The Future of Powdered Alcohol Rests With … the Treasury Department?

How alcohol is regulated in America.

National Journal
Brian Resnick
See more stories about...
Brian Resnick
April 23, 2014, 1 a.m.

We start with the weird fact that alcohol is regulated by the Treasury Department.

More spe­cific­ally, it’s un­der the Al­co­hol and To­bacco Tax and Trade Bur­eau (TTB), which resides in the Treas­ury De­part­ment. The bur­eau was cre­ated in 2003 after the Home­land Se­cur­ity re­or­gan­ized the gov­ern­ment.

The Bur­eau of Al­co­hol To­bacco and Fire­arms (ATF) used to reg­u­late the al­co­hol in­dustry. But in 2003, ATF moved to the Justice De­part­ment from Treas­ury, where the agency now fo­cuses solely on crim­in­al activ­ity, such as smug­gling. Reg­u­la­tion is left to TTB.

His­tor­ic­ally, al­co­hol and taxes have been linked with­in the U.S. gov­ern­ment — the Whis­key Re­bel­lion, after all, was a con­front­a­tion about pay­ing taxes. So it makes sense that al­co­hol reg­u­la­tion resides in Treas­ury.

But agen­cies don’t al­ways reside in the most lo­gic­al places with­in the fed­er­al gov­ern­ment. Con­sider that the Na­tion­al Ocean­ic and At­mo­spher­ic Ad­min­is­tra­tion (NOAA) is situ­ated in the Com­merce De­part­ment, not In­teri­or.

Fel­low hu­mans: We are on the verge of a game change. Al­co­hol, in the near fu­ture, may be avail­able in powdered form. Like Gat­o­rade and iced tea be­fore it, booze will not be lim­ited to bulky, li­quid con­tain­ers. Some might come to call it the “adult Tang.” But for now, it’s called “Pal­co­hol” — short for powdered al­co­hol, not a port­manteau of “your pal, al­co­hol” — and it’s cur­rently go­ing through the fed­er­al reg­u­lat­ory pro­cess.

In the last two weeks, the Al­co­hol and To­bacco Tax and Trade Bur­eau gran­ted and then res­cin­ded a la­bel ap­prov­al for the product. So the product won’t hit shelves just yet. The makers will have to sub­mit new la­bels for ap­prov­al. But to have made it this far means the makers of Pal­co­hol have already been gran­ted a dis­tilling li­cence and gen­er­al ap­prov­al of their bever­age, says Robert C. Lehr­man, a bever­age at­tor­ney and name­sake of Lehr­man Bever­age Law.

“Powdered al­co­hol — there are no rules about it,” Lehr­man says. “Even if they try to ban it, it’s a little bit weird be­cause pre­sum­ably they would have to cite a rule, and I don’t think there’s one in the book.”

So how does something like powdered al­co­hol — or any al­co­hol for that mat­ter — gain ap­prov­al from the U.S. gov­ern­ment? Be­low, we break it down. (Warn­ing: ac­ronyms ahead)

We start with the weird fact that al­co­hol is reg­u­lated by the Treas­ury De­part­ment.

More spe­cific­ally, it’s un­der the Al­co­hol and To­bacco Tax and Trade Bur­eau (TTB), which resides in the Treas­ury De­part­ment. The bur­eau was cre­ated in 2003 after the Home­land Se­cur­ity re­or­gan­ized the gov­ern­ment.

The Bur­eau of Al­co­hol To­bacco and Fire­arms (ATF) used to reg­u­late the al­co­hol in­dustry. But in 2003, ATF moved to the Justice De­part­ment from Treas­ury, where the agency now fo­cuses solely on crim­in­al activ­ity, such as smug­gling. Reg­u­la­tion is left to TTB.

His­tor­ic­ally, al­co­hol and taxes have been linked with­in the U.S. gov­ern­ment — the Whis­key Re­bel­lion, after all, was a con­front­a­tion about pay­ing taxes. So it makes sense that al­co­hol reg­u­la­tion resides in Treas­ury.

But agen­cies don’t al­ways reside in the most lo­gic­al places with­in the fed­er­al gov­ern­ment. Con­sider that the Na­tion­al Ocean­ic and At­mo­spher­ic Ad­min­is­tra­tion (NOAA) is situ­ated in the Com­merce De­part­ment, not In­teri­or.

So, is TTB the ab­so­lute au­thor­ity over al­co­hol?

The short an­swer: No.

Con­gress gave the reg­u­la­tion of al­co­hol to the Treas­ury sec­ret­ary in 1935 in the Fed­er­al Al­co­hol Ad­min­is­tra­tion (FAA) Act. The Treas­ury then del­eg­ated that au­thor­ity to ATF, which has since been trans­ferred to TTB.

But just three years later, in 1938, Con­gress passed the Fed­er­al Food, Drug and Cos­met­ic Act, which es­tab­lished the Food and Drug Ad­min­is­tra­tion (FDA) to reg­u­late food. Food is defined as “art­icles used for food or drink for man or oth­er an­im­als.” Al­co­hol is a drink used by man.

So the FDA also reg­u­lates al­co­hol?

Kind of.

In 1976, a U.S. dis­trict court rul­ing cla­ri­fied the dis­crep­ancy between the two laws. “There is no ques­tion but that [FAA] le­gis­la­tion ex­tends au­thor­ity to reg­u­late la­beling of al­co­hol­ic bever­ages to the Sec­ret­ary of the Treas­ury, who in turn has del­eg­ated that au­thor­ity to the BATF,” the judge wrote. “We are fully con­vinced that it was Con­gress’ in­ten­tion to place ex­clus­ive jur­is­dic­tion to reg­u­late the la­beling of al­co­hol­ic bever­ages in [ATF, which is now TTB].”

“Amaz­ingly,” the judge wrote, “this par­tic­u­lar query has taken nearly forty years to reach the fed­er­al courts.”

After that de­cision, ATF and the FDA came to a “memor­andum of un­der­stand­ing,” in which ATF would have primary reg­u­lat­ory con­trol over al­co­hol, but FDA still can raise con­cerns over un­safe products.

So why aren’t there nu­tri­tion facts on booze?

Be­cause al­co­hol is not primar­ily reg­u­lated by the FDA, it doesn’t have to ad­here to FDA pack­aging rules. Lehr­man puts it like this: “Whatever is the most con­fus­ing, byz­antine, old-fash­ioned way, that’s the way it’s reg­u­lated,” he says.

Ever try to find the cal­or­ie count on a bottle of vodka? Dis­til­lers don’t have to list it. Want to know what makes that ap­plet­ini in a bottle taste like apples? In­gredi­ent lists aren’t re­quired. Even the dis­clos­ing of al­ler­gens is vol­un­tary. Un­til 1995, it was ac­tu­ally il­leg­al for a beer to la­bel its al­co­hol con­tent (the gov­ern­ment was wor­ried that brew­ers would en­gage in “strength wars,” vy­ing to make the most al­co­hol­ic beer on the shelf).

But TTB has oth­er, some­times sub­ject­ive, re­quire­ments for its la­bels. “I once got a plum li­queur re­jec­ted be­cause the gov­ern­ment said it didn’t taste like plums,” Lehr­man says. “Plumb was the main in­gredi­ent so that was kind of wacky.”

Some of the rules are some­what dra­coni­an. A la­bel was once re­jec­ted be­cause the man­u­fac­tur­ers for­got a peri­od at the end of the man­dat­ory warn­ing state­ment.

What power does the FDA have over al­co­hol?

Let’s con­sider what happened to Four Loko.

Four Loko was a fruit-flavored malt bever­age with ad­ded caf­feine. The col­lege kids bought it in droves when it was com­monly avail­able in 2010. Four Loko, and its im­it­at­ors, were all cleared through TTB. That was un­til news re­ports of Four Loko-re­lated hos­pit­al­iz­a­tions began to cir­cu­late. The FDA stepped in, or­der­ing com­pan­ies to stop selling the drinks. (On one hand, there’s noth­ing stop­ping any­one from mak­ing an equi­val­ent Red Bull and vodka. On the oth­er, a can of Four Loko was equi­val­ent to three cups of cof­fee and three cans of beer.)

TTB fol­lowed through with the FDA’s or­der. “If the U.S. Food and Drug Ad­min­is­tra­tion (FDA) deems their caf­fein­ated al­co­hol bever­age products adul­ter­ated un­der the Fed­er­al Food, Drug and Cos­met­ic Act,” the bur­eau wrote, “we would con­sider them to be mis­labeled un­der the Fed­er­al Al­co­hol Ad­min­is­tra­tion Act, mak­ing it a vi­ol­a­tion for in­dustry mem­bers to sell or ship the products in in­ter­state or for­eign com­merce.”

The Fed­er­al Trade Com­mis­sion also got in­volved with reg­u­lat­ing Four Loko, in­sist­ing that it in­clude serving sizes on the can.

So that’s the fi­nal word on al­co­hol reg­u­la­tion?

Oh no, that’s ac­tu­ally just the be­gin­ning. “Don’t for­get then there’s 50 states with sep­ar­ate rules,” Lehr­man says. “Be­cause of pro­hib­i­tion and the 21st Amend­ment, they can all do their own thing — and they do.”

So, is TTB the absolute authority over alcohol?

The short an­swer: No.

Con­gress gave the reg­u­la­tion of al­co­hol to the Treas­ury sec­ret­ary in 1935 in the Fed­er­al Al­co­hol Ad­min­is­tra­tion (FAA) Act. The Treas­ury then del­eg­ated that au­thor­ity to ATF, which has since been trans­ferred to TTB.

But just three years later, in 1938, Con­gress passed the Fed­er­al Food, Drug and Cos­met­ic Act, which es­tab­lished the Food and Drug Ad­min­is­tra­tion (FDA) to reg­u­late food. Food is defined as “art­icles used for food or drink for man or oth­er an­im­als.” Al­co­hol is a drink used by man.

So the FDA also regulates alcohol?

Kind of.

In 1976, a U.S. dis­trict court rul­ing cla­ri­fied the dis­crep­ancy between the two laws. “There is no ques­tion but that [FAA] le­gis­la­tion ex­tends au­thor­ity to reg­u­late la­beling of al­co­hol­ic bever­ages to the Sec­ret­ary of the Treas­ury, who in turn has del­eg­ated that au­thor­ity to the BATF,” the judge wrote. “We are fully con­vinced that it was Con­gress’ in­ten­tion to place ex­clus­ive jur­is­dic­tion to reg­u­late the la­beling of al­co­hol­ic bever­ages in [ATF, which is now TTB].”

“Amaz­ingly,” the judge wrote, “this par­tic­u­lar query has taken nearly forty years to reach the fed­er­al courts.”

After that de­cision, ATF and the FDA came to a “memor­andum of un­der­stand­ing,” in which ATF would have primary reg­u­lat­ory con­trol over al­co­hol, but FDA still can raise con­cerns over un­safe products.

So why aren't there nutrition facts on booze?

Be­cause al­co­hol is not primar­ily reg­u­lated by the FDA, it doesn’t have to ad­here to FDA pack­aging rules. Lehr­man puts it like this: “Whatever is the most con­fus­ing, byz­antine, old-fash­ioned way, that’s the way it’s reg­u­lated,” he says.

Ever try to find the cal­or­ie count on a bottle of vodka? Dis­til­lers don’t have to list it. Want to know what makes that ap­plet­ini in a bottle taste like apples? In­gredi­ent lists aren’t re­quired. Even the dis­clos­ing of al­ler­gens is vol­un­tary. Un­til 1995, it was ac­tu­ally il­leg­al for a beer to la­bel its al­co­hol con­tent (the gov­ern­ment was wor­ried that brew­ers would en­gage in “strength wars,” vy­ing to make the most al­co­hol­ic beer on the shelf).

But TTB has oth­er, some­times sub­ject­ive, re­quire­ments for its la­bels. “I once got a plum li­queur re­jec­ted be­cause the gov­ern­ment said it didn’t taste like plums,” Lehr­man says. “Plumb was the main in­gredi­ent so that was kind of wacky.”

Some of the rules are some­what dra­coni­an. A la­bel was once re­jec­ted be­cause the man­u­fac­tur­ers for­got a peri­od at the end of the man­dat­ory warn­ing state­ment.

What power does the FDA have over alcohol?

Let’s con­sider what happened to Four Loko.

Four Loko was a fruit-flavored malt bever­age with ad­ded caf­feine. The col­lege kids bought it in droves when it was com­monly avail­able in 2010. Four Loko, and its im­it­at­ors, were all cleared through TTB. That was un­til news re­ports of Four Loko-re­lated hos­pit­al­iz­a­tions began to cir­cu­late. The FDA stepped in, or­der­ing com­pan­ies to stop selling the drinks. (On one hand, there’s noth­ing stop­ping any­one from mak­ing an equi­val­ent Red Bull and vodka. On the oth­er, a can of Four Loko was equi­val­ent to three cups of cof­fee and three cans of beer.)

TTB fol­lowed through with the FDA’s or­der. “If the U.S. Food and Drug Ad­min­is­tra­tion (FDA) deems their caf­fein­ated al­co­hol bever­age products adul­ter­ated un­der the Fed­er­al Food, Drug and Cos­met­ic Act,” the bur­eau wrote, “we would con­sider them to be mis­labeled un­der the Fed­er­al Al­co­hol Ad­min­is­tra­tion Act, mak­ing it a vi­ol­a­tion for in­dustry mem­bers to sell or ship the products in in­ter­state or for­eign com­merce.”

The Fed­er­al Trade Com­mis­sion also got in­volved with reg­u­lat­ing Four Loko, in­sist­ing that it in­clude serving sizes on the can.

So that's the final word on alcohol regulation?

Oh no, that’s ac­tu­ally just the be­gin­ning. “Don’t for­get then there’s 50 states with sep­ar­ate rules,” Lehr­man says. “Be­cause of pro­hib­i­tion and the 21st Amend­ment, they can all do their own thing — and they do.”

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