For more than a decade, the Center for Science in the Public Interest ("CSPI") and the Bureau of Alcohol, Tobacco and Firearms ("BATF") have been sparring over the need to disclose ingredients on the labels of alcoholic beverages. BATF finally adopted an ingredient disclosure rule in 1980, but rescinded it in 1981; the recission was reversed by the District Court in 1983 but, after a round of legal maneuvers, BATF substantially rescinded the rule again later that year. Although we reject several of BATF's stated reasons for the second rescission, we conclude that the agency has nonetheless managed to bring itself within the confines of reasoned decisionmaking and has adequately, if minimally, explained its reversal. We therefore reverse the District Court's decision vacating BATF's 1983 rulemaking.

The Federal Alcohol Administration Act ("FAA Act"), 27 U.S.C. Sec. 205(e) (1982), authorizes the Secretary of the Treasury to promulgate such regulations:

(1) as will prohibit deception of the consumer with respect to such products or the quantity thereof and as will prohibit, irrespective of falsity, such statements ... as the Secretary of the Treasury finds to be likely to mislead the consumer; [and] (2) as will provide the consumer with adequate information as to the identity and quality of the products....

This authority, now exercised by BATF, was first invoked with respect to ingredient labeling in 1974. BATF proposed a broad labeling rule which would have required across-the-board listing of all ingredients in malt beverages, except incidental additives, in order of predominance. 39 Fed.Reg. 27,812 (1974); see also 40 Fed.Reg. 6349 (1975) (same for wine); 40 Fed.Reg. 6354 (1975) (same for distilled spirits). These proposals were withdrawn in 1975 after the agency concluded that the proposed regulations were, inter alia, excessively costly, potentially misleading as to the nutritional value of alcoholic beverages, and unnecessary because ingredient usage was already comprehensively regulated. 40 Fed.Reg. 52,613 (1975).

In 1979 BATF proposed what it characterized as a "partial ingredient labeling" rule. The proposal trimmed the costs of the 1974 approach in several ways: eliminating the requirement that ingredients be listed in order of predominance, clarifying the requirement that incidental additives not be listed, and permitting "shotgun" labeling of essential components--such as "grapes and/or grape juice"--to reduce the need for frequent label changes. 44 Fed.Reg. 6740, 6740-41 (1979).

After receiving comments on the proposed rule, designated ATF-66, BATF concluded that "the disclosure of ingredients used in the production of alcoholic beverages is of real value" and adopted the regulations substantially as proposed. 45 Fed.Reg. 40,538, 40,540 (1980). The agency acknowledged, however, that there were "uncertainties existing in the data underlying the health and consumer benefits," primarily with respect to the extent of allergic reactions to alcoholic beverage ingredients. Id. at 40,539-40. BATF made one major change in adopting ATF-66 in order to accommodate its goal of "minimizing costs to industry and consumers in meeting regulatory objectives," adding an "address label option" so that, when certain conditions were met, a company could simply provide its address on the label and send an ingredients listing to anyone who requested such information. Id. at 40,540-41.

Less than one year after adopting ATF-66, BATF proposed rescinding the rule on the ground that it did not accord with the mandate of Executive Order 12,291 to minimize the costs of regulation. 46 Fed.Reg. 24,962, 24,693 (1981). BATF's statement of reasons for rescinding the rule was brief and concluded that

the ingredient labeling regulations would result in increased costs to consumers and burdens on industry which are not commensurate with the benefits which might flow from the additional label information ... [and] would not result in an appreciable benefit to consumers when compared to the existing label information requirements and standards of identity.

46 Fed.Reg. 55,093, 55,094 (1981).

CSPI promptly challenged BATF's reversal, winning a district court order declaring the agency's action to be in violation of both the FAA Act and the Administrative Procedure Act. Center for Science in the Public Interest v. Department of the Treasury, 573 F. Supp. 1168, 1179 (D.D.C.1983) [hereinafter cited as CSPI I ]. The District Court concluded that the agency's virtually exclusive reliance on Executive Order 12,291 violated the FAA Act and that the agency had failed to state a permissible reason for the rescission, rejecting the agency's conclusions that the rule's costs exceeded its benefits and that existing regulations provided adequate information to consumers. Id. at 1174-78.

BATF appealed only from that portion of the District Court's order mandating implementation of ATF-66 within one year; the Wine Institute and Distilled Spirits Council of the United States ("DISCUS") appealed the remainder of the decision. Before the appeal could be heard, BATF proposed and finalized ATF-150, a new rulemaking substantially rescinding ATF-66. 48 Fed.Reg. 27,782 (1983) (proposed rule); 48 Fed.Reg. 45,459 (1983) (final rule). This court accordingly dismissed BATF's appeal of the mandatory effective date as moot. Center for Science in the Public Interest v. Regan, 727 F.2d 1161, 1164-65 (D.C.Cir.1984) [hereinafter cited as CSPI II ]. We refused, however, to vacate the remainder of the District Court's decision because review had been prevented by the deliberate action of the losing party and so CSPI "ought to be left in the same position as if no appeal had been taken." Id. at 1165-66.

In ATF-150, BATF rescinded the ingredient labeling rule because, inter alia, the information provided was not of interest to consumers and might mislead them, uncertainties existed as to potential health benefits, the rule's costs were substantial and not justified by the negligible benefits, existing regulations would generally be adequate to protect consumers, and the address label option would not provide the anticipated cost savings. 48 Fed.Reg. at 45,550-54. Instead, the agency adopted a case-by-case approach to requiring disclosure of ingredients shown to pose health problems and mandated disclosure of an artificial color, FD & C Yellow No. 5. Id. at 45,554-55. CSPI again challenged BATF's action and the District Court again concluded that BATF had failed to provide a reasoned explanation for its rescission. Center for Science in the Public Interest v. Department of the Treasury, No. 84-2079, slip op. at 10-12 (D.D.C. Oct. 30, 1985), reprinted in Joint Appendix ("J.A.") 584, 593-95 [hereinafter cited as CSPI III ].

At the outset, we must reject two of CSPI's most strenuously advanced arguments. First, BATF has committed no error by undertaking a new rulemaking in response to the District Court's action in CSPI I. As we pointed out in CSPI II, "it is not improper for an agency to engage in new rulemaking to supersede defective rulemaking." 727 F.2d at 1164.1 Second, BATF need not base its reversal on new evidence or changed circumstances. The Supreme Court has acknowledged that an agency may change its course "either with or without a change in circumstances." Motor Vehicle Manufacturers Association v. State Farm Mutual Automobile Insurance Co., 463 U.S. 29, 57, 103 S. Ct. 2856, 2873, 77 L. Ed. 2d 443 (1983).

An agency which chooses to reverse a previously held position must, however, supply a "reasoned analysis" of its decision. Id. Such an analysis should include an explanation for the reversal which is supported by the record and a discussion of what alternatives were considered and why they were rejected. International Ladies' Garment Workers' Union v. Donovan, 722 F.2d 795, 817-18 (D.C.Cir.1983). While reviewing courts start with a "presumption ... against changes in current policy that are not justified by the rulemaking record," State Farm, 463 U.S. at 42, 103 S.Ct. at 2866, an agency which "examine[s] the relevant data and articulate[s] a satisfactory explanation for its action," id. at 43, 103 S.Ct. at 2866, has met its burden of justification. See Center for Auto Safety v. Peck, 751 F.2d 1336, 1343 (D.C.Cir.1985).

This Court has further explained that while an agency which seeks to revoke an existing rule carries

[t]he burden ... to justify the change from the status quo[,] that justification need not consist of affirmative demonstration that the status quo is wrong; it may also consist of demonstrating, on the basis of careful study, that there is no cause to believe that the status quo is right, so that the existing rule has no rational basis to support it.

Id. at 1349 (citation omitted). Here BATF concluded that its prior decision in ATF-66 "was unwise ... [and] a different decision is preferable and within the zone of legitimate discretion under the FAA Act." 48 Fed.Reg. at 45,556.2 This decision must be upheld if it is the product of careful study and reasoned decisionmaking. We therefore review, seriatim, the primary reasons advanced by BATF to justify its policy reversal.

BATF promulgated ATF-66 pursuant to its authority to "provide the consumer with adequate information as to the identity and quality" of alcoholic beverages. 27 U.S.C. Sec. 205(e) (1982). In rescinding ATF-66, BATF found that the ingredient disclosure rule would not achieve its intended purpose of "provid[ing] consumers with information upon which to make an informed choice." 48 Fed.Reg. at 45,550. The agency concluded that the information disclosed under the labeling requirement or address label option "would not be useful and is not of substantial interest to the consumers generally ... [and] may have negative consequences of being misdescriptive of the products." Id. at 45,551. BATF thus drew two related conclusions: that consumers do not want ingredient information and that such information is, in any event, of little value to them. Id. at 45,555.

BATF's first rationale--lack of consumer interest in ingredient disclosure--hardly meets the test of reasoned analysis. BATF's assessment was based primarily on an informal survey by a trade association and mentioned only in passing an opinion poll, specially commissioned in connection with ATF-66, which provided harder data on the extent of consumer interest.3 48 Fed.Reg. at 45,550. In ATF-66 BATF had carefully considered this data, concluded that it was ambiguous, and declined to rely on consumer interest as a basis for its disclosure requirement. 45 Fed.Reg. at 40,540. Since the original rule was not predicated on consumer interest in ingredient information, the arguable absence of such interest provides no reasoned basis for discarding the rule.

Indeed, BATF itself concluded that the lack of grassroots support for ingredient labeling alone was not determinative and acknowledged that it can require disclosure of information which consumers in general have not actively solicited if some consumers would use and benefit from such information. 48 Fed.Reg. at 45,555. Thus, for example, BATF seems to presume that certain people will welcome and rely on label information to avoid substances to which they are allergic. See id. at 45,551 (noting AFT-66's conclusion that "consumers who are allergic to certain ingredients generally should be able to find out ... if those ingredients are used in alcohol beverages so they can avoid the possibility of adverse reactions if they so choose"). Lack of general consumer interest, then, provides no reason for rescinding the rule if ingredient disclosure is intended primarily to provide information to people at risk for allergic reactions.

BATF's consumer rationale has a second prong, however, which does provide a reasoned justification for the rescission. The agency concluded that ingredient information was of little value to consumers because "[t]he substantial transformation involved in the production process means that there is only a strained relationship between the initial ingredients which go into the production process and the ultimate contents of the product to be consumed." Id. at 45,555. There is more than enough evidence in the record to support the agency's conclusion that, in many cases, both basic ingredients and additives will be substantially transformed by distillation and fermentation. See infra at 1001 n. 5. Although CSPI has pointed to some contrary evidence that initial ingredients in alcoholic beverages remain in the final product in quantities sufficient to cause allergic reactions, the record supports BATF's conclusion. Consolo v. Federal Maritime Commission, 383 U.S. 607, 620, 86 S. Ct. 1018, 1026, 16 L. Ed. 2d 131 (1966) (agency can be supported by substantial evidence even if record also supports opposite conclusion.) Because of this transformation, the ingredients information provided by AFT-66 would have been of little value to consumers generally or to people with allergies, and the label information might even have been misleading since it would not accurately describe the contents of the finished product.4

After assessing the additional record evidence on health effects, BATF concluded that the new record contained "uncertainties as to how many people are affected, to what extent, and even whether there are allergic reactions to alcohol beverages." 48 Fed.Reg. at 45,551. The agency therefore decided to address any adverse health effects from specific ingredients on a case-by-case basis. Id.; see infra at 1003. We have examined the record and concur in BATF's characterization of the evidence on the health effects of alcoholic beverage ingredients. Although CSPI has pointed to record evidence of allergic reactions to the contents of alcoholic beverages, there is enough contrary evidence to establish that such reactions are exceptional.5 See supra at 1000.

BATF's position on health effects does represent a reversal of its conclusion in ATF-66 that, although there were uncertainties as to the extent of adverse health effects, there was clear evidence "that ingredients used in alcoholic beverages can have adverse effects for humans including, but not limited to, allergic reactions." 45 Fed.Reg. at 40,540. The more recent conclusion is, however, based on a new record.6 In particular, the earlier conclusion relied largely on the specially commissioned BDM study, which had examined only allergic reactions to various ingredients used to make alcoholic beverages and made "a very key assumption" that those ingredients remain in the finished product to some degree. J.A. at 758-59. BATF no longer makes this assumption, given the evidence in the 1983 record establishing that there is "considerable medical and scientific dispute over the degree to which components of the initial ingredients may survive the production process to cause allergic reaction." 48 Fed.Reg. at 45,555; see supra at 11 n. 5.

We accept BATF's conclusion that rescission was justified in part because of uncertainties that ATF-66 would provide consumers with information useful in preventing adverse health effects such as allergic reactions. An agency cannot, of course, "merely recite the terms 'substantial uncertainty' as a justification for its actions." State Farm, 463 U.S. at 52, 103 S.Ct. at 2871. But "just as an agency reasonably may decline to issue a safety standard if it is uncertain about its efficacy, an agency may also revoke a standard on the basis of serious uncertainties if supported by the record and reasonably explained." Id. at 51-52, 103 S.Ct. at 2870-71. BATF's conclusions as to the uncertain nature of health benefits from ingredient disclosure were so supported and must be upheld.

BATF properly concluded that the costs of ingredient labeling could be considered in assessing whether ATF-66 was necessary to provide consumers with adequate information but that such consideration could not be determinative.7 See 48 Fed.Reg. at 45,552. Part of BATF's discussion of costs is, however, disingenuous at best. The agency states that it had previously found that the costs of ingredient labeling were not excessive "in large part based upon the assumption that the adoption of the name and address option would significantly reduce the cost of providing the information." 48 Fed.Reg. at 45,551. While the address label option was adopted in order "to minimize the costs while still meeting basic policy objectives," the agency's conclusion that the costs of ingredient labeling were not excessive was based on cost figures which attributed no savings to the address label option. 45 Fed.Reg. at 40,540. It is quite clear that, in 1980, ATF-66 was thought to be cost-effective with or without the address label option.

The remainder of BATF's 1983 discussion of why the costs of ingredient labeling are now "substantial" largely rehashes evidence from the 1980 BDM study. The agency provides no reasoned explanation of why the same cost figures which were held to be "not ... excessive" and "not substantial" in 1980 are suddenly "substantial."

BATF also explained, however, that the costs of ATF-66 "are not justified by the questionable and negligible benefits of the full disclosure requirements of that decision." 48 Fed.Reg. at 45,552. This conclusion is supportable even if the cost estimates have not changed since 1980. Having reassessed the health benefits of ATF-66, it was rational for BATF to reassess the balance between those benefits and the costs of the regulation. Even though we reject BATF's conclusion that the costs of ATF-66 are appreciably different in 1983 than they were in 1980, we have accepted its views that the rule's benefits are far less certain than they were believed to be. It was not arbitrary or capricious for the agency to conclude that the cost/benefit balance of ATF-66 has accordingly shifted to the point where the costs of the regulation are no longer justified.

In its first attempt to rescind ATF-66, BATF concluded that no ingredient labeling was necessary because consumers were adequately protected by existing regulations, such as "standards of identity" which define what ingredients can be used in alcoholic beverages and FDA regulations requiring prior approval of such ingredients. 46 Fed.Reg. at 55,094. In reversing BATF, the District Court found that the agency had failed to explain why it was satisfied that existing regulations provided consumers with adequate information. CSPI I, 573 F. Supp. at 1177. The court gave preclusive effect to this ruling in CSPI III. Slip op. at 6-7, J.A. at 589-90.

We agree with the District Court that BATF has not explained how standards of identity and FDA approval can provide consumers with any necessary information about the contents of alcoholic beverages. BATF's mandate is not to protect the health of consumers but to provide them with "adequate information," yet the agency has not explained how the cited regulations provide any information to consumers. If the record had demonstrated that consumers desired ingredient information or that allergic consumers would benefit from disclosure of potential allergens, existing regulations would not obviate ingredient disclosure regulations, as evidenced by BATF's decision to require disclosure of specific ingredients. We therefore assign no weight to this rationale in assessing whether BATF has adequately explained the rescission of ATF-66.

BATF rejected the use of the address label option because "(1) there is little cost savings associated with this option, and (2) the quality and usefulness of the information which would be provided is even less than for ingredient listing on the label." 48 Fed.Reg. at 45,553. Both of these conclusions are reasonable and supported by record evidence. The record in ATF-66 contained little information on the address label option. The record now contains evidence that the address label option would entail many of the same one-time costs as labeling--because labels would have to be changed to contain the requisite language--and some of the ongoing costs. See, e.g., J.A. at 1492, 1527, 1581, 1652, 1694-98, 2271-72. Further, the information would be of limited utility because addresses are already required to be on labels and because of the lengthy time lag between purchase of the beverage and receipt of ingredient information. BATF properly considered alternatives to rescission by considering retention of the address label requirement and did not err in concluding that the address label option was not a viable alternative.

F. Case-by-Case Approach to Specific Ingredients

BATF not only considered but adopted an alternative to complete rescission by obligating itself to consider "the necessity of mandatory labeling of other ingredients on a case-by-case basis through its own rulemaking initiative, or on the basis of petitions for rulemaking." 48 Fed.Reg. at 45,555. The agency has already followed through on this commitment by mandating disclosure of an artificial color, FD & C Yellow No. 5, in the rulemaking rescinding ATF-66 and by conducting rulemakings on saccharin and sulfiting agents.8 The decision to proceed case-by-case is based on BATF's conclusion, which is supported by the record, that the comments it received did not establish a need to disclose specific ingredients other than FD & C Yellow No. 5.9 BATF acted within its authority in adopting a case-by-case approach to ensure that consumers receive "adequate information" about an ingredient once a health threat has been demonstrated.

BATF's efforts to explain its turnabout have hardly been exemplary, but the record developed, the explanation provided, and the alternatives considered10 combine to meet the standard of reasoned decisionmaking. Although we reject some of the agency's stated rationales, enough of its reasoning withstands scrutiny to obviate a remand for further explanation. While we "may not supply a reasoned basis for the agency's action that the agency itself has not given ... [we may] 'uphold a decision of less than ideal clarity if the agency's path may reasonably be discerned.' " State Farm, 463 U.S. at 43, 103 S. Ct. at 2866 (citations omitted). The path of reasoning leading to BATF's decision to rescind ATF-66 may still be discerned even after the rejected rationales are omitted: the record failed to establish that ingredient disclosure would provide useful information as to the actual contents of alcoholic beverages or would aid consumers seeking to avoid allergic reactions and so ATF-66--including the address label option--was unnecessary and unjustifiably costly. BATF's rescission of ATF-66 is affirmed and the decision of the District Court accordingly is

Reversed.