Hot Topics for the Distilled Spirits Industry

July 7, 2009

This year's TTB Expo covered numerous topics of interest to distilled spirits producers and distributors including import and export requirements, labeling tips, "organic" distilling, and some pitfalls of artisan distilling. The Alcohol and Tobacco Tax and Trade Bureau held its annual Expo in Covington, Kentucky on June 24, 25, and 26. As usual, presentations to the distilled spirits industry played a prominent role in this year's Expo. TTB officials discussed the details of the Federal Alcohol Administration Act and the regulations that have grown up around it.

Officials also discussed the repeal of the Special Occupational Tax for distilled spirits producers and marketers. Industry members learned about the licensure and bonding requirements for opening a distilled spirits plant, as well as the excise tax and record-keeping requirements that all distilled spirits businesses must consider. In addition, a few topics of special interest were covered at the Expo: Import and Export Requirements Several presenters focused on the requirements for importation and exportation of distilled spirits.

Importers were encouraged to remember that they must comply with licensure, bonding, and labeling requirements in addition to typical customs and excise tax requirements. The first step to becoming an importer of distilled spirits is the Federal Importer Basic Permit. TTB officials demonstrated the application process for this permit, which typically takes about two months, and pointed out a few common mistakes that applicants often make. Importers were also reminded to be prepared to comply with TTB's background check and screening process, described in detail at the Expo. Exporters were introduced to the International Trade Division, TTB's liaison on international issues, which can help exporters by working to reduce barriers to the exportation of distilled spirits.

Exporters were also briefed on how to take advantage of drawbacks against the federal excise tax when they export spirits. The TTB has a great deal of information available for domestic producers and wholesalers of distilled spirits who are looking to export these spirits overseas. In addition to market analysis, including emerging markets, TTB has information about the legal and regulatory requirements of foreign markets. Labeling Tips TTB's rigorous labeling requirements were the subject of several presentations at this year's Expo. TTB officials clarified what information must and may be on the label as well as what information absolutely cannot be on the label. TTB's online Certificate of Label Approval (COLA) system was described in another presentation. This system is not only easier and faster than the conventional paper-based application system, it also leads to fewer rejections and facilitates recordkeeping. "Organic" Distilling The demand for "organic" food products has increased steadily over recent years and even the distilled spirits industry is looking for ways to tap into this market. In order for a distilled spirit to qualify to place the word "organic" on its label, it must comply with the USDA's National Organic Program (NOP) requirements.

These requirements include prohibitions on the use of certain substances in the farming of grains and other ingredients used in distilled spirits. In addition, and of particular interest to distillers, the NOP requirements specify certain handling techniques that must be followed through the distilling process in order to qualify for the "organic" label. TTB officials covered these topics at the Expo, as well as the specific "organic" labeling that may be used depending on the level of NOP requirements adhered to. The Pitfalls of Artisan Distilling In a development that may shape up to be similar to the microbrew craze that swept the brewing industry, artisan distilleries are gaining increasing visibility and popularity. Artisan distilleries bring variety to the market and operating one can be a fun and profitable small business. But artisan distilleries are more likely than large, established distilleries to trip up on certain regulatory pitfalls. Artisan distillers should pay careful attention to the regulatory requirements surrounding labeling, gauging, record keeping, bonding, and the locations in which distilleries can be located. The Expo included an interesting presentation covering these topics that was specially geared for artisan distillers.

These presentations raised just a few issues of importance to distilled spirits businesses – from large and small producers, to wholesalers, to importers and exporters. And, although this year's Expo was valuable to industry members who attended, non-participants aren't out of luck. Click here to find these presentations and any other presentations from this year's TTB Expo. For further details, or for any assistance with legal matters related to your distilled spirits operation, contact Matthew P. Forgue or Joseph J. Dehner or any other attorney in Frost Brown Todd's International Services Group or Entrepreneurial Business and Venture Capital Practice Group.

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