New Guidelines for Distillery-Produced Hand Sanitizer (Updated)

Davis Wright Tremaine LLP

Davis Wright Tremaine LLP

Update April 5:  This advisory has been updated to include the latest information on distillery-produced hand sanitizer.

In response to the nationwide hand sanitizer shortage in the wake of the COVID-19 pandemic, many distilleries have rallied to help through the production of ethanol for hand sanitizer. On March 18, 2020 the Alcohol and Tobacco Tax and Trade Bureau (TTB) announced it is temporarily waiving until June 30, 2020 (with possibility of extension) the prior authorization and formula approval typically imposed upon Distilled Spirits Permittees (DSPs) to produce ethanol-based hand sanitizers and to produce and transfer ethanol to certain other entities to use in hand sanitizers. In addition, on March 26, 2020 TTB released revised guidance for the production and tax exemption of ethanol-based hand sanitizers, a summary of which is below.

Likewise, the Oregon Liquor Control Commission (OLCC) and Washington State Liquor and Cannabis Board (WSLCB) have given approval for state licensed distilleries to produce hand sanitizers subject to additional state requirements. In response, many Northwest DSPs and DSPs across the country have been quick to ramp up hand sanitizer production during this shortage.

Hand Sanitizer Production Guidelines for DSPs

Distilleries interested in hand sanitizer production can do so through June 30, 2020 without requiring additional approval, but should follow’s TTB’s written guidance, which requires that such ethanol-based hand sanitizers be produced in conformance with FDA guidelines, including formula, registration and labeling requirements. Consistent with FDA formula and TTB guidance:

  • Tax-free ethanol may be used to produce hand sanitizer if it is denatured according to TTB regulations and Food and Drug Administration (FDA) guidance. The pending federal CARES Act, if enacted as currently drafted, will codify the excise tax exemption of any alcohol removed in 2020 to produce hand sanitizer according to FDA formula.
  • Through June 30, 2020, DSPs are exempt from the requirements to request pre-approval from TTB to receive denatured or un-denatured distilled spirits in bond from another DSP and to obtain additional bond coverage. As a result, DSPs may now transfer ethanol in bond to a second DSP for the second DSP’s production of hand sanitizer.
  • Alcohol, whether or not denatured, may be delivered tax-free to state and local governments, hospitals, blood banks, sanitariums, certain pathological laboratories, non-profit clinics, and qualifying educational institutions, for making hand-sanitizer pursuant to a TTB Industrial Alcohol User permit, if that alcohol is not for resale or use in the manufacture of any product for sale. Such hospital, clinic, laboratory or governmental recipient must obtain a TTB Industrial Alcohol User permit to receive the ethanol from DSPs and use it to produce hand sanitizer. TTB has assigned personnel to work 7 days a week to temporarily expedite approval of TTB Industrial Alcohol User permits for these purposes.

DSPs must continue to keep full records of their operations, including any transfers in bond between DSPs or removals of spirits for transfer to governments, hospitals, clinics, and laboratories for production of non-beverage products.

Branding Considerations

In light of the increase in production and sale of hand sanitizers by consumer DSP brands, such brands should take special care to prominently disclose in their branding that their hand sanitizer products are "for external use only" and should not be consumed. This is particularly important where hand sanitizer products are being marketed and sold under brand names most often associated with consumable distilled spirts, to avoid misleading consumers regarding the nature of the product. See full TTB details here.

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DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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