Starting a Craft Brewery- The Regulatory Process- Part 3

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Brewery Tour, photo by Dustin Askins via Flickr Creative Commons

Part 1 of this series discussed state licensing for establishing a brewery.  Part 2 discussed municipal and county regulations for a new brewery.  Part 3 will discuss the process to receive a federal permit, labeling requirements, and brewer’s bonds.

Federal Licensing

No matter the form the business takes, the brewery which produces more than 200 gallons of beer will need to receive a permit from the federal Alcohol and Tobacco Trade and Tax Bureau, or TTB.  The process to obtain this permit is to apply through the TTB’s website.  That website also provides an interactive tutorial for completing the application, allowing the applicant to focus on the specifics of his or her business.  From there, it is as simple as following the instructions and providing the required information.

There is no fee to apply for such a permit or after obtaining the permit.  This process averages around three months to complete, although it may take longer depending on the circumstances. If the permit application was filed online, then the applicant will be able to follow the process online.  After applying for the permit, the TTB will notify the applicant whether the application has been granted or denied.  It is important to note that brewing cannot begin simply because an application has been filed.  The permit must be granted before manufacturing can begin.

Labeling

A brewery needs to label its product so that consumers can quickly identify it and, hopefully, to gain a marketing edge.  This process is not as simple as designing the label and putting on the product.  Alcoholic beverages have specific requirements, regulated by the TTB.  The TTB requires the alcoholic content percentage be placed on a label, plus a health warning, the brewery name, brewery location, and more.

After designing a label with these requirements in mind, the TTB must approve the label.  If the label is approved, the TTB will issue a certificate of label approval, or COLA.  The TTB has an online application process to receive a COLA.  It also provides an online tutorial which will walk the applicant through the process based on the type of alcohol to be labelled.  A series of information and an image of the proposed label must be submitted in the application.

After applying, the TTB will notify the brewer if the COLA application has been granted or denied.  The processing time between the application and the decision averages three weeks, but an applicant should be prepared for the application to take longer.  If the application was filed online, the applicant will be able to monitor the progress towards a decision.  Note that a TTB permit is required before it will grant a COLA.

Brewer’s Bond

The TTB requires that a brewery have a brewer’s bond, and so this will be an essential piece to forming a brewery business.  The bond is required to ensure that a brewery pays its state and federal taxes.  Since the amount of taxes due will vary, the exact cost of a brewer’s bond varies depend on multiple factors, most significantly the size of the brewery’s production.

There are two ways to meet the brewer’s bond requirement.  The first is to attain a surety bond.  This method operates much like insurance.  It requires the brewery to pay an amount to a third party, who will be responsible for covering the costs if needed.  The second approach to meeting the brewer’s bond requirement is called a collateral bond.  This means that the brewery must post the brewers bond itself.  Even after a choice has been made, the brewery can change to the other type at any time.

After posting a brewer’s bond, the brewery will extend for four years.  A Brewer’s Bond Continuation Certificate must be then filed with and accepted by the TTB in order to remain in compliance.

The brewer’s bond step is very simple but critical to starting a brewery.


Brewery Tour, photo by Dustin Askins via Flickr Creative Commons

 

 

 

About William Adams

Attorney at Norton, Moore, & Adams, LLP.
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