Wednesday, July 8, 2015

Whiskey Law: Kentucky Whiskey...from Canada

I recently Tweeted about a new label approved for Kentucky Select Club whiskey, a Canadian blend from Houston based Mexcor (I've written previously about these state-themed bottles which were formerly called Crown Club).

Regarding this Canadian Whiskey, I was asked, doesn't the use of the name "Kentucky" on the label violate the Kentucky law stating that any whiskey using Kentucky on the label must be aged in Kentucky for at least a year?  The answer is no, and here is why.

As I've discussed before, Kentucky has a state law regulating the use of the term "Kentucky" on whiskey labels. Kentucky Revised Statute section 244.370 states:

No whiskey produced in Kentucky, except whiskey the barrel containing which is branded "Corn Whiskey" under the internal revenue laws, shall be bottled in Kentucky or removed from this state unless such whiskey has been aged in oak barrels for a period of not less than one (1) full year; provided, however, that whiskey aged less than one (1) year may be removed from the state and bottled, or bottled in Kentucky, if the word "Kentucky" or any word or phrase implying Kentucky origin does not appear on the front label or elsewhere on the retail container or package except in the name and address of the distiller as required by federal regulation. For violations of this section, the department shall revoke the permit of the licensee from whose warehouse or premises such whiskey shall have been removed or in which such whiskey shall have been bottled.

Notice that the law begins with the phrase "No whiskey produced in Kentucky." Kentucky  Club is produced in Canada, not Kentucky.  Therefore, it is presumably exempt from this law.  Why would Kentucky leave such a giant loophole in its law?  Well, keep in mind that the state of Kentucky, like all states, only has the power to legislate within its borders. It has no ability to regulate activities outside of the state. Of course, if it so desired, Kentucky could extend this law to include not just whiskey produced in Kentucky but whiskey sold there as well, but for now, the law does not appear to do that, so Kentuckians may have to deal with Kentucky whiskey from Canada on their shelves.

While it may not violate Kentucky law, there are also TTB regulations which prohibit misleading labels which convey an erroneous impression as to the whiskey's origin, though presumably, in this case, since the TTB approved the label, they found no such erroneous impression. 27 CFR § 5.34(a).


Anonymous said...

It's possible that there are violations of consumer laws, enforceable by the FTC or state attorneys general. Most states have specific consumer laws that prohibit misrepresentations of geographic origin.

Rich Thomas said...

That would be the first thing I would have thought: even IF Kentucky made the claim to exercise such restrictions outside state lines, they would be struck down as unconstitutional in court.

There is something similar at work with American whiskeys that can't be called bourbon in the U.S., but are labeled as such when they are exported.

Anonymous said...

There are regulations and there are tort laws, such as consumer protection statutes. If a seller brings goods into a state, then the seller is subject to the jurisdiction of that state's courts with respect to that state's consumer protection statutes.