Maurice A. Deane School of Law at Hofstra UniversityScholarly Commons at Hofstra Law

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In Vino Veritas - Mercatum - Conventio:Agreements In Wine TradeJuli CampagnaMaurice A. Deane School of Law at Hofstra University

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Recommended CitationJuli Campagna, In Vino Veritas - Mercatum - Conventio: Agreements In Wine Trade, 36 INT’L L. NEWS, SEC. OF INT’L L. & PRAC.,A.B.A., 8 (2007)Available at: https://scholarlycommons.law.hofstra.edu/faculty_scholarship/517

IN VINO VERITAS-MERCATUM-CONVENTIO-tin L,.i-i e ji'Tade

By jul Campagna

iUSI to trade in wine n

•006 one bilateral, one

n ... ti teral. These agree-constitute all the wine

lfie agreements to whichUted States is a party

", B itra Wvine~

The agreement between theEuropean Community (EC)and the United States onTrade in Wine entered intoforce on March 10, 2006.

This agreement provides for mutual acceptance of existingwine practices and also addresses certain labeling issues.Since 1983, the European Union had been granting andrenewing short-term derogations from U.S. wine madewith practices they do not recognize. Different regulatoryrequirements for wine labeling constitute some of thegreatest barriers to as well as the highest costs in the inter-national trade of wine.

Nearly 40 percent of U.S. wine imports in 2005 werefrom the EU countries, for an amount exceeding $2.5 bil-lion. The EU, in turn, purchased over half of U.S. wineexports in 2005, contributing $323 million to our $606million of wine export revenues.

The European Commission recommended adoptingthe agreement citing the importance of the U.S. marketfor the EC wine sector. The U.S. market is essential toFrance Italy, and Spain-Europe's largest producers.Domestic consumption of wine in Europe continues todecline dramatically In Italy, per capita wine consump-tion has dropped 50 percent during the past 30 years.France and Spain show very similar trends.

Although most wine produced in these countries is

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table wine, the only domestic sector growing in all three isthe fine wine sector. Young consumers spend significantlymore than their parents on wine for special occasions; nev-ertheless, they drink much less on a daily basis. YoungAmerican consumers, on the other hand. are drinkingmore wine than at any time in history Table wines faremuch better in the United States, for all age groups, thando high-quality wines. The key substantive provisions ofthe agreement govern the Use of Certain Terms on WineLabels with Respect to Wines Sold in the United States(article 6) and Names of Origin (article 7). The UnitedStates has promised to change the legal status of the follow-ing 17 terms on the labels of wine produced and sold inthe United States: Burgundy Chablis, champagne, Chianti,claret, haut Sauterne, Hock, Madeira, Malaga, Marsala,Moselle, port, retsina, Rhine, Sauterne, sherry and TokayExcept for wines that come under the grandfathering pro-visions of the agreement, only "wine originating in theCommunity" (meaning, made from grapes wholly obtainedin EU territory) may use these names on its labels.

Other than "retsina,' all these terms are classified as"semi-generic" under the Internal Revenue Code of 1986(IRC) at 26 U.S.C. § 5388, as implemented by the Bureauof Alcohol and Tobacco Tax and Trade (TTB) in Title 27,Part 4 (Labeling and Advertising of Wine), of the Code ofFederal Regulations (CFR).

The IRC defines semi-generic names as those thatshow geographic significance but also specify a class andtype of wine and lists the place of oigin of each of these17 names, for example, Burgundy (France) and Tokay(Hungary), at 26 U.S.C. § 5388(c). Labels on wine sold inthe United States, whether domestic or imported, maynot use semi-generic names unless they contain a disclo-sure statement as to the true place of origin of the wine.Thus, Burgundy produced in New York state must clearlyindicate its New York origin in order to comply with cur-rent U.S. law. In pursuance of our new treaty obligations,however, unless a current wine comes under the grandfa-thering provisions explained below, wines labeled, forexample, "Tokay of Tennessee" may no longer be import-ed, stocked, or sold in U.S. commerce.

A generic name, under current TTB regulations, is onethat started out with geographic significance but since has

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become generic, and now only designates a class or typeof wine and not its geographic origin. Examples under§ 4.24(a)(2) are -vermouth" and "sake." As a result, thereis no requirement to distinguish sake as not coming fromJapan, for instance. Many Americans argue that "Chablis"and "champagne," especially if written without capitaliz-ing their initial letters, should be classified as genericrather than semi-generic names.

Grandfathering provisions exempt "any person or itssuccessor in interest' from the new rules on semi-genericlabeling names, provided the wine used that name on alabel granted a "Certificate of Label Approval" (COLA) bythe TTB prior to March 10, 2006. "Person" refers to thebrand, rather than to the actual producer or legal ownerot that brand, making the exemption a broad one.

(1) appellation of origin, (2) indications of source, and (3)non-generic names of geographic significance.

Sixteen EU member states have obtained protection fortheir appellations of origin. The European lists are lengthyand highly detailed. The United States has now agreed, forexample, to protect the appellations of 451 Italian qualitywines and 126 Italian table wines. One designated Italiantable wine merits protection whether labeled in the mascu-line or feminine: "Toscano" or "Toscana." Another designat-ed Italian table wine from the bilingual area in theDolomites (the Alto Adige) is to be protected in both itsItalian and its German names: "Vigneti delle Dolomiti" and"Weinberg Dolomiten." The actual term "table wine" is nowreserved for EU wines as well. The EU has agreed to pro-tect 65 U.S. appellations of origin in its territory. The list

o pares ow uarantee egra prot ec t o nto specij'ic names of gCoaphK: orgn

In Industry Circular 2006-1, dated March 10, 2006, theTTB explains how the exemption works for "persons andsuccessors in interest." If Company A produces "Smith Ele-gance California Cream Sherry," its brand name is "Smith"and its "fanciful name," for purposes of the COLA, is "Ele-gance." 'Sherry' is the class and type of designation, and"California" is the labeled appellation of origin. The produc-er's goal, of course, is to be able to use the name "Sherry" onthe label. As long as Company A does not change the brandname (Smith) or the fanciful name (Elegance), it comeswithin the exemption. It may change the appellation of ori-gin from 'California" to "Napa Valley," and it may delete"Cream." Finally, it may sell its rights in the COLA to othercompanies, who may continue to use it under these rles.

The United States has agreed to notify the EC in writingof the date that it changes its labeling laws. It has furtherpromised to "take measures to ensure that any wine notlabeled in conformity with this Article is not placed on oris withdrawn from the market until it is labeled in confor-mity with this Article." As of press time, the United Stateshas not enacted any implementing legislation. Neitherhouse of Congress introduced legislation in 2006.

The other key substantive provision, Names of Origin,addresses issues that the United States and Europe have dis-puted since the Uruguay Rounds: geographic indications.Under the agreement, both parties now guarantee legal pro-tection to specific names of geographic origin. These nameswill be reserved for the exclusive use of wines produced inthe stated regions. The three treaty-protected categories are

includes names such as Cayuga Lake, Grand River Valley,Napa Valley, and Yountville.

All 27 EU member states as well as all 50 United Statesare now protected as indications of source.

Germany, France, Italy, Portugal, and Spain also obtainedprotection for non-generic names of geographic significancesuch as "liebfraumilch" and "Oporto." Actually, these namesalready are protected under U.S. law. Unlike with semi-generic names, such as "Chablis" and "champagne," the U.S.does not permit domestic or imported wines to combinenon-generic names with normative appellations of origin, forexample, "Liebfraumilch of Little Rock." By including thesenames in the terms of the agreement, the EU undoubtedlysought to ensure that they would not slip into semi-genericor generic status. At present, the TTB has exclusive authorityto reclassify geographically significant names of wines. TheUnited States has promised to remove the TTBs discretion.

Note that wine names such as 'Pascal Bouchard" or"Robert Mondavi" are not covered by this treaty Thesenames are trademark names and come under trademarkprotection. Like trademarks, geographical indications (GIs)function as source indicators. Unlike trademarks, GIs donot give any one company exclusive property rights. Bothadvise customers about the quality or taste they can expectfrom the wine in the bottle. Whereas a trademark repre-sents a business's reputation, a GI represents a region's rep-utation. The protection sought and granted to the termretsina" is similar to a protected designation of origin

(PDO) in EU law. There is no traditional wine-growing

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region in Greece named Retsina. Nevertheless, the name isa traditional non-geographic name that Europeans deemworthy of protection.

GIs actually have existed since antiquity, but they onlybecame a recognized form of intellectual property world-wide in 1995 under section 3 of the Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS).GIs are defined in article 22 of TRIPS as indications that"identify a good as originating in a territory of a Member,or a region or locality in that territory, where a given

tion of Industrial Property, as last amended in 1967.Under Article 10 bis of the Paris Convention, deceptiveuse of geographic origin constitutes unfair competition.

In essence, both sides had and have good legal, eco-nomic, and cultural arguments for their positions, mostof which are beyond the scope of this article In a 2005holding in a dispute brought by Australia against the EU,which the United States joined, the EC-Protection ofTrademarks and Geographical Indications for AgriculturalProducts and Foodstuffs case, the WTO also acknowledged

he veolgraphtc nanes and terns I u-ed inthe agreement do not peet the U S. definitionof inte/lectial properiy.

quality, reputation or other characteristic of the good isessentially attributable to its geographic origin." Article23 of TRIPS grants special GI protections to wines andspirits. As World Trade Organization (WTO) memberstates, the United States and the EU are legally bound toprotect GIs under the terms of TRIPS.

Interestingly, there is no dispute-settlement provisionin the EU-U.S. Bilateral Wine Trade Agreement. The par-ties resolved to "provide a harmonious environment foraddressing wine trade issues" in the recitals, and endedwith a joint declaration to resolve their differencesthrough informal bilateral consultations, rather thanthrough formal dispute settlement mechanisms.

This bilateral agreement represents a welcome change inEU-U.S. wine trade relations. The United States staunchlyopposed including GIs during TRIPS negotiations, prefer-ring to include only trademarks. Europe obviously pre-vailed. The European position is hardly surprising, giventhe strong protections for GIs in the domestic laws of itsmember states since the 19th century. France passed legis-lation in 1824 that criminalized producers for falsely desig-nating the geographic origin of goods. The first GT inmodem times may well be "Chianti," which was declaredas such in 1716 by Grand Duke Cosimo III de' Medici.Certainly since the mid-19th century, when Baron Ricasoliestablished the Chianti recipe, there has been no doubtconcerning the protection of the wine's geographical origin.

Most EU member states are also states parties to theMadrid Agreement for the Repression of False or Decep-tive Indications of Source on Goods. In any case, article 2of TRIPS, which binds both the EU and the UnitedStates, requires members to comply with articles Ithrough 12 of the 1883 Paris Convention for the Protec-

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both sides. Though the case was not limited to wine, theWTO Dispute Settlement Body held that the substantivelaw of GI protection in the EU was not inconsistent withTRIPS. It further held, however, that TRIPS does not per-mit the unqualified coexistence of geographical indica-tions with prior trademarks, as the EU had alleged.

By concluding the EU-U.S. Bilateral Wine Trade Agree-ment, the parties are fulfilling their international lawduties, under article 24 of TRIPS, "to enter into negotia-tions aimed at increasing the protection of geographicalindications under Article 23" (the specific wine and spiritprotection provisions). Spirits have not been included, norhas the full breadth of wine. Nonetheless, the agreement isa serious attempt by the parties to limit squabbles and pro-vide more certainty for all parties in the nultibillion-dollar,multibillion-euro wine trade business.

This agreement does not mean that both sides will livehappily ever after. Indeed, the United States has express-ly stated that the geographic names and terms includedin the agreement do not meet its definition of intellectualproperty and that it does not have to confer or recognizeany intellectual property rights in them. This is out ofstep with both European and international law. At thesame time, the United States has specifically agreed, inthe Joint Declaration, to enter into a future dialogue onthis very position. Dialogue, cooperation, and good faithare terms that pervade the agreement. Now if we can justget that implementing legislation in place.

J h Wforld Wine trade Group Agreemen',The World Wine Trade Group (WWTG) countries didnot have any fences to mend when they concluded theAgreement on Requirements for Wine Labeling in Sep-

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tember 2006. The WWTG member countries areArgentina, Australia, Canada, Chile, Mexico, NewZealand, South Africa, and the United States. This groupdates back to June 1998 when their governments andwine industry representatives met in Zurich to discussand plan wine trade development in light of the WTO.

Australia backed the United States during theUruguay Rounds in opposing geographical indicationsfor purposes of wine trade. While most TRIPS negotia-tions divided along the lines of developing and devel-oped countries, Gis divided the "New World" and the"Old World." New World countries present at the Zurichmeeting all supported unsubsidized wine production,exporters, and markets. Under the Common AgriculturalPolicy, the EU subsidizes wine production the same waythe United States subsidizes corn: heavily.

The terms of trade in wine among WWTG membersare actually set forth in two treaties. The first agreement,the 2001 Mutual Acceptance Agreement on OenologicalPractices (MAA), deals with wine-making practices andhas full treaty status in all eight countries. The parties tothe MAA mutually accepted each other's laws, regulationsand requirements regulating wine-making practices.

Although the WWTG members did not finalize theirWine Labeling Agreement until September 2006, they hadbeen working within the framework of an earlier, non-binding declaration made in October 2000, the Statementof Principles on Wine Label Requirements, also known asthe Sonoma Principles. In the Sonoma Principles, theyacknowledged their wish to facilitate international trade inwine in accordance with the WTO, and recognized thatwine labels should be designed to meet the various needsof consumers, producers, and regulators and be mutuallyaccepted by wine-trading countries. Essentially, all infor-mation was to be clear, accurate, truthful, and not mislead-ing. Terms such as percentage of alcohol, and how to

express it, as well as content volume, and how to expressit, were to be mutually accepted. Wine producers, declaredthe Sonoma Principles, "should be free to label their prod-ucts as they see fit subject to TRIPS and applicable laws ongeographical indications and intellectual property." Theprovisions of the 2006 WWTG Labeling Agreementembody the Sonoma Principles.

Both wVVWTG agreements set up a council to managethe agreement and provide for dispute resolution. Whena dispute arises, each country has a duty to provide rep-resentatives from their relevant governmental agencieswho have actual expertise in the matter disputed.

Australia and Argentina increased their exports by overfive percent between 2004 and 2005. Although the UnitedStates actually decreased its worldwide exports during thesame period, all WWTG countries, including the UnitedStates, increased their exports to each other as a percentageof total export volume during this time. At 30 liters in2005, Argentina has the greatest per capita domestic con-sumption of any of the WWTG countries. Australia is closebehind. The United States significantly lower than theother group members, consuming less than ten liters percapita in 2005 (a record high). Nonetheless, U.S. wine con-sumption continues to grow, and the market is huge,dwarfing all other WWTG countries in total wine con-sumption. We consumed 2.5 billion liters in 2005.

Chile, a key wine-trade partner of the United States,regrets that Americans will not try (or at least will notpurchase) its fabulous fine wines. Nonetheless, Ameri-cans are hooked on Chilean table wine. Europe has a glutof table wine and an ever-declining domestic consumermarket. France continues to lose market share to NewWorld wines in the United States. If the dollar continuesto weaken against the euro, unfortunate European wineproducers will need all strategies available to make surethat table-wine-drinking Americans buy their goods. +

ITLOS Forms New Chamber for Maritime Delimitation Disputeshe International Tribunal for the Law of the Sea

. (ITLOS), located in Hamburg, Germany, has formeda standing special chamber to deal with maritime

delimitation disputes under article 15 of the tribunal'sstatute. The new Chamber for Maritime Delimitation Dis-putes will handle maritime delimitation disputes concern-

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ing the interpretation or application of any provision of theUnited Nations Convention on the Law of the Sea, whichthe involved parties must agree to submit to the chamber,and concerning any other agreement that confers jurisdic-tion on ITLOS. Further information about the tribunal andthe chamber is available at www.itlos.org. +

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