rules implementing the International Trade Data System (ITDS). TTB published these final rules on December 22, 2016 – mission accomplished.
  2. Revisions to TTB regulations to implement the “Protecting Americans from Tax Hikes Act of 2015” (PATH Act). Among other things, the PATH Act amended the Internal Revenue Code definition of “hard cider” and changed the bonding requirements for small excise taxpayers. While listed as a priority for action in late 2016, TTB has shown little ability to quickly amend its regulations to reflect statutory changes enacted by Congress (see Taxpayer Relief Act note below).
  3. Revisions to modify and streamline TTB’s wine, distilled spirits, and malt beverage labeling regulations. This item has appeared in the Unified Agenda for several years, and apparently stems from a January 2011 Executive Order requiring the identification and elimination of outmoded and burdensome regulations. The Unified Agenda lists a December 2016 publication date for a Notice of Proposed Rulemaking (NPRM) on this subject.
  4. Back on the “priority” list of this Unified Agenda is the NPRM permitting the self-certification of nonbeverage product formulas. Projected publication of that NPRM now has slipped to September 2017.
  5. A project to combine the current four forms required for reporting by distilled spirits plants (DSPs) into two report forms now receives priority status. Originally proposed in December 2011, TTB now expects to publish a 2017 “Supplemental NPRM” to gather more comments on the subject.

Among the other TTB rulemaking projects industry members may take an interest in are the following:

  1. TTB’s allergen labeling rulemaking, initiated in April 2005, remains on the Unified Agenda, but under the heading of “Next Action Undetermined.”  This suggests that TTB may walk away from mandatory allergen labeling altogether.
  2. TTB is considering amendments to the “standards of fill” for wine and distilled spirits, with an NPRM projected date of April 2017.
  3. A new item proposes an NPRM to amend the wine labeling regulations in order to better address the labeling of flavored wines.  The project arises from a petition received by TTB and projects an April 2017 publication date.
  4. TTB has withdrawn (and presumably abandoned) the rulemaking project, commenced in 2010, to further define the use of terms like “estate bottled” on wine labels.
  5. TTB continues to plan for a “Supplemental NPRM” to solicit additional comments on the use of an American viticultural area as an appellation on a wine finished in an adjacent state.  TTB now expects to publish the Supplemental NPRM in January 2017.
  6. Final rules arising from the August 2016 NPRM proposal to impose certain Federal Alcohol Administration Act labeling requirements on [...]

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TTB Publishes Final Rule to Streamline Importation and Exportation Procedures

by | Jan 3, 2017 | ,

On December 22, 2016, TTB published a Final Rule implementing the streamlined importation and exportation procedures established by the International Trade Data System (ITDS). See 91 Fed. Reg. 94186 (Dec. 22, 1016). ITDS is an interagency program to establish a “singe window” that importers and exporters can use to submit all data required by Federal agencies in order to clear imports or exports. Under the new system, importers and exporters will need to file only with the “Automated Broker Interface,” a system run and administered by Customs & Border Protection (CBP). The CBP system then makes that data available to every other federal agency, including TTB, which requires it. In short, importers and exporters of alcohol beverages can fulfill all their filing requirements electronically, through a single system.

A link to TTB’s Final Rule is found here.



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Texas Court of Appeals Hands Down Instructive Administrative Law Opinion

by | Dec 29, 2016 | , ,

A recent Texas Court of Appeals decision, EATX Coffee, LLC v. Texas Alcoholic Beverage Commission, provides an important reminder of how principles of administrative law may check the current trend towards “regulation by Internet.” Ct. of App of Texas, 4th Dist., No. 04-16-00213-CV (Dec. 7, 2016). Like TTB and many other state alcohol beverage authorities, the Texas Alcoholic Beverage Commission (TABC) periodically publishes “Question and Answer” (Q&A) documents purporting to interpret the Texas Alcoholic Beverage Code.

The EATX opinion arose from a challenge of two particular Q&A’s that, in effect, banned the filling of “crowlers” by Texas beer and wine retailers. A crowler is an aluminum can that a retailer can fill with beer and seal for consumers to take away from the retail premises. While TABC has declared that retailers may fill and sell “growlers” of beer (large bottles filled and sealed by retailers), the TABC’s Q&A’s declared the filling of crowlers to constitute manufacturing – an activity that a retailer cannot engage in without a manufacturing license. (And, of course, under state tied house laws a retailer generally cannot lawfully obtain a manufacturing license).

EATX, having invested in crowler equipment and facing disciplinary action over its filling and sale of crowlers, filed a lawsuit against the TABC seeking a declaration that TABC’s Q&A’s were wrong because the filling of a crowler does not constitute manufacturing. EATX also sought an injunction against enforcement. In response, TABC asserted that the Q&A’s were not a “rule” and therefore the trial court lacked jurisdiction to hear a challenge to the Q&A’s, and also asserted that EATX failed to exhaust the administrative remedies it could raise in defense of a TABC disciplinary action against EATX’s retail license.

The Texas Court of Appeals, 4th District, reversed. Reviewing the Q&A’s, the Court of Appeals concluded that: (1) they are of general applicably as they purport to apply to all retail permit holders; (2) they interpret the law and do not simply re-state it; (3) they do not affect only TABC’s internal management or organization. As such, the Q&A’s constitutes a “rule” within the meaning of Texas’ Administrative Procedures Act and the trial court had jurisdiction to hear the case and grant relief. Turning to exhaustion, the Court of Appeals found no authority for the proposition that a litigant aggrieved by the promulgation of a rule must instead wait and raise its arguments in an action brought to cancel, suspend or refuse to renew its license. In short, EATX can have its day in court.

Given the declining use of notice-and-comment rulemaking by TTB and most state alcohol regulatory agencies, the use of Q&A’s, “FAQs,” “advisory bulletins,” “industry memoranda,” and similar informal policy documents has been rising for decades. While such expedients may help move policy forward in a quicker, less resource-intensive (for the agency) manner, the EATX opinion stands as a useful reminder to regulators that this approach has limits.



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Two New TTB Rulings Issued on General Use Formulas

by | Oct 10, 2016 |

On September 29, the Alcohol & Tobacco Tax & Trade Bureau (TTB) issued two new Rulings announcing the creation “general use formulas” for certain distilled spirits and agricultural wines. These general use formulas permit the production or importation of these products without the need to first obtain an approved formula (for domestic products) or a pre-import approval (PIA – for imported products) from TTB.

TTB Ruling 2016-2 exempts from the regulations’ formula and PIA requirements most “agricultural wines,” a category that generally encompasses wines fermented from materials other than fruit. Most notably, honey wine (mead) is now exempt from the requirement to file for a formula or a PIA prior to applying for label approval and/or introducing the product into commerce.

TTB Ruling 2016-3 exempts certain categories of distilled spirits from formula and PIA requirements. For certain categories of spirits made with less than 2.5 percent “harmless coloring, flavoring, or blending materials,” certain specific materials are now authorized without the need to obtain formula or PIA approval. The categories and materials are:

  1. Vodka made with sugar (up to 2g per liter) and/or citric acid (up to 1 g per liter);
  2. Rum made with sugar, brown sugar, molasses and/or caramel;
  3. Certain types of whiskies made with sugar, caramel and/or wine; and
  4. Certain types of brandy made with sugar, caramel, fruit from the same fruit used to make the brandy and/or wine fermented from the same fruit.

These changes represent a modest but helpful attempt to reduce the number of formula and PIA submissions filed by the industry.



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The BA’s Growing Influence on Capitol Hill

by and | Sep 29, 2016 | , , ,

How is it that the Brewers Association—an organization that has no political action committee, has employed a staff lobbyist for only 18 months, and has only had a strong presence in Washington since 2009—has gained significant traction among policymakers in the nation’s capital?

The BA is now a serious player in Washington. That is not by accident; it’s a carefully conceived strategy implemented by the BA board and senior staff—including president and CEO Bob Pease—over the last seven years that seeks to leverage the inherent strengths of America’s small craft brewers.

Read the full article, originally published in the September/October 2016 issue of The New Brewer.



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Join McDermott Partners Marc Sorini and Andrew B. Kratenstein at the 21st Annual CLE International Wine, Beer & Spirits Law Conference

by | Jul 20, 2016 | ,

The annual Wine, Beer & Spirits Law Conference will be held on September 22-23, 2016 in Colorado Springs, CO to discuss the latest developments in alcohol policy and practice.  Co-Chair and McDermott partner Marc Sorini has again lined up a great program of speakers on legal topics of interest to the industry.  In addition, Marc and McDermott Partner Andrew B. Kratenstein will give the following presentations:

  • Thursday, September 22, 9:30-10:15 am: Marc will help kick off the conference by discussing the intersection of the First Amendment and tied-house law.
  • Thursday, September 22, 3:15-4:30 pm: Andrew will join three other lawyers to explore the strategies and tactics of supplier-distributor disputes, touching on venue, injunctions and other topics.

For more information or to register, please visit https://www.cle.com/Broadmoor.



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Trademark Tips for Small Distillers

by | Apr 20, 2016 | ,

What’s in a name? (Or a slogan, logo, symbol or other source-identifying device?) Well, turns out a lot. While the craft spirits industry is a tight knit and collegial community, businesses must strive to create a unique and distinctive place in the market that makes their products stand out from the rest. For small distillers, who may have leaner advertising budgets than the spirits giants, one effective way to plant your flat in the ground and say “This is who we are, come and join us!” is through trademarks.

A trademark is any word, name, symbol, logo and/or device the identifies the goods and services of one party, and distinguishes such offerings from those of others.

Below we provide some tips and recommendations for small distillers to consider when selecting and protecting trademarks.

Read the full article (originally published in the Spring 2016 issue of Artisan Spirit).



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TTB Publishes Projected Regulatory Agenda as Part of Government’s Unified Agenda

by | Jan 4, 2016 | , , ,

As it does twice per year, the Alcohol and Tobacco Tax and Trade Bureau (TTB) recently published its projected Regulatory Agenda as part of the federal government’s “Unified Agenda.”  Links to the U.S. Department of Treasury’s portions of the Unified Agenda appear below.

TTB’s latest contribution to the Unified Agenda lists six priority projects that it hopes to publish rulemaking notices on in 2016:

  1. Revise TTB’s import and export regulations to make them compatible with the International Trade Data System (ITDS).  ITDS aims to create a single electronic exchange portal for all import and export activities.  TTB expects to propose these new regulations by March 2016.
  2. Revise TTB’s labeling regulations for wine, distilled spirits, and malt beverages (beer) to eliminate outmoded, ineffective and excessively burdensome regulations.  TTB plans to propose these revised regulations for industry and public comment sometime before the end of 2016.
  3. Finalize new regulations on specially denatured and completely denatured alcohols.  Most notably, the new regulations would re-classify many specially denatured alcohol products as completely denatured alcohols – greatly reducing the amount of regulatory oversight over such products.  The final regulations would build off a Notice of Proposed Rulemaking published in June of 2013, and TTB expects to finalize these regulations shortly.
  4. Propose new regulations to permit the self-certification of flavors and other non-beverage articles as eligible for “drawback.”  By permitting industry self-certification, TTB would greatly reduce the number of regulatory filings required of the flavor, extract and fragrance industries.  TTB expects to publish proposed regulations before June 2016, coupled with a “Temporary Rule” permitting industry members to begin self-certification immediately.
  5. Revise the Distilled Spirits Plant (DSP) regulations to reduce the TTB-mandated monthly reports required by DSP operators from four to two.  $11,000 to $16,000.Already subject to a Notice of Proposed Rulemaking in 2011, TTB plans to press ahead with a “Supplemental” Notice by March 2016.
  6. Make an inflation-adjustment to the civil penalties for violations of the Alcohol Beverage Labeling Act of 1988, which mandated the now-familiar Government Warning on all alcohol beverage labels.  TTB plans to publish a Final Rule in 2016 to raise the maximum penalty for violations from $11,000 to $16,000.

In addition to the six priority items above, TTB’s portion of the Unified Agenda includes dozens of other rulemaking projects, from those completed in the most recent fiscal year to issues expected to be first raised in a rulemaking notice during the following year.  As with prior years, the industry must view TTB’s expected publication and completion dates with a great degree of caution, as resource challenges, political pressure and other factors often delay the rulemaking process.

Click here to view the Statement of Priorities.

Click here to view the All Treasury Agenda.



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