Elimination of Certain Standards of Fill for Wine

 
CONTENT
Federal Register, Volume 84 Issue 126 (Monday, July 1, 2019)
[Federal Register Volume 84, Number 126 (Monday, July 1, 2019)]
[Proposed Rules]
[Pages 31257-31264]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-13768]
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DEPARTMENT OF THE TREASURY
Alcohol and Tobacco Tax and Trade Bureau
27 CFR Part 4
[Docket No. TTB-2019-0004; Notice No. 182]
RIN 1513-AB56
Elimination of Certain Standards of Fill for Wine
AGENCY: Alcohol and Tobacco Tax and Trade Bureau, Treasury.
ACTION: Notice of proposed rulemaking.
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SUMMARY: In this document, the Alcohol and Tobacco Tax and Trade Bureau
(TTB) addresses numerous petitions requesting that TTB amend the
regulations that govern wine containers to provide for additional
authorized standards of fill. TTB is proposing to eliminate all but a
minimum standard of fill for wine containers and thus eliminate
unnecessary regulatory requirements and provide consumers broader
purchasing options. TTB welcomes comments on this proposed
deregulation, and it also seeks comments on the relative merits of
alternatives, such as adding new authorized standards of fill and
developing an expedited process for adding additional standards in the
future. All of these approaches would eliminate restrictions that
inhibit competition and the movement of goods in domestic and
international commerce.
DATES: Comments must be received on or before August 30, 2019.
ADDRESSES: Please send your comments on this proposed rule to one of
the following addresses:
     Internet: https://www.regulations.gov (via the online
comment form for this document as posted within Docket No. TTB-2019-
0004 at ``Regulations.gov,'' the Federal e-rulemaking portal);
     U.S. Mail: Director, Regulations and Rulings Division,
Alcohol and Tobacco Tax and Trade Bureau, 1310 G Street NW, Box 12,
Washington, DC 20005; or
     Hand delivery/courier in lieu of mail: Alcohol and Tobacco
Tax and Trade Bureau, 1310 G Street NW, Suite 400E, Washington, DC
20005.
    See the Public Participation section of this document for specific
instructions and requirements for submitting comments, and for
information on how to request a public hearing.
    You may view copies of this proposed rule and any comments TTB
receives about this proposal at https://www.regulations.gov within
Docket No. TTB-2019-0004. A link to that docket is posted on the TTB
website at https://www.ttb.gov/wine/wine-rulemaking.shtml under Notice
No. 182. You also may view copies of this proposed rule and any
comments TTB receives about this proposal by appointment at the TTB
Information Resource Center, 1310 G Street NW, Washington, DC 20005.
Please call 202-453-2135 to make an appointment.
FOR FURTHER INFORMATION CONTACT: Jennifer Berry, Alcohol and Tobacco
Tax and Trade Bureau, Regulations and Rulings Division; telephone 202-
453-1039, ext. 275.
SUPPLEMENTARY INFORMATION:
Background
TTB Authority
    The Alcohol and Tobacco Tax and Trade Bureau (TTB) administers
regulations setting forth bottle size and related standards of fill for
containers of wine products distributed within the United States. The
authority to establish these standards is based on section 105(e) of
the Federal Alcohol Administration Act (FAA Act), codified at 27 U.S.C.
205(e), which authorizes the Secretary of the Treasury to prescribe
regulations relating to the ``packaging, marking, branding, and
labeling and size and fill'' of alcohol beverage containers ``as will
prohibit deception of the consumer with respect to such products or the
quantity thereof . . . .'' TTB administers the FAA Act pursuant to
section 1111(d) of the Homeland Security Act of 2002, as
[[Page 31258]]
codified at 6 U.S.C. 531(d). In addition, the Secretary of the Treasury
has delegated certain FAA Act administrative and enforcement
authorities to TTB through Treasury Order 120-01, dated January 24,
2013 (superseding Treasury Order 120-01, dated January 24, 2003).
Current Standards of Fill for Wine
    The standards of fill for wine are contained in subpart H of part 4
of the TTB regulations (27 CFR part 4). The term ``standard of fill''
is used in the TTB regulations and in this document to refer to the
authorized amount of liquid in the container, rather than the size or
capacity of the container itself. For better readability, however, this
document sometimes uses the terms ``size'' or ``container size'' and
``standards of fill'' interchangeably. Within subpart H, paragraph (a)
of Sec.  4.72 (27 CFR 4.72(a)) authorizes the use of the following
metric standards of fill for containers other than those described in
paragraph (b) of that section:
     3 liters;
     1.5 liters;
     1 liter;
     750 milliliters;
     500 milliliters;
     375 milliliters;
     187 milliliters;
     100 milliliters; and
     50 milliliters.
    Paragraph (b) of Sec.  4.72 states that wine may be bottled or
packed in containers of 4 liters or larger if the containers are filled
and labeled in quantities of even liters (4 liters, 5 liters, 6 liters,
etc.).
Current Headspace Requirements for Wine
    Requirements for headspace, the empty space between the top of the
wine and the top of the container, are also contained in subpart H of
27 CFR part 4. Within subpart H, paragraph (a)(3) of Sec.  4.71 (27 CFR
4.71(a)(3)) states that a standard wine container must be made and
filled so as to have a headspace not in excess of 6 percent of the
total capacity of the container after closure if the net content of the
container is 187 milliliters or more and, in the case of all other wine
containers, a headspace not in excess of 10 percent of such capacity.
Current Standards of Fill for Distilled Spirits and Malt Beverages
    The standards of fill for distilled spirits are contained in
subpart E of part 5 of the TTB regulations (27 CFR part 5). In a
separate notice of proposed rulemaking published elsewhere in this
issue of the Federal Register, TTB is also proposing to eliminate most
of the standards of fill for distilled spirits.
    Unlike wine and distilled spirits, there are no standards of fill
prescribed for malt beverages under the FAA Act. However, in the case
of malt beverages, Sec.  7.22(a)(4) of the TTB regulations (27 CFR
7.22(a)(4)) requires the display of net contents on the brand label as
mandatory label information.
History of Standards of Fill for Wine
    Standards of fill for wine were first established in October 1941
by T.D. 5093 (6 FR 5465, October 25, 1941), which became effective in
October 1943. Those standards were as follows:
     4.9 gallons;
     3 gallons;
     1 gallon;
     \1/2\ gallon;
     1 quart;
     \4/5\ quart;
     \4/5\ pint;
     \2/5\ pint;
     ounces;
     3 ounces; and
     2 ounces.
    Over the years, a number of changes were made to these standards.
The most significant change took place in 1974 when TTB's predecessor
agency, the Bureau of Alcohol, Tobacco and Firearms (ATF), adopted
metric standards of fill for wine containers. These metric standards
were adopted in T.D. ATF-12 (39 FR 45216, December 31, 1974). ATF
provided a phase-in period for the new metric sizes that lasted until
January 1, 1979, at which time metric sizes became mandatory. The
metric standards of fill originally adopted for wine were as follows:
     3 liters;
     1.5 liters;
     1 liter;
     750 milliliters;
     375 milliliters;
     187 milliliters; and
     100 milliliters.
    Later amendments to the metric standards for wine containers
included:
     T.D. ATF-49 (43 FR 19846, May 9, 1978), which allowed
whole liter sizes larger than 3 liters;
     T.D. ATF-76 (46 FR 1725, January 7, 1981), which added the
50- milliliter miniature size; and
     T.D. ATF-303 (55 FR 42710, October 23, 1990), which
allowed the 500-milliliter size in interstate commerce. Prior to the
Treasury decision, it could only be used for intrastate commerce or
export.
Prior Notices Seeking Comments on Changes to Standards
    In addition to the rulemakings cited above that adopted or amended
standards of fill for wine, ATF twice solicited comments on whether the
standards of fill should be retained, revised, or eliminated.
    In 1987, ATF published an advance notice of proposed rulemaking
(ANPRM), Notice No. 633 (52 FR 23685, June 24, 1987), which solicited
comments on whether the standards of fill requirements for distilled
spirits and wine should be retained either in general or as metric
standards. The Washington State Liquor Control Board (WSLCB) had
petitioned ATF to amend the regulations to allow for the importation of
distilled spirits not bottled in authorized metric standards of fill if
the bottles were labeled with certain additional information.
    In its petition, the WSLCB stated that many foreign manufacturers
bottle their spirits in standards of fill that are not authorized in
the United States (for example, 740 milliliters and 800 milliliters).
Consequently, while these products could be shipped to other countries,
they could not be imported into the United States. The WSLCB argued
that the existing standards of fill stifled price competition on
imported distilled spirits, resulting in an artificial price increase
for U.S. consumers. Although the petition requested an amendment of the
standards of fill requirements for distilled spirits only, the ANPRM
requested comments on retaining or eliminating the standards of fill
for distilled spirits and wine. On February 6, 1990, ATF published
Notice No. 696 (55 FR 3980) and stated that it found no basis to
eliminate the existing standards of fill for wine and distilled
spirits.
    In 1993, ATF published another ANPRM, Notice No. 773 (58 FR 35908,
July 2, 1993), in response to three petitions requesting the
reinstatement or addition of four sizes to the standards of fill for
distilled spirits. The petitioners requested that the regulations be
amended to include four sizes used in other countries: A 296-milliliter
can, a 500-milliliter bottle, a 680-milliliter bottle, and a 946-
milliliter bottle. The petitioners also made many of the same arguments
for retaining the existing standards that were noted in Notice No. 696.
Although these petitions only involved an amendment to the existing
standards for distilled spirits, ATF believed it was also appropriate
to address the larger issue of retaining or eliminating the standards
of fill requirements for distilled spirits and wine. A common theme in
the three petitions was that the current standards of fill were
hindering international trade between the United States and countries
with different standard container sizes.
[[Page 31259]]
As a result, ATF sought comment in Notice No. 773 on whether the
existing standards of fill should be revised, retained, or eliminated.
ATF did not undertake further rulemaking on this issue.
Petitions and Inquiries Regarding Changes to Standards
    In the past several years, TTB has received a number of petitions
and inquiries regarding changes to the standards of fill requirements
for wine.
    Several of these petitions and inquiries were from producers,
bottlers, and importers interested in distributing wine in cans.
Generally speaking, these industry members assert that the standards of
fill they propose (200, 250, and 355-milliliters) are standard can
sizes prevalent in the United States and would therefore be more cost
efficient for them to use than the sizes currently authorized in Sec.
4.72. These petitions and inquiries addressing can sizes include the
following:
    1. A U.S. wine bottler submitted a petition requesting that Sec.
4.72 be revised to allow wine to be packaged in 200-milliliter cans.
The bottler stated that 200-milliters is a standard can size, while the
187-milliter size authorized in Sec.  4.72 is difficult to obtain.
    2. A California winery that packages its wine in 187-milliliter
cans also petitioned for the addition of the 200-milliliters size to
Sec.  4.72 for metal containers having the general shape and size of a
can. The petitioner stated that it must have its 187-milliliter cans
custom manufactured, which is costly and inefficient. Additionally, the
petitioner noted that 200-milliliters is listed in 27 CFR 5.47a as an
approved standard of fill for distilled spirits packaged in metal
containers. According to the petitioner, approving that size for wine
would bring the wine standards of fill in line with can industry
standards and the standards of fill for distilled spirits and non-
alcoholic beverages.
    3. An Argentine winery petitioned for the addition of 355-milliter
and 250- milliliter sizes to Sec.  4.72. The winery packages its
products in 12-ounce (355- milliliter) and 8.4-ounce (250-milliliter)
aluminum cans, but is unable to sell its product in the U.S.
marketplace since these sizes are not authorized in Sec.  4.72.
    4. An importer of Australian wine inquired about selling 250-
milliliter cans of wine to concert and sporting arenas, but was unable
to do so since 250- milliliter is not an authorized standard of fill as
prescribed in Sec.  4.72.
    5. A U.S. producer of wine and distilled spirits filed a petition
requesting that TTB authorize a 355-milliliter standard of fill, or 12
ounces, for wine sold in cans. Currently, the petitioner sells wine
packed in a 12 ounce cans only in Puerto Rico, and would like to use
the same size cans for wine sold in the rest of the United States.
    6. A Colorado-based winery that packages its wine in cans
petitioned TTB to approve 250-milliliters as an authorized standard of
fill. The petition noted that the 250-milliliter size has become
standard in the U.S. for various beverages, including wines that
contain less than 7 percent alcohol by volume and are thus not
regulated under the FAA Act. It argues that this creates an unfair
playing field for many wineries and that the current rules restrict
sales, growth, and job creation.
    In addition to the petitions discussed above that addressed the
packaging of wine in cans, TTB also received a petition from an
importer of boxed wine requesting that the agency authorize a standard
of fill of 2.25 liters for wine containers. The importer states that
such a container would significantly reduce environmental impact
because it holds as much as three 750-milliliter wine bottles at half
the weight of such bottles.
    Additionally, TTB has received several inquiries over the years
regarding the importation of the French product known as ``vin jaune''
(``yellow wine'' in English). Vin jaune is made in the Jura region of
France, using a technique similar to that used for making Sherry. In
accordance with French and European Union regulations, it must be sold
in a 620-milliliter bottle. Since 620-milliters is not an authorized
size in Sec.  4.72, vin jaune cannot be imported into the United
States.
    Finally, foreign governments have contacted TTB regarding the wine
standards of fill regulations. Among these was a 2007 request from the
Government of Moldova asking that TTB waive the standards of fill
requirements for importations of Moldovan wine. At the time, Moldova
reported that it had over a million bottles of aged wine in its
National Treasury of Wine that could not be sold in the United States
due to the U.S. bottle size limitations. Also in 2007, the Government
of Georgia requested that TTB add the 700-milliliter bottle to the
authorized standards of fill. It stated that the 700-milliliter bottle
was a standard size in the former Soviet Union, and the addition of the
700-milliliter standard of fill in the TTB regulations would eliminate
a restriction on the sale of Georgian wines in the United States.
Petition Regarding Bottle Headspace
    TTB has also received a petition from a company that imports
individually sealed glasses of wine from France and markets them in
North America. These individually sealed 100 milliliter size glasses of
wine were designed to enable consumers to drink a glass of wine without
having to open a full bottle. However, the product must comply with 27
CFR 4.71(a)(3), which requires a headspace not in excess of 10 percent
for containers smaller than 187 milliliters. The petitioner stated that
these containers require more than the maximum 10 percent headspace
allowance for the following reasons:
     A minimum of 25 to 30 percent headspace is required to
keep wine away from the edge of the glass during the manufacturing
process, thus ensuring the glass container is sealed correctly.
     If the headspace were the required 10 percent, consumers
would likely spill the contents when peeling off the aluminum foil due
to the strength of the seal.
    The petitioner also noted in support of its petition that, since
the glass container will be clear, the purchaser will clearly see the
actual content and the actual net content will be clearly identified on
the label.
TTB Proposal
    In view of the points made in the petitions and inquiries discussed
above, TTB believes that it is appropriate to revisit the wine
standards of fill issue. TTB is proposing to eliminate the existing
standards of fill for wine, except that the regulations would maintain
a minimum standard of 50 milliliters. The minimum container size is
needed to ensure sufficient space on the container for required
labeling. TTB also welcomes comments on merely adding some or all of
the standards of fill requested in the petitions, or adding some or all
of those standards and also adopting an expedited approach for adding
new sizes in the future. TTB is considering eliminating the standards
of fill for the following reasons:
    1. Executive Order 13771, titled ``Reducing Regulation and
Controlling Regulatory Costs,'' and Executive Order 13777, titled
``Enforcing the Regulatory Reform Agenda,'' task Federal agencies with
identifying and eliminating regulations to reduce regulatory burdens
and costs for industry. TTB believes that this proposal is aligned with
these Executive Orders as explained below.
    2. Elimination of the existing standards of fill would address the
recent petitions on this issue, would
[[Page 31260]]
eliminate the need for industry members to petition for additional
authorizations if marketplace conditions favor different standards in
the future, and would eliminate requirements that restrict competition
and the movement of goods in domestic and international commerce.
    3. It would address concerns that the current standards of fill
unnecessarily limit manufacturing options and consumer purchasing
options, particularly where consumers may seek smaller containers to
target a specific amount of consumption.
    4. TTB believes that current and proposed labeling requirements
regarding net contents (see 27 CFR 4.32(b)(2) and 4.37) and those
regarding the design and fill of containers (see 27 CFR 4.71) provide
consumers with adequate information about container contents.
    TTB is not aware of consumer deception issues related to container
sizes of malt beverages, for which there is no standard of fill
requirement. In addition to eliminating the current standards of fill
for wine containers, TTB proposes to amend the current headspace
requirements for wine in 27 CFR 4.71(a)(3).
    Specifically, TTB is proposing to allow wine bottled in a clear,
100-milliliter or smaller container to contain a headspace of not more
than 30 percent of the total capacity of the container. The proposed
revision would allow more wine products to be bottled in individually
sealed glasses such as those described above. This would be permitted
only for wine bottled in a clear container so that the consumer would
be able to see the actual contents of the container, thus reducing the
possibility of consumer deception.
Discussion of the Proposed Changes
    Regarding the specific regulatory amendments proposed in this
document, TTB notes the following:
     In Sec.  4.32, which concerns mandatory label information
for wine, paragraph (b)(2) is amended by removing the second sentence,
which would no longer be relevant if the referenced standards of fill
are removed.
     In Sec.  4.37, which concerns net contents, the
introductory text of paragraph (a) is revised to remove the several
references to ``standard of fill'' and to replace the words
``prescribed in Sec.  4.72'' with a reference to Sec.  4.71, which is
revised as discussed below. In addition, the introductory text of
paragraph (b) is revised, and current paragraph (b)(1) is removed and
paragraphs (b)(2) and (3) are redesignated as (b)(1) and (2)
respectively, to reflect the removal of the standards of fill.
     Section 4.70, which concerns the application of standard
wine container requirements (i.e., design, fill, and headspace) and the
standards of fill requirements, is amended by removing references to
Sec.  4.72.
     Section 4.71, which concerns standard wine containers, is
revised to remove a reference to Sec.  4.72, to include tolerances
(discrepancies between actual and stated fill), in the paragraph
concerning fill, to require a minimum fill of 50 milliliters, and to
add the 30 percent headspace allowance for 100-milliliter or smaller
containers as discussed above.
     Finally, Sec.  4.72, which specifies the metric standards
of fill for wine, is removed because it would no longer serve any
purpose.
Alternatives to the Proposal
    TTB is also considering maintaining the standards of fill but
liberalizing the existing regulatory scheme. It simply could add some
or all of the petitioned-for standards (200, 250, 355, 620, and 700
milliliters and 2.25 liters) to Sec.  4.72(a). It also could institute
an expedited process for considering future petitions to add additional
standards of fill and help ensure Sec.  4.72 is non-discriminatory and
does not create unnecessary obstacles to competition, trade, or
investment. For example, TTB could amend its regulations in Sec.  4.72
to provide for administrative approvals of standards of fill. Under
such an expedited system, the Administrator could authorize new
standards of fill in response to a petition if the petition shows good
cause for approval (such as commercial viability), barring the
Administrator determining that the proposed standard would cause
confusion. Administratively approved standards of fill then would be
published on the TTB website so that other industry members are aware
of the additional authorized sizes.
Public Participation
Comments Sought
    TTB requests comments on the proposals to eliminate the standards
of fill for wine (with the exception of a minimum 50-milliliter
specification) and to add a new headspace specification for wine
bottled in a clear, 100-milliliter or smaller container. TTB also
requests comments on alternative approaches, such as maintaining the
standards of fill but adding some or all of the petitioned-for
standards (200, 250, 355, 620, 700 milliliters and 2.25 liters) to
Sec.  4.72(a)--including comments on the alternative of developing an
expedited process for adding new standards of fill in the future and
the criteria for approval of specific standards under an expedited
process. Additionally, TTB understands that some state regulations on
standards of fill for wine may incorporate TTB regulations by
reference. TTB requests comments from state regulators on whether this
proposal will present a regulatory issue at the state level. TTB
invites any other suggestions or alternatives related to the issue of
standards of fill, including headspace requirements, for wine. Given
the absence of standards of fill for malt beverages, TTB would be
particularly interested in comments that address the merits of
continuing to apply different rules to wine and spirits.
    Any person submitting comments may present such data, views, or
arguments as he or she desires. Comments that provide the factual basis
supporting the views or suggestions presented will be particularly
helpful in developing a reasoned regulatory decision on this matter.
Submitting Comments
    You may submit comments on this notice of proposed rulemaking by
one of the following three methods:
     Federal e-Rulemaking Portal: You may send comments via the
online comment form posted with this proposed rule within Docket No.
TTB-2019-0004 on ``Regulations.gov,'' the Federal e-rulemaking portal,
at https://www.regulations.gov. A direct link to that docket is
available under Notice No. 182 on the TTB website at https://www.ttb.gov/wine/wine-rulemaking.shtml. Supplemental files may be
attached to comments submitted via Regulations.gov. For complete
instructions on how to use Regulations.gov, click on the site's
``Help'' tab.
     U.S. Mail: You may send comments via postal mail to the
Director, Regulations and Rulings Division, Alcohol and Tobacco Tax and
Trade Bureau, 1310 G Street NW, Box 12, Washington, DC 20005.
     Hand Delivery/Courier: You may hand-carry your comments or
have them hand-carried to the Alcohol and Tobacco Tax and Trade Bureau,
1310 G Street NW, Suite 400E, Washington, DC 20005.
    Please submit your comments by the closing date shown above in this
proposed rule. Your comments must reference Notice No. 182 and include
your name and mailing address. Your comments also must be made in
English, be legible, and be written in
[[Page 31261]]
language acceptable for public disclosure. TTB does not acknowledge
receipt of comments, and considers all comments as originals.
    In your comment, please clearly state if you are commenting for
yourself or on behalf of an association, business, or other entity. If
you are commenting on behalf of an entity, your comment must include
the entity's name as well as your name and position title. In your
comment via Regulations.gov, please enter the entity's name in the
``Organization'' blank of the online comment form. If you comment via
postal mail or hand delivery/courier, please submit your entity's
comment on letterhead.
    You may also write to the Administrator before the comment closing
date to ask for a public hearing. The Administrator reserves the right
to determine whether to hold a public hearing.
Confidentiality
    All submitted comments and attachments are part of the public
record and subject to disclosure. Do not enclose any material in your
comments that you consider to be confidential or inappropriate for
public disclosure.
Public Disclosure
    TTB will post, and you may view, copies of this proposed rule and
any online or mailed comments received about this proposal within
Docket No. TTB-2019-0004 on the Federal e-rulemaking portal. A direct
link to that docket is available on the TTB website at https://www.ttb.gov/wine/wine-rulemaking.shtml under Notice No. 182. You may
also reach the relevant docket through the Regulations.gov search page
at https://www.regulations.gov. For information on how to use
Regulations.gov, click on the site's ``Help'' tab.
    All posted comments will display the commenter's name, organization
(if any), city, and State, and, in the case of mailed comments, all
address information, including email addresses. TTB may omit voluminous
attachments or material that it considers unsuitable for posting.
    You may view copies of this proposed rule and any electronic or
mailed comments TTB receives about this proposal by appointment at the
TTB Information Resource Center, 1310 G Street NW, Washington, DC
20005. You may also obtain copies for 20 cents per 8.5 x 11-inch page.
Contact TTB's Regulations.gov administrator at the above address or by
telephone at 202-453-2135 to schedule an appointment or to request
copies of comments or other materials.
Regulatory Analysis and Notices
Analysis of Impacts
    The Administrator of the Office of Information and Regulatory
Affairs (OIRA), Office of Management and Budget, has waived review of
this proposed rule in accordance with section 6(a)(3)(A) of Executive
Order 12866. OIRA will subsequently make a significance determination
of the final rule, pursuant to section 3(f) of Executive Order (E.O.)
12866. The impacts of this proposed rule have been examined in
accordance with Executive Order 12866, Executive Order 13563, the
Regulatory Flexibility Act (5 U.S.C. 601-612), and the Unfunded
Mandates Reform Act of 1995 (Pub. L. 104-4). This rule is anticipated
to be designated under Executive Order 13771 as a deregulatory action.
    The Regulatory Flexibility Act requires agencies to analyze
regulatory options that would minimize any significant impact of a rule
on small entities. Because this proposed rule would increase regulatory
flexibility by expanding the options available to small entities, we
propose to certify that the rule will not have a significant economic
impact on a substantial number of small entities.
    The Unfunded Mandates Reform Act of 1995 requires agencies to
prepare a written assessment of costs and benefits before proposing a
rule with mandates that ``may result in the expenditure by State,
local, and tribal governments, in the aggregate, or by the private
sector, of $100,000,000 or more (adjusted annually for inflation) in
any one year.'' This proposed rule would impose no new mandates.
Purpose of the Rule
    Several regulatory requirements are intended to decrease the risk
that consumers will misjudge the quantities of wine in containers
available for sale. These include:
     A requirement that quantities of wine conform to values on
a list of standard quantities, with each of the standard quantities
separated by at least 50 milliliters (27 CFR 4.71(a)(2)); and
     A limitation on the amount of unfilled headspace at the
top of the container (27 CFR 4.71(a)(3)).
    The standard quantities are called ``standards of fill.'' A
requirement that, with few exceptions, a quantity available for sale
match a standard of fill may decrease the risk of consumer confusion,
but, under some circumstances, the limitation also decreases economic
efficiency by preventing production at the lowest possible cost.
Limiting the amount of headspace in containers may decrease the risk of
consumer confusion, but, under some circumstances, that limitation may
decrease economic efficiency by preventing desirable products from
entering the market.
    This proposed rule would eliminate the requirement that quantities
correspond to standards of fill, allowing wine to be sold in any
quantity of 50 milliliters or more. The proposed rule would also
increase permitted headspace for individually sealed glasses of wine in
clear containers. These changes are expected to increase economic
efficiency by allowing manufacturers to produce at lower costs and
introduce products that would otherwise be prohibitively costly or
explicitly forbidden.
Background
    Businesses are categorized by type using the North American
Industry Classification System (NAICS). Establishments primarily
engaged in manufacturing wines and brandies are classified under NAICS
code 312130. Establishments primarily engaged in the wholesale
distribution of wine and distilled spirits are classified under NAICS
code 424820. Establishments primarily engaged in retailing alcoholic
beverages, including wine, are classified under NAICS code 445310.
    Total establishments, employees, and payroll for each category are
reported by the Census Bureau in the County Business Patterns (CBP)
data series. The most recent year for which CBP data were available at
the time of this analysis was 2016. Total receipts for establishments
in each category are reported by the Census Bureau in the Statistics of
U.S. Businesses (SUSB) data series. The most recent year for which SUSB
receipt data were available at the time of this analysis was 2012.
Table 1 reports total establishments, employees, payroll, and receipts
for each category.
[[Page 31262]]
                                          Table 1--Industry Information
----------------------------------------------------------------------------------------------------------------
                                                                                      Payroll        Receipts
           Industry              NAICS Code      Establishments      Employees      ($millions)     ($millions)
----------------------------------------------------------------------------------------------------------------
Wineries.....................          312130              3,604          51,107           2,520          15,525
Wholesalers specializing in            424820              2,599          87,026           6,462          76,170
 wine and distilled spirits..
Retailers specializing in              445310             33,958         167,286           3,795          43,085
 wine & other alcoholic
 beverages...................
----------------------------------------------------------------------------------------------------------------
Sources: Establishment counts, employee counts, and payroll are from 2016 County Business Patterns data
  published by the Census Bureau. Receipts are from 2012 Statistics of U.S. Businesses data published by the
  Census Bureau.
    Although wine is typically sold in glass bottles, wine is also
available in other types of containers, including aluminum cans. Sales
of canned wine have grown rapidly in recent years, reaching $28 million
in 2017, up from $14.5 million in 2016 and $6.4 million in 2015.\1\
However, canned wine still accounts for only about 0.2 percent of all
wine sales.\2\
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    \1\ Martha C. White, ``Canned wine is the drink of summer 2017.
Here are our top picks.'' Money. June 14, 2017, available at http://time.com/money/4816413/canned-wine-can-juice-box-rose-sparkling/.
    \2\ Nielsen, ``Heard it through the grapevine: Wine trends to
watch for in 2018.'' Jan. 16, 2018, available at http://www.nielsen.com/us/en/insights/news/2018/heard-it-through-the-grapevine-wine-trends-to-watch-for-in-2018.html.
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Costs
    This proposed deregulation would, if implemented, impose no new
mandates. However, the rule could create some costs for both consumers
and producers. We are unable to quantify the costs, but welcome public
comment with relevant information.
    Consumers who know that quantities conform to the standards of fill
can misjudge a quantity only by mistaking one standard quantity for
another. The difference between the smallest standard, 50 milliliters,
and the next standard, 100 milliliters, is 50 milliliters, or 100
percent of the smaller standard. The absolute differences between
adjacent standards are typically larger for larger quantities, and, for
quantities below 3 liters, never fall below 33 percent of the smaller
standard. Large differences between standards decrease the risk that
one quantity on the list of standards will be mistaken for another.
    The rule would create costs for consumers if eliminating the
standards of fill increased confusion about the quantities available
for sale. However, confusion about quantities available for sale would
continue to be limited by other regulations, including a requirement
that net contents appear on a label affixed to the container (27 CFR
4.32(b)(2)), a prohibition against containers designed in such a way as
to mislead consumers about the quantities contained (27 CFR (a)(1)),
and the limitation on headspace (27 CFR 4.71 (a)(3)).
    The limitation on headspace reduces the risk of consumer confusion
by causing the quantity contained to correspond closely to the volume
of the container. Headspace is limited to 6 percent of capacity after
closure for containers with net contents of 187 milliliters or more and
10 percent for other containers. The proposed rule would, if
implemented, allow headspace that does not exceed 30 percent for clear
containers with net contents of 100 milliliters or less.
    Increasing the limit on headspace would create costs for consumers
if it increased confusion about the quantities available for sale.
However, the exception is limited to containers with contents clearly
visible. Confusion about quantity contained would be less likely with
clear containers than with opaque containers, because the quantity
contained could be observed directly and consumers would be less likely
to use container size as a proxy for quantity.
    Standards of fill also may have created secondary benefits that
would be foregone with their elimination. For example, standard sizes
may facilitate price comparison by consumers. When the net contents of
bottles are equal, the relative prices of the bottles correspond to the
relative prices per unit of wine they contain. When container sizes
differ, the relative prices of bottles may differ from the relative
prices per unit, so the elimination of fill standards could make the
comparison of prices per unit more difficult. Price per unit labeling
by retailers would decrease an impact of eliminating fill standards on
the ease of comparison. Although price per unit labeling by retailers
is common, it is not mandatory in most states, and, where it is
mandatory, wine is typically excluded.3 4
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    \3\ National Institute of Standards and Technology, ``Unit
Pricing Guide: A Best Practice Approach to Unit Pricing.'' NIST
Special Publication 1181 (2015), available at https://www.nist.gov/sites/default/files/documents/2017/04/28/SP1181-Unit-Pricing-Guide.pdf.
    \4\ National Institute of Standards and Technology, ``U.S.
Retail Pricing Laws and Regulations by State.'' available at https://www.nist.gov/pml/weights-and-measures/us-retail-pricing-laws-and-regulations-state.
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    The introduction of products that do not correspond to the
standards of fill could also create some costs for wine manufacturers,
wholesalers, and retailers. Potential costs include those related to
the renovation of production facilities, the distribution of containers
that do not conform to current standards, and the reconfiguration of
retail spaces. However, new products would only be introduced if
profits from introducing them were, in expectation, positive.
    Therefore the expected value to consumers of the new products would
generally exceed the expected cost of their production, including any
costs created by deviation from the standards of fill, so that the
benefits of introduction would be at least as large as the costs.
Benefits
    This proposed deregulation could, if implemented, create a range of
benefits. These include increasing economic efficiency by allowing
producers to harness economies of scale, increasing the variety of
products available to consumers, and increasing the competitiveness of
the market for wine. We are unable to quantify the benefits, but we
welcome public comment with relevant information.
    The market for canned wine has grown rapidly in recent years.
However, according to petitions from industry, the most common sizes of
aluminum cans, like 200 milliliters, differ from the standards of fill.
    Can makers must reconfigure equipment to change the size of the
cans produced. This reconfiguration creates a fixed cost for each size
produced. Producing more cans of a given size lowers the average cost
per can because it spreads the fixed cost across a larger number of
cans. The standard of fill closest to 200 milliliters is 187
milliliters. Petitions from industry
[[Page 31263]]
indicate that the fixed costs associated with the production of 187
milliliter cans rather than 200 milliliter cans are substantial.
Eliminating the standards of fill would allow wine makers to harness
economies of scale and achieve lower costs by using the common 200
milliliter cans.
    In some other countries, wine is produced in standard quantities
that do not match the standards of fill in the United States.
Reconfiguring those wine production facilities to produce bottles
specifically for the United States creates a fixed cost. If the cost of
reconfiguration is sufficiently high, no bottles may be produced for
the United States, despite positive demand for those products at prices
that correspond to production at scale.
    Eliminating the standards of fill would allow more manufacturers
producing primarily for foreign markets to sell their wines in the
United States. The entry of those firms would increase competition in
the wine market. More competitive markets allocate resources more
efficiently by matching prices more closely to costs, so an increase in
the competitiveness of the wine market would create economic benefits.
    The introduction of those products would also increase consumer
choice by providing them with options they may prefer to those
currently available. Wines made primarily for foreign markets may not
be the only new products introduced. Wine makers currently producing
for the United States could also choose to introduce products that
deviate from the current standards of fill.
    Bottles that deviate from the current standards may allow consumers
to more closely match the quantities they purchase to the quantities
they desire to consume. Furthermore, some limited evidence suggests
that consumers value novelty in bottle sizes, and novel bottle sizes
may be of value to producers in differentiating their
brands.5 6
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    \5\ Henrich Brunke, Franziska Thiemann & Rolf Mueller, ``Odd
Prices for Odd Bottles at VDP Auctions.'' Paper presented at
Enometrics XVI conference of the Vineyard Data Quantification
Society in Namur, Belgium (2009).
    \6\ J. Fran[ccedil]ois Outreville, ``Does the Bottle Size
Matter? An Investigation into Differences between Posted and Market
Price.'' American Association of Wine Economists Working Paper No.
86 (2011).
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    Increasing the limitation on headspace for clear containers of 100
milliliters or less could also improve consumer welfare by increasing
the options available. Comment from industry indicates that current
headspace restrictions are problematic for individually sealed glasses
of wine, since filling the glasses to the top creates difficulties for
both manufacturing and consumption. Increasing the limitation on
headspace could decrease manufacturing costs and improve consumer
experiences with individually sealed glasses of wine.
Alternatives
    The requirement that net contents conform to standards of fill
reduces the risk of consumer confusion about quantity at the cost of
restrictions on producers that decrease market efficiency. Consumer
information about net contents is also a concern for other types of
beverages, and the regulatory approaches taken for those beverages
present some alternatives to the proposed deregulation.
    One alternative would be to add new standards of fill to the
current list. For example, a 200 milliliter standard could be added to
accommodate the use of aluminum cans. One problem with that approach is
that the new standard would be only 13 milliliters above the current
standard of 187 milliliters, a difference of slightly less than 7
percent of the smaller standard. Standards separated by such small
amounts would be expected to do little to reduce consumer confusion.
That problem could be addressed by providing separate lists of
standards for cans and other containers, as have been provided for
distilled spirits (27 CFR 5.47a), so that a significant difference
between standards of fill was maintained for each category of
container.
    However, the piecemeal addition of new standards as circumstances
change involves costs that are avoided by eliminating the standards of
fill entirely. The addition of new standards through rulemaking would
continue to involve the burden on industry of petitioning for new
standards and awaiting the outcomes and the burden on the government of
responding to the petitions and promulgating new rules.
    Standards of fill are not the only tool available for reducing the
risk of consumer confusion about quantities available for sale. The
appearance of net contents on the label is another tool, and more
prominent net contents labeling may achieve the same reduction in the
risk of confusion without incurring the costs associated with the
standards of fill. Currently, wine must generally conform to standards
of fill, and net contents can appear on any label affixed to the
container. Malt beverages need not conform to standards of fill, but
net contents must generally appear on the brand label (27 CFR 7.22).
Similarly, beverages like carbonated soft drinks need not conform to
standards of fill, but net quantity of contents must appear on the
principal display panel (21 CFR 101.7).
    A second alternative to this proposed rule would be to eliminate
the standards of fill but require that net contents appear on the brand
label, analogous to the requirements for malt beverages and soft
drinks. However, the requirement that net contents appear on the brand
label would constitute a new mandate on wine makers. Changing labels
would involve administrative costs as well as the costs of redesigning
labels and replacing printing equipment like engraving plates or
cylinders. The proposed rule avoids those costs by avoiding changes to
the labeling requirements. In addition, introducing a new requirement
to include net contents on the brand label could potentially lead to a
conflict with the World Wine Trade Group Agreement on Requirements for
Wine Labelling (``WWTG Labelling Agreement''), which provides that
certain common wine mandatory labeling information (country of origin,
product name, net contents and alcohol content) be permitted to appear
in any ``single field of vision.'' The WWTG Labelling Agreement sought
to reduce regulatory burden on businesses in countries that are parties
to the Agreement.
    Currently, some wine products are not subject to the requirement
that net contents conform to a standard of fill (27 CFR 4.70). However,
when net contents do not conform to a standard of fill, net contents
must appear on a label affixed to the front of the bottle (27 CFR
4.32(b)(2)). A third alternative is to eliminate the requirement that
net contents conform to a standard of fill, but keep the standards of
fill and keep the requirement that net contents be stated on a label
affixed to the front of the bottle when the net contents do not conform
to a standard of fill.
    This alternative would impose no new mandate, although it would
create some costs not created by the proposed rule. This alternative
could also incur problems similar to the alternative above with regard
to potentially conflicting with the WWTG Labelling Agreement.
Additionally, some foreign producers that do not conform to the
standards of fill may need to change their labeling to satisfy the
labeling requirement for the U.S. market. However, wine makers would
only be expected to undertake those changes if doing so maximized
profits.
    Therefore changes to labeling would only be expected if making them
were less costly than conforming to the standards of fill. Furthermore,
making such changes would only maximize
[[Page 31264]]
profits if, in expectation, the value to consumers exceeded the cost of
production, including the cost of any labeling changes.
    We welcome comment on these and other alternatives, including
information that will aid us in quantifying their costs and benefits.
Paperwork Reduction Act
    The collection of information in this rule has been previously
approved by the Office of Management and Budget (OMB) under the title
``Labeling and Advertising Requirements Under the Federal Alcohol
Administration Act,'' and assigned control number 1513-0087. This
proposed regulation would not result in a substantive or material
change in the previously approved collection action, since the nature
of the mandatory information that must appear on labels affixed to the
container remains unchanged.
Drafting Information
    Jennifer Berry of the Regulations and Rulings Division drafted this
document, along with other Department of the Treasury personnel.
List of Subjects in 27 CFR Part 4
    Advertising, Consumer protection, Customs duties and inspection,
Imports, Labeling, Packaging and containers.
Amendment to the Regulations
    For the reasons discussed in the preamble, TTB proposes to amend 27
CFR part 4 as follows:
PART 4--LABELING AND ADVERTISING OF WINE
0
1. The authority citation for part 4 continues to read as follows:
    Authority:  27 U.S.C. 205, unless otherwise noted.
Sec.  4.32   [Amended]
0
2. In Sec.  4.32(b)(2), the second sentence is removed.
0
3. In Sec.  4.37:
0
a. Paragraph (a) introductory text is revised;
0
b. Paragraph (b) subject heading and introductory text are revised;
0
c. Paragraph (b)(1) is removed; and
0
d. Paragraphs (b)(2) and (3) are redesignated as paragraphs (b)(1) and
(2), respectively.
    The revisions read as follows:
Sec.  4.37   Net contents.
    (a) Statement of net contents. The net contents of wine shall be
stated in the metric system of measure in accordance with Sec.  4.71
and as follows:
* * * * *
    (b) Optional statement of U.S. equivalent contents. Net contents in
U.S. equivalents may appear on the label together with the required
metric net contents statement if shown as follows:
* * * * *
Sec.  4.70   [Amended]
0
4. Amend Sec.  4.70 by:
0
a. In paragraph (a), the words ``herein prescribed'' are removed and
the phrase ``as prescribed in Sec.  4.71'' is added in its place;
0
b. In paragraph (b) introductory text, the phrase ``Sections 4.71 and
4.72 of this part do'' is removed and the phrase ``Section 4.71 of this
part does'' is added in its place; and
0
c. In paragraph (c), the phrase ``Section 4.72'' is removed and the
phrase ``Section 4.71.'' is added in its place.
0
5. Section 4.71 is revised to read as follows:
Sec.  4.71   Standard wine containers.
    (a) A standard wine container must be made, formed, and filled to
meet the following specifications:
    (1) Design. It must be so made and formed as not to mislead the
purchaser. Wine containers must (irrespective of the correctness of the
net contents specified on the label) be so made and formed as not to
mislead the purchaser if the actual capacity is substantially less than
the apparent capacity upon visual examination under ordinary conditions
of purchase or use;
    (2) Fill and tolerances. It must be so filled as to reflect the
quantity, including tolerances, specified for wine in the net contents
provisions of Sec.  4.37 but may not have a fill of less than 50
milliliters; and
    (3) Headspace. It must be designed and filled so that the
headspace, or empty space between the top of the wine and the top of
the container, meets the following specifications:
    (i) Except as provided in paragraph (a)(3)(iii) of this section, if
the net contents stated on the label are 187 milliliters or more, the
headspace must not exceed 6 percent of the container's total capacity
after closure.
    (ii) In the case of all other containers, except as described in
paragraph (a)(3)(iii) of this section, the headspace must not exceed 10
percent of the container's total capacity after closure.
    (iii) Exception. Wine bottled in clear containers, with the
contents clearly visible, that are 100-milliliters or less may have a
headspace that does not exceed 30 percent of the container's total
capacity after closure.
    (b) [Reserved]
Sec.  4.72   [Removed and Reserved]
0
6. Section 4.72 is removed and reserved.
    Signed: June 18, 2019.
Mary G. Ryan,
Acting Administrator.
    Approved: June 20, 2019.
Timothy E. Skud,
Deputy Assistant Secretary Tax, Trade, and Tariff Policy.
[FR Doc. 2019-13768 Filed 6-28-19; 8:45 am]
 BILLING CODE 4810-31-P