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Treasury Dept. agency suspends granting new AVAs.

The US Treasury Department's Tax and Trade Bureau says it is so overwhelmed with new AVAs-within-AVAs petitions that it is suspending granting any more.

America (Country Appellation)

The Big Freeze: Money and Politics Stop AVA Petitions in Their Tracks

Calistoga AVA Dustup Now Goes Beyond Napa Valley.

by Alan Goldfarb
August 9, 2007

U.S. Treasury Department Bureau suspends AVA determinations while taking another look at existing AVA regulations.

Calling the Treasury Department’s action last week that temporarily suspended the issuance of any more American Viticultural Areas (AVA), “a major freeze,” Wine Institute’s general counsel Wendell Lee has sounded a warning that the AVA system cries out for tougher scrutiny.

Although the government’s move was most assuredly motivated by Calistoga’s (CA) four-year attempt to secure AVA status, the situation – now a full-blown controversy – goes well beyond the tiny northern Napa Valley region. The Treasury and Tax and Trade Bureau’s (TTB) surprising action will prove to test the viability of the AVA system as it’s currently regulated.

Read the letter from the U.S. Treasury about the suspension of the AVA process: Treasury AVA letter

Here’s the Congressional Wine Caucus response: Wine Caucus letter
[Both letters are in PDF format.]
“Is this global warming, or the ice age?” asked Lee rhetorically, after hearing the news from Hawaii where he was vacationing. “The TTB is freezing AVAs and virtually every single California AVA will have two issues that will be affected - intellectual property (as it pertains to trademarks) and overlapping AVAs and what trumps what.”

Actually, according to TTB spokesperson Art Resnick, his department currently has “approximately” a dozen AVA-within- AVA petitions, whose status will be put on hold pending the TTB’s call for hearings on the matter.

In addition to the Calistoga petition - which has been stymied because of two geographically named entities both using Calistoga in their brand names – there are 12 outstanding regions which have been forced to continue to wait. These include Tulocay in the Coombsville area of the town of Napa and Paso Robles, which is petitioning TTB to divide its area along east-west boundaries.

There’s More Than Geography That Goes into a Sub-Appellation

No new AVAs It is precisely the murky question of sub-regional areas within larger AVAs that has TTB putting a halt to its regulations for the first time since 1986 when its rules for sub-appellations were placed on the books.

“The ones that we’re not taking action on currently are appellations within appellations and overlapping appellations that may affect brand names that are currently out in the market,” said Resnick. He was no doubt alluding to Calistoga Estates and Calistoga Cellars, the two brands which currently don’t use a preponderance of their grapes from the area in question.

“In recent years, an increasing number of petitions have been submitted that affect established brands, and there are some that believe that undermines the value of the program,” continued Resnick.

Marvin Stirman of Calistoga Estates has refused in recent phone calls and e-mails to speak with AppellationAmerica on the matter. But Roger Louer of Calistoga Cellars said he believes TTB is “doing the right thing” to curtail any further action. However, he added, “I don’t like things up in the air. It could be four
Calistoga AVA-pending_lg.jpg
The AVA that broke the camel’s back? Was it the controversial Calistoga AVA petition that stopped all new AVA consideration by the U.S.Tax and Trade Bureau?
to five years down the pike (for the matter to be resolved). … It’s still in limbo. The good news is that we can continue with the brand. I don’t think anything’s changed, except it’s delayed it.”

Stirman, Louer and others who have geographic-named brands within a proposed AVA face the unenviable and costly possibility of having to switch their brand names if the TTB doesn’t change its regulations. But that seems unlikely since the conundrum is precisely why the agency is now calling for public comments.

TTB’s Resnick reiterated the department’s stance: “There are those (brands) who some think are undermining the value of the program to begin with, and because of those concerns, we’re going to review it. Our goal here is to protect the integrity of the AVA system for both consumers and producers. And if that means perhaps changing some of the approval process, that’s what we’ll do.”

When that process will begin is undetermined but Resnick added, “In the near future, we’ll enter the rule-making process and open this up for public comments. We’re moving rapidly toward rule-making and I do know there’s a push on this. This one’s going to move rapidly.”

The Wine Institute, which is the powerful lobbying arm for the California wine industry, with offices in Washington, D.C. and San Francisco, also will take another look at the AVA system. According to WI’s president and CEO Bobby Koch, who knows his way around the capital as a lobbyist and is George W. Bush’s brother-in-law, the institute will poll its members on the matter.

“We’re going to have a public policy meeting later this month to begin a dialogue internally – not only on actions by Treasury but what directions they may take,” Koch said. “There is some serious education that needs to take place as well. It’s been a number of years since the rank and file membership has focused on this issue.”

According to Institute’s Wendell Lee, his organization has only focused on one AVA in the past – California Coastal – but this latest matter most assuredly will bring the larger issue back onto center stage.

“We’re curious observers” regarding AVAs, is how Lee described WI’s previous stance on these matters. “But with this latest issue, it will be something that we will have to query our members about and get their response. It’s a major change in Wine Institute’s approach to AVAs and (we need) to see if our members want us to become engaged in this issue.”

Are There Too Many Sub-Appellations Now?

No new AVAs Both Lee and TTB’s Resnick were asked by APPELLATION AMERICA if the AVA system was showing signs of maturation by the fact that there have been so many petitions from AVAs within AVAs? And isn’t that an indication of better defining of specific areas based on unique and definable characteristics?

Resnick declined to respond, indicating that it is not his place to do so. But Lee had some comments pertaining to the notion that two decades into the AVA system, its main purpose seems to be that of a marketing tool rather than an indication of definitive regional characteristics.

“When you look at the underlying purpose of what an AVA could be is, that it’s indicating to the consumer what a region is and where the grapes come from,” he said. “AVAs weren’t designed to be quality designations. They were designed for geographic designations; and they’ve been used as a

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Reader Feedback

Reader Comments... [5]

Harry Haff , Chef Instructor, Wines and Beverages
Le Cordon Bleu Atlanta, Atlanta, GA
Good article and what it really comes down to is money. The TTB is interested in protecting brand names rather than terroir names. Ludicrous. The entire purpose of AVA, AOC, DOC, whatever, is geographical distinction. It is not to protect a couple of high rolling marketeers. The fact that TTB put a hold on new AVAs underlines the fact that the organization does not believe in its own mission, that of identifying areas with specific, identifiable geographical distinction. The first logical step is to insure that product coming from an area, or labeled as coming from an area, actually does so. For economic issues of mislabeling wines, as in Calistoga Cellars, why not simply require the word "style" in the brand name if a marketeer wishes to fictionalize the origin of his or her product? New name: Calistoga Style Wines Cellars, or something like it. Not a big deal. And get AVA review out of Treasury and put it where it belongs -- as part of the Department of Agriculture. After all, this issue should be about identifying the source of an agricultural product; not who had the most money first. Thanks.

Leo McCloskey , President
Enologix, Sonoma, CA
Washington D.C. knows more about wine than Californians; we may be at some tipping point -- that's the point of no return. Europeans created Appellations d'Origine (AOCs) to protect small companies against big companies beginning in 1919 in the Rhone and ending in 1935. They legislated historical farming, genetic stocks, and much more. Yes, the weakest AOCs made everyone a Grand Cru -- Rhone. But growers who weakened the Rhone paid the price, literally. The most successful European AOCs rated wines, too, as evidenced by the 1855 Classification of Bordeaux. They reaped the rewards. The reason we have wine ratings is because the AVAs created information voids for consumers. Like all voids they get filled. One way to strengthen AVAs is to include price, volume and quality information about the land.

Jim LaMar , Editor
Professional Friends of Wine, Fresno, CA
I agree with Chef Haff [comment #1]: AVAs should be about viticulture, PERIOD. They are not about wine making and especially not about wine selling. The TTB should have more courage and apply more concern to protecting the public from deceptive marketing. Allowing defined terms, like "Estate", to be used in brand names whose business doesn't meet the requirements; or, "grandfathering" geographically significant names used by businesses that only perform the most minor non-geographically significant tasks, like cellaring or bottling, on location is just plain sloppy work. Let charlatans suffer their own consequences or force them to conform for the immediate benefit to the public and the ultimate health of the industry.

Alex Heckathorn
CSA (Compliance Service of America), Myrtle Point, OR
Thanks for doing a good story on the issue and getting some important comments from TTB and Wendell Lee. Wendell was around in 1986 and tried hard to address this issue then, but the industry would not do it. On solutions you might review Sara Schorske's comments at: http://www.csa-compliance.com/PDF/NewAVAsThreat.pdf

Thanks again, it was good to read a non-partisan piece on this issue.

Alex Heckathorn
CSA (Compliance Service of America), Myrtle Point, OR
In the spirit of complete disclosure here is some information about CSA. Sara Schorske has written numerous petitions to establish or amend AVAs. She is deeply rooted in that process and works very hard to establish the reasons why various areas are unique and sees the reality of those factors that make certain areas unique. But then again, how unique or different must it be. And then there is consumer confusion caused by all the small AVAs.

At the same time we are well aware of the trouble AVA names can cause with brand names. We do a lot of consulting on wine labels and we have worked with many wineries that have been affected by AVA names (and the Napa truth in labeling law). In fact one of our friends and neighbors is one of the principal shareholders of Eola Hills Winery and we were the ones who sat across the table, sharing his wine and explained to him, to his horror, the implications of the Eola Hills AVA petition on their brand name. We have also been the compliance consultants for Calistoga Cellars since its inception in 1998. So in that dispute we will certainly appear as partisans, but the reality is that we see all sides of these issues very, very clearly.

So, from those of us who have been in the trenches, we believe that the TTB is actually taking an intelligent and well-considered step to solve the inherent conflicts in the program. TTB has been concerned about this problem for years while the other participants slept. TTB has rung the wakeup bell so it’s time to find solutions.

Thanks for adding to the intelligent discussion of the issues. Here are some comments from one of Sara's articles on AVA's: American Viticultural Areas: Boon or Boondoogle, published in 2001.

Working with an imperfect system, the establishment of AVAs has always been a somewhat controversial subject, with vintners differing -- sometimes strongly -- about where boundary lines belong, about how the approval of a proposed area may affect existing brand names in the industry, and even about how many AVAs the system can support.

There are always voices in the crowd saying, "We have enough viticultural areas already. Any more would be confusing." Proponents of that view have been asserting it since the early 80's! Recently, AVA controversy achieved a new milestone: the California Wine Institute broke with its own tradition of impartiality by coming out against the proposed California Coast Viticultural Area.

There is plenty of room for controversy in the process. No human system is perfect, and the AVA approval process isn't even close. The petitioners and the regulators face several challenges:
** It can be difficult to find actual empirical data to support an area that is intuitively understood or popularly accepted to be unique. This was especially true in the early days of AVAs, when many areas were newly converted to winegrapes. Today more is known about existing vineyards, and more soils and weather consideration often goes into planning new plantings. But it still can be challenging to find enough of the right kind of information to support a petition.
** At the same time, it can be relatively easy for opponents of a proposed area to find at least some data, or to present some subjective testimony, that seems to refute the petitioner's suggestion.
** Previously approved areas are treated like legal precedents, even when the evidence originally presented for their approval may have been weaker or less objective than the kind of data currently required for new AVAs.
** The boundaries suggested by the historical usage of a proposed name may be different than the boundaries supported by pure scientific fact. When historical or current name evidence contradicts geographical evidence, ATF will sometimes honor history, and sometimes follow science. Generally, if the petition makes a good case for one over the other, ATF will agree. This makes sense, especially where there is no controversy. Years later, however, petitioners for a new area adjacent to or enclosed within such an AVA may feel the rigorousness of their geographic arguments is hampered by the precedent status of the existing boundaries.
** When the first AVAs were established, ATF occasionally allowed partial overlaps (AVAs which are only partly contained within other AVAs). Now, the Bureau's policy is to disallow partial overlaps, unless the evidence for them is extremely strong. This often constrains present day petitioners to either work within existing boundaries or change them concurrent with the establishment of a new sub appellation, if current evidence supports a different, more precise boundary that extends beyond the previously approved line.

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