[Federal Register Volume 64, Number 26 (Tuesday, February 9, 1999)]
[Proposed Rules]
[Pages 6486-6489]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 99-3009]



[[Page 6485]]

_______________________________________________________________________

Part IV





Department of the Treasury





_______________________________________________________________________



Bureau of Alcohol, Tobacco and Firearms



_______________________________________________________________________



27 CFR Parts 4, 5, and 7



Prohibition of Certain Alcohol Beverage Containers and Standards of 
Fill for Distilled Spirits and Wine (98R-452P); Proposed Rule

  Federal Register / Vol. 64, No. 26 / Tuesday, February 9, 1999 / 
Proposed Rules  

[[Page 6486]]



DEPARTMENT OF THE TREASURY

Bureau of Alcohol, Tobacco and Firearms

27 CFR Parts 4, 5, and 7

[Notice No. 872]
RIN 1512-AB89


Prohibition of Certain Alcohol Beverage Containers and Standards 
of Fill for Distilled Spirits and Wine (98R-452P)

AGENCY: Bureau of Alcohol, Tobacco and Firearms (ATF), Department of 
the Treasury.

ACTION: Notice of proposed rulemaking (NPRM).

-----------------------------------------------------------------------

SUMMARY: The Bureau of Alcohol, Tobacco and Firearms proposes to amend 
regulations to clarify the standards of fill for distilled spirits and 
wine. ATF also proposes to amend regulations to prohibit certain 
alcohol beverage containers that are likely to mislead consumers as to 
the identity or character of the distilled spirits, wine, or malt 
beverage products or are likely to be confused with other (non-alcohol) 
food products. ATF proposes these changes to ensure consumer protection 
and to preclude administrative difficulties and jeopardy to the 
revenue. These proposed rules prohibit certain types of alcohol 
beverage containers. ATF is concerned that certain containers are 
likely to confuse consumers as to the nature of the product, especially 
those packages that are similar to those that contain ice cream, 
popsicles, squeeze-package frozen snacks, dairy creamers, or other non-
alcohol food products. ATF specifically requests comments on the 
clarity of this proposed rule and how it may be made easier to 
understand. ATF also requests alternative approaches to accomplish the 
objectives outlined in this notice.

DATES: Send your comments on or before April 12, 1999.

ADDRESSES: Send your comments in writing or via facsimile transmission, 
electronic mail, or through the ATF internet web site.

Where do I Send Written Comments?

    Send written comments to: Chief, Regulations Division, Bureau of 
Alcohol, Tobacco and Firearms, P.O. Box 50221, Washington, DC 20091-
0221 Notice No. 872. You may submit comments by facsimile transmission, 
e-mail, or by internet. You must follow specific instructions, see the 
detailed requirements in Supplementary Information--2. Public 
Participation--Written Comments.

Where do I Send Facsimile Comments?

    Submit comments of not more than three pages by facsimile 
transmission to (202) 927-8602.

Where do I Send Electronic Mail (e-mail) Comments?

    Submit e-mail comments to [email protected].

Where do I Send Comments to the ATF Homepage?

    Submit comments using the comment form provided with the online 
copy of the proposed rule on the ATF homepage web site at http://
www.atf.treas.gov/core/regulations/rules.htm.

FOR FURTHER INFORMATION CONTACT: William H. Foster, Regulations 
Division, (202) 927-8210, Bureau of Alcohol, Tobacco and Firearms, 650 
Massachusetts Avenue, NW, Washington, DC 20226. You may also write 
questions by e-mail to [email protected]. ATF will not 
accept comments on the proposal that are submitted to this address.

SUPPLEMENTARY INFORMATION:

1. Background

    The Bureau of Alcohol, Tobacco and Firearms is concerned that the 
use of certain containers in the packaging of alcohol beverages 
presents administrative difficulty for revenue collections and promotes 
consumer deception as to the contents of the alcohol beverage 
container. The use of these containers encourages complacency as to the 
dangers of both the abuse of alcohol beverages by all consumers and the 
consumption of alcohol beverages by underage persons. Existing 
regulations provide for standardized fill sizes for distilled spirits 
and wine. The standard sizes are intended to prevent consumer deception 
as to the quantity of product purchased and to facilitate the proper 
calculation of excise tax upon the products.
    Some producers have increasingly stretched the limits of these 
regulations by packaging their products in non-authorized-fill 
containers that are sold together as a single authorized standard of 
fill. In practice, these containers are then disbanded by retailers and 
sold by their individual (non-standard of fill) units. This ``aggregate 
packaging'' encourages inappropriate use of alcohol beverages by the 
novelty of the small sizes that are, in turn, easily concealed. This 
practice enables retailer and consumer practices to undermine State and 
local controls which prohibit the possession of open containers of 
alcohol or prohibit retailers such as bar establishments from 
possessing on premise any package under certain specified sizes.

Aggregate Fill

    The issue of whether the standard of fill requirements may be 
satisfied by aggregate packaging was raised in 1988, when an importer 
sought permission to import 375-milliliter bags. Each bag contained 25 
individual pots of 15-milliliters each, similar to that of a coffee 
creamer container. This request was approved, as were subsequent 
requests for other types of containers. Such products now include 
distilled spirits products packaged in packs of thirty 25-milliliter 
test tubes (750-milliliter aggregate fill) and in a carton of plastic 
sachets, like popcicles. Products are also packaged in small cups 
similar to ice cream containers, or squeeze packages like popsicles, 
with others similarly bundled in the aggregate. ATF believes that this 
wide array of container types is likely to confuse consumers as to the 
quantity and nature of the alcohol beverage. Likewise, the variety of 
container sizes contributes to administrative difficulty in determining 
appropriate excise tax for the products. ATF also now recognizes the 
likelihood that underage individuals more easily obtain and use 
aggregate fill products.

Enforcement Problems in States and Local Jurisdictions

    ATF's policy of allowing aggregate fills has also resulted in 
problems with State and local alcohol beverage controls, either by 
conflicting with State standard of fill provisions or with prohibitions 
against open containers of alcohol beverages.
    For example, some states prohibit ``by-the-drink'' retailers from 
possessing on premise packages such as those comprising the aggregate-
fill containers. To maintain these packages on retail premises, the 
retailer must break apart the 750-milliliter aggregate package in order 
to reach the individual 25-milliliter containers. Once the outer 
``aggregate fill'' carton is broken apart, the retailer would be in 
violation of State law by possessing a package containing less than the 
authorized standard of fill on retail premises. Since these products 
are packaged in a 750-milliliter aggregate standard of fill, questions 
arise as to whether the State may prohibit such retailers from 
possessing the products.
    Also, these containers present conflicts with State and local 
prohibitions against ``open containers.''

[[Page 6487]]

The smaller aggregate-fill containers are more easily concealed. In 
public areas where alcohol beverages are prohibited these small 
containers provide a ready means to undermine local enforcement 
efforts.

ATF Authority for Standards of Fill

    The Federal Alcohol Administration Act (27 USC 205(e)) authorizes 
the Secretary of the Treasury to regulate the bottle sizes for wine, 
distilled spirits, and malt beverages. The Internal Revenue Code of 
1986 (26 USC 5301) likewise authorizes regulations regarding the kind 
and size of containers for distilled spirits. Distilled spirits 
regulations allow for several standards of fill (27 CFR 5.47a). Wine 
regulations also authorize several standards of fill (27 CFR 4.73). 
Malt beverage regulations do not currently prescribe standards of fill, 
but do address net contents statements on labels (27 CFR 7.27). The 
purpose of the standards of fill provisions is to prevent a 
proliferation of bottle sizes and shapes which would inevitably result 
in consumer confusion and deception with regard to the quantity and net 
contents of the alcohol beverage package. The uniformity in bottle 
sizes required by these standards also facilitates the proper 
calculation of Federal excise tax.
    Aggregate packaging practices undermine the standard of fill 
regulations and the underlying objectives of revenue protection and 
consumer protection. ATF recognizes such packaging presents the 
possibility, if not likelihood, that retailers will break apart the 
outer, labeled package and sell the individual non-standard containers, 
thereby diminishing any likelihood that consumers will be adequately 
informed about the quantity, identity, and quality of product they 
purchase. Also, the individual non-standard containers do not bear the 
mandatory label requirements, increasing the likelihood of consumer 
deception as to the identity and quantity of the product. The 
individual containers do not carry the required government warning 
statement, so this basic health protection is lost when these aggregate 
packages are unwrapped. ATF has no authority under the standard of fill 
provisions to proceed against retailers for breaking apart authorized 
fill containers for individual sale; however, ATF may proceed against 
such retailers under the alteration of label provisions.
    ATF has encouraged certain safeguards to protect against consumer 
deception in the event that aggregate packages are broken apart and the 
single-serving packages are sold individually. These safeguards 
include: labeling the individual containers as ``not for individual 
sale'' and ``not for children,'' sealing the outer container with 
shrink wrap or other secure methods, and encouraging bottlers to bottle 
the individual units of the package in authorized standards of fill 
(such as 50-milliliters). However, ATF believes these safeguards have 
not proven fully effective to preclude abuse of the standards of fill.
    ATF has reconsidered its position on the standard of fill 
regulations, for the reasons cited above. Although ATF authority exists 
under the law, existing regulations do not provide an adequate basis to 
reject such containers outright. We believe the most effective way of 
resolving this issue is through rulemaking to define the standards of 
fill to exclude aggregate fills. We propose to amend regulations to 
define the standard of fill to apply to the container in direct contact 
with the alcohol beverage. This measure serves to protect the integrity 
of the existing standard of fill regulations.
    ATF is not concerned about containers such as aluminum cans or 
glass bottles that are well-established in the marketplace as both 
alcohol and non-alcohol beverage containers. Nor does ATF consider this 
change to preclude the use of certain distinctive containers that might 
contain separate chambers. For example, a glass container with two 
separate chambers permanently fused together would be considered a 
single standard of fill.

ATF Authority to Prohibit Misleading Containers

    The Federal Alcohol Administration Act (27 U.S.C. 205(e)) 
authorizes the Secretary of the Treasury to regulate the packaging of 
wine, distilled spirits, and malt beverages to prohibit deception of 
the consumer with respect to alcohol beverage products. Distilled 
spirits regulations prohibit certain practices deemed to encourage 
consumer deception (27 CFR 5.42). Wine and beer regulations also 
prohibit practices that may lead to consumer deception (27 CFR 4.39 and 
27 CFR 7.29). The purpose of these provisions is to prevent practices 
that will result in consumer confusion and deception with regard to the 
quality and character of the alcohol beverage contained in the package. 
ATF likewise has authority under the Internal Revenue Code of 1986 to 
prescribe containers and labeling for alcohol beverages (26 USC 5368).
    Apart from the separate sale of individual units, additional 
consumer deception issues have arisen from the aggregate packaging 
concept. In ``aggregate packaging,'' some producers have used 
unconventional alcohol beverage containers that are misleading as to 
the identity or character of products as alcohol beverages. Some of 
these smaller packages resemble products that consumers readily 
identify as coffee creamers, or children's frozen gelatin confections.
    Supermarket shelves offer a variety of products such as yogurt, 
dairy creamers, ice cream, unfrozen popsicles, gelatins, and other 
similar products. Alcohol beverages packaged in similar containers 
either confuse the fact that they contain alcohol beverages or are 
otherwise novelty-type containers that encourage alcohol consumption by 
both eligible and underage consumers, trivialize the dangers associated 
with inappropriate alcohol consumption, or are easily confused with 
other food products.
    Container manufacturers advertise that thinwall containers such as 
those currently used by certain alcohol beverage producers have a 
number of applications, such as kid's meals containers, sand buckets, 
candy containers, popcorn containers, ice cream, yogurt, processed 
cheese, and other similar uses. These containers are readily identified 
in the marketplace with non-alcohol products. Such packaging for 
alcohol beverages obscures the identity of the products as containing 
alcohol. Questions also arise as to the health dangers such misleading 
packaging might present to those who may be harmed by ingestion of 
alcohol products, either due to allergy or other health conditions.
    ATF proposes to prohibit alcohol beverage containers that are 
likely to be confused with containers for other products, particularly 
non-alcohol food products. This change would serve to preclude the use 
of those containers that are likely to deceive the consumer as to its 
contents or mislead consumers by trivializing the dangers and risks 
associated with alcohol consumption.
    ATF is also concerned about some containers of certain wines of 
less than 7 percent alcohol by volume. These containers, while not 
subject to the labeling requirements of the Federal Alcohol 
Administration Act, must bear labels as prescribed by regulations. The 
difficulty in determining that these are alcohol beverages raises 
administrative problems for both the government and the industry and 
retailers involved in the distribution of these products. For tax 
administration purposes, the type of alcohol beverage must be readily 
apparent. Regulation of container shapes and sizes protects the revenue 
by prohibiting generic containers that would otherwise camouflage the 
illegal

[[Page 6488]]

removal of non-tax-paid alcohol. Likewise, for wholesalers and 
retailers who are subject to special tax based on the categories of 
products they sell and who usually have local licenses that delineate 
the type of alcohol beverage they can sell, it is important that the 
markings, branding and labels are not misleading or confusing as to the 
true character of the alcohol beverage product.
    These changes do not affect or prohibit those generic containers, 
such as aluminum cans, that meet the standards of fill and are labeled 
sufficiently to identify the product as an alcohol beverage.
    These changes would prohibit any container that, through its 
material and shape, is not readily recognized as conveying an alcohol 
beverage or any container that is likely to be confused with a non-
alcohol product. Through this effort, ATF seeks to standardize the type 
or appearance of containers that are authorized for use to contain 
alcohol beverages, so as to protect the consumer by preventing 
deception as to the identity and quality of the product.

2. Public Participation--Written Comments

Who May Comment on This Notice?

    ATF asks for comments from consumers, industry members, trade 
associations, public interest and advocacy groups, State and local 
governments, and all other interested persons. We will carefully 
consider all comments we receive on or before April 12, 1999. We will 
also carefully consider comments we receive after that date if it is 
practical to do so, but we cannot assure consideration for late 
comments. ATF specifically requests comments on the clarity of this 
proposed rule and how it may be made easier to understand.
    We are interested in any data or studies that deal with the impact 
of container design or shapes of containers. ATF particularly solicits 
public comment on the existence and degree of consumer deception as to 
the identity and quality of the product in containers which resemble 
non-alcohol conveyances or children's toys. We request relevant 
information and data from consumers, industry members, public interest 
advocacy groups, and all others interested. Also, we are interested in 
any alternative approaches that achieve the objectives outlined in this 
notice.

Will ATF Keep My Comment Confidential?

    ATF cannot recognize any material in comments as confidential. All 
comments and materials may be disclosed to the public. If you consider 
your material to be confidential or inappropriate for disclosure to the 
public you should not include it in a comment. We may also disclose the 
name of any person who submits a comment.

Disclosure: Who May Review the Comments ATF Receives for This 
Notice?

    Any interested person may inspect copies of this notice and all 
comments. You may inspect these documents during normal business hours 
in the ATF Reference Library, Room 6480, 650 Massachusetts Avenue, NW, 
Washington, DC.

How Do I Send Facsimile Comments?

    You may submit comments of not more than three pages by facsimile 
transmission to (202) 927-8602. Facsimile comments must:

 be legible
 reference this notice number
 be 8\1/2\'' x 11'' in size
 contain a legible written signature
 be not more than three pages long.

    We will not acknowledge receipt of facsimile transmissions. We will 
treat facsimile transmissions as originals.

How Do I Send Electronic Mail (E-mail) Comments?

    You may submit comments by e-mail by sending the comments to 
[email protected]. You must follow these 
instructions. E-mail comments must:

 contain your name, mailing address, and e-mail address
 reference this notice number
 be legible when printed on not more than three pages 8\1/2\'' 
x 11'' in size

    We will not acknowledge receipt of e-mail. We will treat e-mail as 
originals.

How Do I Send Comments to the ATF Internet Web Site?

    You may also submit comments using the comment form provided with 
the online copy of the proposed rule on the ATF internet web site at 
http://www.atf.treas.gov/core/regulations/rules.htm

3. Regulatory Analyses and Notices

Is this a Significant Regulatory Action as Defined by Executive 
Order 12866?

    This is not a significant regulatory action as defined in Executive 
Order 12866. A regulatory assessment is not required.

Does the Paperwork Reduction Act Apply to this Proposed rule?

    The Paperwork Reduction Act of 1995 (44 USC 3507) and its 
implementing regulations (5 CFR Part 1320) do not apply to this notice 
because ATF is not proposing any requirements to collect information.

How does the Regulatory Flexibility Act Apply to this Proposed 
Rule?

    Pursuant to Sec. 7805(f) of the Internal Revenue Code, ATF has 
submitted these proposed rules to the Chief Counsel for Advocacy of the 
Small Business Administration for comment on its impact on small 
business.
    Under the Regulatory Flexibility Act (5 USC 601 et seq.), ATF must 
consider whether a notice of proposed rulemaking would have a 
significant economic impact on a substantial number of small entities. 
The factual basis of this proposal does not create a burden on small 
entities.
     It will not impose, or otherwise cause, a significant 
increase in recordkeeping or other compliance burdens on a substantial 
number of small entities.
     It will not have significant secondary or incidental 
effects on a substantial number of small entities.
    This proposal strengthens existing regulations that prohibit the 
use of unauthorized container sizes and that protect consumers from 
being misled about the identity, quality, or quantity of the product. 
ATF believes that because this proposal addresses only deceptive or 
confusing packaging, and not the products themselves, it will not 
burden sales or otherwise impose costs on distributors or retailers of 
alcoholic beverage products. 
    Accordingly, ATF certifies this proposed rule will not have a 
significant impact on a substantial number of small entities. ATF is 
not required to conduct an initial regulatory flexibility analysis.

Drafting Information: Who Wrote This Notice?

    William H. Foster, Regulations Division, Bureau of Alcohol, Tobacco 
and Firearms wrote this notice.

List of Subjects

27 CFR Part 4

    Advertising, consumer protection, customs duties and inspections, 
imports, labeling, packaging and containers, and wine.

27 CFR Part 5

    Advertising, consumer protection, customs duties and inspections, 
imports, labeling, liquors, and packaging and containers.

[[Page 6489]]

27 CFR Part 7

    Advertising, beer, consumer protection, customs duties and 
inspection, imports, and labeling.

Authority and Issuance

    For the reasons discussed in the preamble, ATF proposes to amend 27 
CFR Parts 4, 5, and 7, as follows.

PART 4--LABELING AND ADVERTISING OF WINE

    Paragraph 1. The authority citation for 27 CFR Part 4 is revised to 
read as follows:

    Authority: 26 USC 5368 and 27 USC 205.

    Paragraph 2. ATF amends Sec. 4.39 by adding a new paragraph (n) to 
read as follows:


Sec. 4.39  Prohibited practices.

* * * * *
    (n) Misleading bottles or containers. Any container of wine (as 
defined in Sec. 24.10 of this chapter) that, by virtue of the material 
from which it is composed or by its shape or design, or that by its 
ordinary and customary use is likely to mislead the consumer as to the 
alcohol character of the product, is prohibited. Such containers that 
are likely to be identified or perceived by consumers as conveying a 
non-alcohol product will be considered misleading, unless the Director 
determines that the information on the label adequately dispels any 
misleading impression.
    Paragraph 3. ATF amends Sec. 4.73 by adding a new paragraph (d) to 
read as follows:


Sec. 4.73  Metric standards of fill.

* * * * *
    (d) The standards of fill prescribed in paragraph (a) of this 
section apply to the container in direct contact with the wine and may 
not be satisfied by an aggregation of multiple containers into a single 
unit.

PART 5--LABELING AND ADVERTISING OF DISTILLED SPIRITS

    Paragraph 4. The authority citation for 27 CFR Part 5 continues to 
read as follows:

    Authority: 26 U.S.C. 5301, 7805, 27 U.S.C. 205.

    Paragraph 5. ATF amends Sec. 5.42 by adding a new paragraph (c) to 
read as follows:


Sec. 5.42  Prohibited practices.

* * * * *
    (c) Misleading bottles or containers. Any container that, by virtue 
of the material from which it is composed or by its shape or design, or 
that by its ordinary and customary use is likely to mislead the 
consumer as to the alcohol character of the product, is prohibited. 
Containers that are likely to be identified or perceived by consumers 
as conveying a non-alcohol product will be considered misleading, 
unless the Director determines that the information on the label 
adequately dispels any misleading impression.
    Paragraph 6. ATF amends Sec. 5.47a by adding a new paragraph (a)(3) 
to read as follows:


Sec. 5.47a  Metric standards of fill (distilled spirits bottled after 
December 31, 1979).

    (a) * * *
    (3) The standards of fill prescribed in paragraphs (a)(1) and 
(a)(2) of this section apply to the container in direct contact with 
the distilled spirits and may not be satisfied by an aggregation of 
multiple smaller containers into a single unit.
* * * * *

PART 7--LABELING AND ADVERTISING OF MALT BEVERAGES

    Paragraph 7. The authority citation for 27 CFR Part 7 continues to 
read as follows:

    Authority: 27 U.S.C. 205.

    Paragraph 8. ATF amends Sec. 7.29 by adding a new paragraph (i) to 
read as follows:


Sec. 7.29  Prohibited practices.

* * * * *
    (i) Misleading bottles or containers. Any container that, by virtue 
of the material from which it is composed or by its shape or design, or 
that by its ordinary and customary use is likely to mislead the 
consumer as to the alcohol character of the product, is prohibited. 
Containers that are likely to be identified or perceived by consumers 
as conveying a non-alcohol product will be considered misleading, 
unless the Director determines that the information on the label 
adequately dispels any misleading impression.

    Signed: January 20, 1999.
John W. Magaw,
Director.
    Approved: January 22, 1999.
John P. Simpson,
Deputy Assistant Secretary (Regulatory, Tariff and Trade Enforcement).
[FR Doc. 99-3009 Filed 2-5-99; 8:45 am]
BILLING CODE 4810-31-P