VASCM: TTB Proposed Changes to AVA Requirements

[Mary Lindsay]

I am forwarding some information from the California Assn. of Winegrape 
Growers (CAWG) about new changes to the AVA system proposed by the TTB 
that affect brand names and 'nested' appellations. The proposed changes 
are opposed by CAWG, the Wine Institute, and other state industry 
groups. The TTB's comment period on these changes has been extended to 
March 20. Since our email distribution does not permit attachments, I 
will first copy the message from CAWG, followed by some of the detailed 
information that was attached to it.  If anyone wants to view the 
attachments, let me know and I will forward them. To view the proposed 
rules, go to:  http://www.ttb.treas.gov/wine/index.shtml.

- Mary Lindsay
Vice President, VASCM
mary at munsvineyard.com

"Last week, the CAWG board voted to oppose both Notice. No. 77 and 78.  
Napa Valley Vintners and Paso Robles Wine Country Alliance are opposing 
the rulemaking and working to create a strong industry consensus to 
oppose it.  Wine Institute's public policy committee is recommending its 
board oppose the rulemaking when the board meets in March.   

There has been no satisfactory explanation from TTB on what led to such 
a dramatic proposal to change a system that has worked fairly well for 
more than 20 years.  Particular concerns are the rolling grandfather 
date for brand names with geographic designations and the threat to 
nesting appellations within larger appellations.  Industry organizations 
who worked on the original AVA rules are concerned that it would be 
extremely difficult to ever again achieve the consensus that was reached 
to create the current rules.   At this time we have not learned of any 
support for the rule changes.

It is critically important for growers that the integrity of the AVA 
system be protected.  Napa Valley Vintners has provided the attached 
arguments for consideration by other industry groups.  For more 
information, please contact Rex Stults with Napa Valley Vintners 
(www.napavintners.com) or Stacie Jacob with Paso Robles Wine Country 
Alliance."

- Karen Ross, CAWG

On November 20, 2007, the Federal Register had two Notices of Proposed 
Rulemaking published by TTB.  One proposal pertains to the pending 
"Calistoga" viticultural area and the other proposes comprehensive 
changes to the procedural and evidentiary requirements for the 
establishment of all future viticultural areas. 

 
No. 77:  "Calistoga" AVA -- TTB states Calistoga is the most appropriate 
name for the area and that there is substantial basis for its 
establishment.  TTB acknowledges that certain brand name owners have 
demonstrated a legitimate interest in not losing their ability to 
continue to use their existing brand names.  In an attempt to bridge the 
interests of both the AVA petitioners  and the brand owners, TTB 
proposes that for non-grandfathered brand names that contain "Calistoga" 
(1) the wine must meet the appellation of origin requirements for 
Calistoga or (2) the brand name must have been in actual commercial use 
for a significant period of time based on certificates of label approval 
issued before March 31, 2005 and the label must further contain 
statements sufficient to dispel any impression that the use of  
Calistoga in the brand name means that the wine qualifies for the 
Calistoga appellation. 

In 1986, Treasury-TTB established the AVA regulatory framework for 
addressing geographic brand names which effectively gave notice to 
future brand owners about restrictions on brand names with geographic 
significance.  Notice #77 proposes grandfathering a brand in the 
proposed AVA of Calistoga even though the wines it produces do not use 
Calistoga grapes.

Comments on this proposal were originally due on January 22, 2008 but 
have been extended until March 20^th . 

No. 78:  Comprehensive Changes Proposed for AVA Regulations -- This 
notice makes sweeping substantive and procedural changes to the 
provisions regarding future viticultural areas establishment.  TTB 
issued this proposal following a self-imposed suspension and 
comprehensive internal review of AVA-related activities earlier this 
year.  TTB states that change is necessary to address the AVA Name/Brand 
Name conflicts and the establishment of AVAs within AVAs.  TTB's 
proposed changes contemplate, among other things, the following:

 *Rolling Grandfather Date:  *A "rolling grandfather date" to supplement 
the existing grandfather date that already exists in 27  CFR 4.39(i) -- 
this supplementary proposal would allow brand names that are not 
grandfathered under the existing grandfather date to be used if the wine 
is labeled with statements sufficient to dispel the impression that the 
geographic area suggested by the brand name is indicative of the origin 
of the wine, provided the brand name:

                + Was used in a certificate of label approval issued
                  prior to the 5-year period immediately preceding
                  receipt of a perfected petition for the establishment
                  of the viticultural area;
                + Was in actual commercial use on labels for at least 3
                  years during that 5-year period.
                +

    * *Petition Requirements:  *A revamped regulation addressing AVA
      petition requirements, with more defined evidentiary requirements
      for viticutlural area petitions;
    *

    * *AVAs within AVAs:  *A separate provision regarding AVAs within
      AVAs that requires such AVA petitions to include information that
      both identifies the attributes of the proposed AVA that are
      consistent with the existing AVA and explains how the proposed AVA
      is sufficiently distinct from the existing AVA.  Proposed
      regulations would give TTB the discretion to modify a larger
      existing  AVA to remove the area represented by a smaller proposed
      AVA, which would not entitle a wine produced from the smaller AVA
      to also use the name of the larger AVA as an appellation of
      origin.  Notice #78 threatens to eliminate the common and
      internationally understood practice of "nesting" wine appellations
      within larger wine appellations;
    *

    * *Perfecting an AVA Petition:  *A separate provision describing the
      initial submission and "perfecting" of an  AVA petition;
    *

    * *Identifying the Terms of Viticultural Significance:  *The
      proposal includes amendments to all existing AVA regulations,
      appending a sentence to the end of each of the sections that
      identifies the specific term that TTB considers to be
      viticulturally significant (e.g., TTB is proposing that "Lime Kiln
      Valley" is the term of vitiucltural significance; which means that
      a "Lime Kiln Cellars" brand name, for example, would be considered
      viticulturally significant.)**

* *Comments on this proposal are also due March 20^th .  To view the 
proposed rules, go to:  http://www.ttb.treas.gov/wine/index.shtml. 

 - - -

Background information (from the Napa Valley Vintners):

On November 20^th , the United States Treasury Department via the 
Alcohol and Tobacco Tax and Trade Bureau (TTB) proposed revisions to the 
regulations for American Viticultural Areas (AVAs) that will undermine 
decades of work on the part of the wine industry to establish a workable 
AVA system in the U.S. similar to those used throughout the rest of the 
world.  The effects of these proposals are far-reaching and will have 
substantial and severe consequences to all U.S. wine regions and wine 
brands, but more importantly, to the truth in labeling rights of consumers.
 
The revised regulations presented by the TTB provide certain wine brands 
the right to market and sell their products with deceptive labels, 
leading consumers to believe their wines are from grapes grown in 
certain appellations or winemaking regions, when they are not.  These 
regulations provide, for a select few wine brands, a loophole through 
which to sell their misleading wines.  This jeopardizes the integrity of 
the vast majority of winemakers who properly and honestly label and 
brand their wines based on decades of consumer protection legislation, 
relegating these long-time and honest producers into a compromised 
position with regard to the consumers who expect government approved 
labels to be forthright and true.
 
The regulations being proposed by the TTB flagrantly disregard the 
rights of consumers to know what they are buying.  Though the example is 
based on a local issue in Napa Valley, the consequences are 
far-reaching.  The case in question is Notice # 77, where a brand 
labeled as "Calistoga Cellars" leads the buyer to believe the wine to be 
from the proposed AVA of Calistoga, one of the most historic and 
specific wine producing regions in California, when it is not. The 
grapes are not grown in Calistoga and the wine is not made here. Yet, a 
buyer would surely think that a wine labeled as such would be from the 
renowned Calistoga region known for outstanding quality.  Herein lies 
the rationale for why a producer would want such a chance to sell its 
wine with a misleading label, trading on the quality reputation of this 
place. TTB should not be in the business of making new rules to protect 
the special interests of producers of misleading brands.
 
Additionally, the companion proposal, Notice # 78, threatens to 
eliminate the common and internationally understood practice of 
"nesting" wine appellations within larger wine appellations and to 
eliminate the existing high standards of grape source requirements, 
providing additional channels for consumer deception.  Furthermore, this 
proposal looks to create "Rolling Grandfather" clauses that will allow 
new brands that would undermine the basic tenets of established law by 
allowing the use of mis-descriptive geographic brands on an ongoing basis.
 
This is not solely Napa Valley's problem as it will affect all other 
American wine regions by opening the door for less forthright producers 
to mislabel wines, thereby diluting public confidence in our domestic 
products.  The proposal, interestingly, is in conflict with the 
U.S.-supported World Trade Organization's Agreement on Trade-Related 
Aspects of Intellectual Property Rights (TRIPS), which protects 
geographic identity in wine labeling.  It is also in conflict with other 
wine labeling laws administered by the U.S. Patent and Trademark Office.
 
These regulations will have a substantial negative impact on consumer 
confidence and compromise the integrity of the American wine industry 
both domestically and internationally. The Napa Valley Vintners, a 
non-profit trade association, seeks broad-based opposition from 
consumers and opinion- and policy-makers to this irresponsible proposal 
by the TTB.

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