New Federal Bureau Takes Over Regulating Wine Industry

With the ATF split in two, issues such as mislabeling of wines and health warnings will be handled by the Tax and Trade Bureau.

Lynn Alley
Posted: February 10, 2003

One of the lesser-known side effects of the new Homeland Security Act is that the government agency that has regulated alcohol for the past three decades has been split in two.

Until this year, matters such as the fine points of wine labeling were lumped under the same umbrella as firearms and explosives crimes -- not the kind of company vintners want to keep when they're trying to build a stronger wine culture in the United States. Now, changes are being implemented that will allow regulators to devote more time to consumer protection and to working with wine producers.

On Jan. 24, the Bureau of Alcohol, Tobacco and Firearms -- which among other things, oversees wine labels, health statements on wine bottles, and the establishment of American Viticultural Areas -- was formally divided into two new agencies. (The ATF was created in 1972, but a government entity responsible for collecting alcohol taxes has existed in various incarnations since 1789.)

The Alcohol and Tobacco Tax and Trade Bureau (TTB) will handle the regulatory and taxation aspects of the alcohol and tobacco industries, and will continue to report to the Treasury Department. The remainder of the ATF, which now reports to the Justice Department, oversees the firearms, explosives and arson programs and the federal criminal laws on alcohol and tobacco smuggling.

"We're excited about the opportunity to do a good or better job than we have in the past," said Art Libertucci, who was appointed director of the new TTB.

Prior to the split, said Libertucci, alcohol and tax inspectors were often pulled off the job to work on more pressing firearms and explosives investigations. The new TTB will have dedicated agents, in the field and in the lab, and a dedicated research facility.

An important part of the TTB's job is to make sure that consumers get what they think they're buying, by verifying whether information such as the grape variety and appellation listed on a wine label and on other packaging materials matches what's in the bottle. In addition, TTB agents check for harmful contaminants in wines by doing tests on random samplings of foreign and domestic bottlings purchased at stores around the county.

"If there is an image out there that we're going to take a Big Brother approach to the industry, I'd like to dispel it," said Libertucci, who was formerly the assistant director of the ATF. "We want to help businesses to follow the rules, and we're presuming people in business are proceeding in a legitimate way. We want to stress education and voluntary compliance." He added, "We plan, for instance, to help educate companies on how to keep proper records."

The new bureau expects to have 200 people in the field within the next couple of years. "We now have 40 on board," said Libertucci. "Some of them are inspectors that have come over with us from the ATF, but we'll have to hire and train about 180 new recruits."

The TTB will be divided into two divisions, the larger of which will audit taxes. (In the 2001 fiscal year, the ATF collected more than $8.1 billion in alcohol beverage taxes, with $692 million of that coming from the wine industry.) "The other agents will go in and do inspections, look at labeling issues and product composition issues, making sure people are in compliance with federal regulations," said Libertucci.

The former ATF's research on alcohol -- such as an effort to identify pesticide residues in wine, which could be used to check the authenticity of organic wines -- will continue in a new lab that is part of the TTB. "The lab is very important to everything we do," said Libertucci. "And we intend to continue our programs on varietal and geographic verification and pesticide testing. The work they've been doing, under the direction of Dr. Sumer Dugar, looks promising."

Among the first actions from the TTB that will be visible to consumers is a long-awaited decision on "health-effects" wine labels, a subject that has generated much controversy in recent years.

In early 1999, the ATF approved two wine labels: one that referred consumers to consult with their family doctors on the health-effects of drinking alcohol, and another suggesting that consumers consult the U.S. dietary guidelines for more information. Wine producers had hoped to direct consumers to research on the potential health benefits of wine, but anti-alcohol forces countered by seeking to strengthen the warning labels on wine. The ATF has frozen any approvals of new health-effects labels since 1999, while it sought public comment.

"Although we have had longstanding policies related to the use of health claims, we have never published official regulations," acknowledged Libertucci. "After extensive public hearings around the country, we are ready to publish our final rules on this matter, probably within the next two or three weeks."

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