Tuesday, April 22, 2014

TTB Fails Are Becoming All Too Frequent

The U.S. Treasury Department's Alcohol Tax and Trade Bureau (TTB), which regulates all alcoholic beverages sold in the United States, announced today that it has not approved for sale a new powdered alcohol product called Palcohol, reversing previous announcements by the bureau and producer that approval had been obtained.

It's hard to believe that such a thing as powdered alcohol can actually work and there is plenty of reason to be skeptical. The website, for instance, says you reconstitute Palcohol by adding it to five ounces of water, but it never says how much powder to use in that formula. A teaspoon? A tablespoon? A cup? Very suspicious.

It is probably good that TTB has put the brakes on this. The operator of a beverage law web site told USA Today that it looks like Congressional intervention. Powerful people are asking questions TTB can't answer.

They should not stop there.

The vehicle through which TTB regulates alcoholic beverages (usually in liquid form) is the Certificate of Label Approval (COLA) process. Producers submit proposed labels and other required information, which TTB reviews and either approves or rejects. Rejections usually include some guidance as to how the label can be corrected.

Many producers, large and small, complain about the process. They say COLA rulings often seem arbitrary and inconsistent, and TTB's guidance is often vague or contradictory.

One big problem is that the COLA process is largely run on the honor system. They expect producers to know and obey the rules. They usually only question something on a COLA application if it is wrong on its face, and sometimes not even then.

A few years ago, TTB approved a label for a 'potato whiskey,' despite that most basic of rules that whiskey is a product made from grain. Even though the rules clearly state that whiskey must be "bottled at not less than 80° proof," TTB has approved whiskey bottled at lower proof on several occasions.

Although the system seems to be breaking down now, it worked okay when virtually all producers were big companies, with lots of lawyers, all making the same products. Now the big companies are innovating like never before and there are hundreds of new micro-producers, some of whom don't understand the rules, and some of whom deliberately circumvent them when they think it's to their advantage.

As TTB becomes less and less effective, the crafty dodgers become more brazen.

The problem has gotten nothing but worse. Clearly, TTB is overwhelmed, and their 'honor system' is crumbling. When it comes to consumers being able to trust that the alcoholic beverage products they buy and consume are labeled correctly, we simply cannot. TTB fails way too often, to the point where the consumer protection part of their operation has become just about worthless.

However, they still seem to do their main job, tax collection, quite well.

Here is a great example. There is a TTB rule that says every distilled spirit label has to have on it the name of the producer (name can be a DBA) and a location (city and state) where that producer does business. The listed state does not have to be the state where the product was distilled but if it's not, then the state in which the product was distilled must be disclosed too.

A diligent whiskey enthusiast has compiled a list of 29 products, all whiskeys from small producers, that fail to list the state of distillation, even though it is known that the state of distillation is not the same as the state shown on the label. He has provided his list to TTB.

In more than a few cases, the producer has listed the location with which it wants to be associated when their product is in fact distilled in Lawrenceburg, Indiana, a fact they would just as soon obscure. These are not, in other words, honest mistakes. They are deliberate actions intended to mislead consumers, in clear violation of Federal law.

This is not about whether or not alcohol is over-regulated. This is about rules of long standing that some producers follow and others flout to give themselves a competitive advantage, so honest producers are hurt and public confidence in the regulatory system is seriously eroded.

Let's hope the legislators who are questioning the Palcohol decision will also address the much larger mess that TTB has become.


TDR said...

Bureaucracy bashing is easy; but it's much more likely the agency is simply underfunded for what it is tasked to do than the usual, lame "government workers are lazy story"

Chuck Cowdery said...

I agree. Do you think I said something contrary to that? Show me where. Regardless of the reason, TTB is failing. That's a problem.

Wade said...

Maybe they should contract out label approvals for whiskey. I'm available

TipsyTexan said...

Chuck are you able to share the list, or the source of the list, of the 29 misleading whiskeys? Inquiring mind in Texas want to know...

Chuck Cowdery said...

It's the work of another Texan and you can find it on straightbourbon.com

Chuck Cowdery said...

The rule, if you want to look it up in the Standards of Identity, is Sec. 5.36(d).

merd said...

Are you meaning to tell me that 30 proof washing machine agitated potato flake spirits sifted through a dirty sock for 15 minutes after being stirred with a burnt oak spoon isn't bourbon? Please, sir. Label approved. Leave your taxes and tips on the jar.

Robert said...

I hereby nominate Chuck Cowdery to be TTB's next and first whiskey specialist. TTB may need more expertise in this area, along the lines of the illustrious Battle Martin, or Charles Bacon before him. In case the Cowdery crowd does not follow beer closely, Battle Martin kind of sort of has his own fan club and shrine over here: http://www.bevlaw.com/bevlog/200000-beer-labels-and-out. Before you say no Chuck, think about all the opportunities to say, we are going to need a sample.