AAIAC

The Alliance of Alcohol Industry Attorneys & Consultants is a select organization of alcoholic beverage licensing and compliance professionals.

When and How to get a COLA Waiver

Obtaining a COLA (Certificate of Label Approval) from the TTB can be a time-consuming process that’s difficult to sync with the rest of your operations. But here’s a little-known fact: if you are importing alcoholic beverages for use at a tradeshow, or to give out samples for soliciting orders, you may be eligible for a COLA waiver.

COLA waivers can be requested by submitting a formal letter to the TTB. The letter must guarantee that the products in question will meet these compliance requirements before reaching a U.S. port:
• The products will be imported by the holder of a Federal Importer’s Basic Permit (you also need to include the permit number)
• All applicable taxes and duties will be paid
• The imported products will have the following labels:
o Government Warning Statement (Code of Federal Regulations, Title 27, Subpart 16)
o Purpose label (e.g. “For Trade Show Purposes Only – Not for Sale”)
o A sulfites disclaimer for eligible wines (e.g. “CONTAINS SULFITES”)

The letter also has to provide information regarding the details of the products you need waivers for, including:
• The purpose for importing and for requesting a waiver (for tradeshows or other events, include dates and locations)
• The class, type, and quantity of each alcoholic beverage product
• The country of origin for each product
• The brand name of each product

The TTB accepts these waiver requests by both email and fax (202-453-2970). To make the process even faster and easier, I recommend using this official template provided by the TTB (this opens a MS Word file you can save and modify).

Original author: Robert Pinson
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Alcoholic Beverages and FDA Jurisdiction

Alcoholic Beverages and FDA Jurisdiction

Alcoholic Beverages and FDA Jurisdiction

Even though the primary regulatory authority for the alcoholic beverages is the TTB, the FDA does have some power in the industry. Since many alcohol manufacturers aren’t sure when or where they may be subject to FDA regulations, I thought I’d shed some light on the agency.

Currently, the TTB and the FDA operate together under a non-binding Memorandum of Understanding, which basically outlines when, why, and how the TTB refers issues to the FDA. These issues are largely related to health and safety. For example, if you submit a formula to the TTB for a distilled spirit containing an unusual ingredient, the TTB will deny your application unless you can provide documentation certifying that the ingredient is Generally Regarded as Safe (GRAS) by the FDA for use in alcoholic beverages. You may recall the big industry upset circa 2010 when the FDA declared caffeine as an unsafe food additive for alcoholic beverages.

Beyond issuing certificates and declarations, there are circumstances where the FDA has more active authority. As part of the agency’s mission to promote food items that are properly labeled and safe for consumption, the FDA can take action in cases of adulterated or contaminated food products – including domestic and imported alcoholic beverages. Specifically, if alcoholic beverages have been reported as adulterated, the FDA has the power to seize those products, refuse their importation, and actively discourage their distribution through consumer markets. Generally, this happens when a manufacturer has been slow or ineffective at implementing a product recall.

In addition to formulation approvals, food safety compliance, and product recall procedures, alcohol manufacturers may also need to interact with the FDA on issues including:
• Registration of food facilities
• Labeling of wines and ciders containing less than 7% alcohol by volume
• Labeling of beers that do not contain barley or hops
• Facility inspections

If you have any questions about FDA jurisdiction in your business or other regulatory compliance issues, I’d be happy to help.

Original author: Robert Pinson
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Are Alcohol Producers & Spent Grains Exempt from the latest FSMA?

Like any manufacturing process, the production of alcoholic beverages creates byproducts. After mashing, grains are lautered to separate the wort from residual grain. While the wort continues on in the production of the spirit, the leftover spent grains have no further use. But rather than throw them away, brewers commonly sell or donate the spent grain to farmers who use it as fertilizer or livestock feed.

640px-Spent_grain

Spent Grain

This environmentally-friendly exchange has been a popular practice for centuries, and continues today. However, I still get lots of questions from newer breweries about spent grains, compliance issues, and oversight from the TTB or FDA. This confusion likely stems from the upheaval that the entire alcohol beverage industry went through during late-2013 early-2014 when the FDA proposed some new rules in an update to the Food Safety Modernization Act (FSMA).

Essentially, the FDA proposed rules to better regulate the quality assurance of animal food by requiring “that certain facilities establish and implement hazard analysis and risk-based preventive controls for food for animals.” This would place an extremely expensive and cumbersome burden on breweries across the nation to bring their facilities, processes, and staff all up to code.

To make a long story short: all the trade associations and congress members backed by breweries, wineries, and distilleries spoke out against the proposal, the FDA back-pedaled and added an exemption to section 116 of the FSMA for alcohol-related facilities, and the producers and consumers of spent grains all lived happily ever after. Coincidentally, the latest iteration of the FSMA has compliance deadlines starting this month – but it’s nothing that the manufacturers of fine spirits need to worry about any more.

I’d toast to that.

Original author: Robert Pinson
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Two Florida Breweries Clash Over Trademark Dispute

due-south-brewingIn an interesting combination of alcoholic beverage law and IP law, two breweries in the state of Florida recently butted heads over a trademark dispute. It started when Due South Brewing of Boynton Beach – which has a flagship series of IPAs which range from Category 3-5 – sent a cease and desist letter to Big Storm Brewing claiming that the Tampa-based brewery’s “Hurricane Series” of Belgian-style beers, labeled Categories 1-5, violated Due South’s common law trademark rights to the terms “Category 3” and “Category 4.”

While all beer labels must pass through the TTB before hitting the market, the TTB only makes sure that labels meet the compliance requirements on their checklist. They’re not checking for trademark infringement, so this type of dispute is not unheard of in the alcoholic beverage industry. It sounds like Due South is making a mountain out of a molehill, since a generic-sounding trademark on a completely different style of beer could have a tough time in court against fair-use arguments. But, there is a legal basis for their claim.

Firstly, Due South’s “Category” series is one of its most popular lines. The “Category” trademark is very valuable to them, so it’s in their best interest to take potential infringements seriously. If they don’t, it potentially becomes much easier in future disputes for imitators to argue that their use of the trademark is legitimate.

Fun fact: Due South’s Category 5 IPA placed in multiple categories of the Best Florida Beer Championships of 2014 and 2015. If the brewery’s trademark hadn’t expired last April, they surely would have included it in their claim.

Secondly, a trademark infringement claim must prove that the other party’s use of the trademark is likely to confuse consumers. In their cease and desist letter, Due South claims that they received more than 30 reports of “actual consumer confusion and/or diminution of consumer goodwill” in less than a week.

big-storm-logoFortunately for them, Big Storm made the smartest decision in this scenario: they consulted with a law firm. In a dense, six page response, they laid defensive groundwork citing fair-use, questioning the strength of the trademark, and denying the likelihood of consumer confusion. The legal exchange between the law firms representing the breweries can be read here.

In response, Due South appears to have dropped the issue for now to avoid potentially drawn out litigation. Overall, this serves as an excellent lesson for breweries and the benefits of retaining legal counsel.

Original author: Robert Pinson
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UPDATE: Hotels CANNOT Sell Bottles of Booze in Tennessee

UPDATE: Apparently we had a miscommunication with the ABC.  Hotels CANNOT sell spirits by the bottle.  Hotels can sell wine by the bottle in connection with food service, including room service.  There is no change in the policy.

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Old dogs can learn new tricks.  Today, we found out that the Tennessee ABC has been quietly advising that hotels can sell spirits by the bottle at gift shops, with some conditions.

Tennessee law generally prohibits the sale of bottles of spirits at any business holding an on-premise liquor license, like a restaurant or bar.  You cannot order a bottle of Jack Daniels to your table at a honky tonk.  Only wine can be sold by the bottle.

Hotels are a little different.  You have a room.  What you do in your room is your own business.  The ABC apparently recognized this difference.

Here are the rules for bottle sales, as we understand them:

The bottle must be opened by a hotel employee.  Guests cannot purchase a sealed bottle. The bottles must be priced at or above cost.  Ensure that the bottle is scheduled on your price schedule filed with Revenue. The hotel must pay the liquor-by-the-drink tax. The bottle must be consumed on property. We strongly encourage hotels to post signage instructing that alcohol must be consumed in the hotel and cannot be taken off property. The hotel must ID check to ensure the purchaser is 21 or over.

It logically follows that a hotel can also sell a bottle of spirits through room service.  We are cautiously advising hotels that it is legal to sell a bottle of Jack to a room, using the same guidelines.

Instead of signage, we recommend that the room service include a card that says that alcohol must be consumed in the hotel and cannot be taken off property.  We think most hotels will prefer to include a card that says that alcohol must be consumed in your room.  Who wants guests wandering around the property with drinks from their room?

Brings to mind a Van Halen classic, Take Your Whiskey Home:

Well, my baby, she don’t want me around
She said she’s tired of watchin’ me fall down
She wants the good life (ow) only the best
But I like that bottle better than the rest

Original author: William T. Cheek III
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Sin Taxes on Alcohol and the Revenue Generated

With a presidential election upcoming, you can expect tax policies to be subject to heightened scrutiny. Proposing a tax increase of any kind is usually bad for any delegate’s political career – most of the time. Specifically, I’m talking about the so-called “sin taxes” that only apply to certain industries such as tobacco, gambling, and of course alcohol.

Increasing sin taxes is more or less acceptable to the public because part of their purpose to reduce the consumption of goods and services considered harmful. In some states, sin taxes are a major source of revenue. According to cost information website HowMuch.net, the state of Texas generated more than $1 billion in revenue from alcohol taxes in 2014. The runners-up were Florida, with $452 million and New York with $250 million.

That same year, Tennessee took in almost $148 million from alcohol taxes, accounting for about 1% of the states total tax revenue. I’m no tax expert, but that sounds low to me. Perhaps the state is comparatively lenient on the alcohol industry since producers of fine spirits are part of the state’s cultural history.

But that doesn’t mean those producers have it easy when it comes to taxes. They’re also subject to federal excise taxes (FET) on distilled spirits – which account for more than one-third of the shelf price of most alcohol brands when combined with state-levied taxes. Luckily, there is a chance those FETs could be reduced if the issue is given enough support. That’s something to keep in mind during this political season.

Original author: Robert Pinson
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The Beer Institute Announces Rollout of Nutrition Labels

FDA_Nutrition_Facts_Label_AngleAlcoholic beverages have had this regulatory quirk where, even though they are considered foodstuffs, they are not required to have nutritional fact labels or ingredients lists. The reason for this is because alcoholic beverages are regulated by the TTB instead of the FDA. To date, the TTB has not put any major pressure on alcohol producers to label their products – but thanks to the largest trade association in the business, you may start to see nutrition facts for alcohol becoming widespread.

Earlier this month, the Beer Institute announced “The Brewers’ Voluntary Disclosure Initiative,” which aims to label beers with nutritional information – including a list of ingredients, serving size, calories, carbohydrates, fat, protein, and ABV.

As for how these labels should look, the Beer Institute is leaving that up to the individual breweries. The guidelines indicate that nutritional disclosures can appear as a label on the bottle, a reference to a website, or a QR code. Since the information provided is meant to be voluntary, the types of information disclosed will vary. For example, I can imagine lots of breweries not wanting to include an ingredients list.

Members of the Beer Institute are being encouraged to achieve compliance with the initiative by 2020. Several major breweries have already agreed to follow these guidelines, including:

Busch MillerCoors HeinekenUSA Constellation Brands Beer Division North American Breweries Craft Brew Alliance

Collectively, these breweries produce more than 81% of the volume of beer sold in the US – so you can expect other breweries to follow suit to stay competitive in the market.

Original author: Robert Pinson
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Tennessee Liquor Industry Big Player in Money and Politics – Again

We could not help noticing the enormous amounts of money donated by liquor industry associations in the second quarter of 2016.      Nothing really new, but it confirms just how important the state political process is to the wholesalers and retailers, which were massively impacted by wine in groceries (WIGS) and scored a number of victories in the final WIGS law.

According to our friends at The Tennessee Journal, the liquor wholesalers topped the list of all PACS with $106,000 contributed in the second quarter.  Although retail liquor stores were 11th on the list at $39,500, their stellar lobbyists – McMahan Winstead – donated an additional $45,250.

In comparison, the second highest contributor are the Teachers at $63,450.  The hotel restaurant association logged $42,500.

Reminds us of one of our favorite lines from a movie – Richard Pryor in the 1970’s classic “Car Wash”

Cause money walks…..and bullshit talks…

Original author: William T. Cheek III
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Jack Daniel’s Clarifies its Corporate History

Jack Daniels Family of BrandsWhen it comes to Tennessee’s proud history of whisky distilling, one thing that comes to mind for most folks is Jack Daniels Old No. 7. The legendary Jack Daniel Distillery in Lynchburg celebrates its 150th anniversary this year, and they’re using the occasion to officially clarify one of the formative points of the founder’s history – who gave him his start as one of America’s greatest distillers.

If you’ve ever taken a tour of the distillery, the origin of Jack Daniels is summed up as: when he was still a boy, Jasper Newton “Jack” Daniel was sent to work for Rev. Dan Call – a Lutheran preacher who also ran a general store and distillery. Call taught young Jack how to run the whisky still, and the rest is history. But, that’s not the whole story. Call, essentially running three business, was a busy man and actually instructed his slave and Master Distiller, Nearis Green, to teach Jack everything he knew.

Many historians, whisky enthusiasts, and Tennessee locals have known about Nearis Green for some time. In fact, a 1967 biography, Jack Daniel’s Legacy by Ben A. Green (no relation), quotes Call saying, “Uncle Nearest [sic] is the best whiskey maker that I know of.” However, the spotty record keeping of frontier history (making the details of Green’s involvement unclear) combined with the brand never addressing it during tours or in its marketing have kept the story from being widely known.

According to Phil Epps, global brand director for Jack Daniel’s, there had been “no conscious decision” to whitewash Green from history, but “as we dug into it we realized it was something that we could be proud of.” Now, fans of Old No. 7 will start hearing about Green in the distillery’s marketing campaigns and during facility tours.

This news got me thinking – do Green’s descendants have any claim on the rights to his likeness? That’s probably a question better suited for my colleague and personality rights expert, Stephen Zralek.

Original author: Robert Pinson
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What Kinds of Wine Can a Grocery Store Sell in Tennessee

Food stores licensed to sell wine in Tennessee under WIGS can only stock certain kinds of wine.  As WIGS has rolled out, confusion over what can be sold at a grocery has been a major issue.

There are no final rules yet from the ABC – its early and we do not expect final rules yet – but here is our summary of what wine we believe a grocery store can sell in Tennessee:

Wine.  The law defines wine as being the product of fermented grapes.  Think Chardonnay, Merlot, Champagne. Blackberry and other Fruit Wines.  As long as the wine is made from fermented berries, groceries can sell it.  Flavored fruit wines are probably not allowed. Wine Coolers.  This is a product being discussed, but for now, wine coolers can be sold by grocery stores. Beer up to 5% by weight, which is roughly 6.4% by volume.  This goes up to 8% by weight, roughly 10% by volume, starting January 1, 2017.

A grocery cannot sell:

Fortified alcoholic beverages, like port alcoholic beverages and sherry, unless the wine is under 18% alcohol by volume MD 20/20, Thunderbird, Night Train and Wild Irish Rose are all under the maximum strength of alcoholic beverages and can be sold at food stores Alcohol derived from alcoholic beverages that has had substantial changes to the alcoholic beverages due to the addition of flavorings and additives Sake Spirits like whiskey, vodka and run Liqueurs and cordials like Frangelico, Schnapps, Baileys and Grand Marnier Beer over 5% alcohol by weight or 6.4% alcohol by volume

Our buddy Willa reminds us of the Gordon Lightfoot tune Blackberry Wine:

There’s a new moon risin’ and the wind sings its old song
Pass it on over it’s a sin to be sober too long

Original author: William T. Cheek III
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WIGS 20% Minimum Markup Massively Mystifies Tennessee Groceries

Wine in groceries has been legal in Tennessee for just 18 days.  But the WIGS law seems to have raised more questions than answers.

The statutory 20% minimum markup has been a constant source of questions for grocers.  Here is one of our favorites:

When the wholesale price of wine drops, what is the minimum price that can be charged?

For example, say you have purchased wine at $10 per bottle.  You price the wine at $12, the lowest legal price.

The wholesaler offers you the same wine for $9 a bottle.  You can price this at $10.80.  You buy the $9 wine, but have wine on the shelves that you purchased at $10.

Can you sell the all of the wine at $10.80, including the wine you purchased at $10?

Our best guess is yes.  We think the last invoice price will be the rule for WIGS pricing.  Look to the last invoice price and make sure the price is marked up at least 20%.

The Eagles comes to mind:

Wastin’ our time
On cheap talk and wine

There is no guidance from the ABC yet.  Given the huge number of WIGS questions, we do not fault the ABC.  Things are moving at the speed of light.

 

Original author: William T. Cheek III
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What is Glycol and why is it Required in Brewing Beer?

What is Glycol and why is it Required in Brewing Beer?

What is Glycol and why is it Required in Brewing Beer?

In the brewing industry, glycol is a necessary part of day-to-day operations. It’s used in chiller systems that run throughout fermentation tanks and conditioning tanks to control temperature during fermentation reactions. In the service side of the industry, glycol is also used for maintaining temperature of draft beer dispensing.

To be clear, we’re not talking about toxic ethylene glycol. And we’re definitely not talking about adding any kind of glycol to alcoholic beverages – which was the center of a huge scandal in 1985.

Beer brewers only use propylene glycol, and not just any kind. Even though it’s known as “food-grade antifreeze,” there are many inexpensive, low-quality glycol solutions – most of which are not designed for a brewery’s recirculation system and run the risk of causing equipment damage. For compliance and superior performance, breweries use USP-Grade Propylene Glycol. USP (United States Pharmacopeia) is the official, standard-setting authority for medicines, supplements, and health care products in the United States. Propylene glycol with USP-Grade certification assures quality and safety for use in the food and beverage industry.

In order to achieve the desired temperature, brewers must use the proper ratio of glycol to water in the chiller system. Too much glycol will cost more and limit efficiency of the chiller, while not enough glycol could lead to freezing and damage the chiller system if left unchecked.

The average brewery uses an approximate 35% glycol to 65% water solution – but this can vary depending on the ambient temperature of the facility and the type of product being fermented. To maximize the efficiency and extend the life of your chiller system, keep up with annual inspections and consult with your equipment manufacturer for optimal glycol/water ratios and preventative maintenance.

Original author: Robert Pinson
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Hot Off the Press: Tennessee ABC Issues FAQS for WIGS

Moments ago, TABC Director Clay Byrd released final guidance for wine in grocery stores, which we affectionately call WIGS.  Here is your very own copy.

WIGS has been live for consumers for 11 days, but the euphoria is still palpable.  We hear the Pointer Sisters classic:

I’m so excited, and I just can’t hide it
I’m about to lose control and I think I like it

Original author: William T. Cheek III
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Shot Gun Marriage: Tennessee Department of Revenue Releases Guide for Terminating Your Liquor Wholesaler

Shot gun marriage pretty much sums it up.  For distilleries, wineries and breweries, choosing a wholesaler in Tennessee is like marrying your high school sweat heart.  She may look great when you are in high school, but as you grow older, you have to ask “Did I find the right partner for life.”

Unlike your high school sweat heart, divorce is not really an option for your Tennessee wholesaler.  Tennessee law protects wholesalers and makes terminating the relationship practically impossible.

The Tennessee Department of Revenue recently issued a guideline for terminating a wholesale contract.  Download a copy here Guide.

Wholesale termination reminds us of the J. Geils Band tune:

You love her but she loves him
And he loves somebody else you just can’t win
And so it goes till the day you die
This thing they call love it’s gonna make you cry
I’ve had the blues the reds and the pinks
One thing for sure
Love stinks yeah, yeah
(Love stinks)

In order to start the termination process, a manufacturer has to tell its wholesaler in writing that it wants to terminate the relationship and provide specific reasons why the wholesaler is inadequate. The wholesaler has 30 days to fix the problems.

This is not something any reasonable business person would do. Why tell someone you cannot divorce that you do not like them and tell them why?

We know of no manufacturer that has terminated a wholesaler contract in Tennessee. Although scuffles between manufacturers and wholesalers sometimes result in trading brands, between wholesalers, the brand termination process in Tennessee is heavily weighted in favor of the wholesaler.

Original author: William T. Cheek III
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