[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