[Federal Register: July 18, 2008 (Volume 73, Number 139)]
[Rules and Regulations]
[Page 41259-41261]
From the Federal Register Online via GPO Access [wais.access.gpo.gov]
[DOCID:fr18jy08-10]
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DEPARTMENT OF THE TREASURY
Alcohol and Tobacco Tax and Trade Bureau
27 CFR Parts 7, 16, and 25
[TTB Ruling 2008-3]
Classification of Brewed Products as ``Beer'' Under the Internal
Revenue Code of 1986 and as ``Malt Beverages'' Under the Federal
Alcohol Administration Act
AGENCY: Alcohol and Tobacco Tax and Trade Bureau, Treasury.
ACTION: Ruling on the classification of brewed products.
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SUMMARY: This document reproduces a ruling issued by the Alcohol and
Tobacco Tax and Trade Bureau on July 7, 2008, to clarify that that
certain brewed products classified as ``beer'' under the Internal
Revenue Code of 1986 do not meet the definition of a ``malt beverage''
under the Federal Alcohol Administration Act.
DATES: The ruling was effective on July 7, 2008.
FOR FURTHER INFORMATION CONTACT: Ramona Hupp, Regulations and Rulings
Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G Street, NW.,
Room 200-East, Washington, DC 20220; telephone (202) 927-2166.
SUPPLEMENTARY INFORMATION: On July 7, 2008, the Alcohol and Tobacco Tax
and Trade Bureau (TTB) issued TTB Ruling 2008-3 to clarify that certain
brewed products classified as ``beer'' under the Internal Revenue Code
of 1986 do not meet the definition of a ``malt beverage'' under the
Federal Alcohol Administration Act. We made this ruling available
through the TTB Web site on July 8, 2008. This ruling is reproduced
below:
TTB Ruling 2008-3
Classification of Brewed Products as ``Beer'' Under the Internal
Revenue Code of 1986 and as ``Malt Beverages'' Under the Federal
Alcohol Administration Act
In recent months, the Alcohol and Tobacco Tax and Trade Bureau
(TTB)
[[Page 41260]]
has received inquiries from brewers regarding the labeling standards
that apply to beers produced from substitutes for malted barley, such
as rice or corn. We also have fielded questions from brewers and
importers regarding the appropriate labeling of beers that are made
without hops. This ruling explains the statutory criteria for
classification of products as ``beer'' and ``malt beverages'' under the
applicable laws and regulations.
Laws and Regulations
Federal Alcohol Administration Act
Sections 105(e) and (f) of the Federal Alcohol Administration Act
(FAA Act), 27 U.S.C. 205(e) and (f), vest broad authority in the
Secretary of the Treasury to prescribe regulations with respect to the
labeling and advertising of wine, distilled spirits, and malt beverages
that are introduced into interstate or foreign commerce or imported
into the United States. Section 105(e) also provides that no person may
bottle, or remove from customs custody in bottles, distilled spirits,
wine, or malt beverages unless he has obtained a certificate of label
approval issued in accordance with regulations prescribed by the
Secretary. Regulations that implement the provisions of Sec. Sec.
105(e) and (f), as they relate to malt beverages, are set forth in part
7 of the TTB regulations (27 CFR part 7), Labeling and Advertising of
Malt Beverages. In the case of malt beverages, the labeling provisions
of the FAA Act apply only if the laws of the State into which the malt
beverages are shipped impose similar requirements.
Section 117(a)(7) of the FAA Act (27 U.S.C. 211(a)(7)) defines the
term ``malt beverage'' as ``a beverage made by the alcoholic
fermentation of an infusion or decoction, or combination of both, in
potable brewing water, of malted barley with hops, or their parts, or
their products, and with or without other malted cereals, and with or
without the addition of unmalted or prepared cereals, other
carbohydrates or products prepared therefrom, and with or without the
addition of carbon dioxide, and with or without other wholesome
products suitable for human food consumption.'' The same definition
appears in the TTB regulations at 27 CFR 7.10.
Internal Revenue Code of 1986
Chapter 51 of the Internal Revenue Code of 1986 (IRC) sets forth
excise tax collection and related provisions pertaining to distilled
spirits, wines, and beer; these provisions and the regulations
promulgated thereunder are also administered by TTB. Within Chapter 51
of the IRC, section 5051 (26 U.S.C. 5051) imposes a tax on all beer
brewed or produced, and removed for consumption or sale, within the
United States, or imported into the United States. Section 5412 of the
IRC (26 U.S.C. 5412) provides that beer may be removed from the brewery
for consumption or sale only in hogsheads, packages, and similar
containers, marked, branded, or labeled in such manner as the Secretary
of the Treasury may by regulation require. Regulations that implement
the Chapter 51 provisions pertaining to beer are set forth in part 25
of the TTB regulations (27 CFR part 25) and include, in Sec. 25.142
(27 CFR 25.142), label requirements for beer in bottles.
Section 5052(a) of the IRC (26 U.S.C. 5052(a)) defines the term
``beer,'' for purposes of Chapter 51, as ``beer, ale, porter, stout,
and other similar fermented beverages (including sake or similar
products) of any name or description containing one-half of 1 percent
or more of alcohol by volume, brewed or produced from malt, wholly or
in part, or from any substitute therefor.'' The same definition appears
in the TTB regulations at 27 CFR 25.11. In addition, with reference to
what may be a substitute for malt, Sec. 25.15(a) of the TTB
regulations (27 CFR 25.15(a)) states that ``[o]nly rice, grain of any
kind, bran, glucose, sugar, and molasses are substitutes for malt.''
``Beer'' versus ``Malt Beverage''
As indicated above, the definition of a ``beer'' under the IRC
differs from the definition of a ``malt beverage'' under the FAA Act in
several significant respects. First, the IRC does not require beer to
be fermented from malted barley; instead, a beer may be brewed or
produced from malt or ``from any substitute therefor.'' Second, the IRC
does not require the use of hops in the production of beer. Third, the
definition of ``beer'' in the IRC provides that the product must
contain one-half of one percent or more of alcohol by volume, whereas
there is no minimum alcohol content for a ``malt beverage'' under the
FAA Act.
Accordingly, a fermented beverage that is brewed from a substitute
for malt (such as rice or corn) but without any malted barley may
constitute a ``beer'' under the IRC but does not fall within the
definition of a `` malt beverage'' under the FAA Act. Similarly, a
fermented beverage that is not brewed with hops may fall within the IRC
definition of ``beer'' but also falls outside of the definition of a
``malt beverage'' under the FAA Act.
It should be noted that sake and similar products are included
within the definition of ``beer'' under the IRC. See 26 U.S.C. 5052(a).
However, sake is also included within the definition of a wine under
the FAA Act, which, among other things, covers only wines with an
alcohol content of at least seven percent alcohol by volume. See 27
U.S.C. 211(a)(6). Thus, sake and similar products with an alcohol
content of at least seven percent alcohol by volume are subject to the
labeling and other requirements of the FAA Act.
TTB Jurisdiction Over These Products
Beers (other than sak[eacute] and similar products) that do not
conform to the definition of a ``malt beverage'' in the FAA Act are
outside the scope of the FAA Act and, therefore, are not subject to the
labeling, advertising, and other provisions of the TTB regulations
promulgated under the FAA Act. This means, among other things, that
brewers and importers of such products are not required to obtain a
certificate of label approval for these beers.
Brewery products that are not malt beverages under the FAA Act but
that conform to the IRC definition of ``beer'' are still subject to all
applicable requirements of the IRC and part 25 of the TTB regulations,
including the labeling of bottles (Sec. 25.142) and the approval of
formulas (27 CFR 25.55). Furthermore, all alcohol beverages containing
not less than one-half of one percent alcohol by volume and intended
for human consumption are subject to the Government health warning
statement requirements of the Alcoholic Beverage Labeling Act of 1988
(the ABLA, codified at 27 U.S.C. 213 through 219 and 219a) and the ABLA
implementing regulations in part 16 of the TTB regulations (27 CFR part
16).
In cases where a brewery product (other than sak[eacute] and
similar products) fails to meet the definition of a ``malt beverage''
under the FAA Act, the product will be subject to ingredient and other
labeling requirements administered by the U.S. Food and Drug
Administration (FDA). As reflected in the 1987 Memorandum of
Understanding between FDA and TTB's predecessor agency, the Bureau of
Alcohol, Tobacco and Firearms (ATF), TTB is responsible for the
promulgation and enforcement of regulations with respect to the
labeling of distilled spirits, wines, and malt beverages pursuant to
the FAA Act. Importantly, however, in cases where an alcohol beverage
is not covered by the labeling provisions of the FAA Act, the product
is subject to ingredient and other labeling requirements under the
Federal
[[Page 41261]]
Food, Drug, and Cosmetic Act, and the implementing regulations that are
administered by FDA.
Required Quantities of Malted Barley and Hops to Qualify as a Malt
Beverage Under the FAA Act
TTB and its predecessor agency have previously provided guidance on
the minimum quantities of malted barley and hops required to be used in
the production of malt beverages. In 1994, the Bureau of Alcohol,
Tobacco and Firearms (ATF) issued ATF Compliance Matters 94-1, which
provided that beers fermented from at least 25 percent malted barley
(calculated as the percentage of malt, by weight, compared to the total
dry weight of all ingredients contributing fermentable extract to the
base product) and made with at least 7\1/2\ pounds of hops (or the
equivalent thereof in hop extracts or hop oils) per 100 barrels were
``malt beverages'' under the FAA Act. Because neither the FAA Act nor
the implementing regulations in 27 CFR part 7 prescribe minimum
standards for the amount of malted barley used in the production of a
malt beverage, we are now reconsidering this guidance.
Pending a decision on whether to engage in rulemaking on this
issue, TTB will continue to address inquiries from brewers regarding
the classification of fermented beverages that contain hops and malted
barley, but are made from less than 25 percent malted barley or less
than 7\1/2\ pounds of hops per 100 barrels. For example, we recently
determined that a neutral malt beer base containing a much lower amount
of malted barley (one percent of the total dry weight of all
ingredients contributing fermentable extract to the product) conformed
to the definition of a ``malt beverage.''
Brewers and importers should contact the Assistant Director,
Advertising, Labeling and Formulation Division, if they have a question
as to whether a particular product falls within the definition of a
``malt beverage'' and therefore is subject to the certificate of label
approval and other requirements under the FAA Act.
TTB Holding
Held, in order for a brewery product to fall within the definition
of a ``malt beverage'' under the FAA Act, it must be a fermented
beverage made from both malted barley and hops, or their parts, or
their products. A fermented beverage that qualifies as a ``beer'' under
the IRC (other than sak[eacute] or similar products) but that is made
without both malted barley and hops is not subject to the requirements
of the FAA Act.
Dated: July 7, 2008.
John J. Manfreda,
Administrator.
Dated: July 14, 2008.
John J. Manfreda,
Administrator.
[FR Doc. E8-16413 Filed 7-17-08; 8:45 am]
BILLING CODE 4810-31-P