WineAmerica's Comments on TTB Notice 122: Allowing Country of Origin Vintage Dating on Wine Labels

January 3, 2012

Director, Regulations and Rulings

Division, Alcohol and Tobacco Tax and

Trade Bureau, P.O. Box 14412,

Washington, DC 20044–4412

Re:      WineAmerica Comments on TTB Notice No. 122

Dear Director Isenberg:

Thank you for the opportunity to comment on Notice No. 122, Proposed Revision to Vintage Date Requirements.  This rulemaking would allow wines labeled with a country appellation of origin, including American appellation wines, to disclose their vintage.  WineAmerica has long supported this change to TTB regulations and urges the implementation of this proposed rulemaking as soon as possible.

This rulemaking is critical to our membership for at least two reasons:

First, the prohibition against use of vintage dates on country appellation wines unnecessarily harms domestic wineries.  American appellation wines are produced in every state, but because they are prohibited from bearing basic, truthful and important vintage information, are at a considerable market disadvantage to other wines.

Second, vintage information helps clarify the “identity and quality” of wines for consumers.  27 U.S.C. § 205(e)(2).  While American appellation wines, like all vintage wines, can vary widely year-to-year, current regulations make it difficult for consumers to distinguish which vintages of American appellation wine they prefer.

If adopted, Notice No. 122 would benefit thousands of American businesses, allowing wineries in every state to truthfully disclose information about their products that consumers find useful.

Overview

TTB has long prohibited wines with a country appellation of origin from including a vintage date.  See 27 C.F.R. § 4.27.  Since at least 2006, however, TTB has recognized that market forces have made the historical reasons for this limitation obsolete.  See Change to Vintage Date Requirements, 71 Fed. Reg. 25748, 25751 (May 2, 2006) (responding to comments suggesting that vintage dating was primarily about location and harvest conditions, TTB noted that “vintage date information may be used by consumers in various ways.”)  Notice No. 122 takes full account of changing consumer perceptions by allowing country appellation wines to bear a vintage date.  WineAmerica applauds TTB for this notice of proposed rulemaking, and strongly urges its adoption.

Over the past 30 years the number of domestic wineries has grown astronomically, from fewer than 600 basic permitted wineries in 1975, to more than 7,500 located in every corner of the United States today.  This dynamic growth is a remarkable success story that continues to unfold.  Wineries are at the heart of a new model of rural economic development that relies on agri-tourism and values the authenticity of local products that reflect local culture.  These businesses have pumped fresh investment and profit into nearly every corner of the country.  And in every state, for a wide range of reasons, wineries make American appellation wines.

With our still fragile economic recovery, TTB’s decision to publish Notice No. 122, reducing an unnecessary regulatory burden that could restrict the continued growth of nascent and successful family businesses that promote good jobs in areas of the country that desperately need them, is sensible regulatory reform.

Truthfully Disclosing Vintage

American and other country appellation wines should be permitted to utilize vintage dates.  As TTB notes in Notice No. 122, consumers often “use the vintage date to ensure that they are not purchasing a wine that is too old or too young for their preferences.”  Proposed Revision to Vintage Date Requirements, 76 Fed. Reg. 68373, 68374 (Nov. 4, 2011).  This allowance for disclosure of “information as to the identity and quality of the products” is fundamental to the Federal Alcohol Administration Act’s (“FAA Act”) labeling standards.  27 U.S.C. § 205(e).  Wine labels should always be permitted to bear such truthful information that is helpful to consumers.

In 2006, commenters took issue with the overly narrow logic of 27 C.F.R. § 4.27 by noting that “[w]ith the exception of the luxury-priced wine market where a particular vintage is often celebrated for its uniqueness, nearly all other wine consumers, both domestically and abroad, have specific style and quality expectations that are consistent from purchase to purchase.”  71 Fed. Reg. at 25750.  This consumer expectation continues to remain true, and justifies TTB’s decision to broaden vintage dating regulations through Notice No. 122.  More broadly, vintage dates promote product transparency and lot identification, shelf management tools that protect producers and allow consumers to more clearly identify wines they like.

Prohibiting vintage dating for country appellation wines can also carry a false connation.  It can give the misimpression of product uniformity from year-to-year—that a wine is in a “house” style produced from several vintages—when that is not in fact the case.  It can likewise lead consumers to believe a product is a “jug” wine when the truth might be otherwise.  Similarly, the restriction can be misleading in the way it creates consumer confusion.  If a particular varietal wine is ordinarily a vintage product, consumers may not understand why the same varietal wine, produced by the same winery, because of vintage conditions and a need for out-of-state fruit, is suddenly non-vintage.  Simply put, the prohibition on vintage dating can unfairly mark a wine as inferior or unfamiliar and cause consumer deception prohibited by the FAA Act.  See id.

Wineries should not be penalized for choosing to use the American appellation.  So long as the vintage information provided is truthful and not misleading, country appellation wines should be permitted to bear a vintage date.

Practical Impact of Policy Change

The Public COLA Registry lists more than 10,000 wines that have secured Certificates of Label Approval in the last decade that use an American appellation on their label.  In addition, wineries throughout the U.S. regularly seek Certificates of Label Exemption in order to vintage date American appellation wines sold exclusively in intrastate commerce.  Wineries should not be forced to choose between interstate sales and vintage dating, but that is exactly what TTB regulations currently require.

Notice No. 122 would finally treat American appellation wines as the equal of multi-state, state and county appellation wines.  By establishing a more market driven definition for vintage labeling, TTB will make consumer outreach and education far easier.  Wineries will no longer have to give long-winded explanations for why their American appellation wines are non-vintage, or why their vintage American appellation wines can only be sold in intrastate commerce.  The wines will simply be permitted to stand or fall on their own merits.

Conclusion

The change contemplated by Notice No. 122 has long been a priority for WineAmerica and we welcome TTB’s publication of the notice of proposed rulemaking.  This rulemaking will benefit wineries throughout the U.S., and the many thousands of wines that utilize the American appellation.

WineAmerica Letter of Support for A4436: Permits Self-distribution in NJ

December 20, 2011

RE:     A4436 (Burzichelli, Wisniewski, Riley) – Permits direct shipping by wineries and creates Out-of-State Winery license

Dear Member of the Assembly:

WineAmerica, the National Association of American Wineries, on behalf of our member wineries in New Jersey and across the nation, encourages you to vote yes on A4436, a bill that would permit New Jersey and out-of-state wineries to self-distribute their products, operate satellite tasting outlets, and ship wine directly to New Jersey consumers.  WineAmerica is the only national winery trade association.

We support this bill because it secures local winery privileges threatened by the recent Third Circuit decision in Freeman v. Corzine, 629 F.3d 146 (3d Cir. 2010) while expanding opportunity for wineries throughout the United States.  A4436 offers continuing support to the New Jersey wine industry’s progress, growth and prosperity, and removes an unhelpful cloud of uncertainty that has prevented New Jersey wineries from opening their doors.

For more than a year, the looming Freeman decision has been a weight on the dynamic growth of the state’s wineries.  A4436 will finally allow New Jersey winemakers to focus on what they do best—keep small farms viable and, through agri-tourism, build a new model for farm development.  Failure to pass this important bill could put the success of this burgeoning industry in serious jeopardy.

New Jersey’s dynamic wine industry is a critical component of the state’s agricultural potential and heritage, and contributes to the preservation of rural landscapes that could otherwise be turned over to developers.  In crafting its winery laws, New Jersey has rightly tried to keep these agricultural spaces vital and flourishing.  A4436 supports this legitimate local purpose and promotes a traditional agricultural form—winemaking—that reliably makes family farming more economically feasible.

Small, dynamic businesses, like those of our members, that are particularly well-suited to small parcel agriculture; creating jobs in the state’s fastest growing agriculture segment; and paying more in taxes than they use in public resources, should be provided every opportunity to sell their goods in open markets.  Wineries are keeping small farms viable and, through agri-tourism, are building a new model for farm development.  New Jersey wineries are family destinations that educate consumers about local agriculture and feature local musicians and entertainers.  Their impact is dynamic—helping make local restaurants, hotels, and attractions more viable.  In other words, local wineries are keeping the “Garden” in the “Garden State.”

Many New Jersey wineries are unable, or find it difficult, to reach consumers in the state, since smaller brands are not likely to find distribution through traditional three-tier channels.  Satellite tasting outlets and self-distribution enable wineries to capture lost sales that often result from consumers’ inability to find their favorite New Jersey wines on local store shelves.  Similarly, direct-to-consumer shipping has proven a vital channel for customers to find the wines they want, while still allowing for safe and effective regulation.

In a recent comprehensive report examining direct shipping laws in the states where shipping is allowed, the Maryland Comptroller’s Office, the state agency that regulates alcohol in Maryland, concluded that: (1) state regulation of direct-to-consumer shipping is effective; (2) the safety protocols written into state direct shipping laws prevent deliveries to minors; and (3) recordkeeping and reporting requirements give states the tools for effective tax collection on wine shipments.  See Peter Franchot, Compt’r. of Md., Direct Wine Shipment Report (2010), available at http://www.comp.state.md.us/DWS_Complete.pdf.

We support A4436 because it reinforces existing winery privileges and expands opportunity for both in-state and out-of-state businesses in the form of direct-to-consumer shipping.  Wineries add both to the character and the strength of New Jersey’s agricultural industry, tourism and family farm development.  While direct shipping capacity caps remain problematic, see Family Winemakers of Cal. v. Jenkins, 592 F.3d 1 (1st Cir. 2010), but see Black Star Farms LLC v. Oliver, 600 F.3d 1225 (9th Cir. 2010), New Jersey wineries should be afforded the opportunity to operate efficiently and profitably and New Jersey’s citizens should be allowed the benefit of free access to the wines of their choice.  We believe that A4436 promotes these aims, and respectfully request that you vote yes on this important bill.

Building On Our 2011 Successes

By Cary M. Greene

As we come to the end of another year, American wineries have a lot to be thankful for.  Our products are finding more consumers, and sales at higher price points are rebounding.  The playing field for direct-to-consumer shipping continues to expand, and wineries are winning battles to simplify state sales and distribution laws.  We’ve held harmful legislation at bay, including the CARE bill, H.R. 1161, and we’ve made progress at the state and national association level that will strengthen the impact of our industry grassroots.  It’s a lot to absorb, and a lot to be proud of.

Still, we expect our share of challenges in 2012.  Ensuring sufficient Congressional funding for the Alcohol & Tobacco Tax & Trade Bureau (“TTB”) will be high on the priority list.

The importance of this institutional knowledge can’t be overstated.  Within the context of its regulatory mandate—effectively regulating interstate commerce in alcohol and collecting federal excise taxes—TTB and its predecessor, the Bureau of Alcohol, Tobacco & Firearms (“BATF”), have overseen a massive transformation of the wine industry, from a relatively concentrated group of wineries to a highly diffuse industry with thousands of mom and pop players.  The agency has used a relatively flexible hand, learning along the way where smaller players encounter regulatory difficulties.  This approach has reaped dividends in the form of federal excise taxes.

In 2011, the agency operated on a budget of $100 million, but collected nearly $11 billion in alcohol beverage excise taxes, with nearly $1 billion coming from wineries alone.  That kind of ratio, nearly 110:1 in revenues over expenses, is a measure of success that few other federal agencies are likely to match.  A regulator starting from scratch would be unlikely to match this success.  A fully Congressionally-funded TTB could probably do even better.

While the agency isn’t perfect—the glacial pace of the label approval program in particular has become a major source of frustration for WineAmerica members—the problems the agency faces have more to do inadequate funding than ineffectiveness.  Say what you will about the existing federal standards, but there are many good regulators within TTB who understand the practical impact of the existing system, and who are trying to make federal rules work better.

TTB has its priorities in the right place, whether its simplification of its label rules or its desire to educate the industry about the impact of its rules and the extent of its programs.  We will certainly do our part to help Congress and the Administration understand this success and the need for additional funding in 2012.

WineAmerica's Testimony in Favor of Direct Shipping in New Jersey

Update: S3172 Passed the New Jersey State Senate on December 15 by a vote of 23-13.

On December 15, 2010 WineAmerica will present written testimony to the New Jersey State Senate in favor of S3172, which would allow direct-to-consumer shipment of wine. Below is the text of our testimony.

RE:      S3172 (Sweeney) – Permits direct shipping by wineries and creates Out-of-State Winery license

WineAmerica, the National Association of American Wineries, on behalf of our member wineries in New Jersey and across the nation, encourages you to vote yes on S3172, a bill that would permit New Jersey and out-of-state wineries to self-distribute their products, operate satellite tasting outlets, and ship wine directly to New Jersey consumers.  WineAmerica is the only national winery trade association.

We support this bill because it secures local winery privileges threatened by the Third Circuit decision in Freeman v. Corzine, 629 F.3d 146 (3d Cir. 2010) while expanding opportunity for wineries throughout the United States.  S3172 offers continuing support to the New Jersey wine industry’s progress, growth and prosperity, and removes an unhelpful cloud of uncertainty that has prevented New Jersey wineries from opening their doors.  For more than a year, the looming Freeman decision has been a weight on the dynamic growth of the state’s wineries.  S3172 will finally allow New Jersey winemakers to focus on what they do best—keep small farms viable and, through agri-tourism, build a new model for farm development.

We support S3172 because it reinforces existing winery privileges and expands opportunity for both in-state and out-of-state businesses in the form of direct-to-consumer shipping.  While direct shipping capacity caps remain problematic, New Jersey wineries should be afforded the opportunity to operate efficiently and profitably and New Jersey’s citizens should be allowed the benefit of free access to the wines of their choice.  We believe that S3172 promotes these aims, and respectfully request that you vote yes on this important bill.

Revisting Advertising Compliance

We originally posted this in September, but think it is worth another look.

Make Sure Your Advertising is TTB Compliant

By Michael Kaiser

The TTB doesn't merely collect your taxes and approved your labels, they also regulate advertising for alcoholic beverages.  Now your advertisements do not need to be approved by the TTB, but they must be complaint with the regulations and it is up to the winery or "responsible advertiser" to make sure the advertisements are complaint.

Let's examine what is considered by TTB to be an advertisement.  According to TTB:

The regulations define the term"advertisement" as any written or verbal statement, illustration, or depiction which is in, or calculated to induce sales in, interstate or foreign commerce, or is disseminated by mail.  Examples include ads in newspapers or magazines, trade booklets, menus, wine cards, leaflets, circulars, mailers, book inserts, catalogs, promotional materials, or sales pamphlets.  The definition includes any written, printed, graphic, or other material accompanying the container; markings on cases, billboards, signs, or other outdoor display; and broadcasts made via radio, television, or in any other media.  Though not specifically listed, this definition includes website and other Internet-based advertising.

That last sentence is very important.  The regulations for labeling and advertising of wine have not been updated for quite some time, and they were originally written before the Internet became what it is today.  So the TTB places Internet advertising under the "any other media" umbrella.  The TTB considers Facebook and other social media sites to be advertising. 

Required Information
There is some required information for advertising material.  They are listed in the regulations (27 CFR Part 4.62) as the following:
 

• Responsible advertiser. The advertisement shall state the name and address of the permittee responsible for its publication or broadcast. Street number and name may be omitted in the address.
• Class, type, and distinctive designation. The advertisement shall contain a conspicuous statement of the class, type, or distinctive designation to which the product belongs, corresponding with the statement of class, type, or distinctive designation which is required to appear on the label of the product.
• Exception. (1) If an advertisement refers to a general wine line or all of the wine products of one company, whether by the company name or by the brand name common to all the wine in the line, the only mandatory information necessary is the name and address of the responsible advertiser. This exception does not apply where only one type of wine is marketed under the specific brand name advertised.  (2) On consumer specialty items, the only information necessary is the company name or brand name of the product.

Prohibited Information
As with wine label, there are prohibited practices for wine advertising.  The regulations (27 CFR Part 4.64) list them as the following.

• Any statement that is false or untrue in any material particular, or that, irrespective of falsity, directly, or by ambiguity, omission, or inference, or by the addition of irrelevant, scientific or technical matter tends to create a misleading impression.
• Any statement that is disparaging of a competitor's products.
• Any statement, design, device, or representation which is obscene or indecent.
• Any statement, design, device, or representation of or relating to analyses, standards, or tests, irrespective of falsity, which the appropriate TTB officer finds to be likely to mislead the consumer.
• Any statement, design, device, or representation of or relating to any guarantee, irrespective of falsity, which the appropriate TTB officer finds to be likely to mislead the consumer. Money-back guarantees are not prohibited.
• Any statement that the wine is produced, blended, bottled, packed, or sold under, or in accordance with, any municipal, State, or Federal Government authorization, law, or regulations; and if a municipal, State, or Federal permit number is stated, the permit number shall not be accompanied by any additional statement relating thereto.
• Any statement of bonded winecellar and bonded winery numbers unless stated in direct conjunction with the name and address of the person operating such winery or storeroom. Statement of bonded winecellar and bonded winery numbers may be made in the following form: “Bonded Winecellar No. __,” “Bonded Winery No. __,” “B. W. C. No. __,” “B. W. No. __.” No additional reference thereto shall be made, nor shall any use be made of such statement that may convey the impression that the wine has been made or matured under Government supervision or in accordance with Government specifications or standards.
• Any statement, design, device, or representation which relates to alcohol content or which tends to create the impression that a wine contains distilled spirits, is comparable to a distilled spirit, or has intoxicating qualities.
• Any word in the brand name or class and type designation which is the name of a distilled spirits product or which simulates, imitates, or creates the impression that the wine so labeled is, or is similar to, any product customarily made with a distilled spirits base.

Additionally, wine advertising may not include information that is deemed be inconsistent with labeling. Any label depicted on a bottle in an advertisement shall be a reproduction of an approved label.
Further restricted items on wine advertisements are:

• Statement of age. No statement of age or representation relative to age (including words or devices in any brand name or mark) shall be made, except (1) for vintage wine, in accordance with the provisions of §4.27; (2) references in accordance with §4.38(f); or (3) use of the word “old” as part of a brand name.
• Statement of bottling dates. The statement of any bottling date shall not be deemed to be a representation relative to age, if such statement appears without undue emphasis in the following form: “Bottled in __” (inserting the year in which the wine was bottled).
• Statement of miscellaneous dates. No date, except with respect to statement of vintage year and bottling date, shall be stated unless, in addition thereto, and in direct conjunction therewith, in the same size and kind of printing there shall be stated an explanation of the significance of such date: Provided, That if any date refers to the date of establishment of any business, such date shall be stated without undue emphasis and in direct conjunction with the name of the person to whom it refers.
• Flags, seals, coats of arms, crests, and other insignia. No advertisement shall contain any statement, design, device, or pictorial representation of or relating to, or capable of being construed as relating to, the armed forces of the United States, or of the American flag, or of any emblem, seal, insignia, or decoration associated with such flag or armed forces; nor shall any advertisement contain any statement, device, design, or pictorial representation of or concerning any flag, seal, coat of arms, crest, or other insignia likely to mislead the consumer to believe that the product has been endorsed, made, or used by, or produced for, or under the supervision of, or in accordance with the specifications of the government, organization, family, or individual with whom such flag, seal, coat of arms, crests, or insignia is associated.
• Statements indicative of origin. No statement, design, device, or representation which tends to create the impression that the wine originated in a particular place or region, shall appear in any advertisement unless the label of the advertised product bears an appellation of origin, and such appellation of origin appears in the advertisement in direct conjunction with the class and type designation.
• Use of the word “importer” or similar words. The word importer or similar words shall not appear in advertisements of domestic wine except as part of the bona fide name of the permittee by or for whom, or of a retailer for whom, such wine is bottled, packed or distributed: Provided, That in all cases where such words are used as part of such name, there shall be stated the words “Product of the United States” or similar words to negate any impression that the product is imported, and such negating statements shall appear in the same size and kind of printing as such name. 
• Confusion of brands. Two or more different brands or lots of wine shall not be advertised in one advertisement (or in two or more advertisements in one issue of a periodical or newspaper, or in one piece of other written, printed, or graphic matter) if the advertisement tends to create the impression that representations made as to one brand or lot apply to the other or others, and if as to such latter the representations contravene any provision of §§4.60 through 4.64 or are in any respect untrue.
• Deceptive advertising techniques. Subliminal or similar techniques are prohibited. “Subliminal or similar techniques,” as used in this part, refers to any device or technique that is used to convey, or attempts to convey, a message to a person by means of images or sounds of a very brief nature that cannot be perceived at a normal level of awareness.

Health-related statements:    

• Health-related statement means any statement related to health and includes statements of a curative or therapeutic nature that, expressly or by implication, suggest a relationship between the consumption of alcohol, wine, or any substance found within the wine, and health benefits or effects on health. The term includes both specific health claims and general references to alleged health benefits or effects on health associated with the consumption of alcohol, wine, or any substance found within the wine, as well as health-related directional statements. The term also includes statements and claims that imply that a physical or psychological sensation results from consuming the wine, as well as statements and claims of nutritional value ( e.g., statements of vitamin content). Statements concerning caloric, carbohydrate, protein, and fat content do not constitute nutritional claims about the product.  
• Specific health claim is a type of health-related statement that, expressly or by implication, characterizes the relationship of the wine, alcohol, or any substance found within the wine, to a disease or health-related condition. Implied specific health claims include statements, symbols, vignettes, or other forms of communication that suggest, within the context in which they are presented, that a relationship exists between wine, alcohol, or any substance found within the wine, and a disease or health-related condition. 
• Health-related directional statement is a type of health-related statement that directs or refers consumers to a third party or other source for information regarding the effects on health of wine or alcohol consumption.

Rules for advertising

• Health-related statements. In general, advertisements may not contain any health-related statement that is untrue in any particular or tends to create a misleading impression as to the effects on health of alcohol consumption. TTB will evaluate such statements on a case-by-case basis and may require as part of the health-related statement a disclaimer or some other qualifying statement to dispel any misleading impression conveyed by the health-related statement. Such disclaimer or other qualifying statement must appear as prominent as the health-related statement.
• Specific health claims. A specific health claim will not be considered misleading if it is truthful and adequately substantiated by scientific or medical evidence; sufficiently detailed and qualified with respect to the categories of individuals to whom the claim applies; adequately discloses the health risks associated with both moderate and heavier levels of alcohol consumption; and outlines the categories of individuals for whom any levels of alcohol consumption may cause health risks. This information must appear as part of the specific health claim and in a manner as prominent as the specific health claim.
• Health-related directional statements. A statement that directs consumers to a third party or other source for information regarding the effects on health of wine or alcohol consumption is presumed misleading unless it: Directs consumers in a neutral or other non-misleading manner to a third party or other source for balanced information regarding the effects on health of wine or alcohol consumption; and includes as part of the health-related directional statement, and in a manner as prominent as the health-related directional statement, the following disclaimer: “This statement should not encourage you to drink or increase your alcohol consumption for health reasons;” or includes as part of the health-related directional statement, and in a manner as prominent as the health-related directional statement, some other qualifying statement that the appropriate TTB officer finds is sufficient to dispel any misleading impression conveyed by the health-related directional statement.

It is clear that the TTB has an extensive list of prohibited practices for advertising of wine (and other alcoholic beverages) but it is consistent with the prohibited practices on wine labels.  If you have any questions about anything listed in this blog post please let us know and we will clarify them further for you.  It is essential for wineries to be compliant with TTB advertising regulations. 

Joint Farm Bill Proposal Hits a Wall as Super Committee Fails

By Jennifer Montgomery

Late last week, we were advised by Agriculture Committee staff that the Chairs and Ranking Members of the House and Senate Agriculture Committees had reached a tentative agreement on a 2012 Farm Bill proposal to be submitted to the Super Committee for consideration in the deficit reduction deliberations. Senate Agriculture Committee Chairwoman Debbie Stabenow (D-MI) and Ranking Member Pat Roberts (R-KS), had been working alongside House Agriculture Committee Chairman Frank Lucas (R-OK) and Ranking Member Collin Peterson (D-MN) to proactively come up with a Farm Bill proposal to cut $23 billion dollars out of the agriculture budget over the next 10 years. WineAmerica, along with other members of the Specialty Crop Farm Bill Alliance, had been working to try to ensure that critical specialty crop programs were protected as much as possible during this process.

While we did not see any legislative language at that time, some information on specialty crop programs was released. Under that tentative proposal, priority specialty crop programs would have faired well, under the circumstances:  

·        Blocks grants would have been funded at $70 million per year (up from $55 million).

o       They included a multi-state component that will be used to enhance multi-state projects.

o       They added acres to the calculation of how funding would allocated to each state.

·        The Pest and Disease Title would have been funded at $60 million for the first two years and $65 million thereafter (current is $50 million).

o       It would have rolled the Clean Plant Network into section 10201 of the Pest & Disease Title.

·        It would have provided $400 million over 10 years for the Specialty Crop Research Initiative (SCRI) and would have protected the baseline for those 10 years, so the program would not have been truncated.

·        The Value-Added Producer Grant program would have received $15 million in mandatory money, which is the current funding level in the 2008 Farm Bill.

But in light of the collapse of the Super Committee’s efforts, this proposal is not on the table and the general expectation is that the 2012 Farm Bill will now be written and considered in regular order, the way previous Farm Bills have been developed.

Given the hard work and bi-partisan cooperation that went into the creation of the proposal, WineAmerica considers it to be a good first step and it is hoped that it will serve as the foundation of the upcoming Farm Bill process – whatever that process turns out to be.

DTC Wine Symposium Expands to San Francisco, January 18-19, 2012

Once again, WineAmerica is a sponsor of the successful Direct to Consumer Wine Symposium, the annual summit on wine direct marketing and sales. We encourage your marketing teams to attend.

Organized by vintners, for vintners, the fifth annual summit will take place at the Stanford Court Hotel in San Francisco on January 18 (evening) and January 19 (day). 

Speakers from within and outside the wine industry will address topics such as:

·        Branding in the Digital Age (Keynote)

·        State of the States: What to Expect in 2012

·        Taking Your Wine Club to the Next Level

·        Using Video to Boost Sales

·        How to Improve E-commerce Campaigns

·        Training Tasting Room Staff, A to Z

The summit is an important fundraiser for the co-presenters, Free the Grapes! and Coalition for Free Trade. We have worked with these groups and other associations to increase the number of legal states for winery shipment from 17 to 38 in the last decade. Their focus on PR and litigation, respectively, has played an instrumental role, complementing industry representation in state capitols and Washington D.C.

There are several new components for the 2012 event:

•  DTC Winery Check Up:  This results of this research project, which aggregates DTC sales performance for 120+ wineries along 18 separate metrics, will be presented January 19.

• Video Contest: The Steering Committee will recognize outstanding achievement in video production by naming and promoting three winning winery promotional videos. 

•  January 18 Evening Social Mixer: A short presentation will be followed by a wine reception and mixer for registrants and sponsors at the Stanford Court.  

Early registration pricing for the evening social mixer ($75) and full day of programs ($375) ends December 12. The Stanford Court Hotel’s reduced rate of $209/night expires December 18. View the program and register at www.dtcwinesymposium.com.

 

WineAmerica Supports Federal Bill Allowing USPS to Deliver Wine to Consumers

November 18, 2011

The Senate recently introduced S. 1789, the “21st Century Postal Service Act of 2011.”  The bill includes a provision—section 404—that would modify federal law to allow the shipping of wine by the U.S. Postal Service (“USPS”).  As a longtime advocate of winery direct-to-consumer shipping, WineAmerica supports this important provision, with qualification.

WineAmerica believes in fair markets and competition in the sale and distribution of wine.  For years, there has been a growing mismatch between the state-based legal distribution system adopted in the wake of Prohibition and the wine market, particularly as it relates to small wine brands.  See, e.g., Federal Trade Commission, Working Paper No. 304, State Regulation of Alcohol Distribution: The Effects of Post & Hold Laws on Consumption and Social Harms (Sept. 2010).  Direct-to-consumer shipping has proven highly effective both from the standpoint of allowing consumers to find and purchase the wines they want, and of providing regulators the ability to collect taxes and prevent underage consumption.  See, e.g., Comptroller of Maryland, Direct Wine Shipment Report (Dec. 2010).

Common carriers such as FedEx and the UPS have secured licenses, permits or approvals to deliver wine directly from wineries to consumers in at least 38 states.  State laws typically mandate:

(1)         that packages containing wine include a shipping label indicating their contents; and

(2)         that common carriers obtain the signature of an adult on delivery.

State laws may also require common carriers:

(1)         to file wine delivery reports; and

(2)         to refuse receipt of shipments from businesses that do not follow state legal requirements.

These tools ensure state regulatory control over wine deliveries.  E.g., id. at 66-69.

Section 404 of S. 1789 would allow “a licensed winery” to ship via USPS “in accordance with the law of the State, territory, or district of the United States where the addressee or a duly authorized agent takes delivery.”  Wineries would gain the ability to ship through USPS to consumers, provided they followed state shipping laws with respect to licensing, tax payment, and regulatory control.

We fully support the laudable goals of section 404 of S. 1789 because the provision would give wineries and consumers greater access and choice with respect to the delivery of wine, subject to state shipping law.  We believe, however, that the legislation contains several technical ambiguities that must be clarified before passage.  They are:

·             USPS must be subject to the same state requirements that bind other common carriers, including license applications and the power of states to rescind delivery authority; and

·             The definition of “wine” used in section 404 should include all wines produced in accordance with the Internal Revenue Code (26 U.S.C. § 5041(a); 27 C.F.R. § 24.10) rather than the more limited definition provided in the Federal Alcohol Administration Act (27 U.S.C. § 211).

In its current form, section 404 represents a significant step forward for winery and consumer choice, but before WineAmerica can fully support the bill, without qualification, the language must be fixed to account both for state legal obligations and for the products produced by U.S. wineries.

WineAmerica will continue to support efforts that simplify and improve winery direct-to-consumer shipping laws, and hope that Congress will see fit to pass this important legislation with the suggested changes.

WineAmerica Co-Hosting Wine and Shellfish Reception on Capitol Hill Tonight

Tonight WineAmerica, the Wine Institute and the East Coast Shellfish Growers Association are co-sponsoring a white wine and shellfish reception for the Congressional Wine Caucus and the Congressional Shellfish Caucus.  Traditionally this has been an event that only served California wine.  For the first time WineAmerica is providing wine from the East Coast for this event.  Special thanks to the Virginia Wine Marketing Board, the Long Island Wine Council, Fox Run Vineyards (NY), Priam Vineyards (CT), Boordy Vineyards (MD), Black Ankle Vineyards (MD), Sugarloaf Mountain Vineyard (MD) and Knob Hall Winery (MD) for donating wine for this event.

The following East Coast wines will be served with select wines from California, provided by the Wine Instutite

Connecticut:
Priam Vineyards Chardonnay
Priam Vineyards Gewurtztraminer

Maryland
Black Ankle Vineyards 2010 Viognier
Boordy Vineyards 2010 Reserve Chardonnay
Knob Hall Tryst White Blend
Knob Hall 2010 Vidal Blanc
Sugarloaf Mountain Vineyards 2010 Chardonnay


Finger Lakes, NY
Anthony Road Wine Company 2010 Pinot Gris
Anthony Road Wine Company 2009 Riesling
Fox Run Vineyards Arctic Fox White Wine
Fox Run Vineyards 2010 Chardonnay
Miles Wine Cellars 2010 Chardonnay
Miles Wine Cellars Ghost White Wine


Long Island, NY
Bedell Cellars 2008 "Taste White" White Wine
Palmer Vineyards 2009 Pinot Blanc
Scarola Vineyards 2009 "Capella" Chardonnay
Sparkling Point 2007 Brut Sparkling Wine
Waters Crest Winery 2010 Sauvignon Blanc
Wolffer Estate 2010 Classic White


Virginia
Barboursville Vineyards 2009 Viognier
Breaux Vineyards 2010 Viognier
Gray Ghost 2009 Chardonnay
Jefferson Vineyards 2010 Chardonnay 

 


 


 

2011 Fall Board Meeting in Boise

By Michael Kaiser

The annual WineAmerica Fall Board of Directors and Membership meeting has come and gone once again.  This year we visited the Snake River Valley in Southwest Idaho.  The Snake River Valley is Idaho's first American viticultural area and is home to the largest concentration of wineries and vineyards in the state.  The meeting itself was held at Hotel 43, a boutique hotel in Downtown Boise.  This year we had attendees from Maryland, Nebraska, Idaho, Michigan, Colorado, California, Washington, Missouri, Oregon, Virginia, South Dakota, New York, Tennessee, Texas and Ohio. 

The WineAmerica Board of Directors discussed a wide range of new association initiatives this week, and there will be more news on those initiatives as they progress.  The WineAmerica Board and the State Associations Council also held various policy discussions ranging from the reauthorization of the Farm Bill to continuing to fight the so-called CARE Act (HR 1161).

On Monday night, the Idaho Wine Commission hosted an informal welcome reception, sponsored by the Southwest Idaho Tourism Association for the meeting attendees.  Six local wineries were featured at the reception:  Williamson Orchards and Vineyards, Cinder Wines, Bitner Vineyards, Huston Vineyards, Woodriver Cellars and Fraser Vineyards.  The group then enjoyed a dinner at Fork Restaurant in Boise featuring local ingredients and wine. 

Tuesday after the Board meeting ended we visited Bitner Vineyards (owned and operated by WineAmerica Board member Ron Bitner and his wife Mary) and then went to Ste. Chappelle Winery (the largest in the state) for a catered dinner and wine pairing.  An enjoyable ending to a productive day.

The dates and location have been determined for the 2012 Fall Board of Directors and Membership Meeting.  The meeting will be in Sonoma County, CA from November 12 to 14, 2012.  The exact location has yet to be determined. 

TTB Issues Notice of Proposed Rulemaking to Allow Vintage Dating on Country of Origin Wines

The TTB has issued a Notice of Proposed Rulemaking to allow the use of vintage dating on a wine labeled with a country appellation of origin, such as "American".  The official TTB summary is as follows.

The Alcohol and Tobacco Tax and Trade Bureau proposes to amend its wine labeling regulations to allow a vintage date to appear on a wine that is labeled with a country of origin.  The proposal would provide greater grape sourcing and wine labeling flexibility to winemakers, both domestic and foreign, while still ensuring that consumers are provided with adequate information as to the identity and quality of the wines they purchase.  

WineAmerica advocated for this rulemaking last year, below is an excerpt of an article we published in January 2010 regarding this issue:

The Alcohol & Tobacco Tax & Trade Bureau (TTB) has long prohibited wines with a country appellation of origin from including a vintage date. It is one of the many technical blips that we live with in alcohol beverage regulation that doesn’t seem to matter much until it affects your business. Like many other technical rules with somewhat mysterious origins, inertia has largely kept this vintage date prohibition alive. It’s time to seek a reevaluation.  

There’s a strong case to be made that “American” and other country appellation wines should be permitted to utilize vintage dates. The reasons largely relate to how vintage dates are used in the market. Often, vintage dates are thought of as shorthand for whether wines need aging, are ready to drink, or are over the hill. They also promote product transparency and lot identification, shelf management tools that protect producers and allow consumers to more clearly identify wines they like. In addition, allowing vintage dating for American appellation wines would encourage the further development of wine industries in nontraditional winemaking states that have occasional need for out-of-state fruit.


There are few, if any, policy justifications for TTB’s restriction against country appellation vintage dating. As was stated eloquently in comments to TTB several years ago, “[w]ith the exception of the luxury-priced wine market where a particular vintage is often celebrated for its uniqueness, nearly all other wine consumers, both domestically and abroad, have specific style and quality expectations that are consistent from purchase to purchase.” Change to Vintage Date Requirements, 71 Fed. Reg. 25748, 25750 (May 2, 2006).

Likewise, the vintage date restriction often has unintended consequences. Some countries restrict use of varietal labeling except in instances where a wine bears a country appellation. This means that many foreign wineries selling in the U.S. are forced to choose between vintage labeling and varietal labeling. Under the current regulations then, foreign wineries are being punished for the practices of their domestic regulators.
 
Prohibiting vintage dating for country appellation wines can also carry a false connation. It can give the misimpression of product uniformity from year-to-year—that a wine is in a “house” style produced from several vintages—when that is not in fact the case. Similarly, the restriction can be misleading in the way it creates consumer confusion. If a particular varietal wine is ordinarily a vintage product, consumers may not understand why the same varietal wine, produced by the same winery, is suddenly non-vintage. Simply put, the prohibition on vintage dating can unfairly mark a wine as inferior or unfamiliar.


WineAmerica is encouraged to see that the TTB has proposed this rulemaking and will be submitting comments in support of the change.  We encourage our individual members to do the same. 

The TTB is seeking public comments on the proposal from today until January 3.  To view the full notice and submit comments follow the link below.

Notice of Proposed Rulemaking on Vintage Dating

TTB Issues Final Approval of New Grape Variety Names for American Wines

The TTB has issued their final ruling on proposed grape variety names for use on domestic wine labels.  The TTB's statement on the ruling is below, as is the link to the final rulemaking.

This document adopts, as a final rule, a proposal to amend the Alcohol and Tobacco Tax and Trade Bureau regulations by adding a number of new names to the list of grape variety names approved for use in designating American wines, and to include in the list several separate entries for synonyms of existing entries so that readers can more readily find them.  These amendments will allow bottlers of wine to use more grape variety names on wine labels and in wine advertisements.

Effective Date: This final rule is effective November 28, 2011.

Read the Final Rule

Understanding the California ABC’s New Advisory for Wineries and Third Party Providers

Our friends and WineAmerica Supplier Member ShipCompliant have written a great analysis of the new advisory put out by the California ABC on "Third Party Providers". 

Understanding the California ABC’s New Advisory for Wineries and Third Party Providers

November 1st, 2011

By Jeff Carroll - VP of Compliance, ShipCompliant

The proliferation of “Third Party Providers” (TPP) within the wine industry has been significant over the past two years. Known otherwise as “Third Party Marketers”, “Third Party Advertising Agents” and “Marketing Agents”, they represent a new sales channel for suppliers whether in the form of “flash sales” or multiple product offer websites.

However, anybody that has operated as a TPP in California has done so under a great deal of uncertainty ever since the issuance by the California Department of Alcoholic Beverage Control (ABC) of an advisory in June 2009 that questioned the degree to which TPPs and wineries utilizing their services were acting in accordance with the laws and regulations of California. Most of that has changed with a new advisory letter issued today by the California ABC that provides clear guidance on how wineries and TPPs can work together.

This article lays out the key concepts every licensed seller (wineries and wine retailers) should understand and adhere to in order to work with non-licensed TPPs in a compliant fashion. We see this new advisory by the California ABC as a critical new document that will have a big impact for wine suppliers, consumers, and advertisers alike.

KEY CRITERIA FOR LICENSED SELLERS WORKING WITH THIRD PARTY PROVIDERS

Criteria #1: Placement & Pricing
What the Advisory says: “all sales transactions involving Third Party Providers must ultimately be conducted by and under the control of a licensee. This includes decisions concerning the selection of alcoholic beverages to advertise or offer for sale, the pricing of those beverages, and the ultimate acceptance and fulfillment of the sales transaction.”
Best Practice: When engaging a TPP, the licensed seller should monitor how their products are being represented, and should also communicate to the TPP an allowable price (or price range) for advertisement to the consumer. Sellers should also communicate to the TPP the states in which they are licensed to ship so the TPP can filter products by the consumer’s state and also show the list of available states for each seller.

Criteria #2: Transparency
What the Advisory says: “The licensee responsible for the sale must be clearly identified and must ultimately control the transaction, including any decisions concerning acceptance or rejection of such orders.”
Best Practice: TPPs should clearly show to the consumer, prior to checkout, the name of the licensee for the transaction. For example, “This product is sold and shipped by Winery A, Sonoma, CA”. The licensee name should also be presented to the consumer on any generated consumer invoices.

Criteria #3: Acceptance
What the Advisory says: “The licensee responsible for the sale must be clearly identified and must ultimately control the transaction, including any decisions concerning acceptance or rejection of such orders.”
Best Practice: A good mechanism for ensuring acceptance is a batch email that is sent out on a periodic (daily or semi-daily, for example) basis. The email would contain the order request information and details, and the seller would have the opportunity to reject or accept the orders by responding to the email, or clicking on an accept/reject button. If a comprehensive compliance check has already been run against the seller’s shipping license, then the seller would likely not have many reasons to reject the requests.

Criteria #4: Fulfillment
What the Advisory says: “Licensees must also be responsible for, and must control, the fulfillment of orders and the shipment of alcoholic beverages from the licensees’ licensed premises or other authorized shipping point (such as a licensed public warehouse).”
Best Practice: Following the acceptance process, the seller then provides instructions for releasing the order to fulfillment. Licensees should ensure that the wine is shipped either from their licensed premise, or a licensed warehouse. The wine is then shipped, and a shipping notification is sent back to both the seller and the TPP. Following shipping notification, payment is captured.

Criteria # 5: Payment and Disbursement
What the Advisory says: “The control of funds from a transaction involving the sale of alcoholic beverages constitutes a significant degree of control over a licensed business. As such, while a Third Party Provider may act as an agent for the licensee in the collection of funds (such as receiving credit card information and securing payment authorization), the full amount collected must be handled in a manner that gives the licensee control over the ultimate distribution of funds. This means that the Third Party Provider cannot independently collect the funds, retain its fee, and pass the balance on to the licensee. The Third Party Provider should pass all funds collected from the consumer to the licensee conducting the sale, and that licensee should thereafter pay the Third Party Provider for services rendered.”
Best Practice: At the time of transaction, payment is authorized, but not captured. Following shipment notification, payment is captured, and funds settle either directly to the seller, or into a trust account that is controlled by the seller. The funds can then be disbursed to the parties (for advertising fees, fulfillment fees, technology fees, etc.) from the control of the licensed seller.

The new criteria for licensees working with TPPs is a paradigm shift that will work its way through the industry over the next few months. However, we believe that as licensed sellers and TPPs understand the change and put in to place mechanisms to insure they are operating compliantly, the new rules will help both TPPs and licensed sellers operate with certainty, at least in California.

It is important to understand that this new criteria only applies to licensees in California. However, California’s regulatory system often acts as a benchmark for regulators in other states and we will be watching closely to see how other states react to this collaborative effort between the ABC and the working group of industry experts it established to provide recommendations on the issue of TPPs in California. It should be noted that this new CA ABC advisory was issued today in the midst of a meeting of the National Conference of State Liquor Administrators (NCSLA) meeting in San Francisco. So, regulators in most states are now well aware of the new California advisory and the process they used to come to the solution.

In the end, what’s important for licensees working with TPPs to understand is that it is the licensed seller (the winery or retailer) that is ultimately responsible for the actions of the Third Party Provider, which makes it in the best interests of the licensee to be sure the TPP understands these new rules and that they are in compliance with them.

TTB Retail Registration

It has been a few years since the Special Occupational Tax was repealed by the US Congress, due to the successful grassroots efforts of WineAmerica and others.  While not required to pay the $500 or $1000 tax, all alcohol retailers are still required to register with TTB.  For more information on what is required please go here:

TTB Retailer Registration FAQ

Mandatory E-Verify Passes House Committee

By Jennifer Montgomery

This week, the House Judiciary Committee passed the Legal Workforce Act (HR 2164), introduced by House Judiciary Chairman Lamar Smith (R-TX). The bill would mandate the use of E-Verify for all US employers. Administered by the Department of Homeland Security, E-Verify is an Internet-based system used by businesses to determine the eligibility of their employees to work in US. The Agriculture Coalition for Immigration Reform (ACIR), including WineAmerica, has repeatedly expressed its concerns to Congress over the inaccuracies of the E-Verify program, as well as concerns about passing this legislation without a provision to address the agricultural labor shortage.   

During the hearing, Rep. Dan Lungren (R-CA), co-chair of the Congressional Wine Caucus, offered an agriculture labor amendment, but it was struck down by the committee. The legislation contained a three-year waiver for the agriculture industry, but it was stripped from the bill in this week’s committee action as well. This means that HR 2164 will go to the floor of the House of Representatives with no provisions addressing the unique labor needs of agriculture. This is a development that will make the bill more difficult to pass in the House and more unlikely to pass the Senate.

Additionally, Chairman Smith plans to hold a hearing on a separate agriculture labor bill, the American Specialty Agriculture Act. Its prospects for passage are not known at this point.

We will keep you advised as the process moves forward.

TTB Issues New Guidance for "Personalized Labels"

By Michael Kaiser

The TTB has issued updated guidelines for the approval of "personalized labels".  In the past the TTB had allowed "templates" to be submitted for personalized labels.  Meaning, the required information for the wine would be on the label, but the artwork could change. This allowed a winery to submit one label for many events, rather than having to submit a separate label for weddings, birthday, etc.  A few years ago, the TTB started requiring new COLA submittals for any possible change in artwork.  That meant that a winery would need to submit COLAs for any specific event they might do.  This lead to increased work for wineries as well as the TTB.

Due to the dramatically increased turnaround times for COLA approvals, the TTB has now gone back allowing for a "template" for personalized labels.  The standard is as follows:

In addition, the application must contain in item 19 of the paper application, or in the special wording section found in Part II/Step 2 in COLAs Online, a description of the specific personalized information that may change. For example, the application may state: “The graphics, salutations, dates, and artwork presented on this label may be changed to personalize this label.” For bottles etched with personalized information, the application must also indicate in item 19 of the paper application or in the special wording section found in Part II/Step 2 in COLAs Online that personalized information will be etched on the bottle. The label submitted with the COLA may contain a “blank” area where customized artwork or information will appear when the actual labels are printed.

Additionally all personalized labels will be approved with this qualification:

The approval of this COLA covers this label and any additions, deletions or changes in graphics, salutations,  congratulatory dates and names, and artwork to personalize the label as indicated on the application. This approval to change the personalizing information does not permit the addition of any information that discusses either the alcohol beverage or characteristics of the alcohol beverage or that is inconsistent with or in violation of the provisions of 27 CFR parts 4, 5, 7or 16, as applicable, or any other applicable provision of law or regulations.

This is a step in the right direction for speeding up COLA turnaround times and WineAmerica suggested to TTB on numerous occasions to go back to template approvals for personalized labels.  We applaud TTB for taking this step.

If you have any questions please feel free to contact us and if you wish to read the entire release from TTB it can be found here:

Public Guidance for Personalized Labels