The Session - Cask-Conditioned Beer & the TTB

Today’s post is brought to you by The Session. It’s a group writing project where beer (or in my case beer-related) bloggers from around the world write on a single beer-related topic on the same day (the first Friday of the month). This month’s topic is cask-conditioned beer, and the Session is being hosted by Thomas Cizauskas over at Yours For Good Fermentatables.

Cask-conditioned beer is naturally carbonated, unfiltered, unpasteurized, and uncentrifuged. These are the beers you see bar tenders laboriously hand-pumping to siphon the beer into your glass. “Real ale,” as some purists call it.

The TTB does not require a brewery to submit for approval any formulas for beer that is produced through traditional processes. Cask-conditioned beer (unless it uses some weird ingredients during brewing) does not need formula approval.

Non-traditional methods for which approval must be obtained, according to the TTB’s regulations, include: “removal of any volume of water from beer, filtration of beer to substantially change the color, flavor, or character, separation of beer into different components, reverse osmosis [(pre-mash reverse osmosis is standard and does not require approval)], concentration of beer, and ion exchange treatments.” Those all sound like non-traditional methods.

But, when did pasteurization, filtration, and forced carbonation become “traditional processes.” When does a standard industry practice become the norm, for which formula approval is no longer needed?

Ice beers, as we’ve mentioned, are in some circumstances considered by the TTB to be a traditional process. So, removal of some water from beer is now acceptable without formula approval. There is no definition of how much filtration will require formula approval, so, that standard could change as well depending on industry practice.

The TTB manufacturing regulations for the wine industry are much more specific (even specific Brix concentrations are stated and required). With the beer industry, however, interpretation of the regulations shifts with the policies of the agency.

Direct Shipping: Still a Long Way to Go

image by Kyle May

Recent court decisions (the Court of Appeals for the First Circuit in the Family Winemakers case, and the Supreme Court in the Granholm case) represent major victories for wineries looking to use additional distribution methods and for consumers. The path for direct shipping, however, is still very cluttered in most states. The problem is that, while court cases may open the door for more direct shipping, additional changes to the laws are needed for consumers to actually benefit from the courts’ decisions.

Many states, even while allowing direct shipping to consumers, also limit wineries with:

- Winery capacity caps;

- Consumer aggregate volume limits;

- Special permit requirements for each delivery truck carrying alcoholic beverages; and

- Other limitations (such as a consumer’s physical presence requirement at each year (AZ)).

These requirements are just as onerous and problematic for wineries and for wine consumers as are the discriminatory legislation at issue in the court cases.

Take the consumer volume limits as an example. Often, a winery in violation of the aggregate limits risks fines, the loss of its shipping privileges, and, even, the loss of its license. The problem is that wineries have no reliable way to know if the case of wine it is shipping to a consumer will put that consumer over his or her volume limit. In a state like New York, where the volume limit is 36 cases per year, the risk may be less. But, in other states, such as New Mexico, with a 2 case limit, the risk is far greater. Wineries are, essentially, burdened with tracking how much wine each consumer has purchased not only from their winery, but from all wineries.

There are few carriers that will even deal with the business of delivering wine, FedEx and UPS being the two major carriers for interstate delivery. They have both avoided interstate wine shipments to states that require special permitting for each delivery vehicle, or have other onerous delivery requirements (such as Massachusetts).

Until these types of laws are also changed, the court cases based on discriminatory legislation will not be enough to really allow wineries to ship directly to their consumers.

*** A good resource for the state requirements on direct shipping is the Wine Institute

Are all small producer incentives at risk?

image by jimg944

This week we discussed the Court of Appeals for the First Circuit’s decision declaring unconstitutional a Massachusetts law which gave smaller production wineries additional shipping rights over larger wineries.

The risk is that the Court’s decision will extend to other incentives (federal and state) given to small alcohol producers:

- Quantity tax caps for smaller producers (for wineries, there are even tax caps based on the type of wine produced at the federal level, as well as in some states);

- On and off premises sales directly to consumers;

- The right to sell directly to retailers and otherwise self distribute; and

- Limited Exceptions to state franchise laws (among others).

While, the Court’s decision could be detrimental to small producer incentives, there are factual limitations to the case.

The Court stated that:

“Massachusetts has used its 30,000 gallon grape wine cap to expand the distribution options available to ‘small’ wineries, including all Massachusetts wineries, but not to similarly situated ‘large’ wineries, all of which are outside Massachusetts. The advantages afforded to ‘small’ wineries by these expanded distribution options bear little relation to the market challenges caused by the relative sizes of the wineries. Section 19F's statutory context, legislative history, and other factors also yield the unavoidable conclusion that this discrimination was purposeful.”

In reaching its decision, the Court focused on the discriminatory intent of the law, which was evidenced by the legislative history, and statements made by the bill’s supporters essentially stating that they wanted to protect in-state producers. Additionally, the law excluded all non-grape wine from the volume caps (as a means to provide Massachusetts wineries with the advantage). So, (purely as an example) a Massachusetts winery producing 26,000 gallons of grape wine a year, and 35,000 gallons of other fruit wine per year would still fall under the small winery category. This starts to be a bit suspicious. The Court, it would seem, simply called out a discriminatory law.

If there had not been discriminatory legislative history behind the law, or, if the definition of a small winery was more in line with traditional definitions of wine, would the Court have come to the same decision? Who knows.

But, the extension of this decision to all incentives given to small producers is ridiculous. The federal government and the states routinely tax and regulate alcohol manufacturers based on their size. This is true in all industries, not just alcohol producers. How are small producer incentives different than, say, employment laws that do not apply to businesses with less than 15 employees?

We have a strong history of providing small businesses with incentives. There is a point at which this decision will collide with the federal and state goal of encouraging small business.

The Case that Could Put Small Producer Incentives at Risk

image by jimg944

Earlier this month, the US Court of Appeals for the First Circuit ruled that a Massachusetts law (which gave smaller production wineries additional shipping rights over larger wineries) is unconstitutional because

“... the effect of this particular gallonage cap is to change the competitive balance between in-state and out-of-state wineries in a way that benefits Massachusetts’ wineries and significantly burdens out-of-state competitors.”

The National Beer Wholesaler’s Association’s statement, the day after the decision, sums up the largest issue surrounding this decision:

“This opinion will put at risk laws designed to encourage the development of small brewers, small vintners and small distillers as well as those designed to ensure that alcohol is effectively regulated.”

The Massachusetts law at issue allowed small wineries (those producing less than 30,000 gallons per year) to simultaneously ship wines directly to consumers and to have their wines sold through the traditional three tier distribution channels. Large wineries, on the other hand, could either ship wine directly to Massachusetts consumers (and opt out of other distribution options), or have their wines sold at wine retailers, restaurants, and bars through the traditional distribution methods.

The law did not effect any Massachusetts winery (as in all Massachusetts wineries fell into the small winery category). It did not matter that the law was not discriminatory on its face, the effect of this law, the Court held, was to discriminate against out-of-state wineries.

The court’s ruling, on its face has some potentially serious ramifications for small wineries, breweries and distilleries which receive tax and regulatory incentives at both the federal and the state level. Extended even further, the decision could put at risk small business incentives in other industries.

As with all court opinions, there are limitations to the decision … check in with us Friday for a discussion of some of the factual limitations of the case.

What is it? Beer or distilled spirit?

image from Central Scotland News Agency

We have seen a lot of strong beers lately, made by a freezing and concentration process. Some have argued that the process used is really cold distillation and the resulting product is not beer. But, it is nothing different than a traditional method of making eisbocks. An eisbock, according to the BJCP guidelines is made by freezing beer and removing the ice to concentrate the alcohol.

Is this still beer? According to the TTB, the freezing method falls under the beer concentrate regulations. It is an acceptable practice to remove a certain amount of water from beer to concentrate it, “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.”

The TTB has found 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.” However, this finding was based on “ice beer [that did 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.”

The question is: are these high alcohol beers similar to the ice beers on which the TTB based its ruling? Is only .5% of the water removed to concentrate the beer to 32% alcohol? It can be a fine line between what is beer, and what is a distilled product.

Whether it’s beer or spirits to the TTB, in most states, such high alcohol beer will be sold and treated like a spirit. Many states have ABV limits on what is or is not beer. If your product is above that limit, it will be treated like a spirit. Which means, usually, that only state liquor stores may sell the product.

What is it? Beer or Wine?

image by .sandhu

Braggot, according to the BJCP guidelines, is a mead made with malt. But, what is it according to the TTB? And, why should you care?

The reason the distinction between beer and mead needs to be made is that they are two different license categories under the federal laws. Mead is wine, and, well, beer is beer. Most craft beer does not need formula approval, but all mead does.*

Mead makers are required to also have a federal FAA Act permit, brewers are not. The process, labeling, and record keeping regulations are slightly different between wine and beer. This is why the distinction matters.

Mead, according to the TTB, is an agricultural wine, or, wine "made from agricultural products other than the juice of [grapes, berries, or other] fruits."** Beer is "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."***

So, what exactly is "mead made with malt?" It’s beer. The simple addition of malt, makes the mead now a beer. According to the TTB, any addition of malt makes it a beer.

What about a mead with no malt, but with added hops? That is still a mead, and covered by the wine regulations. The formula must be pre-approved by the TTB before production. And, get this, mead makers are only allowed to add one pound of hops to every 1,000 pounds of honey.**** If your process requires more hops, forget it, the TTB will not likely approve it as a honey wine. It then goes into the "other than standard wine" category, for which there are additional regulations. Or, add some malt, and it becomes beer (for which you will also still need to file a formula approval).

Simple enough, right? Sure.

*See §§ 27 CFR 24.201 and 24.80-81.

**See § 26 USC 5387.

***See § 26 U.S.C. 5052.

**** See § 27 CFR 24.203.

Maybe We Should Walk

image by antwerpenR

Another one for the silly files: In Virginia Beach, if you are the drunk passenger of someone suspected of a DUI, you too could be charged with a DUI even though you are not driving. Let’s forget for one moment that a DUI charge is based on a blood alcohol level of .08 or higher (that’s an issue for another day).

I could understand if the drunk passenger was steering the wheel, or somehow in control of the car. But, simply allowing the more sober person to drive? Come on!

It’s not clear what happens if the driver is found not to be over the legal limit. Does the over the legal limit passenger still receive the DUI? If this was the law everywhere, passengers could be spending 24 hours in jail (as is the mandatory DUI punishment in some areas). All for letting the more sober person drive. What's the point of even having a designated driver in this situation?