[Federal Register Volume 76, Number 13 (Thursday, January 20, 2011)]
[Rules and Regulations]
[Pages 3489-3502]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2011-1138]


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DEPARTMENT OF THE TREASURY

Alcohol and Tobacco Tax and Trade Bureau

27 CFR Parts 4, 9, and 70

[Docket No. TTB-2007-0068; T.D. TTB-90; Re: Notice Nos. 78 and 80]
RIN 1513-AB39


Revision of American Viticultural Area Regulations

AGENCY: Alcohol and Tobacco Tax and Trade Bureau, Treasury.

ACTION: Final rule; Treasury decision.

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SUMMARY: In this Treasury decision, the Alcohol and Tobacco Tax and 
Trade Bureau amends the regulations concerning the establishment of 
American viticultural areas (AVAs). The changes provide clearer 
regulatory standards for the establishment of AVAs and clarify the 
rules for preparing, submitting, and processing viticultural area 
petitions.

DATES: Effective Date: This final rule is effective on February 22, 
2011.

FOR FURTHER INFORMATION CONTACT: Rita D. Butler, Regulations and 
Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, 1310 G 
Street, NW., Suite 200-E, Washington, DC 20220; telephone: 202-453-
2101.

SUPPLEMENTARY INFORMATION:

Background

TTB Authority

    Section 105(e) of the Federal Alcohol Administration Act (FAA Act), 
27 U.S.C. 205(e), authorizes the Secretary of the Treasury to prescribe 
regulations for the labeling of wine, distilled spirits, and malt 
beverages. The FAA Act provides that these regulations should, among 
other things, prohibit consumer deception and the use of misleading 
statements on labels, and ensure that labels provide the consumer with 
adequate information as to the identity and quality of the product. The 
Alcohol and Tobacco Tax and Trade Bureau (TTB) administers the 
regulations promulgated under the FAA Act.
    Part 4 of the TTB regulations (27 CFR part 4) provides for the 
establishment of definitive viticultural areas and for the use of their 
names as appellations of origin on wine labels and in wine 
advertisements. Part 9 of the TTB regulations (27 CFR part 9) 
prescribes the standards for submitting a petition to establish a new 
American viticultural area (AVA) or to modify an existing AVA, and it 
contains a list with descriptions of all approved AVAs. Part

[[Page 3490]]

70 of the TTB regulations (27 CFR part 70) concerns procedure and 
administration and includes, at Sec.  70.701 (27 CFR 70.701), 
provisions regarding rulemaking procedures.

Definition

    Section 4.25(e)(1)(i) of the TTB regulations (27 CFR 4.25(e)(1)(i)) 
defines a viticultural area for American wine as a delimited grape-
growing region distinguishable by geographic features, the boundaries 
of which have been recognized and defined in part 9 of the TTB 
regulations. These AVA designations allow vintners and consumers to 
attribute a given quality, reputation, or other characteristic of a 
wine made from grapes grown in an area to its geographic origin. The 
establishment of viticultural areas allows vintners to describe more 
accurately the origin of their wines to consumers and helps consumers 
to identify wines they may purchase. Establishment of a viticultural 
area is neither an approval nor an endorsement by TTB of the wine 
produced in that area.

Current AVA Petition Process

    Section 9.3 of the TTB regulations (27 CFR 9.3) sets forth the 
current procedure and standards for the establishment of AVAs. 
Paragraph (a) of that section states that TTB will use the rulemaking 
process based on petitions to establish AVAs received in accordance 
with Sec. Sec.  4.25(e)(2) and 70.701(c). Paragraph (b) of Sec.  9.3 
provides that a petition for the establishment of an AVA must contain 
the following:
     Evidence that the name of the viticultural area is locally 
and/or nationally known as referring to the area specified in the 
application;
     Historical or current evidence that the boundaries of the 
viticultural area are as specified in the application;
     Evidence relating to the geographical features (climate, 
soil, elevation, physical features, etc.) which distinguish the 
viticultural features of the proposed area from surrounding areas;
     The specific boundaries of the viticultural area, based on 
features which can be found on United States Geological Survey 
(U.S.G.S.) maps of the largest applicable scale; and
     A copy of the appropriate U.S.G.S. map(s) with the 
boundaries prominently marked.

Notice of Proposed Rulemaking

    On November 20, 2007, TTB published a notice of proposed 
rulemaking, Notice No. 78, in the Federal Register (72 FR 65261) 
setting forth, among other things, a revision of subparts A and B of 
part 9. The original comment period closing date of January 22, 2008, 
was extended an additional 60 days in Notice No. 80, published in the 
Federal Register (72 FR 71290) on December 17, 2007.
    In Notice No. 78, TTB and Treasury stated that a comprehensive 
review of the AVA program was warranted in order to maintain the 
integrity of the program. We considered the impact that the 
establishment of an AVA can have on the use of existing brand names. In 
this regard, we stated that we did not believe it to be appropriate for 
a government agency to choose between competing commercial interests, 
in the context of the labeling provisions of the FAA Act, where a 
conflict exists between a proposed AVA name and an established brand 
name used on a wine label approved by TTB, if such choices can be 
avoided.
    We also noted that there has been an increase in the number of 
petitions for the establishment of new AVAs within already existing 
AVAs. Since recognizing the existence of an AVA is based on the idea 
that the defined area is unique for viticultural purposes with 
reference to what is outside it, we stated that preserving the 
integrity of the AVA program warrants clarifying the standards 
concerning the establishment of new AVAs within existing AVAs.
    Finally, we believed that there was a need to explain and clarify 
the AVA petition submission and review process and to clearly state the 
existing authority to deny, and the grounds for denying, an AVA 
rulemaking petition.

AVA Name and Brand Name Conflict

    As we stated in Notice No. 78, the designation of a new AVA can 
create a conflict with existing brand names. This conflict can arise 
because a brand name that includes an approved AVA name may not be used 
unless at least 85 percent of the wine is derived from grapes grown 
within the boundaries of the AVA. See 27 CFR 4.25(e)(3). Moreover, TTB 
prohibits the use of misleading brand names (27 CFR 4.33), and also 
prohibits brand names that tend to create the impression that the wine 
is entitled to bear a designation recognized by TTB unless the wine 
meets the requirements for that designation (27 CFR 4.39(a)(8)). The 
establishment of a new AVA could also give rise to a misleading 
impression regarding the provenance of a wine that carries a known 
brand name similar to the AVA name but that does not meet the 85 
percent requirement that applies to AVA name usage, thereby not 
providing the consumer with adequate information as to the identity and 
quality of the wine and creating confusion for consumers.
    TTB noted in Notice No. 78 that the effect of the current 
regulatory provisions is to give precedence to the establishment of an 
AVA over the use of a brand name on a previously approved label. This 
precedence is derived from the combined effect of the appellation of 
origin and geographic brand name requirements of 27 CFR 4.25(e) and 
4.39(i)(1). If a wine is not eligible for labeling with the 
viticultural area name and that name appears in the brand name, then 
the label would not be in compliance with TTB regulations and TTB would 
require the bottler to obtain approval of a new label with a new brand 
name in order to market it. Therefore, vintners are on notice that the 
decision to establish a brand name having geographical significance 
could result in the continued use of that brand name being restricted 
or prohibited by the subsequent establishment of an AVA using an 
identical or similar name. Whenever possible, however, TTB works with 
petitioners to amend petitions in order to limit the adverse impact on 
established brand names because established brand names have value to 
label holders, the sudden use of a new AVA name on labels instead of a 
long-established brand name may be confusing to consumers, and the AVA 
process can be used intentionally as a method of limiting competition 
from pre-existing brand name holders.

AVAs Within AVAs

    Notice No. 78 noted that, in recent years, TTB has received an 
increasing number of petitions that propose a boundary change to an 
existing AVA, the establishment of an AVA entirely or partially within 
an existing AVA, or the establishment of a new, larger AVA that would 
encompass all of one or more existing AVAs. Such petitions can create 
the appearance of a conflict or inconsistency because, with reference 
to the criteria set forth in Sec.  9.3(b), the new petition might draw 
into question the accuracy and validity of the evidence presented in 
support of the establishment of the existing AVA or the legitimacy of 
the justification for establishing a new AVA. For example, with 
reference to the boundary description and the geographical features 
criteria, a change in an existing AVA boundary, or the adoption of a 
new AVA within an existing AVA, could suggest that the original 
boundary was improperly drawn or that there is no unity or consistency 
in the features of the existing AVA that give it a unique

[[Page 3491]]

and distinctive identity in a viticultural sense.
    Further, we noted in Notice No. 78 that when a new AVA is 
established entirely within an existing AVA, depending on the unique 
facts presented in each AVA petition, an argument could be made that 
the smaller AVA is, by its very existence, distinct from the AVA that 
surrounds it, with the result that wine produced within it should not 
be labeled with the name of the larger AVA.

Petition Submission and Review Process

    In Notice No. 78, we noted that the part 9 regulations could more 
completely describe the submission and review process, including the 
various actions that TTB may take at each stage of the AVA petitioning 
procedure.
    Under TTB's current AVA petition process, we process all AVA 
petitions that are submitted to us. TTB's practice is to work with the 
petitioner both before and after submission of the petition to ensure 
that it contains all necessary information. TTB specialists spend 
considerable time reviewing the petition, contacting the petitioner, 
and requesting missing evidence from the petitioner. In some cases, 
deficient petitions are returned to the petitioner for revision and 
resubmission. Only after the petition is perfected (that is, it appears 
to contain all of the information required under Sec.  9.3) do we 
proceed with preparation of an appropriate rulemaking document. As we 
noted in Notice No. 78, as a general rule, the practice of TTB has been 
to accept the information provided by the petitioner in a perfected 
petition with the assumption that the information provided is correct. 
TTB does not conduct a detailed, separate investigation of the validity 
of the petition evidence at that point. To confirm or refute the 
information provided by the petitioner, TTB has relied on comments 
provided in response to the published notice of proposed rulemaking 
(NPRM).
    We also noted in Notice No. 78 that whereas the TTB regulations in 
part 9 speak in terms of what an AVA petition must contain, they do not 
clearly reflect the fundamental administrative principle that the 
authority to grant carries a concomitant authority to deny an AVA 
petition. We have come to realize that some believe that all that is 
necessary to successfully petition for the establishment of an AVA is 
to submit a petition with evidence under the terms of Sec.  9.3(b).
    We also noted that TTB has authority not to initiate rulemaking, or 
not to approve the petitioned-for AVA action after publication of a 
proposal, for any one of a number of reasons, such as:
     The evidence submitted with the petition does not 
adequately support use of the name proposed for a new AVA;
     The evidence of distinguishing features submitted with the 
petition does not support drawing or redrawing the AVA boundary as 
proposed;
     The extent of viticulture within the proposed boundary is 
not sufficient to constitute a grape-growing region within the 
intendment of the AVA program; or
     Approval of a proposed new AVA would be inconsistent with 
the purpose of the FAA Act, contrary to another statute or regulation, 
or otherwise not in the public interest.

Summary of Proposed Changes

    In Notice No. 78, TTB proposed to amend three provisions within 
part 4 of the TTB regulations that concern AVAs, to revise subparts A 
and B of part 9 of the TTB regulations, to amend various sections 
within subpart C of part 9, and to amend one provision within part 70 
of the TTB regulations.

Part 4 Amendments

    To permit the establishment of an AVA and at the same time mitigate 
the impact on existing brand labels which contain terms that would be 
viticulturally significant if the proposed AVA was established, TTB 
proposed in Notice No. 78 to amend Sec.  4.39(i) of the TTB regulations 
(27 CFR 4.39(i)) by adding a new ``grandfathering'' standard that would 
apply in the case of AVAs established after adoption of the final rule 
in this matter and that would be based on a specified number of years 
that an affected Certificate of Label Approval (COLA) had been issued 
and that the brand label had been in actual commercial use prior to 
receipt by TTB of a perfected AVA petition.
    By way of background, Notice No. 78 noted that at the beginning of 
the AVA program, TTB's predecessor agency and Treasury adopted Sec.  
4.39(i) to permit the continued use of brand names that had been used 
in COLAs issued before July 7, 1986, subject to application of any one 
of three conditions. This original ``grandfather'' approach was 
intended to protect brand names that had existed prior to the 
development of the AVA program. This solution did not specifically 
address conflicts between AVAs and brand names in COLAs that came into 
existence after July 7, 1986, although it effectively put all vintners 
on notice that the use of a brand name with geographic significance 
could later be restricted by the establishment of a viticultural area.
    While TTB in Notice No. 78 noted its intention to continue to work 
with future AVA petitioners to limit the adverse impact on established 
brand names, TTB also recognized that sometimes it would not be 
possible to amend a petition to achieve this result. To address this 
possibility, TTB proposed a new grandfathering standard.
    In addition, we proposed in Notice No. 78 to update two provisions 
within Sec.  4.25(e) and conform them to the proposed changes to part 9 
described below.

Part 9 Amendments

    Notice No. 78 proposed to revise subparts A and B of part 9 to 
clarify the operation of the AVA petition and rulemaking process by 
explaining how a petitioner must submit an AVA petition to TTB, by 
setting forth with considerably greater specificity what information a 
petition must contain, and by explaining how TTB would process these 
petitions. In addition to setting forth standards for the establishment 
of an AVA, the proposed amendments addressed the requirements for 
proposed boundary and name changes to existing AVAs to ensure that an 
AVA proposal published by TTB to change an existing AVA (for example, a 
boundary expansion) would have adequate supporting evidence. The 
specification of requirements for boundary changes was proposed to 
ensure that TTB receives petitions that conform to AVA regulatory 
standards rather than to considerations that are not central to the AVA 
concept.
    The proposed regulatory language also reflected the principle that 
TTB may decide not to proceed with rulemaking after receipt of a 
petition, in which case TTB would provide an explanation of the 
decision to the petitioner. The proposed amendments also specifically 
delineated the authority of TTB to decide not to proceed with approval 
of the petitioned-for AVA action after publication of the NPRM. The 
proposed regulatory amendments attempted to make a clear distinction 
between the petition process and the rulemaking process, because a 
decision not to go forward may be made at either stage.
    The proposed amendments in subpart C involved the addition of 
statements regarding the viticultural significance of names of 
previously established AVAs, or notable portions of those names, for 
wine labeling purposes under part 4 of the TTB regulations. TTB stated 
in Notice No. 78 that these amendments were consistent with the 
practice employed by TTB over the past several

[[Page 3492]]

years of including a second sentence in paragraph (a) of each section 
covering a new AVA, to specify what is viticulturally significant as a 
result of the establishment of the AVA. While in many cases only the 
full name of the AVA was specified in each of the subpart C amendments 
proposed in Notice No. 78, in some instances a portion of the name was 
also identified as viticulturally significant if, based on TTB's label 
approval practice, its use on a label could be taken to represent the 
full AVA name. We specifically invited comments on whether any existing 
labels would be at risk if the proposed amendments were adopted as a 
final rule.

Comments Invited on the Regulatory Proposals

    In Notice No. 78, TTB invited interested parties to comment on the 
proposed rulemaking and regulatory texts. In addition, we invited 
comments on the following specific questions:
    1. Whether additional or different standards should apply to the 
establishment of an AVA; for example, whether there should be a 
requirement that a specified percentage of the land mass of the 
proposed AVA be involved in viticultural activities.
    2. Whether in some or all cases the establishment of a smaller AVA 
located within the boundaries of a larger AVA should result in a 
prohibition against the use of the larger AVA name on wine labels.
    3. Whether the use of a ``grandfather'' provision to avoid 
conflicts between an established brand name and the establishment of a 
proposed AVA is appropriate.
    4. Whether the terms of the proposed ``grandfather '' provision are 
appropriate and, if so, what time periods should apply to establish 
commercial use of the brand name involved in a conflict.
    5. Whether it would be more appropriate to adopt an alternative to 
the ``grandfather'' provision proposed that would apply to brand names 
that have longstanding commercial use under one or more existing 
certificates of label approval without specifying a time period.
    6. What type of dispelling information would prevent consumers from 
being misled as to the origin of the wine when a ``grandfather'' 
provision applies. Other comments for a requirement on dispelling 
information were encouraged.

Comments Received and TTB Analyses/Responses

    TTB received 191 comments in response to Notice No. 78. The table 
below summarizes who submitted comments and the number of comments 
submitted.

------------------------------------------------------------------------
                                                              Number of
                  Who submitted  comments                      comments
------------------------------------------------------------------------
Federal Government.........................................            2
State Government...........................................            2
Local Government...........................................            6
Wine Industry Members......................................           88
Interest Groups/Trade Organizations........................           31
Concerned Citizens.........................................           48
Other......................................................           14
                                                            ------------
    Total..................................................          191
------------------------------------------------------------------------

    In the category of Interest Groups/Trade Organizations, there were 
no consumer groups that submitted comments. With regard to Concerned 
Citizens, it cannot be determined in what capacity the commenters have 
submitted their comments (e.g., as consumers, or as owners of an 
alcohol beverage business).
    Twenty-four of the comments received were either requests for 
extension of the Notice No. 78 comment period or requests that TTB end 
the suspension of AVA petition processing then in place. The latter 
comments were submitted in support of the then-proposed Lehigh Valley 
AVA, which was established on March 11, 2008, by T.D. TTB-66 (73 FR 
12870). Since the Notice No. 78 comment period was extended as 
requested, the establishment of the Lehigh Valley AVA was approved, and 
the suspension was ended, these issues have been resolved as the 
commenters had requested and are now moot.

Comments From Government Officials

    We received a comment from one U.S. Senator, a joint comment from 
two U.S. Congressional Representatives, and comments from one 
California State Senator and several other California State and local 
government officials concerning Notice No. 78. All of the commenters 
expressed general opposition to Notice No. 78, and a number of the 
commenters expressed opposition to specific portions of the proposed 
regulations. All of the commenters also opposed TTB Notice No. 77, 
published in the Federal Register on November 20, 2007 (72 FR 65256), 
which proposed the establishment of a ``Calistoga'' AVA.
    One U.S. Senator's comment was in the form of a letter to the 
Secretary of the Treasury to ``express my opposition to the Notices * * 
* as the actions in these rules will have a detrimental affect on the 
way wine is identified, branded and labeled in the United States.'' The 
Senator's comment further noted that ``California's wine industry 
contributes over $125 billion annually to the Nation's economy.''
    Two Members of the U.S. House of Representatives wrote a joint 
letter to the Secretary of the Treasury and the TTB Administrator to 
``express our grave concern over two Notices * * * which would 
significantly and detrimentally alter the American Viticultural Area 
(AVA) system.'' They further stated, ``Even after the successful 
establishment of 189 viticultural areas by rulemaking, TTB now proposes 
major changes in Notices No. 77 and 78 that would have substantial, 
complicated and irreparable consequences for the future of America's 
growing wine industry, which now contributes over $100 billion a year 
to our economy.'' In addition, they stated, ``We strongly believe that 
the existing AVA regulations have successfully served their purpose for 
over twenty years, and in fact, work very well. These NPRMs are not 
needed and are not supported by the wine industry.'' Fifty-nine other 
Members of Congress also signed the letter.
    A California State Senator submitted the contents of California 
Senate Joint Resolution 22, which she stated was passed unanimously in 
the State Senate and the State Assembly, ``as a statement of the 
California Legislature's concern and opposition to'' Notice Nos. 77 and 
78. She further stated that the ``Senate and the Assembly of the State 
of California, jointly request the Tobacco Tax and Trade Bureau to 
protect and preserve the ability of California wineries, as well as all 
American wineries, to contribute to the economy of California and the 
nation by withdrawing the Notices.''
    The Secretary of the California Department of Food and Agriculture 
had concerns with our regulatory proposals, stating, ``The revised 
regulations provide certain wine brands the right to market and sell 
their products with deceptive labels, leading consumers to believe 
their wines are from grapes grown in certain appellations or winemaking 
regions, when they are not.'' This commenter also believes that these 
proposals ``are far-reaching and could have substantial and severe 
consequences for all U.S. wine regions and wine brands.''
    The city manager of Calistoga, California, opposed changes (in 
Notice Nos. 77 and 78) that would ``eliminate the common and 
internationally understood practice of nesting wine appellations within 
larger wine appellations. Napa Valley is a highly recognized and 
respected wine growing region throughout the world.''

[[Page 3493]]

    The mayor of Paso Robles, California, opposed the proposed changes 
in Notice Nos. 77 and 78, stating that ``the TTB proposed revisions to 
the regulations * * * will undermine decades of work on the part of the 
wine industry.'' He stated further, ``The effects of these proposals 
are far-reaching and will have substantial and severe consequences to 
all U.S. wine regions and wine brands and to the truth in labeling 
rights of consumers.'' In specific regard to Notice No. 78, he wrote 
that it ``threatens to eliminate the common and internationally 
understood practice of `nesting' wine appellations within larger wine 
appellations.'' He also stated that ``this proposal [Notice No. 78] 
looks to create `Rolling Grandfather' clauses that will allow new 
brands that would undermine the basic tenets of established law by 
allowing the use of misdescriptive geographic brands on an ongoing 
basis and creates loopholes for a select few.'' He also stated, ``These 
regulations will have a substantial negative impact on consumer 
confidence and compromise the integrity of the American wine 
industry.''
    The chair of the Napa County Board of Supervisors opposed our 
proposals in Notice No. 78, stating, ``The Board also opposes Notice 
78, which would end the common and internationally understood practice 
of `nesting' wine appellations * * *. Nesting transmits crucial 
information to consumers.'' He also provided a copy of a Resolution 
passed by the board in regard to this opposition.
    The Napa County agricultural commissioner also opposed our 
proposals in Notice No. 78, stating, ``I also oppose Notice 78, which 
would end the common and internationally understood practice of 
`nesting' wine appellations * * *. Nesting transmits crucial 
information to consumers.''
    The president of the Napa County Farm Bureau opposed our proposals 
in Notice No. 78, stating that the Bureau, ``[o]pposes the 
comprehensive and sweeping AVA regulatory changes proposed in Notice 
78. We do not support the rolling grandfather date which supplements 
[27 CFR] 4.39(i), or the elimination of the common and internationally 
understood practice of `nesting' wine appellations.''

TTB Response

    TTB appreciates the concerns and reservations these officials have 
expressed over our proposed changes to the AVA regulations. We 
recognize that viticulture and wine making are industries important to 
the American economy and are especially important to the economy of the 
State of California. However, we disagree with those commenters who 
suggested that the regulatory proposals we made in Notice No. 78 would 
result in a severe economic impact or have other substantial 
consequences on the wine industry, and we note in this regard that no 
specific data were provided to support these general statements.
    As we stated in Notice No. 78, the proposals we made were intended 
to strengthen the AVA program. As one commenter pointed out, the 
regulations for the establishment of AVAs are over 20 years old. 
Although these regulations may have been initially successful in 
getting the AVA program ``off the ground,'' the regulations have not 
been updated to address a number of procedural and substantive issues 
or the problems with AVA petitions that have arisen over the years. At 
the time of publication of Notice No. 78, some of the AVA issues or 
petition problems encountered by TTB were as follows:
     Petitions to create an AVA were incomplete for numerous 
reasons.
     Petitions to expand an existing AVA where the acreage to 
be added to the existing AVA has no viticulture and where no 
significant viticulture is planned in the near future.
     Petitions to expand an existing AVA for the purpose of 
including adjacent viticultural acreage, with no evidence that the 
expansion area has any geographical features in common with the 
existing AVA.
     Petitions to expand an existing AVA for the purpose of 
including adjacent viticultural acreage where the evidence submitted 
clearly shows that the geographical features of the adjacent acreage 
are incompatible with those of the existing AVA.
     Petitions from separate petitioners to create an AVA 
within an existing AVA where their respective requests are inconsistent 
with each other because they provide conflicting geographical features 
evidence for the same area.
     Petitions where the proposed AVA name conflicted with the 
brand names on existing labels.
    Based on the issues and problems outlined above, we believe that 
the AVA program has not operated as well as some of these commenters 
suggest, and that the current part 9 regulations do not provide 
sufficient clarity and transparency regarding the AVA petition and 
approval process and regarding the manner in which TTB exercises its 
authority in that process. The part 9 proposals set forth in Notice No. 
78 were not a radical departure from the current regulatory standards 
but rather were a necessary elaboration on those standards in order to 
clarify existing petition requirements and existing TTB authority 
regarding the processing of AVA petitions. Since the comment period 
closed on this proposal on March 20, 2008, TTB has continued to process 
AVA petitions and to publish proposed and final regulatory actions with 
respect to petitions submitted. However, TTB continues to encounter the 
issues and problems described above and therefore, TTB believes that 
the need for the proposed regulations remains.
    With regard to the comments opposing the proposed Calistoga 
viticultural area, which was the subject of Notice No. 77, these 
comments are outside the scope of this rulemaking and were addressed in 
a separate final rulemaking action specific to Notice No. 77 (see T.D. 
TTB-83, 74 FR 64602, December 8, 2009). With regard to the comments 
concerning the specific topics of ``nesting'' and the proposed 
``grandfather provision,'' we received a number of other comments 
concerning these proposals. We discuss these additional comments and 
provide a response to all the comments received on these specific 
issues below.

Other Comments in General Opposition

    Fifteen other commenters generally opposed the proposed revisions, 
without detailing that opposition to any specific provision or issue. 
For example, the Wine Institute commented, ``TTB already has the 
ability to deal with complex issues and unanticipated controversies 
fairly * * * TTB can issue policy statements, guidance documents, and 
manuals on AVA establishment with interpretive and procedural 
guidelines * * * Wine Institute believes that these alternatives are 
preferable than the proposed regulatory changes, which could lead to 
unintended consequences.'' This commenter added that TTB has a 27-year 
record of successful AVA rulemaking, is acting under what appears to be 
``an artificial sense of urgency,'' and should continue to use the 
existing regulations. Other commenters asserted that the proposed 
provisions ``have far reaching consequences'' or are ``inconsistent 
with fair and sound practices,'' that ``consumers will not be protected 
under the proposed regulations,'' or that ``the current regulations do 
a good job.''

TTB Response

    As explained in detail in Notice No. 78, TTB and Treasury believed 
that there were valid reasons for proposing the regulatory changes. The 
specific regulatory proposals were crafted after much deliberation 
within TTB and

[[Page 3494]]

Treasury regarding: (1) Our duty to protect the consumer under the FAA 
Act; (2) our desire to be fair to, and to protect the economic 
interests of, all stakeholders; and (3) the long-term viability and 
credibility of the AVA program. We disagree with the suggestion that 
these regulations were developed in haste without substantial 
consideration as to their overall impact on the AVA program. Moreover, 
these general statements in opposition were not accompanied by any 
supporting data. Finally, as regards the use of other alternatives such 
as policy statements, guidance, or manuals, these alternatives are not 
binding on either the public or TTB and therefore are inadequate 
substitutes for regulatory action.

Comments on Specific Issues

    The remaining 144 comments addressed one or more of the following 
issues:
     Whether a minimum percentage of landmass should be 
involved in viticultural activities for proposed AVAs;
     Whether the establishment of a smaller AVA within a larger 
AVA should prevent the use of the larger AVA name;
     Whether the establishment of a smaller AVA within a larger 
AVA (``nesting'') should be eliminated;
     Whether the proposed new part 4 grandfather provision, or 
an alternative grandfather approach, should be adopted, and if so, what 
type of dispelling information is appropriate;
     Whether the procedural provisions proposed for part 9 
should be adopted; and
     Whether the statements of viticultural significance 
proposed for part 9 are appropriate.
    Below are comment summaries and TTB responses by issue.

Comments on Minimum Percentage of Landmass

    Proposed Sec.  9.12(a)(1), which concerns name evidence, stated 
that the name identified for the proposed AVA ``must be currently and 
directly associated with an area in which viticulture exists.'' Also, 
proposed Sec.  9.14(b)(2)(i) stated as one of the reasons for 
withdrawing a proposal, the fact that the extent of viticulture within 
the proposed boundary ``is not sufficient to constitute a grape-growing 
region as specified in Sec.  9.11(a).'' However, in the proposed 
regulatory texts we did not specify a minimum requirement for 
viticultural activities.
    As noted above, in the ``comments invited'' section of Notice No. 
78, TTB asked whether there should be a requirement that a specified 
percentage of the landmass of the proposed AVA be involved in 
viticultural activities. Eight comments specifically addressed this 
question--two in favor and six in opposition.
    One commenter in favor of such a standard wrote:

    The need for more reflective AVAs grows exponentially as the 
U.S. wine market expands into the global market. * * * TTB has 
invited comments concerning standards for establishment of an AVA. 
As to percentage of land involved in viticultural activities I would 
offer the following: ``viticultural activities'' must be defined. 
Only grape growing is space sensitive and thus in connection with 
AVAs only vineyards should be considered viticultural activity. It 
is inappropriate for TTB to grant AVA status to large areas of land 
not used in viticulture.

    This commenter further noted that we did not define ``viticultural 
activities'' in such a context within Notice No. 78. Determining that a 
region be ``known for grape-growing'' should be sufficient to establish 
the fact that there are existing viticultural activities occurring in 
the area.
    The Paso Robles AVA Committee (PRAVAC), which is comprised of 35 
wineries and 25 grape growers, favored such a standard and wrote, ``TTB 
may reasonably require that petitioners demonstrate some minimum amount 
of viticulture in the proposed new area.'' The PRAVAC requested that 
``any such threshold be fixed as a minimum acreage planted to 
vineyard,'' and added:

    Unless some critical mass of viticulture exists in an area, it 
is difficult to identify which unique features actually do affect 
the grapes grown in that region. A minimum acreage provides an 
easily ascertainable standard that also effectively fixes a minimum 
size for AVAs, thereby preventing additional subdivision into 
miniscule, vineyard-sized AVAs. Unlike potentially cultivated land, 
the existence of which is subject to individual interpretation, 
vineyard acreage is readily visible and easy to measure.

    The remaining commenters who addressed this topic opposed a 
standard that would require a specific percentage of landmass of a 
proposed AVA to be involved in viticultural activities. In this regard, 
one of these commenters stated that ``the purpose of an AVA designation 
is to identify a place of special character,'' and asked, ``What does 
percentage of acreage have to do with this?''
    Another commenter wrote that ``this rule change should be 
considered to be in restraint of trade and could only be considered to 
benefit the established areas to the detriment of developing areas. The 
Government should not be penalizing the establishment of new 
vineyards.''
    One commenter argued that the objective of the AVA program is to 
allow vintners and consumers to attribute a given quality, reputation, 
or other characteristic of wine made from grapes grown in an area to 
its geographic origin. This person further stated that the ``percentage 
of landmass is not compatible with the objective, nor does it in any 
way help the smaller wine producing areas at all.''
    A commenter on behalf of Triassic Legacy Vineyards wrote:

    The promise of an appellation to entice wine enthusiasts to 
purchase the wines is a major factor in encouraging landowners to 
make the huge investment of time energy and money to become growers 
and vintners. I respectfully request that the concept of requiring 
that an AVA have some percentage of total area under viticulture be 
abandoned.

    Finally, a commenter on behalf of Tablas Creek Vineyard stated:

    While density of a plantation is a factor in determining the 
importance of an AVA, that density should be measured against the 
available planting acres in the appellation and not the simple total 
geographic area. The economic importance of grape/wine production to 
the area should also be noted.

TTB Response

    TTB believes that the proposed regulatory language concerning this 
issue should be adopted without change. As stated in Notice No. 78, one 
of the key reasons for proposing changes to these regulations is to 
maintain the integrity of the AVA program, and requiring a sufficient 
amount of viticulture within a proposed AVA is necessary in order to 
ensure that designation of the AVA has meaning. For example, we do not 
believe that if a grape grower plants five acres of grapes in an area 
encompassing 10,000 square miles, that amount of viticulture is 
sufficient to justify the designation of an AVA.
    On the other hand, for several reasons TTB does not believe it is 
appropriate to establish a specific percentage of landmass as a 
requirement for establishing an AVA. First, TTB recognizes that often 
the reason that petitioners seek AVA designations is to assist in the 
marketing of their wines, and we are concerned that a minimum 
percentage of landmass requirement might overly favor established 
areas. Second, although establishing by regulation a precise minimum 
percentage standard would provide an easy, mechanical method for TTB to 
decide whether sufficient viticulture exists in the proposed AVA, we 
believe that such an across-the-board,

[[Page 3495]]

mechanical rule could operate to the detriment of the AVA program by 
discounting the possibility of future expansion of viticulture within 
the area. We believe that where it might appear that the amount of 
acreage devoted to viticulture is too small in comparison to the size 
of the proposed AVA, other relevant factors could exist (such as the 
number of vineyards established and how they are dispersed within the 
proposed AVA), which could lead to the conclusion that the extent of 
viticulture within the proposed AVA is sufficient. TTB recognizes that 
the lack of dispersed viticulture in a proposed AVA could warrant a 
closer review of the sufficiency of the distinguishing geographical 
features and name evidence provided in the petition, but these issues 
should be reviewed on a case-by-case basis.
    TTB also recognizes that the regulations require the boundaries to 
be delineated based upon certain distinguishing features, such as 
climate, geology, soils, physical features, and elevation, in addition 
to the name of the area. For example, a watershed or ridge-line may 
provide the best marker to delimit the area. Sometimes those features 
that are common to the area may far exceed the actual grape-growing 
then occurring. Therefore, grape-growing areas and boundaries based on 
geographic features are unlikely to be exactly alike. The proposed 
regulatory texts were intended to underscore the fundamental principle 
behind every AVA petition, that is, that viticulture already exists 
within the boundary proposed for the new AVA, and we believe that the 
texts achieve that result.
    Finally, we do not agree with the suggestion that we also consider 
the economic importance of grape/wine production to the area as part of 
the analysis of the sufficiency of viticulture in the proposed AVA. An 
area may be known to consumers as a grape-growing region whether or not 
grape/wine production is important to the overall economy of the area, 
and, accordingly, we do not believe adding this consideration would be 
appropriate.

Comments on Whether Approval of a Smaller AVA Should Prevent Use of a 
Larger Surrounding AVA Name and Whether Nesting of AVAs Should Be 
Eliminated

    In proposed Sec.  9.12(b), which concerns AVAs within AVAs, we 
stated:

    If the petition proposes the establishment of a new AVA entirely 
within, or overlapping, an existing AVA, the evidence submitted 
under paragraph (a) of this section must include information that 
both identifies the attributes of the proposed AVA that are 
consistent with the existing AVA and explains how the proposed AVA 
is sufficiently distinct from the existing AVA and therefore 
appropriate for separate recognition. If the petition proposes the 
establishment of a new AVA that is larger than, and encompasses, all 
of one or more existing AVAs, the evidence submitted under paragraph 
(a) of this section must include information addressing whether, and 
to what extent, the attributes of the proposed AVA are consistent 
with those of the existing AVA(s). In any case in which an AVA would 
be created entirely within another AVA, whether by the establishment 
of a new, larger AVA or by the establishment of a new AVA within an 
existing AVA, the petition must dispel any apparent inconsistency or 
explain why it is acceptable. When a smaller AVA has name 
recognition and features that so clearly distinguish it from a 
larger AVA that surrounds it, TTB may determine in the course of the 
rulemaking that it is not part of the larger AVA and that wine 
produced from grapes grown within the smaller AVA would not be 
entitled to use the name of the larger AVA as an appellation of 
origin or in a brand name.

    As noted above, in the ``comments invited'' section of Notice No. 
78, TTB asked whether in some or all cases the establishment of a 
smaller AVA located within the boundaries of a larger AVA should result 
in a prohibition against the use of the larger AVA name on wine labels. 
Twenty-four commenters specifically address this question--two in favor 
of such a prohibition and 22 opposed to it.
    One of the two commenters in favor asserted that more than one AVA 
on one wine label is inherently contradictory to the regulations in 
proposed Sec.  9.12(b). This commenter further stated that nesting 
``weakens consumer understanding of AVAs.'' Though opposed to the 
concept of nesting, this commenter stated that it is unfair to change 
the regulations by not allowing wine producers to put both the sub-AVA 
and larger AVA on its wine labels. This commenter suggested that TTB 
allow wine producers to use sub-AVAs in conjunction with ``political 
appellations.''
    The other commenter in favor of such a prohibition expressed 
concern that some small AVAs within larger AVAs ``are not based on 
oenological, environmental, topographical or historical differences but 
are intended for an egotistical or economical basis, only.'' For this 
reason, this commenter supported the proposed changes regarding the 
establishment of an AVA within another AVA.
    Of the 22 comments in opposition to the proposed regulatory text, 
many of them argued, in essence, that an AVA within a larger AVA makes 
sense, helps to better identify and define the wine, is already part of 
the existing AVA program (many businesses established and built 
themselves up based on this concept), and coincides with other 
countries' practices. For example, one commenter stated that ``more 
than three-fourths of all existing AVAs are located inside another AVA 
* * * AVAs within AVAs help consumers both better understand 
viticultural distinctions that may exist within a larger AVA and gain 
information about the origin and thus value of a particular wine.''
    Commenters who opposed this proposal also asserted that it is 
always better for the consumer to have more information about where a 
wine comes from. Some pointed out that the use of the larger, and 
therefore probably more well-known, AVA name aids the consumer in 
determining where the sub-AVA is located.
    A commenter on behalf of Premier Pacific Vineyards stated that the 
proposals in Notice No. 78 ``will have tangible negative effects on 
wine consumers and the industry.'' This commenter further stated, ``Not 
allowing producers to list all the information on the wine's origin by 
limiting the description to a small AVA without providing the often 
more familiar larger AVA, removes useful information from the consumer. 
Changing the rules in a way that makes the origin of wine and labeling 
more confusing or less descriptive represents a disservice to the 
consumer.''
    The president of Appellation St. Helena, which represents 60 
wineries and 7 vineyards, stated that this provision is ``a huge step 
backward'' and that it ``flies in the face of all of the other great 
wine growing regions worldwide that go to great lengths to encourage 
detailed naming of specific places.''
    A commenter affiliated with the University of California, Davis, 
wrote that the ``concept of hierarchical classification, or nesting 
finer-scale places within courser-scale places, is both global and 
almost ubiquitous.'' Further, as an analogy to different levels for 
specifying AVAs, several commenters discussed the classification system 
of dogs. These commenters wrote that a Yorkie is a Terrier which is a 
dog. They further stipulated that no one will refute the fact that 
though a Yorkie is not the same as all terriers and a Terrier is not 
the same as all dogs, they are all in fact dogs and therefore share 
similar characteristics.
    With regard to the companion issue of whether the nesting of AVAs 
should be eliminated, TTB received 36 comments, all in opposition. Many 
of these commenters share the belief that nesting

[[Page 3496]]

is a common worldwide practice that consumers understand.
    One of these commenters stated:

    An AVA contained within a larger AVA is and should remain part 
of the larger AVA * * * Informed consumers already understand that 
viticultural distinctiveness is measured at multiple levels. Most 
major wine producing countries recognize this fact and formally 
incorporate varying levels of viticultural distinctiveness into 
their regulations. For example, Australia's regulations describe 
zones, regions, and sub-regions, all of which are geographical 
indications of the source of grapes, which, like AVAs, contain no 
quality controls or quality connotations, but which require a 
showing of varying levels of viticultural distinctiveness; Chile has 
regions and sub-regions; and in France, the Burgundy and Bordeaux 
appellations are divided into districts, communes and even smaller 
appellation areas. Formal regulatory recognition of multiple levels 
of viticultural distinctiveness exists throughout the world because 
such recognition leads to logical, organized and understandable 
appellations of origin and, ultimately, well-informed consumers. In 
none of these countries are smaller AVAs carved out from 
surrounding, larger AVAs.

    A commenter on behalf of the PRAVAC argued that ``every appellation 
system in the world utilizes geographic nesting to specify the origin 
of wines, and consumers worldwide are already familiar with this 
concept.'' This commenter further stated that ``nesting itself is 
fundamental to the existence of a meaningful appellation system * * * 
TTB must not enact rules that threaten this structure.''
    A commenter on behalf of Premier Vineyards wrote that ``nested or 
telescoping AVAs are consistent with the TTB's goal of identifying and 
defining geographic areas (AVAs) that have unique geographic features 
that result in distinctive grapes and wine.'' However, another 
commenter on behalf of Sonoma County Vintners stated that ``this does 
not mean that TTB should not limit overlaps that do not meet the tests 
for creating an AVA.''

TTB Response

    TTB believes there is merit in the comments received asserting that 
nesting should not be prohibited, and that recognition of a smaller AVA 
should not by definition prohibit the use of the viticultural name of 
the larger AVA in which it lies. TTB agrees that consumer interests are 
served by greater specificity within a hierarchy, where a true 
hierarchy exists.
    However, TTB notes that a determination that a hierarchy of grape-
growing regions based on similar yet distinguishable geographical 
features exists, rather than a situation in which an entirely different 
grape-growing region lies within another grape-growing region, must be 
based on the facts related to the geographical features presented in 
the AVA petition under consideration. The comments received in response 
to Notice No. 78 do not convince us that the mere fact that a proposed 
AVA would be located within an existing AVA is sufficient to allow the 
use of either the existing AVA name or the proposed AVA name, at the 
sole discretion of the vintner.
    For example, if an existing AVA is defined as being a large valley 
and its distinguishing geographical features are those that are found 
on the valley floor, it may be appropriate to approve a proposed AVA 
described as being situated in whole or in part on the same valley 
floor within the existing AVA if the proposed AVA shares some of the 
geographical features with the existing AVA but at the same time has 
other geographical features that are sufficiently distinctive as to 
warrant its own AVA designation. On the other hand, if within that 
large valley AVA there is a mountain on which a petitioner proposes to 
establish a new AVA above the 500-foot elevation line, the evidence 
provided in the petition might demonstrate that the distinguishing 
features of the proposed AVA bear no relationship to those of the 
valley floor. In the latter case, the new petition has demonstrated 
that this is not a hierarchical situation involving some sharing of 
common features but rather is a proposal to establish an entirely 
distinctive AVA. In such a case, TTB believes it may be inappropriate 
to take a regulatory action that could cause consumers mistakenly to 
conclude that wine produced from grapes grown within the petitioned-for 
AVA has the same characteristics as wine produced from grapes grown in 
the existing AVA.
    Based on our experience in reviewing petitions for the 
establishment of AVAs, we have found that in the vast majority of cases 
petitioners who propose the establishment of an AVA within an existing 
AVA, and who provide evidence that there are sufficiently 
distinguishable geographical features in the proposed AVA to warrant 
its recognition, can also establish through the evidence submitted that 
the proposed AVA has some geographical features that are sufficiently 
similar to those of the existing AVA so as to allow it still to be 
considered a part of the existing AVA. In those very rare instances in 
which no notable common geographical features between the two AVAs can 
be found, we believe that permitting the use of both AVA names for wine 
sourced from the grapes grown within the proposed AVA could be 
misleading to the consumer, and it would not be appropriate for TTB to 
take regulatory action which would produce that result.
    After careful consideration of the comments submitted, TTB has 
determined that it would be inappropriate to adopt regulatory language 
that prohibits future approvals of AVAs that entirely surround or lie 
entirely within, or that overlap, existing AVAs, provided such 
approvals are adequately justified through petition evidence and 
rulemaking procedures. TTB also believes that the decision as to 
whether or not a proposed AVA that entirely surrounds, lies entirely 
within, or overlaps, an existing AVA should prohibit label holders from 
using the existing AVA name on the wine labels as well should be made 
on a case-by-case basis considering the evidence submitted by the 
proposing AVA petitioner. The regulatory language as proposed in Notice 
No. 78 is consistent with these principles and will afford sufficient 
flexibility under the case-by-case approach. TTB notes the intent of 
the provisions dealing with AVAs within AVAs is to apply it 
prospectively to newly established areas only. AVAs already established 
within AVAs will not be affected by these provisions.

Comments on the New Part 4 Grandfather Provision

    The text proposed in Notice No. 78 for new Sec.  4.39(i)(3) stated:

    (3) Brand names that do not meet the requirements of paragraph 
(i)(2) of this section and that contain the name of a viticultural 
area or other term of viticultural significance established under 
part 9 of this chapter on or after [INSERT EFFECTIVE DATE OF FINAL 
RULE] may be used in conjunction with information which the 
appropriate TTB officer finds to be sufficient to dispel the 
impression that the geographic area suggested by the brand name is 
indicative of the origin of the wine, provided that the brand name:
    (i) Was used in an existing certificate of label approval issued 
prior to the 5-year period immediately preceding receipt of the 
perfected petition for establishment of the viticultural area; and
    (ii) Was in actual commercial use on labels for at least 3 years 
during that 5-year period.

    As noted above, in the ``comments invited'' section of Notice No. 
78, TTB asked whether the use of a grandfather provision to avoid 
conflicts between an established brand name and the establishment of a 
proposed AVA is appropriate. Of the 191 comments received, 107 comments 
specifically addressed this issue--2 in favor of using such a 
grandfather provision and 105 opposed to its use.

[[Page 3497]]

    A commenter on behalf of Compliance Service of America, whose 
services include the preparation and filing of AVA petitions, stated in 
favor of the grandfather provision, ``It is understandable the TTB sees 
this problem and its effect more completely than many industry members, 
because TTB has been forced to find the solutions for the competing 
interests of the parties.'' This commenter further stated, ``The 
problem of conflicts between new AVAs and existing brands continues to 
exist and is becoming even more prevalent as more * * * AVAs are 
created. With the growth of the US wine industry and the proliferation 
of AVAs, conflicts will only become more frequent, and will continue to 
be devastating to wineries that have literally put the viticultural 
area on the map.'' This commenter cited the petitioned-for Eola Hills 
AVA as an example, pointing out that Eola Hills Winery developed the 
region as a grape-growing region and essentially created the 
viticultural significance of the name Eola Hills. The commenter 
asserted that the establishment of the AVA would have had an adverse 
impact on the use of the winery's brand name and noted that the problem 
was narrowly avoided by adding a modifier to the AVA name so that the 
AVA name established is Eola-Amity Hills.
    A commenter representing Calistoga Partners, L.P., also in favor of 
the grandfather provision, wrote:

    We believe that TTB's proposed rulemaking in Notice No. 78 is 
fundamentally a fair resolution of the potential conflicts between 
the rights of brand owners who had brand names in actual commercial 
use based on existing certificates of label approval and the rights 
of those who wish to establish a new AVA, and represents a 
reasonable compromise that we would strongly support.

    Most of the 105 commenters who opposed the grandfather provision 
wrote that they believe the proposed provision would allow misleading, 
confusing, and/or deceptive wine labels in the marketplace and thereby 
harm consumers. Many of these commenters further asserted that the 
grandfather provision will have far reaching consequences that will 
degrade the integrity of the AVA system. A number of these commenters 
specifically referred to the issues discussed in Notice No. 77, 
regarding the proposed establishment of a Calistoga viticultural area, 
as an example of problems that a grandfather provision can create.
    The president of the Washington Wine Institute wrote that the 
grandfather proposals put forth in Notice No. 78 ``are not sufficient 
to protect against deceptive labeling and consumer misunderstanding; in 
fact, they are a step backwards from both industry and governmental 
efforts to provide consumers with accurate and comprehensible 
information about the wine in the bottle.''
    The commenter on behalf of the PRAVAC wrote:

    Current law applies two different sets of labeling rules for the 
industry: One set of rules applies to geographic brands used in 
COLAs issued prior to July 7, 1986, and a different set--the 
labeling rules set forth in the current regulations--governs every 
other geographic brand in the U.S. marketplace. While not a perfect 
solution, at least these two groups are easily identifiable and not 
subject to change. The number of grandfathered brands with 
misdescriptive names is finite, thus limiting the chances for 
consumer deception.

    This commenter further stated that the proposed changes to the 
regulations would create three sets of labeling rules: (1) For brands 
on COLAs issued prior to July 7, 1986; (2) for geographic brands used 
on COLAs issued at least 5 years prior to the date on which a petition 
for a conflicting AVA is ``perfected'' that also have been used in 
commerce for at least 3 of those 5 years; and (3) for brands on COLAs 
that do not fall into either of the preceding categories. This 
commenter added that ``this solution is inadvisable.'' This commenter 
also provided an example of a name conflict involving a petitioned-for 
AVA within the Paso Robles AVA, the proposed El Pomar District AVA, 
which was resolved with the owners of the potentially conflicting COLAs 
by their consenting to the use of the proposed AVA name prior to 
submission of the petition.
    The president of the industry trade association Wine America, 
wrote:

    The grandfathering clause would allow already existing 
geographic brand names that contain a reference to a new AVA to 
continue to be used as long as they were on a COLA approved at least 
five years before filing of an AVA petition and have been in actual 
commercial use for at least three years of those five years. This 
change in regulation is driven by concern that petitioners may 
propose AVAs to limit competition to the detriment of established 
businesses.

    This commenter added that this proposal ``creates consumer 
confusion, it undermines the value of the appellation for wineries 
properly using the appellation, and we believe the TTB has sufficient 
authority to resolve such conflicts through other means.''
    The president of the board of directors for the Napa Valley 
Vintners trade association raised concern on the issue, stating:

    This proposed rule requiring five years of ownership of COLA and 
three years of use in commerce * * * is contrary to TTB's consumer 
protection mandate set under the FAA Act. It has no basis in, and is 
contrary to, recognized trademark and unfair competition law and 
does not comport with the provisions of Article 23 of the Agreement 
on Trade-Related Aspects of Intellectual Property Rights * * *. As 
mandated by the FAA Act, TTB's primary function in the regulation of 
wine labeling is to protect consumers by ensuring that they are not 
misled. The proposed grandfather rule in Notice No. 78 is contrary 
to this Congressional mandate.

    Many of the commenters indicated that they believe the current 
regulations in existence for more than 20 years are fair to all 
concerned and do not believe it is fair to change this provision now 
because industry members have been playing by these rules for 20 plus 
years. Several commenters pointed to TTB's regulations, which prohibit 
the use of misleading and deceptive labeling. Other commenters pointed 
out that TTB has the responsibility to protect the public from 
misleading labels.
    One commenter further asserted that the grandfather provisions are 
not in line with the FAA Act. This commenter pointed to the TTB 
regulations that outline the label revocation procedure set forth in 27 
CFR part 13, subpart D. In discussing the establishment of this 
procedure, this commenter stated that TTB made the following 
observation, ``Paragraph 1 of Form 5100.31 [Application for and 
Certification/Exemption of Label/Bottle Approval] does not constitute 
trademark protection.''
    A commenter on behalf of the International Trademark Association 
wrote:

    [The] proposal advocated by TTB fails to properly consider the 
principle of ``first in time, first in right'' priority and the fact 
that U.S. trademark and unfair competition laws recognize the 
establishment of rights in trademarks and geographical indications 
based on use and consumer recognition without the necessity of any 
type of registration. Accordingly, the grandfather proposal 
advocated in NPRM No. 78, and effectively applied in NPRM No. 77, 
does not ensure that the valid rights of either trademark owners or 
the users of geographical indications or the interest of consumers, 
will be protected.

    As noted above, in the ``comments invited'' section of Notice No. 
78, TTB asked whether it would be more appropriate to adopt an 
alternative to the grandfather provision that would apply to brand 
names that have longstanding commercial use under one or more existing 
certificates of label approval without specifying a time period. Four 
commenters specifically

[[Page 3498]]

responded to this question--all in opposition to the use of such an 
alternative.
    Also as noted above, in the ``comments invited'' section of Notice 
No. 78, TTB asked for comments on what type of dispelling information 
would prevent consumers from being misled as to the origin of the wine 
when a grandfather provision applies as well as for other comments for 
a requirement on dispelling information. Twenty-two commenters 
specifically responded to this comment solicitation, all in opposition 
to using dispelling information to avoid misleading consumers.
    Several of these commenters stated that disclaimers will not be 
effective in avoiding the misleading of consumers when consumers are 
purchasing wine from a wine list in a restaurant or online. For 
example, the Napa Chamber of Commerce believes that ``disclaimers 
hidden on back labels do not help consumers make informed choices when 
choosing from a wine list.'' In addition, the president of Duckhorn 
Wine Company stated that ``additional wording on the label to help 
clarify the origin of wines * * * will not dispel confusion as most 
consumers will not see the label before they order wine in a restaurant 
or purchase wine online.'' Another commenter wrote, ``Consumers 
purchasing wine via mail-order or the Internet * * * purchase wine with 
brand names that include wine region names with the belief that the 
wine is from the region identified in the brand name.''
    Some commenters provided references to studies that indicate that 
dispelling information is not effective in avoiding consumer deception 
or confusion. One commenter stated that ``more frequently courts have 
found disclaimers to be ineffective,'' and that ``[t]his judicial 
skepticism over disclaimers is supported by the scholarly literature'' 
such as the article by Jacob Jacoby and George Szybillo entitled ``Why 
Disclaimers Fail.'' The commenter noted that ``disclaimers generally 
are not likely to be effective because the information provided does 
not automatically translate into the desired effect, i.e., 
comprehension.'' This commenter also added that ``using a disclaimer or 
other dispelling label information to suggest that wine with a 
misleading geographic brand name is not from the place identified * * * 
will be ineffective because consumers will neither read nor absorb the 
disclaimer information in the retail purchase environment.''
    Finally, as noted above, in Notice No. 78 TTB proposed a 5-year/3-
year standard for applying the proposed new grandfather provision in 
Sec.  4.39(i) when it is not possible otherwise to limit the adverse 
impact on established brand names when a new AVA is approved. In order 
for the grandfather provision to apply to a brand name, the COLA for 
the label carrying that brand name must have been issued at least 5 
years prior to the receipt of the perfected petition for establishment 
of the new AVA. Additionally, the label in question must have been in 
actual commercial use for at least 3 years during that 5-year period.
    A few commenters specifically opposed this provision. The commenter 
on behalf of the International Trademark Association wrote, ``This 5-
year COLA/3-year in use rule is arbitrary and capricious and does not 
reflect any recognized standard for the acquisition of trademark rights 
and does not protect the rights of trademark owners.''

TTB Response

    The comments in opposition to the addition of a new grandfather 
provision to Sec.  4.39(i), in part, have caused us to reassess our 
proposal. In response to the two comments favoring the grandfather 
provision, as noted below, in almost all cases in which a potential 
conflict has arisen between a proposed new AVA name and a brand name 
used on a label, our predecessor agency and we have been able to find a 
mutually satisfactory solution that would permit the establishment of 
the AVA with the least negative impact on current label holders while 
also protecting consumers. We believe that we will continue to be able 
to resolve future conflicts this way without need for a new grandfather 
provision. We recognize that there may be the rare case in which a 
mutually satisfactory solution cannot be found. In such cases we 
believe that a case-by-case resolution is a better approach than to 
create a new grandfather provision as a default resolution. Moreover, 
we believe that adoption of the new grandfather provision as proposed 
could lead to over-reliance on it, thus unnecessarily increasing the 
use of labels that must carry dispelling information, and could 
increase the risk of consumer confusion. Accordingly, we have 
determined not to adopt the new grandfather provision proposed in 
Notice No. 78. We reserve reconsideration of this issue in the future 
should circumstances warrant.
    In the past, when a conflict has arisen between an existing 
approved label and a proposed AVA name, TTB or its predecessor agency, 
the viticultural area petitioners, and/or the affected label holders 
usually have been able to satisfactorily resolve the conflict. For 
example, we have approved a modified name for the AVA, as in the case 
of the ``Oak Knoll District of Napa Valley'' viticultural area (T.D. 
TTB-9, 69 FR 8562) and the ``Diamond Mountain District'' viticultural 
area (T.D. ATF-456, 66 FR 29698), or we have approved an entirely 
different name, as in the case of the ``Chalone'' viticultural area 
(T.D. ATF-107, 47 FR 25519). In these and similar cases, TTB or its 
predecessor agency found that name evidence supported the use of the 
modified or different name, that the modified or different name was 
associated with the proposed viticultural area boundaries, and that use 
of the approved name reduced potential consumer confusion with long-
standing existing labels. The commenter on behalf of Compliance Service 
of America described a similar circumstance involving the proposed 
``Eola Hills'' name in a comment cited above.
    We have also in some cases designated new AVAs that limit the use 
of existing labels when the affected label holders have indicated that 
they understood the restrictive effect and did not object to the 
designation (e.g., ``Lake Chelan'' AVA, T.D. TTB-76, published in the 
Federal Register at 74 FR 19409 on April 29, 2009). In another case we 
withdrew the proposal to establish the AVA for insufficient name 
evidence while acknowledging the principle that an established brand 
name could be a factor in deciding not to establish a proposed AVA 
because it would create consumer confusion (see Notice No. 84, 
published in the Federal Register at 73 FR 34902 on June 19, 2008, 
withdrawing the ``Tulocay'' AVA proposal). And in the recent 
``Calistoga'' AVA case, we resolved the issue by providing a three-year 
transitional period to afford the affected brand name holders time to 
adjust their business models to the new AVA rule (see T.D. TTB-83, 
published in the Federal Register at 74 FR 64602 on December 8, 2009). 
In all of these cases, TTB and its predecessor agency, most often with 
the cooperation of the affected parties, have been able to resolve the 
issue without the need for a new grandfather provision under Sec.  
4.39(i).
    We believe it is preferable for all the parties who would be 
affected by AVA rulemaking to resolve any conflicts through solutions 
that protect the interests of, and are acceptable to, all concerned 
parties, including consumers, rather than to rely on TTB to resolve the 
issue through rulemaking. We continue to believe that most conflicts 
can be resolved in such a manner. As such,

[[Page 3499]]

TTB will continue to seek resolution of these conflicts on a case-by-
case basis.
    As to the comments regarding dispelling information that would have 
been required as part of a grandfathering standard under the proposed 
rule, we continue to believe that dispelling information is appropriate 
and effective in certain situations, but because we are not adopting a 
grandfathering standard with a dispelling information requirement in 
this final rule, we do not need to respond further to these comments.
    Regarding the comment that our regulatory proposal would be in 
conflict with international agreements and trademark rights, the 
decision not to include a grandfather provision in this final rule 
makes it unnecessary to address the comment in this rulemaking.
    Finally, we have decided not to adopt any of the other proposed 
editorial-type changes to Sec.  4.39(i) because any change may result 
in unintended debate and confusion as to its interpretation.

Comments on Whether the Part 9 Procedural Provisions Should Be Adopted

    In Notice No. 78, TTB proposed amendments to the part 9 texts to 
clarify the rules for preparing, submitting, and processing AVA 
petitions. A few commenters specifically addressed these changes, 
stating that while they are not opposed to the proposed procedural 
changes, they do not see them as necessary. Other commenters stated 
that the current regulations work well for the industry and consumers, 
and one commenter specifically mentioned the ``Draft AVA Manual'' 
developed by TTB as a useful document in preparing an AVA petition.

TTB Response

    TTB has determined that the proposed regulatory provisions in 
question should be adopted without change. TTB proposed these 
regulatory changes based on what we have learned over the years in 
reviewing and acting on AVA petitions. We will strengthen the process 
through providing more effective guidance to the public by including 
details in our regulations on how to petition for the establishment or 
modification of an AVA and on what evidence is necessary to support a 
petition, and by clearly stating the actions we might take in response 
to petitions or comments received. The regulatory changes in question 
do not impose new standards but rather represent a codification of 
longstanding administrative authority and practice and address a need 
for greater transparency regarding the AVA regulatory process. Finally, 
with regard to the ``Draft AVA Manual,'' we do not believe that such a 
publication is an appropriate substitute for clear, detailed, 
regulatory texts.

Comments on Statements of Viticultural Significance

    In Notice No. 78, TTB proposed to amend existing sections within 
subpart C of part 9 by adding statements regarding the viticultural 
significance for wine labeling purposes of viticultural area names or 
key portions of those names. One commenter stated that ``TTB should 
[not] promulgate terms of viticultural significance without explaining 
the criteria for the selection so that the industry can provide 
meaningful comments.''

TTB Response

    At this time, TTB is reserving the addition of regulatory text 
delineating which terms TTB would consider to have viticultural 
significance for possible future rulemaking. Such future rulemaking 
would provide TTB with the opportunity to gather additional information 
concerning the impact of such changes on existing brand names. In the 
interim, TTB's existing authority to determine terms of viticultural 
significance is unaffected (see 27 CFR 4.39(i)(3)).

Conclusion

    Accordingly, we are adopting the proposed regulatory amendments 
with the changes as discussed above. We have also made several non-
substantive, editorial changes to the regulatory texts to enhance their 
readability and precision.

Regulatory Analysis and Notices

Executive Order 12866

    This rule is not a significant regulatory action as defined by 
Executive Order 12866. Therefore, it requires no regulatory assessment.

Regulatory Flexibility Act

    We certify that these regulations, if adopted, would not have a 
significant economic impact on a substantial number of small entities. 
These regulations more specifically state the type of explanations a 
petitioner must submit in order to support the establishment of a new 
viticultural area or modify an existing area, but these regulations 
would not impose additional associated costs because the specific data 
that petitioners would rely on to develop these explanations under 
these revised regulations are already a part of the data set required 
of petitioners under existing rules. As noted in Notice No. 78 and in 
this final rule document, the regulatory amendments do not impose new 
standards but rather represent a codification of longstanding 
administrative authority and practice. Therefore, no regulatory 
flexibility analysis is required.

Paperwork Reduction Act

    The collection of information contained in this final regulation 
has been reviewed and approved by the Office of Management and Budget 
(OMB) in accordance with the requirements of the Paperwork Reduction 
Act (44 U.S.C. 3507(d)) under control number 1513-0127. An agency may 
not conduct or sponsor, and a person is not required to respond to, a 
collection of information unless it displays a valid control number 
assigned by OMB.
    The collection of information in this regulation is in 27 CFR 9.11 
and 9.12. This information is required to petition TTB to establish a 
new AVA or to change an existing AVA. This information will be used to 
verify evidence sources and to determine whether the information is 
sufficient to begin the rulemaking process (that is, proceed to a 
notice of proposed rulemaking). The collection of information is 
required to obtain a benefit. The likely respondents are non-profit 
institutions and small businesses or organizations.

Drafting Information

    Rita D. Butler of the Regulations and Rulings Division drafted this 
document.

List of Subjects

27 CFR Part 4

    Advertising, Customs duties and inspection, Imports, Labeling, 
Packaging and containers, Reporting and recordkeeping requirements, 
Trade practices, and Wine.

27 CFR Part 9

    Wine.

27 CFR Part 70

    Administrative practice and procedure, Claims, Excise taxes, 
Freedom of information, Law enforcement, Penalties, Reporting and 
recordkeeping requirements, and Surety bonds.

Amendments to the Regulations

    For the reasons discussed in the preamble, TTB amends 27 CFR, 
chapter I, parts 4, 9, and 70, as follows:

[[Page 3500]]

PART 4--LABELING AND ADVERTISING OF WINE

0
1. The authority citation for part 4 continues to read as follows:

    Authority:  27 U.S.C. 205, unless otherwise noted.


0
2. In Sec.  4.25, paragraphs (e)(1)(i) and (e)(2) are revised to read 
as follows:


Sec.  4.25  Appellations of origin.

* * * * *
    (e) Viticultural area--(1) Definition--(i) American wine. A 
delimited grape-growing region having distinguishing features as 
described in part 9 of this chapter and a name and a delineated 
boundary as established in part 9 of this chapter.
* * * * *
    (2) Establishment of American viticultural areas. A petition for 
the establishment of an American viticultural area may be made to the 
Administrator by any interested party, pursuant to part 9 and Sec.  
70.701(c) of this chapter. The petition must be made in written form 
and must contain the information specified in Sec.  9.12 of this 
chapter.
* * * * *

PART 9--AMERICAN VITICULTURAL AREAS

0
3. The authority citation for part 9 continues to read as follows:

    Authority: 27 U.S.C. 205.


0
4. A new Sec.  9.0 is added before subpart A to read as follows:


Sec.  9.0  Scope.

    The regulations in this part relate to American viticultural areas 
created under the authority of the Federal Alcohol Administration Act 
and referred to in Sec.  4.25(e) of this chapter.
0
5. Subpart A is revised to read as follows:
Subpart A--General Provisions
Sec.
9.1 Definitions.
9.2 Territorial extent.
9.3 Delegations of the Administrator.

Subpart A--General Provisions


Sec.  9.1  Definitions.

    (a) General. For purposes of this part, and unless the specific 
context otherwise requires, the following terms shall have the meanings 
indicated:
    Administrator. The Administrator, Alcohol and Tobacco Tax and Trade 
Bureau, Department of the Treasury, Washington, DC.
    American viticultural area. A viticultural area as defined in Sec.  
4.25(e)(1)(i) of this chapter.
    Appropriate TTB officer. An officer or employee of the Alcohol and 
Tobacco Tax and Trade Bureau authorized to perform any functions 
relating to the administration or enforcement of this part by TTB Order 
1135.9, Delegation of the Administrator's Authorities in 27 CFR Part 9, 
American Viticultural Areas.
    Approved map. The U.S.G.S. map(s) used to define the boundary of an 
approved AVA.
    AVA. An American viticultural area.
    Perfected petition. A petition containing all of the evidence 
meeting the requirements of Sec.  9.12 and containing sufficient 
supporting information for TTB to decide whether or not to proceed with 
rulemaking to establish a new AVA or to change an existing AVA.
    Person. An individual, partnership, association, corporation, or 
other entity.
    Petition. A written request to establish a new AVA or to change an 
existing AVA, signed by the petitioner or an authorized agent of the 
petitioner, and submitted in accordance with this part and Sec.  
70.701(c) of this chapter.
    Petitioner. An individual or entity that submits a petition to TTB.
    Term of viticultural significance. A name recognized under Sec.  
4.39(i)(3) of this chapter.
    TTB. The Alcohol and Tobacco Tax and Trade Bureau, Department of 
the Treasury, Washington, DC.
    U.S.G.S. The United States Geological Survey.
    (b) Use of other terms. Any other term defined in the Federal 
Alcohol Administration Act and used in this part shall have the same 
meaning assigned to it by that Act.


Sec.  9.2  Territorial extent.

    This part applies to the several States of the United States, the 
District of Columbia, and Puerto Rico.


Sec.  9.3  Delegations of the Administrator.

    Most of the regulatory authorities of the Administrator contained 
in this part are delegated to appropriate TTB officers. Those TTB 
officers are specified in TTB Order 1135.9, Delegation of the 
Administrator's Authorities in 27 CFR Part 9, American Viticultural 
Areas. You may obtain a copy of this order by accessing the TTB Web 
site (http://www.ttb.gov) or by mailing a request to the Alcohol and 
Tobacco Tax and Trade Bureau, National Revenue Center, 550 Main Street, 
Room 1516, Cincinnati, OH 45202.
0
6. Subpart B is revised to read as follows:
Subpart B--AVA Petitions
Sec.
9.11 Submission of AVA petitions.
9.12 AVA petition requirements.
9.13 Initial processing of AVA petitions.
9.14 AVA rulemaking process.

Subpart B--AVA Petitions


Sec.  9.11  Submission of AVA petitions.

    (a) Procedure for petitioner. Any person may submit an AVA petition 
to TTB to establish a grape-growing region as a new AVA, to change the 
boundary of an existing AVA, or to change the name of an existing AVA. 
The petitioner is responsible for including with the petition all of 
the information specified in Sec.  9.12. The person submitting the 
petition is also responsible for providing timely and complete 
responses to TTB requests for additional information to support the 
petition.
    (b) How and where to submit an AVA petition. The AVA petition may 
be sent to TTB using the U.S. Postal Service or a private delivery 
service. A petition sent through the U.S. Postal Service should be 
addressed to: Regulations and Rulings Division, Alcohol and Tobacco Tax 
and Trade Bureau, 1310 G Street, NW., Washington, DC 20220. A petition 
sent via a private delivery service should be directed to: Regulations 
and Rulings Division, Alcohol and Tobacco Tax and Trade Bureau, Suite 
200E, 1310 G Street, NW., Washington, DC 20005.
    (c) Purpose and effect of submission of AVA petitions. The 
submission of a petition under this subpart is intended to provide TTB 
with sufficient documentation to propose the establishment of a new AVA 
or to propose changing the name or boundary of an existing AVA. After 
considering the petition evidence and any other relevant information, 
TTB shall decide what action to take in response to a petition and 
shall so advise the petitioner. Nothing in this chapter shall, or shall 
be interpreted to, compel any Department of the Treasury official to 
proceed to rulemaking in response to a submitted petition.


Sec.  9.12  AVA petition requirements.

    (a) Establishment of an AVA in general. A petition for the 
establishment of a new AVA must include all of the evidentiary 
materials and other information specified in this section. The petition 
must contain sufficient information, data, and evidence such that no 
independent verification or research is required by TTB.
    (1) Name evidence. The name identified for the proposed AVA must

[[Page 3501]]

be currently and directly associated with an area in which viticulture 
exists. All of the area within the proposed AVA boundary must be 
nationally or locally known by the name specified in the petition, 
although the use of that name may extend beyond the proposed AVA 
boundary. The name evidence must conform to the following rules:
    (i) Name usage. The petition must completely explain, in narrative 
form, the manner in which the name is used for the area covered by the 
proposed AVA.
    (ii) Source of name and name evidence. The name and the evidence in 
support of it must come from sources independent of the petitioner. 
Appropriate name evidence sources include, but are not limited to, 
historical and modern government or commercial maps, books, newspapers, 
magazines, tourist and other promotional materials, local business or 
school names, and road names. Whenever practicable, the petitioner must 
include with the petition copies of the name evidence materials, 
appropriately cross-referenced in the petition narrative. Although 
anecdotal information by itself is not sufficient, statements taken 
from local residents with knowledge of the name and its use may also be 
included to support other name evidence.
    (2) Boundary evidence. The petition must explain in detail the 
basis for defining the boundary of the proposed AVA as set forth in the 
petition. This explanation must have reference to the name evidence and 
other distinguishing features information required under this section. 
In support of the proposed boundary, the petition must outline the 
commonalities or similarities within that boundary and must explain 
with specificity how those elements are different in the adjacent areas 
outside that boundary.
    (3) Distinguishing features. The petition must provide, in 
narrative form, a description of the common or similar features of the 
proposed AVA affecting viticulture that make it distinctive. The 
petition must also explain with specificity in what way these features 
affect viticulture and how they are distinguished viticulturally from 
features associated with adjacent areas outside the proposed AVA 
boundary. For purposes of this section, information relating to 
distinguishing features affecting viticulture includes the following:
    (i) Climate. Temperature, precipitation, wind, fog, solar 
orientation and radiation, and other climate information;
    (ii) Geology. Underlying formations, landforms, and such 
geophysical events as earthquakes, eruptions, and major floods;
    (iii) Soils. Soil series or phases of a soil series, denoting 
parent material, texture, slope, permeability, soil reaction, drainage, 
and fertility;
    (iv) Physical features. Flat, hilly, or mountainous topography, 
geographical formations, bodies of water, watersheds, irrigation 
resources, and other physical features; and
    (v) Elevation. Minimum and maximum elevations.
    (4) Maps and boundary description. (i) Maps. The petitioner must 
submit with the petition, in an appropriate scale, the U.S.G.S. map(s) 
showing the location of the proposed AVA. The exact boundary of the AVA 
must be prominently and clearly drawn on the maps without obscuring the 
underlying features that define the boundary line. U.S.G.S. maps may be 
obtained from the U.S. Geological Survey, Branch of Distribution. If 
the map name is not known, the petitioner may request a map index by 
State.
    (ii) Boundary description. The petition must include a detailed 
narrative description of the proposed AVA boundary based on U.S.G.S. 
map markings. This description must have a specific beginning point, 
must proceed unbroken from that point in a clockwise direction, and 
must return to that beginning point to complete the boundary 
description. The boundary description must refer to easily discernable 
reference points on the U.S.G.S. maps. The proposed AVA boundary 
description may rely on any of the following map features:
    (A) State, county, township, forest, and other political entity 
lines;
    (B) Highways, roads (including unimproved roads), and trails;
    (C) Contour or elevation lines;
    (D) Natural geographical features, including rivers, streams, 
creeks, ridges, and marked elevation points (such as summits or 
benchmarks);
    (E) Human-made features (such as bridges, buildings, windmills, or 
water tanks); and
    (F) Straight lines between marked intersections, human-made 
features, or other map points.
    (b) AVAs within AVAs. If the petition proposes the establishment of 
a new AVA entirely within, or overlapping, an existing AVA, the 
evidence submitted under paragraph (a) of this section must include 
information that both identifies the attributes of the proposed AVA 
that are consistent with the existing AVA and explains how the proposed 
AVA is sufficiently distinct from the existing AVA and therefore 
appropriate for separate recognition. If the petition proposes the 
establishment of a new AVA that is larger than, and encompasses, all of 
one or more existing AVAs, the evidence submitted under paragraph (a) 
of this section must include information addressing whether, and to 
what extent, the attributes of the proposed AVA are consistent with 
those of the existing AVA(s). In any case in which an AVA would be 
created entirely within another AVA, whether by the establishment of a 
new, larger AVA or by the establishment of a new AVA within an existing 
one, the petition must explain why establishment of the AVA is 
acceptable. When a smaller AVA has name recognition and features that 
so clearly distinguish it from a larger AVA that surrounds it, TTB may 
determine in the course of the rulemaking that it is not part of the 
larger AVA and that wine produced from grapes grown within the smaller 
AVA would not be entitled to use the name of the larger AVA as an 
appellation of origin or in a brand name.
    (c) Modification of an existing AVA.
    (1) Boundary change. If a petition seeks to change the boundary of 
an existing AVA, the petitioner must include with the petition all 
relevant evidence and other information specified for a new AVA 
petition in paragraphs (a) and (b) of this section. This evidence or 
information must include, at a minimum, the following:
    (i) Name evidence. If the proposed change involves an expansion of 
the existing boundary, the petition must show how the name of the 
existing AVA also applies to the expansion area. If the proposed change 
would result in a decrease in the size of an existing AVA, the petition 
must explain, if so, the extent to which the AVA name does not apply to 
the excluded area.
    (ii) Distinguishing features. The petition must demonstrate that 
the area covered by the proposed change has, or does not have, 
distinguishing features affecting viticulture that are essentially the 
same as those of the existing AVA. If the proposed change involves an 
expansion of the existing AVA, the petition must demonstrate that the 
area covered by the expansion has the same distinguishing features as 
those of the existing AVA and has different features from those of the 
area outside the proposed, new boundary. If the proposed change would 
result in a decrease in the size of an existing AVA, the petition must 
explain how the distinguishing features of the excluded area are 
different from those within the boundary of the smaller AVA. In all

[[Page 3502]]

cases the distinguishing features must affect viticulture.
    (iii) Boundary evidence and description. The petition must explain 
how the boundary of the existing AVA was incorrectly or incompletely 
defined or is no longer accurate due to new evidence or changed 
circumstances, with reference to the name evidence and distinguishing 
features of the existing AVA and of the area affected by the proposed 
boundary change. The petition must include the appropriate U.S.G.S. 
maps with the proposed boundary change drawn on them and must provide a 
detailed narrative description of the changed boundary.
    (2) Name change. If a petition seeks to change the name of an 
existing AVA, the petition must establish the suitability of that name 
change by providing the name evidence specified in paragraph (a)(1) of 
this section.


Sec.  9.13  Initial processing of AVA petitions.

    (a) TTB notification to petitioner of petition receipt. The 
appropriate TTB officer will acknowledge receipt of a submitted 
petition. This notification will be in a letter sent to the petitioner 
within 30 days of receipt of the petition.
    (b) Acceptance of a perfected petition or return of a deficient 
petition to the petitioner. The appropriate TTB officer will perform an 
initial review of the petition to determine whether it is a perfected 
petition. If the petition is not perfected, the appropriate TTB officer 
will return it to the petitioner without prejudice to resubmission in 
perfected form. If the petition is perfected, TTB will decide whether 
to proceed with rulemaking under Sec.  9.14 and will advise the 
petitioner in writing of that decision. If TTB decides to proceed with 
rulemaking, TTB will advise the petitioner of the date of receipt of 
the perfected petition. If TTB decides not to proceed with rulemaking, 
TTB will advise the petitioner of the reasons for that decision.
    (c) Notice of pending petition. When a perfected petition is 
accepted for rulemaking, TTB will place a notice to that effect on the 
TTB Web site.


Sec.  9.14  AVA rulemaking process.

    (a) Notice of proposed rulemaking. If TTB determines that 
rulemaking in response to a petition is appropriate, TTB will prepare 
and publish a notice of proposed rulemaking (NPRM) in the Federal 
Register to solicit public comments on the petitioned-for AVA action.
    (b) Final action. Following the close of the NPRM comment period, 
TTB will review any submitted comments and any other available relevant 
information and will take one of the following actions:
    (1) Prepare a final rule for publication in the Federal Register 
adopting the proposed AVA action, with or without changes;
    (2) Prepare a notice for publication in the Federal Register 
withdrawing the proposal and setting forth the reasons for the 
withdrawal. Reasons for withdrawal of a proposal must include at least 
one of the following:
    (i) The extent of viticulture within the proposed boundary is not 
sufficient to constitute a grape-growing region as specified in Sec.  
9.11(a); or
    (ii) The name, boundary, or distinguishing features evidence does 
not meet the standards for such evidence set forth in Sec.  9.12; or
    (iii) The petitioned-for action would be inconsistent with one of 
the purposes of the Federal Alcohol Administration Act or any other 
Federal statute or regulation or would be otherwise contrary to the 
public interest;
    (3) Prepare a new NPRM for publication in the Federal Register 
setting forth a modified AVA action for public comment; or
    (4) Take any other action deemed appropriate by TTB as authorized 
by law.

PART 70--PROCEDURE AND ADMINISTRATION

0
7. The authority citation for part 70 continues to read as follows:

    Authority:  5 U.S.C. 301 and 552; 26 U.S.C. 4181, 4182, 5146, 
5203, 5207, 5275, 5367, 5415, 5504, 5555, 5684(a), 5741, 5761(b), 
5802, 6020, 6021, 6064, 6102, 6155, 6159, 6201, 6203, 6204, 6301, 
6303, 6311, 6313, 6314, 6321, 6323, 6325, 6326, 6331-6343, 6401-
6404, 6407, 6416, 6423, 6501-6503, 6511, 6513, 6514, 6532, 6601, 
6602, 6611, 6621, 6622, 6651, 6653, 6656-6658, 6665, 6671, 6672, 
6701, 6723, 6801, 6862, 6863, 6901, 7011, 7101, 7102, 7121, 7122, 
7207, 7209, 7214, 7304, 7401, 7403, 7406, 7423, 7424, 7425, 7426, 
7429, 7430, 7432, 7502, 7503, 7505, 7506, 7513, 7601-7606, 7608-
7610, 7622, 7623, 7653, 7805.

0
8. Section 70.701 is amended by adding a sentence at the end of 
paragraph (c) to read as follows: ``A petition to establish a new 
American viticultural area or to modify an existing American 
viticultural area is subject to the rules in part 9 of this chapter.''

    Signed: October 1, 2010.
John J. Manfreda,
Administrator.
    Approved: October 1, 2010.
Timothy E. Skud,
Deputy Assistant Secretary, (Tax, Trade, and Tariff Policy).
[FR Doc. 2011-1138 Filed 1-19-11; 8:45 am]
BILLING CODE 4810-31-P