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Non-Alcoholic Beer Regulation 101

As part of the general move to better-for-you beverages, non-alcoholic (NA) options have been and will likely continue to be on the rise. However, how NA is treated, or not treated, as “beer” has significant impact on its potential route to market. The below summarizes the overall treatment of NA beer under US federal law, as well as examples of restrictions on direct-to-consumer (DTC) shipments imposed by certain states.

FEDERAL TREATMENT OF NA BEER

  • Tax Treatment: The Alcohol and Tobacco Tax and Trade Bureau’s (TTB) regulations define “beer” as a fermented beverage containing 0.5% or more alcohol by volume (ABV) and brewed or produced from malt, wholly or in part, or from any substitute for malt. (See: 27 C.F.R. § 25.11.) The regulations refer to a malt beverage containing less than 0.5% ABV as a “cereal beverage.” (See: 25.11.) Because NA beer contains less than 0.5% ABV, TTB will not treat it as a “beer” under the Internal Revenue Code (IRC), and accordingly it will not be subject to federal alcohol excise taxes in the United States.
  • Formula Requirements: Once a process is developed for an NA malt beverage and prior to production, a formula must be submitted and approved by TTB. If an NA malt beverage is “alcohol-free,” TTB policy is to require submission of laboratory testing results.
  • Labeling: The Federal Alcohol Administration Act (FAA Act) regulates malt beverages, regardless of their alcohol content, if they meet the Act’s requirements of containing some malted barley, some hops (or hop parts or products) and having been subject to fermentation. An anomaly exists because the FAA Act’s definition of “malt beverage” does not include any minimum or maximum threshold of alcohol content. Because nonalcoholic and alcohol-free beers are produced like conventional beer and then de-alcoholized, they fall under TTB’s labeling and advertising jurisdiction. Several regulations specifically address such products. (See: 27 CFR § 7.71.)
  • FDA Requirements: The Food and Drug Administration (FDA) requires NA beverages that are not malt beverages under the FAA Act (beverage without malt and hops or an unfermented beverage) to be labeled in accordance with the Food, Drug, and Cosmetic Act (FD&C Act), Fair Packaging and Labeling Act (FPLA) 15 U.S.C. §§ 1451-1461, and the Nutrition Education and Labeling Act 21 U.S.C. §§ 343-350. (Click here for more information.) These statutes and the FDA regulations require a full ingredient list and nutritional facts label. If an NA beverage without malt or hops or an unfermented beverage is being considered, a full explanation of the FDA requirements will be needed to develop a compliant production, labeling and marketing plan. The FDA has industry guidance on labeling and formulation of “dealcoholized beer.” (See: FDA CPG Sec. 510.400, updated Nov. 2005.)
  • Production Process Issue: If the production process for an NA beverage includes removal of alcohol from beer through reverse osmosis or other processes that separate alcohol from the other components of a beverage, the process may be considered distilling operations, which will require a federal basic permit for a distilled spirits plant. (SeeATF Ruling 85-6.)
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Importing and Exporting Beer

Importing and exporting beer or other alcohol beverages involves multiple levels of government regulation and taxation. Some regulations, taxes, and reporting requirements mirror your existing compliance obligations as a brewery. Other obligations are unique and include government agencies that are not involved in regulating domestic producers, such as US Customs and Border Protection (CBP) and the Commerce Department.

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Florida Federal District Court Rules GRAS Regulation Preempts Florida Statute Criminalizing Ingredient

In an important ruling dismissing a proposed class action, the US District Court for the Southern District of Florida ruled that the US Food and Drug Administration’s (FDA’s) generally recognized as safe (GRAS) regulation preempts a Florida statute that criminalized adding grains of paradise to liquor. More specifically, the Court in Marrache v. Bacardi USA, Inc., 2020 US Dist. LEXIS 13668 (January 28, 2020), ruled that the Florida statute was preempted because it conflicts with the Federal Food, Drug and Cosmetic Act (FFDCA) and the FDA’s regulations (21 C.F.R. § 182.10) which establish that grains of paradise are GRAS. 2020 US LEXIS 13668, at *4.

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EPA Approves Use of 10 Pesticide Products on Hemp

Yesterday, the Environmental Protection Agency (EPA) announced its approval of 10 new pesticides for use on hemp products. EPA’s approval of nine biopesticides and one conventional pesticide provides greater certainty to hemp farmers in time for the 2020 planting season.

The hemp industry awaits further guidance from other federal regulatory agencies.

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What to Know About FDA’s Recent Statements on CBD

Last week FDA issued a public release on CBD titled, “What You Need to Know (And What We’re Working to Find Out) About Products Containing Cannabis or Cannabis derived Compounds, Including CBD.”

The FDA document does not break much new ground, though it emphasizes again FDA’s concern with the safety of CBD, some of which comes from FDA’s review of the CBD-based epilepsy drug Epidiolex. FDA does not believe it has enough information about certain aspects of CBD, such as what happens if someone takes CBD daily for sustained periods. In addition, FDA specifically identifies as a potential harm the use of CBD with alcohol because of the increased risk of sedation and drowsiness, which can lead to injuries. FDA, in addition to issuing this document, sent 15 warning letters to companies marketing CBD products that FDA views as unapproved drugs primarily because of the drug like claims made for such products.

FDA appears to be on a path toward considering a regulation to allow the marketing of CBD in conventional foods or as a dietary supplement. This approach will likely take a long time—perhaps some 2-4 years—absent legislative changes that do not appear likely in an election year. In the meantime, FDA continues to view putting into interstate commerce a food to which CBD has been added or to market CBD as or in a dietary supplement as a violation of the Federal Food, Drug, and Cosmetic Act (FD&C Act).




USDA Publishes Long-Awaited Interim Regulations Governing the Production of Legalized Hemp

Yesterday, the United Stated Department of Agriculture (USDA) released its interim final rule setting forth the proposed rules and regulations regarding the production of hemp under the provisions of the Agricultural Improvement Act of 2018, or the “2018 Farm Bill.” As mandated by the 2018 Farm Bill, the proposed regulations outline provisions for both the approval by the USDA of State or Indian Tribe proposed plans as well as the development of its own federal plan for the production of hemp in the absence of an applicable approved State or Tribal program.

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Cannabis and Hemp Update

Cannabis legalization receives widespread popular support. According to opinion polls, more than two-thirds of Americans support full legalization—a steep rise in support considering that as recently as 2005, almost two-thirds of Americans opposed legalization. The country appears on the path to full cannabis legalization, but until that time, citizens and companies should be aware of the legal risks involved in entering the cannabis space.

Access the full article.

Originally published in The New Brewer, July/August 2019.




FDA CBD Docket Closed, Agency to Soon Provide Status Report

The Food and Drug Administration (FDA) has increased its efforts to follow through on its commitment to provide guidance to stakeholders on the regulatory landscape for products containing CBD. On May 31, 2019, the FDA held a public hearing to obtain scientific data and information about the safety, manufacturing, product quality, marketing, labeling and sale of products containing cannabis or cannabis-derived compounds. Following the hearing, the FDA established a docket to allow the public to submit additional comments, research and information to the Agency. The docket closed on July 16 and received nearly 5,000 comments. On July 12, FDA Chief Information Officer and Principal Deputy Commissioner Dr. Amy Abernethy confirmed via Twitter that the Agency is “expediting its work to address” questions surrounding CBD and plans “to report on [its] progress around end of summer/early fall.” Due to the significant number of comments to the docket, it remains to be seen whether FDA will provide any material development that impacts the regulation of CBD products beyond a progress report on its review of the docket.




Learnings from the FDA Hearing on Cannabis and Cannabis-Derived Compounds

On Friday May 31, 2019, the Food and Drug Administration (FDA) held a public hearing on the topic of cannabis or cannabis-derived compounds. The FDA held the hearing to gather information regarding the safety risks and health benefits associated with cannabis products. More than 110 speakers, including academic researchers, trade associations and cannabis product manufacturers, presented to the FDA panel during the all-day hearing. Below we outline the notable points from the hearing, including statements by FDA officials and interesting speaker comments. (more…)




USDA Issues Opinion on Several Hemp-Related Provisions of the 2018 Farm Bill

On May 28, 2019, the United States Department of Agriculture (USDA) issued a legal opinion to address questions raised by several hemp-related provisions of the Agricultural Act of 2018, better known as the 2018 Farm Bill. The USDA opinion clarifies four areas of the 2018 Farm Bill:

  1. the removal of hemp as a controlled substance and schedule I drug became effective upon enactment of the 2018 Farm Bill;
  2. following the publication of implementing regulations, states and Indian tribes cannot prohibit interstate transportation and shipment of hemp and hemp-based products, and the USDA confirmed that this preemption also covers hemp produced under the 2014 Farm Bill;
  3. pending certain exceptions, individuals with certain controlled substance felony convictions will be barred from producing hemp; and
  4. following the enactment of the 2018 Farm Bill, states and Indian tribes still retain the ability to regulate hemp production, including the ability to grow or cultivate hemp in that state or territory.

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