On October 11, 2017, the Alcohol and Tobacco Tax and Trade Bureau (TTB) reopened the comment period for the following three notices of proposed rulemaking:

  1. Notice No. 160, Proposed Revisions to Wine Labeling and Record Keeping Requirements

TTB proposes to amend the labeling and record keeping requirements of 27 C.F.R. part 24. The proposed rule provides that standard grape wine containing 7 percent or more alcohol by volume (ABV) covered by a certificate of exemption from label approval may not be labeled with a varietal (type of grape) designation, a type designation containing a varietal significance, a vintage date or an appellation of origin unless the wine is labeled in compliance with the appropriate standards in 27 C.F.R. part 4 for that label information. TTB also seeks comments on alternate proposals submitted during previous comment periods for Notice No. 160.

Comments are due on or before January 9, 2018. You may view the original notice and rule here. Comments on this proposed rule amendment can be made electronically here.

  1. Notice No. 164, Wine Treating Materials and Related Regulations

TTB proposes to amend the regulations regarding wine production found in 27 C.F.R. part 24 regarding permissible materials and treatments used to treat wine and juice for wine. These proposed amendments respond to wine industry members seeking greater flexibility in wine production.

Comments are due on or before January 9, 2018. You may view the original notice and rule here. Comments on this proposed rule amendment can be made electronically here.

  1. Notice No. 165, Proposed Addition of New Grape Variety Names for American Wines

TTB proposes to amend wine labeling regulations found in 27 C.F.R. part 4 by adding additional grape variety names approved for use in designating American wines. TTB believes these changes will allow wine bottlers greater flexibility and provide consumers with more information while continuing to protect against deceptive labels.

Comments are due on or before December 11, 2017. You may view the original notice and rule here. Comments on this proposed rule amendment can be made electronically here.

On September 29, 2017, the federal Alcohol and Tobacco Tax and Trade Bureau (TTB) issued Ruling 2017-2, which updates and supersedes older agency guidance on allowable returns of beer and malt beverage products that contain “pull dates” or other indicators of product freshness.

The Federal Alcohol Administration (FAA) Act includes a general prohibition on “consignment sales,” 27 USC 205(d). Congress believed that all transactions should be “bona fide” sales. Id. The intent was to prevent a wide range of unscrupulous practices that might occur if manufacturers and wholesalers furnishing alcohol beverages to retailers on consignment or with the right of return.

The FAA Act prohibition on consignment sales does not apply to “transactions involving solely the bona fide return of merchandise for ordinary and usual commercial reasons arising after the merchandise has been sold.” Id. TTB regulations provide an extensive list of reasons that a manufacturer or wholesaler can accept returns. 27 CFR, Part 11, Subpart D. Continue Reading TTB Issues Guidance on Application of Consignment Sales Regulations to Freshness Dating and Returns from Retailers

Today’s off-premises retail landscape is dominated by large chains that rely on practices generally known as category management to maximize the profitability of their stores. Some of the activities falling under the category management umbrella require close interaction between the retailer and the producers, importers, or distributors supplying them product. As a result of this interaction, the federal Alcohol & Tobacco Tax & Trade Bureau (TTB) last year issued a ruling indicating that industry members’ participation in category management activities could result in a violation of the tied-house provision of the Federal Alcohol Administration (FAA) Act and the TTB’s corresponding tied-house regulations.

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Originally published in The New Brewer, September/October 2017.

On July 20, 2017, the Federal Alcohol and Tobacco Tax and Trade Bureau (TTB) announced a joint operation it conducted with the Florida Department of Alcoholic Beverages and Tobacco (DABT) to investigate potential trade practice violations in the Miami, Florida area. According to a very brief press release issued by TTB, the investigation focused on alleged “pay-to-play” schemes. “Pay-to-play” is an industry term generally used to mean the provision of payments or other “things of value” by an upper-tier industry member (i.e., supplier or wholesaler) to a retailer to secure placement for the industry member’s products in the retailer’s premises.

Although neither TTB nor the DABT has released any specific details of the investigation or the parties involved, the investigation suggests that TTB is acting on prior announcements that it would seek to aggressively enforce its trade practice regulations. TTB’s 2017 budget included a $5 million earmark to enhance trade practice enforcement. As part of this effort, TTB transitioned 11 of its existing investigators to new roles focusing exclusively on trade practice enforcement.

The joint investigation also comes on the heels of other recent enforcement of trade practice laws and regulations—specifically involving allegations of pay-to-play activities—by state alcohol regulators. In just the last few months, the Massachusetts Alcoholic Beverages Control Commission initiated an enforcement action against an Anheuser-Busch InBev (ABI)-owned distributor in connection with an alleged pay-to-play scheme. The California Department of Alcoholic Beverage Control also recently settled an enforcement action against ABI wholesalers for alleged trade practice violations. Also, in June, a New Jersey beer wholesaler agreed to pay a nearly $2 million fine to settle trade practice allegations brought by the Division of Alcoholic Beverage Control.

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.

Connect with more than 100 professionals from around the country at the 22nd Annual Wine, Beer & Spirits Law Conference to be held September 14-15, 2017 in Portland, Oregon.  McDermott Partner Marc Sorini will co-chair the event and will speak on alcohol regulatory and distribution issues in the transactional context.  Other conference topics include TTB updates, trade practice developments, crisis management, trends in retailer liability, private label legal issues, and more.  You can view the conference agenda here.

Register today.

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.

With articles about the “magic” of turning employees into company owners popping up in the New York Times and The Atlantic last fall, Employee Stock Ownership Plans are becoming part of the mainstream vernacular. Referred to by those in the know as “ESOPs” (pronounced “ee-SAHP”), these specialty retirement plans are a popular—and tax effective—way for companies to manage succession planning. When structured properly, and ESOP can provide huge financial benefits to companies and their employees alike. According to the National Center for Employee Ownership, there are almost 7,000 ESOPs currently in place. About 10 million people—more people than currently love in the state of Washington—actively participate in an ESOP today.

There have been several craft brewers who have taken advantage of the ESOP structure in the past year and we expect this trend to pique the interest of craft distilleries. This article explores at a very high level some of the issues involved with starting and maintaining a craft distillery ESOP.

Read the full article.

Originally published in Artisan Spirit, Spring 2017.

The Alcohol and Tobacco Tax and Trade Bureau (TTB) recently notified holders of permits that were originally filed in paper of plans to move all permits to the Permits Online (PONL) system this fall. This could lead to substantial delays due to the volume of permits included.  Industry members who wish to submit requests ahead of that time can send their information (EIN, Permit and Registry Numbers) to Permits.Online@ttb.gov and enter Permits Online Data Load in the subject line of the email. Filing amendments electronically has historically been significantly faster using TTB’s PONL system.

Arthur DeCelle wrote this bylined article describing how brewers can use product labels, point of sale (POS) advertising, social networks, and other media to tell customers about their environmental responsibility efforts. Such information “must be truthful and substantiated by evidence [and] must not be deceptive to reasonable consumers,” Mr. DeCelle wrote, urging brewers to “carefully consider the language you use and any potential for consumer deception [regarding] false or deceptive environmental claims.”

Read the full article.

Originally published in New Brewer, March/April 2017.