On Wednesday, June 22, 2016, TTB published a notice in the Federal Register proposing important changes to wine labeling regulations and recordkeeping requirements. Comments to the proposed changes will be accepted through August 22, 2016 and can be submitted through the Federal Register website). The notice proposes to amend TTB’s labeling and recordkeeping regulations to maintain that standard grape wines at or above 7% alcohol by volume that are covered by a certificate of exemption from label approval may not be labeled with any of the following:
- A varietal (grape type) designation;
- A type designation of varietal significance;
- A vintage date; or
- An appellation of origin (unless the wine is labeled in compliance with the corresponding requirements found in 27 CFR Part 4)
The notice also proposes amendments to Part 4 (wine labeling regulations) to include a reference to the new Part 24 requirement.
In its industry newsletter, TTB states, “[w]e are taking this action in response to concerns raised by wine industry members and members of Congress about the accuracy of label information on certain wines covered by certificates of exemption from label approval, particularly the labeling of certain wines that may not meet the part 4 regulatory requirements for using American viticultural area (AVA) names.”
27 CFR Part 24 talks to the records a proprietor must maintain to substantiate label information in regard to wines. Specifically, Part 24 requires a proprietor who removes a bottled or packed wine with certain information on the label (such as the varietal, type designation, vintage date, or appellation of origin) maintain complete records so that the information appearing on the label can be verified by TTB during an audit. This includes information from the beginning source material to the removal of the wine for consumption or sale and these requirements apply to all wines (not just wines that are required to obtain a COLA from TTB).
However, as the regulations currently stand, Part 24 does not discuss the conditions under which a proprietor may use a grape variety as a type designation, an appellation of origin, or vintage year on a wine label. Instead, TTB wine labeling regulations are found in 27 CFR Part 4. Part 4 covers labeling requirements with respect to vintage years, appellations of origin (and AVAs), type designations of varietal significance, and similar.
Certificates of exemption from label approval are generally issued when a wine will only be sold within the state where it is bottled and not, for example, in interstate commerce (thus subjecting the wine to labeling requirements in 27 CFR Part 4 as well as the need for a Certificate of Label Approval from TTB). These wines are usually quite easy to differentiate from those sold in interstate commerce because the labels of wines covered by the certificate of exemption contain a statement along the lines of, “FOR SALE IN [STATE] ONLY.” Further, if a bottler or packer of wine can show that the wine will not be sold, offered for sale, or shipped or delivered for shipment, or otherwise introduced into interstate commerce, the wine will be exempt from the requirements of Part 4.
The specific concern that appears to be common among industry members (per the proposed rule) is the use of AVAs on these wine labels covered by the certificate of exemption from label approval. The wines covered by the exemption are labeled with AVA names but allegedly do not meet the Part 4 requirements with respect to using an AVA name on a label. To use an AVA name on a label, the following conditions must be met per 27 CFR 4.25(e)(3)(iv):
- The AVA name must have been approved under 27 CFR Part 9;
- Not less than 85% of the wine must be derived from the grapes grown within the boundaries of the AVA (Note that this is the federal requirement and some state or local laws may be more restrictive); and
- The wine must have been fully finished within the State, or one of the States, within which the labeled viticultural area is located (with few, minor exceptions).
The proposed rule proceeds to say that a wine labeled with “Napa Valley” as the AVA but also containing a statement, “Produced and bottled by ABC Winery, Anytown, Illinois” would not meet the provisions of 27 CFR 4.25(e)(3)(iv) because the wine was not fully finished in California and the wine would thus not qualify for a COLA (i.e., if submitted to TTB for review, the label would likely come back either needing corrections with respect to the above mentioned statement or be rejected). The loophole that currently seems to exist is that such wine labels can instead request a certificate of exemption from label approval from TTB as long as they are sold only within the state of the permittee submitting the label (Illinois in the above example) and not introduced into interstate commerce. Should the label be eligible for the certificate of exemption from label approval, the label would be exempt from Part 4 provisions (and thus exempt from provisions detailing AVA, vintage year, and other similar requirements). This is a very realistic concern as, if one quickly browses the TTB public COLA database or LabelVision, it is very evident that several industry members are submitting certificate of exemption from label approval applications to TTB and using recognized AVAs on the label (a practice which could easily beguile an unsuspecting consumer). Understandably, this is very much a concern of industry members, trade groups, and other players who have sought to protect and form strict regulations pertaining to, for example, AVAs.
While TTB’s proposed rule may solve industry concern that some wines (at or above 7% alcohol by volume) covered by the certificate of exemption from label approval that do not meet the regulatory label requirements in Part 4, it leaves an interesting loophole open and calls to question the following: What about wines under 7% alcohol by volume whose labels are subject to the regulations of the FDA? These wines are not required to obtain a COLA or a certificate of exemption from label approval. While I have not seen many wine labels under the 7% alcohol by volume threshold that would cause the type of industry concern that many of the at or above 7% alcohol by volume wine labels have, there still seems to be an interesting loophole here that, should the proposed rule become finalized, may provide opportunity for creative industry members.
For more information on wine or alcohol law, AVAs, or TTB matters, please contact Lindsey Zahn.
DISCLAIMER: This blog post is for general information purposes only, is not intended to constitute legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.