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In Vino Veritas: In Wine There is Truth

In recent years, China has become one of the greatest markets for American wine exports. In 2003, China imported over 1.2 millions liters of American wines, making it the 24th largest market for American wine exports. (See New Opportunities in China for American Wine Producers.) In May of this last year, the U.S. Commerce Secretary Gary Locke signed an agreement with Hong Kong to help promote the sale of American wines in China. (See Creating Thirst for American Wine in China.) Furthermore, a recent survey conducted by Vinexpo shows that red wine has an 88 percent of annual total sales by volume with white wine sales expected to grow by 41.7 percent by 2013. Whereas China is the fastest growing market, and despite clear economic success of American wines in the Chinese market, such success has not developed without  deterrents — one of which particularly shapes the landscape of future exports of American wines.

Recent discovery of counterfeit wines in China has prompted many winemakers to seek diplomatic actions. Australian wine products, which are said to be worth $2.5 billion in exports per year, have been particularly susceptible to the counterfeit wines in Chinese markets. (See Winemakers See Red Over Bogus Bottles.) Allegedly, the bottles of Australian winemakers have been filled with Chinese wine but sport the labels of bouquets of Australian wineries. “Chinese entrepreneurs are counterfeiting Australian wine, including knock-offs of one of our best-known brands, Penfolds, and promoting the fakes as quality wines in shops and trade fairs throughout the country.” (See Chinese Fake it with Counterfeits of Australian Wines.) But, reportedly, it is not just large wineries that are victims of counterfeit; many of the smaller winemakers have been struck with counterfeit bottles as well.  This creates a considerable problem for exports of wine to China, especially as winemakers are starting to develop an interest in the market. Many winemakers are concerned about developing a bitter taste and thus hindering their reputation among Chinese consumers, which could certainly hurt future sales in the market.

Australian wineries are not the only victims to counterfeit wine products in China. In 2006, Canadian ice wines fell victim to the Chinese counterfeit wines. (See Château Faux.) In February of this year, 400,000 bottles of the French Fitou wine was found to be counterfeit. (See Chinese Counterfeit 400,000 Bottles of Fitou Wine.) Finally, this last month, it was estimated that over 70 percent of bottles of the French Lafite wine in China were counterfeit. (See China’s Lafite Wine Bubble: 70% of Wine is Fake?)

Although the Chinese market is, quite clearly, an emerging wine market for exports, winemakers must be wary when exporting high volumes of both luxury and table wines. Until appropriate legal relief is determined, it is most appropriate that producers of wine in America (and other countries) who choose to export products to China understand the ramifications of such. Although a market with a great taste developing for wine, and hence a substantial revenue potential, wine producers much take into consideration the risks averred: tarnishing of brand reputation, causing consumer taste to weaken and prices to subsequently plummet.

DISCLAIMER: This blog post is not intended as legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.

Lindsey A. Zahn

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Lindsey is the founder and author of On Reserve: A Wine Law Blog. She is an alcohol beverage and food attorney and is admitted to the New York State Bar.

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