Modernization of the Labeling and Advertising Regulations for Distilled Spirits and Malt Beverages

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.

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:

• 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.

• 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.

• 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.

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.

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

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:

• 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.

• 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

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‐reference to proposed § 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 § 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 §§ 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

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 §§ 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 §§ 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 § 4.22(b)(3) and § 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 § 4.22(b)(3), for wine bottled in the United States, and § 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 §§ 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

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 §§ 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

https://www.ttb.gov

).

The proposed regulatory amendments in §§ 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 §§ 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 §§ 4.24(c), 5.24(c), and 7.24(c). Proposed §§ 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 § 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 §§ 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 §§ 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)

(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 §§ 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 §§ 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

structure, and the final rule also includes this regulatory text in §§ 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 §§ 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 §§ 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 §§ 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 § 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 §§ 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 §§ 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 § 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

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‐by‐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‐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 §§ 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,

https://www.ttb.gov,

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 §§ 4.30 and 7.20 provide that someone wanting to relabel must receive prior written permission from the appropriate TTB officer. Current § 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 §§ 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

shipment in) interstate or foreign commerce.

Proposed §§ 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 §§ 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 §§ 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 §§ 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 §§ 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 §§ 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 §§ 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 §§ 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 §§ 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

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 §§ 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 §§ 4.44, 5.44, and 7.44.

NABI, Heaven Hill Brands, Wine Institute, and DISCUS expressed support for proposed §§ 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 §§ 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 §§ 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 §§ 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 §§ 4.52, 5.52, and 7.52 governing legibility of labels, type size, and language

requirements were largely based on the requirements currently found in §§ 4.38, 5.33, and 7.28. The proposed regulations clarified existing regulations and policy.

TTB set out in proposed §§ 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 §§ 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 §§ 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 §§ 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 §§ 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 §§ 4.53, 5.53, and 7.53 set out the type size requirements for mandatory information under the

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 § 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 § 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 §§ 5.53, and 7.53 as set forth in Notice No. 176, with a clarifying change to § 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 § 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 §§ 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 § 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 § 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 §§ 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 §§ 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 §§ 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 §§ 5.55 and 7.55 as set forth in Notice No. 176.

g. Additional Information (Non-Mandatory Information) on Labels

Proposed §§ 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 §§ 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.”

Beverly Brewery Consultants expressed concern about the provisions in proposed § 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 § 5.56 should be struck on the grounds that it is duplicative of proposed § 5.122.

TTB Response

TTB is finalizing proposed §§ 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 §§ 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 §§ 5.55 and 5.122 are duplicative. Proposed § 5.55 is explicit in authorizing the use of additional information, whereas proposed § 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 §§ 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 §§ 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 §§ 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 §§ 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 §§ 4.38a and 5.41. However, as set forth at current § 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 §§ 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

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 §§ 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 § 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 § 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 §§ 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 § 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 §§ 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

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 § 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 §§ 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 §§ 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 §§ 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 §§ 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 §§ 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 §§ 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.

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 §§ 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 § 5.36(a)(6) and current § 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 § 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 § 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 § 5.67(c), TTB does not believe it is necessary to revise the proposed § 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 § 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

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 § 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 §§ 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 §§ 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

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 § 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 §§ 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 §§ 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 §§ 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 §§ 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 §§ 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 §§ 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 Comité 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 §§ 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 §§ 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 §§ 5.84, and 7.84 as Proposed.

e. Prohibited Labeling Practices in General

Subpart G sets forth the prohibited labeling practices. Proposed §§ 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 §§ 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

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 §§ 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 § 5.102. However, DISCUS expressed opposition to the proposed restatement of existing regulations.

TTB Response

TTB is finalizing §§ 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 §§ 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 §§ 4.122(a), 5.122(a), and 7.122(a) set out the general prohibition against any statement or representation,

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 §§ 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 § 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 §§ 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 § 7.126 (use of flags); § 7.127 (use of certain seals), § 7.124 (disparaging competitors), and § 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 § 7.122, which lays out a solid approach to making determinations on false and misleading labels. If TTB attempts to enforce §§ 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 Notic

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