(IMBIBE+BLOG)

Last week, the TTB issued an Industry Circular on the issue of tie-in sales, which are illegal under the Federal Alcohol Administration Act (FAA Act) and 27 C.F.R. § 6.72.  Tie-in sales occur when a retailer is forced to purchase a product (which it may or may not want) in order to get the product that it wants.  Tie-in sales include combination sales in which one or more products may only be purchased in combination with other products.

In its Circular, available here, the TTB provides a list of examples of prohibited tie-in sales.  The examples include:

-          A retailer must purchase a certain amount of regular distilled spirits, whether bottled or cased, in order to be allowed to purchase distilled spirits in a special holiday container or packaging.

-          A retailer must purchase ten cases of Winery X’s Merlot from a wholesaler in order to purchase ten cases of Winery X’s Chardonnay.

-          A retailer must purchase an industry member’s pre-mixed alcohol beverage specialty product (for example, strawberry daiquiri) in order to purchase a certain amount of their regular distilled spirits case goods.  In other words, the regular distilled spirits products are not sold separately but only in combination with the specialty product.

-          A retailer is required to purchase a two-bottle package containing one each of a winery’s Merlot and Chardonnay in order to get the Merlot.  The Merlot is not available for purchase separately.

-          A retailer must purchase a slow moving wine in order to purchase a distilled spirit that is in heavy demand.  The distilled spirit is not available for purchase separately.

The take-away point is that each alcoholic beverage item needs to be available for purchase separately.  It is still permissible to package alcohol products together or with other consumer goods, subject to state and federal restrictions, but the alcohol components should also be available separately.  For additional information on the rules applicable to combination packs, contact one of the attorneys at Strike & Techel with any questions.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2012 · All Rights Reserved ·

Currently, distilled spirits plants (DSPs) are required to complete and file operational report forms, which can number up to seven per month. The TTB has proposed eliminating the current forms and replacing them with two new report forms (TTB F 5110.77 and TTB F 5110.78) in order to streamline the reporting process and reduce costs. According to the TTB’s research, DSPs currently submit an average of 28.4 operational reports per year. The TTB notes that certain data within the required reports is not analyzed or used. Moreover, the increased use of alcohol as a fuel and the growth in artisanal distillers has resulted in many new DSPs and the corresponding burden on TTB to process the paperwork from these DSP has grown tremendously. If the proposal is approved, one report would be used for operations involving spirits for beverage use, while the other would handle reporting on industrial use spirits. Additionally, DSPs that submit quarterly tax returns could switch to quarterly operational reporting, as opposed to the current monthly reporting requirement. The comment period for this proposed revision runs through February 3, 2012, which is right around the corner. The full text of the proposal can be found here.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2012 · All Rights Reserved ·

There were a number of new viticultural areas, commonly referred to as AVAs, approved by the TTB late this year, as well as an expansion of certain AVAs and several new proposed areas for which comments are due in early 2012. A summary on the latest activity is below. The TTB designates viticultural areas in order to allow vintners to more precisely describe the origins of their wines and so that consumers may make purchasing decisions with such specific origination information in mind.

Expanded Areas Effective December 16, 2011

Russian River Valley (California) – The Russian River Valley AVA, located in Sonoma County, California, was expanded by 14,044 acres.

Northern Sonoma (California) – The Northern Sonoma AVA, also located in Sonoma County, California, was expanded by 44,244 acres.

New Viticultural Areas Effective January 13, 2012

Coombsville (California) – The Coombsville AVA in Napa County, California covers 11,075 acres. The area is within the Napa Valley and North Coast viticultural areas. The Coombsville AVA is nearly identical to the previously proposed Tulocay AVA, which the TTB withdrew from consideration in June 2008.

Fort Ross-Seaview (California) – The Fort Ross-Seaview AVA in Sonoma County, California embodies 27,500 acres. The area is within the Sonoma Coast viticultural area, which in turn is within the North Coast viticultural area.

Naches Heights (Washington) – The Naches Heights AVA in Yakima County, Washington covers 13,254 acres. The Naches Heights AVA is within the Columbia Valley viticultural area located mainly in central and southern Washington, although a small portion of northern Oregon is also included within the Columbia Valley AVA.

New Proposed Viticultural Areas

Inwood Valley (California) – The TTB has proposed creating a 28,298-acre Inwood Valley AVA in Shasta County, California. Comments on the proposal must be received by February 3, 2012.

Middleburg Virginia (Virginia) – The TTB has proposed creating a 198-square mile Middleburg Virginia AVA located in the northern Virginia counties of Loudoun and Fauquier. Comments on the proposal must be received by January 9, 2012.

In February we posted about The Alcohol and Tobacco Tax and Trade Bureau’s proposed rule to add new names to the approved list of grape variety names that can be used to designate United States wines. The original post is available here. The TTB has completed its rulemaking process and the revised rule will go into effect November 28, 2011, the Monday after Thanksgiving. More than 50 new names were added to the list, including some popular well known varietals like Grenache Blanc and Grüner Veltliner. To aid in locating information within the new and lengthy list, the TTB also included synonyms for a number of entries. Full details on the revised rule are available here.

Trigged by a petition from the European Commission, the Alcohol and Tobacco Tax and Trade Bureau (TTB) has proposed revisions to the current vintage date requirements in order to allow vintage dates to appear on wine that is labeled with a country as the appellation of origin. Currently 27 CFR 4.27(a) defines vintage wine as “wine labeled with the year of harvest of the grapes,” and in order to include a vintage wine identification the wine “must be labeled with an appellation of origin other than a country (which does not qualify for vintage labeling.)” The original reasoning behind such a requirement was to ensure that customers can easily ascertain information about a wine’s quality and identity. The European Commission’s petition did not take issue with that underlying goal, but rather argued that some of its member countries are smaller than states within the United States. The practical effect of the vintage date rule thus essentially means a wine from California labeled with a “California” appellation can include a vintage date while a wine from the country of Austria, which is about half the size of California, cannot include a vintage date if the wine is labeled with “Austria” as the appellation.

The TTB will be taking public comment on the proposed rule through January 3, 2012. The full rulemaking notice is available here.

Alcohol Beverage industry members may soon hear from the TTB if their websites do not contain a responsible advertiser statement and other information that is mandatory on all alcohol advertisements.  Industry member websites are considered advertisements subject to these requirements, and recently the TTB has been independently investigating websites for compliance.  If the mandatory information is not present on a website’s homepage, the TTB has begun sending letters to industry members requiring compliance and a confirming response to the TTB.

The federal requirements vary slightly depending whether the alcohol being advertised is beer, wine, or distilled spirits, but in general all alcohol advertisements are required to contain a responsible advertising statement that includes the permittee’s name and address, as well as statements regarding the class and type of alcohol.

Industry members – check your websites and other advertisements and make sure they contain all mandatory information!  If you have any questions about these requirements, the attorneys at Strike & Techel are available to help.

The TTB recently announced new guidance on personalized labels, which supersedes its prior guidance in TTB G 2010-1 from April 7, 2010. The guidance provided in 2010 did not allow changes to artwork or graphics on a personalized label without resubmission of the label for approval. The TTB has relaxed its view and now will allow changes to graphics and artwork on personalized labels without requiring application for a new certificate of label approval (“COLA”). Names, event dates and salutations can also be changed without applying for a new COLA, as was previously allowed under the 2010 guidance. Personalized labels are for use with targeted customers or clients for things like weddings and grand openings. They are distinct from private labels, which remain subject to the standard COLA requirements and require resubmission for a COLA when label artwork is changed.

In order to obtain this flexibility on personalized labels, such preference must be indicated on the initial COLA application and the information that may change must be described. The label must still contain all standard mandatory label information. When issuing the COLA approval for personalized labels the TTB will include a qualification stating that the COLA covers the label and any changes in “graphics, salutations, congratulatory dates and names, and artwork to personalize the label as indicated on the application.” The new guidance is available here. If you would like to discuss COLA applications, please feel free to contact any of the attorneys at Strike & Techel.

Trademark owners that want to make sure their marks are not used in the newly-established .XXX internet domain have until October 28, 2011, to opt out of the domain.  .XXX is a domain for adult entertainment websites, and was approved earlier this year by the Internet Corporation for Assigned Names and Numbers.  The sunrise period for .XXX began on September 7, and runs through October 28, during which time applications are being accepted for adult entertainment industry members to register with the domain (called the “Sunrise A” period), as well as for trademark owners that are not in the adult entertainment industry to block the use of their names on the .XXX domain (the “Sunrise B” period).  A trademark owner that registers during the Sunrise B period will effectively remove its brand name from the list of available domain names.

After October 28th, domain names become available to the general public, and trademark owners that have not opted out are at risk of having their marks used on the .XXX domain.  The cost to register in Sunrise B generally ranges from $200 to $300, depending on which domain registrar is used to opt out of .XXX.  You can find the list of accredited registrars here.

If you need assistance with registering your marks during the Sunrise B period, the attorneys at Strike & Techel are available to help.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2011 · All Rights Reserved ·

People, especially in the San Francisco Bay Area, are often concerned about genetically modified organisms or bioengineering in their food. Given the fervor, does it make sense for suppliers to assume the concern extends to alcoholic beverages and label accordingly? While some manufacturers may want to highlight that their products are “GMO free” or “GM free,” the Alcohol and Tobacco Tax and Trade Bureau’s (TTB) current policy prohibits such labeling. Producers of non-alcoholic beverages have a little more latitude regarding GM labeling: The FDA’s position is that special labeling of bioengineered or genetically modified foods is not required, but manufacturers may voluntarily label their foods with such information. Additional information on the FDA’s position is available here. The TTB tends to be very cautious in allowing new types of information on alcohol labels and often prohibits any reference whatsoever until they have had the opportunity for careful review and can provide guidance in the proper manner of presenting such information. This has been true in the context of organic labeling and with respect to nutritional information (e.g., calories, fat, carbs, etc.). So we can expect that the TTB will weigh in with some direction on how GM-related statements can be offered in the future, but for now, they cannot be used on alcoholic beverage labels. Be sure to keep the TTB’s position in mind before submitting a certificate of label approval with any “GMO” related terms or references.

Ever wonder whether the claim that a wine uses “organic grapes” is really true?  Wine is one area where if such claims make their way onto a wine bottle, they are almost certainly valid, as the TTB and the National Organic Program (“NOP”) maintain extremely strict requirements for organic claims on the label.  The NOP has four primary categories for alcoholic beverages: 1) “100% Organic,” 2) “Organic,” meaning at least 95% organic and with no chemically added sulfites, 3) “Made with Organic [ingredients],” requiring at least 70% organic ingredients and may contain chemically added sulfites, and 4) for certain products that contain less than 70% organic ingredients, the ingredients statement may disclose the organic components.

In order to make any organic claims on a wine bottle or other alcohol label, TTB requires several sources of verification, making for a comprehensive but arduous application process.  Along with the items normally required for label approval, applicants must first provide a Processor’s or Handler’s Operation Certificate, which certifies that the winery uses accepted NOP standards.  Notably, imported wines sometimes have difficulty meeting this requirement because foreign certifications are only sufficient if the foreign entity is also a USDA-Accredited Certifying Agent.  Next, applicants must provide an Accredited Certifying Agent Preview, which indicates that the label has been reviewed and found to be in compliance with TTB rules.  Additionally, applicants may need to provide a crop certificate that certifies that the agricultural produce used in the product were grown to NOP standards.

The TTB also has specific rules for the label itself, including requiring a “certification statement,” which includes the name of the accredited certifying agent.  These requirements must be repeated for each vintage year, as labels for new vintages must be resubmitted for approval.

Notably, despite these strict requirements for organic wine labels, other statements on wine bottles that pertain to farming techniques and other “green” claims are largely unregulated by the TTB.  However, this is a fast-evolving area, so stay tuned.

If you need assistance with organic labels, the attorneys at Strike & Techel are familiar with the process and able to help.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2010-2011 · All Rights Reserved ·