Title of Regulation: 3VAC5-40. Requirements for Product Approval (amending 3VAC5-40-30).

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: June 29, 2016.

Effective Date: July 15, 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 9 of § 4.1-103 of the Code of Virginia provides that the Alcoholic Beverage Control Board has the power to determine the nature, form, and capacity of all containers used for holding alcoholic beverages to be kept or sold under Title 4.1 of the Code of Virginia and prescribe the form and content of all labels and seals to be placed on the containers.

Subdivisions B 17, B 18, and B 19 of § 4.1-111 of the Code of Virginia were amended by Chapter 404 of the 2015 Acts of Assembly and require the board to incorporate the amendments to those subdivisions into 3VAC5-40-30.

Purpose: The amendments are intended to meet specific statutory directives enacted by Chapter 404 of the 2015 Acts of Assembly to modernize regulations on business practices by retail on-premises and off-premises licensees and gourmet shop licensees. The amendments enhance public safety by placing limitations on the outlined practices in order to prevent overconsumption by consumers.

Rationale for Using Fast-Track Rulemaking Process: The rulemaking process is expected to be noncontroversial because the agency is responding to specific statutory mandates. The agency has minimal discretion.

Substance: The proposed amendment redefines a growler as a resealable container made of glass, metal, ceramic, or other materials approved by the board and also provides for:

• Beer and cider sold for off-premises consumption by persons licensed to sell beer and cider for off-premises consumption may be sold in growlers with a maximum capacity of 128 fluid ounces or, for metric sizes, four liters.

• Wine may be sold for off-premises consumption in growlers with a maximum capacity of 64 fluid ounces or two liters if metric sizes. Wine may be sold in growlers only by persons licensed to sell wine for both on-premises and off-premises consumption or gourmet shop licensees; wine sold by gourmet shop licensees in growlers shall be labeled with (i) the manufacturer's name or trade name, (ii) the place of production, (iii) the net contents in fluid ounces, and (iv) the name and address of the retailer.

Retail licensees authorized to sell wine and beer for both on-premises and off-premises consumption and gourmet shop licensees may sell wine and beer in sealable containers made of metal or other materials approved by the board with a maximum capacity of 32 fluid ounces or one liter if in metric size, provided the alcoholic beverages are placed in the container following an order from the consumer.

Issues: The primary advantage of the proposal is to meet the legislative mandate. The proposal modernizes the board's regulations and permits certain licensees to sell wine, beer, and cider in growlers and in sealable containers with limitations. 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. Pursuant to Chapter 404 of the 2015 Acts of Assembly, the Alcoholic Beverage Control Board proposes to amend this regulation to allow certain alcoholic beverage licensees to sell beer, wine, and cider in larger growlers or in new types of containers for off-premises consumption.

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

Estimated Economic Impact. Chapter 404 of the 2015 Acts of Assembly amended Virginia Code section 4.1-111(B)(17,18,19)  to 1) increase the amount of beer and cider that can be sold for off-premises consumption from 64 ounces or two liters to 128 ounces or four liters in a growler by a beer and cider retailer licensed to sell only for off-premises consumption; 2) allow the sale of wine for off-premises consumption up to 64 ounces or two liters in a growler by a wine retailer licensed to sell only for off-premises consumption; and 3) allow the sale of wine or beer for off-premises consumption up to 32 ounces or one liter in a sealed container made of metal or other types of materials by a wine and beer retailer or a gourmet shop licensed to sell for on or off-premises consumption. Thus, the proposed regulation will allow in general only for off-premises consumption certain licensees to sell beer, cider, or wine in larger quantities or allow them to be sold in new types of containers in addition to growlers.

While the proposed changes could be expected to increase the sales of wine, beer, or cider in the Commonwealth, the Department of Alcoholic Beverage Control notes that the licensees currently could achieve the same sales goals by selling smaller but a larger number of growlers, but has no information on the likely magnitude of such impact. In that sense, the proposed regulation provides greater flexibility to achieve the same sales goals. In addition, the proposed regulation is identical in substance to the statute and therefore no significant effect is expected upon promulgation of these changes as the affected licensees are already allowed to sell beer, wine, and cider under the statute. Thus, while higher sales could be reasonably expected to benefit the affected licensees, no significant economic impact is likely for them or on public consumption upon promulgation of this regulation, other than improving clarity through consistency between the regulation and the Code of Virginia.

Businesses and Entities Affected. The proposed regulation applies to approximately 8,000 retail and gourmet shop licensees.

Localities Particularly Affected. The proposed changes apply statewide.

Projected Impact on Employment. The proposed amendments could be expected to increase sales of wine, beer, and cider and increase the demand for labor employed in production and sales. However, the statute has been in effect and any such impact is probably already realized. Thus, no significant impact on employment is expected upon promulgation of this regulation.

Effects on the Use and Value of Private Property. Allowing the sale of larger quantities of wine, beer, and cider provides more flexibility in achieving same sales goals and may have had a positive revenue impact on affected licensees and their asset values when the statute has authorized them to do so.

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. The vast majority of the 8,000 retail and gourmet shops are estimated to be small businesses. The proposed regulation does not impose costs on them. The proposed regulation simply conforms to the statute, which may have had a positive impact on sales.

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 simply conforms to the statute allowing consumers to purchase beer, wine, and cider in larger and new type of containers from certain retailers.

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

Summary:

The amendments redefine the term "growler" and conform the limitations on growlers to Chapter 404 of the 2015 Acts of Assembly.

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 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 resealable container made of glass, ceramic, or metal container having a capacity of not more than 64 fluid ounces (or two liters if a metric-sized container) that has a resealable closure. 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. Growlers sold by gourmet shop licensees must be labeled with (i) the manufacturer's name or trade name; (ii) the place of production; (iii) the net contents in fluid ounces; and (iv) the name and address of the retailer, or other materials approved by the board as well as resealable containers approved by the board.

1. Beer and cider may be sold for off-premises consumption by persons licensed to sell beer and cider for off-premises consumption in growlers with a maximum capacity of 128 fluid ounces or if in metric size containers, four liters.

2. Wine may be sold for off-premises consumption in growlers with a maximum capacity of 64 fluid ounces or, for metric size containers, two liters. Wine sold in growlers may only be sold by persons licensed to sell wine for both on-premises and off-premises consumption and by gourmet shop licensees. Wine sold by gourmet shop licensees shall be labeled with the (i) manufacturer's name or trade name, (ii) place of production, (iii) net contents in fluid ounces, and (iv) name and address of the retailer.

3. Retail licensees licensed to sell wine and beer for both on-premises and off-premises consumption and gourmet shop licensees licensed for off-premises consumption may sell wine and beer in sealed containers made of metal or other materials approved by the board with a maximum capacity of 32 fluid ounces or if in metric size containers, one liter, provided that the alcoholic beverages are placed in the container following an order from the consumer.

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.

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 80 fluid ounces in capacity.