Extension for Johannisberg Riesling; Additional Grape Varieties (98R-406P)

DEPARTMENT OF THE TREASURY

Bureau of Alcohol, Tobacco and Firearms

27 CFR Part 4

[T.D. ATF-417; Ref. Notice No. 871]

RIN: 1512-AB80

Extension for Johannisberg Riesling; Additional Grape Varieties

(98R-406P)

AGENCY: Bureau of Alcohol, Tobacco and Firearms (ATF), Department of

the Treasury.

ACTION: Treasury Decision, final rule.

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SUMMARY: This final rule amends the wine labeling regulations to allow

use of the term ``Johannisberg Riesling'' on American wine labels for

an additional seven years. The effect of this amendment allows American

wineries additional time to educate consumers regarding the name change

and allow for transitional time regarding the labeling, packaging and

merchandising of Johannisberg Reisling. Additionally, ATF is adding two

new names, Traminette and Aglianico, to the list of prime grape variety

names for use in designating American varietal wines.

EFFECTIVE DATE: October 1, 1999.

FOR FURTHER INFORMATION CONTACT: Ms. Teri Byers, Regulations Division,

650 Massachusetts Avenue, NW, Washington, DC 20226; Telephone (202)

927-8195, or alcohol/[email protected].

SUPPLEMENTARY INFORMATION:

Background

Law and Regulations

Section 105(e) of the Federal Alcohol Administration Act (FAA Act),

27 U.S.C. 205(e), vests broad authority in the Director, as a delegate

of the Secretary of the Treasury, to prescribe regulations intended to

prevent deception of the consumer, and to provide the consumer with

adequate information as to the identity and quality of the product.

Regulations which implement the provisions of section 105(e) as they

relate to wine are set forth in title 27, Code of Federal Regulations,

part 4.

The regulations at Sec. 4.23(b) provide that a grape variety name

may be used as the type designation of a grape wine if not less than 75

percent of the wine is derived from grapes of that variety. The wine

must be labeled with an appellation of origin. Under Sec. 4.23(d), a

bottler may use two or more grape variety names as the type designation

of a grape wine if all the wine is made from grapes of the labeled

varieties, and the percentage of the wine derived from each grape

variety is shown on the label.

T.D. ATF-370

In 1996, ATF issued a final rule containing a list of approved

prime grape variety names which may be used as the designation for

American wines. The purpose of creating a list of prime grape variety

names was to help standardize wine label terminology and prevent

consumer confusion by reducing the large number of synonyms for grape

varieties that were previously used for labeling American wines.

The rule contained two other lists of alternative names that could

be used as grape wine designations until January 1, 1997, or January 1,

1999. Finally, the rule also contained a procedure by which interested

persons could petition the Director for the addition of names to the

list of prime grape names.

Johannisberg Riesling

In T.D. ATF-370, ATF announced that the name ``Johannisberg

Riesling'' should no longer be permitted as a grape variety designation

on American wines. The true name for this grape variety is simply

``Riesling.'' However, in the United States, wineries had long used the

terms ``Johannisberg Riesling'' and ``White Riesling'' to distinguish

the true Riesling grape from other grapes that were incorrectly

designated as ``Riesling.''

The final rule listed ``Riesling'' as the prime name for this

grape. The term ``White Riesling'' was listed as a synonym for

``Riesling.'' This term is used internationally as a designation for

this wine, and is also the botanical name for this grape.

The final rule placed the name ``Johannisberg Riesling'' as an

alternative name that could be used only to label American wines

bottled prior to January 1, 1999. ATF noted that ``Johannisberg

Riesling'' is not the correct name for this grape variety. Furthermore,

``Johannisberg'' is a German geographic term, and the name of a

specific winegrowing region within Germany. Since the final rule

authorized use of the name Riesling, standing by itself, as the prime

name for wine made from this grape, ATF determined that there was no

longer the necessity to distinguish wine made from the true Riesling

grape by use of the term ``Johannisberg Riesling.'' Owing to the

necessity to prepare new packaging and marketing materials, its use was

authorized for wines bottled prior to January 1, 1999.

Petition

ATF subsequently received a petition from the law firm of Buchman &

O'Brien, filed on behalf of trade

[[Page 49386]]

associations representing United States wineries. The petition asked

ATF to extend the phase-out period for the term Johannisberg Riesling

for an additional seven years to January 1, 2006.

The petition provided several reasons for extending the phase-out

date. Despite the fact that ATF made it clear in the notices issued

prior to T.D. ATF-370 that there was significant controversy

surrounding the term Johannisberg Riesling, the petition alleged that

ATF failed to provide the industry with notice that it was phasing out

the term. The petitioner also cited the 10 year phase-out period in the

recently published Treasury decision relating to Gamay Beaujolais as

support for extending the period. The petition asserted that because

the Johannisberg Riesling designation had been in documented commercial

use for over 100 years, an additional seven years would provide enough

transitional time to educate the consuming public regarding the

designation change. Finally, the petition states that the abrupt

elimination of Johannisberg Riesling would cause material economic harm

and hardship to the United States wine industry.

The petitioners also submitted a letter from the Deutsches

Weininstitut GmbH in support of the extension. Letters were also

submitted from several wineries, including Stimson Lane Vineyards &

Estates (``Stimson Lane'') setting forth the reasons for an extension.

Stimson Lane noted that in the 1960s and 1970s, ``many inferior

riesling products were being produced in the United States. * * * To

overcome the stigma that had become associated with these various

rieslings, we and other producers focused our attention and brand

investments on the term Johannisberg Riesling to refer to a medium-dry,

highly complex wine.''

Stimson Lane argued that it would take several years to educate

American consumers that the term ``Riesling'', standing alone, now

designates the same wine previously known as ``Johannisburg Riesling.''

In fact, Stimson Lane suggested that the mere prospect was so

``overwhelming and complex that the industry has not even begun to

agree how they are going to accomplish this.'' They noted that the term

``Johannisberg Riesling'' had been used for more than 100 years, and

has sales of 36,000,000 bottles per year. Accordingly, an additional

seven years would provide a more reasonable phase-out period.

The petition also included a letter from ELGIN, a marketing

communications company, which provided marketing information

illustrating the negative impact on wineries and consumers should ATF

restrict the Johannisberg Riesling phase-out period to three years.

ELGIN drew a comparison between Johannisberg Riesling and the 1982

Nissan Corporation's decision to change the Datsun brand name to

Nissan. ELGIN asserted that this change in brand name was implemented

in the United States over a six-year period; however, Nissan still saw

its share drop in the first two years from 5.9 percent to 4.5 percent

due to the name change.

Notice No. 871

In response to the petition, ATF issued Notice No. 871 on January

6, 1999 (64 FR 813). In the notice, ATF proposed extending the phase-

out period for an additional seven years. We sought comments on the

addition of four grape variety names to the list of prime names.

ATF also issued a rule that temporarily extended the effective date

for phasing out the use of ``Johannisberg Riesling'' on American wine

labels. See T.D. ATF-405 (64 FR 753). The date was deferred until

September 30, 1999, so that ATF would have time to evaluate the

comments received in response to the notice of proposed rulemaking. ATF

stated that the proposed extension of the phase-out period did not

signify any change in ATF's position regarding the eventual removal of

``Johannisberg Riesling'' from the list of prime names.

Comments Received in Response to Notice No. 871

ATF received nine comments in response to Notice No. 871. Six

comments were in favor of allowing the continued use of the designation

``Johannisberg Riesling'' on American wine labels for an additional

seven years. One comment flatly opposed any extension, while another

comment suggested that a two-year extension would be more appropriate.

The ninth comment addressed semigeneric designations.

Comments in Favor of the Proposed Extension

Comments in favor of the proposed extension were received from the

President's Forum of the Beverage Alcohol Industry, Sand Castle Winery,

Stimson Lane Vineyards and Estates, the California Association of

Winegrape Growers (CAWG), the Washington Wine Institute and the

Washington Wine Commission, and Buchman & O'Brien.

Several commenters stated that an insufficient phase-out period

would have a significant economic impact on many growers and vintners.

For example, the comment from CAWG stated that the proposed extension

was consistent with actions taken by ATF with respect to other labeling

terms, such as Gamay Beaujolais, and that ``[g]iven the huge investment

made by growers and vintners in developing markets for our products, we

believe the transition time provided by this proposal is appropriate

and fair.''

A comment on behalf of the Washington Wine Institute and Washington

Wine Commission noted the ``serious economic consequences'' to

Washington growers and vintners that would result from a shorter phase-

out period. The comment stated that ``Because 95% of all Riesling wine

has been sold in the U.S. as Johannisberg Riesling, we need every

minute of the proposed extension period to educate our consumers in the

hope that we can minimize ultimate damages to the Riesling category.''

Other wineries also commented that it would take several years to

do the type of consumer education necessary to avoid major defections

from their brands. Stimson Lane reiterated in its comment the serious

economic consequences that would be associated with having to

``jettison this name without the necessary transition period requested

in our petition.'' A comment from Sand Castle Winery reiterated the

need to educate the public on the new terminology.

The President's Forum of the Beverage Alcohol Industry reiterated

its prior support of the extension, and stated that extension would be

in the best interests of consumers and the U.S. wine industry.

JBC International submitted a comment on behalf of CAWG and the

Wine Institute. In this comment, it was noted that Wine Institute

supported the extension of the phase-out of the term ``Johannisberg

Riesling.'' However, the comment stressed that the industry's position

with respect to the term ``Johannisberg Riesling,'' which is not a

semigeneric designation, ``does not indicate any future positions the

U.S. industry might take with regard to the use of semi-generic

terms.''

Comments in Opposition to Proposed Extension

ATF received two comments in opposition to the proposed seven year

extension. The National Association of Beverage Importers, Inc. (NABI)

suggested that a two year extension would be more appropriate. Coudert

Brothers, on behalf of the Deutscher Weinfonds, opposed any extension

of the phase-out period.

[[Page 49387]]

NABI suggested that further use of the term ``Johannisberg

Riesling'' would be misleading to consumers, since Johannisberg is a

place of origin, and the wine does not come from Johannisberg. While

they supported a ``reasonable'' phase-out period for U.S. winemakers,

NABI suggested that a 10 year phase-out (the original three years

provided by the final rule, plus the proposed seven year extension) was

too long.

The NABI comment also supported ATF's original determination in

1996 to set a 3 year phase-out period, and the adequacy of ATF's notice

to the wine industry on this issue. Finally, the NABI comment pointed

out that German Riesling wines are not labeled as ``Johannisberg

Riesling'' unless the wines were made from grapes grown in the

geographic region of Johannisberg.

Coudert Brothers submitted a comment on behalf of the Deutscher

Weinfonds (``DW''), a quasigovernmental authority in the Federal

Republic of Germany. The comment opposed the proposed extension as

unnecessary. Coudert Brothers reiterated that ``Johannisberg Riesling''

is not a correct varietal name, and that the term ``Johannisberg'' is

instead a geographic term referencing a district in the Rheingau region

of Germany where grapes have been grown for more than a thousand years.

The comment from Coudert Brothers supported the adequacy of ATF's

notice on this issue, and suggested that since ``Johannisberg

Riesling'' is not a brand name, the petitioners' analogies to the

length of time needed to build consumer recognition of a new brand name

were not appropriate.

Finally, the comment from Coudert Brothers noted that the petition

had attached a letter in support of the proposed extension from

Deutches Weininstitut GmbH. Coudert Brothers asserted that Deutches

Wineinstitut is an affiliate of DW, and that after a full review of the

facts and history, Deutches Weininstitut had reconsidered its

statements in that letter and adopted the position of DW.

Conclusion

After carefully considering the comments on this issue, ATF has

decided to extend the phase-out period for an additional seven years.

Accordingly, the term may be used on labels of American wines bottled

prior to January 1, 2006. We believe that this period of time will

allow wineries sufficient time to educate consumers regarding the name

change, and to make necessary changes in the labeling, packaging, and

merchandising of ``Riesling'' and ``White Riesling'' wines.

ATF's statutory mandate under the FAA Act is to regulate the use of

terms on wine labels so as to ensure that consumers are not misled, but

instead are adequately informed as to the identity of the wine. We

stand behind the reasons set forth in T.D. ATF-370 for discontinuing

the use of ``Johannisberg Riesling'' as a prime name for a grape

variety. It is not the correct name for the variety, and there are two

better names (``Riesling'' and ``White Riesling'') that are recognized

throughout the world, and which do not contain the geographic reference

``Johannisberg.''

Nonetheless, the vintners and grape growers affected by this

decision have made a persuasive case that American consumers still

associate the name ``Johannisberg Riesling'' with the true Riesling

grape in the United States. American consumers may not associate the

term ``Riesling,'' standing by itself, with the wine that has been

labeled for so many years as ``Johannisberg Riesling.''

It is reasonable to allow the industry an additional seven years to

educate consumers as to the true meaning of the ``Riesling'' and

``White Riesling'' varietal designations. By the end of this period,

American consumers will have sufficient information about the product

so that they will be able to make an educated choice once the labeling

terminology changes.

Two commenters suggested that ATF should not further perpetuate the

use of a misleading geographic term as a varietal name. While ATF

agrees that the name ``Johannisberg Riesling'' should be phased out, it

does not agree that its continued use for another seven years will

mislead consumers. It should be noted that wines labeled with a

varietal designation must also bear an appellation of origin. See 27

CFR Sec. 4.23(a). Thus, the labels for ``Johannisberg Riesling'' wines

will clearly indicate the true geographic origin of the wines.

Accordingly, we do not believe that this limited extension of the

phase-out period will result in consumer confusion.

Traminette and Aglianico

In Notice No. 871, ATF proposed to add the names ``Traminette'' and

``Aglianico'' to the list of approved prime names in Sec. 4.91. As

discussed in further detail in the notice, ATF was provided with

sufficient evidence to satisfy the requirements under Sec. 4.93. No

comments were received regarding these varietal names. Accordingly, ATF

is amending Sec. 4.91 to include ``Traminette'' and ``Aglianico'' in

the list of approved prime names for grape varieties.

Vernaccia and Counoise

In Notice No. 871, ATF also sought additional comments regarding

the inclusion of ``Vernaccia'' and ``Counoise'' as prime names in

Sec. 4.91. No comments were received on either of these names.

Millbrook Winery petitioned ATF for approval of ``Vernaccia'' as a

prime name. Millbrook's petition stated that they obtained Vernaccia

cuttings from the foundation Plants Materials Service at the University

of California at Davis several years ago, and have cultivated this

grape in their vineyards.

As we stated in Notice No. 871, the available literature indicates

that the name ``Vernaccia'' is associated with several unrelated

Italian grape varieties, including Vernacci di Oristano, Vernacci di

San Giminiano, Vernaccia di Serrapetrona, and Vernaccia Trentina. These

varieties include both green and black grapes, and are used in making

distinctively different red, white, and sparkling wines.

It was unclear from the petition which ``Vernaccia'' grape was

actually contained in the FPMS collection and grown in U.S. vineyards.

Accordingly, ATF sought information on this issue in the notice of

proposed rulemaking. However, no comments were submitted. In the

absence of a positive identification as to which ``Vernaccia'' grape is

being grown in the United States, the requirements of Sec. 4.93 have

not been met with respect to this name. Accordingly, ATF is not adding

``Vernaccia'' to the list of prime names in section 4.91.

Eberle Winery in Paso Robles, California, petitioned ATF to list

``Counoise'' in Sec. 4.91. Although this is a well-documented red

variety from the Rhone region of France, ATF had insufficient

information to determine whether ``Counoise'' is suitable for wine

production in the United States, or the extent to which ``Counoise''

may be grown domestically.

Accordingly, ATF solicited information on the domestic cultivation

of the ``Counoise'' grape. No comments on this issue were received.

Since the requirements of Sec. 4.93 have not been met regarding this

grape name, we are not amending Sec. 4.91 to add the name ``Counoise.''

Trousseau vs. Bastardo

Section 4.91 currently lists Trousseau as a prime grape name while

Sec. 4.92 lists Bastardo as an alternative name for this grape variety

which cannot be used for designating American wine bottled after

[[Page 49388]]

January 1, 1997. Trousseau is a French name for the grape, while

Bastardo is the Portuguese name. ATF was asked to reexamine whether the

name Bastardo should be authorized as a synonym for Trousseau, or

whether Bastardo should replace Trousseau as the prime grape name at

Sec. 4.91.

ATF received no comments on this issue. Accordingly, ATF sees no

reason to overturn the decision made in T.D. ATF-370. Trousseau will

remain the prime name for this grape.

Paperwork Reduction Act

The provisions of the Paperwork Reduction Act of 1995 (44 U.S.C.

3507) and its implementing regulations, 5 CFR part 1320, do not apply

to this final rule because no requirement to collect information is

imposed.

Regulatory Flexibility Act

It is hereby certified that this regulation will not have a

significant economic impact on a substantial number of small entitles.

This regulation will extend the phase-out period for the use of the

term Johannisberg Riesling and it will permit the use of other grape

varietal names. The regulation will not impose any recordkeeping or

reporting requirements. Accordingly, a regulatory flexibility analysis

is not required because this final rule does not (1) have significant

secondary or incidental effects on a substantial number of small

entities; or (2) I impose, or otherwise cause a significant increase in

the reporting, recordkeeping, or other compliance burdens on

substantial entities.

Executive Order 12866

It has been determined that this regulation is not a significant

regulatory action as defined by Executive Order 12866. Accordingly,

this final rule is not subject to the analysis required by this

Executive Order.

Drafting Information

The principal author of this document is Ms. Teri Byers,

Regulations Division, Bureau of Alcohol, Tobacco and Firearms. However,

other personnel within ATF and the Treasury Department participated in

developing this document.

List of Subjects in 27 CFR Part 4

Advertising, Consumer protection, Customs duties and inspections,

Imports, Labeling, Packaging and containers, Wine.

Authority and Issuance

Accordingly, 27 CFR part 4, Labeling and Advertising of Wine, is

amended as follows:

PART 4--AMENDED

Paragraph 1. The authority citation for Part 4 continues to read as

follows:

Authority: 27 U.S.C. 205.

Par. 2. Section 4.91 is amended by adding the names ``Aglianico''

and ``Traminette,'' in alphabetical order, to the list of prime grape

names, to read as follows:

Sec. 4.91 List of approval prime names.

* * * * *

Aglianico

* * * * *

Traminette

* * * * *

Par. 3. Section 4.92 is amended by removing the name ``Johannisberg

Riesling'' from paragraph (b) and by adding a new paragraph (c), to

read as follows:

Sec. 4.92 Alternative names permitted for temporary use.

(c) Wines bottled prior to January 1, 2006.

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Alternative Name Prime Name

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Johannisberg Riesling Riesling.

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Signed: July 22, 1999.

John W. Magaw,

Director.

Approved: August 13, 1999.

John P. Simpson,

Deputy Assistant Secretary (Regulatory, Tariff & Trade Enforcement).

[FR Doc. 99-23784 Filed 9-10-99; 8:45 am]

BILLING CODE 4810-31-P