Rule2022-00841
Modernization of the Labeling and Advertising Regulations for Distilled Spirits and Malt Beverages
Primary source
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Published
February 9, 2022
Effective
March 11, 2022
Issuing agencies
Treasury DepartmentAlcohol and Tobacco Tax and Trade Bureau
Abstract
The Alcohol and Tobacco Tax and Trade Bureau (TTB) is amending certain of its regulations governing the labeling and advertising of distilled spirits and malt beverages to address comments it received in response to a notice of proposed rulemaking, Notice No. 176, published on November 26, 2018. On April 2, 2020, TTB finalized certain labeling amendments arising out of that proposed rule. This document finalizes the reorganization of, and addresses the remaining issues related to, the labeling of distilled spirits and malt beverages. Reorganizing the wine labeling regulations, and addressing the remaining labeling issues related to wine, as well as reorganizing and finalizing the regulations related to the advertising of wine, distilled spirits, and malt beverages, will be accomplished in future rulemaking. The regulatory amendments in this document will not require industry members to make changes to alcohol beverage labels or advertisements but instead provide additional flexibility to make certain changes going forward.
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[Federal Register Volume 87, Number 27 (Wednesday, February 9, 2022)]
[Rules and Regulations]
[Pages 7526-7622]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2022-00841]
[[Page 7525]]
Vol. 87
Wednesday,
No. 27
February 9, 2022
Part II
Department of the Treasury
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Alcohol and Tobacco Tax and Trade Bureau
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27 CFR Parts 5 and 7
Modernization of the Labeling and Advertising Regulations for Distilled
Spirits and Malt Beverages; Final Rule
Federal Register / Vol. 87, No. 27 / Wednesday, February 9, 2022 /
Rules and Regulations
[[Page 7526]]
DEPARTMENT OF THE TREASURY
Alcohol and Tobacco Tax and Trade Bureau
27 CFR Parts 5 and 7
[Docket No. TTB-2018-0007; T.D. TTB-176; Ref: T.D. TTB-158 and Notice
Nos. 176 and 176A]
RIN 1513-AB54
Modernization of the Labeling and Advertising Regulations for
Distilled Spirits and Malt Beverages
AGENCY: Alcohol and Tobacco Tax and Trade Bureau, Treasury.
ACTION: Final rule; Treasury decision.
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SUMMARY: The Alcohol and Tobacco Tax and Trade Bureau (TTB) is amending
certain of its regulations governing the labeling and advertising of
distilled spirits and malt beverages to address comments it received in
response to a notice of proposed rulemaking, Notice No. 176, published
on November 26, 2018. On April 2, 2020, TTB finalized certain labeling
amendments arising out of that proposed rule. This document finalizes
the reorganization of, and addresses the remaining issues related to,
the labeling of distilled spirits and malt beverages. Reorganizing the
wine labeling regulations, and addressing the remaining labeling issues
related to wine, as well as reorganizing and finalizing the regulations
related to the advertising of wine, distilled spirits, and malt
beverages, will be accomplished in future rulemaking. The regulatory
amendments in this document will not require industry members to make
changes to alcohol beverage labels or advertisements but instead
provide additional flexibility to make certain changes going forward.
DATES: This final rule is effective March 11, 2022.
FOR FURTHER INFORMATION CONTACT: Christopher M. Thiemann or Kara T.
Fontaine, Regulations and Rulings Division, Alcohol and Tobacco Tax and
Trade Bureau, 1310 G Street NW, Box 12, Washington, DC 20005; telephone
202-453-2265.
SUPPLEMENTARY INFORMATION:
Table of Contents
I. Background
A. TTB's Statutory Authority
B. Notice No. 176
C. T.D. TTB-158
D. Scope of this Final Rule
E. Issues That Are Outside of the Scope of This Final Rule
F. Proposals Not Being Adopted
II. Discussion of Specific Comments Received and TTB Responses
A. Issues Affecting Multiple Commodities
B. Amendments Specific to 27 CFR part 5 (Distilled Spirits)
C. Amendments Specific to 27 CFR part 7 (Malt Beverages)
D. Amendments of the Advertising Regulations
E. Impact on Public Guidance Documents
III. Derivation Tables for Finalized Parts 5 and 7
IV. Regulatory Analyses and Notices
A. Regulatory Flexibility Act
B. Executive Order 12866
C. Paperwork Reduction Act
V. Drafting Information
List of Subjects
Authority and Issuance
I. Background
A. TTB's Statutory Authority
Sections 105(e) and 105(f) of the Federal Alcohol Administration
Act (FAA Act), 27 U.S.C. 205(e) and 205(f), set forth standards for the
regulation of the labeling and advertising of wine, distilled spirits,
and malt beverages (referred to elsewhere in this document as ``alcohol
beverages'').
The Alcohol and Tobacco Tax and Trade Bureau (TTB) administers the
FAA Act pursuant to section 1111(d) of the Homeland Security Act of
2002, codified at 6 U.S.C. 531(d). The Secretary of the Treasury (the
Secretary) has delegated to the TTB Administrator various functions and
duties in the administration and enforcement of this law through
Treasury Department Order 120-01. For a more in-depth discussion of
TTB's authority under the FAA Act regarding labeling, see Notice No.
176.
B. Notice No. 176
The TTB regulations concerning the labeling and advertising of
alcohol beverages are contained in 27 CFR part 4, Labeling and
Advertising of Wine; 27 CFR part 5, Labeling and Advertising of
Distilled Spirits; and 27 CFR part 7, Labeling and Advertising of Malt
Beverages. These 27 CFR parts are hereafter referred to as parts 4, 5,
and 7, respectively.
On November 26, 2018, TTB published in the Federal Register Notice
No. 176 (83 FR 60562), ``Modernization of the Labeling and Advertising
Regulations for Wine, Distilled Spirits, and Malt Beverages.'' The
principal goals of that proposed rule were to:
<bullet> Make the regulations governing the labeling of alcohol
beverages easier to understand and easier to navigate. This included
clarifying requirements, as well as reorganizing the regulations in 27
CFR parts 4, 5, and 7 and consolidating TTB's alcohol beverage
advertising regulations in a new part, 27 CFR part 14.
<bullet> Incorporate into the regulations TTB guidance documents
and current TTB policy, as well as changes in labeling standards that
have come about through statutory changes and international agreements.
<bullet> Provide notice and the opportunity to comment on potential
new labeling policies and standards, and on certain internal policies
that had developed through the day-to-day practical application of the
regulations to the approximately 200,000 label applications that TTB
receives each year.
TTB requested comments from the public and all interested parties
on the regulatory proposals contained in Notice No. 176. TTB stated
that it was particularly interested in comments that address whether
the proposed revisions to the labeling and advertising regulations will
continue to protect the consumer by prohibiting false or misleading
statements and requiring that labels provide the consumer with adequate
information about the identity and quality of the product. Where TTB
proposed substantive changes, TTB sought comments on the proposals for
further appropriate improvements. With respect to the few proposed
changes in Notice No. 176 that might require changes in current
labeling or advertising practices, TTB sought comments on the impact
that the proposed changes would have on industry members and any
suggestions as to how to minimize any negative impact.
TTB also solicited comments from consumers, industry members, and
the public on whether such changes would adequately protect consumers.
Any regulatory proposals put forward by TTB on this issue would, of
course, have to be consistent with the statutory requirements of the
FAA Act.
The comment period for Notice No. 176 originally closed on March
26, 2019, but was reopened and extended at the request of commenters
(see Notice No. 176A, 84 FR 9990). The extended comment period ended on
June 26, 2019. TTB received and posted 1,143 comments in response to
Notice No. 176. Commenters included trade associations, consumer and
public interest groups, foreign entities, a Federally-recognized
American Indian tribe, State legislators and members of Congress,
industry members and related companies, and members of the public. The
vast majority of comments addressed proposals relating to distilled
spirits, with nearly 700 comments addressing the proposed amendment on
the size and shape of oak barrels used to age distilled spirits.
[[Page 7527]]
TTB is also taking into consideration for purposes of this
rulemaking earlier comments that were submitted to the Department of
the Treasury in response to a Request for Information (RFI) published
in the Federal Register on June 14, 2017 (82 FR 27212). The RFI invited
members of the public to submit views and recommendations for Treasury
Department regulations that could be eliminated, modified, or
streamlined to reduce burdens. The comment period for the RFI closed on
October 31, 2017.
Eight comments on the FAA Act labeling regulations, which included
28 specific recommendations, were submitted in response to the RFI. For
ease of reference, TTB has posted these comments in the docket for this
rulemaking. TTB is considering all of the relevant recommendations
submitted in response to the RFI either as comments to Notice No. 176
or as suggestions for separate agency action, as appropriate.
C. T.D. TTB-158
On April 2, 2020, TTB published T.D. TTB-158 in the Federal
Register (85 FR 18704), which finalized certain proposals from Notice
No. 176, and announced its decision not to move forward with certain
other proposals. Generally, the amendments that TTB adopted in T.D.
TTB-158 were well-supported by commenters, could be implemented
relatively quickly, and would either give more flexibility to industry
members or help industry members understand existing requirements,
while not requiring any current labels or advertisements to be changed.
TTB did not incorporate the proposed reorganization of the regulations
in T.D. TTB-158. Instead, amendments to the TTB regulations were made
within the framework of the existing regulations.
D. Scope of This Final Rule
In this rulemaking, TTB is finalizing the reorganization proposed
in Notice No. 176 for parts 5 and 7. This includes breaking up large
existing sections into smaller sections to improve clarity and
readability, resulting in a larger number of overall sections but not a
larger number of regulatory requirements. TTB is also adopting many
proposals that incorporate current policy into the regulations,
providing improved transparency for industry and facilitating overall
compliance. This final rule also addresses comments that TTB received
on the proposed regulatory provisions for all of parts 5 and 7 by
incorporating changes in the regulations; announcing that TTB will not
move forward with some proposed changes; and identifying proposals or
issues raised that will be considered for future rulemaking.
The document also includes liberalizing changes for distilled
spirits or malt beverages that are either unique to a single commodity
(such as the keg collar amendments, which are specific to malt
beverages), or which largely bring the distilled spirits and malt
beverage regulations into conformity with current policy already
adopted for wine labeling (such as the liberalizing changes that allow
information previously required to appear on a ``brand label'' to
appear anywhere on the container, as long as certain elements of
mandatory information appear in the same field of vision).
As previously indicated, this document does not contain any
amendments that will require changes to distilled spirits or malt
beverage labels or advertisements.
TTB is also adopting clarifying and liberalizing changes that will
remove certain outdated regulatory restrictions on labeling and
otherwise allow additional flexibility in labeling requirements that
were proposed in Notice No. 176. Examples include providing additional
flexibility in allowing the labeling of kegs with ``keg collars'' and
``tap covers'' that are not firmly affixed to the keg under certain
circumstances to facilitate the reuse of kegs by different brewers; and
removing some outdated restrictions on the use of ``disparaging''
statements on labels if such statements are truthful and non-
misleading.
In this final rule, TTB is not amending the labeling or advertising
regulations in part 4, which relate to wine. The comments on the
proposed amendments to part 4 raised several issues that are unique to
wine and require further analysis. Accordingly, TTB plans to address
these issues in a future rulemaking, which will reorganize part 4 in a
manner similar to the way in which parts 5 and 7 are being reorganized.
The future rulemaking on part 4 will also address the substantive
issues raised by the commenters on the labeling and advertising of
wine. At that time, TTB will also pursue the reorganization of the
advertising regulations pertaining to wine, distilled spirits, and malt
beverages in a new part 14, as proposed in Notice No. 176. In the
interim, existing policies will continue for wines.
E. Issues That Are Outside of the Scope of This Final Rule
TTB received some comments that either asked TTB to take action
with regard to separate rulemaking projects or petitioned for
rulemaking on specific issues. These comments are considered to be
outside of the scope of this rulemaking but will be evaluated as
suggestions for future rulemaking by TTB.
1. Separate Rulemaking Initiatives
In Notice 176, TTB identified several ongoing rulemaking
initiatives related to the labeling and advertising of alcohol
beverages that would be handled separately from the proposed rule,
stating as follows:
There are a number of ongoing rulemaking initiatives related to
labeling and advertising of alcohol beverages that will be handled
separately from this proposed rule due to their complexity. For
example, this document does not deal with ``Serving Facts''
statements, an issue that was the subject of a 2007 notice of
proposed rulemaking (see Notice No. 73, 72 FR 41860, July 31, 2007)
and TTB Ruling 2013-2. Nor does TTB address its current policy
requiring statements of average analysis on labels that include
nutrient content claims. Industry members should continue to rely on
TTB's published rulings and other guidance documents on these
issues. TTB's policy on gluten content statements is still an
interim one; therefore, that issue is not addressed in the proposed
rule (see TTB Ruling 2014-2). Substantive changes to allergen
labeling requirements are not addressed in this document. Standards
of fill requirements are not addressed in this document but TTB
plans to address them in a separate rulemaking document.
Subsequent to the publication of Notice No. 176, TTB published
Ruling 2020-2, which put into place updated policy on gluten content
statements. Accordingly, comments that TTB received on these issues
will either be treated as suggestions for future rulemaking or as
comments on other current rulemaking initiatives.
a. Serving Facts and Allergen Labeling
The Center for Science in the Public Interest (CSPI), the Consumer
Federation of America, and the National Consumers League submitted a
joint comment to the Secretary of the Treasury, which referenced prior
rulemaking initiatives relating to ``Serving Facts'' and allergen
labeling. The comment asked the Secretary to instruct TTB:
to withdraw the proposed rule and to issue a new proposal providing
a mandatory, standardized declaration covering alcohol content by
percentage and amount, serving size, calories, ingredients, allergen
information, and other information relevant to consumers. This rule
could be based on the prior regulatory dockets already underway and
would provide much-needed closure to those considerable efforts.
[[Page 7528]]
TTB received many other comments urging the adoption of mandatory
allergen labeling, mandatory ingredient labeling, and mandatory
nutrient labeling.
As noted above, TTB specifically identified these issues as being
outside the scope of Notice No. 176. Accordingly, TTB will consider
these comments as a suggestion for future rulemaking.
b. Standards of Fill
In Notice No. 176, TTB identified standard of fill requirements as
being outside of the scope of this rulemaking, and explained that TTB
planned to address standards of fill in a separate rulemaking document.
However, Notice No. 176 included a proposal to address ``aggregate''
standards of fill in a manner that is based on current policy. In 1988,
TTB's predecessor agency started permitting bottlers and importers of
wine and distilled spirits products to use containers that did not meet
a standard of fill provided that the non-standard of fill containers
were banded or wrapped together and sold as a single wine or distilled
spirits product that, in total, met an approved standard of fill. For
example, a wine or distilled spirits product sold in a package of
thirty 25 mL containers to meet an authorized standard of fill of 750
mL would be an aggregate package under this policy. While this type of
aggregate packaging has been permitted for some time, TTB's policy
(which includes several conditions that must be met to qualify for
treatment as an aggregate standard of fill) has not yet been codified
in the regulations. In Notice No. 176, TTB proposed to codify the
policy in the regulations, with certain revisions.
In response to Notice No. 176, TTB received 79 comments regarding
standards of fill. Only a few of these comments addressed aggregate
standards of fill. Instead, the comments generally focused on whether
standards of fill should be eliminated entirely, and if not, what new
standards of fill should be added to the wine and distilled spirits
regulations. Accordingly, TTB included these comments in the rulemaking
docket for its separate rulemaking project that focused on standards of
fill.
On July 1, 2019, TTB published two notices of proposed rulemaking
on standards of fill in the Federal Register. See Notice No. 182 (84 FR
31257) and Notice No. 183 (84 FR 31264). On December 29, 2020, after
reviewing the comments received in response to these notices, as well
as the 79 comments concerning standards of fill that were submitted in
response to Notice No. 176, TTB published in the Federal Register T.D.
TTB-165 (85 FR 85514), which amended the regulations in parts 4 and 5
to add seven new standards of fill for wine and distilled spirits. TTB
also stated that it will conduct rulemaking to propose the addition of
several new standards of fill for wine, including the 180, 300, 360,
550, 720 milliliters, and 1.8 L sizes.
TTB believes it would be premature to adopt final regulations on
aggregate standards of fill before TTB, the industry, and the public
have the opportunity to evaluate whether the expansion of the number of
standards of fill available to industry members affects the merits of
codifying in the regulations its aggregate standard of fill policy.
Accordingly, while TTB will continue to enforce its current policy on
aggregate standards of fill, it is not adopting regulations on this
issue at this time, but will instead evaluate the need for further
rulemaking on this question.
c. Petition on Agency Guidance
In response to Notice No. 176, TTB also received a petition from
the New Civil Liberties Alliance requesting that the Treasury
Department initiate a rulemaking process to promulgate regulations
prohibiting any departmental component from issuing, relying on, or
defending improper agency guidance. This petition is outside of the
scope of Notice No. 176.
d. Comments and Petitions on Standards of Identity for New Classes of
Distilled Spirits Products
TTB received several comments requesting the creation of new
standards of identity for various distilled spirits products that TTB
did not propose in Notice No. 176. For example, Privateer International
asked that the regulations be amended to create a standard of identity
for ``Straight rum.'' The comment stated that if TTB determined that
the proposal was not within the scope of Notice No. 176, it should be
considered as a petition under 27 CFR 70.701(c). Other commenters
requesting new standards of identity for various distilled spirits
products included E&J Gallo Winery (for Superior Grape Brandy), Desert
Door (for Sotol), the Irish Spirits Association (for Irish Cream
Liqueur), and Domeloz Spirits (for Somel).
After carefully reviewing these requests, TTB has determined that
it would not be appropriate to move forward on any of these issues
without first soliciting public comment on the proposed standards of
identity. Accordingly, TTB will treat these comments as a request for
further rulemaking and will evaluate them separately from this
rulemaking.
TTB also received comments in support of petitions that had
previously been filed with TTB but were not incorporated into the
proposed amendments in the notice. For example, the American Single
Malt Whiskey Commission submitted a comment in which it renewed its
petition to include ``Single malt whiskey'' as a standard of identity
in 27 CFR part 5. TTB received over 250 comments in support of this
petition. Similarly, Singani63 submitted comments in support of a
petition to establish a standard of identity for ``Singani,'' and
SpiritsNL submitted comments in support of a petition to establish
standards of identity for ``Genever.'' Because these issues were not
specifically put forward for comment in Notice No. 176, the public and
the industry were not given an opportunity to comment on the standards
of identity suggested by the petitioners. TTB has determined that
actions on these petitions would be premature without seeking public
comment on the petitioned-for standards of identity. Accordingly, TTB
will consider these comments for future rulemaking.
2. Other Issues Outside of the Scope
TTB also received comments on other topics that relate to
regulatory provisions that are not in parts 4, 5, or 7 (such as
Internal Revenue Code reporting requirements) or issues that were not
aired for comment (such as regulations on private labels). TTB will
treat these comments as suggestions for future rulemaking.
3. Label Approval Requirements
TTB also sought comments on whether more significant changes to the
label approval process, such as expanding the categories of optional
information that may be revised without TTB approval or limiting the
scope of TTB's prior review of labels to certain mandatory information,
should be considered. As noted earlier in this document, the FAA Act
generally requires the submission of applications for label approval
before bottlers or importers introduce their products into interstate
commerce. As part of its label review process, TTB reviews both
optional and mandatory information on labels. With regard to optional
information, TTB's main goal is to ensure that such information does
not mislead consumers.
While TTB received some comments with regard to the larger issue of
ways to streamline the label approval process, TTB has determined that
adoption of
[[Page 7529]]
any regulatory amendments in response to these comments is premature,
without providing industry members and the general public with the
opportunity to directly comment on such proposals.
F. Proposals Not Being Adopted
Some changes proposed in Notice No. 176 were opposed by commenters
who provided substantive comments suggesting that the proposed policies
required changes to existing labels, required industry members to incur
costs, or did not have the intended result within the purpose of the
FAA Act. As a result, TTB is not finalizing the following proposals:
<bullet> An amendment that proposed to clarify and somewhat expand
existing requirements with regard to placing certain label information
on closed ``packaging'' of wine, distilled spirits, and malt beverage
containers.
<bullet> An amendment that proposed to clarify and expand current
requirements that certain whisky products distilled in the United
States must include the State of distillation on the label, by
providing that a bottling address within the State does not suffice
unless it includes a representation as to distillation.
While the proposed amendments would have provided additional
information to consumers, some comments suggested that each of these
proposals might also impose regulatory burdens or costs on industry
members. TTB has concluded that the rulemaking record before it does
not provide an adequate basis for evaluating the costs and benefits of
the proposed revisions. Accordingly, TTB is not moving forward with
these proposals in this rulemaking but will instead clarify current
requirements with regard to labeling requirements for products in
sealed, opaque cartons and the labeling of certain whiskies with
information regarding the State of distillation. TTB will consider
amendments to current policies for future rulemaking.
There were also some proposed clarifying changes that industry
members interpreted as imposing new requirements, even where that was
not the intent of the amendment. In several cases, TTB decided it was
not necessary to adopt regulations on these issues. The failure to
codify these policies does not represent a change in policy, but does
reflect a determination by TTB that codification of these policies in
the manner proposed by Notice No. 176 could be confusing to the
industry and the public.
II. Discussion of Specific Comments Received and TTB Responses
For ease of navigation, TTB is setting forth the issues and
comments it is addressing in this document in the following order:
Issues affecting multiple commodities; amendments specific to 27 CFR
part 5 (distilled spirits); amendments specific to 27 CFR part 7 (malt
beverages); and amendments to the advertising regulations. Within each
discussion, the order reflects generally the order the sections appear
in the finalized regulations, which will aid readers in comparing the
explanations in the preamble with the subsequent section setting forth
the regulatory text.
The proposed changes from Notice No. 176 that were not addressed in
T.D. TTB-158, and that are not addressed specifically in this preamble,
are adopted without change in this final rule, and will not be
discussed in this section. See Notice No. 176 for further information
on those proposals.
A. Issues Affecting Multiple Commodities
1. Comments on the Need for Modernization and Reorganization
TTB received numerous comments from industry members and trade
associations supporting its overall goal to reorganize and recodify the
labeling regulations to simplify and clarify regulatory standards;
incorporate industry circulars, rulings, and current policy into the
regulations; and reduce the regulatory burden on industry members where
possible. A few industry members expressed support for the overall
modernization of the current regulations. For example, a comment from
Big Cypress Distillery called the proposed regulations ``a most welcome
and modernized improvement over the current regulations.'' A comment
from Altitude Spirits stated, ``I think your updates and effort to
modernize the regulations surrounding wine, beer, and spirits are a
great idea and current regulations are in many cases in need of an
update.'' Roulasion Distilling Company commented that the proposed
changes were generally ``a great stride towards transparency and an
improvement for many of my fellow producers.''
Several trade associations also praised the overall modernization
of the regulations. The comment from the Texas Whiskey Association,
which 117 other comments supported, stated that:
In general, we are very supportive of the proposed changes. We
think it clears up perceived ambiguities. We support a code for
producers that results in more transparency and truthfulness for
consumers.
The Brewers Association (BA) noted that the incorporation of
existing industry circulars, rulings, and policy ``is important to
achieve greater understanding and compliance among members of the BA
and the broader alcohol beverage industry.'' The National Association
of Beverage Importers (NABI) expressed its appreciation for the
``structure and parallelism of the three parts.'' Finally, Senator
Charles Schumer expressed support for the ``streamlining'' of the
regulations and urged TTB to finalize them.
Heaven Hill Brands commended TTB for taking on this project, but
also asked that TTB avoid taking a ``piecemeal approach to
modernization'' by finalizing the proposed rule ``in numerous''
documents. BA urged TTB ``to sustain the momentum and complete the
process initiated in Notice 176.'' Finally, some commenters, including
the Distilled Spirits Council of the United States (DISCUS) and Senator
John Kennedy, were more critical of the overall impact of the proposed
rule as well as the wording of certain clarifying language, but
supported certain regulatory amendments.
TTB Response
TTB agrees with the commenters who suggested that incorporating
industry circulars and rulings into the regulations promotes
transparency and consistency, and believes that transparency benefits
both industry members and consumers. TTB also plans to move forward
with the proposed reorganization and parallelism of the parts. TTB
continues to believe that proposed reorganization of the regulations
will make it easier for the public and industry members to find
relevant regulations and to compare regulations in the three parts.
TTB understands the concern that commenters expressed with regard
to an approach that would result in numerous final rules. Nonetheless,
for the reasons described earlier in this document, this final rule
will reorganize only the labeling provisions in parts 5 (distilled
spirits) and 7 (malt beverages). TTB believes it is important to
resolve all of the outstanding labeling issues relating to distilled
spirits and malt beverages in this document, while continuing to work
on the some of the complex issues that pertain specifically to wine.
The reorganization of the wine labeling regulations (in part 4) and the
advertising regulations for wine, distilled spirits, and malt beverages
(in
[[Page 7530]]
a new part 14) will not be addressed in this document, but will be
addressed in the future.
Accordingly, TTB plans to address the reorganization of the wine
labeling regulations in a future rulemaking, which will reorganize part
4 in a manner similar to the way in which TTB is reorganizing parts 5
and 7, and which also will address the substantive issues raised by the
commenters on the labeling and advertising of wine. At that time, TTB
will also pursue the reorganization of the advertising regulations
pertaining to wine, distilled spirits, and malt beverages in a new part
14, as proposed in Notice No. 176.
2. Subpart A--General Provisions
a. Definitions
In Notice No. 176, TTB proposed definitions for ``certificate
holder,'' ``container,'' ``distinctive or fanciful name,'' and
``person'' for consistency across the regulations for wine, distilled
spirits, and malt beverages.
Certificate holder: TTB proposed to add the definition of
``certificate holder'' to parts 4, 5, and 7 to read as follows: ``The
permittee or brewer whose name, address, and basic permit number, plant
registry number, or brewer's notice number appears on an approved TTB
Form 5100.31.'' TTB received one comment on this proposal, from DISCUS,
which expressed support for the addition of this definition to the part
5 regulations, but suggested the elimination of the use of the term
``brewer'' because ``such references should be to a specific alcohol
beverage category in its corresponding part.''
TTB Response
TTB believes that maintaining a single definition in the labeling
regulations for all of the alcohol beverage commodities aids in
understanding, particularly for the many industry members who engage in
business in several alcohol beverage commodities. TTB also notes that
the definitions of the term ``certificate of label approval'' in parts
4, 5 and 7, as amended by T.D. TTB-158, as well as the definition in
part 13, which was not amended by T.D. TTB-158, currently refer to
wine, distilled spirits, and malt beverages. Accordingly, TTB is
finalizing the term ``certificate holder'' as proposed in parts 5 and
7.
Container: TTB proposed to amend the definition of the term
``container'' in parts 4 and 7 and to add the definition to part 5 to
replace the definition of the term ``bottle.'' The proposed rule
defined ``container'' in parts 4 and 7 as any can, bottle, box with an
internal bladder, cask, keg, barrel, or other closed receptacle, in any
size or material, that is for use in the sale of wine or malt
beverages, respectively, at retail. Aside from editorial changes, this
differs from the current definitions in that it specifically
incorporates a box with an internal bladder, sometimes referred to as a
``bag in a box.''
Because of the restrictions on the size of distilled spirits
containers, the proposed definition in part 5 did not include
references to barrels. Furthermore, because there are prescribed
standards of fill for both wine and distilled spirits, the proposed
definitions in parts 4 and 5 included a cross reference to those
standard of fill regulations, to clarify that containers must be in
certain sizes.
TTB received one comment on these proposed amendments. DISCUS
stated that while it recognized ``that a definition including a broader
range of packages is necessary and generally agree[d] with the proposed
definition of ``container[,]'' it urged that the definition include a
cross[hyphen]reference to proposed Sec. 5.62 in order to clarify that
a ``closed receptacle'' should ``not be construed as including
secondary and tertiary packaging.''
TTB Response
TTB is finalizing the definition of ``container'' as proposed in
parts 5 and 7. Because of changes that are being made to the proposed
amendment regarding closed packaging, which will be discussed in
further detail in this document, TTB does not find it necessary to
include the cross reference suggested by DISCUS. TTB is also making a
minor change to the definition, by deleting the reference to internal
bladders, so that the definition covers all boxes, regardless of
whether they include a bladder. TTB notes that some boxes in use today
do not include bladders.
Distinctive or fanciful name: Under current regulations, the term
``distinctive or fanciful name'' refers to a name that must be used on
a distilled spirits label, when a statement of composition is required.
A distinctive or fanciful name is optional on other distilled spirits
or malt beverage products. A distinctive or fanciful name is also
optional for wine, whether or not it bears a statement of composition.
Current regulations use but do not define the term.
Consistent with current policy and use of the term elsewhere in the
regulations, TTB proposed to add a definition of ``distinctive or
fanciful name'' to the definitions section of parts 4, 5, and 7 for the
first time to mean a descriptive name or phrase chosen to identify a
product on the label. The proposed definition clarifies that the term
does not include a brand name, class or type designation, statement of
composition, or, in part 7 only, a designation known to the trade or
consumers.
Beverly Brewery Consultants supported the inclusion of the
definition of ``distinctive or fanciful'' name in the regulations.
However, the Brewers Association opposed the proposed definition of
``distinctive or fanciful name,'' stating that the definition, like
other proposed changes to the class and type regulations, was ``based
on longstanding concepts used in distilled spirits labeling and
advertising regulations. These concepts are not generally understood by
brewers and would necessitate many changes in existing labels and
advertisements.'' Instead, the Brewers Association requested that ``TTB
utilize the language currently found in Sec. 7.24 to address class and
type. If TTB sees the need to modify the current class and type
regulations for beer, those issues should be address[ed] in a separate
rulemaking.''
TTB Response
The Brewers Association commented that the proposed definition of
the term ``distinctive or fanciful name'' would require changes to
labels. However, the proposed definition simply codifies current policy
with regard to the meaning of this term, and thus would not require
changes to approved labels. Furthermore, as previously noted, the
requirement for a distinctive or fanciful name for certain malt
beverages and distilled spirits is in current regulations, and the
Brewers Association comment does not appear to object to the
requirement that such a name appear on labels for certain malt
beverages. See current Sec. Sec. 7.24(a), 7.29(a)(7)(iii), and
7.54(a)(8)(iii).
With regard to the suggestion from the Brewers Association that TTB
should not modify the current class and type regulations for beer, this
comment will be discussed in further detail below in Section II.C.6.a.
Person: TTB proposed to amend the definition of the term ``person''
in parts 4, 5, and 7 by adding ``limited liability company'' to
specifically reflect TTB's current position that limited liability
companies fall under the definition of a ``person.'' TTB also removed
the language pertaining to ``trade buyer'' that read ``and the term
`trade buyer' means any person who is a wholesaler or retailer'' from
the definition of ``person'' that was in part 5. The current definition
of a ``person'' in part 7 did
[[Page 7531]]
not include the definition of a ``trade buyer.''
DISCUS commented that it supported the proposed definition of a
``person'' but urged that the definition of ``trade buyer'' (as any
person who is a wholesaler or retailer) from the existing definition be
retained in some manner in the labeling and advertising regulations,
and that some definition of the term ``retailer'' be added. The DISCUS
comment included a suggested mark-up of the proposed regulations in
part 5, but it did not include regulatory language for this comment.
TTB Response
TTB removed the language pertaining to ``trade buyer'' from the
definition of ``person'' in part 5 because the term ``trade buyer''
does not appear anywhere else in the part 5 regulations. The purpose of
the ``Definitions'' section in each part is to define terms used
elsewhere in that part. Accordingly, TTB is not adopting this
suggestion from DISCUS.
3. Subpart B--Certificates of Label Approval (for Distilled Spirits and
Malt Beverages) and Certificates of Exemption From Label Approval (for
Distilled Spirits)
Notice No. 176 proposed a subpart B in parts 4, 5, and 7, which
contained TTB's regulations implementing the statutory requirement for
COLAs (for wine, distilled spirits and malt beverages) and certificates
of exemption (for wine and distilled spirits). Proposed subpart B also
contained three sections grouped under the heading of ``Administrative
Rules,'' which set forth requirements for: (1) Presenting COLAs to
Government officials; (2) submitting formulas, samples, and other
documentation related to obtaining or using COLAs; and (3) applying for
and obtaining permission to use personalized labels. TTB described
these proposals in more detail in Notice No. 176, Section II.B.2.
a. Explanation of What a Certificate of Label Approval (COLA)
Authorizes
In Notice No. 176, TTB proposed to reorganize for clarity the
regulations implementing the statutory requirement for certificates of
label approval (COLAs). TTB proposed to establish new Sec. Sec. 4.22,
4.25, 5.22, 5.25, 7.22, and 7.25 to set out these requirements. In
these sections, TTB also proposed to set forth what a COLA does and
does not authorize. This information does not appear in the current
regulations.
Specifically, the proposed regulations stated that a COLA, on an
approved TTB Form 5100.31, authorizes the bottling of wine, distilled
spirits, or malt beverages, or the importation of bottled wine,
distilled spirits, or malt beverages, with labels identical to labels
on the COLA or with changes authorized on the COLA or otherwise
authorized by TTB. See proposed Sec. Sec. 4.22(a), 4.25(a), 5.22(a),
5.25(a), 7.22(a), and 7.25(a). The proposed regulations in paragraph
(b) of each of the aforementioned sections provided that, among other
things, a COLA does not: (1) Confer trademark protection; (2) relieve
the certificate holder from its responsibility to ensure that all
ingredients used in the production of wine, distilled spirits, or malt
beverages comply with applicable requirements of the U.S. Food and Drug
Administration (FDA) with regard to ingredient safety; or (3) relieve
the certificate holder from liability for violations of the Federal
Alcohol Administration Act (FAA Act), the Alcoholic Beverage Labeling
Act (ABLA), the Internal Revenue Code (IRC), or related regulations and
rulings. Proposed paragraphs (c) and (d) of the aforementioned sections
discuss when a COLA must be obtained and how to apply for a COLA.
The proposed revisions reflected the longstanding policy of TTB and
its predecessor agencies. Furthermore, the COLA form (TTB Form 5100.31,
Application for and Certification/Exemption of Label/Bottle Approval),
currently specifically provides that the issuance of a COLA does not
confer trademark protection and does not relieve the applicant from
liability for violations of the FAA Act, the ABLA, the IRC, or related
regulations and rulings. TTB believed that adding this information to
the regulations would clarify this position for the public and industry
members.
TTB received several comments in response to the proposed
revisions. Some commenters, including WineAmerica and the United States
Association of Cider Makers (USACM), supported the proposed language
clarifying that the issuance of a COLA does not confer trademark
protection or relieve the certificate holder from its responsibility to
ensure that all of the ingredients used in the production of the
alcohol beverage comply with applicable requirements of the FDA with
regard to ingredient safety. Two commenters suggested revisions that
would require more information on the COLA application regarding
compliance with State law for appellations of origin. As previously
indicated, however, some comments raised concerns about whether TTB was
interpreting FDA regulations. TTB addressed these issues in T.D.TTB-
158.
However, TTB also received many comments in opposition to the
language relating to liability under the FAA Act, ABLA, and the IRC.
The Wine Institute made the following comment:
Wine Institute is concerned about the language found in Sec.
4.22(b)(3) and Sec. 4.25(b)(3), both of which indicate that a
Certificate of Label Approval (COLA) does not relieve the
certificate holder from liability for violations of the FAA Act, the
Alcohol Beverage Labeling Act, the Internal Revenue Code, or related
regulations and rulings. Wine Institute members rely on the COLA
review process to confirm that they have placed information onto
wine labels in compliance with the FAA Act, the Alcohol Beverage
Labeling Act, the Internal Revenue Code, and related federal
regulations and rulings. Wine Institute members understand it is
their responsibility to ensure they have adequate substantiation to
support the accuracy of information and claims made on labels.
However, Wine Institute is concerned that Sec. 4.22(b)(3), for wine
bottled in the United States, and Sec. 4.25(b)(3), for wine
imported in containers, could be used as the basis for a permit
enforcement action against a winery even when a label may have been
approved in error by TTB. Wine Institute would like to better
understand the implications for Wine Institute members with regard
to this provision.
DISCUS also urged TTB not to finalize proposed Sec. Sec. 5.22(b)
and 5.25(b), arguing that it is unnecessary to repeat the statement on
the COLA form that the COLA did not convey trademark protection and
making the following statement:
We urge the Bureau to expressly state that the issuance of a
COLA is confirmation of compliance with TTB's labeling requirements.
If TTB approves a label, misleading statements or representations
should not be present on that label. TTB labeling specialists have
reviewed the material and assessed it against the labeling
regulations and decided whether or not to approve, as well as if any
information needed to be changed. Suppliers need to be able to rely
on TTB approval in this regard.
The Vermont Hard Cider Company (VCC) urged TTB ``not to render the
Congressionally-mandated COLA process purely advisory and oppos[ed] any
changes that undermine the legal certainty of an approved COLA.''
Several commenters, including the American Distilled Spirits
Association (ADSA) and an attorney representing the USACM, suggested
that the revisions propose ``to utterly destroy the certainty provided
by [the] COLA, upending a system that has served both the public and
the industry well and rendering the entire process advisory.'' These
comments suggested that it would violate due process to punish industry
members for activity that was approved through the COLA process, and
that the
[[Page 7532]]
appropriate remedy in such a situation would be to follow the label
revocation procedures contained in part 13 of the TTB regulations. The
comments acknowledged, however, that a COLA would not protect an
industry member who put a product in a container that did not conform
to the product described on the label.
TTB Response
TTB is finalizing Sec. Sec. 5.22(a) and 7.22(a) as proposed, with
the clarifying changes that TTB has already adopted in T.D. TTB-158.
These changes provide that an approved TTB Form 5100.31 authorizes the
bottling of distilled spirits covered by the COLA, as long as the
container bears labels identical to the labels appearing on the face of
the COLA, or labels with changes authorized by TTB on the COLA or
otherwise (such as through the issuance of public guidance available on
the TTB website at <a href="https://www.ttb.gov">https://www.ttb.gov</a>).
The proposed regulatory amendments in Sec. Sec. 5.22(b) and
7.22(b) were intended to clarify current policy, not change the effect
of obtaining TTB approval of a COLA. TTB agrees that, subject to the
conditions set forth on the COLA form itself, TTB's approval of a COLA
represents a decision by the Bureau that the approved label complies,
on its face, with the requirements of the FAA Act, and industry members
are entitled to rely upon that approval unless and until TTB takes
appropriate action, under the provisions of 27 CFR part 13, to revoke
the approval. TTB also agrees that such reliance would not be a willful
violation of the FAA Act.
As previously noted, the language in the proposed sections simply
repeats language from the COLA form that explicitly sets forth the
conditions of a COLA. Some commenters agreed that a COLA does not
convey trademark protection, relieve the industry member from FDA
requirements regarding ingredient safety, or relieve the industry
member from liability for violations under the FAA Act arising from a
situation in which the approved COLA's language does not accurately
describe the product in the container.
Sections I and II of the COLA form expressly set out these
limitations, advising that the form does not constitute trademark
protection, and that the applicant must ensure that all of the
information on the application is ``true and correct.'' With regard to
mandatory type size requirements under the regulations implementing
both the FAA Act and ABLA, Section II of the COLA form also advises
that TTB:
does not routinely review submitted labels for compliance with
applicable requirements for mandatory label information regarding
type size, characters per inch or contrasting background. You must
ensure that the mandatory information on the actual labels is
legible and displayed in the correct type size, number of characters
per inch, and on a contrasting background in accordance with the TTB
labeling regulations, 27 CFR parts 4, 5, 7, and 16, as applicable.
TTB does reserve the right to review applications for compliance
with these requirements and to return non-compliant applications.
Thus, the COLA form itself expressly advises applicants that it is
their responsibility to ensure that the type size of mandatory
information complies with the regulatory requirements.
Furthermore, Section V of the COLA form sets out certain
``allowable revisions'' that may be made to approved labels without
obtaining a new COLA, subject to the condition that the new label
``must be in compliance with the applicable regulations in 27 CFR parts
4, 5, 7, and 16, and any other applicable provision of law or
regulation, including, but not limited to, the conditions set forth in
the `Comments' below.'' TTB does not approve those revisions on an
individual basis, and the industry member is responsible for ensuring
compliance with the regulations and the conditions set forth in Section
V.
Finally, as explained in T.D. TTB-158, it is TTB's position that if
FDA advises TTB that it has determined that distilled spirits, wines,
or malt beverages are adulterated under the Federal Food, Drug and
Cosmetic Act (FD&C Act), then those beverages are also mislabeled
within the meaning of the FAA Act, even if the bottler or importer of
the product in question has obtained a COLA or an approved formula for
the product in question. See Industry Circular 2010-8, dated November
23, 2010, entitled ``Alcohol Beverages Containing Added Caffeine.'' In
such a situation, it is the responsibility of industry members to take
appropriate action after TTB has notified them that their products are
mislabeled as a result of a determination by FDA that the products are
adulterated under the FD&C Act. Nonetheless, after carefully evaluating
the comments, TTB has concluded that it will not move forward with the
proposed Sec. Sec. 5.22(b), 5.25(b), 7.22(b), and 7.25(b). In the
final regulatory text below, these paragraphs are removed and
paragraphs (c) and (d) of each section as proposed are finalized as
paragraphs (b) and (c). While TTB intended the proposed revisions to be
clarifying, the revisions instead caused confusion among the
commenters. Thus, TTB will evaluate all of the comments on this issue
as suggestions for further action to more clearly address these issues
on the COLA form itself or in the regulations in 27 CFR part 13.
TTB's decision not to move forward with the proposed amendments
does not represent any change in TTB's current policy on this issue,
and the limitations and conditions referenced above will continue to
appear on the COLA form.
b. COLA Requirements for Alcohol Beverages Imported in Containers
In Notice No. 176, TTB proposed, consistent with current
regulations, that wine, distilled spirits, and malt beverages, imported
in containers, are not eligible for release from customs custody for
consumption unless the person removing the products has obtained and is
in possession of a COLA. The regulations allow importers, when filing
TTB data electronically, to file with U.S. Customs and Border
Protection (CBP) the COLA identification number(s) applicable to each
such product in lieu of filing a copy of each COLA with CBP. See
Sec. Sec. 4.24(c), 5.24(c), and 7.24(c). Proposed Sec. Sec. 4.25,
5.25, and 7.25, in addition to the provisions described above, state
that importers must obtain a COLA before removing alcohol beverages in
containers from customs custody for consumption.
Beverly Brewery Consultants commented that proposed Sec. 7.24,
relating to COLA requirements for malt beverages imported in
containers, was poorly organized and should be separated into two
sections.
TTB Response
After reviewing the editorial suggestions from Beverly Brewery
Consultants, TTB has decided that the proposed Sec. Sec. 5.24 and 7.24
clearly communicate requirements relating to distilled spirits and malt
beverages imported in containers, and there is no need to separate each
section into two sections. Accordingly, these sections are finalized,
but with minor changes to certain paragraphs discussed below.
c. Transfer of COLAs
Consistent with the FAA Act and current regulations, proposed
Sec. Sec. 4.24, 5.24, and 7.24 provide that wine, distilled spirits,
and malt beverages, imported in containers, are not eligible for
release from customs custody for consumption unless the person removing
the wine, distilled spirits, or malt beverages has obtained a COLA. The
current regulations, as amended by the final rule facilitating the use
of the International Trade Data System (ITDS)
[[Page 7533]]
(T.D. TTB-145, 81 FR 94186, December 22, 2016), provide importers with
two options for showing compliance with this requirement--they may file
with CBP the identification number assigned to the approved COLA, or
they may provide a copy of the COLA to CBP at the time of entry, as was
the case prior to the ITDS amendments.
As a general rule, only the importer to whom TTB issued a COLA may
use that COLA to withdraw bottled alcohol beverages from customs
custody for consumption. Other importers who intend to import the same
distilled spirits, wine, or malt beverages are responsible for
obtaining their own COLAs for such products, as approved labels bear
the name and address of the importer who obtained the COLA for the
product and who is responsible for compliance with the Federal labeling
regulations as part of the mandatory information. An exception to this
general rule is set forth in ATF Ruling 84-3 (which modified ATF Ruling
83-6), which describes circumstances in which an importer may use a
COLA issued to another importer. In general, an importer may use a COLA
issued to another importer if: (1) The importer to which the COLA was
issued has authorized such use, (2) each bottle or individual container
bears the name (or trade name) and address of the importer to which the
COLA was issued, and (3) the importer to which the COLA was issued
maintains records of the companies it has authorized to use its
certificate.
When TTB amended Sec. Sec. 4.40, 5.51, and 7.31 in T.D. TTB-145,
it incorporated text to reflect the provisions of ATF Ruling 84-3 and
provide that bottled wine, distilled spirits, or malt beverages may be
released to an importer who is authorized by a COLA holder to import
products covered by the COLA. Importers must provide proof of such
authorization if specifically requested. TTB noted in T.D. TTB-145 that
it did not supersede ATF Ruling 84-3 or its holding that the COLA
holder, who is the importer identified on the COLA, remains responsible
for the imported product and its distribution in the United States.
Readers should note that these requirements apply only in
situations in which a second importer wishes to use a COLA that was
issued to the first importer, to obtain the release of products bearing
labels that include the name of that first importer from customs
custody. TTB regulations do not prohibit several different importers
from obtaining a COLA for the same foreign wine, distilled spirits
product, or malt beverage, as long as the name of the responsible
importer appears on each label.
Comments from Wine Institute and DISCUS questioned why the proposed
regulations did not incorporate the language in our current regulations
and the ATF Rulings about COLA holders authorizing other importers to
remove from customs custody products covered by a COLA. Wine Institute
noted that this principle seemed to be partially addressed, and
suggested that the regulations be amended to refer to importations with
the COLA holder's authorization. DISCUS urged TTB to incorporate all of
the provisions of ATF Ruling 84-3 into the regulations, stating that
these provisions are critical to the proposed regulation.
TTB Response
As indicated by the comments from Wine Institute and DISCUS, TTB
failed to fully incorporate the regulations finalized by T.D. TTB-145
into Notice No. 176. Accordingly, TTB is adopting the comments from
Wine Institute and DISCUS to the extent that they reflect current
provisions that TTB added to the regulations in 2016 by T.D. TTB-145
regarding the use by one importer of another importer's COLA under
certain circumstances. It was not TTB's intent to modify this policy.
Accordingly, in this final rule, TTB is reinstating the language that
allows an importer to use another importer's COLA under certain
circumstances. This final rule does not supersede ATF Ruling 84-3 or
its holding that the COLA holder remains responsible for the imported
product and its distribution in the United States.
TTB is not adopting DISCUS's suggestion that TTB amend the
regulations to incorporate all of the requirements set forth in ATF
Ruling 84-3. TTB did not air that specific issue for comment in Notice
No. 176, and TTB believes it would be beneficial to solicit public
comments on the recordkeeping and other requirements associated with
adopting such regulatory amendments. TTB will evaluate whether it
should update the ruling in the future, and will treat the DISCUS
comment as a suggestion for future rulemaking.
d. COLA Requirements for Imported Alcohol Beverages Released ``for
Consumption''
Subject to certain exceptions, the FAA Act makes it unlawful for
anyone to remove ``from customs custody, in bottles, for sale or any
other commercial purpose, distilled spirits, wine, or malt beverages,
respectively'' unless the person has obtained and possesses ``a
certificate of label approval covering the distilled spirits, wine, or
malt beverages, issued by the Secretary in such manner and form as he
shall by regulations prescribe.'' [Emphasis added.] See 27 U.S.C.
205(e). That same law also provides that the substantive labeling
requirements of the FAA Act apply to importers who ``remove from
customs custody for consumption, any distilled spirits, wine, or malt
beverages in bottles . . .'' [Emphasis added.] The FAA Act defines the
term ``bottle'' to mean ``any container, irrespective of the material
from which made, for use for the sale of distilled spirits, wine, or
malt beverages at retail.'' See 27 U.S.C. 211(a)(8). TTB and its
predecessors have consistently interpreted these statutory provisions
to mean that (1) a COLA is required for imported alcohol beverages in
bottles only if they are released from customs custody for consumption
in the United States, and (2) that for such consumption entries, a COLA
is not required if the beverage is being imported for a purpose other
than for sale or any other commercial purpose.
NABI commented that the regulations in proposed Sec. Sec. 4.24 and
4.25, 5.24 and 5.25, and 7.24 and 7.25, should be revised to eliminate
references to requiring COLAs before wine, distilled spirits, or malt
beverages, respectively, are removed in containers from customs custody
``for consumption,'' and to instead include only a reference to
removals for ``sale or any other commercial purpose.'' NABI stated that
this revision would be consistent with the statutory language in 27
U.S.C. 205(e), and that the language about removals for consumption was
overly broad.
TTB Response
The final rule adopts the language of the proposed regulations on
this issue. As explained above, TTB views the statutory requirements of
the FAA Act, as implemented in the regulations since 1936, as imposing
two levels of inquiry. Initially, the substantive labeling requirements
of the FAA Act, as well as the COLA requirements for alcohol beverages
released from customs custody in containers, apply only to products
released ``for consumption'' from customs custody. Within the category
of products released for consumption, there is a subcategory of
products that are exempt from the COLA requirement because they are
being imported for a purpose other than sale or any other commercial
purpose.
Current TTB regulations at 27 CFR 4.40(a), 5.51(a), and 7.31(a), as
amended by T.D. TTB-145 (the final rule facilitating the use of ITDS)
include this
[[Page 7534]]
structure, and the final rule also includes this regulatory text in
Sec. Sec. 4.24(d), 5.24(d), and 7.24(d). Thus, the exemption from the
COLA requirement for products imported for a purpose other than sale or
any other commercial purpose is in addition to, not instead of, the
provision that applies the COLA requirements only to alcohol beverages
removed ``for consumption'' in containers from customs custody.
e. Electronic Filing of the COLA Identification Numbers
The proposed and current regulations allow importers, when filing
TTB data electronically with CBP along with the customs entry, to file
the identification number of the valid COLA applicable to each such
product in lieu of filing a copy of each COLA with CBP. See Sec. Sec.
4.24(c), 5.24(c), and 7.24(c).
NABI requested that TTB require only that approved COLAs be on file
for CBP or TTB inspection, citing the time burden of entering each
identification number for shipments that contain products covered by
numerous COLAs. NABI stated that its recommendation is consistent with
proposed regulations at 27 CFR 4.27, 5.27, and 7.27, which require the
importer to present a copy of the approved COLA upon request.
TTB Response
With regard to the electronic filing of the COLA identification
numbers, in 2016, TTB amended its regulations to provide for electronic
filing of an entry with CBP, so that an importer files an
identification number of the approved COLA when filing electronically,
rather than submitting the COLA to customs. See T.D. TTB-145, 81 FR
94186, December 22, 2016. The importer must provide a copy of the COLA
(either electronically or on paper) upon request. As stated in T.D.
TTB-145, these requirements ensure compliance with the FAA Act at 27
U.S.C. 205(e), which requires, with respect to imports, that no person
shall remove from customs custody, in bottles, for sale or any other
commercial purpose, distilled spirits, wine, or malt beverages, without
having obtained and being in possession of a COLA covering the
products. This rule finalizes this aspect of Sec. Sec. 5.24 and 7.24
in a manner consistent with current regulations.
TTB believes that submitting the identification numbers
corresponding to COLAs that cover the products intended for removal
from customs custody, represents the minimum requirement necessary to
support compliance with label requirements and a level playing field
for industry members. This approach also minimizes the number of
importers TTB and/or CBP potentially would need to contact directly to
identify the appropriate COLA intended to be used by the importer,
which supports compliance without unnecessarily impeding the
importation process.
f. Formula Requirements--Cross-cutting 27 CFR 5.28 and 7.28
Specific formula requirements for certain types of beer and wine
are found in TTB's regulations under the IRC. See 27 CFR part 24 for
wine and part 25 for beer. For distilled spirits, the specific formula
regulations are found in both the IRC regulations (part 19) and the FAA
Act regulations (part 5). However, when reviewing applications for
label approval, TTB often finds it necessary to obtain formulation
information about certain products (including imported alcohol
beverages) that are not otherwise subject to the specific formula
requirements in the regulations. TTB requires industry members to
obtain formula approval for certain unusual products to enable
appropriate classification of the product and ensure that producers do
not use prohibited ingredients in the product.
Accordingly, current regulations in Sec. Sec. 4.38(h), 5.33(g),
and 7.31(d) authorize TTB to request more information about the
contents of a wine, distilled spirits product, or malt beverage, but
the language in part 7 is different from the language in parts 4 and 5.
Sections 4.38(h) and 5.33(g) provide that, upon request of the
appropriate TTB officer, a complete and accurate statement of the
contents of any container to which labels are to be or have been
affixed shall be submitted. The regulations in Sec. 7.31(d) state that
the appropriate TTB officer may require an importer to submit a formula
for a malt beverage, or a sample of any malt beverage or ingredients
used in producing a malt beverage, prior to or in conjunction with the
filing of an application for a COLA.
The type of product evaluation required for a particular product
prior to issuance of a COLA depends on that product's formulation and
origin. TTB periodically updates its public guidance to include a list
of the domestic and imported products for which TTB currently requires
formulas or laboratory analysis prior to issuing a COLA.
In Notice No. 176, TTB proposed to standardize the regulatory
language in parts 4, 5, and 7 on this issue. Accordingly, proposed
Sec. Sec. 4.28(a), 5.28(a), and 7.28(a) provided that the appropriate
TTB officer may require a bottler or importer to submit a formula, the
results of laboratory testing, and samples of the product or
ingredients used in the final product, prior to or in conjunction with
the review of an application for label approval. The proposed
regulations also provided that TTB may request such information after
the issuance of a COLA, or in connection with any product that is
required to be covered by a COLA. Proposed Sec. Sec. 4.28(b), 5.28(b),
and 7.28(b) provided that, upon request of the appropriate TTB officer,
a bottler or importer must submit a full and accurate statement of the
contents of any container to which labels are to be or have been
affixed, as well as any other documentation on any issue pertaining to
whether the wine, distilled spirits, or malt beverage is labeled in
accordance with the TTB regulations.
Current TTB regulations and industry practice involve the
submission of alcohol beverage formulas in varying forms and formats
depending on the type of alcohol beverage and whether the product is
domestically produced or imported. TTB believes that this multiplicity
of procedures is unnecessarily complicated and burdensome for both the
regulated industries and TTB. Accordingly, TTB proposed in Notice No.
176 to amend the TTB regulations in parts 4, 5 and 7 to provide that
industry members may file a formula electronically by using Formulas
Online or submitted on paper on TTB Form 5100.51, ``Formula and Process
for Domestic and Imported Alcohol Beverages.'' TTB notes that the vast
majority of industry members now use Formulas Online to submit
formulas, and encourages all industry members to consider the
advantages of online filing.
WineAmerica and the New York Farm Bureau commented in support of
``formula standardization for ease of submission and approval.'' A law
student commented in favor of requiring more formulas to safeguard the
health of consumers. However, some commenters raised concerns that the
proposed regulations were too broad. For example, Wine Institute
commented that proposed Sec. 4.28(b), as drafted, attempted to expand
TTB's authority to demand information from wineries outside of a formal
investigation, and also noted that bottlers of wine may not always have
complete information about the ingredients in formula wine produced by
other wineries.
Some commenters focused on differences in laboratory analysis
requirements for imported alcohol beverages. The Mexican Chamber of the
Tequila Industry and DISCUS both noted that under current TTB policy
(which is not addressed in the current
[[Page 7535]]
or proposed regulations), formulas for domestic products have no
expiration date, while formulas for imported products expire after 10
years. They both urged TTB to eliminate the expiration date for
imported products and to relieve formula requirements regarding
samples. They also disagreed with granting authority to request
formulas, laboratory testing, or samples for products that are not
specifically required to submit formulas, noting that the formulation
of alcohol beverages is often a closely guarded trade secret.
Similarly, Federation des Exportateurs de Vins & Spiritueux de France
(FEVS) commented in support of all the efforts made by TTB to simplify
and streamline the pre-COLA evaluation process, especially for imported
products, and stated that it understood the need for TTB officers
sometimes to get more information on a specific product on a
case[hyphen]by[hyphen]case basis. However, FEVS encouraged TTB to
consider the economic costs and administrative burdens involved with
formula and other pre-COLA analysis, and asked TTB to not define
stricter ``Pre[hyphen]COLA Evaluation modalities for imported products
than those required for domestic products of the same category.'' As an
example, FEVS questioned why a laboratory analysis is still required
for imported flavored distilled spirits while domestic producers only
have to obtain the approval of their formulas. FEVS stated that this
situation creates extra costs and complexity for European Union (EU)
exporters, and that these burdens were not justified because these
products are also well regulated under the EU framework.
TTB Response
TTB is moving forward with its proposal to standardize in parts 5
and 7 the regulatory language regarding TTB's authority to require the
submission of formulas, laboratory testing results, or samples as part
of the label approval process. This is consistent with current policy
and reflects the need to sometimes request, on a case-by-case basis,
more information about a particular product prior to approval of a
label. The final rule also standardizes the language found in the
current distilled spirits regulations, which authorize TTB to require a
full and accurate statement of the contents of the container. TTB is
finalizing the clarifying language from the proposed rule, which
provides that this authority applies after the issuance of a COLA, or
with regard to any distilled spirits or malt beverages required to be
covered by a COLA.
After reviewing the comments on the issue of whether the additional
language in proposed Sec. Sec. 5.28(b) and 7.28(b) reflected an
intention by TTB to expand its authority to require information about
products, TTB has revised the language to mirror more closely the
language found in the current regulations. Thus, to avoid any confusion
on this issue, the final rule does not include language about
submission of other documentation at the time of formula submission
relating to whether the alcohol beverage products comply with labeling
regulations, although this change does not reflect a shift in current
TTB policy regarding its authority require such information.
Finally, with regard to the commenters who requested that imported
and domestic products be subject to the same requirements relating to
formulas and laboratory analysis, TTB notes that it did not specially
address the issues raised in the current or proposed regulations. As
explained in Industry Circular 2020-1, dated February 12, 2020, TTB
currently maintains guidance documents on its website, <a href="https://www.ttb.gov">https://www.ttb.gov</a>, which set forth current formula and laboratory analysis
requirements. TTB periodically updates that list to reflect changes in
TTB policy.
TTB will consider the comments on this issue as suggestions for
future changes to its policy. However, it has been the position of TTB
and its predecessor agencies that because TTB does not have access to
the production records of foreign producers, it must rely upon the
importer, whose basic permit is conditioned upon compliance with the
FAA Act, to provide the necessary information at the time of
importation. For this reason, the formula and laboratory analysis
requirements for imported products may sometimes differ from those
imposed on domestic products of the same class and type. TTB is
continually reviewing its formula and laboratory analysis requirements
to determine if it can reduce burdens on the regulated industry while
fulfilling its statutory mission to protect consumers. The final rule
allows TTB the flexibility to liberalize such requirements without
engaging in rulemaking each time it removes a formula requirement under
the FAA Act.
4. Subpart C--Alteration of Labels, Relabeling, and Adding Information
to Containers
Proposed subpart C of parts 4, 5, and 7 regulates the alteration of
labels, relabeling, and the addition of information to wine, distilled
spirit, and malt beverage labels for which TTB has already issued a
COLA. As stated in Notice No. 176, these regulations are intended to
implement the prohibition in section 105(e) of the FAA Act (27 U.S.C.
205(e)) that prohibits any person from altering, obliterating, or
removing any mark, brand, or label except as authorized by Federal law
or regulations implemented by the Secretary.
As previously noted, the COLA requirements of the FAA Act are
intended to prevent the sale or shipment or other introduction in
interstate or foreign commerce of distilled spirits, wine, or malt
beverages that are not bottled, packaged, or labeled in compliance with
the regulations. To ensure that products with proper labels are not
altered once such products have been removed from bond, section 105(e)
of the FAA Act (27 U.S.C. 205(e)) makes it unlawful for ``any person to
alter, mutilate, destroy, obliterate, or remove any mark, brand, or
label upon distilled spirits, wine, or malt beverages'' that are held
for sale in interstate or foreign commerce, or are held for sale after
shipment in interstate or foreign commerce, unless authorized by
Federal law or pursuant to regulations allowing relabeling for purposes
of compliance with either the FAA Act or State law.
Regulations that implement these provisions of the FAA Act, as they
relate to wine, distilled spirits, and malt beverages, are set forth in
parts 4, 5, and 7, respectively. Current Sec. Sec. 4.30 and 7.20
provide that someone wanting to relabel must receive prior written
permission from the appropriate TTB officer. Current Sec. 5.31 does
not require prior written approval for the relabeling of distilled
spirits, as long as such relabeling is done in accordance with an
approved COLA.
As described in more detail below, proposed subpart C of parts 4,
5, and 7, proposed conforming changes to the regulations that: (1)
Implement the statutory prohibition discussed above; (2) set out the
provisions allowing for relabeling without TTB authorization; (3) set
out the provisions allowing for relabeling only with TTB authorization;
and (4) provide for the use of stickers to identify the wholesaler and
retailer.
a. Alteration of Labels
Proposed Sec. Sec. 4.41(a), 5.41(a), and 7.41(a) set forth the
statutory prohibition under 27 U.S.C. 205(e) on the alteration of
labels. The proposed language provided that the prohibition applies to
any persons, including retailers, holding wine, distilled spirits, or
malt beverages for sale in (or after
[[Page 7536]]
shipment in) interstate or foreign commerce.
Proposed Sec. Sec. 4.41(b), 5.41(b), and 7.41(b) provided that for
purposes of the relabeling activities authorized by this subpart, the
term ``relabel'' includes the alteration, mutilation, destruction,
obliteration, or removal of any existing mark, brand, or label on the
container, as well as the addition of a new label (such as a sticker
that adds information about the product or information engraved on the
container) to the container, and the replacement of a label with a new
label bearing identical information.
Proposed Sec. Sec. 4.41(c), 5.41(c), and 7.41(c) contained new
language that provides that authorization to relabel in no way
authorizes the placement of labels on containers that do not accurately
reflect the brand, bottler, identity, or other characteristics of the
product; nor does it relieve the person conducting the relabeling
operations from any obligation to comply with the regulations in this
part and with State or local law, or to obtain permission from the
owner of the brand where otherwise required.
TTB received four comments of general support for proposed
Sec. Sec. 4.41, 5.41, and 7.41 from Beer Institute, Heaven Hill
Brands, Wine Institute, and DISCUS. However, DISCUS stated that
alteration of labels should only be done with the COLA holder's
approval.
TTB Response
TTB is finalizing proposed Sec. Sec. 5.41 and 7.41 without change.
These regulatory provisions implement the statutory language in a
clearer manner than the current regulations. With regard to the DISCUS
comment, TTB notes that Sec. Sec. 5.41(c) and 7.41(c) explicitly
provide that authorization to relabel under this subpart does not
authorize the placement of labels on containers that do not accurately
reflect the brand, bottler, or other characteristics or the product,
nor does it relieve the responsible person from any obligation to
comply with the TTB regulations and with State or local law, or to
obtain permission from the owner of the brand where required under
other laws. TTB believes this provision adequately addresses the
concerns raised by the DISCUS comment.
b. Authorized Relabeling Activities Without Prior Authorization From
TTB
The current regulations in parts 4 and 7 require persons wishing to
relabel to obtain written permission from TTB, with certain exceptions,
while the regulations in part 5 require persons wishing to relabel to
obtain a COLA from TTB. TTB proposed to update the regulations in parts
4, 5 and 7 for consistency, and to cover all of the situations in which
people need to relabel. The current regulations in part 5 allow persons
who are eligible to obtain COLAs, such as bottlers and importers, to
relabel the covered products even after their removal from bottling
premises or customs custody, respectively, without first obtaining
written approval from TTB. The proposed rule extended this provision to
parts 4 and 7.
Accordingly, the proposed regulations provided that proprietors of
bonded wine premises, distilled spirits plant premises, and breweries,
may relabel domestically bottled products prior to their removal from,
and after their return to bond at, the bottling premises, with labels
covered by a COLA, without obtaining separate permission from TTB for
the relabeling activity. See proposed Sec. Sec. 4.42(a), 5.42(a), and
7.42(a).
The proposed regulations also provided that proprietors of bonded
wine premises, distilled spirits plant premises, and breweries, may
relabel domestically bottled products after removal from the bottling
premises with labels covered by a COLA, without obtaining separate
permission from TTB for the relabeling activity. This would allow, for
example, a brewer to replace damaged labels on containers held at a
wholesaler's premises, as long as a COLA covers the labels, without
obtaining separate permission from TTB to remove the existing labels
and replace them with either identical or different approved labels.
See Sec. Sec. 4.42(b), 5.42(b), and 7.42(b).
The proposed regulations also provided that, under the supervision
of U.S. customs officers, imported wine, distilled spirits, and malt
beverages, in containers in customs custody may be relabeled without
obtaining separate permission from TTB for the relabeling activity.
Such containers must bear labels covered by a COLA when the products
are removed from customs custody for consumption. See Sec. Sec.
4.42(c) and (d), 5.42(c) and (d), and 7.42(c) and (d).
TTB received several comments of strong support in response to
TTB's efforts to bring consistency to the relabeling rules between
wine, distilled spirits, and malt beverages from NABI, Heaven Hill
Brands, the Beer Institute, ADSA, WineAmerica, and the New York Farm
Bureau.
In their comments, WineAmerica and the New York Farm Bureau noted
that these proposals would reduce the regulatory burden with regard to
wine. Heaven Hill Brands and ADSA expressed support for equal treatment
with regard to relabeling activities between wine, distilled spirits,
and malt beverages. NABI stated its appreciation for provisions that
allow importers to relabel products without separate permission. The
Beer Institute recommended ``that TTB allow additional flexibility in
the proposed rule so that `authorized agents' (such as distributors or
co-packers) of breweries and importers are also authorized to make such
changes without having to obtain approval from TTB.''
TTB Response
TTB is finalizing Sec. Sec. 5.42, and 7.42 as proposed, with the
modification that a domestic proprietor who enjoys these privileges
must also be the certificate holder for the COLA (which, in the case of
domestically bottled products, would be the bottler).
In response to the comment from Beer Institute, which suggested
allowing relabeling by ``authorized agents'' of the COLA holder, TTB
notes that nothing in the regulation precludes COLA holders from using
either employees or ``authorized agents'' to physically conduct
relabeling activities, as long as the relabeling is being done at the
direction of the COLA holder. To clarify this point, the regulatory
text in sections 7.42(b) and 5.42(b) is revised to provide that
proprietors may relabel (or direct the relabeling of) domestically
bottled products after removal with labels covered by a COLA, without
obtaining separate permission from TTB for the relabeling activity,
provided that the proprietor is the certificate holder (and bottler).
c. Relabeling Activities That Require Separate Written Authorization
In Notice No. 176, TTB stated that the language in current parts 4
and 7 allow persons who are not eligible to obtain COLAs, such as
retailers, to obtain written permission from TTB to relabel products
that are in the marketplace when unusual circumstances exist. The
proposed rule extended this provision to part 5. It is rare that
someone other than the original bottler or importer will need to
relabel the product, but these situations sometimes occur. For example,
sometimes bottles packed in a shipping carton break, causing damage to
labels of unbroken bottles.
Thus, the proposed regulations allowed persons who are not eligible
to obtain a COLA (such as retailers or permittees other than the
bottler) to obtain written authorization for relabeling if the request
demonstrates that the relabeling was for the purpose of compliance with
the requirements of
[[Page 7537]]
this part or of State law. The proposed regulations provided that the
written application must include copies of the original and proposed
new labels; the circumstances of the request, including the reason for
relabeling; the number of containers to be relabeled; the location
where the relabeling will take place; and the name and address of the
person who will be conducting the relabeling operations.
TTB intended that the proposed regulations enable permittees,
brewers, and retailers to relabel alcohol beverage containers in the
marketplace when there is a permissible reason to do so. TTB sought
comments from industry on whether the proposed regulations would
protect the integrity of labels in the marketplace without imposing
undue burdens on the industry.
WineAmerica, NABI, Heaven Hill Brands, Williams Compliance and
Consulting Group (the Williams Group), Wine Institute, and DISCUS
expressed general support for these provisions.
In its comment, Heaven Hill Brands expressed support for equal
treatment between wine, distilled spirits, and malt beverage
regulations. In addition to providing their support for the proposed
regulations, Wine Institute and DISCUS suggested that any persons
engaged in relabeling who are not eligible to obtain a COLA (retailers,
wholesalers, or proprietors other than the bottler) should be required
to obtain authorization from the COLA holder in addition to written
authorization from TTB. DISCUS commented that its suggested ``revision
will provide greater certainty to industry members regarding their
brand equity and the power to control what happens to their brand
labels once in the marketplace.''
TTB Response
TTB is finalizing proposed Sec. Sec. 5.43 and 7.43 with the
clarification that those who must obtain written authorization to
relabel distilled spirits and malt beverages are wholesalers and
permittees other than the original bottler, not retailers. In response
to DISCUS's concerns about the power of producers to control what
happens to their brand labels once in the marketplace, and the comments
from Wine Institute and DISCUS requesting that TTB require that persons
performing relabeling activities obtain COLA holder approval, TTB is
only authorizing permittees (wholesalers and proprietors other than the
original bottler) to apply for authorization to relabel; however, TTB
is not requiring that the applicant first obtain approval from the COLA
holder. Adopting the comments from Wine Institute and DISCUS that TTB
should require the person performing the relabeling activities to
obtain authorization from the original COLA holder would be more
restrictive than current regulations, and was not specifically aired
for comment. TTB notes that distillers are also subject to the
relabeling regulations under the IRC in 27 CFR part 19, which require
proprietors to retain a statement of authorization to relabel products
that they did not originally bottle; there is no such requirement for
wine under the IRC regulations in 27 CFR part 24.
d. Adding a Label or Other Information to a Container That Identifies
the Wholesaler, Retailer, or Consumer
Consistent with current regulations for wine and distilled spirits,
and an intention to liberalize regulatory requirements for malt
beverages, TTB proposed to allow the addition of a label identifying
the wholesaler, retailer, or consumer as long as the label does not
reference the characteristics of the product, does not violate the
labeling regulations, and does not obscure any existing labels. The
proprietor may add information identifying the wholesaler, retailer, or
consumer before the wine, distilled spirit, or malt beverage leaves the
premises. The wholesaler, retailers, or an agent may make such
additions of information prior to the release of a product from customs
custody. See proposed Sec. Sec. 4.44, 5.44, and 7.44.
NABI, Heaven Hill Brands, Wine Institute, and DISCUS expressed
support for proposed Sec. Sec. 4.44, 5.44, and 7.44. In addition to
expressing support, Wine Institute requested that any alteration of the
label be conducted only with the authorization of the COLA holder and
indicates that consumers could be confused about such stickers.
TTB Response
TTB will finalize Sec. Sec. 5.44 and 7.44 without change. In
response to Wine Institute's request that authorization from the COLA
holder should be required prior to any alteration of a label, TTB notes
that the proposal is consistent with current regulation, and that under
this section, only information regarding the wholesaler, retailer, or
consumer is being applied to the container (rather than the replacement
of an entire label). The adoption of Wine Institute's request would be
a significant restriction and would require rulemaking. Also, TTB has
not received comments from consumers or consumer groups that stickers
identifying the names of wholesalers, retailers, or consumers are
confusing.
5. Subpart D--Label Standards
In Notice No. 176, TTB proposed a new subpart D in each of parts 4,
5, and 7, governing legibility of labels, type size, and language
requirements for mandatory information on labels. The provisions were
predominantly derived from and consistent with current regulations.
a. Affixing Labels
Proposed Sec. Sec. 4.51, 5.51, and 7.51 provided, consistent with
current requirements, that labels must be affixed such that they cannot
be removed without the thorough application of water or other solvents.
DISCUS expressed support for these provisions, but they suggested
amending the regulations so that only mandatory information would be
subject to the ``firmly affixed'' requirement, and to allow ``any part
of the label without mandatory information to be peeled off.'' NABI
recommended that the regulations allow a label to be affixed to a
container over another label ``provided both labels are firmly affixed
to the container and the overlapping label does not obscure any
mandatory information.'' NABI suggested that this amendment would
reflect current TTB policy.
TTB Response
With the exception of the keg collar exemption discussed in the
part 7-specific discussion below, TTB is finalizing Sec. Sec. 5.51 and
7.51 as proposed. Adoption of the DISCUS comment, which would allow
optional information to be included on a peel-off label, would require
broader changes to the definition of a label, which currently includes
both optional and mandatory information. TTB will consider this comment
as a suggestion for future rulemaking. In response to the NABI comment,
TTB notes that, currently, it does not allow a bottler to place one
label over another label on a container. Instead, TTB sometimes allows
this as a temporary solution in a ``use-up'' situation, where
circumstances do not allow another feasible solution. TTB does not
believe that it should extend that option beyond temporary ``use-up''
situations, because the practice could be subject to abuse.
Accordingly, TTB will not adopt the NABI suggestion at this time, but
will consider the comment as a suggestion for further rulemaking on
this issue.
b. Legibility and Other Requirements for Mandatory Information on
Labels
The regulations in proposed Sec. Sec. 4.52, 5.52, and 7.52
governing legibility of labels, type size, and language
[[Page 7538]]
requirements were largely based on the requirements currently found in
Sec. Sec. 4.38, 5.33, and 7.28. The proposed regulations clarified
existing regulations and policy.
TTB set out in proposed Sec. Sec. 4.52(b), 5.52(b), and 7.52(b)
current regulations and existing policy that require mandatory
information to be separate and apart from additional information. The
proposed rule provided a few exceptions to this general rule. First,
brand names are exempt from this requirement. Second, this provision
would not preclude the addition of brief optional phrases as part of
the class and type designation (such as ``premium malt beverage''), the
name and address statement (such as ``Proudly distilled and bottled by
ABC Distilling Company, Atlanta, GA, for over 30 years''), or other
information required by the regulations, as long as the additional
information does not detract from the prominence of the mandatory
information.
Beverly Brewery Consultants, Wine Institute, WineAmerica, the New
York Farm Bureau, and ADSA supported this proposal. Beverly Brewery
Consultants also suggested that TTB should consider adding a
requirement that mandatory information be conspicuous in addition to
being separate and apart from other information on the label. This
comment referred to current requirements in 27 CFR 7.28, which provide
that if ``contained among other descriptive or explanatory information,
the script, type, or printing of all mandatory information shall be of
a size substantially more conspicuous than that of the descriptive or
explanatory information.'' Wine Institute stated that it ``supports the
ability to include brief optional phrases of additional information in
conjunction with mandatory information.'' DISCUS opposed the
requirement that mandatory information be separate and apart from
additional information, but did not provide its rationale for this
position. The Mexican Chamber of the Tequila Industry proposed that TTB
establish specific parameters for the meaning of ``separate and
apart.''
NABI stated that TTB's proposal to allow additional information to
appear with mandatory information provided the ``additional information
does not detract from the prominence of the mandatory information''
represented a vague standard. NABI requested that TTB replace this
standard with one that prohibits additional information from creating a
``misleading impression inconsistent with the mandatory information.''
NABI stated that, under the ``commercial speech'' doctrine developed by
the U.S. Supreme Court, the government may prevent misleading speech,
but not ``detracting speech.''
TTB Response
TTB is finalizing in Sec. Sec. 5.52(b) and 7.52(b) the proposed
provisions requiring mandatory information to be separate and apart
from additional information with the exceptions set forth in the
proposed regulations and as discussed above. However, in response to
the comments, we are clarifying that this new standard does not
represent a change in TTB's current labeling policy. Accordingly, we
are incorporating language in the regulation for greater consistency
with existing regulatory standards in Sec. Sec. 4.38, 5.33, and 7.28.
Instead of requiring that the additional information does not ``detract
from the prominence of the mandatory information,'' the final rule
provides that if contained among other descriptive or explanatory
information, the script, type, or printing of all mandatory information
shall be substantially more conspicuous than that of the descriptive or
explanatory information. While these determinations are made on a case-
by-case basis, current TTB policy considers mandatory information
(other than aspartame) to be substantially more conspicuous if the type
size is at least twice the type size of the surrounding information, or
if the mandatory information is otherwise substantially more
conspicuous because of, for example, the boldness or color of the font.
The final rule provides for distilled spirits labels, and continues to
provide for malt beverage labels, that aspartame declarations must be
separate and apart from all other information.
In response to the Mexican Chamber of the Tequila Industry, TTB
notes that establishing specific parameters for ``separate and apart''
would result in more strict rules than what is currently in place,
potentially requiring industry members to change current labels. This
would also place a significant administrative burden on TTB without a
clear benefit.
In response to NABI, TTB notes that requirements with regard to
mandatory statements are issued pursuant to TTB's authority to ensure
that labels provide consumers with adequate information about the
identity and quality of the product. Requiring that such information be
sufficiently conspicuous on the label is well within TTB's statutory
authority.
c. Contrasting Background
Consistent with current regulations, proposed Sec. Sec. 4.52(c),
5.52(c), and 7.52(c) set forth the existing regulation that states the
requirement that mandatory information must appear on a ``contrasting
background.'' The requirement for a contrasting background ensures that
mandatory information is readily legible to consumers; for example,
white letters on a white background will typically be difficult for
consumers to read. The proposed regulations provided new examples that
indicate how this requirement may be satisfied. The proposed
regulations specifically state that TTB considers black lettering
appearing on a white or cream background, or white or cream lettering
appearing on a black background, to be contrasting. The proposed
regulations do not restrict industry members to the use of black,
cream, or white for use on labels.
Beverly Brewery Consultants and the New York Farm Bureau supported
this proposal. DISCUS opposed this requirement, commenting in favor of
retaining the current language from which TTB derived this provision.
DISCUS suggested that by providing examples of what constitutes a
contrasting background, TTB is requiring, for example, black text to
appear on a white or cream background. DISCUS also suggested that TTB
had determined in 2002 that regulations regarding contrasting
background were not necessary. DISCUS pointed to an advance notice of
proposed rulemaking to support this claim (Notice No. 917, May 22,
2001, 66 FR 28135).
TTB Response
TTB is finalizing proposed Sec. Sec. 5.52(c), and 7.52(c) without
change. The advance notice of proposed rulemaking that DISCUS refers to
pertains to the placement, noticeability, and legibility of the Health
Warning Statement under the Alcoholic Beverage Labeling Act, and TTB
did not propose further amendments in response to that advance notice.
TTB believes that the examples in the final rule are useful points of
reference that act as guide rails for industry members. However, the
regulations do not require mandatory information to appear in specific
colors, nor do they require a contrasting background to be of a
specific color. Industry members will remain free to select type colors
and backgrounds for their labels other than black, white, or cream as
long as the background is contrasting in the judgment of the
appropriate TTB officer.
d. Type Size Requirements for Mandatory Information
Proposed Sec. Sec. 4.53, 5.53, and 7.53 set out the type size
requirements for mandatory information under the
[[Page 7539]]
regulations and incorporated existing policy, which provides that the
minimum type size requirements apply to both capital and lowercase
letters. For malt beverages, these requirements were consistent with
current Sec. 7.28(b)(3), including the requirement that alcohol
content statements not exceed four millimeters on containers larger
than forty fluid ounces.
WineAmerica and FEVS expressed support for the incorporation of
TTB's current policy that minimum type size requirements apply to
capital and lowercase letters. The European Union indicated that it
understood the proposed minimum type size requirements for mandatory
information to be ``fixed,'' that is, that type size cannot exceed the
minimum type sizes set forth in the current and proposed regulations.
The European Union stated that such ``requirements may possibly create
unnecessary obstacles to international trade'' for wine and distilled
spirits.
Beverly Brewery Consultants stated that proposed Sec. 7.53 should
clearly state whether it applies to mandatory or optional alcohol
content statements, or both. In response to the Treasury Department's
Request for Information (RFI), published in the Federal Register on
June 14, 2017 (82 FR 27212), the Brewers Association requested that TTB
remove the maximum type size restriction for alcohol content
statements, stating that such statements have been permitted for more
than 20 years and that there is no compelling reason to restrict the
type size.
TTB Response
TTB is finalizing proposed Sec. Sec. 5.53, and 7.53 as set forth
in Notice No. 176, with a clarifying change to Sec. 7.53, as discussed
below.
In response to the European Union's concern, TTB emphasizes that,
like the current requirements for type size of mandatory information,
the proposed requirements--with the exception of alcohol content
statements--are minimum type size requirements. That is, mandatory
information may appear in type size that is larger than the minimum
type size requirements. Given that these provisions are not new, TTB
does not believe that the requirement poses any potential barriers to
international trade.
Regarding Sec. 7.53, TTB permits, but does not require, alcohol
content statements on malt beverage labels, unless the malt beverage
``contain[s] any alcohol derived from added flavors or other added
nonbeverage ingredients (other than hops extract) containing alcohol,''
in which case an alcohol content statement is required. See Sec. Sec.
7.63(a)(3) and 7.65(a), as finalized below, and T.D. TTB-21, 70 FR 194,
January 3, 2005. Section 7.53(a) provides for minimum type size
requirements for mandatory information on malt beverage labels. In
response to the comment from Beverly Brewery Consultants, TTB is adding
to this section a reference to Sec. 7.63(a)(3) to clarify that these
requirements extend to mandatory statements of alcohol content.
Consistent with current policy, TTB is also clarifying that the maximum
type size limitations in Sec. 7.53(b) apply to all statements of
alcohol content.
Regarding the Brewers Association comment requesting that TTB
remove the maximum type size restriction for alcohol content statements
on malt beverages, which TTB has applied to both mandatory and optional
alcohol content labeling statements, TTB believes such a regulatory
change should not be adopted without providing more specific notice
(and an opportunity to comment) to interested parties. TTB did not
propose to remove the maximum type size requirements for alcohol
content statements on all alcohol beverages containers in Notice No.
176. TTB therefore declines in this rule to change the maximum type
size requirements. TTB may consider changes to this standard in a
future rulemaking. This final rule clarifies current policy with regard
to maximum type size requirements applying to alcohol content
statements.
e. Visibility of Mandatory Information
Proposed Sec. Sec. 4.54, 5.54, and 7.54 explicitly required that
mandatory information on labels must be readily visible and may not be
covered or obscured in whole or in part. DISCUS expressed support for
this proposal. Beverly Brewery Consultants commented that ``[i]n view
of TTB's proposal not to require certain mandatory information to
appear on a `brand label,' I strongly recommend that a `conspicuous'
requirement be added to sec. 7.54 to ensure consumers will be able to
distinguish mandatory label information from other information on the
label.''
TTB Response
TTB is finalizing Sec. Sec. 5.54 and 7.54 as proposed. In response
to the comment from Beverly Brewery Consultants suggesting that
mandatory information must be ``conspicuous,'' current regulations do
not impose such a requirement. Instead, both the current regulations
and the proposed regulations provide that mandatory information must be
``readily visible'' on distilled spirits and malt beverage labels. TTB
does not believe that the commenter supplied an adequate basis for
revising this requirement, and any such change might require revisions
to existing labels. Accordingly, TTB is not adopting this comment. See
Section II.C.4.a below for discussion of the removal of the requirement
that mandatory labeling information appear on the ``brand label'' of
malt beverages.
f. Language Requirements
Consistent with current regulations, proposed Sec. Sec. 4.55,
5.55, and 7.55 generally require mandatory information, other than the
brand name, to appear in the English language. Also consistent with
current malt beverage and distilled spirits requirements, but as a
liberalization for wine, the proposed regulations provided that all
mandatory information may appear solely in Spanish when products are
bottled for sale in the Commonwealth of Puerto Rico. The proposed
regulations allowed for additional statements in foreign languages,
including translations of mandatory information, and the country of
origin, when allowed by CBP regulations. DISCUS expressed support for
this proposal.
TTB Response
TTB is finalizing proposed Sec. Sec. 5.55 and 7.55 as set forth in
Notice No. 176.
g. Additional Information (Non-Mandatory Information) on Labels
Proposed Sec. Sec. 4.56, 5.56, and 7.56, set out current TTB
policy on the appearance of additional information on labels (that is,
information that is not mandatory information). Specifically, the
proposed provisions provided that additional information that is
truthful, accurate, and specific, and that does not violate the
restricted, prohibited, and prohibited if misleading provisions in
subparts F, G, or H of part 4, 5, or 7, for wine, distilled spirits, or
malt beverages, respectively, may appear on labels. Such additional
information may not conflict with, modify, qualify, or restrict
mandatory information in any manner.
NABI noted that proposed Sec. Sec. 4.56, 5.56, and 7.56 did not
specify type size requirements for additional information, but
suggested that, in the experience of its members, TTB specialists often
require the additional information to appear in uniform type size. NABI
stated that the regulations should ``codify clearly the fact that
uniformity is not required absent a TTB showing that the lack of
uniformity itself results in a statement or representation that
misleads the consumer.''
[[Page 7540]]
Beverly Brewery Consultants expressed concern about the provisions
in proposed Sec. 7.56, suggesting that the proposed regulation would
impose a new requirement that additional information be specific, and
providing examples of additional information that is not specific, such
as ``full of flavor'' and ``we have started a revolution with this
beer.''
DISCUS opined that proposed Sec. 5.56 should be struck on the
grounds that it is duplicative of proposed Sec. 5.122.
TTB Response
TTB is finalizing proposed Sec. Sec. 5.56 and 7.56 without change.
In response to the comment from NABI, TTB notes that neither the
current regulations nor the regulations adopted in this final rule
require that additional information be in a uniform type size. TTB does
not have a policy of requiring uniform type size on a general basis but
does sometimes evaluate the type size of additional information in
determining whether it qualifies mandatory information in a misleading
fashion. The prominence and type size of the optional information is
one factor in evaluating whether the information creates a misleading
impression as to the identity of the product. TTB will continue this
policy.
In response to the comment from Beverly Brewery Consultants, which
suggested that the proposed regulation would impose a new requirement
that additional information be specific, TTB emphasizes that the
regulations as finalized do not prohibit the inclusion of puffery (such
as ``full of flavor'') that is not specific. The proposed provisions in
Sec. Sec. 4.56, 5.56, and 7.56 authorize the use of additional
information that is truthful, accurate, and specific provided that it
is used in accordance with subparts F, G, and H. This does not prohibit
the use of non-specific ``puffery'' on labels.
In response to DISCUS, TTB does not agree that proposed Sec. Sec.
5.55 and 5.122 are duplicative. Proposed Sec. 5.55 is explicit in
authorizing the use of additional information, whereas proposed Sec.
5.122 sets out some of the parameters for all information on a
container, including additional information.
6. Subpart E--Mandatory Label Information
Proposed subpart E in parts 4, 5 and 7 sets forth the information
that is required to appear on alcohol beverage labels (otherwise known
as ``mandatory information''). This subpart also prescribes where and
how mandatory information must appear on such labels.
a. What Constitutes a Label
In Sec. Sec. 4.61, 5.61, and 7.61 TTB set out its current policy
specifying what is considered to be the ``label'' for purposes of
mandatory information placement.
DISCUS, WineAmerica, and the New York Farm Bureau expressed support
for the proposed provisions. NABI requested that TTB clarify in the
regulations whether or not TTB considers QR codes to be labeling or
advertising. They also suggested that TTB remove ``plastic film'' from
the proposed regulations that read ``[w]hen used in this part for
purposes of determining where mandatory information must appear, the
term ``label'' includes: (1) Material affixed to the container, whether
made of paper, plastic film, or other matter'' [emphasis added], and
replace it with ``plastic, metal * * *.''
TTB Response
TTB is finalizing Sec. Sec. 5.61, and 7.61 as proposed with the
exception that the finalized regulations will make clear that labels
can be made from plastic and/or metal, in addition to paper and ``other
matter.'' While a QR code itself is part of a label, TTB evaluates the
material it points to under its advertising regulations, as explained
in TTB Industry Circular 2013-1, ``Use of Social Media in the
Advertising of Alcohol Beverages,'' which provides as follows:
Industry members may also enable consumers to access content by
including a quick response code (or QR Code) on a label or
advertisement. Consumers can scan the QR Code with their mobile
device to access the additional content. Depending on the type of
media that is linked to by the QR Code (such as the industry
member's web page, mobile application, or blog), the relevant
regulations and TTB public guidance documents will apply. If, for
example, the QR code links to a document, such as a drink recipe
using an industry member's product, the recipe will be considered an
advertisement because it is a written or verbal statement,
illustration, or depiction that is in, or calculated to induce sales
in interstate or foreign commerce.
TTB believes that TTB Industry Circular 2013-1 covers this matter
adequately and there is no need to incorporate this policy into the
regulations.
b. Closed Packaging
Current regulations in Sec. Sec. 4.38a and 5.41 set out rules for
the placement of information on bottle cartons, booklets, and leaflets.
Briefly, these regulations provide that individual coverings, cartons,
or other containers of the bottle used for sale at retail (that is,
other than a shipping container), as well as any written, printed,
graphic, or other matter accompanying the bottle to the consumer shall
not contain any statement, design, device or graphic, pictorial, or
emblematic representation prohibited by the labeling regulations.
The current regulations also require the placement of mandatory
label information on sealed opaque coverings, cartons, or other
containers used for sale at retail (but not shipping containers).
Coverings, cartons, or other containers of the bottle used for sale at
retail that are designed so that the bottle is easily removable may
display any information that is not in conflict with the label on the
bottle contained therein. However, labels must display any brand names
or designations in their entirety, with any required modifications and/
or statements of composition.
Thus, the prohibited practices for labeling set forth in existing
Sec. Sec. 4.39(a) and 5.42(a) apply to bottles, labels on bottles, any
individual covering, carton, or other container of such bottles used
for sale at retail, and any written, printed, graphic, or other matter
accompanying such bottles to the consumer. The current labeling
regulations in part 7 do not include regulations similar to current
Sec. Sec. 4.38a and 5.41. However, as set forth at current Sec.
7.29(a) and (h), the prohibited practices in the labeling regulations
for malt beverages apply to containers, any labels on such containers,
or any cartons, cases, or individual coverings of such containers used
for sale at retail, as well as to any written, printed, graphic, or
other material accompanying malt beverage containers to the consumer.
In Notice No. 176, TTB stated that the existing regulations create
some confusion as to when a case constitutes labeling and when it
constitutes advertising. Accordingly, TTB proposed identical
regulations in proposed Sec. Sec. 4.62, 5.62, and 7.62 to address
packaging. The proposed regulations provided, consistent with existing
regulations in parts 4, 5 and 7, that packaging may not include any
statements or representations prohibited by the labeling regulations
from appearing on containers or labels. The proposed regulations also
provided, consistent with existing regulations in parts 4 and 5 but as
a new requirement for part 7, that closed packaging, including sealed
opaque coverings, cartons, cases, carriers, or other packaging used for
sale at retail, must include all mandatory information
[[Page 7541]]
required to appear on the label. The rationale for requiring mandatory
information on sealed opaque coverings is that the consumer is not able
to see the label on the container under normal conditions of retail
sale. This rationale would not extend to shipping containers that do
not accompany the container to the retail shelf.
Furthermore, the proposed regulations provided greater clarity than
the current provisions about when packaging is considered closed.
Proposed Sec. Sec. 4.62, 5.62, and 7.62 provide that packaging is
considered closed if the consumer must open, rip, untie, unzip, or
otherwise manipulate the package to remove the container in order to
view any of the mandatory information. Packaging is not considered
closed if a consumer could view all of the mandatory information on the
container by merely lifting the container up, or if the packaging is
transparent or designed in a way that all of the mandatory information
can easily be read by the consumer without having to open, rip, untie,
unzip, or otherwise manipulate the package. TTB sought comment on
whether TTB should require mandatory or dispelling information to
appear on open packaging when part of the label is obscured.
TTB solicited comments on whether the proposed rules would require
significant change to labels, containers, or packaging materials. TTB
also solicited comments on whether the proposed revisions would provide
better information to the consumer and make it easier to find mandatory
information on labels, containers, and packages.
The comments on this issue were split between those that supported
the proposed change and those that stated that the proposed amendments
would change TTB policies and impose new costs on industry members.
Some commenters, including the Oregon Winegrowers Association and the
Willamette Valley Wineries Association, supported the proposed
amendments and urged TTB to go even further, by providing that ``any
consumer facing information on a label or packaging cannot: (1) Be
misleading; and (2) convey any information that is unsupportable by the
label claims.''
The Williams Group supported the proposed provisions as providing
more information to consumers; however, they also indicated that the
amendments might require changes to some packaging.
The Brewers Association specifically expressed support for proposed
Sec. 7.62(c), which sets out provisions for closed packaging because
``[c]onsumers should be able to view the mandatory information at the
point of purchase.'' The Brewers Association further noted that many
brewers already place mandatory information on packaging.
The Beer Institute appeared to support proposed Sec. 7.62,
provided that ``TTB clarify the term `opaque packaging' as packaging
through which individual malt beverage bottles/cans (and mandatory
information contained thereon) cannot be seen by the consumer.''
However, other commenters, including Heavy Seas Beer, DISCUS, and
the Wine Institute, opposed proposed Sec. Sec. 4.62, 5.62, and 7.62,
on the basis that the new requirements would require changes to current
packaging and would thus impose financial burdens. Heavy Seas Beer
commented as follows:
[C]hanging all secondary packaging to meet label requirements,
meaning can wraps and mother cartons, this would be a significant
financial burden for smaller suppliers, as the origin plates would
need to be remade. The cost per plate can run from $1,500-$4,000 per
package. We estimate that the financial burden for this change would
cost our brewery about $75,000, which we simply don't have. If this
new section were to be put into place, we would need 2-4 years to
implement 100%.
Wine Institute and DISCUS argued, without providing specific data,
that the proposal would impose a financial burden. DISCUS argued that
the proposed amendments would ``adversely affect packaging such as gift
boxes, gift bags, tubes, etc.'' because this type of packaging would be
required to bear mandatory information. DISCUS further requested that--
if the proposed rule is adopted--TTB use the language ``sealed'' and
``otherwise manipulate'' rather than ``closed.'' Wine Institute
suggested that the proposed clarifications to TTB policy on what type
of packaging was ``closed'' represented a change in policy, and stated
that ``TTB should not change its policy on containers that can be
opened and restored to its original condition; in other words, without
breaking any type of seal, glue or similar type of permanent closure.''
The New York Farm Bureau, WineAmerica, Heavy Seas Beer, and a
member of the public raised concerns about the cost of having to place
mandatory information on ``shipping containers'' and ``mother
cartons,'' and also discussed the use of this type of packaging for
direct-to-consumer sales (such as sales by wine clubs). Beverly Brewery
Consultants made the observation that proposed Sec. 7.62 would result
in modification or redesign of packaging. Finally, Senator Kennedy
commented in opposition to this proposal as one of many that could be
confusing for consumers and lead to label resubmission.
TTB Response
After carefully considering the comments, it is TTB's conclusion
that the proposed amendment caused confusion on the part of industry
members with regard to whether the proposed amendment would apply to
shipping cartons; this was not the intent of the proposed revision.
However, based on the comments, TTB cannot determine with any certainty
the extent to which the proposed new requirements would require
industry members (in particular, brewers) to change their packaging
materials and incur new costs. TTB does not believe that this can be
resolved without undergoing additional notice and comment rulemaking on
a more specific proposal regarding this issue.
Accordingly, TTB will consider the new requirements for malt
beverages as suggestions for future rulemaking but will not adopt these
requirements at this time. Instead, TTB will retain the current
regulations with regard to parts 5 and 7, with minor modifications to
section 7.62 to clarify that the prohibition against statements or
representations that would be prohibited on a label would include
misleading brand names and class/type designations. This is consistent
with current TTB policy. TTB recognizes that this means the regulations
will not require malt beverages to display mandatory information on
closed cartons. However, malt beverage cartons, cases, or other
coverings of the container used for sale at retail will continue to be
subject to the prohibited practices provisions. With regard to
clarification of current policy as to what constitutes sealed packaging
for industry members, TTB is not changing its current interpretation of
the existing regulations.
c. Brand Names and Trademarks
Proposed Sec. Sec. 4.64, 5.64, and 7.64 set forth requirements for
brand names of wine, distilled spirits, and malt beverages,
respectively. The proposed regulations simply clarify the current
regulations by providing that a brand name is misleading if it creates
(by itself or in association with other printed or graphic matter) any
erroneous impression or inference as to the age, origin, identity, or
other characteristics of the distilled spirits. A brand name that would
otherwise be misleading may be qualified with the word ``brand'' or
[[Page 7542]]
with some other qualification, if the appropriate TTB officer
determines that the qualification dispels any misleading impression
that the label might otherwise create.
The Mexican Chamber of the Tequila Industry commented that proposed
Sec. 5.64 should be revised to include more specific criteria for
determining whether a brand name is misleading, and that legal or
administrative instruments should be established to resolve any
disagreement in this regard between the TTB official and the brand
owner.
TTB Response
TTB is finalizing Sec. Sec. 5.64 and 7.64 as proposed. TTB is not
making the change suggested by the Mexican Chamber of the Tequila
Industry regarding the inclusion of more specific criteria, and the
notice did not solicit comments on more specific language. TTB will
consider this comment as a suggestion for future action. With regard to
the process for resolving disagreements between TTB and brand owners,
TTB notes that the procedures in part 13 regarding administrative
appeals of the denial or revocation of label approval would apply to
brand name issues as well as any other labeling issue that an applicant
or certificate holder wishes to contest through the administrative
process.
d. Name and Address
In the regulations on the name and address of bottlers and
producers of domestically bottled wine, distilled spirits, and malt
beverages, Notice No. 176 proposed clarifying changes to existing
requirements.
The FAA Act provides that wine, distilled spirits, and malt
beverage labels must contain certain mandatory information, including
the name of the manufacturer, bottler, or importer of the product. See
27 U.S.C. 205(e)(2). Under current regulations, bottlers of distilled
spirits and malt beverages may list either the place of bottling, every
location at which the same industry member bottles the product, or,
under certain circumstances, the principal place of business of the
industry member that is bottling the product. Bottlers of distilled
spirits or malt beverages that utilize one of the latter two options
must mark the labels using a coding system that enables the bottler and
TTB to trace the actual place of bottling of each container. This both
protects the revenue and allows for the tracing of containers in the
event of a product recall.
In Notice No. 176, TTB noted that, with the growing number of craft
brewers and craft distillers in the marketplace, there may be more
interest among consumers as to where malt beverages are brewed and
where distilled spirits are distilled. On the other hand, TTB also
wished to provide industry members with flexibility in their labeling
statements, to accommodate the growing number of arrangements where
products are produced or bottled pursuant to contractual arrangements.
One of the major reasons for allowing the use of principal places of
business and multiple addresses on labels is to allow industry members
to use the same approved label for their products that are bottled or
imported at different locations rather than having to seek approval of
multiple labels. In Notice No. 176, TTB noted that, under both the
existing and proposed regulations, industry members are always free to
include optional statements that provide consumers with more
information about their production and bottling processes if they wish.
Accordingly, TTB sought comments from all interested parties, including
industry members and consumers, on whether the proposed labeling
requirements provided adequate information to the consumer while
avoiding undue burdens on industry members.
With regard to alcohol beverages imported in containers, the name
and address inform the consumer of the identity of the importer of the
alcohol beverage product and the location of the importer's principal
place of business. The current regulations at Sec. Sec. 4.35(b),
5.36(b), and 7.25(b) provide that, on labels of imported wines,
distilled spirits, and malt beverages, respectively, the words
``imported by,'' or a similar appropriate phrase, must be stated,
followed immediately by the name of the permittee who is the importer,
or exclusive agent, or sole distributor, or other person responsible
for the importation, together with the principal place of business in
the United States of such person.
Like the current regulations, the proposed regulations in
Sec. Sec. 4.68, 5.68, and 7.68 required the name and address of the
importer when the product is imported in containers. The proposed
regulations clarified that for purposes of these sections, the importer
is the holder of an importer's basic permit making the original customs
entry into the United States, or is the person for whom such entry is
made, or the holder of an importer's basic permit who is the agent,
distributor, or franchise holder for the particular brand of imported
alcohol beverages and who places the order abroad. These provisions
mirror the policy set forth in Revenue Ruling 71-535 with regard to the
name and address requirements applicable to importers.
Proposed Sec. Sec. 4.67, 5.67, and 7.67 addressed the labeling of
products bottled after importation, in a manner largely consistent with
current regulations. If the product is bottled after importation in
bulk, by or for the importer thereof, the proposed rules required an
``imported and bottled by'' or ``imported by and bottled for''
statement, as appropriate.
The proposed regulations in Sec. Sec. 4.67, 5.67, and 7.67
specifically addressed, for the first time, the name and address
requirements applicable to wine, distilled spirits, and malt beverages
that are imported in bulk and then subject to further production or
blending activities in the United States.
In section 1421 of the Taxpayer Relief Act of 1997, Public Law 105-
34, Congress enacted a new IRC provision that permits the transfer of
beer in bulk containers from customs custody to internal revenue bond
at a brewery. After transfer to internal revenue bond at a brewery,
imported beer may be bottled or packed without change or with only the
addition of water and carbon dioxide, or may be blended with domestic
or other imported beer and bottled or packed.
In ATF Procedure 98-1, TTB's predecessor agency provided guidance
to brewers and bottlers for the labeling of imported malt beverages
bottled in the United States. This guidance was necessary because the
existing regulations in part 7 do not address the labeling of imported
malt beverages that are bottled in the United States, or the labeling
of imported malt beverages that are blended with other imported malt
beverages or with domestic malt beverages, and then bottled or packed
in the United States.
Similarly, the current regulations in part 5 provide for the
labeling of distilled spirits bottled after importation, but do not
provide rules concerning the labeling of spirits that were subject to
production activities in the United States after importation.
Thus, proposed Sec. Sec. 4.67, 5.67, and 7.67 provide rules for
the labeling of wine, distilled spirits, and malt beverages,
respectively, that are imported in bulk and are then blended with wine,
distilled spirits, or malt beverages of a different country of origin,
or subjected to production activities in the United States that would
alter the class or type of the product. The proposed rules provide that
such products must be labeled with a ``bottled by'' statement, rather
than an ``imported by'' statement.
[[Page 7543]]
The proposed regulations also included new provisions on the use of
trade names, and the name and address requirements for ``contract
bottling'' situations, in which products are produced and/or bottled by
a third party pursuant to a contact with the brand owner. While these
provisions were new to the regulations, they reflect current TTB
policy. Finally, to reflect current TTB policy, TTB proposed new
language in the regulations regarding the use of misleading trade
names.
In response to the proposed regulations, TTB received comments from
various interested parties, including alcohol beverage producers, trade
associations, and individual commenters. Some of the commenters
addressed wine-specific issues, which TTB is not addressing in this
document.
e. Organization and General Comments
Regarding the reorganization of existing 27 CFR 5.36 into three
distinct sections, DISCUS stated that it opposed the proposed
Sec. Sec. 5.66, 5.67, and 5.68 because ``[t]here is no reason to
divide the existing rule into three separate proposals'' and that the
proposed regulations ``are convoluted and inconsistent with the
direction of providing essential, understandable information for
consumers.'' DISCUS also stated that current Sec. 5.36(a)(6) and
current Sec. 5.36(b)(2)(iii) sufficed for purposes of identifying the
proprietor and importer, respectively, and their principal place of
business.
With regard to proposed 27 CFR 5.66, specifically, DISCUS opposed
the proposal on the ground that it ``not only fails to modernize the
labeling and advertising rules but also is out of sync with historic
industry practices and today's economy. There is no evidence to suggest
that consumers are confused with the existing name and address rules
and this new proposal only would serve to further confuse consumers.''
The Beer Institute commented that it was ``generally concerned
about the changes proposed,'' as TTB did not explain why current
regulations are inadequate and that ``speculation that more activity in
the malt beverage sector `may' lead consumers to want more information
about where malt beverages are brewed simply isn't enough to justify
regulatory change.'' The Beer Institute noted that industry members may
choose to provide consumers with more information about their
production and bottling process and urged TTB to allow market and
consumer demands ``to dictate the level of specificity.''
TTB Response
In response to the DISCUS comment regarding TTB's proposed division
of Sec. 5.36 into three distinct sections, TTB notes that the proposed
regulations are intended to more clearly distinguish between the
regulatory requirements for domestically produced distilled spirits,
distilled spirits imported in containers, and distilled spirits bottled
after importation by separating the current name and address section
into three separate sections. TTB believes that setting out these
requirements in separate sections promotes ease of compliance for
industry members.
Furthermore, the new regulations offer greater clarity and promote
compliance by incorporating previously issued guidance documents. For
instance, the proposed regulations clarify what is meant by
``importer'' for purposes of these sections by incorporating Revenue
Ruling 71-535 into the regulations. The new regulations offer further
clarity by setting out new regulatory requirements for distilled
spirits that were bottled after importation and that were subject to
further production or blending activities in the United States.
f. Distinguishing Between Imported and Domestic Products
NABI expressed its support for proposed 27 CFR 4.68. 5.68, and 7.68
and stated that the proposed sections are ``helpful'' because they
provide ``greater specificity of the parties that may appear on the
label [and] names of the importer in the `imported by' statement than
does the current sections 4.25(b)(1), 5.36(b)(1), and 7.25(b).''
Concerning proposed 27 CFR 7.67, Beverly Brewery Consultants expressed
its support for the incorporation of TTB Procedure 98-1 in the
regulations, as it ``has existed far too long without being
incorporated into the CFR.''
However, DISCUS raised objections to the introduction of the term
``wholly made'' when referring to products made in the United States
without imported distilled spirits, commenting as follows:
The existing name and address rule has worked well for industry
members and the introduction of the term ``wholly made'' only serves
to confuse matters. TTB requests comments regarding whether these
proposals provide adequate information to consumers and avoid undue
burdens on industry members--we respectfully submit that the
existing language better balances these concerns.
With regard to proposed 27 CFR 5.67, alcohol beverage attorney
Steven Masket commented as follows:
Both Section 5.67(a) and Section 5.69 reflect the intention of
the TTB to defer to [CBP] with respect to country of origin marking,
but the bald enumeration of processes in 5.67(c), results in the
possibility that a product of foreign origin will be marked as
domestic. I ask that the TTB further clarify that a product that is
foreign should be treated and marked as imported and not considered
domestic by the sheer action of simply blending or production
activities conducted after importation in bulk, unless those
activities meet the [CBP] rules related to country of origin
marking.
Mr. Masket suggested that TTB revise the regulations to either
distinguish between imported products that TTB considers to have
undergone a substantial transformation in the United States under CBP
rules and those that have not. Or, alternatively, Mr. Masket suggests
that, if TTB ``does not believe that the identity of the importer is
relevant after any of those certain processing activities enumerated in
Sec. 5.67(c) are conducted in the United States, whether substantial
transformation [has occurred] or not under CBP regulations,'' that TTB
should amend section 5.67(c) to add a reference to the CBP marking
requirements.
TTB Response
In response to the DISCUS comment, TTB believes that the proposed
regulatory text regarding products that are ``wholly made'' in the
United States without imported distilled spirits clearly distinguishes
those products from domestic distilled spirits that are blended with
imported distilled spirits. TTB addresses the latter category of
products in the section pertaining to imported spirits that are blended
with domestic spirits after importation.
In response to Mr. Masket's comments on Sec. 5.67(c), TTB does not
believe it is necessary to revise the proposed Sec. 5.67(c) to
distinguish between products that have undergone a substantial
transformation under CBP rules and those that have not. The TTB
regulation does not require the use of the term ``imported by'' to
describe beverages that have undergone production activities in the
United States. This in no way implies that such products may not be
considered to have a foreign country of origin under CBP rules, and in
fact consistent with current regulations, the regulations at Sec. 5.69
include a cross-reference to CBP regulations regarding country of
origin marking requirements at 19 CFR parts 102 and 134. This section
reflects TTB's intention to defer to CBP on the determination of
whether a country of origin statement is required to appear on
distilled spirits bottled after importation that are subject to further
production or blending activities in the United States
[[Page 7544]]
and, if a statement is required, on determinations of the appropriate
country of origin. Accordingly, when CBP requires a country of origin
statement to appear on a distilled spirits container, such labeling
statements must be consistent with CBP regulations.
As to Mr. Masket's comment on Sec. 5.67(c)'s prohibition on
placing an ``imported by'' statement on a label of distilled spirits
bottled after importation and subject to certain processes in the
United States, it is TTB's position that a ``bottled by'' statement is
more appropriate for the labeling of such products in order to
adequately distinguish such products from alcohol beverages that are
imported in containers.
g. Comments in Favor of Imposing New Requirements With Regard to Names
and Addresses on Labels
In addition to comments on the proposed regulations, several
comments provided suggestions for further amendments to the
regulations. The Brewers Association requested that TTB require labels
to disclose whether brewers are part of a controlled group, as defined
in 26 U.S.C. 5051(a) if the name of the controlled group is different
from the brewery or its trade name as it appears on the label. As a
basis for this proposal, the Brewers Association stated that disclosing
brewery ownership is fundamental to TTB's responsibilities in
implementing the FAA Act and that current regulations allow large
companies to hide their ownership and control over multiple brands.
NBWA commented in favor of strengthening transparency with regard to
the identity of alcohol beverage producers.
TTB Response
In response to comments that advocate for new regulatory
requirements within the name and address sections, TTB considers such
comments as outside the scope of this rulemaking as Notice No. 176 did
not solicit comments from industry or the general public on these
specific proposals. For example, the Brewers Association comment in
favor of requiring brewers to identify whether they are members of
``controlled groups'' under tax laws would represent a new requirement.
Such a requirement would go beyond the longstanding policy of TTB and
its predecessor agencies to allow the use of trade names, rather than
the actual corporate names of bottlers or importers (much less the
status of such companies as members of controlled groups) in the
labeling of alcohol beverages. TTB's statutory mandate is to ensure
that the labels identify the bottler or importer of the product.
Accordingly, TTB is not adopting regulations that would go beyond the
identification of the bottler or importer by requiring additional
information about producers, bottlers, or importers in the name and
address regulations.
h. Misleading Trade Names
The Beer Institute expressed its concern about TTB's proposal to
prohibit the use of trade names that would create a misleading
impression as to the age, origin, or identify of the product. The Beer
Institute stated that TTB did not provide a specific explanation of the
need for this proposal and that it ``would be a dramatic change to the
long-standing practice for contract production brewers to adopt and use
the customer's name/trade name on the labels.'' DISCUS also raised
concerns about the provisions regarding the use of trade names,
commenting as follows:
The requirement in subsection (g)(2) regarding trade names is
unnecessary. Some trade names have been used for years and could be
impacted solely because TTB deems them to be misleading
(irrespective of whether consumers are misled). TTB has limited
resources and is not equipped to make determinations as to what is
and is not misleading in this context and TTB should not make
arbitrary changes to longstanding trade names. Separately, requiring
changes to brand names could cause immense harm and have untold
financial and marketplace impacts for industry members.
TTB Response
TTB intended the provision on misleading trade names to reflect
current policy with regard to the misleading use of trade names.
However, TTB did not intend to prohibit, for example, the adoption of
one industry member's trade name on the basic permit or brewer's notice
of another industry member in the context of a contract bottling or
production arrangement.
TTB is finalizing the provision that allows for the use of trade
names. This is consistent with current regulations in part 5 for
distilled spirits and current policy for malt beverages. However, TTB
is not adopting the proposed language specifying that trade names may
not be used in a misleading manner. However, TTB is maintaining its
current policy on this issue, and will view the comments as suggestions
for further public guidance on this issue to clarify TTB's policy. TTB
notes that the general prohibition on the use of misleading statements
on labels suffices to provide TTB with authority to regulate the
misleading use of trade names; however, we also stress that TTB does
not consider the use of identical trade names by different permittees
in a contract bottling or production context misleading, in and of
itself.
7. Subparts F, G, and H--Statements That Are Restricted, Prohibited, or
Prohibited if Misleading
The current regulations include a single section titled
``Prohibited Practices'' that sets forth a number of prohibited
practices, and it also describes certain labeling practices that TTB
regulates in various ways. To make regulatory provisions easier to
find, and to improve readability, TTB proposed to divide the
regulations addressing prohibited practices into three subparts: (1)
Subpart F, practices that may be used under certain conditions, (2)
subpart G, practices that are always prohibited, and (3) subpart H,
practices that are prohibited only if they are used in a misleading
manner on labels.
Proposed subparts F, G, and H each contain language to clarify that
the prohibitions in these subparts apply to any label, container, or
packaging, and define those terms as used in these subparts.
Specifically, for purposes of proposed subparts F, G, and H, the term
``label'' includes all labels on alcohol beverage containers on which
mandatory information may appear, as set forth in proposed Sec. Sec.
4.61, 5.61, and 7.61, as well as any other label on the container.
These proposed sections also set out the parts of the container on
which mandatory information may appear.
The proposed text defines ``packaging'' for purposes of proposed
subparts F, G, and H as any carton, case, carrier, individual covering,
or other packaging of such containers used for sale at retail. It does
not include shipping cartons or cases that are not intended to
accompany the container to the consumer. The proposed rule also
provides that the term ``statement or representation'' as used in those
subparts includes any statement, design, device, or representation, and
includes pictorial or graphic designs or representations as well as
written ones. It also includes both explicit and implicit statements
and representations. This provision avoids the need to repeat the
reference to each type of statement or representation in every section
in these subparts.
a. Subpart F--Restricted Labeling Statements in General
Proposed Sec. Sec. 4.81, 5.81, and 7.81 set out that the labeling
practices covered under subpart F (such as organic claims or food
allergen labeling) may be used
[[Page 7545]]
on labeling only when used in compliance with the provisions set out in
subpart F.
DISCUS expressed support for this section. Beverly Brewery
Consultants stated that Sec. 7.81(a)(1) was unnecessary and commented
that there was no explanation as to why the definition of ``container''
in paragraph (a)(2) differs from the provision in the definitions
section.
TTB Response
TTB is finalizing proposed Sec. Sec. 5.81 and 7.81 as proposed.
TTB disagrees with the comment from Beverly Brewery Consultants with
regard to each section's paragraph (a)(1), which sets forth the general
requirements applicable to restricted labeling statements, and makes
the regulations easier to understand. With regard to each section's
paragraph (a)(2), its purpose is not to define what a container is, but
to clarify that the provisions regarding restricted labeling statements
apply to all parts of the container, including those parts of the
container on which information would not satisfy mandatory labeling
requirements. For example, the regulations in Sec. Sec. 5.61 and 7.61
provide that information appearing on the bottom surface of a container
would not satisfy mandatory labeling requirements. However, pursuant to
the language in Sec. Sec. 5.81(a)(2) and 7.81(a)(2), information
appearing on the bottom surface of the container would nonetheless be
subject to the provisions on restricted labeling practices. Thus, for
example, the regulations would prohibit use of an optional ``organic''
claim on the bottom surface of a container unless the use of the claim
met the requirements set forth in the regulations. The final
regulations do not include any changes to the language of the proposed
regulations.
b. Voluntary Disclosure of Major Food Allergens
TTB received two comments that are specific to the proposed
regulations pertaining to voluntary allergen labeling in Sec. Sec.
4.82, 5.82, and 7.82, which set out the current regulatory provisions
without change. DISCUS commented in support of the provisions as
proposed. The Brewers Association commented in favor of mandatory
allergen labeling, and stated that ``[i]n the event that TTB decides to
maintain the existing voluntary allergen disclosure policy, the BA
believes that this issue warrants a separate rulemaking in the
future.'' In addition, as noted in section I.E.1.a of this document,
TTB received several comments from consumers and consumer groups in
support of mandatory allergen labeling.
TTB Response
TTB is finalizing Sec. Sec. 5.82 and 7.82 as proposed. As
explained in section I.E.1.a. of this document, comments about
mandatory allergen labeling are beyond the scope of this rulemaking. In
the preamble to Notice No. 176, TTB specifically stated that there were
a number of ongoing rulemaking initiatives related to labeling and
advertising of alcohol beverages, including any substantive changes to
the allergen labeling requirements, which TTB stated it would handle
separately from the proposed rule due to their complexity. TTB will
treat comments in favor of mandatory allergen labeling as suggestions
for future rulemaking.
c. Environmental, Sustainability, and Similar Statements
In Notice No. 176, TTB proposed a new section in parts 4, 5, and 7
(see proposed Sec. Sec. 4.85, 5.85, and 7.85) on the use of statements
relating to environmental and sustainability practices. The proposed
rule allowed statements related to environmental or sustainable
agricultural practices, social justice principles, and other similar
statements (such as, ``Produced using 100% solar energy'' or ``Carbon
Neutral'') to appear on labels as long as the statements are truthful,
specific, and not misleading. Similarly, the proposed regulations
provided that statements or logos indicating environmental, sustainable
agricultural, or social justice certification (such as, ``Biodyvin,''
``Salmon-Safe,'' or ``Fair Trade Certified'') may appear on labels of
products that are actually certified by the appropriate organization.
WineAmerica, the New York Farm Bureau, and Sazerac expressed
support for the proposed regulations. However, some commenters,
including the Brewers Association, DISCUS, and Comit[eacute] European
des Enterprises Vins opposed the proposed provisions as unnecessary and
unduly restrictive, and commented that they would delay the label
review process.
TTB Response
TTB has determined that some commenters misunderstood the effect of
the proposed regulations, and misconstrued the proposed regulation to
require additional steps to the label review process, whereas the
proposal simply clarified that the identified claims must be truthful,
specific, and non-misleading, and that certification claims must be
truthful. Nonetheless, TTB is not finalizing proposed Sec. Sec. 5.85
and 7.85 because TTB agrees that the general regulations on false or
misleading claims adequately cover this issue.
d. Use of the Term ``Organic''
Current TTB labeling regulations do not define the term
``organic,'' but instead provide that the optional use of the term
``organic'' in labeling and advertising must comply with regulations
issued by the United States Department of Agriculture's (USDA's)
National Organic Program (7 CFR part 205), as the USDA interprets those
regulations. Proposed Sec. Sec. 4.84, 5.84, and 7.84 would clarify
current TTB regulations by editing existing language specifically
stating that organic claims must conform with USDA regulations
concerning the National Organic Program. DISCUS expressed support for
the proposed regulation. TTB also received comments with regard to
certification requirements that are specific to imported wine, which
TTB will address when it finalizes the proposed wine regulations.
TTB Response
TTB is Finalizing Sec. Sec. 5.84, and 7.84 as Proposed.
e. Prohibited Labeling Practices in General
Subpart G sets forth the prohibited labeling practices. Proposed
Sec. Sec. 4.101, 5.101, and 7.101 provide that the prohibitions set
forth in this subpart apply to any label, container, or packaging, and
then sets out the definitions of those terms for purposes of this
subpart. The prohibited practices include false statements and obscene
or indecent depictions. The proposed rule restated and reorganized
prohibitions currently found in the TTB regulations.
DISCUS commented that this provision was unnecessary on the basis
that it is ``repetitive and addressed elsewhere.''
TTB Response
TTB is finalizing Sec. Sec. 5.101, and 7.101 as proposed. As
previously noted, TTB proposed to divide the regulations addressing
prohibited practices into three subparts: (1) Subpart F, practices that
may be used under certain conditions, (2) subpart G, practices that are
always prohibited, and (3) subpart H, practices that are prohibited
only if they are used in a misleading manner on labels. This final rule
adopts this organization; accordingly, it is necessary to provide for
the substantive prohibitions in each subpart so that the reader does
not need to refer to a
[[Page 7546]]
different subpart to understand the scope of the regulation. TTB
believes this organization makes it easier for industry members to
locate and understand necessary information.
f. False or Untrue Statements
Current regulations prohibit labeling statements that are false or
untrue in any particular, or that, irrespective of falsity, directly,
or by ambiguity, omission, or inference, or by the addition of
irrelevant, scientific, or technical matter, tends to create a
misleading impression. The FAA Act, 27 U.S.C. 205(e), authorizes the
issuance of regulations to prohibit statements that are either false or
misleading. As previously noted, TTB's proposed reorganization of the
regulations places the prohibitions against false statements and
misleading statements in separate subparts. Thus, the regulations on
false statements were proposed in Sec. Sec. 4.102, 5.102, and 7.102
within Subpart G, Prohibited Labeling Practices, while the prohibitions
on misleading statements were proposed in Subpart H, Labeling Practices
That Are Prohibited If They Are Misleading. The American Craft Spirits
Association (ACSA) expressed support for proposed Sec. 5.102. However,
DISCUS expressed opposition to the proposed restatement of existing
regulations.
TTB Response
TTB is finalizing Sec. Sec. 5.102 and 7.102 as proposed. TTB
believes that the reorganization of the existing prohibition will make
the regulations easier to read and understand. The restatement of this
statutory prohibition does not change current requirements or policy,
but it does conform more closely to how commercial speech is analyzed
under the First Amendment, which distinguishes between false commercial
speech (which is not protected) and misleading commercial speech
(which, if it is only potentially misleading, may be qualified in a
manner that dispels the otherwise misleading impression created by the
claim). See Pearson v. Shalala, 164 F.3d 650 (D.C. Cir. 1999).
g. Obscene or Indecent
Consistent with current regulations, proposed Sec. Sec. 4.103,
5.103, and 7.103 provide that wine, distilled spirits, and malt
beverage labels, containers, or packaging may not contain any statement
or representation that is obscene or indecent.
The ACSA commented that they are ``neutral'' on this provision.
Sazerac commented that TTB was approving labels that, in its view, were
``fairly obviously'' obscene.
Several commenters asserted that there were First Amendment
concerns with the regulatory prohibition on ``obscene and indecent''
materials on labels. DISCUS and the Brewers Association urged TTB to
amend the regulations to remove the prohibition altogether. DISCUS
suggested that the terms are ``subjective concepts'' and questioned
``who will be the judge of what is indecent or obscene in the context
of TTB labeling or advertising regulations.'' The Brewers Association
included this prohibition along with other regulations that it
suggested were ``subject to First Amendment challenges as an agency of
the federal government is forced to make subjective decisions approving
or disapproving messages that brewers are communicating to consumers.''
The Brewers Association suggested that this type of regulation would be
better left to self-enforcement through trade associations. The New
Civil Liberties Alliance commented that the proposed regulation
provided discretion to TTB that was ``inherently boundless because a
licensing official must make his or her own ad hoc subjective
determination as to whether the content of the COLA application meets
his or her standards for decency.''
The Wine Institute suggested amending the regulations to prohibit
only obscene material, noting that indecent speech receives protection
under the First Amendment, and suggesting that the relevant case law
indicates ``that such regulations are vulnerable to a First Amendment
challenge.'' In particular, the Wine Institute pointed to the decisions
in two cases involving First Amendment challenges to efforts by States
to ban alcohol beverage labels with vulgar or offensive images. See Bad
Frog Brewery, Inc. v. N.Y. State Liquor Auth., 134 F.3d 87 (2d Cir.
1998), and Flying Dog Brewery, LLLP v. Michigan Liquor Control Com'n,
597 Fed. Appx. 342 (6th Cir. 2015).
TTB Response
TTB is not adopting the suggestion to eliminate the prohibition on
``obscene'' material on labels or advertisements because the current
regulatory prohibition simply incorporates the statutory prohibitions
in 27 U.S.C. 205(e)(4). Furthermore, it is well recognized that the
First Amendment does not protect ``obscene'' speech or child
pornography. See Sable Communications v. FCC, 492 U.S. 115, 124 (1989).
Thus, the statutory and regulatory prohibitions on ``obscene'' labels
and advertisements do not violate the First Amendment.
In evaluating whether labels are ``obscene,'' TTB is mindful of the
three-pronged test established by the U.S. Supreme Court in Miller v.
California, 413 U.S. 15, 24-25 (1973). TTB recognizes that applying
this test in a prior approval context is a difficult challenge.
TTB agrees that the Wine Institute has raised a valid point about
whether there is a distinction between ``obscene'' and ``indecent''
speech under the FAA Act. TTB is aware that offensive speech that is
not obscene receives protection under the First Amendment, and TTB is
mindful of these First Amendment limitations when reviewing labels and
advertisements. In Iancu v. Brunetti, 139 S. Ct. 2294, 2299 (2019), the
Supreme Court struck down a provision of the Lanham Act that barred the
registration of ``immoral'' or ``scandalous'' trademarks, finding it to
be a viewpoint-based ban. The Court also noted that the Justices, in
Matal v. Tam, 137 S. Ct. 1744 (2017), had ``found common ground in a
core postulate of free speech law--the government may not discriminate
against speech based on the ideas or opinions it conveys.'' However,
the FAA Act's restriction on obscene and indecent speech is not a
viewpoint-based restriction. TTB does not reject labels on the sole
grounds that they might be offensive. Instead, as the Sazerac
acknowledges, TTB has approved labels including content that some
people may find offensive, including labels that include expletives or
nudity in certain contexts, based on the First Amendment protections
afforded to such speech under current case law.
Because TTB did not seek specifically comments on this issue in
Notice No. 176, TTB believes that it cannot make any substantive
changes to the existing standard without engaging in notice and comment
rulemaking on the issue. TTB will treat the comments on this issue as
suggestions for future rulemaking action, and will retain the statutory
prohibition in existing regulations. Nonetheless, in applying that
standard, TTB will continue to apply current case law under the First
Amendment, and will not reject labels on the sole grounds that they may
be offensive. As always, TTB urges industry members to consider that,
while their products are intended only for adult consumption, labels on
containers may be visible to children on store shelves.
h. Subpart H--Labeling Practices Prohibited as Misleading
Proposed Sec. Sec. 4.122(a), 5.122(a), and 7.122(a) set out the
general prohibition against any statement or representation,
[[Page 7547]]
irrespective of falsity, that is misleading to consumers as to the age,
origin, identity, or other characteristics of the wine, distilled
spirits, or malt beverages, or with regard to any other material
factor. Proposed Sec. Sec. 4.122(b), 5.122(b), and 7.122(b) also
provided as follows: ``For example, an otherwise truthful statement may
be misleading because of the omission of material information, the
disclosure of which is necessary to prevent the statement from being
misleading.'' This is not a new policy, but the proposed rule sets it
out more clearly.
The Wine Institute urged TTB to eliminate the examples in proposed
Sec. 4.122 and elsewhere in the Code of Federal Regulations,
suggesting that examples are better conveyed to industry via written
guidance documents made available on the agency's website. The Wine
Institute stated that ``[b]y providing examples of permissible or
impermissible label statements in written guidance, TTB will be able to
create or change examples and communicate this information to industry
members in an expeditious manner as opposed to making further points of
clarification or adjustments to the Code of Federal Regulations.''
TTB Response
This final rule adopts proposed Sec. Sec. 5.122 and 7.122 as
proposed. In this case, the example simply illustrates an important
principle to facilitate industry understanding of the regulations,
rather than a factual situation that might change with other
circumstances. Accordingly, the final rule retains this example.
i. General First Amendment Concerns
Subject to certain limited exceptions, the FAA Act specifically
requires industry members to obtain a certificate of label approval in
order to prevent the introduction into interstate commerce of alcohol
beverage containers that are not labeled in accordance with the
implementing regulations. See 27 U.S.C. 205(e). Nonetheless, TTB
received some comments that raised general First Amendment concerns
about the pre-approval of labels to enforce the statutory prohibition
on misleading statements on alcohol beverage labels subject to the FAA
Act.
NABI commented that while current case law does not protect
misleading commercial speech, ``it sets a high bar for the Federal
Government in backing up and proving its claim that any one specific
representation on a label or in an advertisement is misleading.'' NABI
further suggested that ``waiting for consumer complaints about specific
labels or advertisements may be the better approach than purely
speculating in advance of approving a certificate of label approval
(COLA) or pre-clearing a proposed advertisement.''
The New Civil Liberties Alliance (NCLA), which describes itself as
``a nonprofit civil rights organization founded to defend
constitutional rights,'' commented on several First Amendment issues.
The NCLA stated that the proposed rule reformed ``an overly burdensome
regulatory system.'' However, its comment also argues that ``COLAs are
unconstitutional prior restraints on liberties guaranteed to all
Americans by the First Amendment. To ameliorate the unconstitutional
impact of restraints on speech, the Rule should apply the process and
post-publication enforcement of the proposed labeling requirements for
COLAs related to personalized labels * * * to all COLAs.'' [Emphasis in
original.]
The NCLA comment questioned the distinction between the treatment
of labels (which TTB reviews prior to the introduction of the product
in interstate commerce) and advertisements (for which TTB does not
require prior review). NCLA suggested that TTB instead amend the
regulations to allow the approval of COLAs that include a ``template''
of mandatory information, and stated that this approach would be a
logical extension of TTB's current and proposed policies regarding
allowable revisions to approved labels and approval of personalized
labels.
The Washington Legal Foundation (WLF), a nonprofit, public-interest
law firm and policy center, stated that while TTB's proposed rule is in
many ways clarifying, it ``inadequately protects commercial-speech
rights. TTB is interested in promoting marketplace civility and
ensuring that consumers are not misled, but rules promoting these
laudable aims must still avoid unduly chilling free speech rights under
the First Amendment.''
The Brewers Association (BA) submitted a comprehensive comment on
this issue, stating as follows:
As a basic policy, the BA respectfully suggests that TTB treat
all types of label claims and trade dress in a similar manner. If
claims, graphics, or other content on a label are misleading on the
label as submitted, or if claims obscure or improperly modify
mandatory information, TTB should address whatever elements of the
label are misleading. Otherwise, the BA believes that TTB should
maintain its focus on mandatory information concerning malt
beverages. TTB could expressly reserve the right to initiate label
revocation proceedings or enforcement action to seek corrections if
claims on labels are determined to be false or misleading via
competitor complaints or other credible sources, such as the Federal
Trade Commission or recognized third party accreditation
organizations.
Various proposals in Notice 176 impose content restrictions
based on existing TTB regulations that are difficult or impossible
for TTB to enforce in an evenhanded manner and may violate
commercial speech protections guaranteed by the First Amendment.
See, e.g., Cabo Distributing Co., Inc. v. Brady, 821 F. Supp. 601
(N.D. Cal. 1992); Bad Frog Brewery v. New York State Liquor
Authority, 134 F.3d 87 (1998). The recent U.S. Supreme Court opinion
in Iancu v. Brunetti, decided on June 24, 2019 is also instructive
on the topic of regulation of potentially offensive speech.
Specific restrictions proposed Sec. 7.126 (use of flags); Sec.
7.127 (use of certain seals), Sec. 7.124 (disparaging competitors),
and Sec. 7.103 (obscene or indecent statements or representations)
are all subject to First Amendment challenges as an agency of the
federal government is forced to make subjective decisions approving
or disapproving messages that brewers are communicating to
consumers. The BA recommends that TTB delete these sections from the
final regulations.
Hundreds of examples exist of labels approved by TTB that
arguably violate existing regulations as well as the proposed
regulations. This reality places TTB in an untenable situation. To
the extent that any of the restrictions referenced above pose
legitimate government concerns, they can be addressed under proposed
Sec. 7.122, which lays out a solid approach to making
determinations on false and misleading labels. If TTB attempts to
enforce Sec. Sec. 7.126, 7.127, 7.124, and 7.103, a First Amendment
challenge is possible, and the archaic restrictions seem unlikely to
survive. In the past when confronted by an analogous situation, TTB
properly identified health claims as a legitimate policy concern,
engaged in rulemaking, and promulgated a comprehensive and
defensible regulation that is included in Notice 176 at Sec. 7.129.
TTB Response
After carefully reviewing the comments, TTB has concluded that its
proposed regulations comply with First Amendment case law regarding
regulation of commercial speech and the statutory requirement to pre-
approve labels to prevent misleading claims.
In Central Hudson Gas & Electric Corp. v. Public Services
Commission, 447 U.S. 557, 563-566 (1980), the Supreme Court held that
in order to regulate commercial speech, the Government must satisfy a
four-prong test. First, the First Amendment protects expression only if
it concerns lawful activity and is not misleading. Second, the
Government must establish a substantial interest. Third, the regulation
must directly advance the governmental interest asserted. Finally, the
regulation must be no more
[[Page 7548]]
extensive than necessary to serve the interest asserted.
In two cases involving alcohol beverages, the Supreme Court struck
down bans on truthful and non-misleading commercial speech. In Rubin v.
Coors Brewing Co., 514 U.S. 476, 491 (1995), the Supreme Court applied
the Central Hudson analysis in striking down the FAA Act's prohibition
of statements of alcohol content on malt beverage labels unless
required by State law. In 44 Liquormart, Inc. v. Rhode Island, 517 U.S.
484 (1996), the Supreme Court struck down Rhode Island's ban on
advertising the price of alcohol beverages on First Amendment grounds.
However, these decisions did not address the Government's authority to
regulate actually or potentially misleading commercial speech regarding
alcohol consumption. TTB also notes that courts have expressed a
general First Amendment preference for additional disclosure over bans
on potentially misleading commercial speech. See, e.g., Pearson v.
Shalala, 164 F.3d 650, 656 (D.C. Cir. 1999), citing Bates v. State Bar
of Arizona, 433 U.S. 350, 376 (1977) (where attorney advertising was
not inherently misleading, ``the preferred remedy is more disclosure,
rather than less.'').
To the extent that some comments are suggesting that the FAA Act's
COLA requirements are unconstitutional, TTB disagrees. A law acts as a
prior restraint when it mandates that a speaker seek government
permission before engaging in protected expression; however, the
Supreme Court has indicated that the prior-restraint doctrine may not
apply to commercial speech. See Central Hudson Gas & Elec. Corp v.
Public Serv. Comm'n, 447 U.S. 557, 571 n. 13 (1990) (stating that
``commercial speech is such a sturdy brand of expression that
traditional prior restraint doctrine may not apply to it'').
In a recent case involving a First Amendment challenge to TTB's
denial of a petition to allow specific health claims in the labeling
and advertising of distilled spirits regarding the alleged DNA-
protective properties of an ingredient added to alcohol beverages, the
D.C. Circuit declined again to rule on the issue of whether traditional
prior restraint doctrine applies to commercial speech. See Bellion
Spirits, LLC v. United States, 7 F.4th 1201, 1213 (D.C. Cir. Aug. 6,
2021) (``We have previously left open whether the prior-restraint
doctrine applies in the context of commercial speech * * * and we do so
again here. Even assuming the applicability of prior-restraint
principles, Bellion fails to demonstrate an unconstitutional prior
restraint.''). With respect to a facial challenge to TTB's COLA system,
the court held as follows:
By imposing sufficiently ``narrow, objective, and definite
standards,'' Shuttlesworth v. City of Birmingham, 394 U.S. 147, 151,
89 S.Ct. 935, 22 L.Ed.2d 162 (1969), the COLA scheme adequately
channels TTB's discretion. The COLA regulation provides that TTB
``will approve'' specific health claims ``only if the claim is
truthful and adequately substantiated by scientific or medical
evidence; sufficiently detailed and qualified with respect to the
categories of individuals to whom the claim applies; adequately
discloses the health risks associated with both moderate and heavier
levels of alcohol consumption; and outlines the categories of
individuals for whom any levels of alcohol consumption may cause
health risks.'' See 27 CFR 5.42(b)(8)(ii)(B)(2). Those conditions of
approval are ``sufficiently definite to constrain [TTB] within
reasonable bounds.'' See Nutritional Health Alliance v. Shalala, 144
F.3d 220, 228 (2d Cir. 1998).
In addition, the COLA process * * * channels TTB's
decisionmaking through adequately strict deadlines. See Freedman v.
Maryland, 380 U.S. 51, 58, 85 S.Ct. 734, 13 L.Ed.2d 649 (1965). The
regulation states that TTB must respond to an application within 90
days, unless it elects to use one 90-day extension. See 27 CFR
13.21(b). Indeed, applicants who do not receive a decision from TTB
within the specified time period may file an administrative appeal.
Id. We find no ``unbridled'' discretion in that scheme. See City of
Lakewood, 486 U.S. at 757, 108 S.Ct. 2138.
See Bellion Spirits at 1213.
Accordingly, it is TTB's position that the COLA regulations do not
represent an unconstitutional prior restraint on commercial speech.
j. Guarantees
The FAA Act specifically authorizes the issuance of regulations to
prohibit, irrespective of falsity, such statements relating to
``guarantees'' as the Secretary of the Treasury ``finds to be likely to
mislead the consumer.'' See 27 U.S.C. 205(e). Proposed Sec. Sec.
4.123, 5.123 and 7.123 prohibit the use of guarantees that are likely
to mislead the consumer. However, TTB does not prohibit money-back
guarantees. This is a restatement of existing policy currently found in
Sec. Sec. 4.39(a)(5), 5.42(a)(5), and 7.39(a)(5), with minor
modifications for clarity.
In addition to the First Amendment general concerns that commenters
raised about this provision and other provisions relating to misleading
speech, TTB received two comments in opposition to the proposed
provisions on guarantees on the ground that they were unnecessary. ADSA
commented that the provisions are from a bygone era, and DISCUS
suggested that the proposals were vague and unnecessary.
TTB Response
TTB is finalizing proposed Sec. Sec. 5.123 and 7.123 without
change. TTB agrees that the general provisions on misleading statements
might cover this issue; however, the intent of the regulation is to
implement the specific statutory language on this issue. Accordingly,
TTB believes that these specific regulations still serve a useful
purpose.
k. Statements That Are Disparaging of a Competitor's Products
Current regulations mirror the language in the FAA Act, 27 U.S.C.
205(e), which simply prohibits labeling and advertising statements that
``are disparaging of a competitor's products.'' See 27 U.S.C. 205(e)
and (f). In proposed Sec. Sec. 4.124, 5.124, and 7.124, TTB sought to
clarify longstanding ATF and TTB policy (as expressed in T.D. ATF-180,
49 FR 31667, August 8, 1984) that a competitor's product is disparaged
within the meaning of the statutory prohibition only when statements or
claims about the product, or relating to the product, are false or
would tend to mislead the consumer. This policy does not preclude
additional information such as ``puffery'' statements made about one's
own product, nor does it prohibit truthful and nonmisleading
comparative statements or claims that place the competitor's product in
an unfavorable light. TTB's intention was to clarify the prohibition in
a manner that conformed to current case law about protections afforded
to truthful and non-misleading commercial speech.
In the proposed regulatory text, TTB also included examples of
statements that would, or would not, be prohibited under this
provision. For example, TTB would not prohibit a statement of opinion
such as ``We think our [product] tastes better than any other [product]
on the market.'' However, TTB would consider a truthful statement such
as ``We do not add arsenic to our [product]'' to be disparaging because
it falsely implies that other producers do add arsenic to their
products. Furthermore, the proposed regulations provide that labels may
not include statements that disparage their competitor's products by
making specific allegations, such as ``Brand X is not aged in oak
barrels,'' when such statements are untrue.
In its comment, the Washington Legal Foundation (WLF) suggested
that the prohibition on false or misleading ``disparaging'' statements
about a competitor's products would ``violate commercial-speech rights
under the First Amendment.'' WLF pointed out
[[Page 7549]]
that a recent Supreme Court case, Matal v. Tam, 137 S. Ct. 1744 (2017),
struck down the ``disparagement clause'' of the Lanham Act, which
prohibited Federal trademark registration for marks that might
disparage any persons living or dead. WLF noted that the Court held
that the ban ``offends a bedrock First Amendment principle: Speech may
not be banned on the ground that it expresses ideas that offend.'' 137
S. Ct. at 1751. WLF noted that the Court emphasized that heightened
scrutiny applies when a law or regulation engages in viewpoint
discrimination.
The comment from NABI noted that as a general matter, the Supreme
Court has rejected ``paternalism'' on the part of the Federal
Government in prohibiting commercial speech, and suggested that review
by TTB of consumer deception after receipt of consumer complaints might
be a better approach than ``purely speculating'' in advance of
approving a label. The NABI comment specifically referenced the
proposed rule on ``disparaging'' statements. DISCUS commented in favor
of removing both the proposed and existing language on disparaging
statements, and suggested that proposed ``Section 5.122 should serve as
the only regulation governing truthful and misleading labeling claims.
In that regard, the instant rulemaking has several proposed rules
governing truthful, non-misleading statements regarding distilled
spirits labels, containers, and packaging when only one rule is
necessary.''
The Brewers Association suggested that the rule on disparaging
statements was one of several issues that were better left to self-
regulation by the alcohol beverage industries, noting that the Brewers
Association and other industry trade associations maintain advertising
codes that address obscene, indecent, and disparaging materials. The
Association also noted that the ``Federal Trade Commission has
repeatedly expressed support for voluntary industry initiatives to
regulate offensive alcohol beverage advertising and for advertising of
many other consumer products and services. See, e.g., Federal Trade
Commission, Self-Regulation in the Alcohol Industry: March 2014, p.
34.''
TTB received a comment in support of the proposed language on
disparaging statements from ACSA. Other trade associations suggested
amendments to the proposed revision on disparaging statements. Wine
Institute commented in support of the proposed amendments, but stated
that the codified regulations should not include examples of
permissible or impermissible label statements, believing that written
guidance on TTB's website better conveys such examples to industry.
Accordingly, Wine Institute recommended removing the examples from the
proposed regulation.
ADSA questioned the continued need for any specific regulation that
prohibits false or misleading statements that are disparaging about
competitors, and suggested that such statements would be covered by the
general prohibition on false or misleading statements. ADSA was
particularly concerned that the second example in the proposed rule,
about not adding arsenic to a distilled spirits product, was capable of
misinterpretation and ``could be construed as suggesting that any claim
about the absence of an ingredient or feature (e.g., `gluten-free')
constitutes a prohibited disparaging claim.'' Accordingly, ADSA stated
that ``[a]t a minimum, TTB should delete and not replace the examples
in the current proposal.''
TTB Response
TTB notes that it designed the proposed amendment to the
prohibition on statements that are ``disparaging'' of a competitor's
products to address First Amendment issues and clarify longstanding
policy that the prohibition applies only to false or misleading
statements.
Unlike the ``disparagement clause'' of the Lanham Act, which
applied to marks that might disparage any individuals, living or dead,
regardless of whether the information conveyed was truthful and non-
misleading, TTB narrowly focused the proposed rule on statements that
are false or misleading, and the disparage the products of a
competitor. Under the first prong of the Central Hudson test, the First
Amendment does not protect false or misleading commercial speech. The
language of the FAA Act does not specify this important qualification,
but, as explained above, this has been the position of TTB and its
predecessor agency since the 1980s. Unlike the provision of the Lanham
Act that was struck down in Matal v. Tam, the disparagement prohibition
in the proposed rule was thus specifically aimed at commercial speech
(relating to the products of a competitor) that is false or misleading,
and thus serves the dual purpose under the FAA Act of protecting fair
competition and preventing consumer deception.
Based on the comments regarding the examples, TTB agrees that in
this particular situation, the proposed examples seemed to confuse
people rather than shed light on its position. Accordingly, TTB is
removing the examples from the language of the final rule. Instead, the
final rule prohibits only false or misleading statements that
explicitly or implicitly disparage a competitor's product, and does not
prohibit statements of opinion or truthful and non-misleading
comparisons between products. This language is entirely consistent with
current case law under the First Amendment.
l. Tests or Analyses
Proposed Sec. Sec. 4.125, 5.125 and 7.125 prohibit statements or
representations of, or relating to, analyses, standards, or tests,
whether or not truthful, that are likely to mislead the consumer. These
proposed provisions incorporate current policy, but also provide new
examples of misleading statements or representations under these
sections, which TTB intends to illustrate the principle that a truthful
statement about a test or standard may nonetheless be misleading as
presented.
The ACSA expressed its support for the proposed regulation. Wine
Institute suggested the removal of the example of a misleading
statement regarding a test or analysis. The Mexican Chamber of the
Tequila Industry and the Tequila Regulatory Council supported the
inclusion of examples, and requested inclusion of a new example
relating specifically to the testing of tequila by anyone other than an
authorized conformity assessment body. Furthermore, the Tequila
Regulatory Council proposed that ``in the case of tequila, no
statements or declaration of test, other than the one provided by the
conformity assessment body in the form of a NOM [Norma Oficial
Mexicana] mark, be allowed'' and that TTB should require a NOM mark on
any label of Tequila bottled in the United States. The comment states
that this mark, which includes the four-digit code assigned to the
distiller, is a sign of quality and product assurance. Finally, DISCUS
and ADSA opposed the inclusion of Sec. 5.125, on the same grounds that
they opposed the provisions on guarantees. Among other things, they
commented that the general provisions on misleading statements would
cover misleading statements relating to analyses, standards, or tests.
TTB Response
TTB is finalizing proposed Sec. Sec. 5.125 and 7.125 without
change. TTB agrees with DISCUS and ADSA that the general provisions on
misleading statements might cover this issue; however, the intent of
the regulation is to provide guidance that is more specific to
[[Page 7550]]
industry members and consumers as to how they may depict statements
about standards, analyses, and tests on a label without running afoul
of the statute and regulations. Accordingly, TTB believes that these
specific regulations, including the example provided, serve a useful
purpose.
TTB is not adopting the suggestions made in the comments from the
Mexican Chamber of the Tequila Industry and the Tequila Regulatory
Council for the inclusion of a new example in the regulation regarding
testing by anyone other than an authorized conformity assessment body.
Similarly, TTB is not adopting the Tequila Regulatory Council's
suggestion that a NOM mark be required on labels of Tequila bottled in
the United States, as this would require more mandatory information to
appear on Tequila labels. TTB believes that these comments relate
specifically to Tequila rather than to the general prohibition on
misleading testing claims, and that they fall outside of the scope of
the proposals on which TTB solicited comments in Notice No. 176.
m. Depictions of Government Symbols
Under current regulations, TTB prohibits representations relating
to the American flag or the U.S. armed forces from appearing on alcohol
beverage labels in order to prevent misconceptions that the U.S.
government or its armed forces endorse, or otherwise supervised the
production of, the alcohol beverage. However, the regulations prohibit
the use of flags from other countries only where it would be
misleading. The regulations on U.S. and foreign flags are based on the
same statutory provision of the FAA Act at 27 U.S.C. 205(e)(5), which
prohibits deception of the consumer by use of a name or representation
of individuals or organizations when such use creates a misleading
impression of endorsement.
Consistent with the statutory prohibition on which TTB bases these
regulations, it is TTB's current policy to enforce this regulatory
prohibition only where such representations might tend to mislead
consumers. Thus, TTB proposed to amend the regulations to remove the
blanket prohibition against the use of representations of, or relating
to, the American flag, the armed forces of the United States, or other
symbols associated with the American flag or armed forces. Therefore,
proposed Sec. Sec. 4.126, 5.126, and 7.126, retain the prohibition
against the use of such symbols or images where they create the false
or misleading impression that the government entity represented has
endorsed or was otherwise affiliated with the labeled product.
Furthermore, each of these proposed sections specifically provides that
the section does not prohibit the use of a flag as part of a claim of
American origin or a claim of another country of origin.
TTB received several comments in support of removing the blanket
ban on the use of flags on alcohol beverage labels, including comments
from WineAmerica, the New York Farm Bureau, DISCUS, ACSA, and an
attorney in the alcohol beverage field. ADSA suggested that as amended,
the provision was meaningless. Wine Institute commented that a specific
provision on flags was unnecessary and should be covered by a general
misleading provision. Comments from the Brewers Association and the New
Civil Liberties Alliance raised First Amendment concerns about several
regulatory provisions, including this one.
On the other hand, TTB received two comments that favored a blanket
ban on the use of the American flag on labels or in advertisements. One
of these comments, from the Missouri Craft Distillers, raised concerns
about using national symbols for marketing purposes. The other comment,
from Sazerac, suggested that TTB's proposal is contrary to the Federal
Flag Code.
TTB Response
TTB is finalizing Sec. Sec. 5.126 and 7.126 as proposed. The
regulations on depictions of government symbols are based on the
statutory provisions of the FAA Act (27 U.S.C. 205(e)(5)) that prohibit
deception of the consumer by use of name or representation of
individuals or organizations when such use creates a misleading
impression of endorsement or affiliation. As stated in Notice No. 176
and above, the proposed regulations remove the blanket ban on use of
flags and other symbols of the United States and Armed Forces. Rather,
the proposed regulations set out TTB's current policy prohibiting the
use of these symbols only when they create a misleading impression that
there was some sort of endorsement by, or affiliation with, the
governmental entity represented.
With regard to Sazerac's comment, TTB notes that the Federal Courts
have not ruled on the validity of the Flag Code or other criminal
provisions with regard to the use of the image of the American flag for
marketing purposes. TTB believes that the use of an image of a flag as
part of a general message of patriotism may be protected under the
First Amendment, even if that message appears on a product label. For
more information, see the general discussion in the Congressional
Research Service's ``Frequently Asked Questions About Flag Law,'' dated
October 7, 2019, which can be found on the website at <a href="https://crsreports.congress.gov/product/pdf/R/R45945">https://crsreports.congress.gov/product/pdf/R/R45945</a>.
In any case, TTB's regulations implementing the FAA Act's ban on
the use of images that create a misleading impression that an alcohol
beverage is endorsed or otherwise affiliated with any private or public
organization does not intersect with or otherwise affect the
enforcement of the Flag Code, which governs the handling and display of
the United States flag. Thus, TTB does not address the Flag Code in its
analysis of this regulation.
n. Depictions Simulating Government Stamps Relating to Supervision
Proposed Sec. Sec. 4.127, 5.127, and 7.127 retain prohibitions
against depictions simulating government stamps or relating to
government supervision but provide that these representations are only
prohibited if they create the misleading impression that the alcohol
beverage is manufactured under government authority. In Notice No. 176,
TTB specifically solicited comments on whether there is still a need
for regulations on this issue.
DISCUS and the ACSA commented in favor of the proposal. However,
several commenters, including Wine Institute, ADSA, and the Williams
Group expressed the view that specific provisions on this issue were no
longer necessary, as they reflected a ``bygone era'' and it is
questionable as to whether such stamps or other symbols retain any
meaning for consumers today. The Brewers Association included this
provision in its general comment raising First Amendment concerns.
TTB Response
Based on the comments, TTB agrees that there is no longer a need to
include specific prohibitions on this issue. TTB will continue to cover
misleading representations on this issue via the general prohibition on
misleading labeling statements. Accordingly, this final rule does not
include proposed Sec. Sec. 5.127 and 7.127.
o. Health-Related Claims
In proposed Sec. Sec. 4.129, 5.129, and 7.129, TTB set out current
regulations pertaining to health-related statements without change.
ACSA expressed support for these provisions as proposed. The Wine
Institute and St. George Spirits sought clarification on the use of
specific terms used in these provisions, and the Wine Institute
suggested that TTB publish guidance
[[Page 7551]]
with regard to specific issues that the regulations present.
TTB Response
TTB is finalizing Sec. Sec. 5.129 and 7.129 as proposed. However,
TTB will consider the comments it received regarding the issuance of
public guidance on issues pertaining to the regulations on health-
related statements.
p. Appearance of Endorsement
Consistent with current regulations, proposed Sec. Sec. 4.130,
5.130, and 7.130 maintains TTB's prohibition on the use of the name of
a living person or existing private or public organization if the use
of that name or a representation misleads the consumer to believe that
the product has been endorsed, made, or used by, or produced for, or
under the supervision of, or in accordance with the specifications of,
such individual or organization. The difference between the current and
proposed regulations is that proposed Sec. Sec. 4.130, 5.130, and
7.130 made it more clear that actual endorsements are permitted and
that TTB may request documentation supporting a claim of endorsement.
DISCUS commented in favor of retaining the existing regulations,
without explaining the basis for this comment.
TTB Response
TTB believes the proposed regulations reflect the same policy as
the current regulations but are easier to understand. Accordingly, TTB
is finalizing Sec. Sec. 5.130 and 7.130 as proposed, but without the
language that TTB may request documentation supporting a claim of
endorsement. TTB is removing this language because it is true of any
claim.
The final rule also includes language in Sec. Sec. 5.130 and 7.130
that was inadvertently omitted from the proposed rule, for consistency
with the statutory provisions at 27 U.S.C. 205(e)(5). As amended, the
regulatory language, like the statutory language, specifically provides
that the provisions on implied endorsements do not apply to the use of
the name of any person engaged in business as a distiller, brewer,
rectifier, blender, or other producer, or as an importer, wholesaler,
retailer, bottler, or warehouseman of distilled spirits, wine, or malt
beverages. The legislative history of the FAA Act, as reflected in the
Report of the House Committee on Ways and Means (H.R. Rep. No. 1542,
74th Cong., 1st Sess., at 13), explains that this ``provision does not
extend to cases of conflict within the industry as to proprietary
rights in trade or brand names.'' This is consistent with TTB's
longstanding position, as stated on the COLA form, that its issuance of
a COLA in no way confers trademark protection.
The final rule also includes a ``grandfathering'' provision that is
found in the statutory language, regarding names that were in use by
the industry member or its predecessors in interest prior to August 29,
1935, the date that the FAA Act was enacted. While TTB believes it is
unlikely that such ``grandfathered' names are still being used, we are
retaining the statutory language in the final rule out of an abundance
of caution.
8. Subpart I--Standards of Identity
a. Geographic Names
In Notice No. 176, TTB proposed to reorganize and amend existing
regulations setting out the conditions under which geographic names for
distilled spirits and malt beverages may be used on a label as, or as
part of, the designation of the product.
For distilled spirits, the proposed regulations at Sec. 5.154
sought to clarify and update the rules currently found in 27 CFR
5.22(k) and (l). These regulations allow ``generic'' names (i.e., names
that have lost their geographical significance by usage and common
knowledge) to be used to designate products from places other than the
geographic areas otherwise indicated by the name. Current regulations
provide that ``London dry gin'' and ``Geneva (Hollands) gin'' are
examples of generic names. This means, for example, that ``London dry
gin'' may be used on the label of a product that is produced somewhere
other than London, and no modifier such as ``type'' would be required
for such a product.
The proposed regulations provided that geographic names that have
not been found to be ``generic'' may not be used on products made
outside of the place indicated by the name, unless TTB determines that
the name represents a type of distilled spirit, in which case the
designation must include a qualifier such as ``type'' or ``style'' or a
statement indicating the true place of production. TTB proposed to list
names of specific products that fall within the categories of products
without geographical designations that are associated with a particular
geographical region. Similarly, for malt beverages, TTB proposed to
clarify the requirements for the use of geographical names, which are
currently set out in 27 CFR 7.24(f) though (h), and to add to the
regulations several established generic names as well as names of types
of malt beverages that require a qualification that indicates the true
place of production.
In response to these proposals, TTB received a significant number
of comments from various interested parties, including distilled
spirits and malt beverage producers, domestic and foreign trade
associations, and foreign governments. The European Union (EU)
expressed concern that certain names of distilled spirits and malt
beverages listed in TTB's regulations ``correspond to EU [geographical
indications].'' Likewise, Spirits Europe commented that ``a number of
names quoted are registered as geographical indications in the EU (for
example Ouzo, Aquavit).'' Furthermore, many commenters, including the
EU, opposed certain aspects of TTB's proposal that allowed for the use
of the terms ``type'' and ``style'' on the grounds that it would
violate provisions of the Agreement on Trade-Related Aspects of
Intellectual Property Rights (TRIPS). For instance, DISCUS commented
that the proposed regulations appear inconsistent with Article 23 of
the Agreement and ``quer[ied] whether TTB has considered its
applicability.'' Likewise, the NABI encouraged TTB to ``review the U.S.
obligations [under TRIPS] to ensure that the U.S. is in compliance.''
Furthermore, several commenters suggested that the use of the terms
``type'' and ``style'' in conjunction with a geographical designation
creates potential for consumer confusion. For example, FEVS commented
that allowing for the use of ``type'' or ``style'' would be ``extremely
confusing and misleading to consumers as to the nature and essential
qualities of the product'' being purchased. Similarly, DISCUS commented
that ``the use of the terms `style' and `type' would be extremely
misleading to consumers in particular as it relates to the distinctive
products of other nations.'' The Mexican Chamber of the Tequila
Industry stated its belief that the use of the terms ``type'' or
``style'' on distinctive products ``undermines the traditional culture
and social context associated with it'' and that ``labels using the
name of the distinctive product should only be allowed when certified
according to its standard of identity.'' The Republic of Ireland stated
that ``use of the words `Irish type' or `Irish style' on whiskey-
related goods will convey an improper association with Irish Whiskey
and is an evocation of Ireland when such products will not have been
produced in Ireland.''
Several commenters proposed further amendments to the regulations.
For instance, an individual commenter requested that ``Berliner weiss
[be]
[[Page 7552]]
added to the list of recognized non-geographical beer styles'' and
Sazerac requested that TTB ``move `Ojen' and `Swedish Punch' to the
list of products that are associated with a particular place that have
become generic, and therefore may be manufactured in any place.'' The
BNIC requested that TTB add language to its regulations to ``[make]
absolutely clear that when a geographical designation is also a
standard of identity (e.g., a type designation), that designation
cannot be used on a label or in advertising except in conformity with
that standard of identity.'' ACSA supported the intent of TTB's
proposal but stated that ``clarification and additional protections are
necessary in order to avoid misleading consumers and to protect
regional and national American spirit designations.'' Specifically,
ACSA recommended that ``TTB recognize and protect any spirits
designations that are a product of a specific geographic region and
whose production standard have been formally agreed by an organized
cohort of producers in that region such that their products are
genuinely differentiated from the category.'' Furthermore, ACSA
suggested that the terms ``type'' and ``style'' be required to appear
``on the same line and in the same font as the geographical designation
stated.''
With regard to the proposed regulations for malt beverages, Beverly
Brewery Consultants questioned whether ``Munich,'' ``Munchner,'' and
``Kulmbacher'' should still be recognized as being distinctive types
that may be qualified with the word ``type'' or ``American'' or some
other statement indicating the true place of production. On the other
hand, the Brewers Association suggested that the proposed rule would
require labeling changes and suggested that ``[a]ny attempt at this
point in time to disentangle American and European geographic
designations for beer styles is almost certain to result in arbitrary
decisions.'' Finally, an owner of Schilling Beer Co. asked why TTB had
not yet recognized ``IPA'' (which is an abbreviation of the designation
``India Pale Ale'') as a recognized style of beer.
TTB Response
After reviewing and considering the comments received, TTB will not
move forward, at this time, with the proposed reorganization and
clarifying amendments to the existing regulations on geographical names
for distilled spirits and malt beverages. Instead, the final
regulations for distilled spirits (Sec. 5.154) and malt beverages
(Sec. 7.146) retain the provisions of the current regulations as they
appear in sections 27 CFR 5.22(k)-(l) and 27 CFR 7.24(f)-(h),
respectively. As several commenters raised issues relating to
compliance with international agreements to which the United States is
a Party, TTB believes that it must engage in further consultation with
other government agencies on these matters prior to taking further
action on the proposed amendments. For this reason, TTB will also
evaluate the comments that address existing regulations as suggestions
for further rulemaking.
TTB notes that its decision to retain the current regulations
without incorporating the proposed amendments does not represent any
change in TTB's current policy on the matter of geographical names, as
set forth in TTB guidance or otherwise. Thus, for example, while the
final rule does not specifically include Scotch ale (Scottish ale), and
Russian Imperial Stout (Imperial Russian Stout) as examples of generic
designations for malt beve
[…truncated; see source link]Indexed from Federal Register on February 9, 2022.
This is legal information, not legal advice. Laws vary by jurisdiction and change frequently. Always verify current law with official sources and consult a licensed attorney in your jurisdiction for advice on your specific situation.