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On Monday, in Industry Circular Number 2014-02, TTB announced the expansion of its list of allowable revisions to approved labels for alcohol beverages, also known as Certificate of Label Approvals (“COLAs”). The agency currently maintains a list of allowable revisions to approved labels that outlines the permitted changes that can be made to an approved label without resubmitting the label for another agency approval. Prior to Monday, the list of allowable changes consisted of 28 separate items. In its expansion of allowable revisions to approved alcohol beverage labels, TTB noted the following additions to the list of allowable changes:

  1. Delete or change promotional sponsorship-themed graphics, logos, artwork, dates, event locations and/or other sponsorship-related information (e.g., sports leagues, team organizations, annual sporting events, and annual or semi-annual festivals);
  2. Add, delete, or change a label or sticker that provides information about a rating or recognition provided by an organization (e.g., “Recognized as one of the top values in vodka by x Magazine” or “Rated as the best 2012 wine by x Association”), as long as the rating or recognition reflects simply the opinion of the organization and does not make a specific substantive claim about the product or its competitors;
  3. Delete all organic references from the label;
  4. Change an approved sulfite statement to any of these options: “Contains Sulfites,” “Contains (a) Sulfiting Agent(s),” “Contains [name of specific sulfating agent],”“Contains Naturally Occurring and Added Sulfites,” or “Contains Naturally Occurring Sulfites.” “Sulphites” may be used in lieu of “Sulfites;”
  5. Add, delete, or change information about the number of bottles that were “made,” “produced,” “brewed,” or “distilled” in a batch; respectively; and
  6. Add certain instructional statements to the label(s) about how best to consume or serve the product. Only the statements listed in the comments section may be added. (These statements include pre-determined terms such as, “Refrigerate After Opening,” “Do Not Store in Direct Sunlight,” “Shake Well,” “Pour Over Ice,” and “Serve at Room Temperature.”)

See Expansion of Allowable Revisions to Approved Alcohol Beverage Labels. The above allowable revisions were effective the date of the TTB industry circular (Monday, September 29, 2014). Note: Any revisions to previously approved alcohol beverage labels must be made in compliance with 27 CFR parts 4, 5, 7, and 16, as well as any other applicable regulations or laws. With respect to the aforementioned changes, any alterations must also be in compliance with the notations in the “Comments” section of the Expansion of Allowable Revisions to Approved Alcohol Beverage Labels.

The above list is one of the mechanisms that TTB employs to reduce the number of label submissions it receives, and also serves as an attempt to ease regulatory constraints on industry. Generally speaking, the agency review well over 100,000 beer, wine, and spirits labels each year. While the average processing time for labels fluctuates, the review time is often several weeks and can be especially burdensome to industry members who need to make minor changes. While expanding its list of allowable revisions is helpful, it also demonstrates the dichotomy of TTB’s power: the agency’s authority, which derives from the Federal Alcohol Administration Act, is to prohibit consumer deception and the use of misleading statements on alcohol beverage products. In some instances in its expanded list, TTB determined a list of acceptable terms to add to an approved label (i.e., the instructional statements for consumption), but concurrently avoided providing industry members with the freedom to define or create their own terms or statements without requiring a new approval. 

For more information on wine or alcohol law, labeling, or TTB matters, please contact Lindsey Zahn.

DISCLAIMER: This blog post is for general information purposes only, is not intended to constitute legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.

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How Important are Federal Excise Taxes to the Wine Industry?

One of the major functions of the TTB, the federal agency that has primary jurisdiction over alcohol beverages in the U.S., is to collect federal excise taxes on alcohol beverages. As TTB more thoroughly explains on its website, excise tax rate depends on commodity type as well as product. See Tax and Fee Ratessee also Quick Reference Guide to Wine Excise Tax. For example, TTB’s current tax rates for alcohol are divided between beer, wine, and spirits and then subdivided into a hierarchy based on class/type (e.g., table wine, dessert wine, artificially carbonated wine, etc.).

Wine Tax Rates

(Note: There are exceptions, such as small domestic producer credit, to the above.)

One of the important distinctions, especially for wine tax purposes, is the division between table wine and dessert wine class/types. Often, clients will submit a label approval for a wine over 14% ABV and TTB will classify the product as “dessert wine,” even though the wine—for consumption purposes—is technically not a dessert wine. The agency’s reasoning pertains to the chart and tax rates above. Generally speaking, for tax purposes, a wine above 14% ABV will be classified as a “dessert wine” for class/type purposes and taxed at a higher rate than a wine with an ABV percentage at or below 14% ABV. The latter (i.e., the wine at or below 14% ABV) would fall into the “table wine” class/type and also be taxed at a lower tax rate per gallon or per 750 ML bottle.

A perjury statement accompanies each label approval submitted to TTB, meaning that all statements on a wine’s label—including the alcohol by volume percentage—must be truthful and correct. The agency does allow some degree of flexibility with respect to the ABV percentage stated (i.e., 27 CFR 4.36(b)(1) allows for a 1.5% tolerance for wine containing 14% of less of alcohol by volume), but not to the extent the agency presumes an industry member may be avoiding a higher tax bracket from which the government stands to obtain revenue. If a label represents the wine to be in a lower tax class (i.e., at or below 14% ABV) but the actual wine in the bottle contains a higher ABV percentage (i.e., above 14%) to render it belonging to a higher tax class, the agency can take measures against said industry member. As many industry members know, the agency also conducts random samplings of wines currently available on the market to ensure compliance with federal regulations and to maintain that products available to consumers are, indeed, accurately represented. At a recent conference I attended, a TTB representative commented that, in the last year, almost 700 alcohol beverage products were pulled in the market and close to 200 of those products did not conform with what the label stated.

Recently, TTB recognized that the owner of Monterey Wine Cellar, Brenda Jo Kibbee, was sentenced for intentional failure to pay federal excise taxes. See Owner Of Monterey Wine Cellar Sentenced To Prison For Failure To Pay Wine Excise Tax. The owner was sentenced to nine months’ imprisonment and ordered to pay $877,126.94 in restitution to TTB. As reported by the United States Attorney’s Office for the Northern District of California, the wine cellar had taxable wine removed from its bonded wine cellar premises during reporting period of August 1, 2008 through “at least” May 31, 2009. Id. “The sentence was handed down by the Honorable D. Lowell Jensen, United States District Court Judge, in San Jose.” Id.

The type of business is also key to excise tax structure. Generally, the proprietor of the bonded wine premises who removes the wine from bond for domestic consumption or sale is responsible for paying excise taxes. 27 CFR 24.270. In the case of Monterey Wine Cellar, the cellar was responsible for paying the excise taxes to TTB for taxable wine removed from the wine cellar. In most cases, these bonded wine cellars will pay the excise taxes to TTB directly but invoice their winery customers for these expenses. With respect to Monterey Wine Cellar, Ms. Kibbee invoiced and received payment from her winery clients for respective excise tax amounts but failed to pay the excise taxes due to the federal government. 

In conclusion, to answer the above mentioned question, federal excise taxes are indeed important to the wine industry—especially when the government stands to lose a percentage or totality of its revenue. For more information, TTB maintains an extremely helpful section on its website explaining the duties of brewers, distillers, and wineries with respect to excise taxes and filing.

Image property of On Reserve: A Wine Law Blog.

For more information on wine or alcohol law, excise taxes, licensing, or TTB matters, please contact Lindsey Zahn.

DISCLAIMER: This blog post is for general information purposes only, is not intended to constitute legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.

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On Reserve Author to Speak at Wine Law CLE in Virginia

Winery and vineyard law CLE course in Fairfax, VA.

At the end of October, I will be speaking at a winery and vineyard law CLE seminar in Fairfax, Virginia. My discussion is on ethics in wine law and will survey items like jurisdictional issues to engagement letters to avoiding issues during client representation. The full course is designed for attorneys, paralegals, wine industry professionals, and business owners and is hosted by the National Business Institute (“NBI”). The course is scheduled for Monday, October 27, 2014 from 9:00 AM to 4:30 PM and will be held at Waterford at Fair Oaks; 12025 Lee Jackson Memorial Highway; Fairfax, VA 22033. 

The topics for discussion include the following:

  1. Hot Topics in Local Government Winery Regulations
  2. Wine Business Entity Selection
  3. Tax Considerations and Consequences
  4. Vineyard and Winery Land Use Issues
  5. Licenses, Permits and Regulations
  6. Drafting and Negotiating Wine Industry Contracts and Agreements
  7. Protecting Brand Identity Through Trademarks and Copyrights
  8. Ethics

For more information, or to sign up for the seminar, please see NBI’s website here.

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

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Thank You for Attending the Wine Law CLE

Introduction to Wine Law CLE Program Course

Special thanks to all On Reserve readers who attended last week’s CLE course on wine law in New York City. The course surveyed an introduction to wine law, and highlighted some of the major legal issues with respect to federal regulation, state regulation, and direct shipping. Although many issues affect the wine industry, I thought these topics to be most pertinent for an introductory course on the topic. It is also worth exploring pre-Prohibition and post-Prohibition era attitudes to obtain a true understanding of how and why wine is regulated the way it is today. Unfortunately, a 50-minute introductory course does not necessarily allow time to discuss everything. From a contemporary standpoint,  I believe the topics discussed the other night to be most relevant.

Thank you again to Rosenfarb LLC for hosting the wine law CLE event. I had a wonderful time speaking on the topic, and it was truly a “packed house.” I am looking forward to future events and will be sure to share them on the blog.

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

 

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NOPA vs. Napa: A Wine Trademark Opposition

Nopa and Napa Valley Vintners Association Trademark OppositionRecently, a Portuguese wine company, Wine Vision Lda. sought to register the mark “NOPA” in standard characters for “wines” through the United States Patent and Trademark Office. Napa Valley Vintners Association (“NVVA”) filed a notice of opposition with the Trademark Trial and Appeal Board.  Napa Valley Vintners Association v. Wine Vision, Lda., Opposition No. 91189310 (July 29, 2014) [not precedential]. In its opposition, NVVA alleged that it owned and had prior rights in the “common law certification marks NAPA and NAPA VALLEY for wine.” Id. (citing Notice of Opposition ¶ 2).  

As grounds for its opposition, NVVA asserted that Wine Vision’s mark:

  1. Was likely to cause confusion with NVVA’s marks;
  2. Consisted of a geographical indication in violation of § 2(a) of the Lanham Act;
  3. Was geographically deceptive in violation of § 2(a) of the Act; and
  4. Was primarily geographically deceptively misdescriptive in violation of § 2(e)(3) of the Act.

Applicant answered, acknowledging that Napa is a geographical indication, but otherwise denying the aforementioned allegations from the notice of opposition. In the record, NVVA produced information from the CFR as well as excerpts from several books to indicate that Napa Valley is a well recognized and widely known geographical indication and appellation for wine. NVA further contended that “Napa Valley” is often referred to simply as “Napa.”

The Board focused its discussion exclusively on standing. Standing, the Board noted, must be established by an opposer to bring an opposition and in order to prevail on any grounds alleged in the notice of opposition. It is a threshold issue that must be proven in inter partes proceedings and not simply alleged. The Board noted that, to establish standing, an opposer must show it has a “real interest” in the matter “beyond that of a mere intermeddler.” Napa Valley Vintners Association v. Wine Vision, Lda. at 3. In its brief, NVVA argued that it has standing because:

  1. NVVA is a non-profit trade organization associated with Napa Valley wineries and wines bearing the Napa Valley appellation of origin;
  2. NVVA is owner of a pending geographical certification application for Napa Valley; and
  3. As such, NVVA will be harmed by the registration of NOPA mark for wine since the mark is geographically deceptive and misdescriptive and is confusingly similar to NAPA, the abbreviation for Napa Valley.

Id. (citing Opposer’s Trial Brief at 3.)

Unfortunately for NVVA, the Board found that NVVA had no standing particularly because the record did not provide and evidence that suggested such. For example, the record did not provide evidence that NVVA is actually a trade organization, what its functions are, who its members are,  or even if the Association was the actual owner of the mark, “Napa Valley.” The Board did note, much to the contrary, that

Opposer did not plead ownership of an application in its notice of opposition; rather, the notice of opposition only references a ‘common law certification mark,’ about which there is also no evidence of record. Nor is there evidence of record that Opposer owns any mark. Id. at 4.

Napa Valley is certainly an established viticultural area, which is referenced in 27 CFR and was also provided in the record. The important distinction here is that the Board looked for reference to NVVA with a particular emphasis on the Association’s current activities. Id. Further, Wine Vision’s answer did not provide any admissions which would establish NVVA’s standing. Standing is a threshold that requires evidence, not pure speculation.

In this instance, the Board determined that NVVA did not present any evidence to establish standing and thus could not prevail on the grounds of any of its allegations in its notice of opposition. As a result, the Board dismissed the opposition.

For more information on wine or alcohol law, trademark, or labeling, please contact Lindsey Zahn.

DISCLAIMER: This blog post is for general information purposes only, is not intended to constitute legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.

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On Reserve Author to Speak at Wine Law CLE

Wine Law CLE New York Lindsey Zahn

I am extremely excited to announce that next Tuesday, September 16, 2014, I will speak about wine law at a CLE course. The course, titled “Introduction to Wine Law” will take place at Ashton’s Alley Restaurant in New York City. The CLE program is scheduled to run from 6:00 PM to 7:00 PM and will cover several basic topics: federal regulation, state regulation, and the dormant commerce clause in relation to the 21st Amendment (Granholm v. Heald and its aftermath). The course is pending CLE credit. Wine and cheese will be served.

If you’re interested in attending, please RSVP to Genhui Liaoye at genhui.liaoye@rosenfarb.com or (855) 415-4544.

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

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Arthur Goldman, a Pennsylvania attorney, was recently accused of selling wine without a license. The story goes that Mr. Goldman privately procured high-end wiArthur Goldman lawyer wine cellar Pennsylvania Liquor Law contraband seizure of winenes for friends and colleagues, selling the wine directly to multiple parties through his personal cellar as opposed to shipping the wine through Pennsylvania’s state-controlled liquor stores. (For the full original story from January, see U.S. Lawyer Arrested in Undercover Fine Wine Sting.) “He maintained a list and kept about 20 people informed of wines he had available, one of whom was an undercover officer involved in a sting operation. Police said officers made several undercover buys . . . .” U.S. Lawyer Falls Foul of State Wine Laws. Pennsylvania is one of the ten states that presently bans direct shipment of wine sales to consumers.

His wine collection—which is alleged to be valued at about $125,000—was seized and may be annihilated by government officials. The state’s law mandates that contraband wine be destroyed. In particular:

No property rights shall exist in any liquor, alcohol or malt or brewed beverage illegally manufactured or possessed, or in any still, equipment, material, utensil, vehicle, boat, vessel, animals or aircraft used in the illegal manufacture or illegal transportation of liquor, alcohol or malt or brewed beverages, and the same shall be deemed contraband and proceedings for its forfeiture to the Commonwealth may be instituted in the manner hereinafter provided. No such property when in the custody of the law shall be seized or taken therefrom on any writ of replevin or like process. 47 P.S. § 6-601.

The attorney’s collection includes rare wines, as well as wines that are not sold in Pennsylvania’s government-run liquor shops. To wine lovers, the thought of destroying a collection otherwise imbibable is preposterous. Mr. Goldman’s attorney argued that the near-2,500 bottles seized were never intended to be sold and instead belonged to the lawyer’s personal wine collection. See, e.g.Attorney Wants Seized $125K Wine Collection Returned; Pennsylvania May Destroy 2,426 Bottles of Fine Wine. Mr. Goldman hopes to regain his seized collection before the bottles are destroyed or ruined.

If anything, the above story is a clear representation of the dichotomy of how antiquated and unfriendly some state wine laws and regulations can be and yet how encouraging other states are to wine businesses and sales. In the U.S., less than half of the states have state-controlled government liquor stores that oversee the wholesaling or retailing of some or all aspects of alcohol beverage sales. These states are often referred to as alcohol beverage control states (or simply control states). Since such is regulated by the state, the exact terms or conditions of each model vary by the individual state. Not all states with government-controlled retail stores are as discouraging as Pennsylvania. For example, in Virginia (a control state), the state operates several hundred Alcohol Beverage Control stores, but (generally speaking) wine and beer are also sold at local grocery stores. In other control states, like Pennsylvania, alcohol (including wine) can only be purchased at retail outlets run by the state government. To make matters worse, Pennsylvania does not allow direct shipment of wine to consumers from wineries and retailers which, in combination with the limited selections at retail outlets, significantly limits the types of wines consumers within the state can purchase. In this day in age, when technology trumps borders and there is a significant movement in craft beverages with an emphasis on expanding and developing ones palate, it is a true misfortune that such limitations in the wine world still exist. Perhaps Mr. Goldman’s story will one day serve as the collapse of anachronistic regulations.

I spent a great portion of my life in New York, and while the state does not have government-controlled sale of wine, there is a strong prohibition against the sale of wine in grocery stores. Since I spent so many years living in New York, I probably did not even realize—until I started studying wine law—that other states allow wine to be sold in grocery stores. For me, wine always had a separate place: in the liquor store. Perhaps this is the greatest example (for me) of how states differentiate on their regulation of wine. Why doesn’t New York allow wine to be sold at the grocery store? It is a long story, and one that helped earn New York a grade of D+ in the 2013 State-by-State Report Card On Consumer Access To Wine by the American Wine Consumer Coalition. Pennsylvania, however, earned an F on its report card—a grade that many wine aficionados can probably agree was well deserved.

Image property of Philly.com.

For more information on wine or alcohol law, direct shipping, or three-tier distribution, please contact Lindsey Zahn.

DISCLAIMER: This blog post is for general information purposes only, is not intended to constitute legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.

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Introducing LabelVision: The 21st Century COLA Search

ShipCompliant Label Vision Searchable COLA DatabaseLast week, the folks at ShipCompliant officially rolled out a new service called LabelVision. To many in the wine, beer, or spirits industry, this new resource is a game changer. Instantly, we have access to over 1.5 million federally approved labels as far back as 20 years. To some, such a system may not seem much different from the TTB’s current public COLA database. To frequent users of the TTB system, however, LabelVision is a tremendous resource for many reasons. For one, LabelVision’s search capability significantly overpowers that of TTB’s public database: LabelVision allows a user to search a term that may appear on any part of a federally approved label. 

What does this mean, exactly? Well, for starters, instead of just searching the “Brand Name” or “Fanciful Name” of a federally approved label—which is currently the only portion of the actual, federally approved label text we can formally search through TTB’s public database—we can now search any part of an approved label’s text. This includes the paragraph of information a vintner may include about the vintage or the vineyard, as well as any stray text on the label. In the past, when using the public label database, I’ve often found its search capabilities limited and somewhat clunky. Many times, when assisting a client obtain a federal label approval, I’ve often wanted to search other portions of a label’s text than just the “Brand Name” or “Fanciful Name.” (What can be even more disheartening is that TTB tends to be very flexible with the actual brand name listed on the label, which means the applicant can be somewhat creative with what the wine’s brand name is listed as on the application, as long as such name appears on the label portion submitted to TTB as the true brand label.)

LabelVision changes all of this.

Another great aspect about LabelVision is that it serves as a mechanism for brand owners to patrol their registered trademarks and see if another company is potentially infringing upon the brand owner’s mark. This aspect reminds me a lot of my summer in Reims, in particular our trip to Le Comité Interprofessionnel du vin de Champagne (“CIVC”) in Épernay. During our visit, we met with the legal director of the CIVC, who recited many stories about how strictly the term “Champagne” is regulated—and not just on wine or other beverage products. While the CIVC looks at many other products (i.e., not restricted to alcohol) that may wrongfully use its protected geographical indication, a search tool like LabelVision could certainly come in handy for an organization (or brand owner) like the CIVC that seeks to protect a registered trademark or a geographical indication. As mentioned previously, LabelVision provides the ability to search all aspects of an approved label’s text, which can present results that TTB’s public label search simply overlooks or does not currently have the capability to search. (Note: Of course, just because an alcohol label is approved by the TTB does not necessarily guarantee that said label is used in commerce.)

 ShipCompliant's LabelVision: A Searchable Database for Alcohol Beverage Label Approvals

In sum, ShipCompliant’s LabelVision is a great resource for alcohol beverage lawyers, compliance directors, and brand owners. It saves a significant amount of time, and offers great features like the ability to create alerts for new approvals matching certain terms. We’ll be using it a lot more going forward, and we certainly believe the ShipCompliant system is the future of alcohol beverage label searches.

For more information, view the ShipCompliant press release on LabelVision here or the ShipCompliant blog post here.

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

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Rudy Kurniawan counterfeit wine fraud court settlement sentencing

On Thursday, August 7, 2014, Indonesian wine collector Rudy Kurniawan was sentenced to ten years in prison by U.S. District Judge Richard Berman. Mr. Kurniawan is purported to have swindled more than $20 million worth of fake wine that he allegedly created in his California home and later sold to collectors. Purchasers of Kurniawan’s wines included Bill Koch, David Doyle (co-founder of Quest Software Inc.), and real estate tycoon Peter Fascitelli. In December, jurors convicted Mr. Kurniawan of mail fraud and wire fraud. See Vintage Wine Scammer Kurniawan Sentenced to 10 Years Jail. Prosecutors urged a sentence term of 14 years, offering evidence that Rudy Kurniawan had cheated collectors, auction houses, and many others between the years 2004 to 2012.

When imposing the sentence, Judge Berman noted that Mr. Kurniawan “failed to accept responsibility from his crimes.” Id. The Judge ordered Mr. Kurniawan to forfeit $20 million—inclusive of real estate, art, jewelry, and wine—as well as to pay $28.4 million to the purchasers of rare French wines he created and/or blended and bottled at his California home. The Judge noted that “[t]he public at large needs to know that our food and drink are safe and that what’s on the label and is not some potentially unsafe, homemade witches brew.” Id.

Kurniawan is the first individual in the U.S. to be prosecuted for wine fraud. In addition, it is believed that his wine fakes will “infiltrate” the marketplace and auction houses for years to come. Id. While ten years may seem like an unconventionally high sentence term for a crime of this nature, the extent of Mr. Kurniawan’s operation, as well as its effects, will be felt for years to come. Many reason that an extreme sentence term should reflect the extremity of Mr. Kurniawan’s enterprise, as well as pose as a warning for any other individuals contemplating a similar scheme. It should also serve as a message to the public at large, so that consumers may feel confident in their food and beverage purchases. Still, Kurniawan’s attorney, Jerome Mooney, argued that the wealth of the victims at issue in this case significantly diminished the gravity of Kurniawan’s crime. See Wine Fraudster Rudy Kurniawan, Once an L.A. Name, Gets 10 Years.

A sentencing with weight such as that imposed for Kurniawan is important, not just in the context of fraud but also with respect wine labeling. If Judge Berman had applied a lesser sentence to Kurniawan, wouldn’t he effectively be ruling out the importance of 27 CFR Part 4 and relevant Parts of Title 27? On every wine label application to the TTB, there is an application certification statement that reads as follows:

Under the penalty of perjury, I declare: that all statements appearing on this application are true and correct to the best of my knowledge and belief; and, that the representations on the labels attached to this form, including supplemental documents, truly and correctly represent the content of the containers to which these labels will be applied.

See Application for and Certification/Exemption of Label/Bottle Approval. The above certification statement indicates that each applicant for a wine label (or beer or spirits label) certifies that what is represented on the label is actually contained within the bottle. For example, a wine label approved containing a particular vintage year and varietal binds the applicant to the above certification statement. While I am doubtful Rudy Kurniawan ever filed label applications for the wines at issues in this case (if he had, red flags probably would have been raised at an earlier point in time), a lesser sentencing would indicate that fabricating a wine to mimic what a label declares is contained within the bottle is not punishable (or worthy of being punishable) by severe measures.

The above perjury statement is crucial and bestows a significant duty upon the applicant. While some may hold no sympathy for the Kurniawan victims like Bill Koch, I think it at least admirable that Mr. Koch raised the magnitude of the issue of wine fraud, especially as it relates to the industry at large. 

Image property of New York Daily News.

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

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How Are Organic Wine Labels Regulated in the U.S.?

Here is a good, and relevant, question. What happens if a wine label boasts the term, “ORGANIC,” or “CERTIFIED ORGANIC” but is neither organic nor certified as such? As organic products—including wines—become more popular among consumers, there is a greater risk of fraudulent use of the term “ORGANIC.” See, e.g., Is Your Organic Food A Fraud?; OverseasCompanies Fake Organic Certificates.

Last week, The Drinks Business reported that an Australian vineyard, Kings Court Vineyards in Victoria, was accused by the National Association for Sustainable Agriculture, Australia (“NASAA”) for falsely labeling its wines as “ORGANIC.” See Vineyard Caught Over False Organic Claimssee also Organic Chief: We Will Discredit Firms Who Claim False Certification. NASAA, the Australian associated responsible for certifying companies as organic, issued a statement that the certifier never certified Kings Court Vineyards. NASAA indicated that the association never approved Kings Court Vineyards as organic and, as such, the vineyard has been falsely labeling its wines. The association has since obtained an injunction from the Australian Federal Court against the vineyard, preventing the vineyard from labeling its produce as organic. NASAA recited its reasoning for pursuing action to include its desired to protect truth in labeling. In addition, the association noted that there are extremely high costs associated with certifying an operator, an expense that many companies undertake to proudly proclaim their product is organic. See, e.g.Vineyard Busted for Falsely Claiming Organic Status. Additionally, NASAA commented that:

This case is not only about NASAA protecting its brand and reputation but also about defending the brand value and integrity of our certified operators.

See Vineyard Caught Over False Organic Claims (quoting NASAA general manager Ben Copeman). The association’s response portrays the seriousness of certifiers with respect to the term “ORGANIC.” If NASAA were inactive with respect to the above allegation, it is quite possible “ORGANIC” could lose its bite, so to speak, and many companies might be less willing to pay for organic certification.

The U.S. Regulation of Organic on Wine Labels

The United States Department of Agriculture (“USDA”) promulgates regulations relating to the term “organic” and to the National Organic Program (“NOP”), which govern the handling, labeling, processing, marketing, and certification of organic products (including alcohol beverages). Such regulations are found at 7 CFR Part 205. While these regulations are not promulgated by TTB, such organic regulations must be followed when claiming “ORGANIC” on an alcohol beverage label.

In the U.S., TTB recognizes four different types of “ORGANIC” claims. They are as follows:

  1. 100% Organic—the product’s ingredients are all (i.e., 100%) organic and the product does not contain chemically added sulfites;
  2. Organic—the product contains at least 95% organic ingredients and no chemically added sulfites;
  3. “Made with Organic [Ingredients, i.e., grapes]”—the product contains at least 70% organic ingredients (and may contain chemically added sulfites); and
  4. If the product contains less than 70% organic ingredients or if the product is not certified by an organic certified, the product may only include organic ingredients in its ingredient statement.

In addition to the USDA NOP organic regulations, a wine label containing an “ORGANIC” claim must also comply with general TTB wine label requirements (e.g., alcohol by volume percentage statement, net contents statement, and government warning statement, to name just a few).

A TTB label application for a wine label containing an “ORGANIC” claim (i.e., other than an ingredients statement) is required to contain a document called an ACA preview. The ACA preview is issued by a USDA-accredited certifying agents (or “ACA”) and contains the actual image(s) of the wine label along with the ACA’s stamp or signature that the wine at issue complies with organic regulations. For more information, see Changes to the Organic Documentation Requirements. Generally speaking, if an ACA preview does not accompany an organic wine label application, TTB will not approve the application. There are several other specifications required for organic wine labels, in addition to general TTB requirements such as alcohol by volume statement, most of which are detailed here.

IOrganic Wine Label Certification Statement as required by TTBn addition to the ACA preview, TTB requires there to be a statement on the label (below the bottler or importer’s name and address) which states, “Certified Organic By [Name of Certifier].” And example of such requirement is shown on the label on the right.

Similar to the NASAA’s standpoint, the USDA maintains that a food product falsely represented as certified USDA organic violates federal regulations and law. The marketing, labeling, or selling of such products is punishable by fines. In some cases, the violation may be on behalf of the certifier (Some of the relevant regulations are found at 7 CFR 205.662). However, falsely representing a food product as “ORGANIC” is not always the fault of the certifying operation. In certain instances, a fraudulent organic certificate may be created without the authorization of the certifier. See, e.g., USDA Caution on Organic Fraud from China. The National Organic Program welcomes the reporting of such violations by individuals as well as certifiers and maintains an active list of such reported fraudulent organic certificates.

Image property of Patianna

For more information on wine or alcohol law, organic claims, or labeling, please contact Lindsey Zahn.

DISCLAIMER: This blog post is for general information purposes only, is not intended to constitute legal advice, and no attorney-client relationship results. Please consult your own attorney for legal advice.

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