Bonding Requirements Complicate TTB Permit Filing

In today's dynamic market, breweries are no longer limited to just crafting beers. Responding to evolving consumer tastes, many have ventured into producing ciders, distilled spirits, and even ready-to-drink cocktails. As breweries tap into these diverse avenues, they often repurpose existing infrastructure, such as storage tanks and canning lines, to accommodate their expanded operations. These new uses can include alternations (using the same equipment for different licenses) and alternating proprietorships (allowing another company’s license at a facility).

However, expanding your production abilities isn't merely a matter of using existing equipment for different beverages. It demands rigorous compliance with governmental regulations at both state and federal tiers.

As one of the many hoops to jump through, the Alcohol Tax Tobacco and Trade Bureau (“TTB”) requires the "consent of surety" form. As our liquor law office has worked through various TTB filings, we’ve observed heightened oversight of this requirement by the TTB. This form is essential when:

1. The alcoholic beverage manufacturer has a bond on record. Remember, bonds are required only when the annual projected excise tax liability exceeds $50,000.
2. The manufacturer intends to conduct operations not covered under the existing bond, such as alternating premises, alternating proprietor arrangements, or adding a separate location.

While the consent of surety form might seem straightforward—it essentially confirms your surety company's agreement to your alternating premises—it's often overlooked. Missing out on this during the initial application to the TTB for alternating premises can trigger corrections. Moreover, these corrections come with tight deadlines.

Compounding the challenge, the TTB's heightened focus on this form is a recent development. This means many surety companies might be unprepared or uncertain when approached for the consent of surety. Any hesitation or delay from them can jeopardize the timeline, potentially causing the brewery's application to be withdrawn, pushing you to the end of TTB's already lengthy queue.

To sidestep these complications:

1. Initiate the consent of surety form at the outset of your application process.
2. Engage with your surety company early, requesting their prompt completion of the form. Make sure they understand your request is not increasing their exposure to the original bond.
3. If the surety company seeks a written requirement, direct them to the TTB site for clarity.

By being proactive and informed, breweries can seamlessly transition into producing distilled spirits, ensuring the most flexibility to meet the market’s changing demands without regulatory setbacks.

For information about national and state liquor law matters or general manufacturing and distribution advice, please contact our Liquor Law, Licensing, Manufacturing, and Distribution Practice Group: Liquor Law Department Chair Theodore J. Zeller III, Esquire; David C. Berger, Esquire, for Pennsylvania and New Jersey retail and manufacturing licensing; Anthony M. Brichta, Esquire, for federal manufacturing, distribution, formula, and labeling issues; Benjamin P. Sheppard, Esquire, for general state and federal licensing questions including TTB filings, or contact our office at (610) 391-1800.