By Brian D. Kaider, Esq.
On November 26, 2018, the TTB published in the Federal Register a notice of proposed rulemaking, titled, Modernization of the Labeling and Advertising Regulations for Wine, Distilled Spirits, and Malt Beverages (83 Fed. Reg. 60,609). The purpose of these proposed rules is to “simplify and clarify regulatory standards, incorporate guidance documents and current policy into the regulations, and reduce the regulatory burden on industry members where possible.”
When the federal government wants to change rules Americans are subject to, they must first publish the proposed rules and provide a period of time for the public to comment and make suggestions. The government agency is required to review and consider all suggestions before implementing a final rule.
This process is not a formality. TTB wants the rules to adequately protect the public while being as fair and unobtrusive as possible to industry members. It is actively seeking comment on many issues in this notice. As members of the industry affected by these rules, winery owners would be well-advised to review TTB’s proposals and provide feedback before the March 26, 2019 deadline.
This article is meant to introduce some of the key issues with which TTB is grappling. For more detail, please see the full proposal (linked at the end of the article).
Organization
One of the most fundamental proposed changes is a reorganization of parts. Currently 27 CFR parts 4, 5, and 7 relate to wine, distilled spirits, and malt beverages, respectively. TTB is proposing to keep those parts, but to consolidate all advertising issues to a new part 14. They will also make the organization of parts 4, 5, and 7 more uniform. Subjects will be in the same order and the same section numbers will be used within each part. For example, regulations identifying the mandatory information for wine, spirits, and beer labels will be in sections 4.63, 5.63, and 7.63, respectively.
COLAs
In section 4.14.1, TTB is proposing to change the definition of “COLA.” Currently, only changes specifically authorized on the COLA form itself may be made to an approved label without filing for a new COLA. The new definition would allow TTB to authorize additional changes in other ways, such as through issuance of a guidance document on the TTB website.
Certificates of Exemption
Current TTB practice enables an applicant to obtain a certificate of exemption from label approval conditioned on the applicant’s agreement to add the statement, “For sale in [name of State] only” to the label. Proposed rule 4.23 will require the applicant to include the statement on the label submitted with the application.
Personalized Labels
Proposed rule 4.29 clarifies TTB policy on “personalized labels,” labels on which certain changes may be made without having to resubmit the label for TTB approval. The personalized label may contain a personal message, picture, or other artwork specific to the consumer, such as for a wedding or anniversary. The COLA applicant must submit a template for the personalized label with a note as to the specific information that may change. Changes that discuss the wine itself, the alcohol content, or that include information inconsistent with the provisions of TTB regulations or other applicable law are not permitted.
Alteration of Labels
Proposed rules 4.42 and 4.43 describe, in detail, the circumstances when proprietors of bonded wine premises, importers, and certain others may relabel a wine product without obtaining separate permission from TTB for the relabeling activity. In all cases, the new label must be covered by a valid COLA. Industry members who would be affected by these rules are encouraged to thoroughly review the relevant areas of the proposed rules. TTB seeks comments on whether they will protect the integrity of labels in the marketplace without imposing undue burdens on the industry.
Mandatory Label Information – Packaging
Proposed rule 4.62 clarifies the requirements for open or closed packaging. Packaging such as a covering, carton, case, or carrier used for sale at retail (not shipping cartons) that require a consumer to open, rip, untie, unzip, or otherwise manipulate the package in order to view any mandatory information on the bottle is considered “closed packaging” and must include all mandatory information required to appear on the label. If a consumer could view all mandatory information on the container by merely lifting the container up, or if the packaging is transparent or designed such that all mandatory information can easily be read by the consumer, the packaging is considered “open” and may display any information not in conflict with the label on the container inside the packaging.
TTB seeks comment on the following three points: 1) whether it should require mandatory information to appear on open packaging when part of the label is obscured; 2) whether the proposed rules will require significant change to labels, containers, or packaging materials, and 3) whether the proposed revisions will provide better information to the consumer and make it easier to find mandatory information on labels, containers, and packages.
Prohibited Practices
TTB proposes to break this section into three parts:
- Restricted Labeling Statements
Proposed rule 4.87 loosens the restriction on using vineyard, orchard, farm, or ranch names. Current practice allows these names in the brand only if at least 95 percent of the wine was produced from fruit grown on the named property. If used as a trade name in the bottling address, the proposed rule will allow the name as the brand even if no grapes are grown on the property or even if there is no such property with that name.
Proposed rule 4.90 makes five changes to the current law relating to “multistate” appellations: 1) removes the requirement that the states be contiguous; 2) reduces the minimum percentage of grapes from the states named in the appellation from 100% to 85%; 3) removes the requirement that the percentage of the wine derived from grapes of each state be shown on the label 4) adds the requirement that the percentage of wine derived from grapes of a named origin be greater than the percentage from an unnamed origin; and 5) adds the requirement that the states be listed in descending order according to the percentage of wine derived from grapes grown in those states.
While proposed rule 4.90 appears to allow “multistate” appellations for noncontiguous states, proposed rule 4.135, prohibiting misleading references to the origin of wine, appears to contradict this rule. It explains, a wine made from grapes 50% from New York and 50% from Virginia would be ineligible for a multistate appellation because the states are not contiguous. TTB was unable to be reached for clarification in time for publication of this article.
- Prohibited Labeling Practices
In The Grapevine Magazine’s September 2017 issue, the article “Where Never Is Heard A Disparaging Word… Until Now” described the U.S. Supreme Court case, Matal v. Tam, wherein the Court ruled the Trademark Office could not refuse registration of a trademark considered disparaging to a group of people. The Court reasoned that registration of a trademark was not “government speech.” Further, it was concerned if it were to hold otherwise, “other systems of government registration could easily be characterized in the same way.” Thus, the article suggested TTB restrictions on COLA registrations containing “disparaging” content were likely unconstitutional under Tam.
TTB seems to agree. The language of former rule 4.38(f), incorporated into proposed rule 4.56, omits reference to disparaging content. Further, the proposed rules indicate Industry Circular 1963-23, “Use of Disparaging Themes or References in Alcoholic Beverage Advertising is Prohibited” was not incorporated into the proposed rules.
However, proposed rule 4.103 says, “[w]ine labels… may not contain any statement or representation that is obscene or indecent.” On December 15, 2017, the U.S. Court of Appeals for the Federal Circuit decided the case In re Brunetti, finding that in light of Matal v. Tam, the Lanham Act’s bar on registration of “immoral or scandalous” marks was unconstitutional, as well. Whether TTB has not yet determined the applicability of the In re Brunetti decision or will continue to deny COLA registrations containing “obscene or indecent” material until challenged in court remains to be seen.
- Labeling Practices Prohibited if Misleading
This subpart generally prohibits any statement or representation, irrespective of falsity, that is misleading to consumers as to the age, origin, identity, or other characteristics of the wine (see proposed rule 4.122, for example).
Proposed rule 4.124 prohibits false or misleading statements that disparage a competitor’s product. The rule does not preclude expressions of opinion, such as “We think our wine tastes better than any other.” By contrast, a statement like “We do not add arsenic to our wine,” although truthful, would be considered disparaging because it falsely implies other producers do.
Proposed rule 4.126 eliminates the blanket prohibition against the use of the American flag or symbols of the U.S. armed forces, provided the usage does not create the impression of an endorsement by, or affiliation with, the governmental entity represented.
Proposed rule 4.127 retains prohibitions against simulated government stamps, but only if the usage is misleading. TTB seeks comments on whether there is still a need for regulations on this issue.
Proposed rule 4.128 prohibits wine labels or packaging from containing a statement, design, or representation tending to create a false or misleading impression the wine is or contains a distilled spirit or malt beverage. While statements about aging wine in barrels previously used in the production of distilled spirits are acceptable, statements implying the product contains distilled spirits (such as ‘‘bourbon flavored wine’’) are prohibited as misleading. TTB solicits comments on whether the proposed rules adequately protect consumers and whether they will require changes to existing labels.
Proposed rule 4.211 allows bottlers and importers to provide TTB or customs officers with COLAs in photocopies, electronic copies, or records showing the TTB identification number of the approved COLA, rather than an original paper copy.
Dessert Wine
Without proposing a new rule, TTB requests comments about the designation “dessert wine.” Current rule 4.21 requires a dessert wine to be 14-24% alcohol. While rejecting applications for dessert wines below 14%, TTB has approved COLAs for such wines stating “may be served as dessert wine.” Because many consumers associate dessert wine more with the level of sweetness than with alcohol content, TTB requests comments from the public as to: 1) the use of “dessert wine” as a designation of alcohol content; 2) whether there is a more appropriate term for wines containing 14-24% ABV; 3) whether “light” wine to indicate alcohol content is consistent with industry and consumer understanding, and 4) whether the term “natural” wine is understood by the industry and consumers as being a wine with no added brandy and, if not, how the term “natural” is understood in relation to wine.
Citrus Wine
Proposed rule 4.145 incorporates all citrus wines into the category of fruit wines, eliminating citrus wine as a separate class. TTB requests comment as to whether this change would require the change to any existing labels.
Providing Feedback to TTB
TTB’s proposed rules involve many issues and details not summarized above. If you would like to provide feedback to TTB on one or more issues, the entire 132-page document can be found here: https://www.gpo.gov/fdsys/pkg/FR-2018-11-26/pdf/2018-24446.pdf. To submit your feedback, you may use the online comment form here: https://www.regulations.gov/comment?D=TTB-2018-0007-0001 or via U.S. Mail to the Director, Regulations and Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G Street NW, Box 12, Washington, DC 20005.
Brian Kaider is a principal of KaiderLaw, an intellectual property law firm with extensive experience in the craft beverage industry. He has represented clients from the smallest of start-up breweries to Fortune 500 corporations in the navigation of regulatory requirements, drafting and negotiating contracts, prosecuting trademark and patent applications, and complex commercial litigation. bkaider@kaiderlaw.com (240) 308-8032
