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TTB in a DEREGULATORY MOOD BY MARC E. SORINI

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s every reader of Artisan Spirit knows, the Alcohol and Tobacco Tax and Trade Bureau—“TTB”—functions as the primary federal regulator of the alcohol beverage industry. TTB issues the “basic permits” under the Federal Alcohol Administration Act (“FAA Act”) and the “registrations” under the Internal Revenue Code (“IRC”) that serve as the primary federal licenses that a distiller must obtain to legally operate in the United States. TTB reviews and approves the labels of all distilled spirits sold in interstate commerce, issuing certificates of label approval (“COLAs”) for thousands of labels each year. And TTB administers the advertising, tied-house, commercial bribery, and other trade practice provisions contained in the FAA Act, aimed at preventing consumer deception and prohibiting certain marketing practices deemed destructive in the 1930s. In these and other ways, this small government agency—itself a bureau of the Department of the Treasury—has a substantial role to play in the distilled spirits industry. Like all government bodies, TTB is not immune from politics. While TTB itself is staffed by career civil servants, it answers to a Treasury Department hierarchy lead by political appointees selected by the President. Thus, changes in Administration and other political shifts can have subtle and, occasionally, not-so-subtle influences in TTB policies and priorities. A dramatic example of this occurred in the 1990s, after TTB’s predecessor agency, the Bureau of WWW.ARTISANSPIRITMAG.COM  

Alcohol, Tobacco & Firearms ( “ AT F ” ) , approved a number of “directional h e a l t h statements” for wine labels that encouraged the public to ask their doctor about the benefits of moderate wine consumption. These approvals outraged a number of prominent Senators, who immediately informed the Clinton Administration that they would vote against every judicial nominee unless ATF reversed course. Not surprisingly, ATF quickly “reconsidered” its prior approvals and instituted a very restrictive policy towards health statements that remains in place today. Wineries that received COLAs for directional health statements were forced to surrender those COLAs and change their marketing strategies. While the election of Donald Trump as 45th President has not resulted in any dramatic shift in TTB policy, the President’s desire to reduce the regulatory burdens on business has already influenced TTB’s regulatory priorities. The President himself presents a puzzling picture to the alcohol beverage industry. He does not drink, and some suspect that he views alcohol consumption as a weakness to be avoided. Nevertheless, as someone who made millions in the development and operation of hotels, President Trump has made money from the sale of alcohol beverages for decades. Indeed, the President once lent his name to a vodka brand, and his son Eric owns and operates the Trump Winery in Virginia. Moreover, the President recently signed into law the Tax Cuts and Jobs Act, which incorporates a substantial excise tax reduction for producers and importers of distilled spirits, beer, and wine. When it comes to regulations, early in his administration President Trump announced several initiatives to reduce the regulatory burdens on industry. The centerpiece of

those efforts is Executive Order 13771, which requires that for every new regulation promulgated, an agency should identify two regulations for elimination. Executive Order 13771 is subject to exceptions, and many have questioned the “two-for-one” rule as either unworkable or too easily gamed (e.g., by eliminating two very short regulations in exchange for a new, very long regulation). With respect to TTB, however, legislative priorities have taken a decidedly deregulatory turn. In the Treasury Department’s contribution to the most recent “Unified Agenda,” a bi-annual compilation of federal regulatory initiatives, TTB placed a priority on deregulatory projects, several of which would alter the regulatory environment for craft distillers. While some of these initiatives pre-dated the Trump Administration, the change in Administrations appears to have thrust them from back-burner projects to the centerpiece of TTB’s rulemaking efforts. First, TTB expects to propose before the end of 2018 new regulations that will eliminate all but the minimum and maximum “standards of fill” for distilled spirits containers. CHANGES IN As most distillers ADMINISTRATION know, TTB AND OTHER regulations POLITICAL SHIFTS currently proscribe CAN HAVE SUBTLE the only AND, OCCASIONALLY, container NOT-SO-SUBTLE s i z e s INFLUENCES IN TTB that may be lawfully POLICIES AND used by PRIORITIES. distillers to bottle or can their products for sale in interstate commerce. TTB’s proposal will eliminate these prescribed sizes entirely and only set a minimum and maximum size. In the case of the maximum size, the FAA Act itself sets a one-gallon maximum. Because that size limit is set by statute, TTB cannot change it without an act of Congress. A second rulemaking project—long in the

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Artisan Spirit: Spring 2018  

The magazine for craft distillers and their fans.

Artisan Spirit: Spring 2018  

The magazine for craft distillers and their fans.