Craft distillers know the value of a good trademark. The name of a particular spirit, a logo, or a label design can be vitally important to a brand’s identity (and a distiller’s bottom line).  They also know how complicated—and legally fraught—branding can be. For better or worse, trademark disputes involving alcohol beverage products are becoming increasingly common. The disputes that make it to court provide valuable insight that could prevent future legal headaches surrounding the selection, protection, and enforcement of alcohol beverage trademarks.

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Originally published in Artisan Spirit: Fall 2018.

On May 16, 2018, the Alcohol and Tobacco Tax and Trade Bureau (TTB) issued Industry Circular 2018-3, allowing proprietors of distilled spirits plants (DSPs), bonded wine cellars (BWCs) and breweries to submit a request for a variance to the typical method for storing tax-determined and non-tax-determined products. Under TTB regulations, a proprietor designates areas of the premises as bonded and non-bonded. With few exceptions, tax-determined products can only be stored on non-bonded areas of the premises and non-tax-determined products can only be stored in bonded areas.

Under Industry Circular 2018-3, proprietors may request a variance to the bonded/non-bonded designations established in existing regulations. This variance would allow an “alternation” of a specific area or multiple areas between a bonded and non-bonded designation. An “alternation” allows two practices (e.g., brewing and winemaking) statutorily prohibited from occurring at the same premise to occur through the creation of a legal fiction. The premise “alternates” between one type of premise to accomplish one task and reverts to another type of premise to accomplish another task. Continue Reading TTB to Allow Proprietors to Request Alternating Premise Variances for Storage of Tax- and Non-Tax-Determined Commodities

The Agricultural Marketing Service of the US Department of Agriculture (USDA) recently published a proposed rule containing regulations to implement the National Bioengineered Food Disclosure Standard mandated by Congress in 2016. See 83 Fed. Reg. 19860 (May 4, 2018). The proposed regulations would govern the labeling of raw agricultural products and packaged foods whose labeling is governed the federal Food, Drug & Cosmetics Act, including wines below 7 percent alcohol by volume and non-malt beer (e.g., “hard seltzers”). The proposed regulations would not directly apply to alcohol beverages whose labeling is governed by the Federal Alcohol Administration Act, including all distilled spirits, wines containing 7 percent alcohol by volume or greater, and beer containing malted barley and hops. Nevertheless, the Alcohol and Tobacco Tax and Trade Bureau may look to the bioengineered food disclosure regulations as persuasive guidance in developing its own policies towards the disclosure of bioengineered ingredients (often called “genetically modified organisms” or “GMOs”). Continue Reading USDA Publishes Proposed GMO Labeling Regulations

Early this morning, both houses of Congress approved the “Bipartisan Budget Act of 2018,” complex legislation that includes important modifications to an arcane law known as the “rum cover over,” which is an important revenue source for the Commonwealth of Puerto Rico and the US Virgin Islands (USVI).

The temporary excise tax relief provided to distillers in the 2017 federal tax reform law will not diminish the amount of federal excise tax revenue covered over to the treasuries of Puerto Rico and the USVI. The 2017 tax reform law included a two year reduction in the federal distilled spirits excise tax rate from $13.50 per proof gallon to $2.70 per proof gallon on the first 100,000 proof gallons of distilled spirits, and $13.34 per proof gallon on the next 22,130,000 proof gallons produced by each distillery or each controlled group of distilleries. The 2018 Budget Act treats all rum subject to the rum cover over as if it is subject to the full $13.50 per gallon excise tax rate. Continue Reading Additional Rum Cover Over for Puerto Rico and the US Virgin Islands Approved in 2018 Budget Legislation

Last week in its regular newsletter, Alcohol and Tobacco Tax and Trade Bureau (TTB) announced updates to the Fall edition of the semi-annual Unified Agenda of Federal Regulatory and Deregulatory Actions (Regulatory Agenda). Like other federal agencies, TTB uses the Regulatory Agenda to report on its current rulemaking projects.

In the updated agenda, a few new items have been added, and many expected publication dates of Notices of Proposed Rulemaking (NPRMs), Advanced Notices of Proposed Rulemaking (ANPRMs) and Final Rules have changed. As always, readers should recognize that TTB rulemaking moves very slowly, and the Agency often does not meet the aspirational dates published in the Regulatory Agenda. Continue Reading TTB Updates to the Semi-Annual Regulatory Agenda

On January 4, 2017 TTB published in the Federal Register a temporary rule, T.D. TTB–146, modifying the tax filing timeframe for taxpayers who fall below a certain monetary threshold and removing the bond requirements for certain eligible taxpayers who pay taxes below certain maximum amounts on distilled spirits, wine and beer. See 82 Fed. Reg. 1108 (Jan. 4, 2017). Congress mandated these changes when it enacted the PATH Act in December 2015, and the changes became effective on January 1, 2017. The temporary rule involves two primary changes:

  1. Taxpayers who do not reasonably expect to be liable for more than $1,000 in alcohol excise taxes (for distilled spirits, wine and beer) in the calendar year and were not liable for more than $1,000 in the prior year can pay their taxes annually rather than quarterly or semi-monthly. If a taxpayer has multiple locations, the $1,000 threshold applies to the combined total. A taxpayer must select the return period on its return.
  2. Taxpayers who do not reasonably expect to be liable for more than $50,000 in alcohol excise taxes (for distilled spirits, wine and beer) in the calendar year and were not liable for more than $50,000 in the prior year are exempt from filing bonds to cover operations or withdrawals. In order to take advantage of this exemption, the taxpayer must notify TTB of its eligibility and receive TTB approval. New applicants will do this during the initial application process and existing taxpayers can do so through an amendment to their registration or brewer’s notice. Ironically, the bond exemption does not apply to taxpayers that conduct operations or withdrawals of wine or spirits for industrial (as opposed to beverage) use.

TTB has issued additional guidance on the PATH Act’s impact in Industry Circular 2016–2 (Dec. 30, 2016).

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

  1. 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.
  2. 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.
  3. TTB plans to issue a Final Rule requiring the electronic submission of many applications, including those for original and amended basic permits.
  4. 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

  1. 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.
  2. TTB plans an NPRM in July 2015 to propose authorizing additional treatments for use in winemaking.
  3. TTB expects to publish an NPRM late in 2015 to clarify the labeling of certain flavored wines.

Distilled Spirits Project

  1. 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

  1. TTB plans to issue an NPRM on the self-certification of non-beverage product formulas – a 2015 priority item – in July 2015.
  2. TTB believes it will finalize regulations to reclassify many specially denatured alcohol (SDA) formulas as completely denatured alcohol (CDA) and permit the use of more SDA formulas without the submission of an application to TTB.  This is another 2015 priority for the Agency.

Distillers have used barrels to age whiskies, brandies and other distilled spirits for centuries.  Today, American craft distillers increasingly seek to innovate and extend their product offerings by barrel aging spirits, both traditional (e.g., whiskies) and non-traditional (e.g., barrel-rested cocktails).  Not surprisingly, the thicket of alcohol beverage laws and regulations impose certain requirements and place certain limits on the use of barrels.

This article, originally published in the Fall 2013 issue of Artisan Spirit, briefly outlines some of the most important considerations.