The end of 2018 proved to be a moment of flurious activity in the Trade and Tax Bureau (TTB). Last year, after the passage of the Craft Beverage Modernization and Tax Reform Act, the agency had to spend the holiday season tearing through the major tax overhaul, striving to implement rule changes that were set to take effect mere days later. In 2018, while the TTB’s late-year activities are a bit more long-ranging, the agency was still far from taking it easy.
The TTB’s biggest undertaking at this time was an announcement on November 26 of the publication of a proposed rulemaking to “update, simplify, and clarify the labeling and advertising regulations for wine, distilled spirits, and malt beverages.” This massive proposal (taking up well-over 100 pages of the Federal Register) has important implications for the beverage alcohol industry, which will be discussed in more depth below.
But along with this proposed rulemaking, the TTB has also been busy recently establishing and proposing new American Viticultural Areas (AVA). AVAs are an extremely important resource for the wine industry, as they provide accurate and dependable information for consumers regarding the source location of wines. Under federal laws, in order to use an AVA, 85% of a wine must be sourced from grapes grown within the AVA. For an industry taken by the idea of terroir (and rightly so!), having that assurance can be invaluable.
In recent weeks, the TTB has announced the establishment of AVAs for the Upper Hudson (NY) and the Van Duzer Corridor (OR), along with expanding the territories for the established Arroyo Seco (CA) and Monticello (VA) AVAs. In addition, there are also proposals to establish new AVAs for the Crest of the Blue Ridge Henderson County (NC), the West Sonoma Coast (CA), and the Eastern Connecticut Highlands (CT).
Proposed Amendments to Labeling and Advertising Regulations
While new and expanded AVAs are important news, the leading regulatory changes the TTB is working on are those listed by the agency in Notice No. 176, the proposed rulemaking published in the Federal Register of Monday, November 26, 2018.
As the TTB notes, this proposed rulemaking is just the latest in its multi-year effort to “Facilitate Commerce through a Modern Labeling Program Focused on Service and Market Compliance.” This effort has also included removing formula requirements in certain conditions, expanding the list of allowable revisions for labels where they do not need a new COLA, improving the functionality of COLAs Online and Formulas Online, and add lots more staff to handle labeling and formula regulations.
In the proposed rulemaking, the TTB sets out a number of regulatory adjustments and changes they hope to implement, with the stated intent of improving “understanding of the regulatory requirements and to make compliance easier and less burdensome”. These changes the TTB proposes include:
- Incorporating changes to label standards that have arisen from statutory changes (e.g. the use of semi-generic designations on wine labels) or from international agreements (for instance, incorporating designations of geographic significance).
- Permitting greater flexibility on the placement of mandatory information on labels.
- Permitting greater flexibility for wine labels when certain appellations or when using multiple varietal designations.
- Codifying long standing TTB interpretations of rules with First Amendment implications, such as the stance that the prohibition on disparaging statements does not prohibit truthful and accurate comparisons with competitor’s products.
- Modernizing and finalizing rules regarding alcohol content statements for wines and malt beverages, including removing outdated language like the ban on use of the term “pre-war strength” (referring to pre-World War I strengths).
- Instituting rules regarding packaging label requirements, including extending the requirement that opaque packages include mandatory label information to malt beverage products.
- Clarifying rules regarding the use of terms associated with one commodity when used on labels of a different commodity, to prohibit such uses when they would confuse a consumer but permitting them when the use would not be misleading.
- Consolidating alcohol advertising regulations in a single, new part 14 to title 27 of the Federal Register, which will aim to unify rules for all three commodity lines of wines, beers, and spirits.
Note that this proposal does not address other ongoing labeling initiatives by the TTB, such as “Serving Facts” statements, gluten content statements, standards of fill, or modern advertising issues (i.e. social media).
As said, the proposed rules cover more than 100 pages of regulatory adjustments, which can be rather dry reading. For anyone looking for an easier summary, the Libation Law Blog has promised to closely digest the proposed rules and provide helpful summaries of what they find.
The TTB also states that they intend to provide industry members with three years to update their practices and get into compliance with the rules once they are finalized.
Before they get finalized, however, there is opportunity for industry members to file their own comments and suggestions to the agency — indeed, that is the purpose of this proposed rulemaking, to solicit comments from the audience of affected individuals so that when the agency finalizes their rules, they are suited to the real life situation of those affected.
Anyone affected and interested by the proposed rulemaking is encouraged to voice their opinions to the TTB. The comment period is set to close on March 26, 2019 (though we have heard of a petition to extend that period). Before this period ends, comments can be submitted:
- Online at the Federal e-Rulemaking Portal.
- By mail, addressed to Director, Regulations and Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G Street NW, Box 12, Washington, DC 20005.
- In person or courier to the Alcohol and Tobacco Tax and Trade Bureau, 1310 G Street NW, Suite 400, Washington, DC 20005.
However, while the TTB is open to comments from all and sundry, it is recommended that you not take this opportunity frivolously. A well-thought, incisive comment, professionally drafted perhaps with the consultation of an attorney will have a much greater impact than something put together late one night. Indeed, many industry groups are likely to file their own comments, so if you are part of any associations or organizations, consider reaching out to them to see how you can support or influence whatever they might submit to the TTB.
While the government shutdown continues, many agencies have ceased many normal functions. This will affect the ability of agencies to receive comments, consider them, and draft new rules. Though the due date for comments to the TTB is not until the end of March — hopefully long after the shutdown has ended — note that any comments you submit may not be properly received until normal government functions have resumed.