Brendan Quinn is a law clerk in Hogan Lovells Washington, D.C. office. His practice focuses on intellectual property for consumer and technology companies. Veronica Colas is a senior associate in the Washington D.C. office. Her practice focuses on the regulations and policy issues affecting food companies from farm to table. Andrea DiSandro is a senior associate based in the Northern Virginia office. Her practice focuses on a range of technology, trademark, marketing, copyright, patent, and general commercial issues.
If you make a living producing and selling alcohol beverages, congratulations! You are beloved by many. As someone who manufacturers spirits, wine, beer, or other alcohol beverages, you not only address the high demand for your libations, but also the complex and often confusing regulations that affect your business. Now, however, you have the opportunity to participate in a major regulatory revision concerning your products.
As you may know, the Alcohol and Tobacco Tax and Trade Bureau (TTB) is the primary federal agency that regulates alcohol and has specific oversight of the labeling and advertising of these beverages. On Nov. 26, TTB proposed modernizing the regulations that govern the labeling and advertising of alcohol beverages.
The primary goal of this proposal is to make current regulations simpler and clearer for business owners so that compliance will be easier for industry members. Here are some of the top takeaways from the proposed rule:
1. Be heard!
Large regulatory changes like this require a public commenting period where anyone — from individual consumers to key industry players and trade associations — may submit comments for TTB to consider before finalizing its plan.
TTB will review all the submitted comments and consider making changes in response. If TTB doesn’t receive a comment on something, it will presume the public accepts the proposed regulation as is. So if you have opinions, you should comment. But you need to act quickly. The deadline for commenting is March 26, though this deadline could be extended.
2. Nothing is changing…for now
Remember, this is a proposed regulation. TTB plans on setting its compliance date three years from whenever the final regulation is published, which could be more than a year from now. Nothing is changing right now, but industry members should be aware of what may be in store and should participate in the process.
3. TTB isn’t the only agency you need to know
Alcohol is regulated under a complex network of federal and state laws. At the federal level, the Food and Drug Administration, the Department of Agriculture, the Federal Trade Commission, and Customs and Border Protection all may play a role in the regulation of your product.
The proposed regulation clarifies that industry must comply with TTB regulations, as well as all other applicable federal and state requirements. This codifies, for example, TTB’s longstanding position that its review of labels and formulas does not relieve industry members from complying with FDA regulations regarding food additives and ingredient safety or suitable alcohol container materials. Even if you have a certificate of label approval (COLA), you must still ensure (among other things) that all ingredients in your product comply with ingredient safety requirements of the FDA.
4. Who needs a COLA?
Many alcohol labels must be approved by TTB prior to bottling by obtaining a COLA. By contrast, alcohol advertisements do not need to be pre-cleared by TTB, but are still subject to post-market enforcement. Here is a breakdown of when a COLA is needed under the proposed regulation:
Distilled spirits and wine
All domestic producers of distilled spirits and wine must obtain a COLA from TTB in order to bottle their products and sell them interstate. Even if producers do not plan on selling distilled spirits or wine interstate, they still must obtain a certificate of exemption from label approval prior to bottling.
To this end, TTB proposes to alter the requirements for obtaining certificates of exemption. TTB currently issues certificates of exemption conditioned on the applicant’s agreement to add “For sale in [name of state] only” to the beverage container. Under the proposal, applicants would instead be required to include this statement on the label submitted with the application for a certificate of exemption.
Malt beverages are treated differently. COLAs are required for domestic malt beverages shipped into a state from outside of the state only where (1) the laws of the state require that all malt beverages sold in that state be labeled in conformity with TTB’s labeling requirements for malt beverages or (2) the state has adopted virtually identical requirements.
Under the proposed regulation, neither a COLA nor a certificate of exemption would be required for malt beverages bottled and sold exclusively within a state. However, the regulation notes that malt beverages that do not require a COLA may still be subject to TTB’s labeling regulations under applicable state law.
All importers of alcoholic beverages must obtain a COLA to release the products from customs custody.
5. What can (and can’t) you say on a label or in advertising?
Current regulations regarding labeling and advertising appear in 27 C.F.R. Parts 4 (wine), 5 (distilled spirits), and 7 (malt beverages), but in the proposed regulation the subparts relating to advertising will be consolidated into a new Part 14. Other provisions within Parts 4, 5, and 7 would be harmonized so that similar provisions are found in the same subsections across Parts (e.g. mandatory labeling information will be found in § 4.63 for wine, § 5.63 for distilled spirits, and § 7.63 for malt beverages).
Placement of mandatory information
TTB’s current regulations require certain mandatory information to appear on the “brand” label of an alcohol beverage container and other mandatory information to appear on any label. The proposed regulation instead eliminates the concept of “brand” labels and designates the placement of mandatory information for each commodity. Where placement requirements exist, the proposed rule clarifies when such information must be immediately adjacent to or merely in the same field of vision as other information.
TTB’s current regulations prohibit statements or representations that are misleading to consumers as to the age, origin, identity or other characteristics of an alcohol beverage (or any other material factor). Apart from this general prohibition, TTB identifies certain categories of potentially prohibited statements such as disparaging commercial statements, health-related statements, or endorsement statements.
TTB proposes a new potential prohibition on cross-commodity terms – that is, terms that apply to one type of alcohol, like whiskey, being used on the labels of another type of alcohol, like wine or beer. Cross-commodity terms would be prohibited when they might mislead consumers as to the identity of the product. Non-misleading uses of cross-commodity terms would be allowed, such as references to aging malt beverages in barrels previously used for the storage of distilled spirits or wine.
In addition to these general provisions, the proposed regulation includes numerous commodity-specific modifications. You should consult the proposed regulation for more specific instruction on what you can and can’t say about your product, but here are some examples:
Certain whiskey products distilled in the United States would need to include the state of distillation on the label. Listing a bottling address within the state would not suffice unless it includes a distillation claim.
The definition of “distillation” would be streamlined to mean a single run through a pot still or one run through a single distillation column of a column (reflux) still, which may impact labels that currently claim that spirits have been distilled a certain number of times, but use a different definition of ‘‘distillation.”
“Agave spirits’’ would be added as a class of distilled spirits and ‘‘Mezcal’’ would be a type within that class.
The definition of ‘‘age’’ will change to make clear that spirits are only “aged” when stored in or with oak because the wood contact creates chemical changes in the spirits, which is the aging process. Thus, for example, spirits stored in oak barrels lined with paraffin are not ‘‘aged.’’ Or, if spirits age in an oak barrel, but finish in a different type of barrel, only the first contact with oak counts towards the “aging” process.
Varietal designation requirements for wines consisting of multiple types of grapes would be liberalized, allowing greater flexibility in the blending of wines.
Truthful, accurate, specific and non-misleading additional information would be permitted on wine labels about grape varieties used to make a still, sparkling or carbonated grape wine, as long as information about every grape variety used to make the wine is listed in descending order of predominance.
Certain mandatory information would be allowed to appear on the keg collar or tap cover of malt beverage kegs with a capacity of 10 gallons or more, subject to certain requirements.
6. Can you substantiate that?
The proposed regulation introduces substantiation requirements for the minimum evidence needed to support labeling and advertising claims, including:
Implicit and explicit claims need a reasonable basis in fact.
Implicit and explicit statements regarding the amount of support for a claim (e.g., ‘‘tests provide,’’ or ‘‘studies show’’) must reflect the amount of substantiation held by the claimant.
Claims that do not have a reasonable basis in fact, or cannot be adequately substantiated at TTB’s request, will be considered misleading.
Because the new requirements reflect TTB’s current expectations (and are very similar to the Federal Trade Commission’s existing policies on substantiation of advertising claims), this is more of a change in form over substance.
7. Do you age any distilled spirits in oak barrels?
TTB seeks to define the term “oak barrel” as a ‘‘cylindrical oak drum of approximately 50 gallons capacity used to age bulk spirits.”
This proposal would significantly affect distillers who use differently sized or shaped barrels to produce spirits like whiskey or bourbon which must be produced using an “oak barrel.” As a result, this topic has already generated many comments. Consumers and industry members are arguing that this definition would restrict distillers’ abilities to produce craft spirits in smaller batches, to bring spirits to market more quickly, and to store spirits efficiently.
If you would be affected by this change, you should strongly consider commenting on this issue to add your opinion to the public record.
8. How do you package your product?
The proposal clarifies existing requirements on alcohol ‘‘packaging.’’ This includes coverings, cartons, cases, carriers and other packaging used for sale at retail, but does not include shipping cartons or cases that do not accompany the beverage container to consumers.
Existing wine and distilled spirits regulations already require certain mandatory information on closed ‘‘opaque’’ packaging. The proposed rule expands this requirement to include malt beverages and to require that ‘‘closed packaging’’ of all alcohol beverages bear all mandatory information required on the product’s label.
As under current law, “closed packaging’’ would include sealed opaque coverings and cases, as well as packaging the consumer must open, rip, untie, unzip or otherwise manipulate to view any of the mandatory information.
Packaging would not be considered “closed” if the consumer could view all the mandatory information on the labels by merely lifting up the container or looking through transparent packaging.
Bonus! Consider a trademark registration
The proposed regulation clarifies some of the things that a COLA does not do. Specifically, the proposed regulation makes clear that a COLA does not confer trademark protection. TTB believes this revision will clarify this fact for the public and industry members.
Although unregistered trademarks receive some protection under state common law and federal trademark law, trademarks can be best protected through registration under both state and federal laws. Federal trademark registration through the United States Patent and Trademark Office provides significant additional benefits, including:
The right to use the registered trademark symbol: ®
A legal presumption of your ownership of the mark and your exclusive right to use the mark nationwide on or in connection with the goods/services listed in the registration (whereas a state registration only provides rights within the borders of that one state, and common law rights exist only for the specific area where the mark is used.)
Public notice of your claim of ownership of the mark;
Listing in the USPTO’s online databases, which can form a bar to the registration of another confusingly similar mark;
The ability to record your U.S. registration with Customs and Border Protection to prevent importation of infringing foreign goods;
One basis for filing a trademark infringement lawsuit in federal court; and
One basis for an international trademark application.
Trademark registrations are also incredibly helpful when dealing with trademark issues online. Third-party website platforms, such as social media websites, hosting websites, and domain name registrars have enforcement procedures for addressing trademark infringement. Relief is much easier to obtain if you are able to prove you are the rightful owner of the mark. This results in faster removal of infringing content for a significantly lower cost than traditional trademark litigation.
Participate in the commenting process or stay tuned for how this all turns out. But until then, cheers!
To comment on the proposals electronically, use the Regulations.gov comment form for Notice No. 176 found on the website. The regulation also includes instructions for submitting comments by mail or hand delivery.
Andrea DiSandro is a senior associate based in our Northern Virginia office where her practice focuses on a range of technology, trademark, marketing, copyright, patent, and general commercial issues. She guides clients through all aspects of their supply chains, from research and development to manufacturing, distribution, and commercialization.
Veronica Colas is a senior associate in our Washington D.C. office. Her practice focuses on the regulations and policy issues affecting food companies from farm to table. She represents all segments of the food industry, including manufacturers, retailers, restaurants, and food service companies, as well as their trade associations.
Brendan Quinn is a law clerk in Hogan Lovells Washington, D.C. office. His practice focuses on Intellectual Property for consumer and technology companies.