Agencies Adapt Rules to Allow Distilleries to Manufacture Hand Sanitizer

March 30, 2020Alerts

Distilleries throughout the country have been meeting the challenge of the COVID-19 outbreak by pivoting from manufacturing distilled spirits to producing hand sanitizer. The ability to manufacture hand sanitizer arises from a distillery’s use of ethanol as a base product to manufacture vodka, gin and other distilled spirits. To meet the emergent demand for hand sanitizer, the Acting Administrator for the Alcohol and Tax and Trade Bureau (TTB) issued an advisory on March 18, 2020, permitting beverage distilled spirits plants (DSPs) to produce ethanol-based hand sanitizer as follows:

  1. DSPs are exempt from the requirement to obtain additional permits or bonds to manufacture hand sanitizer or to supply ethanol to other TTB-authorized permittees to manufacture hand sanitizer.
  2. DSPs may manufacture hand sanitizer consistent with World Health Organization (WHO) guidelines without first obtaining formula approval. The guidelines from the WHO for the production of hand sanitizer allow the use of either denatured or undenatured ethanol, combined with glycerol (1.45% by volume) and hydrogen peroxide (0.125% by volume).
  3. DSPs are exempt from paying federal excise tax if manufacturing hand sanitizer with denatured ethanol. However, federal excise tax applies if hand sanitizer is manufactured with undenatured alcohol.
  4. The exemptions are approved through June 20, 2020.

On March 20, 2020, the FDA, having regulatory control over the production of hand sanitizer, issued a guidance in the form of a temporary policy for the manufacture of hand sanitizer. The temporary policy states that the FDA does not intend to take any action against alcohol production firms, including DSPs, manufacturing alcohol-based hand sanitizer for consumer use and for the use of health care personnel for the duration of the public health emergency. However, the FDA required that the ethanol be denatured and that the packaging be consistent with requirements as identified in an appendix to the temporary policy. Further, the temporary policy requires that the hand sanitizer be made using United States Pharmacopoeia (USP) grade ingredients and prepared with either sterile or boiled water. Additionally, alcohol production firms making hand sanitizer are required to register their facility as well as their products in the FDA Drug Registration and Listing System. Significantly, the appendix also included a preferred and alternative formula for denaturing the ethanol, both of which require the use of tert-butyl alcohol, as found in 27 CFR part 21. 

The TTB thereafter issued new guidelines on March 26, 2020, allowing DSPs to manufacture hand sanitizer in accordance with the formulations established by the FDA without first obtaining formula approval. The new guidelines also allow DSPs to remove both undenatured and denatured ethanol from bond free of tax to local and state governments for use in making hand sanitizer, per the FDA formulation guidelines, and subject to the local and state governmental entities obtaining an alcohol user permit from the TTB. Hospitals, blood banks, non-profit clinics, certain pathological laboratories and qualifying educational institutions are also now permitted under the new guidelines to receive undenatured and denatured ethanol for use in making hand sanitizer, again under the FDA formulation guidelines, if not for resale and conditioned on obtaining an alcohol user permit from the TTB. Importantly, the TTB has dedicated its personnel to process alcohol user permit applications seven days a week.

Most recently, on March 27, 2020, the FDA updated its guidance for its temporary policy to include revised preferred and alternative formula which relaxes the requirement relative to the use of tert-butyl alcohol. The updated policy also included an alternative formula under 27 CFR part 21 for denaturing the ethanol by use of isopropyl alcohol. The updated policy likely arose from the difficulty that distilleries are facing in sourcing the necessary materials to denature the ethanol.

Clearly, the guidelines and policies being issued by the FDA and TTB are quickly evolving to meet the current COVID-19 pandemic. Although the FDA’s guidance is not legally enforceable, it does provide guidance both to distilleries seeking to manufacture hand sanitizer as well as to the medical and business communities who are responding to the crisis. 

If you have questions on this alert, contact Andrew Karas, who is part-owner of a New Jersey distillery, or any other member of Fox Rothschild LLP’s Food and Beverage Practice.