Why do Proposition 65 notices matter? Every business – wherever located - that sells or ships a product with a chemical on the Proposition 65 list (over 1,000) to a California resident, must comply with the mandatory warnings .Read More
On August 30th new regulations requiring warning signs about Proposition 65 dangers, cannabis exposure and BPA in packaging come into effect. It’s a trifecta of new compliance requirements, and it’s going to expose California alcohol and cannabis licensees to significant penalties for those that don’t pay attention.
The Proposition 65 warnings – not the warning you are used to!Read More
By: Barbara Snider, Senior Counsel, and John Hinman, Senior Partner
Welcome to the insanely complicated world of alcohol regulation!
New legislative changes have now clarified that it’s a crime for almost all licensees to provide free transportation home from events and evenings out.
Unbeknown to most, California ABC law has consistently prohibited almost all alcoholic beverage licensees from providing free rides to customers because “free rides” are considered by the ABC an impermissible “thing of value,” and are considered by the anti-alcohol forces an inducement to consumption. While this prohibition has seldom (if ever) been enforced, it places responsible licensees who want to make sure that their customers are getting home safely in a very difficult spot – do they violate the law by providing a free ride home, or do they potentially endanger the community by allowing an inebriated customer to drive (or get) home on their own?Read More
The December 2017 issue of Wine Business Monthly contains an important and timely article (“FDA Agents Increase Number of Surprise Inspections at Wineries”) written by Barbara Snider, senior counsel to Hinman & Carmichael LLP.
Barbara explores the laws behind FDA’s expanding role in regulating alcoholic beverage manufacturers, provides important information regarding the increasing number of surprise FDA inspections at all alcoholic beverage manufacturers’ facilities, and lays out best practices for compliance.
This article is a “must read” for all manufacturers of alcoholic beverages. Wineries, breweries and distilleries are all considered “food manufacturers” under federal law, fall under the purview of the TTB (Alcohol & Tobacco Tax and Trade Bureau) and are subject to the regulatory authority of the FDA (the Food & Drug Administration). Barbara has done a masterful job of breaking a complex set of regulations down to their component pieces.
This article should be downloaded by every compliance department of every winery, brewery and distillery, and referred to when there is any question about FDA practices, issues or compliance.
Hinman & Carmichael LLP is here for the wine, spirits and beer industries and our lawyers, including Barbara, are available for consultation.
BY: Barbara Snider, Erin Kelleher and John Hinman
We received some great comments and questions regarding the recent (May 22, 2017) blog “Why the FDA is Inspecting Wineries.”
One of the most common questions was “does the FDA inspect breweries and distilleries? The answer is a resounding yes. If you are a brewery or a distillery, revisit the original post for more detail.
Breweries and Distilleries.
The bottom line is that the rules are the same for all alcoholic beverages. Most breweries and distilleries, like wineries, sell their products through general commerce and therefore, must register with the FDA and follow the same Good Manufacturing Practices. All domestic companies must register unless they are considered a “retail food establishment” or “qualified facility” and are exempted from registering as described below in more detail.
Breweries and distilleries, like wineries, are also exempt from Subpart C (Hazard Analysis and Risk-based Preventative Controls) and Subpart G (Supply-Chain Program) but like wineries, must comply with Subparts A and B (related to sanitary conditions and training of employees in personal hygiene) and Subpart F (recordkeeping).
Breweries and distilleries are also subject to FDA inspections and the best practice is to be aware and prepared. Therefore, the advice and brief checklists provided in the May 22nd blog apply equally to them.
The one difference for breweries and distilleries is the disposal of spent grains from the manufacturing process. In 2014 the FDA caused much consternation with its proposed rule that would require breweries and distilleries wishing to send the spent grain for animal feed to additionally comply with the hazard and risk analyses and a supply chain program under the Animal Food regulations. (This would be in addition to complying with the human food regulations with which all alcoholic manufacturers must comply).
The good news is that the FDA listened to the outcry against adding this additional regulatory burden and the current rule provides that processors already implementing human food safety requirements do not need to implement additional preventive controls when simply supplying a by-product (wet spent grains) for animal feed. Breweries and distilleries are expected to assure that there is no physical contamination of the spent grain before shipping. For example, contamination by placing trash or cleaning chemicals into the container holding the spent grain. General sanitary conditions apply to transporting the spent grains for animal feed.
It is important to note, however, that any processor who further “processes” the spent grain for use as animal food (for example, drying, pelleting, heat-treatment) must additionally comply with the Animal Food Good Manufacturing Practices which include developing hazard and risk-analyses and developing preventative controls.
The brewery or distillery may choose which path to take.
How does the FDA exemption for “Retail Food Establishments” apply to wineries, breweries and distilleries?
We had many questions about how the exemption (which is not exactly a model of clarity) works. The exemption as it applies to producers (such as wineries in the initial post but also including breweries and distilleries in this post) is very narrow.
The FDA exemption from the registration requirement is for producers that can demonstrate its primary purpose is to sell product directly to the consumer and that sells more than 51% of their product “out the front door” (“Retail Food Establishments”). So, the question is whether a producer’s business operations are such that it meets the definition of “Retail Food Establishment.”
First, even though the initial blog was written for wineries, because all alcoholic beverages are “food,” those breweries or distilleries that may qualify as a “retail food establishment” could possibly also fall under this narrow exception.
As part of the implementation of the Food Safety Modernization Act (“FSMA”), the FDA amended and expanded the definition of “Retail Food Establishment”. The official definition of a “retail food establishment” in the Code of Federal Regulations is:
“Retail food establishment means an establishment that sells food products directly to consumers as its primary function. The term “retail food establishment” includes facilities that manufacture, process, pack, or hold food if the establishment's primary function is to sell from that establishment food, including food that it manufactures, processes, packs, or holds, directly to consumers. A retail food establishment's primary function is to sell food directly to consumers if the annual monetary value of sales of food products directly to consumers exceeds the annual monetary value of sales of food products to all other buyers. The term “consumers” does not include businesses. A “retail food establishment” includes grocery stores, convenience stores, and vending machine locations. A “retail food establishment” also includes certain farm-operated businesses selling food directly to consumers as their primary function.” (Highlighting and emphasis added.)
Therefore, any winery, brewery, distillery that can qualify as a “retail food establishment” demonstrating that its primary purpose is to sell its product directly to consumers will be exempted from the FDA registration requirement.
This means that the annual monetary value of sales of food products directly to consumers must exceed the annual monetary value of sales of food products to all other buyers (at least 51% direct to consumer sales). The term “consumers” does not include businesses unless (as discussed below) you operate within in a small local area in the same state (truly local businesses) and can be characterized a “Qualified Facility.”
The FDA determined that all “direct-to-consumer sales” (DTC) including Internet and mail order sales are included as part of the calculation to determine whether the primary purpose is to sell directly to consumers. The FDA stated that there is no requirement that DTC must be a face-to-face sale. Therefore, sales proceeds from Internet and mail catalog DTC sales may be used in the calculation to determine that the primary function is to sell directly to consumers. Sales made at farmers’ markets, consumer events, directly from tasting rooms and the like are also considered in the calculation.
Further, while the earlier blog discussed the size requirement needed to qualify as a “retail food establishment” (less than 11 employees) in adopting the final rule, the FDA did away with any employee size requirement to qualify for the retail food establishment exemption stating: “Even if some establishments that use mail, catalog, and Internet orders in determining their primary function are larger establishments and can reach consumers on a national level, we do not believe that is inconsistent with section 102(c) of FSMA, which does not specify that FDA’s amendment to the retail food establishment definition only pertains to establishments of a specific size.”
The principal criteria the FDA will use in determining if an establishment qualifies as a “retail food establishment” is whether its primary purpose is to sell its product direct-to-consumer. The FDA’s basic test is whether an establishment’s annual monetary value of sales of food products directly to consumers exceeds the annual monetary value of sales of food products directly to all other buyers, i.e., more than 51% of its sales are direct-to-consumer.
This appears to be another benefit of the alcoholic beverage industry move to DTC (practically and legislatively) where possible.
We did receive a comment asking us to explain what “Qualified Facilities” means. This very narrow exemption from the FDA registration requirement applies only to very small businesses that principally operate locally. Very briefly, a “qualified facility” status applies to those facilities that sell product to consumers, restaurants or “retail food establishments” located in the same state and not located further than 275 miles from the qualified facility. There are also monetary limits on the value of product sold during the prior 3-year period (less than $500,000 adjusted for inflation). Attestations and documentation are required. Should anyone desire more information on this, please call the FDA, your trade association representative, or your attorney.
We received some inquiries asking whether a winery (or brewery/distillery) needs to develop a “Recall Plan” in the case there is need for the recall of the product. The first point to make is that the TTB has primary control over any recalls for alcoholic beverages and does not require a company under its jurisdiction to prepare a Recall Plan. While it might be a good idea and a good business practice to have a plan of action regarding what to do if you need to recall a product from the market, know that it is not required by the TTB and the FDA cannot impose that requirement (at least not yet!).
You should feel comfortable if the FDA inspector asks about your recall plan and you don’t have one (although we do encourage adoption of a recall plan as a basic best practice).
Conclusion – Be Compliant!
We encourage our clients and friends to approach FDA compliance in the same orderly way that they approach all compliance topics. There should be an officer or manager of the facility charged with the principal responsibility of compliance with operating regulations – whether labor and employee related, production facility related (use permits and equipment safety under OSHA for example), alcohol production and sales related (ABC, TTB and local state OSS permits) or food product related (FDA and local food service requirements for example).
The smaller the enterprise of course the more the burden falls on fewer people. That is also why we encourage checklists and spending quality time with your industry trade associations, who have a vested interest in making sure that their members know the rules.
This is a complex issue with many moving parts. We encourage you to contact your trade association representative or your attorney with your questions before you get that call informing you that the FDA inspector is on the way.
- Decoding the BCC’s Guidance on Commercial Cannabis Activity.
- Prop 65 - Escaping a "Notice of Violation"
- TTB Consignment Sales Investigations - What is Behind the Curtain of the TTB Press Releases?
- Heads Up! The ABC Is Stepping Up Enforcement Against Licensees Located Near Universities
- Coming Soon: New Mandatory Training Requirements for over One Million “Alcohol Servers” In California – September 1, 2021 will be here quickly
- 2019 Legislative Changes for California Alcohol Producers – a Blessing or a Curse?
- A Picture (On Instagram) Is Worth A Thousand Words
- Playing by the Rules: California Cannabis Final Regulations Takeaways
- Hinman & Carmichael LLP Names Erin Kelleher Partner and Welcomes Gillian Garrett and Tsion “Sunshine” Lencho to the Firm
- Congress Makes History and Changes the CBD Game for Good
- Pernicious Practices (stuff we see that will get folks in trouble!) Today’s Rant – Bill & Hold
- CBD: An Exciting New Fall Schedule… or Not?
- MISSISSIPPI RISING - A VICTORY FOR LEGAL RETAILER TO CONSUMER SALES, AND PASSAGE OF TITLE UNDER THE UNIFORM COMMERCIAL CODE
- California ABC's Cannabis Advisory - Not Just for Stoners
- NEW CALIFORNIA WARNINGS FOR ALCOHOLIC BEVERAGES AND CANNABIS PRODUCTS TAKE EFFECT AUGUST 30, 2018, NOW INCLUDING ADDENDUM REGARDING 2014 CONSENT AGREEMENT PARTIES AND PARTICIPANTS
- National Conference of State Liquor Administrators – The Alcohol Industry gathers in Hawaii to figure out how to enforce the US “Highly Archaic Regulatory Scheme.”
- Founder John Hinman Honored with the Raphael House Community Impact Award
- ROUTE TO MARKET AND MARKETING RESTRICTIONS - NAVIGATING REGULATORY SYSTEM CONSTRAINTS
- Alcohol and Cannabis Ventures: Top 5 Legal Considerations
- ATF and TTB: Is Another Divorce on the Horizon? What’s Going on with the Agency?
- STRIKE 3 - YOU REALLY ARE OUT! THE ABC'S STRICT APPLICATION OF PENALTIES FOR SALES TO MINORS
- TTB Temporarily Fixes Problem with Fulfillment Warehouse Tax Credits - an “Alternate Procedure” for Paying Taxes & Reporting
- CUSTOMERS WHO HAVE HAD ONE TOO MANY - THE FREE TRANSPORTATION DILEMMA
- The Renaissance of Federal Unfair Trade Practices - Current Issues and Strategies
- ‘Twas the week before New Year’s and the ABC is out in Force – Alerts for the Last Week of 2017, including the Limits on Free Rides
- Big Bottles, Caviar and a CA Wine Strong Silent Auction for the Holidays!
- The FDA and the Wine and Spirits Industry – Surprise inspections anyone?
- NORTHERN CALIFORNIA WILDFIRES: UPDATED REGULATORY AGENCY DISASTER RELIEF RESOURCES AT A GLANCE
- NORTHERN CALIFORNIA WILDFIRES: REGULATORY AGENCY DISASTER RELIEF RESOURCES AT A GLANCE
- Soon to come to your Local Supermarket– Instant Redeemable Coupons of the digital age!
- The License Piggyback Dilemma – If it Sounds Too Good to be True, it Probably is
- A timely message from our Florida colleagues on the tied house laws, the three-tier system and the need for reform
- ABC Declaratory Rulings – A Modest Proposal Whose Time has Come
- More on FDA Inspections - Breweries, Distilleries and Questions
- WHY THE FDA IS INSPECTING WINERIES
- Senate Bill 378—The Proposed Demise of Due Process for Alcohol Licensees
- ABC Enforcement - Trends and Predictions
- The Corruption Chronicles – Volume One: A New Hope
- New Alcohol Delivery Oversight on the Horizon
- Michigan: Canary in the DtC Coal Mine?
- California ABC and Federal Credit Laws – Active Enforcement and Lots of Questions!
- Big Bottles For The Holidays - The Highest Calling Of The Winemaker's Art
- FINAL COMMENTS TO TTB NOTICE 160 DUE ON WEDNESDAY DECEMBER 7TH – WE ARE ASKING THE TTB TO EXTEND THE COMMENT PERIOD AGAIN TO ALLOW FOR INDUSTRY NEGOTIATION AND ALIGNMENT OF INTERESTS
- SONOMA COUNTY WINERY USE PERMITS, EVENT RESTICTIONS AND DTC
- New TTB Labeling Requirement Regulations: Out-of-State Bottling Is Not Created Equal and Consumers Right to Know Where the Grapes in their Wine Come from is Compromised
- Isn't A Written Agreement With A Distributor Worthless In A Franchise State?
- Crowd Funding for Alcohol Producers and Retailers – Down the Rabbit Hole with the Tied House laws
- Everything you ever wanted to know about the BPA Warning Statement but were afraid to ask
- AB 2082 - A Hunting License for Police and a Lethal Weapon for Politicians that Deprives Licensees of Currently Available Due Process Rights
- “Better Late Than Never”-- Judge in Illinois Dismisses 201 Sales Tax Cases against Retailers
- The Day the Music Almost Died: The Story of the BottleRock ABC Accusations, the ABC Appeals Board and a Victory for a Common Sense Interpretation of the Tied House Laws
- The Arsenic in Wine Class Action Dismissal – what it means
- Counterfeit or Artisanal Mexican Spirits? Pick your Poison, or your lime wedge
- Warning - CA ABC enforcement teams are on the prowl this weekend!
- RELIEF AT LAST! ILLINOIS MOVES TO FIX THE SALES TAX LAWSUITS AGAINST OUT-OF-STATE SELLERS BUT PROPOSES TO PENALIZE WINERIES AND RETAILERS THAT SHIP WITHOUT PERMITS
- The TTB Speaks on Category Management or, be Careful What you Ask for Because you might Get it!
- Hinman & Carmichael LLP Announces the Addition of Jeremy Siegel to its team of top beverage law lawyers
- 2016 LEGISLATIVE UPDATES: Part IV
- 2016 LEGISLATIVE UPDATES: Part III
- 2016 LEGISLATIVE UPDATES: Part II
- 2016 LEGISLATIVE UPDATES: Part I
- Hinman & Carmichael LLP is Hiring!
- John Hinman Presents NBI Webinar on Basics of Alcohol Beverage Law
- ABC DISMISSES SAVE MART GRAPE ESCAPE ACCUSATION BUT REFUSES TO ADOPT JUDGE’S DECISION FINDING NO STRICT LIABILITY FOR ABC VIOLATIONS
- Speakeasies are still with us, and proliferating!
- The War for the Soul of Sonoma County – the Winery Working Group Battle
- Santa Claus isn’t the only one coming to town this Christmas!
- Arizona's Direct to Consumer Shipping Rules - An Exercise in Complexity
- AB 780 - Social Media and the ABC: The California Legislative “Fix” that Fails
- Illinois Finally Offers Certainty and Relief for Victims of Sales Tax Lawsuits, but Prompt Action is Required in Pending Cases
- A Modest Proposal – Adopt the federal rule on Tied-House liability in California
- The Grapes Escaped - Why the First Amendment Matters
- Appellate Court Ruling Strikes Blow Against State’s Arbitrary Beer Label Ban
- Illinois Attorney General's Office Announces Intention to Dismiss False Claims Act Against Liquor Retailers
- Commercial Speech And Alcoholic Beverages - Part III
- Commercial Speech And Alcoholic Beverages - Part II
- Craft Beverages: Social Media Marketing the Effective and Compliant Way
- Commercial Speech And Alcoholic Beverages - Part I
- A LAYPERSON LOOKS AT ARSENIC IN WINE
- The Biggest Retailer in the World vs. the TABC
- Rebecca Stamey-White presents Emerging Issues in Wine Law
- Top Beverage Alcohol Law Firm Adds and Elevates Partners
- Illinois Qui Tam Lawsuits—Private Enforcement Of a State Claim: A Bonanza For A Plaintiff’s Lawyer And A Rip-Off Of Retailers
- BOOZE RULES OF SOCIAL MEDIA: The Retailer Right to Pay Exception
- LIONS AND TIGERS AND TWEETS, OH MY!
- AB 2004: Brewer's Incremental Parity with Wine Makers
- Expanding, Proud Of It, and Wanting to Tell the World
- DC Weighs in Strongly on Third Party Marketer Delivery Services
- “Visual Links” between Beer, Wine and Spirits Labels and Retailers Ruled Unlawful in California — the tied house laws run amok
- Hard Cider Legislative Update
- New Marketing Model for New York – Lot 18 and the NYSLA
- Sweeping Changes in Proposed NYSLA Bill Include Expansion for Craft
- Minimum Resale Price Policies - How to Control Price-Cutters
- AB 2130 – Gloves Off?
- “Gluten-Free” Labels for Wine, Beer and Distilled Spirits. We’re Still Waiting.
- AB 1252: Sanitation Overkill?
- Growlers: Not Just for Beer Anymore
- California Legislative Roundup 2014
- Build It and They Will Come: Craft Products Get New Privileges in CA and TX
- AB 1128: Veto of the “Serve a Minor” Felony Penalty Bill, or How to Lose a Winery in One Sale