Category archives for “Laws”

Compliance Check-In: 2014 TTB Beverage Sample Program Results

February 02, 2015

Each year, the Alcohol and Tobacco Tax and Trade Bureau (TTB), conducts a random sampling of alcoholic beverages, known as the Alcohol Beverage Sample Program. TTB agents purchase alcohol products from retail stores and take them back to the TTB lab for review. The survey identifies compliance issues with the tested beverages, including incorrect alcohol content levels, and Certificate of Label Approval (COLA) discrepancies. The TTB recently released the results of their 2014 review, finding 139 out of 450 total products sampled to be non-compliant.

The most commonly identified issue was mislabeled alcohol percent by volume (ABV), in which the ABV stated on the label was either above or below the actual tested alcohol content. In distilled spirits products, 42 of the 190 beverages sampled were found to contain an ABV over the advertised content, while 14 products contained a lower ABV than advertised. Aside from misleading the consumer, incorrect ABVs can lead to regulatory action from federal tax authorities if the actual alcohol content would place the product in a different tax class.

Another common compliance issue was a discrepancy between the product’s label information and the information listed on the product’s COLA. When a bottler or importer applies for label approval with the TTB, they are issued a COLA and their product’s label must match the information provided on their COLA application (with the exception of some limited information which can be changed without a new COLA). Of the 139 non-compliant products, 40 had labels with missing or added information that did not match their approved COLA.

Other prevalent compliance issues included no COLA for the product, errors in the mandatory government warning message, and incorrect statements of class or type of alcohol. Possible TTB actions in response to incorrectly labeled products could include monetary fines and other regulatory penalties, and at a minimum, would require that the non-compliant labels be corrected. To see the full results of the sample program, click here.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2015 · All Rights Reserved ·


Prescriptions for Alcohol

December 04, 2014

In honor of Repeal Day, partner Kate Hardy agreed to share these fun pieces from her collection of Prohibition-era alcohol prescriptions. One prescribes whisky for the treatment of anorexia, and the others prescribe wine and whisky for unknown ailments. The directions for usage seem reasonable enough: take a pint in a wine glass every four hours, or mix it in eggnog. One of the prescriptions is for “Vin Gallici,” a contemporary of the also often prescribed “Spiritus Frumenti.” These are liquids more commonly referred to as wine and whisky. They were used in many prescriptions during Prohibition, possibly in the hope that they would look more medicinal if they were in Latin.

Liquor Prescription Stub

Prescription form for medicinal liquor

Liquor Prescription Stub

Prescription form for medicinal liquor

Form with stub

Prescription

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·


What is in the Bottle? Rules for California Appellations on Wine Labels

November 10, 2014

Appellations of origin are the place names that describe where the grapes that make up a given wine were grown. There are rules controlling the statement of appellation on the label, all of which are aimed at making sure that the label of the product accurately reflects what is inside the bottle. Most of the appellation labeling rules are in the Code of Federal Regulations at 27 CFR Part 4, but state law must also be considered, and can sometimes be more limiting than the federal rules.

Appellations are required on wines if the label also includes a varietal designation or a vintage year (27 CFR 4.34(b)). The chart below lists some of the basics on appellations for wines made from California grapes.

Federal Rules

Appellation on Label What is in the Bottle?
California 75% of the fruit must be from California and the wine must be finished within California or an adjoining state. (27 CFR 4.25)
A County in California 75% of the fruit has to be from the county and the wine has to be finished in California. (27 CFR 4.25)
Two or Three Counties in California All of the fruit has to come from the listed counties, the percentage of fruit from each county has to be listed on the label, and the wine has to be finished in California. No more than three counties can be listed. (27 CFR 4.25)
An American Viticultural Area (AVA) in California AVAs are specific geographic areas approved by the TTB. A list of all of the AVAs in the country is available here. 85% of the fruit has to come from the AVA and the wine has to be finished in California. (27 CFR 4.25)


Special California Requirements

Appellation on Label Special California Rule
“California” or any geographical subdivision of California (including a county or two or three counties) 100% of fruit must come from California. (Cal. Code Regs., tit. 17, § 17015). This rule is more specific than the federal rules, and means that any wine with a California appellation of any kind must be made from 100% California fruit.
“Sonoma County” Labels MUST say this if also labeled with an AVA entirely within Sonoma County. (Cal. Bus. & Prof. Code 25246)
“Napa Valley” Labels MUST say this if also labeled with an AVA entirely within Napa County. (Cal. Bus. & Prof. Code 25240)
“Lodi” Labels MUST say this if also labeled with an AVA entirely within the Lodi AVA (Cal. Bus. & Prof. Code 25245)
“Paso Robles” Labels MUST say this if also labeled with an AVA entirely within the Paso Robles AVA (Cal. Bus. & Prof. Code 25244)
“Napa”, “Sonoma” and any AVA in Napa County The rules for using “Napa,” “Sonoma,” and any AVAs in Napa are especially strict. Those terms cannot appear on the labels unless the wine in the bottle qualifies for use of the term under the federal labeling regulations.(Cal. Bus. & Prof. Code 25241, 25242 and 27 CFR 4.25)
Counties of Sonoma, Napa, Mendocino, Lake, Santa Clara, Santa Cruz, Alameda, San Benito, Solano, San Luis Obispo, Contra Costa, Monterey or Marin Any written representation (e.g., labels, advertising, company letterhead, etc.) that a wine is produced entirely from grapes grown in these counties must be true. (Cal. Bus. & Prof. Code 25237)
“California Central Coast Counties Dry Wine” This designation can only appear on a label if all of the grapes are from the counties of Sonoma, Napa, Mendocino, Lake, Santa Clara, Santa Cruz, Alameda, San Benito, Solano San Luis Obispo, Contra Costa, Monterey or Marin. (Cal. Bus. & Prof. Code 25236)

Related Labeling Considerations

The appellation rules noted above are intertwined with other federal labeling regulations, which may also come into play. For example, if a label includes a varietal and an appellation, 75% of the grapes used in the wine must be of the stated grape type and all of those grapes must come from the stated appellation. (27 CFR 4.23) If the label includes a vintage year and an appellation, 85% of the grapes in the wine must be from the stated vintage year – and if the appellation is an AVA, the percentage requirement rises to 95%. (27 CFR 4.27)

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·


More New York Industry Guidance on Limited Availability, Brand Registration and more

June 03, 2014

Following our blog post on May 6 (http://strikeandtechel.com/imbiblog/nysla-expands-suppliers-ability-to-entertain-consumers/), regarding the new advisory from New York covering supplier events, here are some more advisories recently published by New York. The advisories summarized here cover limited availability items and closeout sales, new brand registration rules, growler information for beer and cider, and the use of third party agents for consumer tastings.

Limited Availability Items – #2014-5

New York is one of a number of states around the country which continues to require its wholesalers to post prices for wine and spirits around five weeks in advance of sale. The retail posted pricing (from in-state manufacturers and wholesalers to retailers) is available to any retailer who wants to buy the products at the posted price. In the case of products with limited availability, or in the case of closeout sales with limited inventory, the SLA published an advisory in 2013 and now replaces it with this one.

A limited availability item is one where the New York manufacturer or wholesaler believes that demand will exceed supply. As an exception to the general, and strongly enforced, rule against channel pricing, limited availability items can be allocated differently between on- and off-premises retail buyers. A closeout sale occurs when the manufacturer or wholesaler intends to sell its entire remaining inventory of an older or seasonal item at a price at least 10% lower than the last posted price.

In the case of limited availability items, the SLA is switching over the whole current price posting system to create a new category for these types of items. The new system will allow a manufacturer or wholesaler to indicate how it will allocate limited availability items. The system will also allow a manufacturer or wholesaler to move items to limited availability after prices have been posted if there is an exceptional event like a high score from a trade or consumer publication or a celebrity endorsement. In the advisory, the SLA gives a number of examples of allocation methods which are permitted.

Brand Label Registration – #2014-7

In addition to federal certificate of label approval (COLA) requirements from the Alcohol and Tobacco Tax and Trade Bureau (TTB), New York requires brand labels to be registered with the state for almost all alcoholic beverages. Wines over 7% alcohol which have a COLA do not generally need to be registered. Many of the changes in the new advisory parallel recent TTB changes allowing a number of label alterations without requiring a new COLA.

Brand labels must contain the brand or trade name, the class and type of alcoholic beverage, the net contents and other labeling information required for a COLA. If there is any change to the brand name, the flavor description, age or geographic appellation, or if qualifiers like “kosher” or “organic” are added to a label, a new registration must be obtained. If the alcoholic content of a brand registered product changes more than 1.5%, or 0.5% in the case of a cider or a “wine product,” a new registration must be obtained. Unlike wine, “wine products” can be sold in grocery stores if they meet the state-specific definition, which requires things like carbonation and added flavoring materials. Registrations are filed by the brand owner, if they are a New York licensee, or otherwise by the New York wholesaler appointed by the brand owner to post prices for and sell the product.

Brand label registrations are valid for a set calendar year depending on the type of alcoholic beverage. Current registrations will remain in effect until they expire and will then be transitioned to the new schedule. There will be additional use-up periods allowed for non-compliant products.

Private labels owned by retailers who sell them exclusively are exempt from price posting requirements. The labels do not have to contain the retailer’s name, but the brand name must belong to the retailer or the retailer must have the legal right to use the name. A retailer can license the brand name from another entity but cannot license a brand name belonging to a manufacturer or wholesaler. The use of terms like “exclusively bottled for” or “exclusive to” cannot be used to try and create a private brand label for a retailer.

Growlers – #2014-11

The advisory covers the sale of beer and cider in growlers by off premise retailers authorized to sell those beverages and confirms that liquor and wine cannot be sold in growlers in New York. In the case of beer and cider, either the consumer can provide the container or the retailer can. Due to local open container laws, retailers serving growlers should provide sealed containers where applicable.

Authorized Agents for Tastings and Bottle Sales – #2014-13

Certain New York licensees, and certain out-of-state suppliers with supplier marketing permits, are allowed to provide tastings in accordance with an advisory published in July 2013. This new advisory confirms that the licensee or supplier can use another manufacturer or wholesaler licensee as its agent for such a tasting. The only exception is that a beer wholesaler is not allowed to act as an agent for a brewer.

Imbiblog is published for general informational purposes only and is not intended as legal advice. Copyright © 2014 · All Rights Reserved ·


TTB Allows Beer Returns Based on Freshness Dating

December 19, 2012

In response a request from industry members, the Alcohol and Tobacco Tax and Trade Bureau (“TTB”) recently issued Ruling 2012-4, which addresses whether brewers may require wholesalers to pull beer from retailers that is past its freshness date and replace it with fresh beer. Many beers now include freshness dates, and some brewers ask distributors to remove beer from the retail market that is past its freshness date. Brewers argue that this ensures that consumers get fresh product, but the practice is arguably at odds with laws prohibiting consignment sales.

The FAA act makes it unlawful for industry members, including beer producers, importers, and wholesalers, to sell, offer for sale, or contract to sell to any retailer on consignment, under conditional sale, with the privilege of return, or on any basis otherwise than a bona fide sale. See 27 U.S.C. § 205(d). There are limited exceptions to this prohibition, but only for those “ordinary and usual commercial reasons” included in 27 C.F.R. §§ 11.32 – 39. The limited exceptions when an industry member may accept a return include: a) defective product, b) shipment error, c) change in law preventing the sale of a product, d) termination of the buyer’s business or franchise, e) change in product from that held in inventory, and f) possible spoilage of product during the off-season of a seasonal retailer.

None of the exceptions to the consignment sales law clearly applies to returns based on freshness dating, thus prompting the TTB’s Ruling. The Ruling makes clear that under certain conditions, returns based on freshness dating are permitted under the exception for “defective products” found in 27 C.F.R. § 11.32. Those conditions are as follows:

- The brewer has policies and procedures in place that specify the date after which the retailer must pull the product;

- The brewer’s freshness return/exchange policies and procedures are readily verifiable and consistently followed by the brewer;

- The container has identifying markings that correspond with this date; and

- The malt beverage product pulled by the retailer may not re-enter the retail marketplace.

Finally, the TTB noted that wholesalers may not force retailers to overstock the wholesaler’s products under the pretext that the retailer may exchange product based on the freshness date, and that such practices would violate consignment sale and tied-house laws.

Contact one of the attorneys at Strike & Techel if you have any questions about TTB rules and regulations.

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


California’s New Online Sales Tax Law Could Impact California Wine Purchases

July 01, 2011

Earlier this week, California legislators passed a law that requires large internet retailers to collect sales tax for orders placed from California customers. Most of the publicity surrounding the bill has been on large internet retailers like Amazon.com and Overstock.com, which have strongly opposed the law, and are now beginning the process of limiting their presence in California in order to avoid needing to charge sales tax on California purchases. However, the law is not limited to these major retailers, as it stands to affect consumers who order alcohol online as well as out-of-state alcohol retailers who do substantial business in the state.

Two primary factors will most impact whether an alcohol retailer and its consumers will be affected by the new law. First, the law is aimed at large retailers, and only applies only to businesses that have sales within California in excess of $500,000 over the previous 12 months. This likely means that orders from small wineries would remain untaxed, while large internet retailers will probably need to start charging sales tax to California consumers.

Second, the law applies only to retailers that have a “substantial nexus” in California. The precise meaning of this term has already been the source of considerable confusion, and large retailers like Amazon.com have begun breaking ties with California-based affiliates and entities that provide “click-throughs” to their site, so that they are not affected by the law. How this provision affects out-of-state alcohol retailers remains unclear. Retailers that are definitely subject to the law are those with a place of business in California, including an office, place of distribution, sales room, or warehouse. Also, retailers with representatives or salespeople in California will be subject to the law. What remains unknown is whether retailers without any such contacts will be required to collect sales tax on shipments into the state. Stay tuned.

California’s new law went into effect on July 1, 2011, and is codified at Cal. Rev. & Tax Code § 6203.

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


Privatization Fight Still Remains Strong in Washington

January 24, 2011

Although Washington State’s two privatization measures, Initiatives 1100 and 1105, were voted down in the November 2010 elections, privatization proponents have not yet given up the fight. A new bill, SB 5111, is currently presented by Washington Senators Steve Hobbs (D), Curtis King (R), Steve Litzow (R), Phil Rockefeller (D), and Tim Sheldon (D). It was introduced on January 14, 2011 and then referred to the Committee on Labor, Commerce & Consumer Protection. The bill would allow voters the opportunity to once again vote on privatizing liquor sales in Washington. Currently, liquor sales are handled by the Washington State Liquor Control Board (“WSLCB”). If the bill passes, the WSLCB’s liquor assets will be sold off and all funds deposited into the general state fund; the state will, however, maintain a revenue stream from the sale of alcohol.

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


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