TTB ANNOUNCES FINAL REGULATIONS ON
ALCOHOL CONTENT OF FLAVORED MALT BEVERAGES

WASHINGTON, DC -- The Alcohol and Tobacco Tax and Trade Bureau (TTB) today announced final regulations restricting the alcoholic makeup of flavored malt beverages. The regulations will be published in the Federal Register January 3, 2005.

The new regulations require that, in order to continue to be taxed and treated as beer or brewed beverages, the majority (51 percent or more) of alcohol in flavored malt beverages be the product of brewing. No more than 49 percent of the alcohol may come from other flavorings added to the product. Treasury's regulations were also amended to require the alcohol content to appear on the label of flavored malt beverages (unless prohibited by state law) to prevent misleading labeling.

The new standard allows only half the amount of added distilled spirits alcohol flavoring currently found in many flavored malt beverages. Since these modifications will require changes in manufacturing and production, industry will be given one year, from the date of publication in the Federal Register, to comply with the new standard.

The new standards limit added alcohol to be consistent with the relevant statutes and achieve the goal of Executive Order 12866 which requires agencies to design regulations in the most cost-effective manner to achieve the regulatory objective. The new regulation achieves the appropriate balance by protecting the public from misleading or confusing labeling while ensuring that the revenue laws are enforced without unduly burdening commerce.

Brewed products and distilled spirits are treated differently under existing statutes, but the amount of added distilled spirits alcohol derived from flavors allowed in malt beverages is not specifically defined by those statutes. The recent popularity and market growth of these products therefore gave rise to the need for new, clear standards.

Careful study determined that a large number of these products currently derive nearly all of their alcohol content from flavorings containing distilled spirits rather than from fermentation during brewing.

Treasury originally put forth two alternatives: one that would have allowed one-half of one percent of the overall alcohol content to come from distilled spirits/flavors, and another, now being adopted, requiring the majority of the alcohol to be the product of brewing. Comments on the first proposed regulations provided evidence that such a stringent standard would have unfairly affected production investments made since 1996 when a specific alcohol content in such beverages had not yet been specified.

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