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AVA Approvals Suspended

Bureau considers revamping application process

by Jane Firstenfeld
AVA Approvals Suspended
Washington, D.C. -- The Alcohol and Tobacco Tax and Trade Bureau (TTB) may go back to the drawing board with its requirements for creation of certain new American Viticultural Areas (AVAs), revisiting procedures that have been on the books since 1986. The current rules have resulted in the creation of more than 180 recognized growing areas throughout the country, so-designated because of distinct climate, geology and other characteristics. In recent years, producers in large, established AVAs have sought and received ever-more exclusive sub-appellations, using these to promote growing areas considered more prestigious--or simply different--than neighboring vineyards. Grower organizations can spend tens or hundreds of thousands of dollars to document their proposed AVAs; each proposal is considered by TTB and open to public comments, which are also evaluated.

If the system's not broken, why does TTB want to fix it? Apparently, it all comes down to a single request seeking to further subdivide the nation's most revered wine region by creating the Calistoga AVA in the northern Napa Valley. The Calistoga sub-appellation was proposed in 2005 (TTB Notice No. 36), and drew only two--positive--comments before the official comment period ended on May 31, 2005. Subsequently, however, two more comments arrived, one from an attorney, another from a director of Calistoga Estate, each adamantly opposing the proposal.

Early this year, Wines & Vines received comments from Calistoga readers, protesting the TTB's delay in approving their new AVA, which, as Napa Valley's 15th sub-appellation, was assumed to have been a slam-dunk. At that time, TTB director of media affairs Art Resnick explained that even a single negative comment could cause an application to be denied.

The federal foot-dragging continued, and this spring, the Napa Valley Vintners (NVV) began lobbying efforts to win approval, going direct to TTB administrator John Manfreda and his boss, Secretary of the Treasury Henry Paulson. NVV also asked that Napa's U.S. Representative Mike Thompson step in on its behalf. "He's our congressman, and does a great job representing the industry," NVV communications director Terry Hall told Wines & Vines. "We asked him to find out 'what's the deal?'"

Wheels Turn in Washington

On June 19, Thompson received a letter from Kevin I. Fromer, assistant secretary for legislative affairs at the Treasury Department. In a copy forwarded to Wines & Vines by Hall, Fromer states that "Satisfying the regulatory requirements for filing a petition is not necessarily sufficient for the establishment of a new AVA. The Treasury Department makes a determination….on the basis of evidence presented in the petition and on all other relevant information gathered through the public comments received during the rulemaking process or from other sources. This information may include views on the impact that the proposed AVA might have on other parties, such as existing businesses and industry members."

Interestingly, apparently TTB gives equal weight to comments received after its own deadline: The attorney's letter of opposition arrived about a month too late, while the letter from Calistoga Estate arrived in January 2007: 18 months after the comment period closed.

Although brand names established prior to the current AVA system took effect were "grandfathered in," "This solution…does not address conflicts between AVAs and brand names that came into existence after July 7, 1986," Fromer continued. "These post-1986 brand names…are frequently built up over a period of time by substantial investments of capital and hard work. They can attain significant value in and of themselves. This value may then be threatened by a proposal to establish an AVA….The AVA name then becomes 'viticulturally significant.' This in turn may result in a serious restriction on the brand-name holder's ability to use the name because of the requirements to source raw materials for wine production…to materials grown within the new AVA….

"The current Calistoga petition is an example of a petition that would affect an established brand, and asks for establishment of an AVA within an AVA," Fromer went on. "The complexities of these issues have led us to suspend action on approval of this and other similar petitions while we consider revising the existing regulatory approach."

On July 19, Rep. Thompson and 53 other members of the U.S. Congressional Wine Caucus sent a letter to Secretary Paulson and Administrator Manfreda, responding forcefully to Fromer's explanation and proposed revisions.

"We strongly oppose this course of action….These regulations have served to inform and protect the American public. We see absolutely no reason to suspend the regulations regarding AVAs, or to focus specifically on AVAs within AVAs that account for the majority of the existing and pending AVAs. These regulations, which were established after long deliberation in consultation with the wine industry, are clear and unambiguous.

"The foundations of the AVA program are to provide consumers with accurate information about wine origin and to protect consumers from false and misleading marketing of wine with respect to origin. The regulations clearly accomplish these goals, and make wine producers aware that their future use of geographic brand names would be limited to wines from the named place.

"In addition, your proposed suspension of the existing rules related to AVAs, including halting all processing of petitions for AVAs within AVAs, will create chaos in the wine industry, and deprive many wineries with pending petitions of their rights under your current regulations….Should it be necessary, we will also request that the Ways & Means Committee hold an oversight hearing to study this issue further," the representatives concluded.

Terry Hall at NVV also had strong words for the bureaucrats. "You can't just decide arbitrarily to stop decision-making," he said. "You must do the business you are paid to do. You can't just decide one day that it's too hard to answer the phone, so you won't do it anymore."

Hall suggested that the timing for this decision--or lack thereof--is especially inopportune, given recent strides by the U .S. wine industry. "America is poised to become the largest wine consuming nation in the world," he said. "Our industry has worked hard to build worldwide credibility. It's a slap in the face of growers, vintners and certainly consumers, who are really driving the business."

He noted that Napa had recently achieved coveted Geographic Indicator (GI) status with the European Union, and that NVV and other U.S. regions are working with the EU to protect names of geographic significance. "We also, as a government and a people, have just entered into the second phase of wine accords with the EU, and are trying to figure out a way to move forward with our shared agenda," he said. "What message is this sending to our trading partners?"

Resnik at TTB had just returned to his desk after a few days off when Wines & Vines reached him today. He had not yet seen the letter to his bureau from the Wine Caucus, but did suggest that the TTB would not suspend action on all AVA application, just those for sub-appellations, and those affecting existing brand names (presumably including Calistoga Estate).

"We anticipate heading into rulemaking in the near future, and will solicit comments as to if and even how we should change the procedure," he said. "We don't know where we go from there; we'll have to see. Once we publish the notice, it will be open for comment for 60 to 90 days. I was told today this will happen in the near future."
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