ATF Ruling 94-3

The definition of "beer concentrate" in 27 CFR 25.11 does not include a beer whose volume has been reduced as long as there is not more than a 0.5 percent by volume reduction in the beer, and the resultant product retains its character as beer.

ATF has been asked whether the removal of a small quantity of water from beer renders that beer a concentrate under 25.11 and Subpart R of regulations in 27 CFR Part 25. This question has arisen as a result of the process used by some brewers in making ''ice beer."

Background. Beer is defined at 26 U.S.C. 5052 as "Beer, ale, porter, stout, and other similar fermented beverages (including sake or similar products) of any name or description containing one-half of one percent or more of alcohol by volume, brewed or produced from malt, wholly or in part, or from any substitute for malt."

27 CFR 25.11 defines concentrate as "Concentrate produced from beer by the removal of water under the provisions of Subpart R of this part." This section further states that the processes of concentration and reconstitution of beer are authorized processes in the production of beer.

Section 25.261 authorizes the production of concentrate from beer, and the reconstitution of beer from concentrate, at the brewery. Concentrate may be transferred without payment of tax between breweries of the same ownership and may be removed from the brewery without payment of tax for export. This section does not provide for the removal of concentrate from the brewery subject to tax.

Section 25.262 places restrictions on the reconstitution of beer. Accordingly, water and carbon dioxide must be added to concentrate in order to restore the volume to not less than, and the alcoholic content to not greater than, the volume of the beer prior to concentration. Under 25.261(b), beer made from concentrate may be removed from the brewery for consumption or sale on payment or determination of tax. Under 25.263, beer made from concentrate must be labeled as "Produced from concentrate" in addition to all other required label statements.

Regulations issued under the Federal Alcohol Administration Act at 27 CFR 7.24 (b) require malt beverages made from concentrate to be labeled "Produced from concentrate" in addition to all other required label statements.

Production of ice beer. Existing regulations relating to the definition and production of concentrate make no distinction between the removal of large or small amounts of water from beer. Thus, the removal of even a very small amount of water from a beer would appear to render it a concentrate, subject to the special requirements in Subpart R.

In the case at hand, brewers have inquired whether production of ice beer is considered the production of a concentrate. During production of ice beer, the beer is cooled below freezing causing the formation of ice crystals. The beer is then filtered or subjected to other processes which remove a portion of the ice crystals from the beer. The resultant product contains slightly less volume than the beer which entered the process. After this freezing process, brewers restore to the beer at least the volume of water lost when ice crystals are removed.

Discussion. ATF has examined laboratory samples of ice beer. In all cases, ATF finds that the basic character of the beer is unchanged; i.e., the product continues to resemble beer after the removal of small amounts of ice crystals and its alcoholic content is not increased to a substantial degree. The ice beer examined does not resemble a concentrate made from beer which typically contains less than 50 percent of the volume of the beer used to produce it, and has a high alcoholic content. Extensive research has revealed that the regulations relating to beer concentrate were premised on a process which concentrated beer to between 3/4 and 1 /4 or less of its original volume. ATF believes that de minimis removals of beer volume were not considered when the beer concentrate regulations were promulgated. Thus, ATF concludes that beer made by the removal of small amounts of ice crystals is beer rather than a concentrate made from beer.

ATF has also examined statements of process for ice beers. Our examination has found that the volume removed as ice crystals does not exceed 0.5 percent of the volume of the beer entered into the process. ATF thus concludes that removal of up to 0.5 percent of the volume of beer through the removal of ice crystals is customary industry practice and results in a product which may be considered beer.

Held. The meaning of the term "concentrate" defined in 25.11 does not include beer which has been reduced in volume through the extraction of ice crystals from the beer if: (1) the volume removed is a de minimis amount (not more than 0.5 percent of the volume of beer used in producing such product); and (2) the resultant product resembles beer. Under these conditions, the beer is not subject to the restrictions of Subpart R or to labeling requirements relating to concentrate. Such beer may be imported or removed taxpaid or tax determined and sold to consumers as beer.

Further held. In order to determine whether a product is a beer or a concentrate made from beer, brewers or importers shall submit a statement of process to the Associate Director, Compliance Operations, for any product in which any amount of water or ice is removed. Such statement will describe each process used in making beer, will state the alcoholic content of the beer at each stage in production, and will specify the volume reduction of the beer by any process.

27 CFR 7.24: CLASS AND TYPE

(the definition of the term "concentrate" does not include a beer from which a small quantity of water has been removed)

(also sec. 25.11, 25.261, 25.263)

27 CFR 25.11: MEANING OF TERMS

(the definition of the term "concentrate" does not include a beer from which a small quantity of water has been removed)

(also sec. 7.24, 25.261, 25.263)

27 CFR 25.261: GENERAL

(the definition of the term "concentrate" does not include a beer from which a small quantity of water has been removed)

(also sec. 7.24, 25.11, 25.263)

27 CFR 25.263: PRODUCTION OF CONCENTRATE AND RECONSTITUTION OF BEER

(the definition of the term "concentrate" does not include a beer from which a small quantity of water has been removed)

(also sec. 7.24, 25.11, 25.261)