Amendment to the Standards of Identity for Distilled Spirits, 12591-12595 [2013-04242]

Download as PDF 12591 Rules and Regulations Federal Register Vol. 78, No. 37 Monday, February 25, 2013 This section of the FEDERAL REGISTER contains regulatory documents having general applicability and legal effect, most of which are keyed to and codified in the Code of Federal Regulations, which is published under 50 titles pursuant to 44 U.S.C. 1510. The Code of Federal Regulations is sold by the Superintendent of Documents. Prices of new books are listed in the first FEDERAL REGISTER issue of each week. DEPARTMENT OF THE TREASURY Alcohol and Tobacco Tax and Trade Bureau 27 CFR Part 5 [Docket No. TTB–2012–0002; T.D. TTB–112; Ref: Notice No. 127] RIN 1513–AB33 Amendment to the Standards of Identity for Distilled Spirits Alcohol and Tobacco Tax and Trade Bureau, Treasury. ACTION: Final rule; Treasury Decision. AGENCY: The Alcohol and Tobacco Tax and Trade Bureau is amending the regulations setting forth the standards of identity for distilled spirits to include ‘‘Cachaca’’ as a type of rum and as a ¸ distinctive product of Brazil. This amendment follows requests received from the Government of Brazil and subsequent discussions with the Office of the United States Trade Representative. SUMMARY: Effective Date: April 11, 2013. Existing certificates of label approval that contain the term ‘‘Cachaca’’ and do ¸ not comply with the regulations in 27 CFR part 5 will be revoked by operation of regulation on August 26, 2013. Section 5.35a (27 CFR 5.35a) is effective from April 11, 2013 to February 25, 2015. DATES: Kate M. Bresnahan, Regulations and Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G Street NW., Suite 200E, Washington, DC 20005; telephone 202–453–1039, Ext. 151. SUPPLEMENTARY INFORMATION: erowe on DSK2VPTVN1PROD with RULES FOR FURTHER INFORMATION CONTACT: Background TTB Authority Section 105(e) of the Federal Alcohol Administration Act (FAA Act), codified VerDate Mar<15>2010 14:27 Feb 22, 2013 Jkt 229001 in the United States Code at 27 U.S.C. 205(e), authorizes the Secretary of the Treasury to prescribe regulations relating to the packaging, marking, branding, labeling, and size and fill of containers of alcohol beverages that will prohibit consumer deception and provide the consumer with adequate information as to the identity and quality of the product. The Alcohol and Tobacco Tax and Trade Bureau (TTB) administers the FAA Act pursuant to section 1111(d) of the Homeland Security Act of 2002, codified at 6 U.S.C. 531(d). The Secretary has delegated various authorities through Treasury Department Order 120–01 (Revised), dated January 21, 2003, to the TTB Administrator to perform the functions and duties in the administration and enforcement of this law. Regulations implementing the provisions of section 105(e) as they relate to distilled spirits are set forth in part 5 of title 27 of the Code of Federal Regulations (27 CFR part 5). Classes and Types of Spirits The TTB labeling regulations require that the class and type of distilled spirits appear on the product’s brand label (see 27 CFR 5.32(a)(2) and 5.35). Those regulations provide that the class and type must be stated in conformity with § 5.22 of the TTB regulations (27 CFR 5.22) if defined therein. Otherwise, the product must be designated in accordance with trade and consumer understanding thereof, or, if no such understanding exists, by a distinctive or fanciful name, and, in either case (with limited exceptions), followed by a truthful and adequate statement of composition (see 27 CFR 5.35). Section 5.22 establishes standards of identity for distilled spirits products and categorizes these products according to various classes and types. As used in § 5.22, the term ‘‘class’’ refers to a general category of spirits, such as ‘‘whisky’’ or ‘‘brandy.’’ Currently, there are 12 different classes of distilled spirits recognized in § 5.22, including whisky, rum, and brandy. The term ‘‘type’’ refers to a subcategory within a class of spirits. For example, ‘‘Cognac’’ is a type of brandy, and ‘‘Canadian whisky’’ is a type of whisky. Classification of Cachaca ¸ ‘‘Cachaca’’ is a term recognized by the ¸ Brazilian Government as a designation for a Brazilian distilled spirits product PO 00000 Frm 00001 Fmt 4700 Sfmt 4700 made from sugar cane. Currently, Cachaca products are generally ¸ classified as rum under TTB’s labeling regulations. The standard of identity for rum is set forth in § 5.22(f) as an alcoholic distillate from the fermented juice of sugar cane, sugar cane syrup, sugar cane molasses, or other sugar cane by-products, produced at less than 190° proof in such manner that the distillate possesses the taste, aroma and characteristics generally attributed to rum, and bottled at not less than 80° proof; and also includes mixtures solely of such distillates. The above standard does not currently provide for any subcategories or ‘‘types’’ of rum. By letter dated April 30, 2001, the Embassy of the Government of Brazil submitted a petition to TTB’s predecessor agency, the Bureau of Alcohol, Tobacco and Firearms (ATF), in which it requested that ATF amend its regulations to recognize ‘‘Cachaca’’ ¸ as a distinctive product of Brazil. After preliminary discussions with the Brazilian Embassy, no further action was taken with regard to the request. In a second petition, dated March 6, 2006, the Brazilian Embassy asked TTB to amend its regulations to recognize Cachaca as a distinctive product of ¸ Brazil. Among other things, the Embassy noted Brazilian Decree No. 4851, of October 2, 2003, which defines ‘‘Cachaca’’ as ‘‘the typical and exclusive ¸ designation of the sugar cane aguardente produced in Brazil, with an alcohol content of 38 to 48 percent by volume at 20 degrees Celsius, obtained from the distillation of the fermented must of sugar cane with specific sensory characteristics, to which up to six grams of sugar per liter may be added, expressed in terms of sucrose.’’ In addition, following discussions between officials of Brazil and the Office of the United States Trade Representative (USTR), and after consultations between USTR and TTB, the United States Trade Representative and Brazil’s Minister of Development, Industry, and Foreign Trade signed an agreement on April 9, 2012, setting out a procedure that could lead each party to recognize certain distinctive distilled spirits produced in the other party’s territory, including Cachaca. The ¸ agreement provides in part that if, following the publication of a notice of proposed rulemaking, the United States publishes a final rule that provides, E:\FR\FM\25FER1.SGM 25FER1 12592 Federal Register / Vol. 78, No. 37 / Monday, February 25, 2013 / Rules and Regulations erowe on DSK2VPTVN1PROD with RULES among other things, that Cachaca is a ¸ type of rum that is a distinctive product of Brazil, then Brazil, within 30 days thereafter, will recognize Bourbon Whiskey and Tennessee Whiskey as distinctive products of the United States. Besides the petition from the Brazilian Government and advice from USTR, TTB also received a number of essentially identical letters from private parties supporting the recognition of Cachaca as a distinctive type of distilled ¸ spirit. Notice of Proposed Rulemaking and Comments Received On April 30, 2012, TTB published in the Federal Register at 77 FR 25382 a notice of proposed rulemaking, Notice No. 127, which proposed to amend the regulations setting forth the standards of identity for distilled spirits contained in 27 CFR 5.22 to include Cachaca as a ¸ type of rum that is a distinctive product of Brazil. Specifically, TTB proposed amending § 5.22(f), which lays out the standard of identity for rum. Under the proposed regulatory changes, Cachaca would be recognized ¸ as a type within the class designation ‘‘rum’’ that is a distinctive product of Brazil, manufactured in Brazil in compliance with the laws of Brazil regulating the manufacture of Cachaca ¸ for consumption in that country. Under the proposed rule, the product could simply be labeled as ‘‘Cachaca’’ without ¸ the term ‘‘rum’’ appearing on the label. In Notice No. 127, TTB noted that the proposed type description would not include as ‘‘Cachaca’’ any spirits that ¸ use corn or corn syrup in the fermentation process. Some product labels currently include ‘‘Cachaca’’ as ¸ additional information or fanciful names for products that have been manufactured using a small quantity of corn or corn syrup in the fermentation process. Since these products were not distilled exclusively from sugar cane or sugar cane by-products, TTB has required that these products be labeled with distinctive or fanciful names, as well as statements of composition, in accordance with § 5.35. TTB has confirmed with the Brazilian Government that the Brazilian standard for Cachaca would not allow for the use ¸ of corn or corn syrup in the fermentation process. TTB also noted that the Brazilian standard for Cachaca provides that ¸ Cachaca may contain up to six grams of ¸ added sugar per liter. The addition of sugar in this amount would not remove the product from the standard of identity for rum, pursuant to the provisions of 27 CFR 5.23. Accordingly, VerDate Mar<15>2010 14:27 Feb 22, 2013 Jkt 229001 a Cachaca product, which is ¸ manufactured in Brazil in compliance with the laws of Brazil regulating the manufacture of Cachaca for ¸ consumption in that country, and which contains up to six grams of added sugar per liter, would fall within the standard of identity for rum. In Notice No. 127, TTB stated that the Brazilian standard allows products designated as Cachaca ¸ to have an alcohol content ranging from 38 to 48 percent alcohol by volume. TTB further noted that, since the standard of identity contained in the proposed rule identified Cachaca as a ¸ type of rum and the United States standard requires that rum must be bottled at not less than 40 percent alcohol by volume, or 80° proof, any ‘‘Cachaca’’ imported into the United ¸ States would have to conform to this minimum bottling proof requirement. A product that is bottled at below 40 percent alcohol by volume would fall outside the class and type designation. Depending on the way that such a product is manufactured, it may be labeled as a ‘‘diluted Cachaca’’ or a ¸ distilled spirits specialty product bearing a statement of composition. In Notice No. 127, TTB sought comments on the proposed regulatory changes, and specifically requested comments on whether the proposed amendment would have an adverse impact on owners of U.S. trademarks. TTB also expressed specific interest in receiving comments on the extent to which distilled spirits labeled as Cachaca are produced outside Brazil in ¸ order to help determine whether Cachaca should be recognized as a ¸ distinctive product of Brazil. During the comment period, TTB received a request from the European Union (EU) to extend the comment period ‘‘in order to have time to analyze and prepare comments’’ on the proposal. In response to this request, on June 29, 2012, TTB published in the Federal Register at 77 FR 38758 Notice No. 127A which extended the comment period for Notice No. 127 an additional 10 days. Accordingly, the comment period for the proposal outlined in Notice No. 127 closed on July 9, 2012. TTB received a total of 13 responses to Notice No. 127, in addition to the request to extend the comment period (see comment 4 within Docket No. TTB– 2012–0002 at ‘‘Regulations.gov,’’ www.regulations.gov). The 13 responses were received from industry and trade associations (6), consumers (3), businesses (2), the Government of Brazil, and the European Union. Twelve of the commenters commented in support of TTB’s proposal to recognize Cachaca as a ¸ PO 00000 Frm 00002 Fmt 4700 Sfmt 4700 distinctive product of Brazil in the United States. Eight of the commenters supported the regulatory proposal in Notice No. 127 without further change or clarification. Four expressed support for the regulatory proposal but also requested changes to or clarifications of the proposed regulatory text. The EU did not express support or opposition to the proposal, but suggested several changes to, and requested some clarification of, the proposed regulatory text. The requested changes and clarifications are discussed in detail below. None of the comments TTB received asserted that the proposed amendment would have an adverse impact on owners of U.S. trademarks or that any distilled spirits products labeled as Cachaca are produced outside ¸ Brazil. The four comments requesting changes to or clarifications of the proposed regulatory text and the EU comment are discussed in detail below. Comments Concerning Flavored Cachaca ¸ INOX North America (comment 2) supported TTB’s proposal to amend the standards of identity for distilled spirits to include Cachaca as a distinctive type ¸ of rum, but asked that TTB consider an appropriate designation within the Cachaca subclass for flavored varieties ¸ of Cachaca, which contain natural or ¸ artificial flavors and have an alcohol content of 35 percent alcohol by volume. INOX North America stated that these products currently are sold legally in Brazil and that TTB has approved labels for three flavored Cachaca products. ¸ With regard to flavored Cachaca and ¸ the comment submitted by INOX North America, the Brazilian Institute of Cachaca (comment 9) and the ¸ Government of Brazil (comment 11), stated that Brazilian law does not allow flavors to be added to Cachaca in Brazil. ¸ The Brazilian Institute of Cachaca asked ¸ TTB to carefully scrutinize labels for flavored distilled spirits specialty products that claim to be Cachaca or ¸ that refer to Cachaca in their fanciful ¸ names, as these labels may mislead consumers regarding the origin, identity, or characteristics of the products. The comment from the Brazilian Government urged TTB not to approve labels for flavored distilled spirits products referring to Cachaca, ¸ because they could mislead consumers regarding the origin, identity, or characteristics of the product. TTB Response According to the comment submitted by the Government of Brazil, Brazilian law does not authorize the use of a E:\FR\FM\25FER1.SGM 25FER1 Federal Register / Vol. 78, No. 37 / Monday, February 25, 2013 / Rules and Regulations erowe on DSK2VPTVN1PROD with RULES ‘‘flavored Cachaca’’ designation. ¸ Further, the use of such a designation is outside the scope of the proposed rule. Accordingly, TTB is not amending the regulations in § 5.22(f) in order to set forth a special category for ‘‘flavored Cachaca’’ as requested by the ¸ commenter. TTB notes that the products described by INOX North America, which contain added flavors and have an alcohol content of 35 percent, would not meet the standard of identity proposed for Cachaca as a type of rum. However, the ¸ regulations in § 5.22 already contain a standard of identity for flavored rum. Under § 5.22(i), the standard of identity for ‘‘flavored rum’’ is rum ‘‘to which have been added natural flavoring materials, with or without the addition of sugar, and bottled at not less than 60° proof’’. Thus, products that are made by adding natural flavors to Cachaca, and ¸ which comply with the standards of section 5.22(i), may be designated as ‘‘flavored rum.’’ Products that do not meet the ‘‘flavored rum’’ standards may be labeled with distinctive or fanciful names in accordance with § 5.35. In such cases, the label would have to include a statement of composition that identified the base distilled spirits (if applicable, Cachaca) and the ingredients ¸ added to the product (such as ‘‘natural and artificial flavors’’). The designation ‘‘Cachaca’’ may not be used on such ¸ labels in a manner that creates the misleading impression that the final product is Cachaca, but it may be used ¸ to accurately designate the base distilled spirits. Comment Concerning Aged Cachaca ¸ and Sweetened Cachaca ¸ The EU (comment 12) asked for clarification on TTB’s position concerning the labeling of ‘‘Aged Cachaca’’ and ‘‘Sweetened Cachaca’’. ¸ ¸ The EU stated that under Brazilian legislation, ‘‘Aged Cachaca’’ may be ¸ used on a label if the bottle contains a minimum of 50 percent Cachaca that ¸ has been aged for a year or longer, which differs from the U.S. provisions on statements of age. The EU also stated that in Brazil ‘‘Sweetened Cachaca’’ may ¸ contain a maximum of 30 grams of added sugar per liter, while in the United States the total addition of coloring, flavoring, or blending materials in distilled spirits products may not exceed 21⁄2 percent by volume of the finished product. TTB Response Labels bearing a statement of age for Cachaca products being sold or ¸ distributed for consumption in the United States would have to comply VerDate Mar<15>2010 14:27 Feb 22, 2013 Jkt 229001 with TTB regulations applicable to statements of age contained in 27 CFR 5.11 and 5.40(b). Section 5.11 contains the following definition of ‘‘Age’’: ‘‘The period during which, after distillation and before bottling, distilled spirits have been stored in oak containers.’’ Section 5.40(b) covers the use of statements of age on wine labels for rum, brandy, and Tequila. Section 5.40(b) states, in part, that age may, but need not, be stated on labels of rums, brandies, and Tequila. If age is stated, it shall be substantially as follows: ‘‘llyears old’’; the blank to be filled in with the age of the youngest distilled spirits in the product. The statement ‘‘aged Cachaca’’ would ¸ not comply with section 5.40(b), which requires such statements to specify the age of the youngest distilled spirits in the product. However, the statement could be used in conjunction with an age statement that complies with section 5.40(b) (such as ‘‘___ years old’’). A Cachaca or other rum that contains ¸ distilled spirits that have not been aged at all in oak containers would not be entitled to any age statement under TTB regulations, because § 5.40(b) requires age statements to be based on the age of the youngest distilled spirits in the product. With regard to the question concerning labeling of products with the term ‘‘Sweetened Cachaca,’’ Brazilian ¸ law currently states that Cachaca that ¸ contains sugars in quantities above 6 and below 30 grams per liter shall be called ‘‘Sweetened Cachaca’’. ¸ The applicable TTB regulation, 27 CFR 5.23(a)(2), generally allows for the addition of certain harmless coloring, flavoring, or blending materials, including sugar, to any class or type of distilled spirits, without a change in class or type, where the ingredients are not an essential component part of the particular distilled spirits to which added, but are customarily employed therein in accordance with established trade usage. However, the added coloring, flavoring, or blending materials must not total more than 21⁄2 percent by volume of the finished product. The Brazilian standard for ‘‘Sweetened Cachaca’’ is expressed in ¸ terms of grams of sugar per liter. Under the final rule, any Cachaca product ¸ containing more than 21⁄2 percent by volume of added sugar would not be allowed to be labeled as Cachaca under ¸ § 5.22(f), because such a product would not meet the standards for the ‘‘rum’’ designation. If a product does not conform to any of the standards of identity set forth in § 5.22, it must be labeled in accordance with § 5.35. Under this provision, the product must PO 00000 Frm 00003 Fmt 4700 Sfmt 4700 12593 be designated in accordance with trade and consumer understanding thereof, or, if no such understanding exists, by a distinctive or fanciful name, and, in either case (with limited exceptions), followed by a truthful and adequate statement of composition. Thus, consistent with § 5.35, a Cachaca ¸ product containing more than 21⁄2 percent of added sugar by volume in the finished product could be labeled with a statement of composition such as ‘‘Cachaca sweetened with sugar.’’ If the ¸ product contains no more than 21⁄2 percent by volume of added sugar but is no longer entitled to a ‘‘Cachaca’’ ¸ designation under Brazilian law because it contains more than 6 grams of sugar per liter, the product could still be labeled as ‘‘rum’’ under TTB regulations. Comments Concerning the Regulatory Text The Distilled Spirits Council of the United States (DISCUS) supported TTB’s proposal to recognize Cachaca as ¸ a distinctive product of Brazil, but suggested a change to the regulatory text in proposed § 5.22(f)(1) (comment 7). The regulatory text proposed in Notice No. 127 stated that Cachaca must be ¸ ‘‘manufactured in Brazil in compliance with the laws of Brazil regulating the manufacture of Cachaca for ¸ consumption in that country’’ (emphasis added). DISCUS commented that the highlighted language could inadvertently cause confusion as to whether a product that is produced in full conformity with Brazil’s regulations governing the manufacture of Cachaca ¸ for consumption in Brazil and bottled at less than 40 percent alcohol by volume could be labeled and sold in the United States as ‘‘Cachaca.’’ DISCUS believes ¸ that removing the words ‘‘for consumption in that country’’ from proposed § 5.22(f)(1) would bring the proposed regulatory text into conformity with the U.S.–Brazil exchange of letters that occurred on April 9, 2012, and with TTB’s intentions regarding the labeling of Cachaca bottled at less than 40 ¸ percent alcohol by volume. DISCUS also noted that this change to the text would be consistent with TTB Notice No. 126, Standards of Identity for Pisco and Cognac, published in the Federal Register of March 27, 2012 (77 FR 18146). The EU also recommended changes to the proposed regulatory text. The EU suggested that TTB reword proposed § 5.22(f)(1) as follows: (1) ‘‘Cachaca’’ is a rum, as defined in 27 ¸ CFR Part 5[…], which is a distinctive product of Brazil manufactured in Brazil in compliance with the laws of Brazil regulating E:\FR\FM\25FER1.SGM 25FER1 12594 Federal Register / Vol. 78, No. 37 / Monday, February 25, 2013 / Rules and Regulations the manufacture of Cachaca for consumption ¸ in that country. The word ‘‘Cachaca’’ may be ¸ spelled with or without the diacritic mark. This product may be labeled as ‘‘Cachaca’’ ¸ without the term ‘‘rum’’ on the label, provided that it complies with the standard of identity for rum as established in this section. erowe on DSK2VPTVN1PROD with RULES The EU asked that TTB rewrite the regulatory text in this way in order to specify that the labeling derogation for Cachaca will only apply to a product if ¸ that product conforms entirely with the U.S. definition of rum, and not only with regard to the minimum alcohol content. TTB Response TTB is not removing the phrase ‘‘for consumption in that country’’ from the regulatory text proposed in Notice No. 127. That phrase is similar to language in other type designations already in our regulations, including Scotch whisky (§ 5.22(b)(7)), Irish whisky (§ 5.22(b)(8)), and Canadian whisky (§ 5.22(b)(9)), and it is identical to the language found in the class designation for tequila (§ 5.22(g)). Removing that phrase from the regulatory language might suggest that the new regulatory text would have a meaning that is different from existing regulatory language regarding distilled spirits products that are distinctive products of a foreign country. TTB does not want to adopt language that might be interpreted as suggesting that the Brazilian laws governing the manufacture of Cachaca could provide ¸ different standards for products to be exported from those for products to be consumed within Brazil. As for the comparison to language used in Notice No. 126, TTB may consider these comments when drafting the final rule amending the standard of identity for Pisco brandy in § 5.22(d). TTB is accepting the EU’s suggestion to remove the words ‘‘type of’’ from the first sentence of the proposed regulatory text. TTB also will remove the word ‘‘a’’ before rum. TTB believes that these changes in language will conform the regulatory text to other type designations in § 5.22. Nonetheless, the final rule will still establish Cachaca as ¸ a type of rum. TTB does not consider it necessary to include the rest of the EU’s suggestions regarding the regulatory text in this final rule. As a type of rum, Cachaca must ¸ meet all the requirements for the rum class designation specified in § 5.22(f), as well as all of the Brazilian requirements for Cachaca, and TTB ¸ believes that further clarification of the proposed regulatory text in Notice No. 127 is unnecessary. As amended, the standards of identity will provide that VerDate Mar<15>2010 14:27 Feb 22, 2013 Jkt 229001 Cachaca is a rum. Any product that is ¸ not entitled to a ‘‘rum’’ designation under § 5.22(f) will not be entitled to a ‘‘Cachaca’’ designation under ¸ § 5.22(f)(1). TTB Finding For the reasons stated above, TTB considers it appropriate to recognize ‘‘Cachaca’’ as a type within the class ¸ designation ‘‘rum’’ that is a distinctive product of Brazil, manufactured in Brazil in compliance with the laws of Brazil regulating the manufacture of Cachaca for consumption in that ¸ country. Therefore, TTB adopts the regulatory changes proposed in Notice No. 127, incorporating the modifications discussed above. Effect on Existing Labels Consistent with the proposed rule, distilled spirits for which corn or corn syrup has been used in the fermentation process would not meet the standard for ‘‘Cachaca’’ because they are not ¸ manufactured in compliance with the laws of Brazil regulating the manufacture of Cachaca for ¸ consumption in that country, and because they do not comply with the standard for ‘‘rum’’ under section 5.22. Such products would instead continue to be labeled with distinctive or fanciful names, as well as statements of composition, in accordance with § 5.35. Because the base distilled spirits used in such a product are not entitled to be designated as ‘‘Cachaca’’ under the final ¸ rule, the use of the term ‘‘Cachaca’’ as ¸ a fanciful name or in a statement of composition would similarly be prohibited. Thus, any labels for such products that include the term ‘‘Cachaca’’ would be revoked by ¸ operation of regulation. The use of the term ‘‘Cachaca’’ as ¸ additional information on labels of products that are currently designated as ‘‘rum’’ or ‘‘Brazilian rum’’ will continue to be allowed as long as the products in question meet the new regulatory standards for designation as ‘‘Cachaca.’’ Once the final rule goes into ¸ effect, such products may be designated as ‘‘Cachaca’’ without the use of the ¸ designation ‘‘rum’’ on the label. Labels containing the term ‘‘Cachaca’’ ¸ that do not comply with the new regulatory language contained in § 5.22(f) will be revoked by operation of regulation under the provisions of 27 CFR 13.51 and 13.72. Section 13.51 provides that TTB will not individually notify all holders of certificates of label approval that their approvals have been revoked if the revocation occurs by operation of regulation. Moreover, in such cases, it is the responsibility of the PO 00000 Frm 00004 Fmt 4700 Sfmt 4700 certificate holder to voluntarily surrender all certificates that are no longer in compliance. Section 13.72 provides that revocations by operation of regulation become effective on the effective date of the change in the regulation with which the label does not comply, or, if a separate label compliance date is given, on that date. TTB believes that only a small number of industry members have labels that will be revoked by operation of this final rule. In order to minimize any adverse effect on industry members who have noncompliant labels, TTB is adding a label compliance provision to the regulation that allows the continued use of previously approved ‘‘Cachaca’’ ¸ labels for 180 days from the date that the final rule is published in the Federal Register. Accordingly, under the terms of this final rule, noncompliant labels will not be revoked by operation of law until August 26, 2013. This document includes the transition period provisions in the codified regulations at a new § 5.35a for ease of reference, but provides for the expiration of this provision after 2 years, because industry members will no longer have a need to refer to this temporary transition rule after that time. Regulatory Flexibility Act TTB certifies that these regulations will not have a significant economic impact on a substantial number of small entities. The final rule amends the standards of identity for rum at 27 CFR 5.22(f) and does not impose any new reporting, recordkeeping, or other administrative requirement. TTB did not receive any comments indicating that products made outside of Brazil were currently using the designation ‘‘Cachaca’’, and we believe that only a ¸ small number of labels will be noncompliant with the new regulation. The final rule allows the continued use of noncompliant labels for a 180-day period in order to allow sufficient time for necessary labeling changes. Therefore, no regulatory flexibility analysis is required. Executive Order 12866 It has been determined that this final rule is not a significant regulatory action as defined in Executive Order 12866. Therefore, a regulatory assessment is not required. Drafting Information Kate M. Bresnahan of the Regulations and Rulings Division prepared this final rule. E:\FR\FM\25FER1.SGM 25FER1 Federal Register / Vol. 78, No. 37 / Monday, February 25, 2013 / Rules and Regulations List of Subjects in 27 CFR Part 5 Advertising, Consumer protection, Customs duties and inspection, Imports, Labeling, Liquors, and Packaging and containers. Amendments to the Regulations For the reasons discussed in the preamble, TTB amends 27 CFR, chapter I, part 5, as follows: PART 5—LABELING AND ADVERTISING OF DISTILLED SPIRITS Signed: November 30, 2012. John J. Manfreda, Administrator. Approved: December 13, 2012. Timothy E. Skud, Deputy Assistant Secretary, Tax, Trade, and Tariff Policy. [FR Doc. 2013–04242 Filed 2–22–13; 8:45 am] BILLING CODE 4810–31–P DEPARTMENT OF HOMELAND SECURITY Coast Guard 1. The authority citation for part 5 continues to read as follows: ■ 33 CFR Part 165 Authority: 26 U.S.C. 5301, 7805, 27 U.S.C. 205. 2. Amend § 5.22 by revising paragraph (f) to read as follows: ■ § 5.22 The standards of identity. * * * * * (f) Class 6; rum. ‘‘Rum’’ is an alcoholic distillate from the fermented juice of sugar cane, sugar cane syrup, sugar cane molasses, or other sugar cane by-products, produced at less than 190° proof in such manner that the distillate possesses the taste, aroma, and characteristics generally attributed to rum, and bottled at not less than 80° proof; and also includes mixtures solely of such distillates. (1) ‘‘Cachaca’’ is rum that is a ¸ distinctive product of Brazil, manufactured in Brazil in compliance with the laws of Brazil regulating the manufacture of Cachaca for ¸ consumption in that country. The word ‘‘Cachaca’’ may be spelled with or ¸ without the diacritic mark (i.e., ‘‘Cachaca’’ or ‘‘Cachaca’’). ¸ (2) [Reserved] * * * * * ■ 3. Add new § 5.35a to read as follows: erowe on DSK2VPTVN1PROD with RULES § 5.35a Transition period for labels containing the term ‘‘Cachaca.’’ ¸ Holders of certificates of label approval issued prior to April 11, 2013 for labels that contain the term ‘‘Cachaca’’ in a manner that does not ¸ comply with the labeling requirements contained in part 5 of this title may continue to use those certificates until August 26, 2013, at which time those certificates shall be revoked by operation of regulation. VerDate Mar<15>2010 14:27 Feb 22, 2013 Jkt 229001 [Docket Number USCG–2012–0986] RIN 1625–AA00 Safety Zone for Ice Conditions; Baltimore Captain of the Port Zone Coast Guard, DHS. Temporary interim rule with request for comments. AGENCY: ACTION: The Coast Guard is establishing a temporary safety zone in all navigable waters of the Captain of the Port Baltimore Zone. The temporary safety zone restricts vessels from transiting the zone during the effective period, unless authorized by the Captain of the Port Baltimore or his designated representative. This safety zone is necessary to protect mariners from the hazards associated with ice in the navigable waterways. DATES: This rule has been enforced with actual notice from January 26, 2013, until February 25, 2013. This rule is effective in the Federal Register on February 25, 2013 until April 15, 2013, unless cancelled earlier by the Captain of the Port. ADDRESSES: Documents mentioned in this preamble are part of Docket Number USCG–2012–0986. To view documents mentioned in this preamble as being available in the docket, go to http:// www.regulations.gov, type the docket number in the ‘‘SEARCH’’ box and click ‘‘SEARCH.’’ Click on ‘‘Open Docket Folder’’ on the line associated with this rulemaking. You may also visit the Docket Management Facility in Room W12–140 on the ground floor of the Department of Transportation West Building, 1200 New Jersey Avenue SE., Washington, DC 20590, between 9 a.m. and 5 p.m., Monday through Friday, except Federal holidays. You may submit comments, identified by docket number, using any one of the following methods: (1) Federal eRulemaking Portal: http://www.regulations.gov. SUMMARY: PO 00000 Frm 00005 Fmt 4700 Sfmt 4700 12595 (2) Fax: (202) 493–2251. (3) Mail or Delivery: Docket Management Facility (M–30), U.S. Department of Transportation, West Building Ground Floor, Room W12–140, 1200 New Jersey Avenue SE., Washington, DC 20590–0001. Deliveries accepted between 9 a.m. and 5 p.m., Monday through Friday, except federal holidays. The telephone number is 202– 366–9329. See the ‘‘Public Participation and Request for Comments’’ portion of the SUPPLEMENTARY INFORMATION section below for further instructions on submitting comments. To avoid duplication, please use only one of these three methods. FOR FURTHER INFORMATION CONTACT: If you have questions on this rule, call or email Mr. Ronald L. Houck, Sector Baltimore Waterways Management Division, U.S. Coast Guard; telephone 410–576–2674, email Ronald.L.Houck@uscg.mil. If you have questions on viewing or submitting material to the docket, call Barbara Hairston, Program Manager, Docket Operations, telephone (202) 366–9826. SUPPLEMENTARY INFORMATION: Table of Acronyms DHS Department of Homeland Security FR Federal Register NPRM Notice of Proposed Rulemaking A. Public Participation and Request for Comments We encourage you to participate in this rulemaking by submitting comments and related materials. All comments received will be posted without change to http:// www.regulations.gov and will include any personal information you have provided. 1. Submitting Comments If you submit a comment, please include the docket number for this rulemaking, indicate the specific section of this document to which each comment applies, and provide a reason for each suggestion or recommendation. You may submit your comments and material online at http:// www.regulations.gov, or by fax, mail, or hand delivery, but please use only one of these means. If you submit a comment online, it will be considered received by the Coast Guard when you successfully transmit the comment. If you fax, hand deliver, or mail your comment, it will be considered as having been received by the Coast Guard when it is received at the Docket Management Facility. We recommend that you include your name and a mailing address, an email address, or a E:\FR\FM\25FER1.SGM 25FER1

Agencies

[Federal Register Volume 78, Number 37 (Monday, February 25, 2013)]
[Rules and Regulations]
[Pages 12591-12595]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-04242]



========================================================================
Rules and Regulations
                                                Federal Register
________________________________________________________________________

This section of the FEDERAL REGISTER contains regulatory documents 
having general applicability and legal effect, most of which are keyed 
to and codified in the Code of Federal Regulations, which is published 
under 50 titles pursuant to 44 U.S.C. 1510.

The Code of Federal Regulations is sold by the Superintendent of Documents. 
Prices of new books are listed in the first FEDERAL REGISTER issue of each 
week.

========================================================================


Federal Register / Vol. 78, No. 37 / Monday, February 25, 2013 / 
Rules and Regulations

[[Page 12591]]



DEPARTMENT OF THE TREASURY

Alcohol and Tobacco Tax and Trade Bureau

27 CFR Part 5

[Docket No. TTB-2012-0002; T.D. TTB-112; Ref: Notice No. 127]
RIN 1513-AB33


Amendment to the Standards of Identity for Distilled Spirits

AGENCY: Alcohol and Tobacco Tax and Trade Bureau, Treasury.

ACTION: Final rule; Treasury Decision.

-----------------------------------------------------------------------

SUMMARY: The Alcohol and Tobacco Tax and Trade Bureau is amending the 
regulations setting forth the standards of identity for distilled 
spirits to include ``Cacha[ccedil]a'' as a type of rum and as a 
distinctive product of Brazil. This amendment follows requests received 
from the Government of Brazil and subsequent discussions with the 
Office of the United States Trade Representative.

DATES: Effective Date: April 11, 2013. Existing certificates of label 
approval that contain the term ``Cacha[ccedil]a'' and do not comply 
with the regulations in 27 CFR part 5 will be revoked by operation of 
regulation on August 26, 2013. Section 5.35a (27 CFR 5.35a) is 
effective from April 11, 2013 to February 25, 2015.

FOR FURTHER INFORMATION CONTACT: Kate M. Bresnahan, Regulations and 
Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G 
Street NW., Suite 200E, Washington, DC 20005; telephone 202-453-1039, 
Ext. 151.

SUPPLEMENTARY INFORMATION: 

Background

TTB Authority

    Section 105(e) of the Federal Alcohol Administration Act (FAA Act), 
codified in the United States Code at 27 U.S.C. 205(e), authorizes the 
Secretary of the Treasury to prescribe regulations relating to the 
packaging, marking, branding, labeling, and size and fill of containers 
of alcohol beverages that will prohibit consumer deception and provide 
the consumer with adequate information as to the identity and quality 
of the product. The Alcohol and Tobacco Tax and Trade Bureau (TTB) 
administers the FAA Act pursuant to section 1111(d) of the Homeland 
Security Act of 2002, codified at 6 U.S.C. 531(d). The Secretary has 
delegated various authorities through Treasury Department Order 120-01 
(Revised), dated January 21, 2003, to the TTB Administrator to perform 
the functions and duties in the administration and enforcement of this 
law. Regulations implementing the provisions of section 105(e) as they 
relate to distilled spirits are set forth in part 5 of title 27 of the 
Code of Federal Regulations (27 CFR part 5).

Classes and Types of Spirits

    The TTB labeling regulations require that the class and type of 
distilled spirits appear on the product's brand label (see 27 CFR 
5.32(a)(2) and 5.35). Those regulations provide that the class and type 
must be stated in conformity with Sec.  5.22 of the TTB regulations (27 
CFR 5.22) if defined therein. Otherwise, the product must be designated 
in accordance with trade and consumer understanding thereof, or, if no 
such understanding exists, by a distinctive or fanciful name, and, in 
either case (with limited exceptions), followed by a truthful and 
adequate statement of composition (see 27 CFR 5.35).
    Section 5.22 establishes standards of identity for distilled 
spirits products and categorizes these products according to various 
classes and types. As used in Sec.  5.22, the term ``class'' refers to 
a general category of spirits, such as ``whisky'' or ``brandy.'' 
Currently, there are 12 different classes of distilled spirits 
recognized in Sec.  5.22, including whisky, rum, and brandy. The term 
``type'' refers to a subcategory within a class of spirits. For 
example, ``Cognac'' is a type of brandy, and ``Canadian whisky'' is a 
type of whisky.

Classification of Cacha[ccedil]a

    ``Cacha[ccedil]a'' is a term recognized by the Brazilian Government 
as a designation for a Brazilian distilled spirits product made from 
sugar cane. Currently, Cacha[ccedil]a products are generally classified 
as rum under TTB's labeling regulations. The standard of identity for 
rum is set forth in Sec.  5.22(f) as an alcoholic distillate from the 
fermented juice of sugar cane, sugar cane syrup, sugar cane molasses, 
or other sugar cane by-products, produced at less than 190[deg] proof 
in such manner that the distillate possesses the taste, aroma and 
characteristics generally attributed to rum, and bottled at not less 
than 80[deg] proof; and also includes mixtures solely of such 
distillates. The above standard does not currently provide for any 
subcategories or ``types'' of rum.
    By letter dated April 30, 2001, the Embassy of the Government of 
Brazil submitted a petition to TTB's predecessor agency, the Bureau of 
Alcohol, Tobacco and Firearms (ATF), in which it requested that ATF 
amend its regulations to recognize ``Cacha[ccedil]a'' as a distinctive 
product of Brazil. After preliminary discussions with the Brazilian 
Embassy, no further action was taken with regard to the request.
    In a second petition, dated March 6, 2006, the Brazilian Embassy 
asked TTB to amend its regulations to recognize Cacha[ccedil]a as a 
distinctive product of Brazil. Among other things, the Embassy noted 
Brazilian Decree No. 4851, of October 2, 2003, which defines 
``Cacha[ccedil]a'' as ``the typical and exclusive designation of the 
sugar cane aguardente produced in Brazil, with an alcohol content of 38 
to 48 percent by volume at 20 degrees Celsius, obtained from the 
distillation of the fermented must of sugar cane with specific sensory 
characteristics, to which up to six grams of sugar per liter may be 
added, expressed in terms of sucrose.''
    In addition, following discussions between officials of Brazil and 
the Office of the United States Trade Representative (USTR), and after 
consultations between USTR and TTB, the United States Trade 
Representative and Brazil's Minister of Development, Industry, and 
Foreign Trade signed an agreement on April 9, 2012, setting out a 
procedure that could lead each party to recognize certain distinctive 
distilled spirits produced in the other party's territory, including 
Cacha[ccedil]a. The agreement provides in part that if, following the 
publication of a notice of proposed rulemaking, the United States 
publishes a final rule that provides,

[[Page 12592]]

among other things, that Cacha[ccedil]a is a type of rum that is a 
distinctive product of Brazil, then Brazil, within 30 days thereafter, 
will recognize Bourbon Whiskey and Tennessee Whiskey as distinctive 
products of the United States.
    Besides the petition from the Brazilian Government and advice from 
USTR, TTB also received a number of essentially identical letters from 
private parties supporting the recognition of Cacha[ccedil]a as a 
distinctive type of distilled spirit.

Notice of Proposed Rulemaking and Comments Received

    On April 30, 2012, TTB published in the Federal Register at 77 FR 
25382 a notice of proposed rulemaking, Notice No. 127, which proposed 
to amend the regulations setting forth the standards of identity for 
distilled spirits contained in 27 CFR 5.22 to include Cacha[ccedil]a as 
a type of rum that is a distinctive product of Brazil. Specifically, 
TTB proposed amending Sec.  5.22(f), which lays out the standard of 
identity for rum.
    Under the proposed regulatory changes, Cacha[ccedil]a would be 
recognized as a type within the class designation ``rum'' that is a 
distinctive product of Brazil, manufactured in Brazil in compliance 
with the laws of Brazil regulating the manufacture of Cacha[ccedil]a 
for consumption in that country. Under the proposed rule, the product 
could simply be labeled as ``Cacha[ccedil]a'' without the term ``rum'' 
appearing on the label.
    In Notice No. 127, TTB noted that the proposed type description 
would not include as ``Cacha[ccedil]a'' any spirits that use corn or 
corn syrup in the fermentation process. Some product labels currently 
include ``Cacha[ccedil]a'' as additional information or fanciful names 
for products that have been manufactured using a small quantity of corn 
or corn syrup in the fermentation process. Since these products were 
not distilled exclusively from sugar cane or sugar cane by-products, 
TTB has required that these products be labeled with distinctive or 
fanciful names, as well as statements of composition, in accordance 
with Sec.  5.35. TTB has confirmed with the Brazilian Government that 
the Brazilian standard for Cacha[ccedil]a would not allow for the use 
of corn or corn syrup in the fermentation process.
    TTB also noted that the Brazilian standard for Cacha[ccedil]a 
provides that Cacha[ccedil]a may contain up to six grams of added sugar 
per liter. The addition of sugar in this amount would not remove the 
product from the standard of identity for rum, pursuant to the 
provisions of 27 CFR 5.23. Accordingly, a Cacha[ccedil]a product, which 
is manufactured in Brazil in compliance with the laws of Brazil 
regulating the manufacture of Cacha[ccedil]a for consumption in that 
country, and which contains up to six grams of added sugar per liter, 
would fall within the standard of identity for rum. In Notice No. 127, 
TTB stated that the Brazilian standard allows products designated as 
Cacha[ccedil]a to have an alcohol content ranging from 38 to 48 percent 
alcohol by volume. TTB further noted that, since the standard of 
identity contained in the proposed rule identified Cacha[ccedil]a as a 
type of rum and the United States standard requires that rum must be 
bottled at not less than 40 percent alcohol by volume, or 80[deg] 
proof, any ``Cacha[ccedil]a'' imported into the United States would 
have to conform to this minimum bottling proof requirement. A product 
that is bottled at below 40 percent alcohol by volume would fall 
outside the class and type designation. Depending on the way that such 
a product is manufactured, it may be labeled as a ``diluted 
Cacha[ccedil]a'' or a distilled spirits specialty product bearing a 
statement of composition.
    In Notice No. 127, TTB sought comments on the proposed regulatory 
changes, and specifically requested comments on whether the proposed 
amendment would have an adverse impact on owners of U.S. trademarks. 
TTB also expressed specific interest in receiving comments on the 
extent to which distilled spirits labeled as Cacha[ccedil]a are 
produced outside Brazil in order to help determine whether 
Cacha[ccedil]a should be recognized as a distinctive product of Brazil.
    During the comment period, TTB received a request from the European 
Union (EU) to extend the comment period ``in order to have time to 
analyze and prepare comments'' on the proposal. In response to this 
request, on June 29, 2012, TTB published in the Federal Register at 77 
FR 38758 Notice No. 127A which extended the comment period for Notice 
No. 127 an additional 10 days. Accordingly, the comment period for the 
proposal outlined in Notice No. 127 closed on July 9, 2012.
    TTB received a total of 13 responses to Notice No. 127, in addition 
to the request to extend the comment period (see comment 4 within 
Docket No. TTB-2012-0002 at ``Regulations.gov,'' www.regulations.gov). 
The 13 responses were received from industry and trade associations 
(6), consumers (3), businesses (2), the Government of Brazil, and the 
European Union.
    Twelve of the commenters commented in support of TTB's proposal to 
recognize Cacha[ccedil]a as a distinctive product of Brazil in the 
United States. Eight of the commenters supported the regulatory 
proposal in Notice No. 127 without further change or clarification. 
Four expressed support for the regulatory proposal but also requested 
changes to or clarifications of the proposed regulatory text. The EU 
did not express support or opposition to the proposal, but suggested 
several changes to, and requested some clarification of, the proposed 
regulatory text. The requested changes and clarifications are discussed 
in detail below. None of the comments TTB received asserted that the 
proposed amendment would have an adverse impact on owners of U.S. 
trademarks or that any distilled spirits products labeled as 
Cacha[ccedil]a are produced outside Brazil. The four comments 
requesting changes to or clarifications of the proposed regulatory text 
and the EU comment are discussed in detail below.

Comments Concerning Flavored Cacha[ccedil]a

    INOX North America (comment 2) supported TTB's proposal to amend 
the standards of identity for distilled spirits to include 
Cacha[ccedil]a as a distinctive type of rum, but asked that TTB 
consider an appropriate designation within the Cacha[ccedil]a subclass 
for flavored varieties of Cacha[ccedil]a, which contain natural or 
artificial flavors and have an alcohol content of 35 percent alcohol by 
volume. INOX North America stated that these products currently are 
sold legally in Brazil and that TTB has approved labels for three 
flavored Cacha[ccedil]a products.
    With regard to flavored Cacha[ccedil]a and the comment submitted by 
INOX North America, the Brazilian Institute of Cacha[ccedil]a (comment 
9) and the Government of Brazil (comment 11), stated that Brazilian law 
does not allow flavors to be added to Cacha[ccedil]a in Brazil. The 
Brazilian Institute of Cacha[ccedil]a asked TTB to carefully scrutinize 
labels for flavored distilled spirits specialty products that claim to 
be Cacha[ccedil]a or that refer to Cacha[ccedil]a in their fanciful 
names, as these labels may mislead consumers regarding the origin, 
identity, or characteristics of the products. The comment from the 
Brazilian Government urged TTB not to approve labels for flavored 
distilled spirits products referring to Cacha[ccedil]a, because they 
could mislead consumers regarding the origin, identity, or 
characteristics of the product.

TTB Response

    According to the comment submitted by the Government of Brazil, 
Brazilian law does not authorize the use of a

[[Page 12593]]

``flavored Cacha[ccedil]a'' designation. Further, the use of such a 
designation is outside the scope of the proposed rule. Accordingly, TTB 
is not amending the regulations in Sec.  5.22(f) in order to set forth 
a special category for ``flavored Cacha[ccedil]a'' as requested by the 
commenter.
    TTB notes that the products described by INOX North America, which 
contain added flavors and have an alcohol content of 35 percent, would 
not meet the standard of identity proposed for Cacha[ccedil]a as a type 
of rum. However, the regulations in Sec.  5.22 already contain a 
standard of identity for flavored rum. Under Sec.  5.22(i), the 
standard of identity for ``flavored rum'' is rum ``to which have been 
added natural flavoring materials, with or without the addition of 
sugar, and bottled at not less than 60[deg] proof''. Thus, products 
that are made by adding natural flavors to Cacha[ccedil]a, and which 
comply with the standards of section 5.22(i), may be designated as 
``flavored rum.'' Products that do not meet the ``flavored rum'' 
standards may be labeled with distinctive or fanciful names in 
accordance with Sec.  5.35. In such cases, the label would have to 
include a statement of composition that identified the base distilled 
spirits (if applicable, Cacha[ccedil]a) and the ingredients added to 
the product (such as ``natural and artificial flavors''). The 
designation ``Cacha[ccedil]a'' may not be used on such labels in a 
manner that creates the misleading impression that the final product is 
Cacha[ccedil]a, but it may be used to accurately designate the base 
distilled spirits.

Comment Concerning Aged Cacha[ccedil]a and Sweetened Cacha[ccedil]a

    The EU (comment 12) asked for clarification on TTB's position 
concerning the labeling of ``Aged Cacha[ccedil]a'' and ``Sweetened 
Cacha[ccedil]a''. The EU stated that under Brazilian legislation, 
``Aged Cacha[ccedil]a'' may be used on a label if the bottle contains a 
minimum of 50 percent Cacha[ccedil]a that has been aged for a year or 
longer, which differs from the U.S. provisions on statements of age. 
The EU also stated that in Brazil ``Sweetened Cacha[ccedil]a'' may 
contain a maximum of 30 grams of added sugar per liter, while in the 
United States the total addition of coloring, flavoring, or blending 
materials in distilled spirits products may not exceed 2\1/2\ percent 
by volume of the finished product.

TTB Response

    Labels bearing a statement of age for Cacha[ccedil]a products being 
sold or distributed for consumption in the United States would have to 
comply with TTB regulations applicable to statements of age contained 
in 27 CFR 5.11 and 5.40(b). Section 5.11 contains the following 
definition of ``Age'': ``The period during which, after distillation 
and before bottling, distilled spirits have been stored in oak 
containers.'' Section 5.40(b) covers the use of statements of age on 
wine labels for rum, brandy, and Tequila. Section 5.40(b) states, in 
part, that age may, but need not, be stated on labels of rums, 
brandies, and Tequila. If age is stated, it shall be substantially as 
follows: ``----years old''; the blank to be filled in with the age of 
the youngest distilled spirits in the product.
    The statement ``aged Cacha[ccedil]a'' would not comply with section 
5.40(b), which requires such statements to specify the age of the 
youngest distilled spirits in the product. However, the statement could 
be used in conjunction with an age statement that complies with section 
5.40(b) (such as ``------ years old''). A Cacha[ccedil]a or other rum 
that contains distilled spirits that have not been aged at all in oak 
containers would not be entitled to any age statement under TTB 
regulations, because Sec.  5.40(b) requires age statements to be based 
on the age of the youngest distilled spirits in the product.
    With regard to the question concerning labeling of products with 
the term ``Sweetened Cacha[ccedil]a,'' Brazilian law currently states 
that Cacha[ccedil]a that contains sugars in quantities above 6 and 
below 30 grams per liter shall be called ``Sweetened Cacha[ccedil]a''.
    The applicable TTB regulation, 27 CFR 5.23(a)(2), generally allows 
for the addition of certain harmless coloring, flavoring, or blending 
materials, including sugar, to any class or type of distilled spirits, 
without a change in class or type, where the ingredients are not an 
essential component part of the particular distilled spirits to which 
added, but are customarily employed therein in accordance with 
established trade usage. However, the added coloring, flavoring, or 
blending materials must not total more than 2\1/2\ percent by volume of 
the finished product.
    The Brazilian standard for ``Sweetened Cacha[ccedil]a'' is 
expressed in terms of grams of sugar per liter. Under the final rule, 
any Cacha[ccedil]a product containing more than 2\1/2\ percent by 
volume of added sugar would not be allowed to be labeled as 
Cacha[ccedil]a under Sec.  5.22(f), because such a product would not 
meet the standards for the ``rum'' designation. If a product does not 
conform to any of the standards of identity set forth in Sec.  5.22, it 
must be labeled in accordance with Sec.  5.35. Under this provision, 
the product must be designated in accordance with trade and consumer 
understanding thereof, or, if no such understanding exists, by a 
distinctive or fanciful name, and, in either case (with limited 
exceptions), followed by a truthful and adequate statement of 
composition. Thus, consistent with Sec.  5.35, a Cacha[ccedil]a product 
containing more than 2\1/2\ percent of added sugar by volume in the 
finished product could be labeled with a statement of composition such 
as ``Cacha[ccedil]a sweetened with sugar.'' If the product contains no 
more than 2\1/2\ percent by volume of added sugar but is no longer 
entitled to a ``Cacha[ccedil]a'' designation under Brazilian law 
because it contains more than 6 grams of sugar per liter, the product 
could still be labeled as ``rum'' under TTB regulations.

Comments Concerning the Regulatory Text

    The Distilled Spirits Council of the United States (DISCUS) 
supported TTB's proposal to recognize Cacha[ccedil]a as a distinctive 
product of Brazil, but suggested a change to the regulatory text in 
proposed Sec.  5.22(f)(1) (comment 7). The regulatory text proposed in 
Notice No. 127 stated that Cacha[ccedil]a must be ``manufactured in 
Brazil in compliance with the laws of Brazil regulating the manufacture 
of Cacha[ccedil]a for consumption in that country'' (emphasis added). 
DISCUS commented that the highlighted language could inadvertently 
cause confusion as to whether a product that is produced in full 
conformity with Brazil's regulations governing the manufacture of 
Cacha[ccedil]a for consumption in Brazil and bottled at less than 40 
percent alcohol by volume could be labeled and sold in the United 
States as ``Cacha[ccedil]a.'' DISCUS believes that removing the words 
``for consumption in that country'' from proposed Sec.  5.22(f)(1) 
would bring the proposed regulatory text into conformity with the U.S.-
Brazil exchange of letters that occurred on April 9, 2012, and with 
TTB's intentions regarding the labeling of Cacha[ccedil]a bottled at 
less than 40 percent alcohol by volume.
    DISCUS also noted that this change to the text would be consistent 
with TTB Notice No. 126, Standards of Identity for Pisco and Cognac, 
published in the Federal Register of March 27, 2012 (77 FR 18146).
    The EU also recommended changes to the proposed regulatory text. 
The EU suggested that TTB reword proposed Sec.  5.22(f)(1) as follows:

    (1) ``Cacha[ccedil]a'' is a rum, as defined in 27 CFR Part 
5[[hellip]], which is a distinctive product of Brazil manufactured 
in Brazil in compliance with the laws of Brazil regulating

[[Page 12594]]

the manufacture of Cacha[ccedil]a for consumption in that country. 
The word ``Cacha[ccedil]a'' may be spelled with or without the 
diacritic mark. This product may be labeled as ``Cacha[ccedil]a'' 
without the term ``rum'' on the label, provided that it complies 
with the standard of identity for rum as established in this 
section.

    The EU asked that TTB rewrite the regulatory text in this way in 
order to specify that the labeling derogation for Cacha[ccedil]a will 
only apply to a product if that product conforms entirely with the U.S. 
definition of rum, and not only with regard to the minimum alcohol 
content.

TTB Response

    TTB is not removing the phrase ``for consumption in that country'' 
from the regulatory text proposed in Notice No. 127. That phrase is 
similar to language in other type designations already in our 
regulations, including Scotch whisky (Sec.  5.22(b)(7)), Irish whisky 
(Sec.  5.22(b)(8)), and Canadian whisky (Sec.  5.22(b)(9)), and it is 
identical to the language found in the class designation for tequila 
(Sec.  5.22(g)). Removing that phrase from the regulatory language 
might suggest that the new regulatory text would have a meaning that is 
different from existing regulatory language regarding distilled spirits 
products that are distinctive products of a foreign country. TTB does 
not want to adopt language that might be interpreted as suggesting that 
the Brazilian laws governing the manufacture of Cacha[ccedil]a could 
provide different standards for products to be exported from those for 
products to be consumed within Brazil. As for the comparison to 
language used in Notice No. 126, TTB may consider these comments when 
drafting the final rule amending the standard of identity for Pisco 
brandy in Sec.  5.22(d).
    TTB is accepting the EU's suggestion to remove the words ``type 
of'' from the first sentence of the proposed regulatory text. TTB also 
will remove the word ``a'' before rum. TTB believes that these changes 
in language will conform the regulatory text to other type designations 
in Sec.  5.22. Nonetheless, the final rule will still establish 
Cacha[ccedil]a as a type of rum.
    TTB does not consider it necessary to include the rest of the EU's 
suggestions regarding the regulatory text in this final rule. As a type 
of rum, Cacha[ccedil]a must meet all the requirements for the rum class 
designation specified in Sec.  5.22(f), as well as all of the Brazilian 
requirements for Cacha[ccedil]a, and TTB believes that further 
clarification of the proposed regulatory text in Notice No. 127 is 
unnecessary. As amended, the standards of identity will provide that 
Cacha[ccedil]a is a rum. Any product that is not entitled to a ``rum'' 
designation under Sec.  5.22(f) will not be entitled to a 
``Cacha[ccedil]a'' designation under Sec.  5.22(f)(1).

TTB Finding

    For the reasons stated above, TTB considers it appropriate to 
recognize ``Cacha[ccedil]a'' as a type within the class designation 
``rum'' that is a distinctive product of Brazil, manufactured in Brazil 
in compliance with the laws of Brazil regulating the manufacture of 
Cacha[ccedil]a for consumption in that country. Therefore, TTB adopts 
the regulatory changes proposed in Notice No. 127, incorporating the 
modifications discussed above.

Effect on Existing Labels

    Consistent with the proposed rule, distilled spirits for which corn 
or corn syrup has been used in the fermentation process would not meet 
the standard for ``Cacha[ccedil]a'' because they are not manufactured 
in compliance with the laws of Brazil regulating the manufacture of 
Cacha[ccedil]a for consumption in that country, and because they do not 
comply with the standard for ``rum'' under section 5.22. Such products 
would instead continue to be labeled with distinctive or fanciful 
names, as well as statements of composition, in accordance with Sec.  
5.35. Because the base distilled spirits used in such a product are not 
entitled to be designated as ``Cacha[ccedil]a'' under the final rule, 
the use of the term ``Cacha[ccedil]a'' as a fanciful name or in a 
statement of composition would similarly be prohibited. Thus, any 
labels for such products that include the term ``Cacha[ccedil]a'' would 
be revoked by operation of regulation.
    The use of the term ``Cacha[ccedil]a'' as additional information on 
labels of products that are currently designated as ``rum'' or 
``Brazilian rum'' will continue to be allowed as long as the products 
in question meet the new regulatory standards for designation as 
``Cacha[ccedil]a.'' Once the final rule goes into effect, such products 
may be designated as ``Cacha[ccedil]a'' without the use of the 
designation ``rum'' on the label.
    Labels containing the term ``Cacha[ccedil]a'' that do not comply 
with the new regulatory language contained in Sec.  5.22(f) will be 
revoked by operation of regulation under the provisions of 27 CFR 13.51 
and 13.72. Section 13.51 provides that TTB will not individually notify 
all holders of certificates of label approval that their approvals have 
been revoked if the revocation occurs by operation of regulation. 
Moreover, in such cases, it is the responsibility of the certificate 
holder to voluntarily surrender all certificates that are no longer in 
compliance.
    Section 13.72 provides that revocations by operation of regulation 
become effective on the effective date of the change in the regulation 
with which the label does not comply, or, if a separate label 
compliance date is given, on that date. TTB believes that only a small 
number of industry members have labels that will be revoked by 
operation of this final rule. In order to minimize any adverse effect 
on industry members who have noncompliant labels, TTB is adding a label 
compliance provision to the regulation that allows the continued use of 
previously approved ``Cacha[ccedil]a'' labels for 180 days from the 
date that the final rule is published in the Federal Register. 
Accordingly, under the terms of this final rule, noncompliant labels 
will not be revoked by operation of law until August 26, 2013. This 
document includes the transition period provisions in the codified 
regulations at a new Sec.  5.35a for ease of reference, but provides 
for the expiration of this provision after 2 years, because industry 
members will no longer have a need to refer to this temporary 
transition rule after that time.

Regulatory Flexibility Act

    TTB certifies that these regulations will not have a significant 
economic impact on a substantial number of small entities. The final 
rule amends the standards of identity for rum at 27 CFR 5.22(f) and 
does not impose any new reporting, recordkeeping, or other 
administrative requirement. TTB did not receive any comments indicating 
that products made outside of Brazil were currently using the 
designation ``Cacha[ccedil]a'', and we believe that only a small number 
of labels will be noncompliant with the new regulation. The final rule 
allows the continued use of noncompliant labels for a 180-day period in 
order to allow sufficient time for necessary labeling changes. 
Therefore, no regulatory flexibility analysis is required.

Executive Order 12866

    It has been determined that this final rule is not a significant 
regulatory action as defined in Executive Order 12866. Therefore, a 
regulatory assessment is not required.

Drafting Information

    Kate M. Bresnahan of the Regulations and Rulings Division prepared 
this final rule.

[[Page 12595]]

List of Subjects in 27 CFR Part 5

    Advertising, Consumer protection, Customs duties and inspection, 
Imports, Labeling, Liquors, and Packaging and containers.

Amendments to the Regulations

    For the reasons discussed in the preamble, TTB amends 27 CFR, 
chapter I, part 5, as follows:

PART 5--LABELING AND ADVERTISING OF DISTILLED SPIRITS

0
1. The authority citation for part 5 continues to read as follows:

    Authority:  26 U.S.C. 5301, 7805, 27 U.S.C. 205.


0
2. Amend Sec.  5.22 by revising paragraph (f) to read as follows:


Sec.  5.22  The standards of identity.

* * * * *
    (f) Class 6; rum. ``Rum'' is an alcoholic distillate from the 
fermented juice of sugar cane, sugar cane syrup, sugar cane molasses, 
or other sugar cane by-products, produced at less than 190[deg] proof 
in such manner that the distillate possesses the taste, aroma, and 
characteristics generally attributed to rum, and bottled at not less 
than 80[deg] proof; and also includes mixtures solely of such 
distillates.
    (1) ``Cacha[ccedil]a'' is rum that is a distinctive product of 
Brazil, manufactured in Brazil in compliance with the laws of Brazil 
regulating the manufacture of Cacha[ccedil]a for consumption in that 
country. The word ``Cacha[ccedil]a'' may be spelled with or without the 
diacritic mark (i.e., ``Cacha[ccedil]a'' or ``Cachaca'').
    (2) [Reserved]
* * * * *


0
3. Add new Sec.  5.35a to read as follows:


Sec.  5.35a  Transition period for labels containing the term 
``Cacha[ccedil]a.''

    Holders of certificates of label approval issued prior to April 11, 
2013 for labels that contain the term ``Cacha[ccedil]a'' in a manner 
that does not comply with the labeling requirements contained in part 5 
of this title may continue to use those certificates until August 26, 
2013, at which time those certificates shall be revoked by operation of 
regulation.

    Signed: November 30, 2012.
John J. Manfreda,
Administrator.

    Approved: December 13, 2012.
Timothy E. Skud,
Deputy Assistant Secretary, Tax, Trade, and Tariff Policy.
[FR Doc. 2013-04242 Filed 2-22-13; 8:45 am]
BILLING CODE 4810-31-P