What is the correct hanahaga for butter & sweet cream with a hechsher but not chalav yisroel?
Concerning butter, in places where people are leninent to eat such butter, it is permitted to do so. The same is true for sweet cream, which is the cream used in making butter. See sources, below, for more details.
If the common custom is to be stringent, and not to eat these products, then it is better to refrain from using them.
However, they are nonetheless not prohibited, provided that no milk from non-kosher animals is marketed locally, or that plants using such milk would be subject to significant fines or to closure.
The halachah of butter and sweet cream (see Aruch Hashulchan, Yoreh De’ah 115:27) made by non-Jews is possibly more lenient than the halachah of regular milk, because these products could traditionally not be manufactured with non-kosher milk. For this reason, the Tur (Yoreh De’ah 115) writes that some have the custom of permitted the consumption of butter altogether, arguing that no enactment was made against it.
Others, however, were stringent, because of the possibility that non-kosher milk (which was initially intended for drinking) was mixed into the butter. The Shulchan Aruch (115:3) rules that one should follow the custom, and if there is no custom, it is permitted to use the butter by heating it, ensuring that any residual milk evaporates. Milk that becomes mixed into the butter is not a problem, because it is batel (see Shach 27-28; Taz 12; see also Chochmas Adam 67:9).
However, it is questionable if is the lenient opinions are relevant today, when modern advances in food science have enabled manufacturers to develop new methods that allow butter to be made from sources that were previously impossible. Although butter is traditionally made from sweet cream, which is the thick layer skimmed off the top of milk, today whey cream, which is a (less expensive) byproduct of cheese manufacturing, is often added. The addition of whey cream will raise the issue of gevinas akum, which is potentially a problem.
The question, however, refers to butter that has hashgacha, and it is probable that the hashgacha means to ensure that only sweet cream is used in the manufacturing process, or that the whey cream used is halachically permitted. This can be vertified by contacting the relevant kashrus board. The issue of whey cream is related to the prohibition of gevinas akum, and we will not expound on how non-Jewish cream can be permitted (see http://oukosher.org/index.php/common/article/kosher_cheese/).
Even according to the strict opinion (and custom), which is concerned for non-kosher milk being mixed into the butter, we must take into account the poskim who rule that the prohibition of non-Jewish milk does not apply today.
According to some authorities, the original prohibition was stated out of concern that non-kosher milk will be used, and no formal enactment prohibiting the milk was made (Peri Chadash 115:6; Radvaz 2:75 (1147); however, see Chasam Sofer Yoreh De’ah 107), so that where non-kosher milk is not available, and in particular where government supervision prohibits its use, one may be lenient (see Iggros Moshe, Yoreh De’ah 1:47-48, 35; Chazon Ish, Yoreh De’ah 41:4; Ohel Yosef 15:4).
However, other authorities are stringent, the Chelkas Yaakov (2:37) writing that the prohibition applies even today, and “Heaven forbid to be lenient”, and others explaining that the Chazon Ish actually prohibited the use of milk, his written leniency applying applying specifically to powdered milk under extraneous circumstances. Mishnah Halachos (9:155) also writes that the prohibition continues to apply today (as does Kinyan Torah and Be’er Moshe), and Minchas Yitzchak (1:31, sec. 15) criticizes a sefer that quotes Chazon Ish as permitting the milk, writing that today it is accepted to be stringent. Even those who write that one may be lenient add that one should preferably be stringent.
To sum up, the question of non-Jewish milk in general involves a dispute among authorities, and it is generally accepted to be stringent in this matter. For butter and sweet cream there is greater room for leniency, specifically where the custom is to be lenient. This is especially true where a hechsher is given, which presumably takes care of the concern for (non-kosher) whey cream being used, and the kashrus board can be contacted with regard to this detail.