[Federal Register Volume 87, Number 113 (Monday, June 13, 2022)]
[Proposed Rules]
[Pages 35693-35697]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-11901]


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DEPARTMENT OF THE TREASURY

Alcohol and Tobacco Tax and Trade Bureau

27 CFR Part 4

[Docket No. TTB-2022-0005; Notice No. 211]
RIN 1513-AC29


Proposal Regarding Labeling Wines Containing Added Distilled 
Spirits

AGENCY: Alcohol and Tobacco Tax and Trade Bureau, Treasury.

ACTION: Notice of proposed rulemaking.

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[[Page 35694]]

SUMMARY: The Alcohol and Tobacco Tax and Trade Bureau (TTB) proposes to 
amend its wine labeling and advertising regulations to remove an 
existing regulatory prohibition against statements which indicate that 
a wine contains distilled spirits. This proposed deregulatory action 
will allow wine makers and importers to provide additional information 
to consumers about their wines, while still providing consumers with 
adequate and non-misleading information as to the identity and quality 
of the products they purchase.

DATES: Comments must be received on or before August 12, 2022.

ADDRESSES: You may electronically submit comments to TTB on this 
proposal, and view copies of this document, its supporting materials, 
and any comments TTB receives on it within Docket No. TTB-2022-0005 as 
posted at https://www.regulations.gov. A direct link to that docket is 
available on the TTB website at https://www.ttb.gov/wine/notices-of-proposed-rulemaking under Notice No. 211. Alternatively, you may submit 
comments via postal mail to the Director, Regulations and Ruling 
Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G Street NW, 
Box 12, Washington, DC 20005. Please see the Public Participation 
section of this document for further information on the comments 
requested regarding this proposal and the submission, confidentiality, 
and public disclosure of comments.

FOR FURTHER INFORMATION CONTACT: Morgan Johnson, Alcohol and Tobacco 
Tax and Trade Bureau, Regulations and Rulings Division; telephone 202-
453-1039, ext. 217.

SUPPLEMENTARY INFORMATION:

Background

TTB Authority

    Sections 105(e) and (f) of the Federal Alcohol Administration Act 
(FAA Act), 27 U.S.C. 205(e) and (f), authorize the Secretary of the 
Treasury to prescribe regulations for the labeling and advertising of 
wine, distilled spirits, and malt beverages. The FAA Act requires that 
these regulations, among other things, prohibit consumer deception and 
the use of misleading statements on labels and in advertisements, and 
ensure that labels and advertisements provide the consumer with 
adequate information as to the identity and quality of the product.
    TTB administers these FAA Act provisions pursuant to section 
1111(d) of the Homeland Security Act of 2002, as codified at 6 U.S.C. 
531(d). In addition, the Secretary of the Treasury has delegated 
certain administrative and enforcement authorities to TTB through 
Treasury Order 120-01.

Current Regulatory Requirements

    Part 4 of the TTB regulations (27 CFR part 4) sets forth standards 
promulgated under the FAA Act to ensure that wine labeling and 
advertising provides adequate information to consumers as to the 
identity and quality of the product. The TTB regulations at 27 CFR 4.39 
set forth rules regarding certain wine labeling practices that could be 
considered deceptive or misleading, and are therefore prohibited. Among 
these practices, TTB regulations prohibit labeling wine to indicate 
that it contains distilled spirits, with one exception discussed in 
detail below. Specifically, Sec.  4.39(a)(7) states that wine 
containers and labels may not bear ``any statement, design, device, or 
representation (other than a statement of alcohol content in conformity 
with 27 CFR 4.36) which tends to create the impression that a wine (i) 
Contains distilled spirits; (ii) Is comparable to a distilled spirit; 
or (iii) Has intoxicating qualities.''
    Likewise, the TTB regulations at 27 CFR 4.64 address certain wine 
advertising practices that are prohibited as deceptive or misleading, 
and provide a similar prohibition that applies to labeling. 
Specifically, Sec.  4.64(a)(8) provides that wine advertisements may 
not contain any statement, design, device, or representation which 
tends to create the impression that a wine contains distilled spirits, 
is comparable to distilled spirits, or has intoxicating qualities.
    These labeling and advertising provisions were promulgated in the 
1930s after the repeal of Prohibition, likely as a measure to prevent 
winemakers from misrepresenting to consumers that their wine contained 
or was comparable to distilled spirits. In the one exception to this 
prohibition, if a statement of composition is required to appear as the 
designation of a product not defined in part 4, the statement of 
composition may include a reference to the type of distilled spirits 
that has been added to the wine.
    At 27 CFR 4.21, the TTB regulations set forth categories of wine 
that help identify the composition, character, and origin of the wine. 
These identifiers are known as class and type designations. For 
example, ``grape wine'' is a class of wine, and ``Muscadine'' is a type 
of grape wine. This section also sets forth the standards for those 
classes and types, referred to in this document as ``standards of 
identity.'' The consistent and accurate designation of wine leads to 
consumer and trade understanding of the quality and identity of the 
wine. The standards of identity specifically recognize that certain 
types of distilled spirits may be added to certain classes of wine, 
that is, to grape wine, fruit wine, agricultural wine, and aperitif 
wine. See Sec.  4.21(a), (e), (f), and (g), respectively. However, 
because of the prohibitions in Sec. Sec.  4.39(a)(7) and 4.64(a)(8) 
regarding references to distilled spirits, wine bottlers generally have 
not been able to state on the label or in advertising that those wines 
contain spirits.
    If a wine does not meet any of the defined standards of identity, 
the wine label must bear, instead of a class and type designation, a 
statement of composition. See 27 CFR 4.34(a). In such cases, the 
statement of composition may include a reference to the type of 
distilled spirits contained in the wine. See Sec. Sec.  4.39(a)(7) and 
4.64(a)(8). In these instances, statements of composition serve as the 
product's class and type designation and must adequately reflect the 
composition and character of the product. For instance, a raspberry-
flavored grape wine that contains brandy may be labeled as ``Grape wine 
with natural flavor and apple brandy.''

Petition From Sweet and Fortified Wine Association

    The Sweet and Fortified Wine Association, a wine industry trade 
group, submitted a petition to TTB requesting that the regulations be 
revised to allow dessert grape wines to be labeled with the words 
``fortified'' and/or ``grape (wine) spirits added.'' These industry 
members produce wines that are typically standard grape wines in the 
style of port, sherry, madeira, or other types of dessert wine which 
contain added brandy or other distilled spirits. However, as discussed 
above, Sec.  4.39(a)(7) prohibits statements on standard wines (i.e. 
wines which meet a class and type designation) which indicate that the 
wine contains distilled spirits.
    According to the petition, allowing label statements that disclose 
the presence of added spirits in a wine will provide greater 
information to consumers, while prohibiting producers from fully 
disclosing the presence of added spirits could be misleading and is not 
consistent with TTB's consumer protection mission. Additionally, the 
petitioner asserts that producers of fortified wines are finding it 
difficult to accurately communicate on the label that a wine has been 
fortified with spirits since most semi-generic names for fortified 
wines, such as ``port'' or

[[Page 35695]]

``sherry,'' are now prohibited by law from appearing on domestic wine 
labels (unless approved by TTB prior to March 10, 2006). See 26 U.S.C. 
5388(c).\1\ The petitioner believes that this puts producers of new 
fortified wines at a competitive disadvantage in the market place.
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    \1\ A semi-generic name is a name of geographic significance 
which may also serve as a class and type designation. Examples of 
semi-generic names include: Burgundy, Claret, Chablis, Champagne, 
Chianti, Malaga, Marsala, Madeira, Moselle, Port, Rhine Wine (syn. 
Hock), Sauterne, Haut Sauterne, Sherry, and Tokay. On March 10, 
2006, the Agreement between the United States (U.S.) and the 
European Union (EU) on Trade in Wine (``the Wine Agreement'') was 
signed. As part of the Wine Agreement, the U.S. agreed to seek to 
change the legal status of those names to restrict their use solely 
to wines originating in the applicable EU Member State, with certain 
exceptions for ``grandfathered'' names. Shortly thereafter, section 
422 of the Tax Relief and Health Care Act of 2006 (Pub. L. 109-432) 
amended section 5388 of the Internal Revenue Code (26 U.S.C. 5388) 
to implement Article 6 of the Wine Agreement. The effect of this 
change in law is to restrict use of the semi-generic terms 
referenced in the Wine Agreement to wines originating in the 
geographic region indicated by the name. Under Article 6.2 of the 
Wine Agreement and 26 U.S.C. 5388, there is a ``grandfather'' 
provision that allows a person or his or her successor in interest 
using one of the names in the United States before March 10, 2006, 
to continue using the name, provided that the name is only used on 
labels for wine bearing the brand name, or the brand name and 
fanciful name, if any, for which the applicable Certificate of Label 
Approval (COLA) was issued prior to the date of signature of the 
Wine Agreement.
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    The petitioner contends that Sec.  4.39(a)(7) is an antiquated and 
archaic regulation that is irrelevant to American wine consumers in the 
21st century. The petitioner argues that concerns from the post-
Prohibition era that terms such as ``fortified'' imply significant 
alcohol content or could increase the incidence of intoxication have 
little bearing on reality. Instead, according to the petitioner, most 
fortified wines have an alcohol content of 18 to 19 percent, which the 
petitioner asserts is only slightly higher than what many unfortified 
wines achieve as a result of natural fermentation and winemaking 
practices.
    According to the petition, it is the petitioner's understanding 
that TTB previously suggested that using the term ``fortified'' on a 
label could be problematic because the term ``fortified'' has a meaning 
for consumers under the U.S. Food and Drug Administration (FDA) 
regulations regarding the labeling of products with added vitamins, 
minerals, or protein. The petitioner asserts that consumers will not be 
confused by the word ``fortified'' because the word has a different 
meaning when applied to wine than it does when applied to food. The 
petitioner supports its claim by stating that these alternate meanings 
can be found in dictionary definitions of ``fortified.'' As one such 
example, the petitioner notes that Merriam-Webster defines ``fortified 
wine'' as a wine to which alcohol, usually in the form of grape brandy, 
has been added during or after fermentation. Additionally, the 
petitioner notes that TTB regulations use the word ``fortification'' to 
mean containing added spirits, citing the definition of ``added 
brandy'' in 27 CFR 4.10.
    Finally, the petitioner contends that TTB's wine labeling 
regulations are confusing and inconsistent regarding the addition of 
spirits, since the standard of identity for grape wine at Sec.  
4.21(a)(6) permits the addition of alcohol to a dessert grape wine, 
while Sec.  4.39(a)(7) prohibits the producer from referencing the 
presence of added alcohol on the wine's label, except where it appears 
in a required statement of composition.

Historical Usage of Terms Such as ``Fortified Wine''

    The earliest wine labeling regulations issued by the Department of 
the Treasury under the authority of the FAA Act included a standard of 
identity for ``fortified wine'' as a class of wine. In the 1938 edition 
of the Code of Federal Regulations, the wine labeling regulations in 27 
CFR part 4 listed ``fortified wine'' as class six in Sec.  4.21, the 
regulation which contains the standards of identity for wine. Paragraph 
(f) of Sec.  4.21 defined ``fortified wine,'' in part, as a ``product 
made with the addition of such brandy or alcohol as is permitted under 
internal-revenue laws.''
    However, on August 26, 1938, the Department of the Treasury issued 
Regulations No. 4, Amendment No. 2, which, among other revisions, 
removed the fortified wine class from part 4 (3 FR 2093). That same 
rulemaking also added in Sec.  4.39(a)(7) and Sec.  4.64(a)(8), which 
contain prohibitions on statements related to added alcohol that are 
very similar to today's Sec.  4.39(a)(7) and Sec.  4.64(a)(8). 
Statements were prohibited if they created ``the impression that the 
wine has been `fortified' or contains distilled spirits, or has 
intoxicating qualities,'' except that a statement of composition, if 
required to appear as the designation of a product not defined in the 
regulations, could include a reference to the type of distilled spirits 
added to the wine.
    These regulatory changes were not accompanied by an explanation. 
However, TTB has reviewed comments from wine industry members made 
during the rulemaking process regarding the word ``fortified.'' For 
example, prior to the issuance of the finalized regulations, a trade 
association representative expressed concerns in a July 28, 1938 memo 
that the word ``fortified'' had an ``inference that the product 
contains a special alcoholic `kick,' '' and was therefore a selling 
point for certain consumers.
    More recently, the word ``fortified'' has assumed another 
regulatory meaning when applied to foods and beverages. TTB has in the 
past advised that it viewed the idea of using ``fortified'' to describe 
certain grape wines as problematic, given that FDA regulations at 21 
CFR 104.20(h)(3) define the word ``fortified'' to describe foods with 
added vitamins, minerals, or protein. Given the current use of the word 
``fortified'' as established under FDA regulations, TTB previously took 
the position that authorizing the use of the term ``fortified'' in a 
way inconsistent with the FDA regulations could create consumer 
confusion.

TTB Analysis

    After further consideration, TTB agrees with the petitioner that 
allowing a wine producer to disclose the presence of added spirits in a 
wine has the potential to provide more information to consumers, and 
provides producers with greater flexibility to better communicate the 
nature of their products to consumers. TTB also agrees that the wine 
industry has changed significantly since the 1930s. However, TTB is 
still charged by the FAA Act with ensuring that wine is labeled in such 
a way that consumers are not misled about the identity or quality of 
the product. For example, consumers should be able to readily determine 
that a product is wine and not a distilled spirit, and that a wine 
contains added distilled spirits, not vitamins.
    With these concerns in mind, TTB is proposing for public comment an 
amendment to its regulations to allow for a specific type of reference 
to a wine with added distilled spirits. We believe that such references 
will not be misunderstood by or be misleading to consumers, and will 
allow for truthful information related to the identity of the product 
to be conveyed. Specifically, TTB is proposing to amend Sec.  
4.39(a)(7) and Sec.  4.64(a)(8) to provide that even for wines that 
meet a standard of identity, if a wine contains added distilled 
spirits, a statement of composition may be used which indicates that 
distilled spirits have been added.
    As discussed earlier, a statement of composition serves as the 
product's class and type designation when a product does not meet one 
of the

[[Page 35696]]

standards of identity in Sec.  4.21, that is, it is a wine specialty 
product. The statement of composition must adequately reflect the 
composition and character of the product. Under the current regulation, 
the statement of composition for a wine specialty product may reference 
any distilled spirits that have been added to the product. Under the 
proposed regulation, wines that do meet a standard of identity could 
also be labeled with truthful references to added distilled spirits. 
Thus, for example, a product that meets the standard of identity for 
grape dessert wine in Sec.  4.21(a) may be labeled with a statement of 
composition such as ``Grape wine with added brandy.'' The proposed 
regulations would apply to any wine that contains added distilled 
spirits, and not just to dessert grape wines as proposed by the 
petitioner.
    Additionally, the proposed regulations would allow the use of the 
word ``fortified'' as part of such a statement of composition--for 
example, ``Grape wine fortified with brandy.'' TTB is therefore 
including an example of this use of ``fortified'' in the proposed 
regulatory text. TTB believes that when the word ``fortified'' is used 
in this context there will be no misunderstanding that the statement 
indicates that the wine contains added vitamins, minerals, or protein. 
We welcome comments specifically regarding this proposal.
    Further, TTB is proposing to revise Sec. Sec.  4.39(a)(7)(i) and 
4.64(a)(8)(i), which prohibit any statement, design, device, or 
representation which tends to create the impression that a wine 
contains distilled spirits. Under the proposal, the revision would 
specifically prohibit only those statements that would be false or 
misleading, such as, for example, a representation that created the 
impression that the wine contained distilled spirits when it did not. 
TTB also is proposing additional language that would state that when a 
wine does contain added distilled spirits, the wine may be labeled with 
a statement of composition referencing the type of distilled spirit 
that has been added. In general, under this proposal, a distilled 
spirits reference would be permissible on a wine label or in an 
advertisement for a wine, provided that the reference is neither false 
nor misleading. Similarly, under this proposal, a distilled spirits 
reference that appeared as part of a truthful and accurate statement of 
composition would not be considered misleading, as it would provide a 
context that more clearly communicates to the consumer that the added 
distilled spirit is merely an ingredient in the wine, and that the 
product is not a distilled spirits product. However, we invite comments 
on this issue.

Public Participation

Comments Sought

    TTB requests comments from interested members of the public. TTB is 
particularly interested in comments regarding whether the proposed 
amendments will result in statements on wine labels that could be 
misleading to consumers about the product. We are also interested in 
comments about whether a statement of composition which indicates that 
a wine is ``fortified'' with spirits could create the impression that 
the wine contains added vitamins, minerals, or protein. Please provide 
specific information in support of your comments.
    Prior to the publication of this rulemaking, TTB published Notice 
No. 176 in the Federal Register on November 26, 2018 (83 FR 60562), 
which proposed to reorganize and recodify 27 CFR part 4 in order to 
simplify and clarify regulatory standards, and to incorporate guidance 
documents and current policy into the regulations. In Notice No. 176, 
TTB proposed to continue its current policy of allowing a reference to 
added distilled spirits only on the labels of wine that require a 
statement of composition while prohibiting such references on wines 
that do not require a statement of composition. Notice No. 176 also did 
not specifically propose to allow the use of the term ``fortified'' as 
a part a statement of composition as this notice of proposed rulemaking 
does.
    TTB is taking this separate rulemaking action to address only the 
specific circumstances described in this document. As the comment 
period for Notice No. 176 has closed, TTB will consider any relevant 
comments it received in response to Notice No. 176 along with any 
comments made in response to this specific rulemaking in determining 
what action to take on this proposal.

Submitting Comments

    You may submit comments on this proposal as an individual or on 
behalf of a business or other organization via the Regulations.gov 
website or via postal mail, as described in the ADDRESSES section of 
this document. Your comment must reference Notice No. 211 and must be 
submitted or postmarked by the closing date shown in the DATES section 
of this document. You may upload or include attachments with your 
comment. You also may submit a comment requesting a public hearing on 
this proposal. The TTB Administrator reserves the right to determine 
whether to hold a public hearing. If TTB schedules a public hearing, it 
will publish a notice of the date, time, and place for the hearing in 
the Federal Register.

Confidentiality and Disclosure of Comments

    All submitted comments and attachments are part of the rulemaking 
record and are subject to public disclosure. Do not enclose any 
material in your comments that you consider confidential or that is 
inappropriate for disclosure.
    TTB will post, and you may view, copies of this document, its 
supporting materials, and any comments TTB receives about this proposal 
within the related Regulations.gov docket. In general, TTB will post 
comments as submitted, and it will not redact any identifying or 
contact information from the body of a comment or attachment.
    Please contact TTB's Regulations and Rulings division by email 
using the web form available at https://www.ttb.gov/contact-rrd, or by 
telephone at 202-453-2265, if you have any questions regarding comments 
on this proposal or to request copies of this document, its supporting 
materials, or the comments received in response.

Regulatory Flexibility Act

    TTB certifies that this proposed regulation, if adopted, will not 
have a significant economic impact on a substantial number of small 
entities. TTB is proposing to amend its wine labeling and advertising 
regulations to remove an existing regulatory prohibition against 
statements which indicate that a wine contains distilled spirits. This 
proposed deregulatory action will allow wine makers and importers to 
provide additional information to consumers about their wines, while 
still providing consumers with adequate and non-misleading information 
as to the identity and quality of the products they purchase. The 
proposed amendments merely provide optional, additional flexibility in 
wine labeling and advertising decisions. Accordingly, a regulatory 
flexibility analysis is not required.

Executive Order 12866

    It has been determined that this proposed rule is not a significant 
regulatory action as defined by Executive Order 12866 of September 30, 
1993. Therefore, no regulatory assessment is required.

[[Page 35697]]

Drafting Information

    Jennifer Berry of the Regulations and Rulings Division, Alcohol and 
Tobacco Tax and Trade Bureau, drafted this document.

List of Subjects in 27 CFR Part 4

    Administrative practice and procedure, Advertising, Customs duties 
and inspection, Imports, Labeling, Packaging and containers, Reporting 
and recordkeeping requirements, Trade practices, Wine.

Proposed Regulatory Amendment

    For the reasons discussed in the preamble, TTB proposes to amend 27 
CFR, chapter I, part 4 as set forth below:

PART 4--LABELING AND ADVERTISING OF WINE

0
1. The authority citation for 27 CFR part 4 continues to read as 
follows:

    Authority:  27 U.S.C. 205, unless otherwise noted.

0
2. Section 4.39 is amended by:
0
a. Revising paragraphs (a)(7) introductory text and (a)(7)(i); and
0
b. Removing the undesignated paragraph located after paragraph 
(a)(7)(iii).
    The revisions reads as follows:


Sec.  4.39   Prohibited practices.

    (a) * * *
    (7) Any statement, design, device, or representation (other than a 
statement of alcohol content in conformity with Sec.  4.36), which 
tends to create a misleading or inaccurate impression that a wine:
    (i) Contains distilled spirits. (A wine that contains added 
distilled spirits may be labeled with an accurate statement of 
composition which references the type of distilled spirits that have 
been added, for example, ``grape wine fortified with apple brandy,'' or 
``apple wine with apple neutral spirits,'' and not be considered 
misleading.);
    (ii) * * *
    (iii) * * *
* * * * *
0
3. Section 4.64 is amended by revising paragraph (a)(8), including the 
undesignated concluding paragraph, to read as follows:


Sec.  4.64   Prohibited practices.

    (a) * * *
    (8) Any statement, design, device, or representation which relates 
to alcohol content or which tends to create a misleading or inaccurate 
impression that a wine:
    (i) Contains distilled spirits. (A wine that contains added 
distilled spirits may be labeled with an accurate statement of 
composition which references the type of distilled spirits that have 
been added, for example, ``grape wine fortified with apple brandy,'' or 
``apple wine with apple neutral spirits,'' and not be considered 
misleading.);
* * * * *
0
3. Section 4.64 is amended by revising paragraph (a)(8) to read as 
follows:


Sec.  4.64   Prohibited practices.

    (a) * * *
    (8)(i) Any statement, design, device, or representation which 
relates to alcohol content or which tends to create a misleading or 
inaccurate impression that a wine:
    (A) Contains distilled spirits. (A wine that contains added 
distilled spirits may be designated with an accurate statement of 
composition which references the type of distilled spirits that have 
been added, for example, ``grape wine fortified with apple brandy,'' or 
``apple wine with apple neutral spirits,'' and not be considered 
misleading.); (B) Is comparable to a distilled spirit;
    (C)) Has intoxicating qualities.
    (ii) An approved wine label, which bears the statement of alcohol 
content, may be depicted in any advertising media, or an actual wine 
bottle showing the approved label bearing the statement of alcohol 
content may be displayed in any advertising media.
* * * * *

    Signed: May 27, 2022.
Mary G. Ryan,
Administrator.
    Approved: May 27, 2022.
Timothy E. Skud,
Deputy Assistant Secretary (Tax, Trade, and Tariff Policy).
[FR Doc. 2022-11901 Filed 6-10-22; 8:45 am]
BILLING CODE 4810-31-P