Title of Regulation: 3VAC5-40. Requirements for Product Approval (amending 3VAC5-40-10).

Statutory Authority: §§ 4.1-103 and 4.1-111 of the Code of Virginia.

Public Hearing Information: No public hearings are scheduled.

Public Comment Deadline: July 13, 2016.

Effective Date: July 28, 2016.

Agency Contact: Shawn Walker, Director of Law Enforcement, Department of Alcoholic Beverage Control, 2901 Hermitage Road, Richmond, VA 23220, telephone (804) 213-4569, FAX (804) 213-4411, or email shawn.walker@abc.virginia.gov.

Basis: Subdivision 13 of § 4.1-103 and subsection A of § 4.1-111 of the Code of Virginia give the Alcoholic Beverage Control Board the authority to adopt reasonable regulations and do all acts necessary and reasonable and advisable to carry out the provisions of Title 4.1 of the Code of Virginia.

Purpose: The amendment follows the practice currently followed by the board. The intended action is essential to the agency and the public health, safety, and welfare by allowing the agency to require federal label certification documentation to ensure that federal safety requirements are adhered to by the manufacturer.

Rationale for Using Fast-Track Rulemaking Process: The regulation is expected to be noncontroversial because it makes the process for approval of a product for sale in Department of Alcoholic Beverage Control (ABC) stores less burdensome on businesses and follows the current practice.

Substance: The amendment removes the requirement that any person wishing to have products sold in ABC stores to provide a federal certificate of label approval. The amendment permits the board to require a copy of the certificate of label approval before approving it for sale in those cases in which there are questions about the label or the product.

Issues: The advantage to the agency is the proposed amendment is consistent with current practice and removes a requirement from the approval process. The advantage to the public is to allow the agency to verify authenticity and safety of products for human consumption regulated by the agency. There are no disadvantages to the public or the Commonwealth.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The Alcoholic Beverage Control Board (Board) proposes to no longer require sellers of spirits to submit a copy of the federal certificate of label approval before a spirit can be sold in Department of Alcoholic Beverage Control (ABC) stores. The Board proposes to instead insert permissive language for the Board to request a copy of the certificate.

Result of Analysis. The benefits likely exceed the costs for all proposed changes.

Estimated Economic Impact. Under the current regulation sellers of spirits must submit a copy of the federal certificate of label approval before a spirit can be sold in ABC stores. The Board proposes to remove this requirement, and instead provide permissive language for the Board to request a copy of the certificate. The purpose of this requirement is to make certain that federal labeling requirements have been met and the product is approved by the appropriate federal agency. According to ABC, when this requirement was initially implemented there was no electronic database to verify such information; but this information is currently available electronically. Consequently, the Board does not now require a copy of the federal certificate. Thus, the proposed change will conform to the current practice. As a result no significant economic effect is expected other than improving the clarity of the regulation.

Businesses and Entities Affected. The proposed regulation applies to sellers of spirits sold in ABC stores. While ABC does not have information on the number of individual sellers, it estimates that there are approximately 10,000 products that are subject to the certificate requirement.

Localities Particularly Affected. The proposed changes apply statewide.

Projected Impact on Employment. No impact on employment is expected upon promulgation of this regulation.

Effects on the Use and Value of Private Property. No impact on the use and value of private property is expected upon promulgation of this regulation.

Real Estate Development Costs. No impact on real estate development costs is expected.

Small Businesses:

Definition. Pursuant to § 2.2-4007.04 of the Code of Virginia, small business is defined as "a business entity, including its affiliates, that (i) is independently owned and operated and (ii) employs fewer than 500 full-time employees or has gross annual sales of less than $6 million."

Costs and Other Effects. Approximately, 40 percent of the affected entities are estimated to be small businesses. The cost and other effects on small businesses are the same as discussed above.

Alternative Method that Minimizes Adverse Impact. No adverse impact on small businesses is expected.

Adverse Impacts:

Businesses. The proposed regulation does not have an adverse impact on non-small businesses.

Localities. The proposed regulation will not adversely affect localities.

Other Entities. The proposed regulation will not adversely affect other entities.

Agency's Response to Economic Impact Analysis: The Department of Alcoholic Beverage Control concurs.

Summary:

The amendment eliminates the requirement that a federal certificate of label approval be provided to the board before sale of the product in a Department of Alcoholic Beverage Control (ABC) store, but allows the board the option of asking for a certificate of label approval before approving a product for sale in a store.

3VAC5-40-10. Spirits; labels, definitions and standards of identity.

Spirits sold in the Commonwealth shall conform with regulations adopted by the appropriate federal agency, relating to labels, definitions, standards of identity, and standards of fill. In addition, the prior approval of the board must be obtained as to the spirits, containers and labels. Applicants shall furnish the board a certified copy of the approval of the label by such federal agency. The board may request a copy of the federal certificate of label approval before a product is approved for sale.

Subsequent sales under an approved label shall conform to the analysis of the spirits originally approved by the board, and be packaged in approved types and sizes of containers.