In the ever-changing regulatory landscape that alcohol manufacturers must navigate, the regulations imposed by the U.S. Food and Drug Administration (FDA) are often overlooked. But breweries, distilleries and wineries must be aware of these regulations, especially the requirement to register with the FDA unless the manufacturers can demonstrate that their business meets two very narrow exemptions. This is key, because, if the alcohol manufacturer is required to register, it is also subject to random, unannounced inspections by the FDA.

Before I get into the details of FDA registrations and inspections for alcohol manufacturers, here is a brief history of how these regulations came to affect the alcohol industry. The Public Health Security and Bioterrorism Preparedness and Response Act of 2002 (Bioterrorism Act) made changes to the Federal Food, Drug, and Cosmetic Act (FD&C Act). Then, on Oct. 10, 2003, the FDA issued a final rule to implement amendments to the FD&C Act that were enacted under the Bioterrorism Act.

Generally, Section 415 of the FD&C Act requires “that any facility engaged in manufacturing, processing, packing or holding food for consumption in the United States be registered with the [FDA],” see 21 U.S.C. Section 350d(a)(1). A strict reading of that definition may not lead you to believe an alcohol manufacturer would be required to register. However, the FD&C Act defines “food” as “articles used for food or drink for man or other animals …”  21 U.S.C. Section 321(f). So, alcohol manufacturers fall under the FD&C Act because they produce a “drink” for human consumption.

Another important aspect of the FD&C Act is its definition of “facility.” Under the FD&C Act, a “'facility' includes any factory, warehouse or establishment (including a factory, warehouse or establishment of an importer) that manufactures, processes, packs or holds food.” Additionally, the FD&C Act provides limited exemptions to the definition of facility, such as restaurants and retail food establishments. With regard to alcohol manufacturers, the important exemption is for retail food establishments. The full definition of a retail food establishment is codified under 21 CFR 1.227, and was amended and expanded by the Food Safety and Modernization Act (FSMA) signed into law by President Barack Obama on Jan. 4, 2011.

Under the FSMA, a retail food establishment is any food facility (including an alcohol manufacturer) whose primary function is to sell its food products, that it manufactures, direct to consumers. Moreover, the primary function is to sell direct to consumers if “the annual monetary value of sales of food products to consumers exceeds the annual monetary value of sales of food products to all other buyers.” Therefore, one way for an alcohol manufacturer to be exempt from FDA registration as a food facility is to meet the definition of a retail food establishment by having 51 percent or more of its sales of the alcohol beverages it produces be direct to consumer, which includes internet and mail order sales if applicable. The calculation of direct-to-consumer sales can include sales from any satellite locations, farmer's market stands, festivals, or other direct-to-consumer sales opportunities available to Pennsylvania alcohol manufacturers. Ultimately, from the context of a brewery, distillery, or winery, this means that 51 percent or more of its sales are to individual customers, and 49 percent or less are to other buyers, such as retail licensees, distributors and wholesalers.

The FDA's food facility registration requirement for alcohol manufacturers has one additional exemption. However, this exemption requires initial registration prior to the exemption taking place. Once registered with the FDA, the alcohol manufacturer must file an attestation with the FDA showing that it meets the definition of a “qualified facility.” A qualified facility is a small business that has less than $1,000,000 in revenue per year (adjusted for inflation and averaged out over three years); has average annual sales of its products over a three-year period of $500,000 or less; and sells 51 percent or more of its products, over a three-year period, direct to consumers, retail food establishments or restaurants (including other retail establishments purchasing the alcohol, such as hotels, clubs or bars, for sales to their customers), which are located in the same state as the alcohol manufacturer and are within a 275-mile radius of the alcohol manufacturer's facility. The required attestation must prove that the alcohol manufacturer meets the above-referenced requirements. Until the attestation is filed and approved, the alcohol manufacturer would still be subject to FDA inspections. An alcohol manufacturer seeking to qualify under this exemption should maintain records at its facility to prove it meets the requirements of a “qualified facility” in the event of an FDA inspection.

Now that we have fully discussed the FDA registration requirement and exemptions for alcohol manufacturers, we can address a few compliance issues regarding the registrations. If an alcohol manufacturer is required to register with the FDA, it must do so prior to starting production of any products that will be sold to consumers or businesses. Additionally, FDA-registered alcohol manufacturers must renew their registration on a biennial basis between Oct. 1 and Dec. 31. For Pennsylvania-based alcohol manufactures, this timing works out well, as Pennsylvania alcohol manufacturing licenses must be renewed or validated annually during the same period. If an alcohol manufacturer fails to renew their FDA registration, the FDA will deem the alcohol manufacturer's FDA registration to be expired and to have failed to register in compliance with the FD&C Act. Therefore, renewing an FDA registration is just as important as initially registering for an alcohol manufacturer, because an expired registration means an alcohol manufacturer must cease the production and sale of its products.

If an alcohol manufacturer registers with the FDA, it is subject to FDA inspections. These inspections can be random routine surveillance or can be the result of quality issues with the products, consumer complaints, recalls of products, or the follow-up from a previous inspection. Under the FD&C Act and FSMA, the frequency of inspections depends on whether the FDA considers your products “high risk” or “low risk.” The FSMA requires that facilities producing “high risk” products be inspected once every three years, and facilities producing “low risk” products to be inspected once every five years. Regardless, as discussed above, FDA inspections could result from many factors, and not simply routine surveillance. In Pennsylvania, inspections may be made by the FDA, state agencies such as the Department of Agriculture (in fact, the Pennsylvania Department of Agriculture inspectors can be “commissioned” by the FDA to perform its inspections), or local agencies.

I could write an entire article on the requirements, procedures, tips and tricks to FDA inspections. For now, however, I will just address the general requirements to pass an FDA inspection. I suggest that you also contact your national or state trade organization, the FDA, state agencies or your attorney to fully prepare.

For an FDA inspection, an inspector will show up at the alcohol manufacturer's facility and ask for the official representative in charge for FDA inspections. This person should understand all the FDA requirements and procedures put in place by the alcohol manufacturer to meet those requirements. The FD&C Act and FSMA require an alcohol manufacturer to create and follow a Good Manufacturing Practices Program. Many national trade organizations, such as the Brewers Association, have developed Good Manufacturing Practices, based on the rules and regulations of the FD&C Act and FSMA for their members to implement and follow. The FDA inspector will be looking for such things as cleanliness of the facility, adequate record keeping, quality control procedures, proper handling of grain and dry ingredients, hygiene, cleaning schedules and maintenance of the facility. Failing an FDA inspection can lead to suspension of an alcohol manufacturer's registration, which would prevent it from producing and selling its products until the suspension is lifted. Failure can also lead to fines, criminal prosecution and ultimately, termination of FDA registration.

Whether an alcohol manufacturer is required to register with the FDA or not, it is always advisable to institute Good Manufacturing Practices to control its operations and educate its employees. Not only will this keep the alcohol manufacturer's employees safe, but it will lead to better products in the marketplace and an increased respect for those products. The results of FDA inspections are public, and few things can damage a brand more than a failed inspection.

Matthew B. Andersen, an associate with Norris McLaughlin, practices business law and liquor law. Contact him at [email protected].