Sampling for Noncompliance

A few weeks ago, the TTB released the results of its 2015 Alcohol Beverage Sampling program.  Unfortunately for our friends in D.C., this program isn’t quite as enjoyable as it sounds.

Rather than a pub crawl, the sampling program involved the TTB purchasing 450 different regulated beverages in the marketplace, with the goals of (i) verifying that the labels on the products contained adequate descriptive information, (ii) confirming that the labels were not likely to mislead consumers, and (iii) finding any areas of noncompliance with federal law.  All in all, the TTB sampled 154 distilled spirits, 158 malt beverages and 138 wines during the year.

The results are were not especially encouraging.  Of the 450 products reviewed, 157 (almost 35%) were out of compliance in some way.  Several products failed in multiple ways, as the sample showed 208 compliance failures in those 157 products.  The breakdown of failures among the groups is interesting in a few respects.

Wines Travel the Easiest Path to Compliance

According to the TTB sample program, distilled spirits and malt beverages failed at essentially the same rates (40.2% noncompliance for spirits, and 38.6% noncompliance for malt beverages).  That’s close enough to suggest that practices among the two industries are equally good (or equally bad).  But the failure rate for wines was significantly lower (24%).  What can explain this difference?

Different production processes obviously play a role, but the bigger factor appears to be that wines are afforded greater margin of error before being deemed out of compliance in one key respect: alcohol by volume.

Under the law, distilled spirits can be up to 0.15% lower, in reality, than their stated alcohol before being determined to be out of compliance.  But they cannot be higher in actual alcohol content; if the TTB finds that your bourbon is 0.01% ABV above what is shown on the label, you’re out of compliance.  Wines (and malt beverages too, to a lesser extent), on the other hand, generally get much easier treatment.  If a wine is labeled as being above 14% ABV, then the actual contents can be as much as 1% above or below the stated ABV and remain in compliance.  If the wine is labeled as being between 7% and 14%, that tolerance increases to 1.5%.  [Note: if the wine crosses into a different tax class as a result of the disparity between labeled ABV and actual ABV, then it will be out of compliance no matter whether the disparity is within the applicable tolerance threshold.]

All this is a longish way of saying that if you’re going to make distilled spirits and want to stay in the TTB’s good graces, you need to get to be very good at testing your actual ABV, and report/label your product accordingly.  Of the 154 distilled spirits products tested, 48 failed to get this right, resulting in well over half of the compliance failures found within tested spirits.

The Small Stuff Matters

Many of the failures noted by the TTB could have been easily avoided with only a modest amount of additional care to administrative details.  Specifically, of the 157 noncompliant products:

  • 59 had labels which contained different information which was different from the information contained the product’s Certificate of Label Approval (either mandatory or non-mandatory information);
  • 14 had labels that contained mistakes in the language of the government warning;
  • 9 had labels missing mandatory information; and
  • 10 had labels which were printed illegibly or in the incorrect size type.

These types of errors are embarrassing, and can be entirely avoided if only a bit more attention is paid to regulatory compliance.

 The Big Stuff Still Matters (a lot)

TTB reports that one of the sampled spirits was “adulterated”.  That is regulatory code for a product that appears to contain the presence of a poisonous or harmful substance that may pose a health risk.  While this finding was present in only one of the 154 spirits tested, I think we can all agree that even one product failing in this category is too many.

 

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