Wednesday, December 21, 2011

WineAmerica's Comments on TTB Notice 122: Allowing Country of Origin Vintage Dating on Wine Labels


January 3, 2012

Director, Regulations and Rulings
Division, Alcohol and Tobacco Tax and
Trade Bureau, P.O. Box 14412,
Washington, DC 20044–4412

Re:      WineAmerica Comments on TTB Notice No. 122

Dear Director Isenberg:

Thank you for the opportunity to comment on Notice No. 122, Proposed Revision to Vintage Date Requirements.  This rulemaking would allow wines labeled with a country appellation of origin, including American appellation wines, to disclose their vintage.  WineAmerica has long supported this change to TTB regulations and urges the implementation of this proposed rulemaking as soon as possible.

This rulemaking is critical to our membership for at least two reasons:

First, the prohibition against use of vintage dates on country appellation wines unnecessarily harms domestic wineries.  American appellation wines are produced in every state, but because they are prohibited from bearing basic, truthful and important vintage information, are at a considerable market disadvantage to other wines.

Second, vintage information helps clarify the “identity and quality” of wines for consumers.  27 U.S.C. § 205(e)(2).  While American appellation wines, like all vintage wines, can vary widely year-to-year, current regulations make it difficult for consumers to distinguish which vintages of American appellation wine they prefer.

If adopted, Notice No. 122 would benefit thousands of American businesses, allowing wineries in every state to truthfully disclose information about their products that consumers find useful.
Overview

TTB has long prohibited wines with a country appellation of origin from including a vintage date.  See 27 C.F.R. § 4.27.  Since at least 2006, however, TTB has recognized that market forces have made the historical reasons for this limitation obsolete.  See Change to Vintage Date Requirements, 71 Fed. Reg. 25748, 25751 (May 2, 2006) (responding to comments suggesting that vintage dating was primarily about location and harvest conditions, TTB noted that “vintage date information may be used by consumers in various ways.”)  Notice No. 122 takes full account of changing consumer perceptions by allowing country appellation wines to bear a vintage date.  WineAmerica applauds TTB for this notice of proposed rulemaking, and strongly urges its adoption.

Over the past 30 years the number of domestic wineries has grown astronomically, from fewer than 600 basic permitted wineries in 1975, to more than 7,500 located in every corner of the United States today.  This dynamic growth is a remarkable success story that continues to unfold.  Wineries are at the heart of a new model of rural economic development that relies on agri-tourism and values the authenticity of local products that reflect local culture.  These businesses have pumped fresh investment and profit into nearly every corner of the country.  And in every state, for a wide range of reasons, wineries make American appellation wines.

With our still fragile economic recovery, TTB’s decision to publish Notice No. 122, reducing an unnecessary regulatory burden that could restrict the continued growth of nascent and successful family businesses that promote good jobs in areas of the country that desperately need them, is sensible regulatory reform.

Truthfully Disclosing Vintage

American and other country appellation wines should be permitted to utilize vintage dates.  As TTB notes in Notice No. 122, consumers often “use the vintage date to ensure that they are not purchasing a wine that is too old or too young for their preferences.”  Proposed Revision to Vintage Date Requirements, 76 Fed. Reg. 68373, 68374 (Nov. 4, 2011).  This allowance for disclosure of “information as to the identity and quality of the products” is fundamental to the Federal Alcohol Administration Act’s (“FAA Act”) labeling standards.  27 U.S.C. § 205(e).  Wine labels should always be permitted to bear such truthful information that is helpful to consumers.

In 2006, commenters took issue with the overly narrow logic of 27 C.F.R. § 4.27 by noting that “[w]ith the exception of the luxury-priced wine market where a particular vintage is often celebrated for its uniqueness, nearly all other wine consumers, both domestically and abroad, have specific style and quality expectations that are consistent from purchase to purchase.”  71 Fed. Reg. at 25750.  This consumer expectation continues to remain true, and justifies TTB’s decision to broaden vintage dating regulations through Notice No. 122.  More broadly, vintage dates promote product transparency and lot identification, shelf management tools that protect producers and allow consumers to more clearly identify wines they like.

Prohibiting vintage dating for country appellation wines can also carry a false connation.  It can give the misimpression of product uniformity from year-to-year—that a wine is in a “house” style produced from several vintages—when that is not in fact the case.  It can likewise lead consumers to believe a product is a “jug” wine when the truth might be otherwise.  Similarly, the restriction can be misleading in the way it creates consumer confusion.  If a particular varietal wine is ordinarily a vintage product, consumers may not understand why the same varietal wine, produced by the same winery, because of vintage conditions and a need for out-of-state fruit, is suddenly non-vintage.  Simply put, the prohibition on vintage dating can unfairly mark a wine as inferior or unfamiliar and cause consumer deception prohibited by the FAA Act.  See id.

Wineries should not be penalized for choosing to use the American appellation.  So long as the vintage information provided is truthful and not misleading, country appellation wines should be permitted to bear a vintage date.

Practical Impact of Policy Change

The Public COLA Registry lists more than 10,000 wines that have secured Certificates of Label Approval in the last decade that use an American appellation on their label.  In addition, wineries throughout the U.S. regularly seek Certificates of Label Exemption in order to vintage date American appellation wines sold exclusively in intrastate commerce.  Wineries should not be forced to choose between interstate sales and vintage dating, but that is exactly what TTB regulations currently require.

Notice No. 122 would finally treat American appellation wines as the equal of multi-state, state and county appellation wines.  By establishing a more market driven definition for vintage labeling, TTB will make consumer outreach and education far easier.  Wineries will no longer have to give long-winded explanations for why their American appellation wines are non-vintage, or why their vintage American appellation wines can only be sold in intrastate commerce.  The wines will simply be permitted to stand or fall on their own merits.

Conclusion

The change contemplated by Notice No. 122 has long been a priority for WineAmerica and we welcome TTB’s publication of the notice of proposed rulemaking.  This rulemaking will benefit wineries throughout the U.S., and the many thousands of wines that utilize the American appellation.

WineAmerica Letter of Support for A4436: Permits Self-distribution in NJ


December 20, 2011

RE:     A4436 (Burzichelli, Wisniewski, Riley) – Permits direct shipping by wineries and creates Out-of-State Winery license

Dear Member of the Assembly:

WineAmerica, the National Association of American Wineries, on behalf of our member wineries in New Jersey and across the nation, encourages you to vote yes on A4436, a bill that would permit New Jersey and out-of-state wineries to self-distribute their products, operate satellite tasting outlets, and ship wine directly to New Jersey consumers.  WineAmerica is the only national winery trade association.

We support this bill because it secures local winery privileges threatened by the recent Third Circuit decision in Freeman v. Corzine, 629 F.3d 146 (3d Cir. 2010) while expanding opportunity for wineries throughout the United States.  A4436 offers continuing support to the New Jersey wine industry’s progress, growth and prosperity, and removes an unhelpful cloud of uncertainty that has prevented New Jersey wineries from opening their doors.

For more than a year, the looming Freeman decision has been a weight on the dynamic growth of the state’s wineries.  A4436 will finally allow New Jersey winemakers to focus on what they do best—keep small farms viable and, through agri-tourism, build a new model for farm development.  Failure to pass this important bill could put the success of this burgeoning industry in serious jeopardy.

New Jersey’s dynamic wine industry is a critical component of the state’s agricultural potential and heritage, and contributes to the preservation of rural landscapes that could otherwise be turned over to developers.  In crafting its winery laws, New Jersey has rightly tried to keep these agricultural spaces vital and flourishing.  A4436 supports this legitimate local purpose and promotes a traditional agricultural form—winemaking—that reliably makes family farming more economically feasible.

Small, dynamic businesses, like those of our members, that are particularly well-suited to small parcel agriculture; creating jobs in the state’s fastest growing agriculture segment; and paying more in taxes than they use in public resources, should be provided every opportunity to sell their goods in open markets.  Wineries are keeping small farms viable and, through agri-tourism, are building a new model for farm development.  New Jersey wineries are family destinations that educate consumers about local agriculture and feature local musicians and entertainers.  Their impact is dynamic—helping make local restaurants, hotels, and attractions more viable.  In other words, local wineries are keeping the “Garden” in the “Garden State.”

Many New Jersey wineries are unable, or find it difficult, to reach consumers in the state, since smaller brands are not likely to find distribution through traditional three-tier channels.  Satellite tasting outlets and self-distribution enable wineries to capture lost sales that often result from consumers’ inability to find their favorite New Jersey wines on local store shelves.  Similarly, direct-to-consumer shipping has proven a vital channel for customers to find the wines they want, while still allowing for safe and effective regulation.

In a recent comprehensive report examining direct shipping laws in the states where shipping is allowed, the Maryland Comptroller’s Office, the state agency that regulates alcohol in Maryland, concluded that: (1) state regulation of direct-to-consumer shipping is effective; (2) the safety protocols written into state direct shipping laws prevent deliveries to minors; and (3) recordkeeping and reporting requirements give states the tools for effective tax collection on wine shipments.  See Peter Franchot, Compt’r. of Md., Direct Wine Shipment Report (2010), available at http://www.comp.state.md.us/DWS_Complete.pdf.

We support A4436 because it reinforces existing winery privileges and expands opportunity for both in-state and out-of-state businesses in the form of direct-to-consumer shipping.  Wineries add both to the character and the strength of New Jersey’s agricultural industry, tourism and family farm development.  While direct shipping capacity caps remain problematic, see Family Winemakers of Cal. v. Jenkins, 592 F.3d 1 (1st Cir. 2010), but see Black Star Farms LLC v. Oliver, 600 F.3d 1225 (9th Cir. 2010), New Jersey wineries should be afforded the opportunity to operate efficiently and profitably and New Jersey’s citizens should be allowed the benefit of free access to the wines of their choice.  We believe that A4436 promotes these aims, and respectfully request that you vote yes on this important bill.

Monday, December 19, 2011

Building On Our 2011 Successes

By Cary M. Greene

As we come to the end of another year, American wineries have a lot to be thankful for.  Our products are finding more consumers, and sales at higher price points are rebounding.  The playing field for direct-to-consumer shipping continues to expand, and wineries are winning battles to simplify state sales and distribution laws.  We’ve held harmful legislation at bay, including the CARE bill, H.R. 1161, and we’ve made progress at the state and national association level that will strengthen the impact of our industry grassroots.  It’s a lot to absorb, and a lot to be proud of.

Still, we expect our share of challenges in 2012.  Ensuring sufficient Congressional funding for the Alcohol & Tobacco Tax & Trade Bureau (“TTB”) will be high on the priority list.

The importance of this institutional knowledge can’t be overstated.  Within the context of its regulatory mandate—effectively regulating interstate commerce in alcohol and collecting federal excise taxes—TTB and its predecessor, the Bureau of Alcohol, Tobacco & Firearms (“BATF”), have overseen a massive transformation of the wine industry, from a relatively concentrated group of wineries to a highly diffuse industry with thousands of mom and pop players.  The agency has used a relatively flexible hand, learning along the way where smaller players encounter regulatory difficulties.  This approach has reaped dividends in the form of federal excise taxes.

In 2011, the agency operated on a budget of $100 million, but collected nearly $11 billion in alcohol beverage excise taxes, with nearly $1 billion coming from wineries alone.  That kind of ratio, nearly 110:1 in revenues over expenses, is a measure of success that few other federal agencies are likely to match.  A regulator starting from scratch would be unlikely to match this success.  A fully Congressionally-funded TTB could probably do even better.

While the agency isn’t perfect—the glacial pace of the label approval program in particular has become a major source of frustration for WineAmerica members—the problems the agency faces have more to do inadequate funding than ineffectiveness.  Say what you will about the existing federal standards, but there are many good regulators within TTB who understand the practical impact of the existing system, and who are trying to make federal rules work better.

TTB has its priorities in the right place, whether its simplification of its label rules or its desire to educate the industry about the impact of its rules and the extent of its programs.  We will certainly do our part to help Congress and the Administration understand this success and the need for additional funding in 2012.

Wednesday, December 14, 2011

WineAmerica's Testimony in Favor of Direct Shipping in New Jersey

Update: S3172 Passed the New Jersey State Senate on December 15 by a vote of 23-13.

On December 15, 2010 WineAmerica will present written testimony to the New Jersey State Senate in favor of S3172, which would allow direct-to-consumer shipment of wine. Below is the text of our testimony.

RE:      S3172 (Sweeney) – Permits direct shipping by wineries and creates Out-of-State Winery license

WineAmerica, the National Association of American Wineries, on behalf of our member wineries in New Jersey and across the nation, encourages you to vote yes on S3172, a bill that would permit New Jersey and out-of-state wineries to self-distribute their products, operate satellite tasting outlets, and ship wine directly to New Jersey consumers.  WineAmerica is the only national winery trade association.

We support this bill because it secures local winery privileges threatened by the Third Circuit decision in Freeman v. Corzine, 629 F.3d 146 (3d Cir. 2010) while expanding opportunity for wineries throughout the United States.  S3172 offers continuing support to the New Jersey wine industry’s progress, growth and prosperity, and removes an unhelpful cloud of uncertainty that has prevented New Jersey wineries from opening their doors.  For more than a year, the looming Freeman decision has been a weight on the dynamic growth of the state’s wineries.  S3172 will finally allow New Jersey winemakers to focus on what they do best—keep small farms viable and, through agri-tourism, build a new model for farm development.

We support S3172 because it reinforces existing winery privileges and expands opportunity for both in-state and out-of-state businesses in the form of direct-to-consumer shipping.  While direct shipping capacity caps remain problematic, New Jersey wineries should be afforded the opportunity to operate efficiently and profitably and New Jersey’s citizens should be allowed the benefit of free access to the wines of their choice.  We believe that S3172 promotes these aims, and respectfully request that you vote yes on this important bill.

Thursday, December 1, 2011

Revisting Advertising Compliance

We originally posted this in September, but think it is worth another look.

Make Sure Your Advertising is TTB Compliant

By Michael Kaiser

The TTB doesn't merely collect your taxes and approved your labels, they also regulate advertising for alcoholic beverages.  Now your advertisements do not need to be approved by the TTB, but they must be complaint with the regulations and it is up to the winery or "responsible advertiser" to make sure the advertisements are complaint.

Let's examine what is considered by TTB to be an advertisement.  According to TTB:

The regulations define the term"advertisement" as any written or verbal statement, illustration, or depiction which is in, or calculated to induce sales in, interstate or foreign commerce, or is disseminated by mail.  Examples include ads in newspapers or magazines, trade booklets, menus, wine cards, leaflets, circulars, mailers, book inserts, catalogs, promotional materials, or sales pamphlets.  The definition includes any written, printed, graphic, or other material accompanying the container; markings on cases, billboards, signs, or other outdoor display; and broadcasts made via radio, television, or in any other media.  Though not specifically listed, this definition includes website and other Internet-based advertising.

That last sentence is very important.  The regulations for labeling and advertising of wine have not been updated for quite some time, and they were originally written before the Internet became what it is today.  So the TTB places Internet advertising under the "any other media" umbrella.  The TTB considers Facebook and other social media sites to be advertising. 

Required Information
There is some required information for advertising material.  They are listed in the regulations (27 CFR Part 4.62) as the following:
 
  • Responsible advertiser. The advertisement shall state the name and address of the permittee responsible for its publication or broadcast. Street number and name may be omitted in the address.
  • Class, type, and distinctive designation. The advertisement shall contain a conspicuous statement of the class, type, or distinctive designation to which the product belongs, corresponding with the statement of class, type, or distinctive designation which is required to appear on the label of the product.
  • Exception. (1) If an advertisement refers to a general wine line or all of the wine products of one company, whether by the company name or by the brand name common to all the wine in the line, the only mandatory information necessary is the name and address of the responsible advertiser. This exception does not apply where only one type of wine is marketed under the specific brand name advertised.  (2) On consumer specialty items, the only information necessary is the company name or brand name of the product.
Prohibited Information
As with wine label, there are prohibited practices for wine advertising.  The regulations (27 CFR Part 4.64) list them as the following.

  • Any statement that is false or untrue in any material particular, or that, irrespective of falsity, directly, or by ambiguity, omission, or inference, or by the addition of irrelevant, scientific or technical matter tends to create a misleading impression.
  • Any statement that is disparaging of a competitor's products.
  • Any statement, design, device, or representation which is obscene or indecent.
  • Any statement, design, device, or representation of or relating to analyses, standards, or tests, irrespective of falsity, which the appropriate TTB officer finds to be likely to mislead the consumer.
  • Any statement, design, device, or representation of or relating to any guarantee, irrespective of falsity, which the appropriate TTB officer finds to be likely to mislead the consumer. Money-back guarantees are not prohibited.
  • Any statement that the wine is produced, blended, bottled, packed, or sold under, or in accordance with, any municipal, State, or Federal Government authorization, law, or regulations; and if a municipal, State, or Federal permit number is stated, the permit number shall not be accompanied by any additional statement relating thereto.
  • Any statement of bonded winecellar and bonded winery numbers unless stated in direct conjunction with the name and address of the person operating such winery or storeroom. Statement of bonded winecellar and bonded winery numbers may be made in the following form: “Bonded Winecellar No. __,” “Bonded Winery No. __,” “B. W. C. No. __,” “B. W. No. __.” No additional reference thereto shall be made, nor shall any use be made of such statement that may convey the impression that the wine has been made or matured under Government supervision or in accordance with Government specifications or standards.
  • Any statement, design, device, or representation which relates to alcohol content or which tends to create the impression that a wine contains distilled spirits, is comparable to a distilled spirit, or has intoxicating qualities.
  • Any word in the brand name or class and type designation which is the name of a distilled spirits product or which simulates, imitates, or creates the impression that the wine so labeled is, or is similar to, any product customarily made with a distilled spirits base.
Additionally, wine advertising may not include information that is deemed be inconsistent with labeling. Any label depicted on a bottle in an advertisement shall be a reproduction of an approved label.
Further restricted items on wine advertisements are:

  • Statement of age. No statement of age or representation relative to age (including words or devices in any brand name or mark) shall be made, except (1) for vintage wine, in accordance with the provisions of §4.27; (2) references in accordance with §4.38(f); or (3) use of the word “old” as part of a brand name.
  • Statement of bottling dates. The statement of any bottling date shall not be deemed to be a representation relative to age, if such statement appears without undue emphasis in the following form: “Bottled in __” (inserting the year in which the wine was bottled).
  • Statement of miscellaneous dates. No date, except with respect to statement of vintage year and bottling date, shall be stated unless, in addition thereto, and in direct conjunction therewith, in the same size and kind of printing there shall be stated an explanation of the significance of such date: Provided, That if any date refers to the date of establishment of any business, such date shall be stated without undue emphasis and in direct conjunction with the name of the person to whom it refers.
  • Flags, seals, coats of arms, crests, and other insignia. No advertisement shall contain any statement, design, device, or pictorial representation of or relating to, or capable of being construed as relating to, the armed forces of the United States, or of the American flag, or of any emblem, seal, insignia, or decoration associated with such flag or armed forces; nor shall any advertisement contain any statement, device, design, or pictorial representation of or concerning any flag, seal, coat of arms, crest, or other insignia likely to mislead the consumer to believe that the product has been endorsed, made, or used by, or produced for, or under the supervision of, or in accordance with the specifications of the government, organization, family, or individual with whom such flag, seal, coat of arms, crests, or insignia is associated.
  • Statements indicative of origin. No statement, design, device, or representation which tends to create the impression that the wine originated in a particular place or region, shall appear in any advertisement unless the label of the advertised product bears an appellation of origin, and such appellation of origin appears in the advertisement in direct conjunction with the class and type designation.
  • Use of the word “importer” or similar words. The word importer or similar words shall not appear in advertisements of domestic wine except as part of the bona fide name of the permittee by or for whom, or of a retailer for whom, such wine is bottled, packed or distributed: Provided, That in all cases where such words are used as part of such name, there shall be stated the words “Product of the United States” or similar words to negate any impression that the product is imported, and such negating statements shall appear in the same size and kind of printing as such name. 
  • Confusion of brands. Two or more different brands or lots of wine shall not be advertised in one advertisement (or in two or more advertisements in one issue of a periodical or newspaper, or in one piece of other written, printed, or graphic matter) if the advertisement tends to create the impression that representations made as to one brand or lot apply to the other or others, and if as to such latter the representations contravene any provision of §§4.60 through 4.64 or are in any respect untrue.
  • Deceptive advertising techniques. Subliminal or similar techniques are prohibited. “Subliminal or similar techniques,” as used in this part, refers to any device or technique that is used to convey, or attempts to convey, a message to a person by means of images or sounds of a very brief nature that cannot be perceived at a normal level of awareness.
Health-related statements:    
  • Health-related statement means any statement related to health and includes statements of a curative or therapeutic nature that, expressly or by implication, suggest a relationship between the consumption of alcohol, wine, or any substance found within the wine, and health benefits or effects on health. The term includes both specific health claims and general references to alleged health benefits or effects on health associated with the consumption of alcohol, wine, or any substance found within the wine, as well as health-related directional statements. The term also includes statements and claims that imply that a physical or psychological sensation results from consuming the wine, as well as statements and claims of nutritional value ( e.g., statements of vitamin content). Statements concerning caloric, carbohydrate, protein, and fat content do not constitute nutritional claims about the product.  
  • Specific health claim is a type of health-related statement that, expressly or by implication, characterizes the relationship of the wine, alcohol, or any substance found within the wine, to a disease or health-related condition. Implied specific health claims include statements, symbols, vignettes, or other forms of communication that suggest, within the context in which they are presented, that a relationship exists between wine, alcohol, or any substance found within the wine, and a disease or health-related condition. 
  • Health-related directional statement is a type of health-related statement that directs or refers consumers to a third party or other source for information regarding the effects on health of wine or alcohol consumption.
Rules for advertising
  • Health-related statements. In general, advertisements may not contain any health-related statement that is untrue in any particular or tends to create a misleading impression as to the effects on health of alcohol consumption. TTB will evaluate such statements on a case-by-case basis and may require as part of the health-related statement a disclaimer or some other qualifying statement to dispel any misleading impression conveyed by the health-related statement. Such disclaimer or other qualifying statement must appear as prominent as the health-related statement.
  • Specific health claims. A specific health claim will not be considered misleading if it is truthful and adequately substantiated by scientific or medical evidence; sufficiently detailed and qualified with respect to the categories of individuals to whom the claim applies; adequately discloses the health risks associated with both moderate and heavier levels of alcohol consumption; and outlines the categories of individuals for whom any levels of alcohol consumption may cause health risks. This information must appear as part of the specific health claim and in a manner as prominent as the specific health claim.
  • Health-related directional statements. A statement that directs consumers to a third party or other source for information regarding the effects on health of wine or alcohol consumption is presumed misleading unless it: Directs consumers in a neutral or other non-misleading manner to a third party or other source for balanced information regarding the effects on health of wine or alcohol consumption; and includes as part of the health-related directional statement, and in a manner as prominent as the health-related directional statement, the following disclaimer: “This statement should not encourage you to drink or increase your alcohol consumption for health reasons;” or includes as part of the health-related directional statement, and in a manner as prominent as the health-related directional statement, some other qualifying statement that the appropriate TTB officer finds is sufficient to dispel any misleading impression conveyed by the health-related directional statement.
It is clear that the TTB has an extensive list of prohibited practices for advertising of wine (and other alcoholic beverages) but it is consistent with the prohibited practices on wine labels.  If you have any questions about anything listed in this blog post please let us know and we will clarify them further for you.  It is essential for wineries to be compliant with TTB advertising regulations.