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Second Prop 65 Amendment Effective April 1, 2021: New Warnings Required

The Safe Drinking Water and Toxic Enforcement Act of 1986, also known as Proposition 65 (Prop 65), was enacted as a ballot initiative and requires businesses to inform Californians about exposures to chemicals that are known to cause cancer, birth defects or other reproductive harm. The regulation prohibits knowing or intentional exposure of any individual to a “chemical known to the state to cause cancer or reproductive toxicity without first giving clear and reasonable warning to such individual.” (See: 27 CCR § 25249.6.)

The state maintains and updates a list of chemicals known to cause cancer or reproductive toxicity, with alcoholic beverages being added to the list April 29, 2011, and requiring suppliers to comply with Prop 65’s “clear and reasonable warning” mandate. (Click here for more information.) This includes, without limitation, beer, malt beverages, wine and distilled spirits. (See: 27 CCR § 25607.4(a).) Generally speaking, for alcoholic beverages, it is the responsibility of the manufacturer or its distributors to ensure proper compliance with Prop 65. (See: 27 CCR § 25600.2(a).) Further, any consequences for failure to comply with Prop 65 typically rests with the manufacturer or its distributor, provided that the retailer has not frustrated the manufacturer’s reasonable efforts to properly display the warning.

The warning provided must read: “WARNING Drinking distilled spirits, beer, coolers, wine and other alcoholic beverages may increase cancer risk, and, during pregnancy, can cause birth defects. For more information go to www.P65Warnings.ca.gov/alcohol.” (Id. at § 25607.4(a)(1)-(2).) To comply with Section 25607.3, among other specific requirements, the warning must be made at either point of sale (for off-premises consumption) or on a menu or list identifying the alcoholic beverages sold on-premises. (See: 27 CCR § 25607.4.) Note, however, that a supplier who is a party to a “court-ordered settlement or final judgment, establishing a warning method or content is deemed to be providing a “clear and reasonable” warning for that exposure if the warning complies with the order or judgment,” even if the requirements set forth in the order or judgment differ from the specific requirements set forth in the regulations. (See: 27 CCR § 25600(e).)

Prop 65 is enforced by the California attorney general, any district attorney or city attorney for cities whose population exceeds 750,000 and/or any private individual or group acting in the public interest. (See: 27 CCR § 25249.7.) Penalties for violating Prop 65 can be as high as $2,500 per day. (Id.) The fine is paid to the party that brought the litigation, including individuals or groups acting in the public interest, which creates a powerful incentive for private parties to enforce Prop 65. (Id.)

Prop 65 has undergone multiple amendments, two of which are in direct response to the ever-growing e-commerce market for alcoholic beverages. The first amendment, effective August 30, 2018, required the Prop 65 warning language be displayed on websites and on or in packages containing direct-to-consumer orders sent to California addresses. (Click here for [...]

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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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TTB Spring 2019 Updates to Semi-Annual Regulatory Agenda

The spring edition of the federal government’s semi-annual Unified Agenda of Federal Regulatory and Deregulatory Actions (Regulatory Agenda) has been published. Like other federal agencies, the Alcohol and Tobacco Tax and Trade Bureau (TTB) uses the Regulatory Agenda to report on its current rulemaking projects.

The Regulatory Agenda provides glimpses into TTB’s policy focus and aspirations. But, readers should recognize that TTB rulemaking moves very slowly, and the Agency often does not meet the aspirational dates published in the Regulatory Agenda.  (more…)




TTB Updates to the Semi-Annual Regulatory Agenda

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. (more…)




The Ban on Consignment Sales

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.




Proposed Regulation in Texas on Name and Address Labeling for Malt Beverages

Last week, the Texas Alcoholic Beverage Commission (“TABC”) circulated a draft amendment of Texas’ name and address labeling regulation for “malt beverages” (beer).  A copy of the proposed amended regulation (with a redline of the changes) is can be found here.

Consistent with TTB regulations on name and address labeling for malt beverages, the current regulation requires only the name and address of the importer, with foreign producer information optional.  The revised regulation, in contrast, requires:

  • On labels of containers of imported malt beverages, the name and principal place of business of the foreign manufacturer, bottler or shipper must be stated

The proposed regulation accordingly marks a significant Texas departure from federal labeling rules.  First, it requires foreign producer information on the label.  Second, it requires the label to show the name and principal place of business address of the foreign producer.  This could require substantial changes to the labels of malt beverages sold in Texas.

The TABC is scheduled to hold a hearing in Austin on its proposed new regulation on Friday, March 10, 2017.




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