Revision of American Viticultural Area Regulations, 3489-3502 [2011-1138]
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Federal Register / Vol. 76, No. 13 / Thursday, January 20, 2011 / Rules and Regulations
DATES:
This rule is effective January 20,
2011.
FOR FURTHER INFORMATION CONTACT:
Cindy L. Burnsteel, Center for
Veterinary Medicine (HFV–130), Food
and Drug Administration, 7500 Standish
Pl., Rockville, MD 20855, 240–276–
8341, e-mail:
cindy.burnsteel@fda.hhs.gov.
Norbrook
Laboratories, Ltd., Station Works,
Newry, BT35 6JP, Northern Ireland,
filed NADA 141–312 that provides for
veterinary prescription use of
HEXASOL (oxytetracycline and flunixin
meglumine) Injection for the treatment
of bacterial pneumonia associated with
Pasteurella spp. and for the control of
associated pyrexia in beef and nonlactating dairy cattle. The application is
approved as of November 29, 2010, and
the regulations in part 522 (21 CFR part
522) are revised by adding 21 CFR
522.1664.
In accordance with the freedom of
information provisions of 21 CFR part
20 and 21 CFR 514.11(e)(2)(ii), a
summary of safety and effectiveness
data and information submitted to
support approval of this application
may be seen in the Division of Dockets
Management (HFA–305), Food and Drug
Administration, 5630 Fishers Lane, rm.
1061, Rockville, MD 20852, between
9 a.m. and 4 p.m., Monday through
Friday.
Under section 512(c)(2)(F)(ii) of the
act (21 U.S.C. 360b(c)(2)(F)(ii)), this
approval qualifies for 3 years of
marketing exclusivity beginning on the
date of approval.
The Agency has determined under 21
CFR 25.33 that this action is of a type
that does not individually or
cumulatively have a significant effect on
the human environment. Therefore,
neither an environmental assessment
nor an environmental impact statement
is required.
This rule does not meet the definition
of ‘‘rule’’ in 5 U.S.C. 804(3)(A) because
it is a rule of ‘‘particular applicability.’’
Therefore, it is not subject to the
congressional review requirements in
5 U.S.C. 801–808.
SUPPLEMENTARY INFORMATION:
PART 522—IMPLANTATION OR
INJECTABLE DOSAGE FORM NEW
ANIMAL DRUGS
1. The authority citation for 21 CFR
part 522 continues to read as follows:
■
■
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27 CFR Parts 4, 9, and 70
2. Add § 522.1664 to read as follows:
RIN 1513–AB39
§ 522.1664
Oxytetracycline and flunixin.
(a) Specifications. Each milliliter (mL)
of solution contains 300 milligrams (mg)
oxytetracycline base as amphoteric
oxytetracycline and 20 mg flunixin base
as flunixin meglumine.
(b) Sponsor. See No. 055529 in
§ 510.600(c) of this chapter.
(c) Related tolerances. See §§ 556.286
and 556.500 of this chapter.
(d) Conditions of use cattle—(1)
Amount. Administer once as an
intramuscular or subcutaneous injection
of 1 mL per 22 pounds (lb) body weight
(BW) (13.6 mg oxytetracycline and
0.9 mg flunixin per lb BW) where
retreatment of calves and yearlings for
bacterial pneumonia is impractical due
to husbandry conditions, such as cattle
on range, or where their repeated
restraint is inadvisable.
(2) Indications for use. For the
treatment of bacterial pneumonia
associated with Pasteurella spp. and for
the control of associated pyrexia in beef
and nonlactating dairy cattle.
(3) Limitations. Federal law restricts
this drug to use by or on the order of
a licensed veterinarian. Discontinue
treatment at least 21 days prior to
slaughter of cattle. Do not use in female
dairy cattle 20 months of age or older.
Use in this class of cattle may cause
milk residues. A withdrawal period has
not been established in preruminating
calves. Do not use in calves to be
processed for veal. Use of dosages other
than those indicated may result in
residue violations.
Dated: January 11, 2011.
Bernadette Dunham,
Director, Center for Veterinary Medicine.
[FR Doc. 2011–1040 Filed 1–19–11; 8:45 am]
BILLING CODE 4160–01–P
Therefore, under the Federal Food,
Drug, and Cosmetic Act and under
authority delegated to the Commissioner
of Food and Drugs and redelegated to
the Center for Veterinary Medicine, 21
CFR part 522 is amended as follows:
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Alcohol and Tobacco Tax and Trade
Bureau
[Docket No. TTB–2007–0068; T.D. TTB–90;
Re: Notice Nos. 78 and 80]
Animal drugs.
16:17 Jan 19, 2011
DEPARTMENT OF THE TREASURY
Authority: 21 U.S.C. 360b.
List of Subjects in 21 CFR Part 522
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Revision of American Viticultural Area
Regulations
Alcohol and Tobacco Tax and
Trade Bureau, Treasury.
ACTION: Final rule; Treasury decision.
AGENCY:
In this Treasury decision, the
Alcohol and Tobacco Tax and Trade
Bureau amends the regulations
concerning the establishment of
American viticultural areas (AVAs). The
changes provide clearer regulatory
standards for the establishment of AVAs
and clarify the rules for preparing,
submitting, and processing viticultural
area petitions.
DATES: Effective Date: This final rule is
effective on February 22, 2011.
FOR FURTHER INFORMATION CONTACT: Rita
D. Butler, Regulations and Rulings
Division, Alcohol and Tobacco Tax and
Trade Bureau, 1310 G Street, NW., Suite
200–E, Washington, DC 20220;
telephone: 202–453–2101.
SUPPLEMENTARY INFORMATION:
SUMMARY:
Background
TTB Authority
Section 105(e) of the Federal Alcohol
Administration Act (FAA Act), 27
U.S.C. 205(e), authorizes the Secretary
of the Treasury to prescribe regulations
for the labeling of wine, distilled spirits,
and malt beverages. The FAA Act
provides that these regulations should,
among other things, prohibit consumer
deception and the use of misleading
statements on labels, and ensure that
labels provide the consumer with
adequate information as to the identity
and quality of the product. The Alcohol
and Tobacco Tax and Trade Bureau
(TTB) administers the regulations
promulgated under the FAA Act.
Part 4 of the TTB regulations (27 CFR
part 4) provides for the establishment of
definitive viticultural areas and for the
use of their names as appellations of
origin on wine labels and in wine
advertisements. Part 9 of the TTB
regulations (27 CFR part 9) prescribes
the standards for submitting a petition
to establish a new American viticultural
area (AVA) or to modify an existing
AVA, and it contains a list with
descriptions of all approved AVAs. Part
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70 of the TTB regulations (27 CFR part
70) concerns procedure and
administration and includes, at § 70.701
(27 CFR 70.701), provisions regarding
rulemaking procedures.
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Definition
Section 4.25(e)(1)(i) of the TTB
regulations (27 CFR 4.25(e)(1)(i)) defines
a viticultural area for American wine as
a delimited grape-growing region
distinguishable by geographic features,
the boundaries of which have been
recognized and defined in part 9 of the
TTB regulations. These AVA
designations allow vintners and
consumers to attribute a given quality,
reputation, or other characteristic of a
wine made from grapes grown in an area
to its geographic origin. The
establishment of viticultural areas
allows vintners to describe more
accurately the origin of their wines to
consumers and helps consumers to
identify wines they may purchase.
Establishment of a viticultural area is
neither an approval nor an endorsement
by TTB of the wine produced in that
area.
Current AVA Petition Process
Section 9.3 of the TTB regulations
(27 CFR 9.3) sets forth the current
procedure and standards for the
establishment of AVAs. Paragraph (a) of
that section states that TTB will use the
rulemaking process based on petitions
to establish AVAs received in
accordance with §§ 4.25(e)(2) and
70.701(c). Paragraph (b) of § 9.3
provides that a petition for the
establishment of an AVA must contain
the following:
• Evidence that the name of the
viticultural area is locally and/or
nationally known as referring to the area
specified in the application;
• Historical or current evidence that
the boundaries of the viticultural area
are as specified in the application;
• Evidence relating to the
geographical features (climate, soil,
elevation, physical features, etc.) which
distinguish the viticultural features of
the proposed area from surrounding
areas;
• The specific boundaries of the
viticultural area, based on features
which can be found on United States
Geological Survey (U.S.G.S.) maps of
the largest applicable scale; and
• A copy of the appropriate U.S.G.S.
map(s) with the boundaries prominently
marked.
Notice of Proposed Rulemaking
On November 20, 2007, TTB
published a notice of proposed
rulemaking, Notice No. 78, in the
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Federal Register (72 FR 65261) setting
forth, among other things, a revision of
subparts A and B of part 9. The original
comment period closing date of January
22, 2008, was extended an additional 60
days in Notice No. 80, published in the
Federal Register (72 FR 71290) on
December 17, 2007.
In Notice No. 78, TTB and Treasury
stated that a comprehensive review of
the AVA program was warranted in
order to maintain the integrity of the
program. We considered the impact that
the establishment of an AVA can have
on the use of existing brand names. In
this regard, we stated that we did not
believe it to be appropriate for a
government agency to choose between
competing commercial interests, in the
context of the labeling provisions of the
FAA Act, where a conflict exists
between a proposed AVA name and an
established brand name used on a wine
label approved by TTB, if such choices
can be avoided.
We also noted that there has been an
increase in the number of petitions for
the establishment of new AVAs within
already existing AVAs. Since
recognizing the existence of an AVA is
based on the idea that the defined area
is unique for viticultural purposes with
reference to what is outside it, we stated
that preserving the integrity of the AVA
program warrants clarifying the
standards concerning the establishment
of new AVAs within existing AVAs.
Finally, we believed that there was a
need to explain and clarify the AVA
petition submission and review process
and to clearly state the existing
authority to deny, and the grounds for
denying, an AVA rulemaking petition.
AVA Name and Brand Name Conflict
As we stated in Notice No. 78, the
designation of a new AVA can create a
conflict with existing brand names. This
conflict can arise because a brand name
that includes an approved AVA name
may not be used unless at least 85
percent of the wine is derived from
grapes grown within the boundaries of
the AVA. See 27 CFR 4.25(e)(3).
Moreover, TTB prohibits the use of
misleading brand names (27 CFR 4.33),
and also prohibits brand names that
tend to create the impression that the
wine is entitled to bear a designation
recognized by TTB unless the wine
meets the requirements for that
designation (27 CFR 4.39(a)(8)). The
establishment of a new AVA could also
give rise to a misleading impression
regarding the provenance of a wine that
carries a known brand name similar to
the AVA name but that does not meet
the 85 percent requirement that applies
to AVA name usage, thereby not
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providing the consumer with adequate
information as to the identity and
quality of the wine and creating
confusion for consumers.
TTB noted in Notice No. 78 that the
effect of the current regulatory
provisions is to give precedence to the
establishment of an AVA over the use of
a brand name on a previously approved
label. This precedence is derived from
the combined effect of the appellation of
origin and geographic brand name
requirements of 27 CFR 4.25(e) and
4.39(i)(1). If a wine is not eligible for
labeling with the viticultural area name
and that name appears in the brand
name, then the label would not be in
compliance with TTB regulations and
TTB would require the bottler to obtain
approval of a new label with a new
brand name in order to market it.
Therefore, vintners are on notice that
the decision to establish a brand name
having geographical significance could
result in the continued use of that brand
name being restricted or prohibited by
the subsequent establishment of an AVA
using an identical or similar name.
Whenever possible, however, TTB
works with petitioners to amend
petitions in order to limit the adverse
impact on established brand names
because established brand names have
value to label holders, the sudden use
of a new AVA name on labels instead
of a long-established brand name may
be confusing to consumers, and the
AVA process can be used intentionally
as a method of limiting competition
from pre-existing brand name holders.
AVAs Within AVAs
Notice No. 78 noted that, in recent
years, TTB has received an increasing
number of petitions that propose a
boundary change to an existing AVA,
the establishment of an AVA entirely or
partially within an existing AVA, or the
establishment of a new, larger AVA that
would encompass all of one or more
existing AVAs. Such petitions can
create the appearance of a conflict or
inconsistency because, with reference to
the criteria set forth in § 9.3(b), the new
petition might draw into question the
accuracy and validity of the evidence
presented in support of the
establishment of the existing AVA or the
legitimacy of the justification for
establishing a new AVA. For example,
with reference to the boundary
description and the geographical
features criteria, a change in an existing
AVA boundary, or the adoption of a
new AVA within an existing AVA,
could suggest that the original boundary
was improperly drawn or that there is
no unity or consistency in the features
of the existing AVA that give it a unique
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and distinctive identity in a viticultural
sense.
Further, we noted in Notice No. 78
that when a new AVA is established
entirely within an existing AVA,
depending on the unique facts
presented in each AVA petition, an
argument could be made that the
smaller AVA is, by its very existence,
distinct from the AVA that surrounds it,
with the result that wine produced
within it should not be labeled with the
name of the larger AVA.
Petition Submission and Review Process
In Notice No. 78, we noted that the
part 9 regulations could more
completely describe the submission and
review process, including the various
actions that TTB may take at each stage
of the AVA petitioning procedure.
Under TTB’s current AVA petition
process, we process all AVA petitions
that are submitted to us. TTB’s practice
is to work with the petitioner both
before and after submission of the
petition to ensure that it contains all
necessary information. TTB specialists
spend considerable time reviewing the
petition, contacting the petitioner, and
requesting missing evidence from the
petitioner. In some cases, deficient
petitions are returned to the petitioner
for revision and resubmission. Only
after the petition is perfected (that is, it
appears to contain all of the information
required under § 9.3) do we proceed
with preparation of an appropriate
rulemaking document. As we noted in
Notice No. 78, as a general rule, the
practice of TTB has been to accept the
information provided by the petitioner
in a perfected petition with the
assumption that the information
provided is correct. TTB does not
conduct a detailed, separate
investigation of the validity of the
petition evidence at that point. To
confirm or refute the information
provided by the petitioner, TTB has
relied on comments provided in
response to the published notice of
proposed rulemaking (NPRM).
We also noted in Notice No. 78 that
whereas the TTB regulations in part 9
speak in terms of what an AVA petition
must contain, they do not clearly reflect
the fundamental administrative
principle that the authority to grant
carries a concomitant authority to deny
an AVA petition. We have come to
realize that some believe that all that is
necessary to successfully petition for the
establishment of an AVA is to submit a
petition with evidence under the terms
of § 9.3(b).
We also noted that TTB has authority
not to initiate rulemaking, or not to
approve the petitioned-for AVA action
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after publication of a proposal, for any
one of a number of reasons, such as:
• The evidence submitted with the
petition does not adequately support
use of the name proposed for a new
AVA;
• The evidence of distinguishing
features submitted with the petition
does not support drawing or redrawing
the AVA boundary as proposed;
• The extent of viticulture within the
proposed boundary is not sufficient to
constitute a grape-growing region within
the intendment of the AVA program; or
• Approval of a proposed new AVA
would be inconsistent with the purpose
of the FAA Act, contrary to another
statute or regulation, or otherwise not in
the public interest.
Summary of Proposed Changes
In Notice No. 78, TTB proposed to
amend three provisions within part 4 of
the TTB regulations that concern AVAs,
to revise subparts A and B of part 9 of
the TTB regulations, to amend various
sections within subpart C of part 9, and
to amend one provision within part 70
of the TTB regulations.
Part 4 Amendments
To permit the establishment of an
AVA and at the same time mitigate the
impact on existing brand labels which
contain terms that would be
viticulturally significant if the proposed
AVA was established, TTB proposed in
Notice No. 78 to amend § 4.39(i) of the
TTB regulations (27 CFR 4.39(i)) by
adding a new ‘‘grandfathering’’ standard
that would apply in the case of AVAs
established after adoption of the final
rule in this matter and that would be
based on a specified number of years
that an affected Certificate of Label
Approval (COLA) had been issued and
that the brand label had been in actual
commercial use prior to receipt by TTB
of a perfected AVA petition.
By way of background, Notice No. 78
noted that at the beginning of the AVA
program, TTB’s predecessor agency and
Treasury adopted § 4.39(i) to permit the
continued use of brand names that had
been used in COLAs issued before July
7, 1986, subject to application of any
one of three conditions. This original
‘‘grandfather’’ approach was intended to
protect brand names that had existed
prior to the development of the AVA
program. This solution did not
specifically address conflicts between
AVAs and brand names in COLAs that
came into existence after July 7, 1986,
although it effectively put all vintners
on notice that the use of a brand name
with geographic significance could later
be restricted by the establishment of a
viticultural area.
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While TTB in Notice No. 78 noted its
intention to continue to work with
future AVA petitioners to limit the
adverse impact on established brand
names, TTB also recognized that
sometimes it would not be possible to
amend a petition to achieve this result.
To address this possibility, TTB
proposed a new grandfathering
standard.
In addition, we proposed in Notice
No. 78 to update two provisions within
§ 4.25(e) and conform them to the
proposed changes to part 9 described
below.
Part 9 Amendments
Notice No. 78 proposed to revise
subparts A and B of part 9 to clarify the
operation of the AVA petition and
rulemaking process by explaining how a
petitioner must submit an AVA petition
to TTB, by setting forth with
considerably greater specificity what
information a petition must contain, and
by explaining how TTB would process
these petitions. In addition to setting
forth standards for the establishment of
an AVA, the proposed amendments
addressed the requirements for
proposed boundary and name changes
to existing AVAs to ensure that an AVA
proposal published by TTB to change an
existing AVA (for example, a boundary
expansion) would have adequate
supporting evidence. The specification
of requirements for boundary changes
was proposed to ensure that TTB
receives petitions that conform to AVA
regulatory standards rather than to
considerations that are not central to the
AVA concept.
The proposed regulatory language
also reflected the principle that TTB
may decide not to proceed with
rulemaking after receipt of a petition, in
which case TTB would provide an
explanation of the decision to the
petitioner. The proposed amendments
also specifically delineated the
authority of TTB to decide not to
proceed with approval of the petitionedfor AVA action after publication of the
NPRM. The proposed regulatory
amendments attempted to make a clear
distinction between the petition process
and the rulemaking process, because a
decision not to go forward may be made
at either stage.
The proposed amendments in subpart
C involved the addition of statements
regarding the viticultural significance of
names of previously established AVAs,
or notable portions of those names, for
wine labeling purposes under part 4 of
the TTB regulations. TTB stated in
Notice No. 78 that these amendments
were consistent with the practice
employed by TTB over the past several
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years of including a second sentence in
paragraph (a) of each section covering a
new AVA, to specify what is
viticulturally significant as a result of
the establishment of the AVA. While in
many cases only the full name of the
AVA was specified in each of the
subpart C amendments proposed in
Notice No. 78, in some instances a
portion of the name was also identified
as viticulturally significant if, based on
TTB’s label approval practice, its use on
a label could be taken to represent the
full AVA name. We specifically invited
comments on whether any existing
labels would be at risk if the proposed
amendments were adopted as a final
rule.
Comments Invited on the Regulatory
Proposals
In Notice No. 78, TTB invited
interested parties to comment on the
proposed rulemaking and regulatory
texts. In addition, we invited comments
on the following specific questions:
1. Whether additional or different
standards should apply to the
establishment of an AVA; for example,
whether there should be a requirement
that a specified percentage of the land
mass of the proposed AVA be involved
in viticultural activities.
2. Whether in some or all cases the
establishment of a smaller AVA located
within the boundaries of a larger AVA
should result in a prohibition against
the use of the larger AVA name on wine
labels.
3. Whether the use of a ‘‘grandfather’’
provision to avoid conflicts between an
established brand name and the
establishment of a proposed AVA is
appropriate.
4. Whether the terms of the proposed
‘‘grandfather ’’ provision are appropriate
and, if so, what time periods should
apply to establish commercial use of the
brand name involved in a conflict.
5. Whether it would be more
appropriate to adopt an alternative to
the ‘‘grandfather’’ provision proposed
that would apply to brand names that
have longstanding commercial use
under one or more existing certificates
of label approval without specifying a
time period.
6. What type of dispelling information
would prevent consumers from being
misled as to the origin of the wine when
a ‘‘grandfather’’ provision applies. Other
comments for a requirement on
dispelling information were encouraged.
Comments Received and TTB Analyses/
Responses
TTB received 191 comments in
response to Notice No. 78. The table
below summarizes who submitted
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comments and the number of comments
submitted.
Who submitted
comments
Number of
comments
Federal Government .................
State Government ....................
Local Government ....................
Wine Industry Members ...........
Interest Groups/Trade Organizations ...................................
Concerned Citizens ..................
Other .........................................
2
2
6
88
Total ...................................
191
31
48
14
In the category of Interest Groups/
Trade Organizations, there were no
consumer groups that submitted
comments. With regard to Concerned
Citizens, it cannot be determined in
what capacity the commenters have
submitted their comments (e.g., as
consumers, or as owners of an alcohol
beverage business).
Twenty-four of the comments
received were either requests for
extension of the Notice No. 78 comment
period or requests that TTB end the
suspension of AVA petition processing
then in place. The latter comments were
submitted in support of the thenproposed Lehigh Valley AVA, which
was established on March 11, 2008, by
T.D. TTB–66 (73 FR 12870). Since the
Notice No. 78 comment period was
extended as requested, the
establishment of the Lehigh Valley AVA
was approved, and the suspension was
ended, these issues have been resolved
as the commenters had requested and
are now moot.
Comments From Government Officials
We received a comment from one U.S.
Senator, a joint comment from two U.S.
Congressional Representatives, and
comments from one California State
Senator and several other California
State and local government officials
concerning Notice No. 78. All of the
commenters expressed general
opposition to Notice No. 78, and a
number of the commenters expressed
opposition to specific portions of the
proposed regulations. All of the
commenters also opposed TTB Notice
No. 77, published in the Federal
Register on November 20, 2007 (72 FR
65256), which proposed the
establishment of a ‘‘Calistoga’’ AVA.
One U.S. Senator’s comment was in
the form of a letter to the Secretary of
the Treasury to ‘‘express my opposition
to the Notices * * * as the actions in
these rules will have a detrimental affect
on the way wine is identified, branded
and labeled in the United States.’’ The
Senator’s comment further noted that
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‘‘California’s wine industry contributes
over $125 billion annually to the
Nation’s economy.’’
Two Members of the U.S. House of
Representatives wrote a joint letter to
the Secretary of the Treasury and the
TTB Administrator to ‘‘express our grave
concern over two Notices * * * which
would significantly and detrimentally
alter the American Viticultural Area
(AVA) system.’’ They further stated,
‘‘Even after the successful establishment
of 189 viticultural areas by rulemaking,
TTB now proposes major changes in
Notices No. 77 and 78 that would have
substantial, complicated and irreparable
consequences for the future of
America’s growing wine industry,
which now contributes over $100
billion a year to our economy.’’ In
addition, they stated, ‘‘We strongly
believe that the existing AVA
regulations have successfully served
their purpose for over twenty years, and
in fact, work very well. These NPRMs
are not needed and are not supported by
the wine industry.’’ Fifty-nine other
Members of Congress also signed the
letter.
A California State Senator submitted
the contents of California Senate Joint
Resolution 22, which she stated was
passed unanimously in the State Senate
and the State Assembly, ‘‘as a statement
of the California Legislature’s concern
and opposition to’’ Notice Nos. 77 and
78. She further stated that the ‘‘Senate
and the Assembly of the State of
California, jointly request the Tobacco
Tax and Trade Bureau to protect and
preserve the ability of California
wineries, as well as all American
wineries, to contribute to the economy
of California and the nation by
withdrawing the Notices.’’
The Secretary of the California
Department of Food and Agriculture
had concerns with our regulatory
proposals, stating, ‘‘The revised
regulations 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.’’ This commenter
also believes that these proposals ‘‘are
far-reaching and could have substantial
and severe consequences for all U.S.
wine regions and wine brands.’’
The city manager of Calistoga,
California, opposed changes (in Notice
Nos. 77 and 78) that would ‘‘eliminate
the common and internationally
understood practice of nesting wine
appellations within larger wine
appellations. Napa Valley is a highly
recognized and respected wine growing
region throughout the world.’’
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The mayor of Paso Robles, California,
opposed the proposed changes in Notice
Nos. 77 and 78, stating that ‘‘the TTB
proposed revisions to the regulations
* * * will undermine decades of work
on the part of the wine industry.’’ He
stated further, ‘‘The effects of these
proposals are far-reaching and will have
substantial and severe consequences to
all U.S. wine regions and wine brands
and to the truth in labeling rights of
consumers.’’ In specific regard to Notice
No. 78, he wrote that it ‘‘threatens to
eliminate the common and
internationally understood practice of
‘nesting’ wine appellations within larger
wine appellations.’’ He also stated that
‘‘this proposal [Notice No. 78] 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
misdescriptive geographic brands on an
ongoing basis and creates loopholes for
a select few.’’ He also stated, ‘‘These
regulations will have a substantial
negative impact on consumer
confidence and compromise the
integrity of the American wine
industry.’’
The chair of the Napa County Board
of Supervisors opposed our proposals in
Notice No. 78, stating, ‘‘The Board also
opposes Notice 78, which would end
the common and internationally
understood practice of ‘nesting’ wine
appellations * * *. Nesting transmits
crucial information to consumers.’’ He
also provided a copy of a Resolution
passed by the board in regard to this
opposition.
The Napa County agricultural
commissioner also opposed our
proposals in Notice No. 78, stating, ‘‘I
also oppose Notice 78, which would
end the common and internationally
understood practice of ‘nesting’ wine
appellations * * *. Nesting transmits
crucial information to consumers.’’
The president of the Napa County
Farm Bureau opposed our proposals in
Notice No. 78, stating that the Bureau,
‘‘[o]pposes the comprehensive and
sweeping AVA regulatory changes
proposed in Notice 78. We do not
support the rolling grandfather date
which supplements [27 CFR] 4.39(i), or
the elimination of the common and
internationally understood practice of
‘nesting’ wine appellations.’’
TTB Response
TTB appreciates the concerns and
reservations these officials have
expressed over our proposed changes to
the AVA regulations. We recognize that
viticulture and wine making are
industries important to the American
economy and are especially important
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to the economy of the State of
California. However, we disagree with
those commenters who suggested that
the regulatory proposals we made in
Notice No. 78 would result in a severe
economic impact or have other
substantial consequences on the wine
industry, and we note in this regard that
no specific data were provided to
support these general statements.
As we stated in Notice No. 78, the
proposals we made were intended to
strengthen the AVA program. As one
commenter pointed out, the regulations
for the establishment of AVAs are over
20 years old. Although these regulations
may have been initially successful in
getting the AVA program ‘‘off the
ground,’’ the regulations have not been
updated to address a number of
procedural and substantive issues or the
problems with AVA petitions that have
arisen over the years. At the time of
publication of Notice No. 78, some of
the AVA issues or petition problems
encountered by TTB were as follows:
• Petitions to create an AVA were
incomplete for numerous reasons.
• Petitions to expand an existing
AVA where the acreage to be added to
the existing AVA has no viticulture and
where no significant viticulture is
planned in the near future.
• Petitions to expand an existing
AVA for the purpose of including
adjacent viticultural acreage, with no
evidence that the expansion area has
any geographical features in common
with the existing AVA.
• Petitions to expand an existing
AVA for the purpose of including
adjacent viticultural acreage where the
evidence submitted clearly shows that
the geographical features of the adjacent
acreage are incompatible with those of
the existing AVA.
• Petitions from separate petitioners
to create an AVA within an existing
AVA where their respective requests are
inconsistent with each other because
they provide conflicting geographical
features evidence for the same area.
• Petitions where the proposed AVA
name conflicted with the brand names
on existing labels.
Based on the issues and problems
outlined above, we believe that the AVA
program has not operated as well as
some of these commenters suggest, and
that the current part 9 regulations do not
provide sufficient clarity and
transparency regarding the AVA
petition and approval process and
regarding the manner in which TTB
exercises its authority in that process.
The part 9 proposals set forth in Notice
No. 78 were not a radical departure from
the current regulatory standards but
rather were a necessary elaboration on
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those standards in order to clarify
existing petition requirements and
existing TTB authority regarding the
processing of AVA petitions. Since the
comment period closed on this proposal
on March 20, 2008, TTB has continued
to process AVA petitions and to publish
proposed and final regulatory actions
with respect to petitions submitted.
However, TTB continues to encounter
the issues and problems described
above and therefore, TTB believes that
the need for the proposed regulations
remains.
With regard to the comments
opposing the proposed Calistoga
viticultural area, which was the subject
of Notice No. 77, these comments are
outside the scope of this rulemaking and
were addressed in a separate final
rulemaking action specific to Notice No.
77 (see T.D. TTB–83, 74 FR 64602,
December 8, 2009). With regard to the
comments concerning the specific
topics of ‘‘nesting’’ and the proposed
‘‘grandfather provision,’’ we received a
number of other comments concerning
these proposals. We discuss these
additional comments and provide a
response to all the comments received
on these specific issues below.
Other Comments in General Opposition
Fifteen other commenters generally
opposed the proposed revisions,
without detailing that opposition to any
specific provision or issue. For example,
the Wine Institute commented, ‘‘TTB
already has the ability to deal with
complex issues and unanticipated
controversies fairly * * * TTB can issue
policy statements, guidance documents,
and manuals on AVA establishment
with interpretive and procedural
guidelines * * * Wine Institute believes
that these alternatives are preferable
than the proposed regulatory changes,
which could lead to unintended
consequences.’’ This commenter added
that TTB has a 27-year record of
successful AVA rulemaking, is acting
under what appears to be ‘‘an artificial
sense of urgency,’’ and should continue
to use the existing regulations. Other
commenters asserted that the proposed
provisions ‘‘have far reaching
consequences’’ or are ‘‘inconsistent with
fair and sound practices,’’ that
‘‘consumers will not be protected under
the proposed regulations,’’ or that ‘‘the
current regulations do a good job.’’
TTB Response
As explained in detail in Notice No.
78, TTB and Treasury believed that
there were valid reasons for proposing
the regulatory changes. The specific
regulatory proposals were crafted after
much deliberation within TTB and
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Treasury regarding: (1) Our duty to
protect the consumer under the FAA
Act; (2) our desire to be fair to, and to
protect the economic interests of, all
stakeholders; and (3) the long-term
viability and credibility of the AVA
program. We disagree with the
suggestion that these regulations were
developed in haste without substantial
consideration as to their overall impact
on the AVA program. Moreover, these
general statements in opposition were
not accompanied by any supporting
data. Finally, as regards the use of other
alternatives such as policy statements,
guidance, or manuals, these alternatives
are not binding on either the public or
TTB and therefore are inadequate
substitutes for regulatory action.
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Comments on Specific Issues
The remaining 144 comments
addressed one or more of the following
issues:
• Whether a minimum percentage of
landmass should be involved in
viticultural activities for proposed
AVAs;
• Whether the establishment of a
smaller AVA within a larger AVA
should prevent the use of the larger
AVA name;
• Whether the establishment of a
smaller AVA within a larger AVA
(‘‘nesting’’) should be eliminated;
• Whether the proposed new part 4
grandfather provision, or an alternative
grandfather approach, should be
adopted, and if so, what type of
dispelling information is appropriate;
• Whether the procedural provisions
proposed for part 9 should be adopted;
and
• Whether the statements of
viticultural significance proposed for
part 9 are appropriate.
Below are comment summaries and
TTB responses by issue.
Comments on Minimum Percentage of
Landmass
Proposed § 9.12(a)(1), which concerns
name evidence, stated that the name
identified for the proposed AVA ‘‘must
be currently and directly associated
with an area in which viticulture
exists.’’ Also, proposed § 9.14(b)(2)(i)
stated as one of the reasons for
withdrawing a proposal, the fact that the
extent of viticulture within the
proposed boundary ‘‘is not sufficient to
constitute a grape-growing region as
specified in § 9.11(a).’’ However, in the
proposed regulatory texts we did not
specify a minimum requirement for
viticultural activities.
As noted above, in the ‘‘comments
invited’’ section of Notice No. 78, TTB
asked whether there should be a
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requirement that a specified percentage
of the landmass of the proposed AVA be
involved in viticultural activities. Eight
comments specifically addressed this
question—two in favor and six in
opposition.
One commenter in favor of such a
standard wrote:
The need for more reflective AVAs grows
exponentially as the U.S. wine market
expands into the global market. * * * TTB
has invited comments concerning standards
for establishment of an AVA. As to
percentage of land involved in viticultural
activities I would offer the following:
‘‘viticultural activities’’ must be defined. Only
grape growing is space sensitive and thus in
connection with AVAs only vineyards
should be considered viticultural activity. It
is inappropriate for TTB to grant AVA status
to large areas of land not used in viticulture.
This commenter further noted that we
did not define ‘‘viticultural activities’’ in
such a context within Notice No. 78.
Determining that a region be ‘‘known for
grape-growing’’ should be sufficient to
establish the fact that there are existing
viticultural activities occurring in the
area.
The Paso Robles AVA Committee
(PRAVAC), which is comprised of 35
wineries and 25 grape growers, favored
such a standard and wrote, ‘‘TTB may
reasonably require that petitioners
demonstrate some minimum amount of
viticulture in the proposed new area.’’
The PRAVAC requested that ‘‘any such
threshold be fixed as a minimum
acreage planted to vineyard,’’ and
added:
Unless some critical mass of viticulture
exists in an area, it is difficult to identify
which unique features actually do affect the
grapes grown in that region. A minimum
acreage provides an easily ascertainable
standard that also effectively fixes a
minimum size for AVAs, thereby preventing
additional subdivision into miniscule,
vineyard-sized AVAs. Unlike potentially
cultivated land, the existence of which is
subject to individual interpretation, vineyard
acreage is readily visible and easy to
measure.
The remaining commenters who
addressed this topic opposed a standard
that would require a specific percentage
of landmass of a proposed AVA to be
involved in viticultural activities. In this
regard, one of these commenters stated
that ‘‘the purpose of an AVA designation
is to identify a place of special
character,’’ and asked, ‘‘What does
percentage of acreage have to do with
this?’’
Another commenter wrote that ‘‘this
rule change should be considered to be
in restraint of trade and could only be
considered to benefit the established
areas to the detriment of developing
areas. The Government should not be
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penalizing the establishment of new
vineyards.’’
One commenter argued that the
objective of the AVA program is to
allow vintners and consumers to
attribute a given quality, reputation, or
other characteristic of wine made from
grapes grown in an area to its
geographic origin. This person further
stated that the ‘‘percentage of landmass
is not compatible with the objective, nor
does it in any way help the smaller wine
producing areas at all.’’
A commenter on behalf of Triassic
Legacy Vineyards wrote:
The promise of an appellation to entice
wine enthusiasts to purchase the wines is a
major factor in encouraging landowners to
make the huge investment of time energy and
money to become growers and vintners. I
respectfully request that the concept of
requiring that an AVA have some percentage
of total area under viticulture be abandoned.
Finally, a commenter on behalf of
Tablas Creek Vineyard stated:
While density of a plantation is a factor in
determining the importance of an AVA, that
density should be measured against the
available planting acres in the appellation
and not the simple total geographic area. The
economic importance of grape/wine
production to the area should also be noted.
TTB Response
TTB believes that the proposed
regulatory language concerning this
issue should be adopted without
change. As stated in Notice No. 78, one
of the key reasons for proposing changes
to these regulations is to maintain the
integrity of the AVA program, and
requiring a sufficient amount of
viticulture within a proposed AVA is
necessary in order to ensure that
designation of the AVA has meaning.
For example, we do not believe that if
a grape grower plants five acres of
grapes in an area encompassing 10,000
square miles, that amount of viticulture
is sufficient to justify the designation of
an AVA.
On the other hand, for several reasons
TTB does not believe it is appropriate to
establish a specific percentage of
landmass as a requirement for
establishing an AVA. First, TTB
recognizes that often the reason that
petitioners seek AVA designations is to
assist in the marketing of their wines,
and we are concerned that a minimum
percentage of landmass requirement
might overly favor established areas.
Second, although establishing by
regulation a precise minimum
percentage standard would provide an
easy, mechanical method for TTB to
decide whether sufficient viticulture
exists in the proposed AVA, we believe
that such an across-the-board,
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mechanical rule could operate to the
detriment of the AVA program by
discounting the possibility of future
expansion of viticulture within the area.
We believe that where it might appear
that the amount of acreage devoted to
viticulture is too small in comparison to
the size of the proposed AVA, other
relevant factors could exist (such as the
number of vineyards established and
how they are dispersed within the
proposed AVA), which could lead to the
conclusion that the extent of viticulture
within the proposed AVA is sufficient.
TTB recognizes that the lack of
dispersed viticulture in a proposed AVA
could warrant a closer review of the
sufficiency of the distinguishing
geographical features and name
evidence provided in the petition, but
these issues should be reviewed on a
case-by-case basis.
TTB also recognizes that the
regulations require the boundaries to be
delineated based upon certain
distinguishing features, such as climate,
geology, soils, physical features, and
elevation, in addition to the name of the
area. For example, a watershed or ridgeline may provide the best marker to
delimit the area. Sometimes those
features that are common to the area
may far exceed the actual grape-growing
then occurring. Therefore, grapegrowing areas and boundaries based on
geographic features are unlikely to be
exactly alike. The proposed regulatory
texts were intended to underscore the
fundamental principle behind every
AVA petition, that is, that viticulture
already exists within the boundary
proposed for the new AVA, and we
believe that the texts achieve that result.
Finally, we do not agree with the
suggestion that we also consider the
economic importance of grape/wine
production to the area as part of the
analysis of the sufficiency of viticulture
in the proposed AVA. An area may be
known to consumers as a grape-growing
region whether or not grape/wine
production is important to the overall
economy of the area, and, accordingly,
we do not believe adding this
consideration would be appropriate.
Comments on Whether Approval of a
Smaller AVA Should Prevent Use of a
Larger Surrounding AVA Name and
Whether Nesting of AVAs Should Be
Eliminated
In proposed § 9.12(b), which concerns
AVAs within AVAs, we stated:
If the petition proposes the establishment
of a new AVA entirely within, or
overlapping, an existing AVA, the evidence
submitted under paragraph (a) of this section
must include information that both identifies
the attributes of the proposed AVA that are
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consistent with the existing AVA and
explains how the proposed AVA is
sufficiently distinct from the existing AVA
and therefore appropriate for separate
recognition. If the petition proposes the
establishment of a new AVA that is larger
than, and encompasses, all of one or more
existing AVAs, the evidence submitted under
paragraph (a) of this section must include
information addressing whether, and to what
extent, the attributes of the proposed AVA
are consistent with those of the existing
AVA(s). In any case in which an AVA would
be created entirely within another AVA,
whether by the establishment of a new, larger
AVA or by the establishment of a new AVA
within an existing AVA, the petition must
dispel any apparent inconsistency or explain
why it is acceptable. When a smaller AVA
has name recognition and features that so
clearly distinguish it from a larger AVA that
surrounds it, TTB may determine in the
course of the rulemaking that it is not part
of the larger AVA and that wine produced
from grapes grown within the smaller AVA
would not be entitled to use the name of the
larger AVA as an appellation of origin or in
a brand name.
As noted above, in the ‘‘comments
invited’’ section of Notice No. 78, TTB
asked whether in some or all cases the
establishment of a smaller AVA located
within the boundaries of a larger AVA
should result in a prohibition against
the use of the larger AVA name on wine
labels. Twenty-four commenters
specifically address this question—two
in favor of such a prohibition and 22
opposed to it.
One of the two commenters in favor
asserted that more than one AVA on one
wine label is inherently contradictory to
the regulations in proposed § 9.12(b).
This commenter further stated that
nesting ‘‘weakens consumer
understanding of AVAs.’’ Though
opposed to the concept of nesting, this
commenter stated that it is unfair to
change the regulations by not allowing
wine producers to put both the subAVA and larger AVA on its wine labels.
This commenter suggested that TTB
allow wine producers to use sub-AVAs
in conjunction with ‘‘political
appellations.’’
The other commenter in favor of such
a prohibition expressed concern that
some small AVAs within larger AVAs
‘‘are not based on oenological,
environmental, topographical or
historical differences but are intended
for an egotistical or economical basis,
only.’’ For this reason, this commenter
supported the proposed changes
regarding the establishment of an AVA
within another AVA.
Of the 22 comments in opposition to
the proposed regulatory text, many of
them argued, in essence, that an AVA
within a larger AVA makes sense, helps
to better identify and define the wine,
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3495
is already part of the existing AVA
program (many businesses established
and built themselves up based on this
concept), and coincides with other
countries’ practices. For example, one
commenter stated that ‘‘more than threefourths of all existing AVAs are located
inside another AVA * * * AVAs within
AVAs help consumers both better
understand viticultural distinctions that
may exist within a larger AVA and gain
information about the origin and thus
value of a particular wine.’’
Commenters who opposed this
proposal also asserted that it is always
better for the consumer to have more
information about where a wine comes
from. Some pointed out that the use of
the larger, and therefore probably more
well-known, AVA name aids the
consumer in determining where the subAVA is located.
A commenter on behalf of Premier
Pacific Vineyards stated that the
proposals in Notice No. 78 ‘‘will have
tangible negative effects on wine
consumers and the industry.’’ This
commenter further stated, ‘‘Not allowing
producers to list all the information on
the wine’s origin by limiting the
description to a small AVA without
providing the often more familiar larger
AVA, removes useful information from
the consumer. Changing the rules in a
way that makes the origin of wine and
labeling more confusing or less
descriptive represents a disservice to the
consumer.’’
The president of Appellation St.
Helena, which represents 60 wineries
and 7 vineyards, stated that this
provision is ‘‘a huge step backward’’ and
that it ‘‘flies in the face of all of the other
great wine growing regions worldwide
that go to great lengths to encourage
detailed naming of specific places.’’
A commenter affiliated with the
University of California, Davis, wrote
that the ‘‘concept of hierarchical
classification, or nesting finer-scale
places within courser-scale places, is
both global and almost ubiquitous.’’
Further, as an analogy to different levels
for specifying AVAs, several
commenters discussed the classification
system of dogs. These commenters
wrote that a Yorkie is a Terrier which
is a dog. They further stipulated that no
one will refute the fact that though a
Yorkie is not the same as all terriers and
a Terrier is not the same as all dogs,
they are all in fact dogs and therefore
share similar characteristics.
With regard to the companion issue of
whether the nesting of AVAs should be
eliminated, TTB received 36 comments,
all in opposition. Many of these
commenters share the belief that nesting
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is a common worldwide practice that
consumers understand.
One of these commenters stated:
An AVA contained within a larger AVA is
and should remain part of the larger AVA
* * * Informed consumers already
understand that viticultural distinctiveness is
measured at multiple levels. Most major wine
producing countries recognize this fact and
formally incorporate varying levels of
viticultural distinctiveness into their
regulations. For example, Australia’s
regulations describe zones, regions, and subregions, all of which are geographical
indications of the source of grapes, which,
like AVAs, contain no quality controls or
quality connotations, but which require a
showing of varying levels of viticultural
distinctiveness; Chile has regions and subregions; and in France, the Burgundy and
Bordeaux appellations are divided into
districts, communes and even smaller
appellation areas. Formal regulatory
recognition of multiple levels of viticultural
distinctiveness exists throughout the world
because such recognition leads to logical,
organized and understandable appellations of
origin and, ultimately, well-informed
consumers. In none of these countries are
smaller AVAs carved out from surrounding,
larger AVAs.
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A commenter on behalf of the
PRAVAC argued that ‘‘every appellation
system in the world utilizes geographic
nesting to specify the origin of wines,
and consumers worldwide are already
familiar with this concept.’’ This
commenter further stated that ‘‘nesting
itself is fundamental to the existence of
a meaningful appellation system * * *
TTB must not enact rules that threaten
this structure.’’
A commenter on behalf of Premier
Vineyards wrote that ‘‘nested or
telescoping AVAs are consistent with
the TTB’s goal of identifying and
defining geographic areas (AVAs) that
have unique geographic features that
result in distinctive grapes and wine.’’
However, another commenter on behalf
of Sonoma County Vintners stated that
‘‘this does not mean that TTB should not
limit overlaps that do not meet the tests
for creating an AVA.’’
TTB Response
TTB believes there is merit in the
comments received asserting that
nesting should not be prohibited, and
that recognition of a smaller AVA
should not by definition prohibit the
use of the viticultural name of the larger
AVA in which it lies. TTB agrees that
consumer interests are served by greater
specificity within a hierarchy, where a
true hierarchy exists.
However, TTB notes that a
determination that a hierarchy of grapegrowing regions based on similar yet
distinguishable geographical features
exists, rather than a situation in which
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an entirely different grape-growing
region lies within another grapegrowing region, must be based on the
facts related to the geographical features
presented in the AVA petition under
consideration. The comments received
in response to Notice No. 78 do not
convince us that the mere fact that a
proposed AVA would be located within
an existing AVA is sufficient to allow
the use of either the existing AVA name
or the proposed AVA name, at the sole
discretion of the vintner.
For example, if an existing AVA is
defined as being a large valley and its
distinguishing geographical features are
those that are found on the valley floor,
it may be appropriate to approve a
proposed AVA described as being
situated in whole or in part on the same
valley floor within the existing AVA if
the proposed AVA shares some of the
geographical features with the existing
AVA but at the same time has other
geographical features that are
sufficiently distinctive as to warrant its
own AVA designation. On the other
hand, if within that large valley AVA
there is a mountain on which a
petitioner proposes to establish a new
AVA above the 500-foot elevation line,
the evidence provided in the petition
might demonstrate that the
distinguishing features of the proposed
AVA bear no relationship to those of the
valley floor. In the latter case, the new
petition has demonstrated that this is
not a hierarchical situation involving
some sharing of common features but
rather is a proposal to establish an
entirely distinctive AVA. In such a case,
TTB believes it may be inappropriate to
take a regulatory action that could cause
consumers mistakenly to conclude that
wine produced from grapes grown
within the petitioned-for AVA has the
same characteristics as wine produced
from grapes grown in the existing AVA.
Based on our experience in reviewing
petitions for the establishment of AVAs,
we have found that in the vast majority
of cases petitioners who propose the
establishment of an AVA within an
existing AVA, and who provide
evidence that there are sufficiently
distinguishable geographical features in
the proposed AVA to warrant its
recognition, can also establish through
the evidence submitted that the
proposed AVA has some geographical
features that are sufficiently similar to
those of the existing AVA so as to allow
it still to be considered a part of the
existing AVA. In those very rare
instances in which no notable common
geographical features between the two
AVAs can be found, we believe that
permitting the use of both AVA names
for wine sourced from the grapes grown
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within the proposed AVA could be
misleading to the consumer, and it
would not be appropriate for TTB to
take regulatory action which would
produce that result.
After careful consideration of the
comments submitted, TTB has
determined that it would be
inappropriate to adopt regulatory
language that prohibits future approvals
of AVAs that entirely surround or lie
entirely within, or that overlap, existing
AVAs, provided such approvals are
adequately justified through petition
evidence and rulemaking procedures.
TTB also believes that the decision as to
whether or not a proposed AVA that
entirely surrounds, lies entirely within,
or overlaps, an existing AVA should
prohibit label holders from using the
existing AVA name on the wine labels
as well should be made on a case-bycase basis considering the evidence
submitted by the proposing AVA
petitioner. The regulatory language as
proposed in Notice No. 78 is consistent
with these principles and will afford
sufficient flexibility under the case-bycase approach. TTB notes the intent of
the provisions dealing with AVAs
within AVAs is to apply it prospectively
to newly established areas only. AVAs
already established within AVAs will
not be affected by these provisions.
Comments on the New Part 4
Grandfather Provision
The text proposed in Notice No. 78 for
new § 4.39(i)(3) stated:
(3) Brand names that do not meet the
requirements of paragraph (i)(2) of this
section and that contain the name of a
viticultural area or other term of viticultural
significance established under part 9 of this
chapter on or after [INSERT EFFECTIVE
DATE OF FINAL RULE] may be used in
conjunction with information which the
appropriate TTB officer finds to be sufficient
to dispel the impression that the geographic
area suggested by the brand name is
indicative of the origin of the wine, provided
that the brand name:
(i) Was used in an existing certificate of
label approval issued prior to the 5-year
period immediately preceding receipt of the
perfected petition for establishment of the
viticultural area; and
(ii) Was in actual commercial use on labels
for at least 3 years during that 5-year period.
As noted above, in the ‘‘comments
invited’’ section of Notice No. 78, TTB
asked whether the use of a grandfather
provision to avoid conflicts between an
established brand name and the
establishment of a proposed AVA is
appropriate. Of the 191 comments
received, 107 comments specifically
addressed this issue—2 in favor of using
such a grandfather provision and 105
opposed to its use.
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A commenter on behalf of
Compliance Service of America, whose
services include the preparation and
filing of AVA petitions, stated in favor
of the grandfather provision, ‘‘It is
understandable the TTB sees this
problem and its effect more completely
than many industry members, because
TTB has been forced to find the
solutions for the competing interests of
the parties.’’ This commenter further
stated, ‘‘The problem of conflicts
between new AVAs and existing brands
continues to exist and is becoming even
more prevalent as more * * * AVAs are
created. With the growth of the US wine
industry and the proliferation of AVAs,
conflicts will only become more
frequent, and will continue to be
devastating to wineries that have
literally put the viticultural area on the
map.’’ This commenter cited the
petitioned-for Eola Hills AVA as an
example, pointing out that Eola Hills
Winery developed the region as a grapegrowing region and essentially created
the viticultural significance of the name
Eola Hills. The commenter asserted that
the establishment of the AVA would
have had an adverse impact on the use
of the winery’s brand name and noted
that the problem was narrowly avoided
by adding a modifier to the AVA name
so that the AVA name established is
Eola-Amity Hills.
A commenter representing Calistoga
Partners, L.P., also in favor of the
grandfather provision, wrote:
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We believe that TTB’s proposed
rulemaking in Notice No. 78 is
fundamentally a fair resolution of the
potential conflicts between the rights of
brand owners who had brand names in actual
commercial use based on existing certificates
of label approval and the rights of those who
wish to establish a new AVA, and represents
a reasonable compromise that we would
strongly support.
Most of the 105 commenters who
opposed the grandfather provision
wrote that they believe the proposed
provision would allow misleading,
confusing, and/or deceptive wine labels
in the marketplace and thereby harm
consumers. Many of these commenters
further asserted that the grandfather
provision will have far reaching
consequences that will degrade the
integrity of the AVA system. A number
of these commenters specifically
referred to the issues discussed in
Notice No. 77, regarding the proposed
establishment of a Calistoga viticultural
area, as an example of problems that a
grandfather provision can create.
The president of the Washington
Wine Institute wrote that the
grandfather proposals put forth in
Notice No. 78 ‘‘are not sufficient to
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protect against deceptive labeling and
consumer misunderstanding; in fact,
they are a step backwards from both
industry and governmental efforts to
provide consumers with accurate and
comprehensible information about the
wine in the bottle.’’
The commenter on behalf of the
PRAVAC wrote:
Current law applies two different sets of
labeling rules for the industry: One set of
rules applies to geographic brands used in
COLAs issued prior to July 7, 1986, and a
different set—the labeling rules set forth in
the current regulations—governs every other
geographic brand in the U.S. marketplace.
While not a perfect solution, at least these
two groups are easily identifiable and not
subject to change. The number of
grandfathered brands with misdescriptive
names is finite, thus limiting the chances for
consumer deception.
This commenter further stated that
the proposed changes to the regulations
would create three sets of labeling rules:
(1) For brands on COLAs issued prior to
July 7, 1986; (2) for geographic brands
used on COLAs issued at least 5 years
prior to the date on which a petition for
a conflicting AVA is ‘‘perfected’’ that
also have been used in commerce for at
least 3 of those 5 years; and (3) for
brands on COLAs that do not fall into
either of the preceding categories. This
commenter added that ‘‘this solution is
inadvisable.’’ This commenter also
provided an example of a name conflict
involving a petitioned-for AVA within
the Paso Robles AVA, the proposed El
Pomar District AVA, which was
resolved with the owners of the
potentially conflicting COLAs by their
consenting to the use of the proposed
AVA name prior to submission of the
petition.
The president of the industry trade
association Wine America, wrote:
The grandfathering clause would allow
already existing geographic brand names that
contain a reference to a new AVA to continue
to be used as long as they were on a COLA
approved at least five years before filing of
an AVA petition and have been in actual
commercial use for at least three years of
those five years. This change in regulation is
driven by concern that petitioners may
propose AVAs to limit competition to the
detriment of established businesses.
This commenter added that this
proposal ‘‘creates consumer confusion, it
undermines the value of the appellation
for wineries properly using the
appellation, and we believe the TTB has
sufficient authority to resolve such
conflicts through other means.’’
The president of the board of directors
for the Napa Valley Vintners trade
association raised concern on the issue,
stating:
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This proposed rule requiring five years of
ownership of COLA and three years of use in
commerce * * * is contrary to TTB’s
consumer protection mandate set under the
FAA Act. It has no basis in, and is contrary
to, recognized trademark and unfair
competition law and does not comport with
the provisions of Article 23 of the Agreement
on Trade-Related Aspects of Intellectual
Property Rights * * *. As mandated by the
FAA Act, TTB’s primary function in the
regulation of wine labeling is to protect
consumers by ensuring that they are not
misled. The proposed grandfather rule in
Notice No. 78 is contrary to this
Congressional mandate.
Many of the commenters indicated
that they believe the current regulations
in existence for more than 20 years are
fair to all concerned and do not believe
it is fair to change this provision now
because industry members have been
playing by these rules for 20 plus years.
Several commenters pointed to TTB’s
regulations, which prohibit the use of
misleading and deceptive labeling.
Other commenters pointed out that TTB
has the responsibility to protect the
public from misleading labels.
One commenter further asserted that
the grandfather provisions are not in
line with the FAA Act. This commenter
pointed to the TTB regulations that
outline the label revocation procedure
set forth in 27 CFR part 13, subpart D.
In discussing the establishment of this
procedure, this commenter stated that
TTB made the following observation,
‘‘Paragraph 1 of Form 5100.31
[Application for and Certification/
Exemption of Label/Bottle Approval]
does not constitute trademark
protection.’’
A commenter on behalf of the
International Trademark Association
wrote:
[The] proposal advocated by TTB fails to
properly consider the principle of ‘‘first in
time, first in right’’ priority and the fact that
U.S. trademark and unfair competition laws
recognize the establishment of rights in
trademarks and geographical indications
based on use and consumer recognition
without the necessity of any type of
registration. Accordingly, the grandfather
proposal advocated in NPRM No. 78, and
effectively applied in NPRM No. 77, does not
ensure that the valid rights of either
trademark owners or the users of
geographical indications or the interest of
consumers, will be protected.
As noted above, in the ‘‘comments
invited’’ section of Notice No. 78, TTB
asked whether it would be more
appropriate to adopt an alternative to
the grandfather provision that would
apply to brand names that have
longstanding commercial use under one
or more existing certificates of label
approval without specifying a time
period. Four commenters specifically
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responded to this question—all in
opposition to the use of such an
alternative.
Also as noted above, in the
‘‘comments invited’’ section of Notice
No. 78, TTB asked for comments on
what type of dispelling information
would prevent consumers from being
misled as to the origin of the wine when
a grandfather provision applies as well
as for other comments for a requirement
on dispelling information. Twenty-two
commenters specifically responded to
this comment solicitation, all in
opposition to using dispelling
information to avoid misleading
consumers.
Several of these commenters stated
that disclaimers will not be effective in
avoiding the misleading of consumers
when consumers are purchasing wine
from a wine list in a restaurant or
online. For example, the Napa Chamber
of Commerce believes that ‘‘disclaimers
hidden on back labels do not help
consumers make informed choices
when choosing from a wine list.’’ In
addition, the president of Duckhorn
Wine Company stated that ‘‘additional
wording on the label to help clarify the
origin of wines * * * will not dispel
confusion as most consumers will not
see the label before they order wine in
a restaurant or purchase wine online.’’
Another commenter wrote, ‘‘Consumers
purchasing wine via mail-order or the
Internet * * * purchase wine with
brand names that include wine region
names with the belief that the wine is
from the region identified in the brand
name.’’
Some commenters provided
references to studies that indicate that
dispelling information is not effective in
avoiding consumer deception or
confusion. One commenter stated that
‘‘more frequently courts have found
disclaimers to be ineffective,’’ and that
‘‘[t]his judicial skepticism over
disclaimers is supported by the
scholarly literature’’ such as the article
by Jacob Jacoby and George Szybillo
entitled ‘‘Why Disclaimers Fail.’’ The
commenter noted that ‘‘disclaimers
generally are not likely to be effective
because the information provided does
not automatically translate into the
desired effect, i.e., comprehension.’’
This commenter also added that ‘‘using
a disclaimer or other dispelling label
information to suggest that wine with a
misleading geographic brand name is
not from the place identified * * * will
be ineffective because consumers will
neither read nor absorb the disclaimer
information in the retail purchase
environment.’’
Finally, as noted above, in Notice No.
78 TTB proposed a 5-year/3-year
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standard for applying the proposed new
grandfather provision in § 4.39(i) when
it is not possible otherwise to limit the
adverse impact on established brand
names when a new AVA is approved. In
order for the grandfather provision to
apply to a brand name, the COLA for the
label carrying that brand name must
have been issued at least 5 years prior
to the receipt of the perfected petition
for establishment of the new AVA.
Additionally, the label in question must
have been in actual commercial use for
at least 3 years during that 5-year
period.
A few commenters specifically
opposed this provision. The commenter
on behalf of the International Trademark
Association wrote, ‘‘This 5-year COLA/
3-year in use rule is arbitrary and
capricious and does not reflect any
recognized standard for the acquisition
of trademark rights and does not protect
the rights of trademark owners.’’
TTB Response
The comments in opposition to the
addition of a new grandfather provision
to § 4.39(i), in part, have caused us to
reassess our proposal. In response to the
two comments favoring the grandfather
provision, as noted below, in almost all
cases in which a potential conflict has
arisen between a proposed new AVA
name and a brand name used on a label,
our predecessor agency and we have
been able to find a mutually satisfactory
solution that would permit the
establishment of the AVA with the least
negative impact on current label holders
while also protecting consumers. We
believe that we will continue to be able
to resolve future conflicts this way
without need for a new grandfather
provision. We recognize that there may
be the rare case in which a mutually
satisfactory solution cannot be found. In
such cases we believe that a case-bycase resolution is a better approach than
to create a new grandfather provision as
a default resolution. Moreover, we
believe that adoption of the new
grandfather provision as proposed could
lead to over-reliance on it, thus
unnecessarily increasing the use of
labels that must carry dispelling
information, and could increase the risk
of consumer confusion. Accordingly, we
have determined not to adopt the new
grandfather provision proposed in
Notice No. 78. We reserve
reconsideration of this issue in the
future should circumstances warrant.
In the past, when a conflict has arisen
between an existing approved label and
a proposed AVA name, TTB or its
predecessor agency, the viticultural area
petitioners, and/or the affected label
holders usually have been able to
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satisfactorily resolve the conflict. For
example, we have approved a modified
name for the AVA, as in the case of the
‘‘Oak Knoll District of Napa Valley’’
viticultural area (T.D. TTB–9, 69 FR
8562) and the ‘‘Diamond Mountain
District’’ viticultural area (T.D. ATF–
456, 66 FR 29698), or we have approved
an entirely different name, as in the case
of the ‘‘Chalone’’ viticultural area (T.D.
ATF–107, 47 FR 25519). In these and
similar cases, TTB or its predecessor
agency found that name evidence
supported the use of the modified or
different name, that the modified or
different name was associated with the
proposed viticultural area boundaries,
and that use of the approved name
reduced potential consumer confusion
with long-standing existing labels. The
commenter on behalf of Compliance
Service of America described a similar
circumstance involving the proposed
‘‘Eola Hills’’ name in a comment cited
above.
We have also in some cases
designated new AVAs that limit the use
of existing labels when the affected label
holders have indicated that they
understood the restrictive effect and did
not object to the designation (e.g., ‘‘Lake
Chelan’’ AVA, T.D. TTB–76, published
in the Federal Register at 74 FR 19409
on April 29, 2009). In another case we
withdrew the proposal to establish the
AVA for insufficient name evidence
while acknowledging the principle that
an established brand name could be a
factor in deciding not to establish a
proposed AVA because it would create
consumer confusion (see Notice No. 84,
published in the Federal Register at 73
FR 34902 on June 19, 2008,
withdrawing the ‘‘Tulocay’’ AVA
proposal). And in the recent ‘‘Calistoga’’
AVA case, we resolved the issue by
providing a three-year transitional
period to afford the affected brand name
holders time to adjust their business
models to the new AVA rule (see T.D.
TTB–83, published in the Federal
Register at 74 FR 64602 on December 8,
2009). In all of these cases, TTB and its
predecessor agency, most often with the
cooperation of the affected parties, have
been able to resolve the issue without
the need for a new grandfather
provision under § 4.39(i).
We believe it is preferable for all the
parties who would be affected by AVA
rulemaking to resolve any conflicts
through solutions that protect the
interests of, and are acceptable to, all
concerned parties, including consumers,
rather than to rely on TTB to resolve the
issue through rulemaking. We continue
to believe that most conflicts can be
resolved in such a manner. As such,
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TTB will continue to seek resolution of
these conflicts on a case-by-case basis.
As to the comments regarding
dispelling information that would have
been required as part of a grandfathering
standard under the proposed rule, we
continue to believe that dispelling
information is appropriate and effective
in certain situations, but because we are
not adopting a grandfathering standard
with a dispelling information
requirement in this final rule, we do not
need to respond further to these
comments.
Regarding the comment that our
regulatory proposal would be in conflict
with international agreements and
trademark rights, the decision not to
include a grandfather provision in this
final rule makes it unnecessary to
address the comment in this
rulemaking.
Finally, we have decided not to adopt
any of the other proposed editorial-type
changes to § 4.39(i) because any change
may result in unintended debate and
confusion as to its interpretation.
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Comments on Whether the Part 9
Procedural Provisions Should Be
Adopted
In Notice No. 78, TTB proposed
amendments to the part 9 texts to clarify
the rules for preparing, submitting, and
processing AVA petitions. A few
commenters specifically addressed
these changes, stating that while they
are not opposed to the proposed
procedural changes, they do not see
them as necessary. Other commenters
stated that the current regulations work
well for the industry and consumers,
and one commenter specifically
mentioned the ‘‘Draft AVA Manual’’
developed by TTB as a useful document
in preparing an AVA petition.
TTB Response
TTB has determined that the
proposed regulatory provisions in
question should be adopted without
change. TTB proposed these regulatory
changes based on what we have learned
over the years in reviewing and acting
on AVA petitions. We will strengthen
the process through providing more
effective guidance to the public by
including details in our regulations on
how to petition for the establishment or
modification of an AVA and on what
evidence is necessary to support a
petition, and by clearly stating the
actions we might take in response to
petitions or comments received. The
regulatory changes in question do not
impose new standards but rather
represent a codification of longstanding
administrative authority and practice
and address a need for greater
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transparency regarding the AVA
regulatory process. Finally, with regard
to the ‘‘Draft AVA Manual,’’ we do not
believe that such a publication is an
appropriate substitute for clear,
detailed, regulatory texts.
Comments on Statements of Viticultural
Significance
In Notice No. 78, TTB proposed to
amend existing sections within subpart
C of part 9 by adding statements
regarding the viticultural significance
for wine labeling purposes of
viticultural area names or key portions
of those names. One commenter stated
that ‘‘TTB should [not] promulgate terms
of viticultural significance without
explaining the criteria for the selection
so that the industry can provide
meaningful comments.’’
TTB Response
At this time, TTB is reserving the
addition of regulatory text delineating
which terms TTB would consider to
have viticultural significance for
possible future rulemaking. Such future
rulemaking would provide TTB with the
opportunity to gather additional
information concerning the impact of
such changes on existing brand names.
In the interim, TTB’s existing authority
to determine terms of viticultural
significance is unaffected (see 27 CFR
4.39(i)(3)).
Conclusion
Accordingly, we are adopting the
proposed regulatory amendments with
the changes as discussed above. We
have also made several non-substantive,
editorial changes to the regulatory texts
to enhance their readability and
precision.
Regulatory Analysis and Notices
Executive Order 12866
This rule is not a significant
regulatory action as defined by
Executive Order 12866. Therefore, it
requires no regulatory assessment.
Regulatory Flexibility Act
We certify that these regulations, if
adopted, would not have a significant
economic impact on a substantial
number of small entities. These
regulations more specifically state the
type of explanations a petitioner must
submit in order to support the
establishment of a new viticultural area
or modify an existing area, but these
regulations would not impose
additional associated costs because the
specific data that petitioners would rely
on to develop these explanations under
these revised regulations are already a
part of the data set required of
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3499
petitioners under existing rules. As
noted in Notice No. 78 and in this final
rule document, the regulatory
amendments do not impose new
standards but rather represent a
codification of longstanding
administrative authority and practice.
Therefore, no regulatory flexibility
analysis is required.
Paperwork Reduction Act
The collection of information
contained in this final regulation has
been reviewed and approved by the
Office of Management and Budget
(OMB) in accordance with the
requirements of the Paperwork
Reduction Act (44 U.S.C. 3507(d)) under
control number 1513–0127. An agency
may not conduct or sponsor, and a
person is not required to respond to, a
collection of information unless it
displays a valid control number
assigned by OMB.
The collection of information in this
regulation is in 27 CFR 9.11 and 9.12.
This information is required to petition
TTB to establish a new AVA or to
change an existing AVA. This
information will be used to verify
evidence sources and to determine
whether the information is sufficient to
begin the rulemaking process (that is,
proceed to a notice of proposed
rulemaking). The collection of
information is required to obtain a
benefit. The likely respondents are nonprofit institutions and small businesses
or organizations.
Drafting Information
Rita D. Butler of the Regulations and
Rulings Division drafted this document.
List of Subjects
27 CFR Part 4
Advertising, Customs duties and
inspection, Imports, Labeling, Packaging
and containers, Reporting and
recordkeeping requirements, Trade
practices, and Wine.
27 CFR Part 9
Wine.
27 CFR Part 70
Administrative practice and
procedure, Claims, Excise taxes,
Freedom of information, Law
enforcement, Penalties, Reporting and
recordkeeping requirements, and Surety
bonds.
Amendments to the Regulations
For the reasons discussed in the
preamble, TTB amends 27 CFR, chapter
I, parts 4, 9, and 70, as follows:
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PART 4—LABELING AND
ADVERTISING OF WINE
1. The authority citation for part 4
continues to read as follows:
■
Authority: 27 U.S.C. 205, unless otherwise
noted.
2. In § 4.25, paragraphs (e)(1)(i) and
(e)(2) are revised to read as follows:
■
§ 4.25
Appellations of origin.
*
*
*
*
*
(e) Viticultural area—(1) Definition—
(i) American wine. A delimited grapegrowing region having distinguishing
features as described in part 9 of this
chapter and a name and a delineated
boundary as established in part 9 of this
chapter.
*
*
*
*
*
(2) Establishment of American
viticultural areas. A petition for the
establishment of an American
viticultural area may be made to the
Administrator by any interested party,
pursuant to part 9 and § 70.701(c) of this
chapter. The petition must be made in
written form and must contain the
information specified in § 9.12 of this
chapter.
*
*
*
*
*
PART 9—AMERICAN VITICULTURAL
AREAS
3. The authority citation for part 9
continues to read as follows:
■
Authority: 27 U.S.C. 205.
4. A new § 9.0 is added before subpart
A to read as follows:
■
§ 9.0
Scope.
The regulations in this part relate to
American viticultural areas created
under the authority of the Federal
Alcohol Administration Act and
referred to in § 4.25(e) of this chapter.
■ 5. Subpart A is revised to read as
follows:
Subpart A—General Provisions
Sec.
9.1 Definitions.
9.2 Territorial extent.
9.3 Delegations of the Administrator.
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Definitions.
(a) General. For purposes of this part,
and unless the specific context
otherwise requires, the following terms
shall have the meanings indicated:
Administrator. The Administrator,
Alcohol and Tobacco Tax and Trade
Bureau, Department of the Treasury,
Washington, DC.
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§ 9.2
Territorial extent.
This part applies to the several States
of the United States, the District of
Columbia, and Puerto Rico.
§ 9.3
Subpart A—General Provisions
§ 9.1
American viticultural area. A
viticultural area as defined in
§ 4.25(e)(1)(i) of this chapter.
Appropriate TTB officer. An officer or
employee of the Alcohol and Tobacco
Tax and Trade Bureau authorized to
perform any functions relating to the
administration or enforcement of this
part by TTB Order 1135.9, Delegation of
the Administrator’s Authorities in 27
CFR Part 9, American Viticultural
Areas.
Approved map. The U.S.G.S. map(s)
used to define the boundary of an
approved AVA.
AVA. An American viticultural area.
Perfected petition. A petition
containing all of the evidence meeting
the requirements of § 9.12 and
containing sufficient supporting
information for TTB to decide whether
or not to proceed with rulemaking to
establish a new AVA or to change an
existing AVA.
Person. An individual, partnership,
association, corporation, or other entity.
Petition. A written request to establish
a new AVA or to change an existing
AVA, signed by the petitioner or an
authorized agent of the petitioner, and
submitted in accordance with this part
and § 70.701(c) of this chapter.
Petitioner. An individual or entity
that submits a petition to TTB.
Term of viticultural significance. A
name recognized under § 4.39(i)(3) of
this chapter.
TTB. The Alcohol and Tobacco Tax
and Trade Bureau, Department of the
Treasury, Washington, DC.
U.S.G.S. The United States Geological
Survey.
(b) Use of other terms. Any other term
defined in the Federal Alcohol
Administration Act and used in this
part shall have the same meaning
assigned to it by that Act.
Delegations of the Administrator.
Most of the regulatory authorities of
the Administrator contained in this part
are delegated to appropriate TTB
officers. Those TTB officers are
specified in TTB Order 1135.9,
Delegation of the Administrator’s
Authorities in 27 CFR Part 9, American
Viticultural Areas. You may obtain a
copy of this order by accessing the TTB
Web site (https://www.ttb.gov) or by
mailing a request to the Alcohol and
Tobacco Tax and Trade Bureau,
National Revenue Center, 550 Main
Street, Room 1516, Cincinnati, OH
45202.
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6. Subpart B is revised to read as
follows:
■
Subpart B—AVA Petitions
Sec.
9.11 Submission of AVA petitions.
9.12 AVA petition requirements.
9.13 Initial processing of AVA petitions.
9.14 AVA rulemaking process.
Subpart B—AVA Petitions
§ 9.11
Submission of AVA petitions.
(a) Procedure for petitioner. Any
person may submit an AVA petition to
TTB to establish a grape-growing region
as a new AVA, to change the boundary
of an existing AVA, or to change the
name of an existing AVA. The petitioner
is responsible for including with the
petition all of the information specified
in § 9.12. The person submitting the
petition is also responsible for providing
timely and complete responses to TTB
requests for additional information to
support the petition.
(b) How and where to submit an AVA
petition. The AVA petition may be sent
to TTB using the U.S. Postal Service or
a private delivery service. A petition
sent through the U.S. Postal Service
should be addressed to: Regulations and
Rulings Division, Alcohol and Tobacco
Tax and Trade Bureau, 1310 G Street,
NW., Washington, DC 20220. A petition
sent via a private delivery service
should be directed to: Regulations and
Rulings Division, Alcohol and Tobacco
Tax and Trade Bureau, Suite 200E, 1310
G Street, NW., Washington, DC 20005.
(c) Purpose and effect of submission
of AVA petitions. The submission of a
petition under this subpart is intended
to provide TTB with sufficient
documentation to propose the
establishment of a new AVA or to
propose changing the name or boundary
of an existing AVA. After considering
the petition evidence and any other
relevant information, TTB shall decide
what action to take in response to a
petition and shall so advise the
petitioner. Nothing in this chapter shall,
or shall be interpreted to, compel any
Department of the Treasury official to
proceed to rulemaking in response to a
submitted petition.
§ 9.12
AVA petition requirements.
(a) Establishment of an AVA in
general. A petition for the establishment
of a new AVA must include all of the
evidentiary materials and other
information specified in this section.
The petition must contain sufficient
information, data, and evidence such
that no independent verification or
research is required by TTB.
(1) Name evidence. The name
identified for the proposed AVA must
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be currently and directly associated
with an area in which viticulture exists.
All of the area within the proposed AVA
boundary must be nationally or locally
known by the name specified in the
petition, although the use of that name
may extend beyond the proposed AVA
boundary. The name evidence must
conform to the following rules:
(i) Name usage. The petition must
completely explain, in narrative form,
the manner in which the name is used
for the area covered by the proposed
AVA.
(ii) Source of name and name
evidence. The name and the evidence in
support of it must come from sources
independent of the petitioner.
Appropriate name evidence sources
include, but are not limited to, historical
and modern government or commercial
maps, books, newspapers, magazines,
tourist and other promotional materials,
local business or school names, and
road names. Whenever practicable, the
petitioner must include with the
petition copies of the name evidence
materials, appropriately crossreferenced in the petition narrative.
Although anecdotal information by
itself is not sufficient, statements taken
from local residents with knowledge of
the name and its use may also be
included to support other name
evidence.
(2) Boundary evidence. The petition
must explain in detail the basis for
defining the boundary of the proposed
AVA as set forth in the petition. This
explanation must have reference to the
name evidence and other distinguishing
features information required under this
section. In support of the proposed
boundary, the petition must outline the
commonalities or similarities within
that boundary and must explain with
specificity how those elements are
different in the adjacent areas outside
that boundary.
(3) Distinguishing features. The
petition must provide, in narrative form,
a description of the common or similar
features of the proposed AVA affecting
viticulture that make it distinctive. The
petition must also explain with
specificity in what way these features
affect viticulture and how they are
distinguished viticulturally from
features associated with adjacent areas
outside the proposed AVA boundary.
For purposes of this section,
information relating to distinguishing
features affecting viticulture includes
the following:
(i) Climate. Temperature,
precipitation, wind, fog, solar
orientation and radiation, and other
climate information;
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(ii) Geology. Underlying formations,
landforms, and such geophysical events
as earthquakes, eruptions, and major
floods;
(iii) Soils. Soil series or phases of a
soil series, denoting parent material,
texture, slope, permeability, soil
reaction, drainage, and fertility;
(iv) Physical features. Flat, hilly, or
mountainous topography, geographical
formations, bodies of water, watersheds,
irrigation resources, and other physical
features; and
(v) Elevation. Minimum and
maximum elevations.
(4) Maps and boundary description.
(i) Maps. The petitioner must submit
with the petition, in an appropriate
scale, the U.S.G.S. map(s) showing the
location of the proposed AVA. The
exact boundary of the AVA must be
prominently and clearly drawn on the
maps without obscuring the underlying
features that define the boundary line.
U.S.G.S. maps may be obtained from the
U.S. Geological Survey, Branch of
Distribution. If the map name is not
known, the petitioner may request a
map index by State.
(ii) Boundary description. The
petition must include a detailed
narrative description of the proposed
AVA boundary based on U.S.G.S. map
markings. This description must have a
specific beginning point, must proceed
unbroken from that point in a clockwise
direction, and must return to that
beginning point to complete the
boundary description. The boundary
description must refer to easily
discernable reference points on the
U.S.G.S. maps. The proposed AVA
boundary description may rely on any
of the following map features:
(A) State, county, township, forest,
and other political entity lines;
(B) Highways, roads (including
unimproved roads), and trails;
(C) Contour or elevation lines;
(D) Natural geographical features,
including rivers, streams, creeks, ridges,
and marked elevation points (such as
summits or benchmarks);
(E) Human-made features (such as
bridges, buildings, windmills, or water
tanks); and
(F) Straight lines between marked
intersections, human-made features, or
other map points.
(b) AVAs within AVAs. If the petition
proposes the establishment of a new
AVA entirely within, or overlapping, an
existing AVA, the evidence submitted
under paragraph (a) of this section must
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
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AVA and therefore appropriate for
separate recognition. If the petition
proposes the establishment of a new
AVA that is larger than, and
encompasses, all of one or more existing
AVAs, the evidence submitted under
paragraph (a) of this section must
include information addressing
whether, and to what extent, the
attributes of the proposed AVA are
consistent with those of the existing
AVA(s). In any case in which an AVA
would be created entirely within
another AVA, whether by the
establishment of a new, larger AVA or
by the establishment of a new AVA
within an existing one, the petition
must explain why establishment of the
AVA is acceptable. When a smaller
AVA has name recognition and features
that so clearly distinguish it from a
larger AVA that surrounds it, TTB may
determine in the course of the
rulemaking that it is not part of the
larger AVA and that wine produced
from grapes grown within the smaller
AVA would not be entitled to use the
name of the larger AVA as an
appellation of origin or in a brand name.
(c) Modification of an existing AVA.
(1) Boundary change. If a petition
seeks to change the boundary of an
existing AVA, the petitioner must
include with the petition all relevant
evidence and other information
specified for a new AVA petition in
paragraphs (a) and (b) of this section.
This evidence or information must
include, at a minimum, the following:
(i) Name evidence. If the proposed
change involves an expansion of the
existing boundary, the petition must
show how the name of the existing AVA
also applies to the expansion area. If the
proposed change would result in a
decrease in the size of an existing AVA,
the petition must explain, if so, the
extent to which the AVA name does not
apply to the excluded area.
(ii) Distinguishing features. The
petition must demonstrate that the area
covered by the proposed change has, or
does not have, distinguishing features
affecting viticulture that are essentially
the same as those of the existing AVA.
If the proposed change involves an
expansion of the existing AVA, the
petition must demonstrate that the area
covered by the expansion has the same
distinguishing features as those of the
existing AVA and has different features
from those of the area outside the
proposed, new boundary. If the
proposed change would result in a
decrease in the size of an existing AVA,
the petition must explain how the
distinguishing features of the excluded
area are different from those within the
boundary of the smaller AVA. In all
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cases the distinguishing features must
affect viticulture.
(iii) Boundary evidence and
description. The petition must explain
how the boundary of the existing AVA
was incorrectly or incompletely defined
or is no longer accurate due to new
evidence or changed circumstances,
with reference to the name evidence and
distinguishing features of the existing
AVA and of the area affected by the
proposed boundary change. The petition
must include the appropriate U.S.G.S.
maps with the proposed boundary
change drawn on them and must
provide a detailed narrative description
of the changed boundary.
(2) Name change. If a petition seeks
to change the name of an existing AVA,
the petition must establish the
suitability of that name change by
providing the name evidence specified
in paragraph (a)(1) of this section.
§ 9.13
Initial processing of AVA petitions.
(a) TTB notification to petitioner of
petition receipt. The appropriate TTB
officer will acknowledge receipt of a
submitted petition. This notification
will be in a letter sent to the petitioner
within 30 days of receipt of the petition.
(b) Acceptance of a perfected petition
or return of a deficient petition to the
petitioner. The appropriate TTB officer
will perform an initial review of the
petition to determine whether it is a
perfected petition. If the petition is not
perfected, the appropriate TTB officer
will return it to the petitioner without
prejudice to resubmission in perfected
form. If the petition is perfected, TTB
will decide whether to proceed with
rulemaking under § 9.14 and will advise
the petitioner in writing of that
decision. If TTB decides to proceed with
rulemaking, TTB will advise the
petitioner of the date of receipt of the
perfected petition. If TTB decides not to
proceed with rulemaking, TTB will
advise the petitioner of the reasons for
that decision.
(c) Notice of pending petition. When
a perfected petition is accepted for
rulemaking, TTB will place a notice to
that effect on the TTB Web site.
jlentini on DSKJ8SOYB1PROD with RULES
§ 9.14
AVA rulemaking process.
(a) Notice of proposed rulemaking. If
TTB determines that rulemaking in
response to a petition is appropriate,
TTB will prepare and publish a notice
of proposed rulemaking (NPRM) in the
Federal Register to solicit public
comments on the petitioned-for AVA
action.
(b) Final action. Following the close
of the NPRM comment period, TTB will
review any submitted comments and
any other available relevant information
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and will take one of the following
actions:
(1) Prepare a final rule for publication
in the Federal Register adopting the
proposed AVA action, with or without
changes;
(2) Prepare a notice for publication in
the Federal Register withdrawing the
proposal and setting forth the reasons
for the withdrawal. Reasons for
withdrawal of a proposal must include
at least one of the following:
(i) The extent of viticulture within the
proposed boundary is not sufficient to
constitute a grape-growing region as
specified in § 9.11(a); or
(ii) The name, boundary, or
distinguishing features evidence does
not meet the standards for such
evidence set forth in § 9.12; or
(iii) The petitioned-for action would
be inconsistent with one of the purposes
of the Federal Alcohol Administration
Act or any other Federal statute or
regulation or would be otherwise
contrary to the public interest;
(3) Prepare a new NPRM for
publication in the Federal Register
setting forth a modified AVA action for
public comment; or
(4) Take any other action deemed
appropriate by TTB as authorized by
law.
PART 70—PROCEDURE AND
ADMINISTRATION
7. The authority citation for part 70
continues to read as follows:
■
Authority: 5 U.S.C. 301 and 552; 26 U.S.C.
4181, 4182, 5146, 5203, 5207, 5275, 5367,
5415, 5504, 5555, 5684(a), 5741, 5761(b),
5802, 6020, 6021, 6064, 6102, 6155, 6159,
6201, 6203, 6204, 6301, 6303, 6311, 6313,
6314, 6321, 6323, 6325, 6326, 6331–6343,
6401–6404, 6407, 6416, 6423, 6501–6503,
6511, 6513, 6514, 6532, 6601, 6602, 6611,
6621, 6622, 6651, 6653, 6656–6658, 6665,
6671, 6672, 6701, 6723, 6801, 6862, 6863,
6901, 7011, 7101, 7102, 7121, 7122, 7207,
7209, 7214, 7304, 7401, 7403, 7406, 7423,
7424, 7425, 7426, 7429, 7430, 7432, 7502,
7503, 7505, 7506, 7513, 7601–7606, 7608–
7610, 7622, 7623, 7653, 7805.
8. Section 70.701 is amended by
adding a sentence at the end of
paragraph (c) to read as follows: ‘‘A
petition to establish a new American
viticultural area or to modify an existing
American viticultural area is subject to
the rules in part 9 of this chapter.’’
■
Signed: October 1, 2010.
John J. Manfreda,
Administrator.
Approved: October 1, 2010.
Timothy E. Skud,
Deputy Assistant Secretary, (Tax, Trade, and
Tariff Policy).
[FR Doc. 2011–1138 Filed 1–19–11; 8:45 am]
BILLING CODE 4810–31–P
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DEPARTMENT OF THE TREASURY
Alcohol and Tobacco Tax and Trade
Bureau
27 CFR Parts 19, 24, 25, 26, 40, 41, and
70
[Docket No. TTB–2011–0001; T.D. TTB–89;
Re: Notice No. 115; T.D. ATF–365; T.D. TTB–
41; ATF Notice No. 813 and TTB Notice
No. 56]
RIN 1513–AB43
Time for Payment of Certain Excise
Taxes, and Quarterly Excise Tax
Payments for Small Alcohol Excise
Taxpayers
Alcohol and Tobacco Tax and
Trade Bureau, Treasury.
ACTION: Temporary rule; Treasury
decision.
AGENCY:
This temporary rule updates
and reissues Alcohol and Tobacco Tax
and Trade Bureau regulations pertaining
to the semimonthly payments of excise
tax on distilled spirits, wine, beer,
tobacco products, and cigarette papers
and tubes, and also reissues temporary
regulations regarding quarterly payment
of excise tax for small alcohol excise
taxpayers. The temporary regulations
adopted in this document replace
temporary regulations issued under T.D.
ATF–365 and T.D. TTB–41, which were
originally published in 1995 and 2006,
respectively. TTB is soliciting
comments from all interested parties on
these regulatory provisions through a
notice of proposed rulemaking,
published elsewhere in this issue of the
Federal Register.
DATES: Effective Dates: This temporary
rule is effective on February 22, 2011,
through February 24, 2014.
FOR FURTHER INFORMATION CONTACT: For
questions concerning tax payment
procedures and quarterly filing
procedures, contact Jackie Feinauer,
National Revenue Center, Alcohol and
Tobacco Tax and Trade Bureau (513–
684–3442); for questions concerning this
document, contact Kara Fontaine,
Regulations and Rulings Division,
Alcohol and Tobacco Tax and Trade
Bureau (202–453–2103 or
Kara.Fontaine@ttb.gov).
SUMMARY:
SUPPLEMENTARY INFORMATION:
Background
TTB Authority
The Alcohol and Tobacco Tax and
Trade Bureau (TTB) is responsible for
the administration and enforcement of
chapters 51 and 52 of the Internal
Revenue Code of 1986 (IRC). These
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Agencies
[Federal Register Volume 76, Number 13 (Thursday, January 20, 2011)]
[Rules and Regulations]
[Pages 3489-3502]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2011-1138]
=======================================================================
-----------------------------------------------------------------------
DEPARTMENT OF THE TREASURY
Alcohol and Tobacco Tax and Trade Bureau
27 CFR Parts 4, 9, and 70
[Docket No. TTB-2007-0068; T.D. TTB-90; Re: Notice Nos. 78 and 80]
RIN 1513-AB39
Revision of American Viticultural Area Regulations
AGENCY: Alcohol and Tobacco Tax and Trade Bureau, Treasury.
ACTION: Final rule; Treasury decision.
-----------------------------------------------------------------------
SUMMARY: In this Treasury decision, the Alcohol and Tobacco Tax and
Trade Bureau amends the regulations concerning the establishment of
American viticultural areas (AVAs). The changes provide clearer
regulatory standards for the establishment of AVAs and clarify the
rules for preparing, submitting, and processing viticultural area
petitions.
DATES: Effective Date: This final rule is effective on February 22,
2011.
FOR FURTHER INFORMATION CONTACT: Rita D. Butler, Regulations and
Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G
Street, NW., Suite 200-E, Washington, DC 20220; telephone: 202-453-
2101.
SUPPLEMENTARY INFORMATION:
Background
TTB Authority
Section 105(e) of the Federal Alcohol Administration Act (FAA Act),
27 U.S.C. 205(e), authorizes the Secretary of the Treasury to prescribe
regulations for the labeling of wine, distilled spirits, and malt
beverages. The FAA Act provides that these regulations should, among
other things, prohibit consumer deception and the use of misleading
statements on labels, and ensure that labels provide the consumer with
adequate information as to the identity and quality of the product. The
Alcohol and Tobacco Tax and Trade Bureau (TTB) administers the
regulations promulgated under the FAA Act.
Part 4 of the TTB regulations (27 CFR part 4) provides for the
establishment of definitive viticultural areas and for the use of their
names as appellations of origin on wine labels and in wine
advertisements. Part 9 of the TTB regulations (27 CFR part 9)
prescribes the standards for submitting a petition to establish a new
American viticultural area (AVA) or to modify an existing AVA, and it
contains a list with descriptions of all approved AVAs. Part
[[Page 3490]]
70 of the TTB regulations (27 CFR part 70) concerns procedure and
administration and includes, at Sec. 70.701 (27 CFR 70.701),
provisions regarding rulemaking procedures.
Definition
Section 4.25(e)(1)(i) of the TTB regulations (27 CFR 4.25(e)(1)(i))
defines a viticultural area for American wine as a delimited grape-
growing region distinguishable by geographic features, the boundaries
of which have been recognized and defined in part 9 of the TTB
regulations. These AVA designations allow vintners and consumers to
attribute a given quality, reputation, or other characteristic of a
wine made from grapes grown in an area to its geographic origin. The
establishment of viticultural areas allows vintners to describe more
accurately the origin of their wines to consumers and helps consumers
to identify wines they may purchase. Establishment of a viticultural
area is neither an approval nor an endorsement by TTB of the wine
produced in that area.
Current AVA Petition Process
Section 9.3 of the TTB regulations (27 CFR 9.3) sets forth the
current procedure and standards for the establishment of AVAs.
Paragraph (a) of that section states that TTB will use the rulemaking
process based on petitions to establish AVAs received in accordance
with Sec. Sec. 4.25(e)(2) and 70.701(c). Paragraph (b) of Sec. 9.3
provides that a petition for the establishment of an AVA must contain
the following:
Evidence that the name of the viticultural area is locally
and/or nationally known as referring to the area specified in the
application;
Historical or current evidence that the boundaries of the
viticultural area are as specified in the application;
Evidence relating to the geographical features (climate,
soil, elevation, physical features, etc.) which distinguish the
viticultural features of the proposed area from surrounding areas;
The specific boundaries of the viticultural area, based on
features which can be found on United States Geological Survey
(U.S.G.S.) maps of the largest applicable scale; and
A copy of the appropriate U.S.G.S. map(s) with the
boundaries prominently marked.
Notice of Proposed Rulemaking
On November 20, 2007, TTB published a notice of proposed
rulemaking, Notice No. 78, in the Federal Register (72 FR 65261)
setting forth, among other things, a revision of subparts A and B of
part 9. The original comment period closing date of January 22, 2008,
was extended an additional 60 days in Notice No. 80, published in the
Federal Register (72 FR 71290) on December 17, 2007.
In Notice No. 78, TTB and Treasury stated that a comprehensive
review of the AVA program was warranted in order to maintain the
integrity of the program. We considered the impact that the
establishment of an AVA can have on the use of existing brand names. In
this regard, we stated that we did not believe it to be appropriate for
a government agency to choose between competing commercial interests,
in the context of the labeling provisions of the FAA Act, where a
conflict exists between a proposed AVA name and an established brand
name used on a wine label approved by TTB, if such choices can be
avoided.
We also noted that there has been an increase in the number of
petitions for the establishment of new AVAs within already existing
AVAs. Since recognizing the existence of an AVA is based on the idea
that the defined area is unique for viticultural purposes with
reference to what is outside it, we stated that preserving the
integrity of the AVA program warrants clarifying the standards
concerning the establishment of new AVAs within existing AVAs.
Finally, we believed that there was a need to explain and clarify
the AVA petition submission and review process and to clearly state the
existing authority to deny, and the grounds for denying, an AVA
rulemaking petition.
AVA Name and Brand Name Conflict
As we stated in Notice No. 78, the designation of a new AVA can
create a conflict with existing brand names. This conflict can arise
because a brand name that includes an approved AVA name may not be used
unless at least 85 percent of the wine is derived from grapes grown
within the boundaries of the AVA. See 27 CFR 4.25(e)(3). Moreover, TTB
prohibits the use of misleading brand names (27 CFR 4.33), and also
prohibits brand names that tend to create the impression that the wine
is entitled to bear a designation recognized by TTB unless the wine
meets the requirements for that designation (27 CFR 4.39(a)(8)). The
establishment of a new AVA could also give rise to a misleading
impression regarding the provenance of a wine that carries a known
brand name similar to the AVA name but that does not meet the 85
percent requirement that applies to AVA name usage, thereby not
providing the consumer with adequate information as to the identity and
quality of the wine and creating confusion for consumers.
TTB noted in Notice No. 78 that the effect of the current
regulatory provisions is to give precedence to the establishment of an
AVA over the use of a brand name on a previously approved label. This
precedence is derived from the combined effect of the appellation of
origin and geographic brand name requirements of 27 CFR 4.25(e) and
4.39(i)(1). If a wine is not eligible for labeling with the
viticultural area name and that name appears in the brand name, then
the label would not be in compliance with TTB regulations and TTB would
require the bottler to obtain approval of a new label with a new brand
name in order to market it. Therefore, vintners are on notice that the
decision to establish a brand name having geographical significance
could result in the continued use of that brand name being restricted
or prohibited by the subsequent establishment of an AVA using an
identical or similar name. Whenever possible, however, TTB works with
petitioners to amend petitions in order to limit the adverse impact on
established brand names because established brand names have value to
label holders, the sudden use of a new AVA name on labels instead of a
long-established brand name may be confusing to consumers, and the AVA
process can be used intentionally as a method of limiting competition
from pre-existing brand name holders.
AVAs Within AVAs
Notice No. 78 noted that, in recent years, TTB has received an
increasing number of petitions that propose a boundary change to an
existing AVA, the establishment of an AVA entirely or partially within
an existing AVA, or the establishment of a new, larger AVA that would
encompass all of one or more existing AVAs. Such petitions can create
the appearance of a conflict or inconsistency because, with reference
to the criteria set forth in Sec. 9.3(b), the new petition might draw
into question the accuracy and validity of the evidence presented in
support of the establishment of the existing AVA or the legitimacy of
the justification for establishing a new AVA. For example, with
reference to the boundary description and the geographical features
criteria, a change in an existing AVA boundary, or the adoption of a
new AVA within an existing AVA, could suggest that the original
boundary was improperly drawn or that there is no unity or consistency
in the features of the existing AVA that give it a unique
[[Page 3491]]
and distinctive identity in a viticultural sense.
Further, we noted in Notice No. 78 that when a new AVA is
established entirely within an existing AVA, depending on the unique
facts presented in each AVA petition, an argument could be made that
the smaller AVA is, by its very existence, distinct from the AVA that
surrounds it, with the result that wine produced within it should not
be labeled with the name of the larger AVA.
Petition Submission and Review Process
In Notice No. 78, we noted that the part 9 regulations could more
completely describe the submission and review process, including the
various actions that TTB may take at each stage of the AVA petitioning
procedure.
Under TTB's current AVA petition process, we process all AVA
petitions that are submitted to us. TTB's practice is to work with the
petitioner both before and after submission of the petition to ensure
that it contains all necessary information. TTB specialists spend
considerable time reviewing the petition, contacting the petitioner,
and requesting missing evidence from the petitioner. In some cases,
deficient petitions are returned to the petitioner for revision and
resubmission. Only after the petition is perfected (that is, it appears
to contain all of the information required under Sec. 9.3) do we
proceed with preparation of an appropriate rulemaking document. As we
noted in Notice No. 78, as a general rule, the practice of TTB has been
to accept the information provided by the petitioner in a perfected
petition with the assumption that the information provided is correct.
TTB does not conduct a detailed, separate investigation of the validity
of the petition evidence at that point. To confirm or refute the
information provided by the petitioner, TTB has relied on comments
provided in response to the published notice of proposed rulemaking
(NPRM).
We also noted in Notice No. 78 that whereas the TTB regulations in
part 9 speak in terms of what an AVA petition must contain, they do not
clearly reflect the fundamental administrative principle that the
authority to grant carries a concomitant authority to deny an AVA
petition. We have come to realize that some believe that all that is
necessary to successfully petition for the establishment of an AVA is
to submit a petition with evidence under the terms of Sec. 9.3(b).
We also noted that TTB has authority not to initiate rulemaking, or
not to approve the petitioned-for AVA action after publication of a
proposal, for any one of a number of reasons, such as:
The evidence submitted with the petition does not
adequately support use of the name proposed for a new AVA;
The evidence of distinguishing features submitted with the
petition does not support drawing or redrawing the AVA boundary as
proposed;
The extent of viticulture within the proposed boundary is
not sufficient to constitute a grape-growing region within the
intendment of the AVA program; or
Approval of a proposed new AVA would be inconsistent with
the purpose of the FAA Act, contrary to another statute or regulation,
or otherwise not in the public interest.
Summary of Proposed Changes
In Notice No. 78, TTB proposed to amend three provisions within
part 4 of the TTB regulations that concern AVAs, to revise subparts A
and B of part 9 of the TTB regulations, to amend various sections
within subpart C of part 9, and to amend one provision within part 70
of the TTB regulations.
Part 4 Amendments
To permit the establishment of an AVA and at the same time mitigate
the impact on existing brand labels which contain terms that would be
viticulturally significant if the proposed AVA was established, TTB
proposed in Notice No. 78 to amend Sec. 4.39(i) of the TTB regulations
(27 CFR 4.39(i)) by adding a new ``grandfathering'' standard that would
apply in the case of AVAs established after adoption of the final rule
in this matter and that would be based on a specified number of years
that an affected Certificate of Label Approval (COLA) had been issued
and that the brand label had been in actual commercial use prior to
receipt by TTB of a perfected AVA petition.
By way of background, Notice No. 78 noted that at the beginning of
the AVA program, TTB's predecessor agency and Treasury adopted Sec.
4.39(i) to permit the continued use of brand names that had been used
in COLAs issued before July 7, 1986, subject to application of any one
of three conditions. This original ``grandfather'' approach was
intended to protect brand names that had existed prior to the
development of the AVA program. This solution did not specifically
address conflicts between AVAs and brand names in COLAs that came into
existence after July 7, 1986, although it effectively put all vintners
on notice that the use of a brand name with geographic significance
could later be restricted by the establishment of a viticultural area.
While TTB in Notice No. 78 noted its intention to continue to work
with future AVA petitioners to limit the adverse impact on established
brand names, TTB also recognized that sometimes it would not be
possible to amend a petition to achieve this result. To address this
possibility, TTB proposed a new grandfathering standard.
In addition, we proposed in Notice No. 78 to update two provisions
within Sec. 4.25(e) and conform them to the proposed changes to part 9
described below.
Part 9 Amendments
Notice No. 78 proposed to revise subparts A and B of part 9 to
clarify the operation of the AVA petition and rulemaking process by
explaining how a petitioner must submit an AVA petition to TTB, by
setting forth with considerably greater specificity what information a
petition must contain, and by explaining how TTB would process these
petitions. In addition to setting forth standards for the establishment
of an AVA, the proposed amendments addressed the requirements for
proposed boundary and name changes to existing AVAs to ensure that an
AVA proposal published by TTB to change an existing AVA (for example, a
boundary expansion) would have adequate supporting evidence. The
specification of requirements for boundary changes was proposed to
ensure that TTB receives petitions that conform to AVA regulatory
standards rather than to considerations that are not central to the AVA
concept.
The proposed regulatory language also reflected the principle that
TTB may decide not to proceed with rulemaking after receipt of a
petition, in which case TTB would provide an explanation of the
decision to the petitioner. The proposed amendments also specifically
delineated the authority of TTB to decide not to proceed with approval
of the petitioned-for AVA action after publication of the NPRM. The
proposed regulatory amendments attempted to make a clear distinction
between the petition process and the rulemaking process, because a
decision not to go forward may be made at either stage.
The proposed amendments in subpart C involved the addition of
statements regarding the viticultural significance of names of
previously established AVAs, or notable portions of those names, for
wine labeling purposes under part 4 of the TTB regulations. TTB stated
in Notice No. 78 that these amendments were consistent with the
practice employed by TTB over the past several
[[Page 3492]]
years of including a second sentence in paragraph (a) of each section
covering a new AVA, to specify what is viticulturally significant as a
result of the establishment of the AVA. While in many cases only the
full name of the AVA was specified in each of the subpart C amendments
proposed in Notice No. 78, in some instances a portion of the name was
also identified as viticulturally significant if, based on TTB's label
approval practice, its use on a label could be taken to represent the
full AVA name. We specifically invited comments on whether any existing
labels would be at risk if the proposed amendments were adopted as a
final rule.
Comments Invited on the Regulatory Proposals
In Notice No. 78, TTB invited interested parties to comment on the
proposed rulemaking and regulatory texts. In addition, we invited
comments on the following specific questions:
1. Whether additional or different standards should apply to the
establishment of an AVA; for example, whether there should be a
requirement that a specified percentage of the land mass of the
proposed AVA be involved in viticultural activities.
2. Whether in some or all cases the establishment of a smaller AVA
located within the boundaries of a larger AVA should result in a
prohibition against the use of the larger AVA name on wine labels.
3. Whether the use of a ``grandfather'' provision to avoid
conflicts between an established brand name and the establishment of a
proposed AVA is appropriate.
4. Whether the terms of the proposed ``grandfather '' provision are
appropriate and, if so, what time periods should apply to establish
commercial use of the brand name involved in a conflict.
5. Whether it would be more appropriate to adopt an alternative to
the ``grandfather'' provision proposed that would apply to brand names
that have longstanding commercial use under one or more existing
certificates of label approval without specifying a time period.
6. What type of dispelling information would prevent consumers from
being misled as to the origin of the wine when a ``grandfather''
provision applies. Other comments for a requirement on dispelling
information were encouraged.
Comments Received and TTB Analyses/Responses
TTB received 191 comments in response to Notice No. 78. The table
below summarizes who submitted comments and the number of comments
submitted.
------------------------------------------------------------------------
Number of
Who submitted comments comments
------------------------------------------------------------------------
Federal Government......................................... 2
State Government........................................... 2
Local Government........................................... 6
Wine Industry Members...................................... 88
Interest Groups/Trade Organizations........................ 31
Concerned Citizens......................................... 48
Other...................................................... 14
------------
Total.................................................. 191
------------------------------------------------------------------------
In the category of Interest Groups/Trade Organizations, there were
no consumer groups that submitted comments. With regard to Concerned
Citizens, it cannot be determined in what capacity the commenters have
submitted their comments (e.g., as consumers, or as owners of an
alcohol beverage business).
Twenty-four of the comments received were either requests for
extension of the Notice No. 78 comment period or requests that TTB end
the suspension of AVA petition processing then in place. The latter
comments were submitted in support of the then-proposed Lehigh Valley
AVA, which was established on March 11, 2008, by T.D. TTB-66 (73 FR
12870). Since the Notice No. 78 comment period was extended as
requested, the establishment of the Lehigh Valley AVA was approved, and
the suspension was ended, these issues have been resolved as the
commenters had requested and are now moot.
Comments From Government Officials
We received a comment from one U.S. Senator, a joint comment from
two U.S. Congressional Representatives, and comments from one
California State Senator and several other California State and local
government officials concerning Notice No. 78. All of the commenters
expressed general opposition to Notice No. 78, and a number of the
commenters expressed opposition to specific portions of the proposed
regulations. All of the commenters also opposed TTB Notice No. 77,
published in the Federal Register on November 20, 2007 (72 FR 65256),
which proposed the establishment of a ``Calistoga'' AVA.
One U.S. Senator's comment was in the form of a letter to the
Secretary of the Treasury to ``express my opposition to the Notices * *
* as the actions in these rules will have a detrimental affect on the
way wine is identified, branded and labeled in the United States.'' The
Senator's comment further noted that ``California's wine industry
contributes over $125 billion annually to the Nation's economy.''
Two Members of the U.S. House of Representatives wrote a joint
letter to the Secretary of the Treasury and the TTB Administrator to
``express our grave concern over two Notices * * * which would
significantly and detrimentally alter the American Viticultural Area
(AVA) system.'' They further stated, ``Even after the successful
establishment of 189 viticultural areas by rulemaking, TTB now proposes
major changes in Notices No. 77 and 78 that would have substantial,
complicated and irreparable consequences for the future of America's
growing wine industry, which now contributes over $100 billion a year
to our economy.'' In addition, they stated, ``We strongly believe that
the existing AVA regulations have successfully served their purpose for
over twenty years, and in fact, work very well. These NPRMs are not
needed and are not supported by the wine industry.'' Fifty-nine other
Members of Congress also signed the letter.
A California State Senator submitted the contents of California
Senate Joint Resolution 22, which she stated was passed unanimously in
the State Senate and the State Assembly, ``as a statement of the
California Legislature's concern and opposition to'' Notice Nos. 77 and
78. She further stated that the ``Senate and the Assembly of the State
of California, jointly request the Tobacco Tax and Trade Bureau to
protect and preserve the ability of California wineries, as well as all
American wineries, to contribute to the economy of California and the
nation by withdrawing the Notices.''
The Secretary of the California Department of Food and Agriculture
had concerns with our regulatory proposals, stating, ``The revised
regulations 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.'' This commenter also believes that these
proposals ``are far-reaching and could have substantial and severe
consequences for all U.S. wine regions and wine brands.''
The city manager of Calistoga, California, opposed changes (in
Notice Nos. 77 and 78) that would ``eliminate the common and
internationally understood practice of nesting wine appellations within
larger wine appellations. Napa Valley is a highly recognized and
respected wine growing region throughout the world.''
[[Page 3493]]
The mayor of Paso Robles, California, opposed the proposed changes
in Notice Nos. 77 and 78, stating that ``the TTB proposed revisions to
the regulations * * * will undermine decades of work on the part of the
wine industry.'' He stated further, ``The effects of these proposals
are far-reaching and will have substantial and severe consequences to
all U.S. wine regions and wine brands and to the truth in labeling
rights of consumers.'' In specific regard to Notice No. 78, he wrote
that it ``threatens to eliminate the common and internationally
understood practice of `nesting' wine appellations within larger wine
appellations.'' He also stated that ``this proposal [Notice No. 78]
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 misdescriptive geographic brands on an ongoing
basis and creates loopholes for a select few.'' He also stated, ``These
regulations will have a substantial negative impact on consumer
confidence and compromise the integrity of the American wine
industry.''
The chair of the Napa County Board of Supervisors opposed our
proposals in Notice No. 78, stating, ``The Board also opposes Notice
78, which would end the common and internationally understood practice
of `nesting' wine appellations * * *. Nesting transmits crucial
information to consumers.'' He also provided a copy of a Resolution
passed by the board in regard to this opposition.
The Napa County agricultural commissioner also opposed our
proposals in Notice No. 78, stating, ``I also oppose Notice 78, which
would end the common and internationally understood practice of
`nesting' wine appellations * * *. Nesting transmits crucial
information to consumers.''
The president of the Napa County Farm Bureau opposed our proposals
in Notice No. 78, stating that the Bureau, ``[o]pposes the
comprehensive and sweeping AVA regulatory changes proposed in Notice
78. We do not support the rolling grandfather date which supplements
[27 CFR] 4.39(i), or the elimination of the common and internationally
understood practice of `nesting' wine appellations.''
TTB Response
TTB appreciates the concerns and reservations these officials have
expressed over our proposed changes to the AVA regulations. We
recognize that viticulture and wine making are industries important to
the American economy and are especially important to the economy of the
State of California. However, we disagree with those commenters who
suggested that the regulatory proposals we made in Notice No. 78 would
result in a severe economic impact or have other substantial
consequences on the wine industry, and we note in this regard that no
specific data were provided to support these general statements.
As we stated in Notice No. 78, the proposals we made were intended
to strengthen the AVA program. As one commenter pointed out, the
regulations for the establishment of AVAs are over 20 years old.
Although these regulations may have been initially successful in
getting the AVA program ``off the ground,'' the regulations have not
been updated to address a number of procedural and substantive issues
or the problems with AVA petitions that have arisen over the years. At
the time of publication of Notice No. 78, some of the AVA issues or
petition problems encountered by TTB were as follows:
Petitions to create an AVA were incomplete for numerous
reasons.
Petitions to expand an existing AVA where the acreage to
be added to the existing AVA has no viticulture and where no
significant viticulture is planned in the near future.
Petitions to expand an existing AVA for the purpose of
including adjacent viticultural acreage, with no evidence that the
expansion area has any geographical features in common with the
existing AVA.
Petitions to expand an existing AVA for the purpose of
including adjacent viticultural acreage where the evidence submitted
clearly shows that the geographical features of the adjacent acreage
are incompatible with those of the existing AVA.
Petitions from separate petitioners to create an AVA
within an existing AVA where their respective requests are inconsistent
with each other because they provide conflicting geographical features
evidence for the same area.
Petitions where the proposed AVA name conflicted with the
brand names on existing labels.
Based on the issues and problems outlined above, we believe that
the AVA program has not operated as well as some of these commenters
suggest, and that the current part 9 regulations do not provide
sufficient clarity and transparency regarding the AVA petition and
approval process and regarding the manner in which TTB exercises its
authority in that process. The part 9 proposals set forth in Notice No.
78 were not a radical departure from the current regulatory standards
but rather were a necessary elaboration on those standards in order to
clarify existing petition requirements and existing TTB authority
regarding the processing of AVA petitions. Since the comment period
closed on this proposal on March 20, 2008, TTB has continued to process
AVA petitions and to publish proposed and final regulatory actions with
respect to petitions submitted. However, TTB continues to encounter the
issues and problems described above and therefore, TTB believes that
the need for the proposed regulations remains.
With regard to the comments opposing the proposed Calistoga
viticultural area, which was the subject of Notice No. 77, these
comments are outside the scope of this rulemaking and were addressed in
a separate final rulemaking action specific to Notice No. 77 (see T.D.
TTB-83, 74 FR 64602, December 8, 2009). With regard to the comments
concerning the specific topics of ``nesting'' and the proposed
``grandfather provision,'' we received a number of other comments
concerning these proposals. We discuss these additional comments and
provide a response to all the comments received on these specific
issues below.
Other Comments in General Opposition
Fifteen other commenters generally opposed the proposed revisions,
without detailing that opposition to any specific provision or issue.
For example, the Wine Institute commented, ``TTB already has the
ability to deal with complex issues and unanticipated controversies
fairly * * * TTB can issue policy statements, guidance documents, and
manuals on AVA establishment with interpretive and procedural
guidelines * * * Wine Institute believes that these alternatives are
preferable than the proposed regulatory changes, which could lead to
unintended consequences.'' This commenter added that TTB has a 27-year
record of successful AVA rulemaking, is acting under what appears to be
``an artificial sense of urgency,'' and should continue to use the
existing regulations. Other commenters asserted that the proposed
provisions ``have far reaching consequences'' or are ``inconsistent
with fair and sound practices,'' that ``consumers will not be protected
under the proposed regulations,'' or that ``the current regulations do
a good job.''
TTB Response
As explained in detail in Notice No. 78, TTB and Treasury believed
that there were valid reasons for proposing the regulatory changes. The
specific regulatory proposals were crafted after much deliberation
within TTB and
[[Page 3494]]
Treasury regarding: (1) Our duty to protect the consumer under the FAA
Act; (2) our desire to be fair to, and to protect the economic
interests of, all stakeholders; and (3) the long-term viability and
credibility of the AVA program. We disagree with the suggestion that
these regulations were developed in haste without substantial
consideration as to their overall impact on the AVA program. Moreover,
these general statements in opposition were not accompanied by any
supporting data. Finally, as regards the use of other alternatives such
as policy statements, guidance, or manuals, these alternatives are not
binding on either the public or TTB and therefore are inadequate
substitutes for regulatory action.
Comments on Specific Issues
The remaining 144 comments addressed one or more of the following
issues:
Whether a minimum percentage of landmass should be
involved in viticultural activities for proposed AVAs;
Whether the establishment of a smaller AVA within a larger
AVA should prevent the use of the larger AVA name;
Whether the establishment of a smaller AVA within a larger
AVA (``nesting'') should be eliminated;
Whether the proposed new part 4 grandfather provision, or
an alternative grandfather approach, should be adopted, and if so, what
type of dispelling information is appropriate;
Whether the procedural provisions proposed for part 9
should be adopted; and
Whether the statements of viticultural significance
proposed for part 9 are appropriate.
Below are comment summaries and TTB responses by issue.
Comments on Minimum Percentage of Landmass
Proposed Sec. 9.12(a)(1), which concerns name evidence, stated
that the name identified for the proposed AVA ``must be currently and
directly associated with an area in which viticulture exists.'' Also,
proposed Sec. 9.14(b)(2)(i) stated as one of the reasons for
withdrawing a proposal, the fact that the extent of viticulture within
the proposed boundary ``is not sufficient to constitute a grape-growing
region as specified in Sec. 9.11(a).'' However, in the proposed
regulatory texts we did not specify a minimum requirement for
viticultural activities.
As noted above, in the ``comments invited'' section of Notice No.
78, TTB asked whether there should be a requirement that a specified
percentage of the landmass of the proposed AVA be involved in
viticultural activities. Eight comments specifically addressed this
question--two in favor and six in opposition.
One commenter in favor of such a standard wrote:
The need for more reflective AVAs grows exponentially as the
U.S. wine market expands into the global market. * * * TTB has
invited comments concerning standards for establishment of an AVA.
As to percentage of land involved in viticultural activities I would
offer the following: ``viticultural activities'' must be defined.
Only grape growing is space sensitive and thus in connection with
AVAs only vineyards should be considered viticultural activity. It
is inappropriate for TTB to grant AVA status to large areas of land
not used in viticulture.
This commenter further noted that we did not define ``viticultural
activities'' in such a context within Notice No. 78. Determining that a
region be ``known for grape-growing'' should be sufficient to establish
the fact that there are existing viticultural activities occurring in
the area.
The Paso Robles AVA Committee (PRAVAC), which is comprised of 35
wineries and 25 grape growers, favored such a standard and wrote, ``TTB
may reasonably require that petitioners demonstrate some minimum amount
of viticulture in the proposed new area.'' The PRAVAC requested that
``any such threshold be fixed as a minimum acreage planted to
vineyard,'' and added:
Unless some critical mass of viticulture exists in an area, it
is difficult to identify which unique features actually do affect
the grapes grown in that region. A minimum acreage provides an
easily ascertainable standard that also effectively fixes a minimum
size for AVAs, thereby preventing additional subdivision into
miniscule, vineyard-sized AVAs. Unlike potentially cultivated land,
the existence of which is subject to individual interpretation,
vineyard acreage is readily visible and easy to measure.
The remaining commenters who addressed this topic opposed a
standard that would require a specific percentage of landmass of a
proposed AVA to be involved in viticultural activities. In this regard,
one of these commenters stated that ``the purpose of an AVA designation
is to identify a place of special character,'' and asked, ``What does
percentage of acreage have to do with this?''
Another commenter wrote that ``this rule change should be
considered to be in restraint of trade and could only be considered to
benefit the established areas to the detriment of developing areas. The
Government should not be penalizing the establishment of new
vineyards.''
One commenter argued that the objective of the AVA program is to
allow vintners and consumers to attribute a given quality, reputation,
or other characteristic of wine made from grapes grown in an area to
its geographic origin. This person further stated that the ``percentage
of landmass is not compatible with the objective, nor does it in any
way help the smaller wine producing areas at all.''
A commenter on behalf of Triassic Legacy Vineyards wrote:
The promise of an appellation to entice wine enthusiasts to
purchase the wines is a major factor in encouraging landowners to
make the huge investment of time energy and money to become growers
and vintners. I respectfully request that the concept of requiring
that an AVA have some percentage of total area under viticulture be
abandoned.
Finally, a commenter on behalf of Tablas Creek Vineyard stated:
While density of a plantation is a factor in determining the
importance of an AVA, that density should be measured against the
available planting acres in the appellation and not the simple total
geographic area. The economic importance of grape/wine production to
the area should also be noted.
TTB Response
TTB believes that the proposed regulatory language concerning this
issue should be adopted without change. As stated in Notice No. 78, one
of the key reasons for proposing changes to these regulations is to
maintain the integrity of the AVA program, and requiring a sufficient
amount of viticulture within a proposed AVA is necessary in order to
ensure that designation of the AVA has meaning. For example, we do not
believe that if a grape grower plants five acres of grapes in an area
encompassing 10,000 square miles, that amount of viticulture is
sufficient to justify the designation of an AVA.
On the other hand, for several reasons TTB does not believe it is
appropriate to establish a specific percentage of landmass as a
requirement for establishing an AVA. First, TTB recognizes that often
the reason that petitioners seek AVA designations is to assist in the
marketing of their wines, and we are concerned that a minimum
percentage of landmass requirement might overly favor established
areas. Second, although establishing by regulation a precise minimum
percentage standard would provide an easy, mechanical method for TTB to
decide whether sufficient viticulture exists in the proposed AVA, we
believe that such an across-the-board,
[[Page 3495]]
mechanical rule could operate to the detriment of the AVA program by
discounting the possibility of future expansion of viticulture within
the area. We believe that where it might appear that the amount of
acreage devoted to viticulture is too small in comparison to the size
of the proposed AVA, other relevant factors could exist (such as the
number of vineyards established and how they are dispersed within the
proposed AVA), which could lead to the conclusion that the extent of
viticulture within the proposed AVA is sufficient. TTB recognizes that
the lack of dispersed viticulture in a proposed AVA could warrant a
closer review of the sufficiency of the distinguishing geographical
features and name evidence provided in the petition, but these issues
should be reviewed on a case-by-case basis.
TTB also recognizes that the regulations require the boundaries to
be delineated based upon certain distinguishing features, such as
climate, geology, soils, physical features, and elevation, in addition
to the name of the area. For example, a watershed or ridge-line may
provide the best marker to delimit the area. Sometimes those features
that are common to the area may far exceed the actual grape-growing
then occurring. Therefore, grape-growing areas and boundaries based on
geographic features are unlikely to be exactly alike. The proposed
regulatory texts were intended to underscore the fundamental principle
behind every AVA petition, that is, that viticulture already exists
within the boundary proposed for the new AVA, and we believe that the
texts achieve that result.
Finally, we do not agree with the suggestion that we also consider
the economic importance of grape/wine production to the area as part of
the analysis of the sufficiency of viticulture in the proposed AVA. An
area may be known to consumers as a grape-growing region whether or not
grape/wine production is important to the overall economy of the area,
and, accordingly, we do not believe adding this consideration would be
appropriate.
Comments on Whether Approval of a Smaller AVA Should Prevent Use of a
Larger Surrounding AVA Name and Whether Nesting of AVAs Should Be
Eliminated
In proposed Sec. 9.12(b), which concerns AVAs within AVAs, we
stated:
If the petition proposes the establishment of a new AVA entirely
within, or overlapping, an existing AVA, the evidence submitted
under paragraph (a) of this section must 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 and therefore
appropriate for separate recognition. If the petition proposes the
establishment of a new AVA that is larger than, and encompasses, all
of one or more existing AVAs, the evidence submitted under paragraph
(a) of this section must include information addressing whether, and
to what extent, the attributes of the proposed AVA are consistent
with those of the existing AVA(s). In any case in which an AVA would
be created entirely within another AVA, whether by the establishment
of a new, larger AVA or by the establishment of a new AVA within an
existing AVA, the petition must dispel any apparent inconsistency or
explain why it is acceptable. When a smaller AVA has name
recognition and features that so clearly distinguish it from a
larger AVA that surrounds it, TTB may determine in the course of the
rulemaking that it is not part of the larger AVA and that wine
produced from grapes grown within the smaller AVA would not be
entitled to use the name of the larger AVA as an appellation of
origin or in a brand name.
As noted above, in the ``comments invited'' section of Notice No.
78, TTB asked whether in some or all cases the establishment of a
smaller AVA located within the boundaries of a larger AVA should result
in a prohibition against the use of the larger AVA name on wine labels.
Twenty-four commenters specifically address this question--two in favor
of such a prohibition and 22 opposed to it.
One of the two commenters in favor asserted that more than one AVA
on one wine label is inherently contradictory to the regulations in
proposed Sec. 9.12(b). This commenter further stated that nesting
``weakens consumer understanding of AVAs.'' Though opposed to the
concept of nesting, this commenter stated that it is unfair to change
the regulations by not allowing wine producers to put both the sub-AVA
and larger AVA on its wine labels. This commenter suggested that TTB
allow wine producers to use sub-AVAs in conjunction with ``political
appellations.''
The other commenter in favor of such a prohibition expressed
concern that some small AVAs within larger AVAs ``are not based on
oenological, environmental, topographical or historical differences but
are intended for an egotistical or economical basis, only.'' For this
reason, this commenter supported the proposed changes regarding the
establishment of an AVA within another AVA.
Of the 22 comments in opposition to the proposed regulatory text,
many of them argued, in essence, that an AVA within a larger AVA makes
sense, helps to better identify and define the wine, is already part of
the existing AVA program (many businesses established and built
themselves up based on this concept), and coincides with other
countries' practices. For example, one commenter stated that ``more
than three-fourths of all existing AVAs are located inside another AVA
* * * AVAs within AVAs help consumers both better understand
viticultural distinctions that may exist within a larger AVA and gain
information about the origin and thus value of a particular wine.''
Commenters who opposed this proposal also asserted that it is
always better for the consumer to have more information about where a
wine comes from. Some pointed out that the use of the larger, and
therefore probably more well-known, AVA name aids the consumer in
determining where the sub-AVA is located.
A commenter on behalf of Premier Pacific Vineyards stated that the
proposals in Notice No. 78 ``will have tangible negative effects on
wine consumers and the industry.'' This commenter further stated, ``Not
allowing producers to list all the information on the wine's origin by
limiting the description to a small AVA without providing the often
more familiar larger AVA, removes useful information from the consumer.
Changing the rules in a way that makes the origin of wine and labeling
more confusing or less descriptive represents a disservice to the
consumer.''
The president of Appellation St. Helena, which represents 60
wineries and 7 vineyards, stated that this provision is ``a huge step
backward'' and that it ``flies in the face of all of the other great
wine growing regions worldwide that go to great lengths to encourage
detailed naming of specific places.''
A commenter affiliated with the University of California, Davis,
wrote that the ``concept of hierarchical classification, or nesting
finer-scale places within courser-scale places, is both global and
almost ubiquitous.'' Further, as an analogy to different levels for
specifying AVAs, several commenters discussed the classification system
of dogs. These commenters wrote that a Yorkie is a Terrier which is a
dog. They further stipulated that no one will refute the fact that
though a Yorkie is not the same as all terriers and a Terrier is not
the same as all dogs, they are all in fact dogs and therefore share
similar characteristics.
With regard to the companion issue of whether the nesting of AVAs
should be eliminated, TTB received 36 comments, all in opposition. Many
of these commenters share the belief that nesting
[[Page 3496]]
is a common worldwide practice that consumers understand.
One of these commenters stated:
An AVA contained within a larger AVA is and should remain part
of the larger AVA * * * Informed consumers already understand that
viticultural distinctiveness is measured at multiple levels. Most
major wine producing countries recognize this fact and formally
incorporate varying levels of viticultural distinctiveness into
their regulations. For example, Australia's regulations describe
zones, regions, and sub-regions, all of which are geographical
indications of the source of grapes, which, like AVAs, contain no
quality controls or quality connotations, but which require a
showing of varying levels of viticultural distinctiveness; Chile has
regions and sub-regions; and in France, the Burgundy and Bordeaux
appellations are divided into districts, communes and even smaller
appellation areas. Formal regulatory recognition of multiple levels
of viticultural distinctiveness exists throughout the world because
such recognition leads to logical, organized and understandable
appellations of origin and, ultimately, well-informed consumers. In
none of these countries are smaller AVAs carved out from
surrounding, larger AVAs.
A commenter on behalf of the PRAVAC argued that ``every appellation
system in the world utilizes geographic nesting to specify the origin
of wines, and consumers worldwide are already familiar with this
concept.'' This commenter further stated that ``nesting itself is
fundamental to the existence of a meaningful appellation system * * *
TTB must not enact rules that threaten this structure.''
A commenter on behalf of Premier Vineyards wrote that ``nested or
telescoping AVAs are consistent with the TTB's goal of identifying and
defining geographic areas (AVAs) that have unique geographic features
that result in distinctive grapes and wine.'' However, another
commenter on behalf of Sonoma County Vintners stated that ``this does
not mean that TTB should not limit overlaps that do not meet the tests
for creating an AVA.''
TTB Response
TTB believes there is merit in the comments received asserting that
nesting should not be prohibited, and that recognition of a smaller AVA
should not by definition prohibit the use of the viticultural name of
the larger AVA in which it lies. TTB agrees that consumer interests are
served by greater specificity within a hierarchy, where a true
hierarchy exists.
However, TTB notes that a determination that a hierarchy of grape-
growing regions based on similar yet distinguishable geographical
features exists, rather than a situation in which an entirely different
grape-growing region lies within another grape-growing region, must be
based on the facts related to the geographical features presented in
the AVA petition under consideration. The comments received in response
to Notice No. 78 do not convince us that the mere fact that a proposed
AVA would be located within an existing AVA is sufficient to allow the
use of either the existing AVA name or the proposed AVA name, at the
sole discretion of the vintner.
For example, if an existing AVA is defined as being a large valley
and its distinguishing geographical features are those that are found
on the valley floor, it may be appropriate to approve a proposed AVA
described as being situated in whole or in part on the same valley
floor within the existing AVA if the proposed AVA shares some of the
geographical features with the existing AVA but at the same time has
other geographical features that are sufficiently distinctive as to
warrant its own AVA designation. On the other hand, if within that
large valley AVA there is a mountain on which a petitioner proposes to
establish a new AVA above the 500-foot elevation line, the evidence
provided in the petition might demonstrate that the distinguishing
features of the proposed AVA bear no relationship to those of the
valley floor. In the latter case, the new petition has demonstrated
that this is not a hierarchical situation involving some sharing of
common features but rather is a proposal to establish an entirely
distinctive AVA. In such a case, TTB believes it may be inappropriate
to take a regulatory action that could cause consumers mistakenly to
conclude that wine produced from grapes grown within the petitioned-for
AVA has the same characteristics as wine produced from grapes grown in
the existing AVA.
Based on our experience in reviewing petitions for the
establishment of AVAs, we have found that in the vast majority of cases
petitioners who propose the establishment of an AVA within an existing
AVA, and who provide evidence that there are sufficiently
distinguishable geographical features in the proposed AVA to warrant
its recognition, can also establish through the evidence submitted that
the proposed AVA has some geographical features that are sufficiently
similar to those of the existing AVA so as to allow it still to be
considered a part of the existing AVA. In those very rare instances in
which no notable common geographical features between the two AVAs can
be found, we believe that permitting the use of both AVA names for wine
sourced from the grapes grown within the proposed AVA could be
misleading to the consumer, and it would not be appropriate for TTB to
take regulatory action which would produce that result.
After careful consideration of the comments submitted, TTB has
determined that it would be inappropriate to adopt regulatory language
that prohibits future approvals of AVAs that entirely surround or lie
entirely within, or that overlap, existing AVAs, provided such
approvals are adequately justified through petition evidence and
rulemaking procedures. TTB also believes that the decision as to
whether or not a proposed AVA that entirely surrounds, lies entirely
within, or overlaps, an existing AVA should prohibit label holders from
using the existing AVA name on the wine labels as well should be made
on a case-by-case basis considering the evidence submitted by the
proposing AVA petitioner. The regulatory language as proposed in Notice
No. 78 is consistent with these principles and will afford sufficient
flexibility under the case-by-case approach. TTB notes the intent of
the provisions dealing with AVAs within AVAs is to apply it
prospectively to newly established areas only. AVAs already established
within AVAs will not be affected by these provisions.
Comments on the New Part 4 Grandfather Provision
The text proposed in Notice No. 78 for new Sec. 4.39(i)(3) stated:
(3) Brand names that do not meet the requirements of paragraph
(i)(2) of this section and that contain the name of a viticultural
area or other term of viticultural significance established under
part 9 of this chapter on or after [INSERT EFFECTIVE DATE OF FINAL
RULE] may be used in conjunction with information which the
appropriate TTB officer finds to be sufficient to dispel the
impression that the geographic area suggested by the brand name is
indicative of the origin of the wine, provided that the brand name:
(i) Was used in an existing certificate of label approval issued
prior to the 5-year period immediately preceding receipt of the
perfected petition for establishment of the viticultural area; and
(ii) Was in actual commercial use on labels for at least 3 years
during that 5-year period.
As noted above, in the ``comments invited'' section of Notice No.
78, TTB asked whether the use of a grandfather provision to avoid
conflicts between an established brand name and the establishment of a
proposed AVA is appropriate. Of the 191 comments received, 107 comments
specifically addressed this issue--2 in favor of using such a
grandfather provision and 105 opposed to its use.
[[Page 3497]]
A commenter on behalf of Compliance Service of America, whose
services include the preparation and filing of AVA petitions, stated in
favor of the grandfather provision, ``It is understandable the TTB sees
this problem and its effect more completely than many industry members,
because TTB has been forced to find the solutions for the competing
interests of the parties.'' This commenter further stated, ``The
problem of conflicts between new AVAs and existing brands continues to
exist and is becoming even more prevalent as more * * * AVAs are
created. With the growth of the US wine industry and the proliferation
of AVAs, conflicts will only become more frequent, and will continue to
be devastating to wineries that have literally put the viticultural
area on the map.'' This commenter cited the petitioned-for Eola Hills
AVA as an example, pointing out that Eola Hills Winery developed the
region as a grape-growing region and essentially created the
viticultural significance of the name Eola Hills. The commenter
asserted that the establishment of the AVA would have had an adverse
impact on the use of the winery's brand name and noted that the problem
was narrowly avoided by adding a modifier to the AVA name so that the
AVA name established is Eola-Amity Hills.
A commenter representing Calistoga Partners, L.P., also in favor of
the grandfather provision, wrote:
We believe that TTB's proposed rulemaking in Notice No. 78 is
fundamentally a fair resolution of the potential conflicts between
the rights of brand owners who had brand names in actual commercial
use based on existing certificates of label approval and the rights
of those who wish to establish a new AVA, and represents a
reasonable compromise that we would strongly support.
Most of the 105 commenters who opposed the grandfather provision
wrote that they believe the proposed provision would allow misleading,
confusing, and/or deceptive wine labels in the marketplace and thereby
harm consumers. Many of these commenters further asserted that the
grandfather provision will have far reaching consequences that will
degrade the integrity of the AVA system. A number of these commenters
specifically referred to the issues discussed in Notice No. 77,
regarding the proposed establishment of a Calistoga viticultural area,
as an example of problems that a grandfather provision can create.
The president of the Washington Wine Institute wrote that the
grandfather proposals put forth in Notice No. 78 ``are not sufficient
to protect against deceptive labeling and consumer misunderstanding; in
fact, they are a step backwards from both industry and governmental
efforts to provide consumers with accurate and comprehensible
information about the wine in the bottle.''
The commenter on behalf of the PRAVAC wrote:
Current law applies two different sets of labeling rules for the
industry: One set of rules applies to geographic brands used in
COLAs issued prior to July 7, 1986, and a different set--the
labeling rules set forth in the current regulations--governs every
other geographic brand in the U.S. marketplace. While not a perfect
solution, at least these two groups are easily identifiable and not
subject to change. The number of grandfathered brands with
misdescriptive names is finite, thus limiting the chances for
consumer deception.
This commenter further stated that the proposed changes to the
regulations would create three sets of labeling rules: (1) For brands
on COLAs issued prior to July 7, 1986; (2) for geographic brands used
on COLAs issued at least 5 years prior to the date on which a petition
for a conflicting AVA is ``perfected'' that also have been used in
commerce for at least 3 of those 5 years; and (3) for brands on COLAs
that do not fall into either of the preceding categories. This
commenter added that ``this solution is inadvisable.'' This commenter
also provided an example of a name conflict involving a petitioned-for
AVA within the Paso Robles AVA, the proposed El Pomar District AVA,
which was resolved with the owners of the potentially conflicting COLAs
by their consenting to the use of the proposed AVA name prior to
submission of the petition.
The president of the industry trade association Wine America,
wrote:
The grandfathering clause would allow already existing
geographic brand names that contain a reference to a new AVA to
continue to be used as long as they were on a COLA approved at least
five years before filing of an AVA petition and have been in actual
commercial use for at least three years of those five years. This
change in regulation is driven by concern that petitioners may
propose AVAs to limit competition to the detriment of established
businesses.
This commenter added that this proposal ``creates consumer
confusion, it undermines the value of the appellation for wineries
properly using the appellation, and we believe the TTB has sufficient
authority to resolve such conflicts through other means.''
The president of the board of directors for the Napa Valley
Vintners trade association raised concern on the issue, stating:
This proposed rule requiring five years of ownership of COLA and
three years of use in commerce * * * is contrary to TTB's consumer
protection mandate set under the FAA Act. It has no basis in, and is
contrary to, recognized trademark and unfair competition law and
does not comport with the provisions of Article 23 of the Agreement
on Trade-Related Aspects of Intellectual Property Rights * * *. As
mandated by the FAA Act, TTB's primary function in the regulation of
wine labeling is to protect consumers by ensuring that they are not
misled. The proposed grandfather rule in Notice No. 78 is contrary
to this Congressional mandate.
Many of the commenters indicated that they believe the current
regulations in existence for more than 20 years are fair to all
concerned and do not believe it is fair to change this provision now
because industry members have been playing by these rules for 20 plus
years. Several commenters pointed to TTB's regulations, which prohibit
the use of misleading and deceptive labeling. Other commenters pointed
out that TTB has the responsibility to protect the public from
misleading labels.
One commenter further asserted that the grandfather provisions are
not in line with the FAA Act. This commenter pointed to the TTB
regulations that outline the label revocation procedure set forth in 27
CFR part 13, subpart D. In discussing the establishment of this
procedure, this commenter stated that TTB made the following
observation, ``Paragraph 1 of Form 5100.31 [Application for and
Certification/Exemption of Label/Bottle Approval] does not constitute
trademark protection.''
A commenter on behalf of the International Trademark Association
wrote:
[The] proposal advocated by TTB fails to properly consider the
principle of ``first in time, first in right'' priority and the fact
that U.S. trademark and unfair competition laws recognize the
establishment of rights in trademarks and geographical indications
based on use and consumer recognition without the necessity of any
type of registration. Accordingly, the grandfather proposal
advocated in NPRM No. 78, and effectively applied in NPRM No. 77,
does not ensure that the valid rights of either trademark owners or
the users of geographical indications or the interest of consumers,
will be protected.
As noted above, in the ``comments invited'' section of Notice No.
78, TTB asked whether it would be more appropriate to adopt an
alternative to the grandfather provision that would apply to brand
names that have longstanding commercial use under one or more existing
certificates of label approval without specifying a time period. Four
commenters specifically
[[Page 3498]]
responded to this question--all in opposition to the use of such an
alternative.
Also as noted above, in the ``comments invited'' section of Notice
No. 78, TTB asked for comments on what type of dispelling information
would prevent consumers from being misled as to the origin of the wine
when a grandfather provision applies as well as for other comments for
a requirement on dispelling information. Twenty-two commenters
specifically responded to this comment solicitation, all in opposition
to using dispelling information to avoid misleading consumers.
Several of these commenters stated that disclaimers will not be
effective in avoiding the misleading of consumers when consumers are
purchasing wine from a wine list in a restaurant or online. For
example, the Napa Chamber of Commerce believes that ``disclaimers
hidden on back labels do not help consumers make informed choices when
choosing from a wine list.'' In addition, the president of Duckhorn
Wine Company stated that ``additional wording on the label to help
clarify the origin of wines * * * will not dispel confusion as most
consumers will not see the label before they order wine in a restaurant
or purchase wine online.'' Another commenter wrote, ``Consumers
purchasing wine via mail-order or the Internet