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Department of the Treasury Alcohol and Tobacco Tax and Trade Bureau Monday, January 3, 2005 Part III Department of the Treasury Alcohol and Tobacco Tax and Trade Bureau 27 CFR Parts 7 and 25 Flavored Malt Beverage and Related Regulatory Amendments (2002R–044P); Final Rule VerDate jul<14>2003 15:07 Dec 30, 2004 Jkt 205001 PO 00000 Frm 00001 Fmt 4717 Sfmt 4717 E:\FR\FM\03JAR3.SGM 03JAR3 194 Federal Register / Vol. 70, No. 1 / Monday, January 3, 2005 / Rules and Regulations DEPARTMENT OF THE TREASURY III. Discussion of Specific Proposals in TTB A. Information Quality Act Notice No. 4 B. ‘‘Alcohol is Alcohol’’ Alcohol and Tobacco Tax and Trade A. Standard for Added Alcohol and C. Marketing of FMBs to Underage Bureau Alcohol from Fermentation Drinkers B. Proposed 0.5% Added Alcohol by D. More Explicit Labeling of FMBs Volume Standard for ‘‘Beer’’ under the E. Establishing Another Category of 27 CFR Parts 7 and 25 IRC Alcohol Beverages [TTB T.D.–21; Re: TTB Notice No. 4] C. Proposed 0.5% Added Alcohol by F. Other Comments Volume Standard for Malt Beverages XIV. Implementation Dates RIN 1513–AA12 under the FAA Act A. Effective Date for Compliance with the D. Alternative 51/49 (Majority) Alcohol New Added Alcohol Standard Flavored Malt Beverage and Related Standard B. Effect on Products in the Marketplace Regulatory Amendments (2002R–044P) E. Proposed Alcohol Content Labeling C. Additional TTB Comment on the Statement for Flavored Malt Beverages Effective Date AGENCY: Alcohol and Tobacco Tax and F. Use of Distilled Spirits Terms in Malt XV. Comments on the Proposed Regulatory Trade Bureau, Treasury. Beverage Labeling and Advertising Text; Regulatory Text Changes G. Filing Formulas for Fermented A. Reference to Malt Beverage Standards, ACTION: Final rule; Treasury decision. Beverages §§ 7.10 and 7.11 H. Samples; Formulas and Samples for B. Comments on Alcohol Flavoring SUMMARY: The Department of the Imported Malt Beverages Material Reference, §§ 7.11 and 25.15 Treasury and its Alcohol and Tobacco I. Other Issues Raised in Notice No. 4 C. Malt Beverages Above 6.0% Alc/Vol; Tax and Trade Bureau adopt as a final IV. Rulemaking History Status of ATF Ruling 96–1 rule certain proposed changes to the V. Comments Received in Response to Notice D. Changes to § 7.31 regulations concerning the production, No. 4 E. Reference to Standards for Beer, §§ 25.11 taxation, composition, labeling, and A. General Discussion of Comments and 25.15 advertising of beer and malt beverages. B. Overview of Comments F. Other § 25.15 Issues This final rule permits the addition of C. Summary of TTB Final Rule Decisions G. Comments on Formula Proposals, flavors and other nonbeverage materials VI. Comments on Whether the Rulemaking Is §§ 25.55–25.58 Necessary and Fair XVI. Regulatory Analysis and Notices containing alcohol to beers and malt A. Is There a Need to Engage in A. Executive Order 12866 beverages, but, in general, limits the Rulemaking on this Issue? B. Regulatory Flexibility Act alcohol contribution from such flavors B. Fairness and Notice Issues C. Paperwork Reduction Act and other nonbeverage materials to not VII. Regulatory Burden and Cost-Related XVII. Drafting Information more than 49% of the alcohol content of Issues XVIII. List of Subjects the product. However, if a malt beverage A. Costs of Complying with the Proposed XIX. Amendments to the Regulations 0.5% Standard contains more than 6% alcohol by Notes to Readers volume, not more than 1.5% of the B. Effect on Current Products and New volume of the finished product may Product Development A. ATF–TTB Transition C. Effect on Competition consist of alcohol derived from flavors D. Effect on the Retail Licensing System Effective January 24, 2003, section and other nonbeverage ingredients that and Overall Marketplace 1111 of the Homeland Security Act of contain alcohol. This final rule also E. TTB Response 2002 (Public Law 107–296, 116 Stat. amends the regulations relating to the VIII. The 0.5% Standard vs. the 51/49 2135), divided the Bureau of Alcohol, labeling and advertising of malt Standard—Other Issues Tobacco and Firearms (ATF) into two beverages, and adopts a formula A. Comments in Favor of the 0.5% new agencies, the Alcohol and Tobacco requirement for beers. Standard Tax and Trade Bureau (TTB) in the We issue this final rule to clarify the B. Comments in Favor of the 51/49 Department of the Treasury, and the status of flavored malt beverages under Standard C. TTB Response Bureau of Alcohol, Tobacco, Firearms the provisions of the Internal Revenue IX. State Concerns and Explosives in the Department of Code of 1986 and the Federal Alcohol A. Comments by State Regulatory Agencies Justice. The regulation and taxation of Administration Act related to the B. Other Comments in Support of the 0.5% alcohol beverages remains a function of production, composition, taxation, Standard the Department of the Treasury and is labeling, and advertising of alcohol C. Other Comments in Support of the 51/ the responsibility of TTB. References to beverages. This final rule also will 49 Standard the former ATF and the new TTB in this ensure that consumers are adequately D. TTB Response document reflect the time frame, before informed about the identity of flavored X. Mandatory Alcohol Content Labeling for or after January 24, 2003. malt beverages. FMBs A. Comments Supporting the Proposal B. Use of Plain Language DATES: This rule is effective January 3, B. Other Comments 2006. C. TTB Response In this document, ‘‘we,’’ ‘‘our,’’ and ‘‘us’’ refer to the Department of the FOR FURTHER INFORMATION CONTACT: XI. Use of Distilled Spirits Terms on Labels Charles N. Bacon, Alcohol and Tobacco and in Advertisements Treasury and/or the Alcohol and Tax and Trade Bureau, Regulations and A. Comments Received Tobacco Tax and Trade Bureau (TTB). B. TTB Response Procedures Division, P.O. Box 5056, ‘‘You,’’ ‘‘your,’’ and similar words refer XII. New Formula Requirements to members of the alcohol beverage Beverly Farms, MA 01915; telephone A. Fermented Products Requiring Formulas (978) 921–1840. industry and others to whom TTB under § 25.55 regulations apply. SUPPLEMENTARY INFORMATION: B. Standards for Formula Approval C. Alcohol Information in Formulas I. Background Information Table of Contents D. Reasonable Range of Ingredients Notes to Readers E. Formula Confidentiality Flavored malt beverages are brewery A. ATF–TTB Transition F. Standard Form for Formulas products that differ from traditional B. Use of Plain Language G. Formula Proceedings malt beverages such as beer, ale, lager, I. Background Information H. Placement in the CFR porter, stout, or malt liquor in several II. TTB Notice No. 4 XIII. Other Issues Raised by Commenters respects. Flavored malt beverages VerDate jul<14>2003 15:07 Dec 30, 2004 Jkt 205001 PO 00000 Frm 00002 Fmt 4701 Sfmt 4700 E:\FR\FM\03JAR3.SGM 03JAR3 Federal Register / Vol. 70, No. 1 / Monday, January 3, 2005 / Rules and Regulations 195 exhibit little or no traditional beer or set forth guidance on the labeling and most of the flavored malt beverages malt beverage character. Their flavor is advertising of flavored malt beverages studied was derived from alcohol derived primarily from added flavors and again reiterated its intention to flavoring materials and that in some rather than from malt and other engage in rulemaking on the use of cases this figure rose to more than 99%. materials used in fermentation. At the alcohol flavoring materials in the In contrast, the alcohol derived from same time, flavored malt beverages are production of malt beverages. flavors constituted 50% or less of the marketed in traditional beer-type bottles In the interim, State regulatory and overall alcohol in only 4 of the 114 and cans and distributed to the alcohol taxation agencies started to express products studied. beverage market through beer and malt concerns about the status of flavored beverage wholesalers, and their alcohol malt beverages, and these agencies Based on the study’s results, ATF also content is similar to other malt requested that ATF or TTB take action concluded that most flavored malt beverages—in the 4-6% alcohol by to clarify the status of these products as beverages contained very little actual volume range. either malt beverages or distilled spirits. beer base. Only 15 out of the 114 Although flavored malt beverages are In 2002, ATF examined the flavored malt beverages studied produced at breweries, their method of formulation of 114 alcohol beverage contained 51% or more by volume production differs significantly from the products labeled and marketed as fermented beer; the remaining volume production of other malt beverages and flavored malt beverages. ATF undertook of those 15 products consisted of beer. In producing flavored malt this study to find out how these flavors, water, and other ingredients. beverages, brewers brew a fermented products were produced, what Two of the flavored malt beverages base of beer from malt and other ingredients were used, and from where studied contained only 1% fermented brewing materials. Brewers then treat the alcohol in them was derived. This beer by volume. this base using a variety of processes in study did not examine malt beverages order to remove malt beverage character labeled and marketed as flavored beers, II. TTB Notice No. 4 from the base. For example, they remove flavored ales, and so forth (such as the color, bitterness, and taste generally ‘‘cherry beer’’ or ‘‘pumpkin ale’’) since On March 24, 2003, we proposed a associated with beer, ale, porter, stout, these types of malt beverages typically number of regulatory changes and other malt beverages. This leaves a have the character of malt beverages and concerning beer and malt beverages in base product to which brewers add their alcohol is derived primarily from TTB Notice No.
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