EU Labeling Changes and Their Implications: UC Davis EU Wine Law Conference

In setting the context for this discussion (UC Davis EU Wine Labeling Law Conference), Mr. Alessandro Baudino, Attorney and Partner in the firm Franco Baudino e Associati, pointed out that the EU was the world's leading exporter and importer of wine with 45% of its wine growing area, 65% of its production, 57% of its consumption, and 70% of its exports.  The current standing, however, reflects a point on a downward-tilting slope.  Europe experienced increasing production in the face of flat consumption from the 1960s to the mid-90s.  Since 1996, wine consumption has been declining and, while exports have been increasing, imports have been increasing at a faster rate.

According to Mr. Baudino, the Common Market Organization (CMO) has taken a number of steps to reduce the pressure on wine producers in member states.  In 1990 it implemented a financial aid policy for restructuring vineyards but this reform failed to meet its goals of reducing wine surpluses, aligning  demand and supply, and improving sectoral competitiveness.  The most recent initiative is the 2009 reform which targets improved wine producer competitiveness as well as perception of Community wine quality and preservation of Community wine-making traditions. Critical to the success of this initiative, according to Mr. Baudino, are rules on: oenological practices,\;  protected designation of origin (PDO) and geographical indicators (GI); and presentation and labeling of wine products.

The PDO/GI and labeling rules have garnered the most interest in the US, the former because it is fundamentally opposite to the way the wine industry is structured and regulated in the US -- as well as its potential for "big-stick" standards-setting worldwide -- and the latter because of its implications for companies selling in to that market.

The wine quality schemas in the EU member states can basically be collapsed into two categories: table wine and quality wine (with the Germans having some additional quality levels based on sweetness).  According to Article 1 of the Italian Act on PDOs, "A Protected Designation of Origin (PDO) is the name of a geographic area used to define a specific quality wine.  All the characteristics of the wine are due to natural ambient and human factors ...'terroir' " (Dr. Carlo Alberto Panont, member wine commission, Italian Ministry of Agriculture).  A PDO/GI designation is granted by the Community based on an application by a qualified organization through the Ministry of Agriculture of a member state.

The labeling laws are aimed at (Baudino): strengthening the reputation of EU quality wines; providing consumer-relevant information; coordinating the wine laws of member states; and guaranteeing fair competition in the wine market.  Implementation of the new rules began on August 1, 2009 but, according to Paolo Fabris, Attorney and Professor of Commercial Law at Turin University, wines currently on the market, or wines labeled prior to December 31, 2010, can be sold until stocks are exhausted.

The wine label has both mandatory and optional elements and can be written in any of the official EU languages.  The mandatory elements are: category designation (wine, liquer, etc.); the terms Protected Designation of Origin, or PDO, or Protected Geographic Indication, or PGI; the name of the PDO (St. Estephe, for example); country of production; bottler or producer; batch number; and allergens, if any.  The optional elements include vintage, varietals, and production method.

According to Baudino, sanctions for non-compliance are built into the code and include civil as well as criminal penalties for individuals or corporations assessed as liable.  Member states are responsible for developing compliance processess and monitoring for adherence to the laws.

Mr. Michael Newman, an attorney at the San Francisco firm Holland and Knight, addressed the implications of the wine laws for US producers selling in the EU.  Mr. Knight characterized the new EU laws as "a moving target" and "a challenge for Americans when they export."  According to Mr. Newman, the EU and US signed a wine trade agreement in 2006 which: (i) established predictable conditions for bilateral wine trade; (ii) replaced short-term EU derogations; and (iii) mandated that the US limit the use of 16 semi-generic names to wines originally in the EU.  The agreement included a "grandfather" clause that protected existing wines.  As he understands it, some of the names which could previously be used if allowed by the Tax and Trade Bureau (TTB) -- names such as Clos, as in Clos du Val, and Chateau, as in Chateau St. Michel -- would once again be prohibited on a label imported into the EU.  The protocol allowed US companies to use these names until March 2009, after which two-year extensions would be granted upon application for same.  In September 2008 the EU gave notice that they would not extend authorization beyond 2009; meaning that the ability to use those names will expire once existing stock is exhausted.  The US wine industry has applied to the EU to continue to use 10 of the names but the application has not been acted on to this date.

Dr. Felix Bloch, Administrator in the Directorate-General for Agriculture and Rural Development of the European Commission, and Desk Officer for bilateral trade relations with the US, appeared to disagree with Mr. Newman's characterization based on the length and intensity (quiet) of his comments at the conclusion of the presentation.  Unfortunately I was sitting a little ways behind him and was unable to capture those comments.

Review of the UC Davis School of Law EU Wine Labeling Laws Conference

The European Union (EU) announced changes to its wine labeling laws in 2007 and began implementation on August 1, 2009.  The objectives of the new laws are : "To make EU wine producers even more competitive by enhancing the reputation of European wines and regaining market share both in the EU and outside; to make the market-management rules simpler, clearer, and more effective; to achieve a better balance between supply and demand; and to preserve the best traditions of European wine growing and boosting its social and environmental role in rural areas" (EU Regulations, Decanter.com, August 21, 2009).  In that the EU is one of the world's largest wine consuming blocs, implementation of these laws will not only affect consumers and producers within its borders; it will also have implications for non-EU producers selling into the region.

It was within this context that the University of California, Davis (UC Davis) School of Law convened a conference of government regulators, lawyers, and academics from the EU and US to explore opportunities for congruency in wine labeling laws.  The conference, titled Towards a Common Standard: New European Union Label Laws and Geographic Indicators of Origin, was held at the School of Law on the UC Davis campus from June 2-4.

Conference registration, and an accompanying lunch, was scheduled for the period immediately preceding the start of the conference. Both activities were temporarily halted by an evacuation of the building prompted by an ear-splitting fire alarm. After fire officials gave the all-clear, registration and lunch continued as scheduled.

The conference design provided ample opportunities for identification and debate of the issues facing the participants but also provided social settings wherein participants could "break bread" after the rigor of the debates.

The conference presentations were organized into four moderated sessions: EU Labeling Changes, Export Competitiveness, Governments and Control of Fraud, and Looking to the Future: Making Wine Laws Compatible.  The list of presenters was fairly balanced, with eight from Europe and six from the US.  Within the European team there was some imbalance in that five of the presenters were from Italy.  Further, given the importance of France to the world of wine, I was surprised that there were no French participants on the European team.

The conference kicked off with welcoming statements by Kevin Johnson, Dean of the UC Davis School of Law and Beth Greenwood, Associate Dean, Center for International Education, UC Davis Extension and Executive Director, International Programs, UC Davis School of Law.

Over the course of the following one and one-half days, attendees were treated to substantive presentations and spirited debate on issues of significant relevance but different answers depending on perspective.  The EU participants, faced with precipitous declines in internal wine consumption and intense competition from new world wines, see implementation of these laws as integral to retention of tradition and improving competitiveness of an industry under attack.  The Americans view the EU initiative as anti-competitive, forcing an EU approach beyond its borders, and as unhelpful vis a vis attempts to align international trade regimes.  In the final session, Dr. Felix Bloch of the EU stated that while the EU and US remain far apart in their positions regarding wine laws compatibility, they have moved closer and that he was looking to the future with optimism.

Conference organizers provided attendees with two educational opportunities: (i) a tour of the Department of Viticulture and Enology Sustainable Winery on the UC Davis grounds;

and (ii) travel to Napa for a tour of the Opus One vineyards and winery.

Both of these tours were optional but with an additional charge for the Opus One tour.  Both events were well attended.

All in all the UC Davis School of Law should be very pleased with both the construct and conduct of this conference.  It was the first time that the school had convened a conference on this topic and, in my opinion, it was close to a virtuoso performance.  James Lapsley of the UC Davis Department of Viticulture and Enology, and Whitney Denning had, respectively, technical and administrative responsibility for the event and both did an excellent job.  James, in addition to coordinating the speakers, moderated two sessions and accompanied us on all tours and ensured completeness of presentation by "tour guides" by prompting with pointed questions. Whitney was ever present with a broad smile and helpful suggestions and her on-site coordination and partner management was flawless.  I was a little mystified by a change in the conference pricing schema (a la carte versus fixed price) without an attendant explanation and the purpose of Session 2 within the framework of the broader program but these were minor blips in an otherwise well-executed program.

I will cover the conference material, positions, and debates in future posts.