Title of Regulation: 3VAC5-40. Requirements for Product Approval (amending 3VAC5-40-10, 3VAC5-40-20, 3VAC5-40-30; repealing 3VAC5-40-40, 3VAC5-40-50).

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 19, 2013.

Agency Contact: W. Curtis Coleburn III, Chief Operating Officer, Department of Alcoholic Beverage Control, 2901 Hermitage Road, Richmond, VA 23220, telephone (804) 213-4409, FAX (804) 213-4411, TTY (804) 213-4687, or email curtis.coleburn@abc.virginia.gov.

Basis: Section 4.1-111 of the Code of Virginia authorizes the Alcoholic Beverage Control Board to promulgate reasonable regulations necessary to carry out the provisions of Title 4.1 of the Code of Virginia or the general laws of the Commonwealth. Section 4.1-103 of the Code of Virginia also compels the Alcoholic Beverage Control Board to determine the nature, form, and capacity of all containers used for holding alcoholic beverages to be kept or sold under Title 4.1 and prescribe the form and content of all labels and seals to be placed thereon.

Purpose: The proposed regulatory action is necessary to streamline and consolidate the label and container requirements for wine and beer and to remove vague and unenforceable language pertaining to lewd or indecent labels.

Alcoholic beverage regulation is essential to protect the health, safety, and welfare of citizens by encouraging temperance and maintaining an orderly market. In promulgating regulations, the board must balance the need to protect the public safety with the legitimate interests of industry participants to be free of unnecessary restrictions. Each of the proposed amendments maintains essential public safety controls, while providing more flexibility for alcoholic beverage sellers.

Substance: The proposed amendments consolidate existing provisions for approval of wine and beer labels and containers; eliminate antiquated, unenforceable language; and provide for previously approved individual items to be offered in a combination pack.

Issues: The removal of vague and unenforceable provisions will ease the burden on the regulated community. The streamlining and clarification of the provisions of this regulation should help promote the welfare of citizens by providing more definitive and reliable guidance on the labeling and product approval of alcoholic beverages. There are no disadvantages to the public, the agency, or the Commonwealth.

Department of Planning and Budget's Economic Impact Analysis:

Summary of the Proposed Amendments to Regulation. The Alcoholic Beverage Control Board (ABC) proposes to amend its regulations to 1) consolidate product approval regulations for wine and beer, 2) remove the requirement that applicants provide a certified copy of federal label approval, 3) allow wine tasting at farm wineries of wine drawn directly from the barrel, 4) allow sale of wine and hard cider growlers for off premises consumption and 5) set the maximum allowable volume of beer pitchers at 64 fluid ounces.

Result of Analysis. Benefits likely outweigh costs for implementing these proposed changes.

Estimated Economic Impact. Currently, ABC splits rules for product approval for wine and beer so that there are two, nearly duplicative parts to current regulations. ABC proposes to consolidate these two parts so that the length of these regulations is cut and to clarify for affected entities that wine and beer are subject to the same rules in these regulations. No affected entity is likely to incur any costs on account of this change but affected entities are likely to get some small benefit from the additional clarity that this change will likely bring.

Current regulations require entities seeking approval to sell a new beer or wine in the Commonwealth to provide, as a part of the approval process, a certified copy of label approval from the appropriate federal agency. ABC proposes to only require a copy of such label approval since the federal agency no longer provides certified copies. Affected entities will benefit from this change as current regulation requires them to provide something that they cannot procure. No entity is likely to incur any costs on account of this change.

Current regulations require wine to be bottled before it can be sold even at the originating winery. ABC proposes to allow wineries to sell samples of wine taken directly from barrels so long as they keep track of the volume of wine sold in such a manner and comply with Virginia's tax code. No entity is likely to incur any net cost increases on account of this change; wineries are likely to benefit from this change because they will not have to incur the costs of bottling the wine they intend to serve at wine tastings on premises.

Current regulations allow the sale for off premises consumption of beer in reusable, resealable containers of not more than 64 fluid ounces that are known as growlers. Wine and hard cider for off premises consumption may currently only be sold in non-resealable bottles with the original seal unbroken. ABC proposes to change its regulations so that wine and hard cider may also be sold in growlers. This change will benefit sellers of wine and hard cider as it allows them greater flexibility to bottle their product in the most efficient, least costly manner possible.

Current regulations allow the sale of beer in pitchers for onsite consumption but do not specify the size of such pitchers. ABC now proposes to amend these regulations so that beer for onsite consumption may be served in pitchers of up to 64 fluid ounces. ABC set this standard with input from licensees who serve beer onsite (bars, etc.) who reported to ABC that 64 ounces was the usual size for beer pitchers.

Businesses and Entities Affected. ABC reports that approximately 1,000 businesses would be potentially affected by these proposed regulatory changes; 60% of these entities would meet the Commonwealth's definition of small business.

Localities Particularly Affected. No locality will be particularly affected by this proposed regulatory action.

Projected Impact on Employment. This proposed regulatory action is unlikely to have any effect on employment in the Commonwealth.

Effects on the Use and Value of Private Property. These proposed regulatory changes are unlikely to affect the use or value of private property in the Commonwealth.

Small Businesses: Costs and Other Effects. No small business is likely to incur any costs on account of this regulatory action.

Small Businesses: Alternative Method that Minimizes Adverse Impact. No small business is likely to incur any costs on account of this regulatory action.

Real Estate Development Costs. This regulatory action will likely have no effect on real estate development costs in the Commonwealth.

Legal Mandate. The Department of Planning and Budget (DPB) has analyzed the economic impact of this proposed regulation in accordance with § 2.2-4007.04 of the Administrative Process Act and Executive Order Number 14 (10). Section 2.2-4007.04 requires that such economic impact analyses include, but need not be limited to, the projected number of businesses or other entities to whom the regulation would apply, the identity of any localities and types of businesses or other entities particularly affected, the projected number of persons and employment positions to be affected, the projected costs to affected businesses or entities to implement or comply with the regulation, and the impact on the use and value of private property. Further, if the proposed regulation has adverse effect on small businesses, § 2.2-4007.04 requires that such economic impact analyses include (i) an identification and estimate of the number of small businesses subject to the regulation; (ii) the projected reporting, recordkeeping, and other administrative costs required for small businesses to comply with the regulation, including the type of professional skills necessary for preparing required reports and other documents; (iii) a statement of the probable effect of the regulation on affected small businesses; and (iv) a description of any less intrusive or less costly alternative methods of achieving the purpose of the regulation. The analysis presented above represents DPB's best estimate of these economic impacts.

Agency's Response to Economic Impact Analysis: The Alcoholic Beverage Control Board concurs with the economic impact analysis of the Department of Planning and Budget.

Summary:

The proposed amendments (i) consolidate and standardize product approval requirements for wine and beer; (ii) remove vague and unenforceable language relating to lewd or indecent labels on wine or beer; (iii) allow for combining previously approved items into a gift package; and (iv) provide standards and definition for certain beer containers.

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 and, 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.

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.

3VAC5-40-20. Wines Wine and beer; qualifying procedures; disqualifying factors; samples; exceptions.

A. Except as provided in subsection F of this section, all wines wine and beer sold in the Commonwealth shall be first approved by the board as to content, container, and label.

1. An application acceptable to the board or on a form prescribed by the board describing the merchandise shall be submitted for each new brand and type of wine offered for sale in the Commonwealth. A registration fee in such amounts as may be established by the board shall be included with each application.

2. 1. All wine and beer sold in this Commonwealth shall conform with regulations adopted by the appropriate federal agency, relating to labels, definitions and standards of identity. An application acceptable to the board or on a form prescribed by the board describing the merchandise shall be submitted for each new brand and type of wine or beer offered for sale in the Commonwealth. Applicants shall submit a certified copy of the approval of the label by such federal agency. A registration fee in such amount as may be established by the board shall be included with each application.

2. A gift package containing wine or beer for which label approval has been granted may be sold without additional approval by the board.

B. While not limited thereto, the board shall withhold approval of any wine if the alcoholic content exceeds 21% by volume.

C. While not limited thereto, the board may withhold approval of any label:

1. Which implies or indicates that the product contains spirits;

2. Which contains the word "fortified" or implies that the contents contain spirits, except that the composition and alcoholic content may be shown if required by regulations of an appropriate federal agency;

3. Which contains any obscene subject matter or illustration of a lewd, obscene or indecent nature;

4. Which contains subject matter designed to induce minors to drink, or is suggestive of the intoxicating effect of wine or beer;

5. Which contains any design or statement which is likely to mislead the consumer.;

6. Which implies or indicates that the product is government (federal, state, or local) endorsed; or

7. Which implies the product enhances athletic prowess or includes any reference to any athlete, former athlete, or athletic team except that references to athletes or athletic teams shall be allowed to the extent such references are permitted in point-of-sale advertising pursuant to 3VAC5-20-10.

D. A person holding a license as a winery, farm winery, brewery, or a wine or beer wholesaler shall upon request furnish the board without compensation a reasonable quantity of such brand sold by him for chemical analysis.

E. Any wine whose content, label or container does not comply with all requirements of this section shall be exempt therefrom provided that such wine was sold at retail in this Commonwealth as of December 1, 1960, and remains the same in content, label and container. Any wine or beer sold only by direct shipment to consumers by holders of wine or beer shippers' licenses shall be approved upon compliance with subdivision A 2 1 of this section.

F. If the board has not approved a wine or beer for sale within 30 days after receipt by the board of a complete application and registration fee, the wine or beer may be sold in the Commonwealth pending a decision from the board on the application. If the application for approval is rejected, the manufacturer or importer shall discontinue sales of the rejected product upon notice from the board. Any wholesale or retail licensee may continue sales until any inventory on hand at the time of notice from the board is depleted.

3VAC5-40-30. Wine and beer containers; sizes and types; on-premises and off-premises limitations; cooler-dispensers; novel containers; carafes and decanters.

A. Wine may be sold at retail only in or from the original containers of the sizes of 1.7 ounces (50 ml. if in a metric-sized package) or above which have been approved by the appropriate federal agency and beer may be sold at retail only in or from the original containers of the sizes that have been approved by the appropriate federal agency, except that farm winery licensees may conduct barrel tastings at the winery, at which samples of wine not yet bottled may be sold to visitors to the winery. Each farm winery conducting a barrel tasting shall measure the wine withdrawn for the tasting, maintain full and complete records, and remit the taxes imposed by § 4.1-234 of the Code of Virginia.

B. Wine sold for on-premises consumption shall not be removed from the licensed premises except in the original container with closure. Beer dispensed for on-premises consumption shall not be removed from authorized areas upon the premises. No wine or beer shall be sold for off-premises consumption in any container upon which the original closure has been broken, except for a growler. A "growler" is defined as a reusable glass, ceramic, or metal container having a capacity of not more than 64 fluid ounces that has a resealable closure and is labeled with (i) the manufacturer's name or trade name; (ii) the place of production; (iii) the net contents in fluid ounces; and (iv) if sold by a retailer other than the manufacturer, the name and address of the retailer. Growlers may only be used by persons licensed to sell beer or wine for both on-premises and off-premises consumption, or by gourmet shop licensees.

C. Wine shall not be sold for off-premises consumption in any container upon which the original closure has been broken.

D. The sale of wine from cooler-dispensers is prohibited unless the device is designed so that the original container becomes a part of the equipment, except that frozen drink dispensers or containers used in automatic dispensing may be used if approved by the board.

E. C. Novel or unusual containers are prohibited except upon special permit issued by the board. In determining whether a container is novel or unusual, the board may consider, but is not limited to, the following factors: (i) nature and composition of the container; (ii) length of time it has been employed for the purpose; (iii) the extent to which it is designed or suitable for those uses; (iv) the extent to which the container is a humorous representation; and (v) whether the container is dutiable for any other purpose under customs laws and regulations.

F. D. Wine may be served for on-premises consumption in carafes or decanters not exceeding 52 fluid ounces (1.5 liters) in capacity. Beer may be served for on-premises consumption in pitchers not exceeding 64 fluid ounces in capacity.

3VAC5-40-40. Beer containers; sizes; off- and on-premises limitations; novel containers; opening devices. (Repealed.)

A. Beer may be sold at retail only in or from the original containers of the sizes which have been approved by the appropriate federal agency.

B. No beer shall be sold by licensees for off-premises consumption in any container upon which the original closure has been broken, except for a growler or reusable container that is federally approved to hold a malt beverage, has a resealable closure and is properly labeled. Growlers may only be used by persons licensed to sell beer for both on- and off-premises consumption. Further, licensees shall not allow beer dispensed for on-premises consumption to be removed from authorized areas upon the premises.

C. Novel or unusual containers are prohibited except upon special permit issued by the board. In determining whether a container is novel or unusual the board may consider, but is not limited to, the factors set forth in 3VAC5-40-30.

D. No retail beer licensee shall sell at retail any beer packaged in a metal container designed and constructed with an opening device that detaches from the container when the container is opened in a manner normally used to empty the contents of the container.

3VAC5-40-50. Beer; qualifying procedures; samples; exceptions; disqualifying label factors. (Repealed.)

A. Except as provided in subsection E of this section, beer sold in the Commonwealth shall be first approved by the board as to content, container and label.

1. An application acceptable to the board or on a form prescribed by the board describing the merchandise shall be submitted for each new brand and type of beer offered for sale in the Commonwealth. A registration fee in such amounts as may be established by the board shall be included with each application.

2. All beer sold in the Commonwealth shall conform with regulations adopted by the appropriate federal agency, relating to labels, definitions and standards of identity. Applicants shall submit a certified copy of the approval of the label by such federal agency.

B. A brewery licensee or a wholesale beer licensee shall upon request furnish the board without compensation a reasonable quantity of each brand of beer sold by him for chemical analysis.

C. Any beer whose contents, label or container does not comply with all requirements of this section shall be exempt therefrom provided that such beer was sold at retail in this Commonwealth as of December 1, 1960, and remains the same in content, label and container. Any beer sold only by direct shipment to consumers by holders of beer shippers' licenses shall be approved upon compliance with subdivision A 2 of this section.

D. While not limited thereto, the board may withhold approval of any label which contains any statement, depiction or reference that:

1. Implies or indicates that the product contains wine or spirits;

2. Implies the product contains above average alcohol for beer;

3. Is suggestive of intoxicating effects;

4. Would tend to induce minors to drink;

5. Would tend to induce persons to consume to excess;

6. Is obscene, lewd or indecent;

7. Implies or indicates that the product is government (federal, state or local) endorsed;

8. Implies the product enhances athletic prowess or implies such by any reference to any athlete, former athlete or athletic team except that references to athletes or athletic teams shall be allowed to the extent such references are permitted in point-of-sale advertising pursuant to 3VAC5-20-10.

E. If the board has not approved a beer for sale within 30 days after receipt by the board of a complete application and registration fee, the beer may be sold in the Commonwealth pending a decision from the board on the application. If the application for approval is rejected, the manufacturer or importer shall discontinue sales of the rejected product upon notice from the board. Any wholesale or retail licensee may continue sales until any inventory on hand at the time of notice from the board is depleted.