[Federal Register Volume 62, Number 66 (Monday, April 7, 1997)]
[Rules and Regulations]
[Pages 16479-16490]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 97-8808]


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DEPARTMENT OF THE TREASURY

Bureau of Alcohol, Tobacco and Firearms

27 CFR Part 4

[T.D. ATF-388; Ref. Notice Nos. 581, 749 and 793]
RIN 1512-AB08


Gamay Beaujolais Wine Designation (92F-042P)

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

ACTION: Treasury Decision, Final Rule.

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SUMMARY: This final rule amends the wine labeling regulations to allow 
use of the term ``Gamay Beaujolais'' on American wine labels for a 
period of 10 years. From the time this final rule takes effect until 
the end of the phase-out period, a wine which derives not less than 75 
percent of its volume from Pinot noir grapes, Valdiguie (``Napa 
Gamay'') grapes, or a combination of both varieties, may use ``Gamay 
Beaujolais'' as a type designation of varietal significance. However, 
from January 1, 1999, until the end of the phase-out period, brand 
labels using the designation ``Gamay Beaujolais'' must also bear in 
direct conjunction therewith the varietal names Pinot noir and/or 
Valdiguie, along with the following statement on the brand or back 
label: ``Gamay Beaujolais is made from at least 75 percent Pinot noir 
and/or Valdiguie grapes.'' After the expiration of the phase-out 
period, the term ``Gamay Beaujolais'' will no longer be recognized as a 
designation for American wines.

EFFECTIVE DATE: This final rule is effective May 7, 1997.

FOR FURTHER INFORMATION CONTACT: Thomas B. Busey, Wine, Beer and 
Spirits Regulation Branch, Bureau of Alcohol, Tobacco and Firearms, 650 
Massachusetts Avenue, NW, Washington, DC 20226, Telephone: (202) 927-
8230.

[[Page 16480]]

SUPPLEMENTARY INFORMATION:

The Federal Alcohol Administration Act

    Section 105(e) of the Federal Alcohol Administration Act (FAA Act), 
27 U.S.C. 205(e), vests broad authority in the Director, ATF, as a 
delegate of the Secretary of the Treasury, to prescribe regulations 
intended to prevent deception of the consumer, and to provide the 
consumer with adequate information as to the identity and quality of 
the product.
    Regulations which implement the provisions of section 105(e) as 
they relate to wine are set forth in title 27, Code of Federal 
Regulations, part 4 (27 CFR part 4). Section 4.23(b) provides that the 
name of a single grape variety may be used as the type designation of a 
grape wine if the wine is labeled with an appellation of origin, and if 
not less than 75 percent of the wine is derived from grapes of that 
variety, the entire 75 percent of which was grown in the labeled 
appellation of origin area. Section 4.23(d) provides that the names of 
two or more grape varieties may be used as the type designation for a 
wine if all of the grapes used to make the wine are of the labeled 
varieties, and the percentage of the wine derived from each variety is 
shown on the label (with a tolerance of plus or minus 2 percent). 
Further rules are mandated for the use of varietal designations for 
wines labeled with multicounty or multistate appellations of origin.
    Section 4.28 of the regulations was added by T.D. ATF-370, 61 FR 
522 (1996). This section contains a category of type designations of 
varietal significance for American wines. These names designate wines 
which have some varietal basis, but which do not meet the requirements 
for use of a single varietal designation. These designations apply to 
wines which are composed of a mixture of specific grape varieties. ATF 
believes these wines demonstrate characteristics of the grape varieties 
used to produce them and their names imply some grape variety source. 
This type designation was established in regulations first promulgated 
in 1996.
    Section 4.34(a) requires that the class and type be stated in 
conformity with the standards of identity in Subpart C, and in the case 
of still wine, there may appear in lieu of the class designation any 
varietal (grape type) designation, type designation of varietal 
significance, semigeneric geographic designation, or geographic 
distinctive designation to which the wine is entitled. Additionally, 
Sec. 4.34(b)(1) provides that an appellation of origin disclosing the 
true origin of the wine shall appear in direct conjunction with and in 
lettering substantially as conspicuous as the class and type 
designation if a grape type (varietal) designation is used under the 
provisions of Sec. 4.23 or a type designation of varietal significance 
is used under the provisions of Sec. 4.28.

History of Gamay Beaujolais Name

    Beaujolais is a region in France known for producing a distinctive 
type of wine. The ``Gamay noir a jus blanc'' (otherwise known as the 
``Gamay'') is the predominant grape variety used in the production of 
Beaujolais wine.
    In the 1940s, a grape grown in California was identified by 
researchers at the University of California at Davis (UCD) as the 
``Gamay Beaujolais'' grape. At that time, it was mistakenly thought 
that this was the same Gamay grape grown in Beaujolais, France. For 
decades, American wines made from this grape were labeled as ``Gamay 
Beaujolais.''
    In the late 1960's, researchers at UCD decided that the grape known 
as ``Napa Gamay'' was the true Gamay grape, and that the ``Gamay 
Beaujolais'' vine was actually a clone of Pinot noir. The Foundation 
Plant Material Service (FPMS) at UCD (a service operated in cooperation 
with UCD which makes virus-free, true type plant material available to 
the industry), identified the Gamay Beaujolais vine as a clonal 
selection of the Pinot noir variety.
    Notwithstanding the conclusion that the ``Gamay Beaujolais'' grape 
was not related to the true Gamay grape variety, ATF's predecessor 
agency decided to allow wines produced from both the Napa Gamay and 
Pinot noir grape varieties to be labeled as ``Gamay Beaujolais,'' 
pending a final resolution of the many controversies related to the 
names of grape varieties which had been erroneously identified in the 
United States. In the 1980s, ATF began the process of evaluating many 
of these varietal names, in order to formulate an authoritative list of 
grape varieties used to produce American wines.

Winegrape Varietal Names Advisory Committee

    In 1982, ATF established the Winegrape Varietal Names Advisory 
Committee (referred to as the ``Committee'') to conduct an examination 
of the hundreds of grape variety names and synonyms in use in the 
United States. (47 FR 13623, March 31, 1982). According to its charter, 
the Committee was to advise the Director of the grape varieties and 
subvarieties which are used in the production of wine, to recommend 
appropriate label designations for these varieties, and to recommend 
guidelines for approval of names suggested for new grape varieties. 
Their recommendations were restricted to the names of grapes used in 
producing American wines. The Committee's final report, presented to 
the Director in September 1984, contained the Committee's findings 
regarding use of the most appropriate names for domestic winegrape 
varieties.
    The final report of the Winegrape Varietal Names Advisory Committee 
concluded as follows:

At present, there are substantial plantings of two varieties which 
include the name Gamay. Neither are the true Gamay (or one of its 
several clones) grown in Europe. Gamay Beaujolais is a clone of 
Pinot Noir, and Napa Gamay is an as yet unidentified variety, which 
is neither Gamay nor Pinot noir.

The Committee accepted the recommendation of its subcommittee that the 
names ``Napa Gamay'' and ``Gamay Beaujolais'' should be phased out. 
They noted that since Napa Gamay and Gamay Beaujolais (Pinot noir) were 
two distinctively different varieties, wine made from a blend of both 
grapes should not be labeled with one varietal designation. Id. at 27-
29. The Subcommittee on Gamay Beaujolais actually recommended that 
``the wine known as `Gamay Beaujolais' be considered a limited semi-
generic wine produced from the grape variety Pinot noir and the grape 
currently known as `Napa' Gamay, either singly or in combination with 
each other.'' The Committee's Final Report stated that the Committee 
had ``considered a suggestion that the term Gamay Beaujolais be allowed 
for use on domestic wine labels as a `semi-generic' non-varietal 
designation,'' but made no recommendation on that issue due to the 
conclusion that ``the suggestion is outside the mandate of the 
Committee, which is limited solely to varietal names.'' The Committee 
did, however, note this suggestion for ``possible consideration'' by 
ATF.

Notice No. 581

    On the basis of the recommendations contained in the Committee's 
final report, ATF issued Notice No. 581 on February 4, 1986 (51 FR 
4392). That notice proposed the addition of subpart J, American Grape 
Variety Names to part 4. The new subpart was to contain a list of every 
grape varietal name authorized for use in the production of American 
wines. ATF received 156 written comments in response to this notice.
    With respect to use of the name ``Gamay Beaujolais,'' Notice No. 
581 proposed that it should be permitted as an alternate grape variety 
name for future use only for a period of five years.

[[Page 16481]]

During the period of its continued use, Notice No. 581 proposed that 
the actual name of the grape, either Pinot noir or Napa Gamay, should 
appear on the label in direct conjunction with the designation ``Gamay 
Beaujolais.'' After the passage of five years, Gamay Beaujolais could 
no longer be used as a label designation.

Comments to Notice No. 581

    The proposal to phase out use of Gamay Beaujolais proved 
controversial. Only a few respondents concurred with ATF's proposal, 
while 27 respondents objected to some part of the proposal. Many 
commenters suggested that Gamay Beaujolais was well known to consumers 
as a light, red, young, fruity wine, and that consumers did not view it 
as a varietal wine. Some commenters stated that consumer recognition of 
Gamay Beaujolais was good; that the wine was popular; that consumers 
knew what they were buying, and that elimination of the designation 
would serve no consumer purpose. Winery proprietors and grape growers 
cited the large market for this wine and argued that elimination of the 
designation would have a severe economic impact on their businesses.
    Louis P. Martini, a member of the Winegrape Names Advisory 
Committee, submitted a comment in opposition to the proposed 5-year 
phase-out period. He suggested that ``[t]o remove this name from wine 
labels would effectively remove this wine from the market.'' Other 
industry members advocated a longer phase-out period, or objected to 
the phase-out altogether. On the other hand, one consumer advocate 
suggested that five years was too long a phase-out period, and the 
French Government opposed any recognition of the term ``Gamay 
Beaujolais'' in the regulations.

Notice No. 749

    Because the comments on Notice No. 581 varied widely in their 
approach to the proposals, and because a lengthy period of time had 
passed since the issuance of Notice No. 581, ATF decided to open the 
issue of grape varietal names to additional public comment. Thus, on 
September 3, 1992, ATF issued Notice No. 749 (57 FR 40380), seeking 
comment on new and revised proposals relating to grape variety names.
    By this time, UCD had determined that the grape known as ``Napa 
Gamay'' was not the Gamay grape of France. The ``Napa Gamay'' grape 
variety was positively identified by the FPMS as Valdiguie, although it 
is not widely known by this name in the United States. In Notice No. 
749, ATF proposed that ``Napa Gamay'' be considered a synonym for the 
prime name Valdiguie and requested comments on whether Napa Gamay 
should be phased out in the future. ATF also announced that the ``Gamay 
Beaujolais'' issue would be the subject of a separate notice of 
proposed rulemaking.

Notice No. 793

    On April 5, 1994, ATF published Notice No. 793 (59 FR 15878) in the 
Federal Register proposing specific conditions for the use of Gamay 
Beaujolais as a wine label designation. The 90-day comment period 
closed on July 5, 1994.
    ATF stated that the evidence considered by ATF established that 
``Gamay Beaujolais'' was not a true varietal name, and that the two 
grape varieties which have been called ``Gamay Beaujolais'' in this 
country are not Gamay grapes. Thus, ATF concluded that Gamay Beaujolais 
should not be listed in subpart J of 27 CFR part 4 as a grape variety 
name. On the basis of the comments to Notice Nos. 581 and 749 and 
current trade and consumer recognition of the name, ATF stated that 
many consumers viewed Gamay Beaujolais as a type of red wine which may 
be described as light and fruity. However, ATF also believed that many 
consumers associated the designation ``Gamay Beaujolais'' with a wine 
produced from the Pinot noir or Napa Gamay grape varieties. Therefore, 
instead of phasing out the use of the designation ``Gamay Beaujolais'' 
as proposed in Notice No. 581, ATF proposed in Notice No. 793 to 
specifically allow the continued use of Gamay Beaujolais under 
Sec. 4.34, relating to class and type designations. Section 4.34 was 
selected for placement of the Gamay Beaujolais designation because 
Sec. 4.28 and the type designations of varietal significance it 
established did not exist in 1994.
    As previously discussed, existing regulations provided that a wine 
was not entitled to a varietal type designation unless 75 percent of 
its volume is derived from grapes of that variety. Accordingly, ATF 
proposed to allow the use of the designation ``Gamay Beaujolais'' only 
where the wine derived not less than 75 percent of its volume from 
Pinot noir grapes or Napa Gamay grapes. Wine labels bearing the 
designation ``Gamay Beaujolais'' would also have been required to bear 
a varietal type designation (Pinot noir or Napa Gamay) and an 
appellation of origin. Furthermore, the proposed amendment to Sec. 4.34 
specified that the optional designation ``Gamay Beaujolais'' must 
appear in direct conjunction with the varietal type designation and the 
appellation of origin, and must appear in lettering of substantially 
the same size and kind.

T.D. ATF-370

    On January 8, 1996, ATF issued T.D. ATF-370 (61 FR 522), a final 
rule on the issue of grape variety names for American wines. ATF issued 
a comprehensive list of grape variety names approved for use on 
American wine labels. The final rule took effect on February 7, 1996. 
The name ``Napa Gamay'' is listed as a synonym for ``Valdiguie ''; 
however, ``Napa Gamay'' may only be used on labels of wines bottled 
prior to January 1, 1999. The name ``Gamay Beaujolais'' was not listed 
as an approved varietal name. Instead, the preamble noted that ATF has 
made Gamay Beaujolais the subject of a separate rulemaking proceeding. 
The preamble also stated that ``[i]n the interim, ATF will permit 
domestic wineries to use Gamay Beaujolais as a designation. Such wine 
must derive at least 75 percent of its volume from Pinot noir, from 
Valdiguie (Napa Gamay), or from a mixture of these grapes.'' 61 FR at 
532.

Comments to Notice No. 793

    There were 237 comments submitted in response to Notice No. 793. 
211 comments were in favor of allowing the continued use of the 
designation ``Gamay Beaujolais'' on wine labels, while 26 were opposed 
to any use of ``Gamay Beaujolais'' on American wine labels.

Comments in Favor of Proposal

    The Wine Institute, American Vintners Association, winegrape 
growers associations, wine grape growers, wine producers, and wine 
wholesalers submitted comments in favor of allowing continued use of 
``Gamay Beaujolais'' on American wine labels. However, many of these 
commenters took issue with some of ATF's proposals.
    Some commenters suggested that the designation ``Gamay Beaujolais'' 
had lost any varietal significance, and it should not be restricted to 
wines made from Pinot noir or Napa Gamay grapes. Thus, for example, the 
American Vintners Association suggested that any light, red, young, 
fruity wine should be allowed the designation ``Gamay Beaujolais'' as 
long as the actual grape variety is shown on the label.
    The vast majority of comments received by ATF came from 
wholesalers, vineyard proprietors, and wineries who supported the 
recognition

[[Page 16482]]

of ``Gamay Beaujolais'' in the regulations. However, these commenters 
opposed ATF's proposal that a wine labeled with the designation ``Gamay 
Beaujolais'' must derive 75 percent of its volume from either the Napa 
Gamay or Pinot noir grape variety. The comments noted that the 
longstanding industry practice was to blend the two grape varieties in 
the production of ``Gamay Beaujolais'' wine, and that the blend of the 
two distinct grape varieties should be considered as meeting the 75 
percent requirement found in the regulations.
    Most of the comments in favor of allowing a blend of Pinot noir and 
``Napa Gamay'' grapes also brought up the issue of whether varietal 
percentages should be required on the label. ATF did not propose such a 
requirement in Notice No. 793, because the regulations at Sec. 4.23 do 
not require a listing of percentages where 75 percent of the wine is 
derived from a single grape variety. However, under Sec. 4.23(d), 
percentages must be listed on the label whenever two or more grape 
varieties are used as the type designation for a wine.
    The commenters who raised this issue were opposed to listing the 
percentage of grape varieties on the label. Instead, they suggested 
that the varietal names ``Pinot noir'' and ``Napa Gamay'' be listed on 
the label in descending order by volume, without requiring that the 
percentages be shown. The Wine Institute suggested that this option 
would allow ``the broadest amount of winemaking flexibility in 
achieving the Gamay Beaujolais style and minimizing consumer confusion 
that could result from a multiple varietal label.''
    While many commenters in favor of retention of the term ``Gamay 
Beaujolais'' stated that consumer recognition of this wine was good, 
none of the comments offered specific evidence, such as consumer 
surveys, on what consumers understood to be the varietal significance 
of the term. The Wine Institute submitted a label dating back to at 
least 1950, showing that the use of this name on American wine labels 
went back several decades, and submitted evidence tending to show that 
consumers had positive views about ``Gamay Beaujolais'' wines. However, 
some of this evidence actually tended to support the conclusion that 
some American consumers consider ``Gamay Beaujolais'' to be a style of 
wine similar to French Beaujolais wines. This evidence did not support 
ATF's premise in Notice No. 793 that American consumers were aware that 
wines labeled as ``Gamay Beaujolais'' were made from Pinot noir or 
Valdiguie grapes.

Comments in Opposition to Use of Gamay Beaujolais

    Of the 26 comments received in opposition to the continued use of 
Gamay Beaujolais on wine labels, 13 were from importers and 4 from 
foreign producers-exporters. The remaining 9 comments are discussed in 
more detail below.
    Most of these commenters strongly opposed the use of ``Gamay 
Beaujolais'' on American wine labels, stating that American wineries 
were continuing to use the term because they wanted to take unfair 
advantage of the Beaujolais name. Secondly, these commenters believed 
that use of the term ``Gamay Beaujolais,'' even when modified with a 
geographical appellation of origin and a varietal type designation, was 
highly misleading and confusing to consumers, since it was being used 
to describe a wine that was not made from Gamay grapes, and did not 
originate in Beaujolais, France. However, like the comments supporting 
the proposal, none of the opposing comments provided specific evidence, 
such as consumer surveys, on the consumer's perception of the term. 
Finally, it was argued that continued use of the term ``Gamay 
Beaujolais'' on American wine labels constituted a violation of ATF 
regulations and the United States Government's commitment to prevent 
any erosion of protected appellations of origin.
    The Delegation of the Commission of the European Communities (now 
the European Union) commented that the proposal would confuse and 
mislead consumers, since it allows ``the use of the optional 
designation `Gamay Beaujolais' for wine which is recognized by BATF as 
originating neither from a true `Gamay' grape variety nor from the 
`Beaujolais' area of France.'' Their comment also argued that any 
recognition of the designation ``Gamay Beaujolais'' for American wines 
would violate Item III of the Exchange of Letters between the EC and 
the United States dated July 26, 1983, as well as provisions of the 
Uruguay Round Agreement on Trade Related Aspects of Intellectual 
Property (TRIPS). This argument was based on the premise that the 
proposed rule would erode protection of the nongeneric designation 
``Beaujolais.'' Instead, the comment suggested implementing the 
shortest possible transition period for allowing the term pending its 
outright prohibition. The Comite Vins, the European Community 
association representing the Community's entire wine industry and 
trade, and the Federation des Exportateurs de Vins et Spiritueux de 
France (FEVS) filed similar comments in opposition to the proposed 
rule.
    The Agricultural Attache from the French Embassy also made similar 
arguments, and suggested that the proposed rule would essentially 
create a new semigeneric designation to the detriment of a French 
appellation of origin already recognized by U.S. regulations.
    Separate comments from the Union Viticole du Beaujolais 
(representing French Beaujolais growers) and the Federation Des 
Syndicats de Negociants-Eleveurs de Grande Bourgogne (representing 
Beaujolais and Burgundy wine merchants) strongly opposed the proposed 
rule as misleading to consumers and in violation of U.S. international 
commitments.
    A comment on behalf of the Deutscher Weinfonds (DW), stated that 
while the DW had no direct interest in this matter, it felt strongly, 
``as a matter of principle, that distinctive geographical designations, 
and distinctive grape varietals, particularly those recognized by BATF 
in its regulations, should in no way be diluted or compromised.''
    The National Association of Beverage Importers, Inc. (NABI), a 
trade association representing importers of wine, beer, and distilled 
spirits, filed a comment representing the views of the majority of its 
members. NABI stated that the Brown-Forman Beverage Company and 
Heublein, Inc. did not agree with its comment. NABI stated that use of 
the designation ``Gamay Beaujolais'' in accordance with the proposed 
rule was misleading to consumers, since it would be used to designate a 
wine produced from grapes which were not Gamay grapes, and since the 
product had nothing to do with the protected geographical designation 
``Beaujolais.'' NABI argued that the proposed erosion of the term 
``Beaujolais'' was in violation of international agreements, as well as 
ATF's own regulations, since ``Beaujolais'' is recognized as a 
distinctive designation in 27 CFR 4.24(c). NABI recommended that ATF 
adopt its earlier proposal to phase out the use of the term over a 
five-year period commencing with the publication of the final rule.
    Finally, the law firm of Ropes & Gray submitted a comment on behalf 
of its clients the Institut National des Appellations d'Origine 
(``INAO'') and the Union Interprofessionelle des Vins du Beaujolais 
(``UIVB''). Shortly prior to publication of Notice No. 793, the INAO 
and UIVB had petitioned ATF to eliminate recognition of the designation

[[Page 16483]]

``Gamay Beaujolais'' on American wine labels. Their comment in response 
to Notice No. 793 argued that recognition of ``Gamay Beaujolais'' as a 
labeling term would erode the protection of the distinctive designation 
``Gamay Beaujolais,'' and would essentially create a new semigeneric 
wine designation. The INAO and UIVB argued that there is no objective 
evidence that establishes that consumers are not misled by use of the 
labeling designation ``Gamay Beaujolais.'' They suggested that even if 
an accurate appellation of origin and varietal designation appeared on 
the label in conjunction with the designation ``Gamay Beaujolais,'' 
consumers might still erroneously believe that the wine is made from a 
combination of, for example, Pinot noir and Gamay grapes, or that 
consumers will still be misled into believing that the wine is similar 
to French Beaujolais wines.
    The INAO and UIVB also argued that ATF's recognition of the name 
``Gamay Beaujolais'' is in violation of the international obligations 
of the United States, and stated that such recognition would undermine 
the protection accorded the distinctive name ``Beaujolais,'' and create 
a new semigeneric name.

Discussion of Comments

    In Notice No. 793, ATF proposed the continuance of the name ``Gamay 
Beaujolais'' on American wine labels, premised on the belief that 
American consumers had come to associate this term with a wine made 
from Pinot noir and Valdiguie (``Napa Gamay'') grapes. ATF recognized 
that the use of this term to designate these grapes arose from an 
initial classification error; however, ATF reasoned that if consumer 
recognition of the term was based on its new secondary meaning in the 
United States, then the term would not mislead the American consumer if 
used in direct conjunction with an appellation of origin, as well as a 
varietal type designation. Thus, the most important issue in 
determining whether the regulations should continue to authorize use of 
the name ``Gamay Beaujolais'' on American wine labels was whether 
American consumers were aware that the term has a secondary meaning 
referring to wines made from Pinot noir and Valdiguie grapes.
    Many of the commenters in opposition to Notice No. 793 challenged 
ATF's assumption that consumers understood the true varietal basis of 
``Gamay Beaujolais'' wines. While the commenters in favor of continuing 
the use of ``Gamay Beaujolais'' stated that there was good consumer 
recognition of the term, they did not provide evidence that many 
American wineries had voluntarily disclosed the true grape varieties in 
``Gamay Beaujolais'' wines on the label. Without this labeling 
information, the fact that the designation had appeared on American 
wine labels for decades did not establish that consumers knew that the 
wines were actually made from Pinot noir or Napa Gamay grapes.
    Upon careful consideration of the comments, ATF has concluded that 
none of the commenters were able to provide any competent and reliable 
consumer perception evidence showing that the average American consumer 
was knowledgeable enough to recognize that ``Gamay Beaujolais'' was a 
wine made from the Pinot noir and ``Napa Gamay'' grape varieties. In 
fact, some of the commenters in favor of the proposed rule (such as the 
American Vintners Association) actually took a contrary position on 
this matter, and argued that American consumers did not associate 
``Gamay Beaujolais'' with a particular grape variety or varieties. 
These commenters suggested that the American consumer actually 
associated the designation ``Gamay Beaujolais'' with a style of wine 
making.
    While the comments (of both those supporting and opposing the 
proposal) did not provide direct evidence of consumer understanding of 
the varietal significance of the term ``Gamay Beaujolais,'' ATF 
believes that there is a legitimate basis for its belief that the wine 
industry and knowledgeable consumers associate the term with a wine 
produced from Pinot noir and/or Valdiguie (``Napa Gamay'') grapes. It 
is ATF's understanding that the term ``Gamay Beaujolais'' is not used 
to designate French Beaujolais wines or other French wines made from 
Gamay noir grapes. While wine experts thus immediately know that the 
term ``Gamay Beaujolais'' is used to refer to a wine which is not made 
from Gamay grapes, it is not apparent whether the average American 
consumer is as knowledgeable on this issue. For example, in Jancis 
Robinson's Vines, Grapes, and Wines, (Alfred A. Knopf, New York 1986) 
at 227, under the listing of ``Gamay Beaujolais,'' the true meaning of 
this name is explained in a forthright manner, although the author goes 
on to state that ``these facts are not widely known among ordinary wine 
drinkers.''
    Because the comments did not shed much light on the issue of 
consumer perception, ATF reviewed articles in the popular press to see 
whether these articles provided consumers with accurate information 
about the identity of ``Gamay Beaujolais'' wines. Many of these 
articles indicated that knowledgeable wine writers were aware of the 
varietal composition of ``Gamay Beaujolais'' wines. For example, an 
article by Gerald Boyd in the July 15, 1992 edition of the San 
Francisco Chronicle entitled ``Lighten Up with Young Gamays and 
Pinots'' states that ``[l]ong thought the true grape of Beaujolais, 
Gamay Beaujolais is in fact a clone of Pinot Noir.'' Frank Prial of the 
New York Times stated as follows in an article entitled ``Wine Talk'' 
dated January 16, 1991: ``Gamay beaujolais and Napa gamay are fairly 
popular California grapes, but neither is actually gamay; gamay 
beaujolais is an inferior clone of the pinot noir grape, and Napa gamay 
is probably a little-used grape from the South of France called 
valdiguie.''
    These examples reflect that there is a fairly widespread knowledge 
among knowledgeable wine writers that ``Gamay Beaujolais'' wines are 
not made from Gamay noir grapes. On the other hand, some of these 
articles suggested that the labeling of these wines was confusing. For 
example, in the March 28, 1990 edition of the Washington Post, in an 
article entitled ``All-American Beaujolais,'' Ben Giliberti explained 
the true identity of the ``Gamay Beaujolais'' and ``Napa Gamay'' 
grapes, and then stated ``Regardless of grape variety, most domestic 
bottlings are labeled gamay beaujolais--a confusing situation that one 
hopes will be rectified by labeling authorities in the near future.'' 
In an article entitled ``French Beaujolais Needn't Fear that California 
Clone,'' in the July 18, 1991 edition of the Atlanta Constitution, 
writer Bruce Galphin explains that ``it has been widely known for years 
that gamay Beaujolais is a clone (mutated form) of pinot noir'' but 
also states that the situation is ``confusing to Americans learning 
about wine.''

Conclusion

    After carefully reviewing the comments, as well as commentary by 
wine experts such as Jancis Robinson, and articles in the popular press 
such as the ones cited above, ATF has concluded that the industry and 
wine experts understand the term ``Gamay Beaujolais'' to have varietal 
significance when used on American wine labels, even though the term 
initially arose from a classification error. However, ATF has concluded 
that while the term has thus acquired a secondary meaning in the United 
States to refer to a wine made from Pinot noir and/or ``Napa Gamay'' 
grapes, the average consumer

[[Page 16484]]

may not understand this varietal significance of the term unless 
additional information is provided. Thus, ATF has concluded that the 
unqualified use of the term ``Gamay Beaujolais'' on wine labels may 
tend to mislead consumers as to the varietal identity of the wine.
    In Notice No. 793, ATF proposed permanently to allow use of the 
term ``Gamay Beaujolais'' in conjunction with a true varietal 
designation--either Pinot noir or Valdiguie (``Napa Gamay''). However, 
there were several good points that were raised in opposition to this 
proposal. Several commenters suggested that ATF was merely codifying a 
historical error, and that erroneous varietal designations should not 
be allowed merely because such designations were supplemented with 
additional truthful information. The INAO and UIVB suggested that the 
juxtaposition of the term ``Gamay Beaujolais'' with ``Pinot noir,'' for 
example, might further confuse the consumer, and mislead the consumer 
into believing that the wine was a blend of ``Gamay Beaujolais'' and 
Pinot noir grapes.
    ATF has reevaluated its proposal in light of these comments. While 
ATF still believes that the name ``Gamay Beaujolais'' has consumer 
recognition in the United States, we also recognize that it is not the 
correct name for these two grape varieties, and that the average 
consumer should not be expected to have technical knowledge about grape 
classification issues in order to understand a wine label.
    Since the establishment of the Winegrape Varietal Names Advisory 
Committee in 1982, it has been ATF's goal to eliminate the use of 
incorrect grape variety names in the labeling of American wines, even 
where those names have been used on a longstanding basis in the United 
States. The final rule on varietal names eliminated the usage of many 
names that had been used in the United States for a long time, where 
those names did not accurately reflect the recognized names of the 
grape varieties in question. See T.D. ATF-370 (61 FR 522). This same 
logic dictates that use of the name ``Gamay Beaujolais'' should be 
phased out in the United States.
    Thus, ATF has decided that the regulations should not provide 
permanent recognition of the labeling designation ``Gamay Beaujolais.'' 
The original classification and naming errors made with respect to the 
``Gamay Beaujolais'' (Pinot noir) and ``Napa Gamay'' (Valdiguie ) 
grapes should not be compounded by allowing the name ``Gamay 
Beaujolais'' to be used indefinitely to designate wines made from two 
separate grape varieties, neither of which is a true Gamay grape. The 
purpose of the rulemaking project on varietal names was to rectify the 
errors made in the past with respect to classification of American wine 
grape varieties, and to ensure that American consumers were not misled 
as to the true identity of American varietal wines. This is all the 
more important since varietal names have assumed increasing importance 
in the marketing of wines.
    Accordingly, ATF has decided that it will terminate recognition of 
the labeling designation ``Gamay Beaujolais'' within 10 years. During 
this phase-out period, interim labeling requirements will ensure that 
consumers are adequately informed as to the varietal content of the 
wine. ATF has concluded that it is necessary to allow a period of time 
in which wineries can continue to use the labeling designation ``Gamay 
Beaujolais,'' as long as this designation is qualified in a manner that 
will allow consumers to be educated as to what the varietal 
significance of the term really is.

Interim Labeling Requirements

    This final rule provides that ATF will temporarily recognize the 
name ``Gamay Beaujolais'' as a type designation of varietal 
significance. This means that the name has varietal significance, but 
it does not fit the requirements for a varietal designation. In this 
case, the name is used to designate a wine where not less than 75 
percent of the volume of the wine is derived from Pinot noir grapes, 
Valdiguie (``Napa Gamay'') grapes, or a combination of both.
    As previously explained, Sec. 4.28, relating to type designations 
of varietal significance, did not exist in 1994, at the time Notice No. 
793 was published. Upon consideration of the comments received in 
response to this notice and the regulatory structure adopted as a 
result of the varietal name rulemaking, ATF has determined that the 
type of wine described as Gamay Beaujolais is a better fit in 
Sec. 4.28, rather than as a separate class and type designation in 
Sec. 4.34.
    ATF will allow a period of 10 years from the issuance of this final 
rule for wineries to phase out the use of the term ``Gamay 
Beaujolais.'' To the extent that consumers have formed a loyalty to or 
preference for the wine that they know as ``Gamay Beaujolais,'' this 
transition period will allow them time to learn more information about 
the varietal content of the wine. It will also allow wineries and grape 
growers time to make any necessary changes in their planting and 
marketing plans.
    Pursuant to the existing regulations, an appellation of origin must 
also appear in direct conjunction with any type designation of varietal 
significance. This will ensure that consumers are not misled as to the 
origin of the wine. However, ATF also believes that some further 
information on the label is necessary in order to ensure that the 
consumer is not misled as to the varietal content of the wine. These 
requirements will be discussed in further detail below.

Interim Definition of ``Gamay Beaujolais''

    In Notice No. 793, ATF proposed that the designation ``Gamay 
Beaujolais'' could only be used where the wine met the requirements for 
use of either the Pinot noir or Valdiguie (``Napa Gamay'') varietal 
designation. In that case, the designation would have to be qualified 
by the use of a single varietal designation, signifying that 75 percent 
of the wine was derived from either Pinot noir or Valdiguie (``Napa 
Gamay'') grapes. However, the comments received from American 
wholesalers, growers of Pinot noir and Valdiguie grapes, and American 
wineries who produced ``Gamay Beaujolais'' wines were overwhelmingly 
opposed to this proposal. These comments pointed out that it had been 
ATF's longstanding policy to allow the Pinot noir and Valdiguie grape 
varieties to be combined to make up the regulatory 75 percent 
requirement. Many comments stressed that it was important for wineries 
to have the flexibility to adjust percentages in order to arrive at the 
most desirable blend. For example, the California Association of 
Winegrape Growers stated that restricting the term to only one of these 
grape varieties would ``unduly restrict(s) the winemakers ability to 
creatively blend to consumer taste.''
    Since the use of the term ``Gamay Beaujolais'' is being phased out 
over the next 10 years, and since the comments establish that the term 
is well recognized in the wine industry as referring to wines made from 
a combination of Pinot noir and Valdiguie (``Napa Gamay'') grapes, ATF 
has decided to define the term in a way that incorporates the status 
quo over the past several decades. Thus, ATF is defining the term 
``Gamay Beaujolais'' to mean an American wine which derives at least 75 
percent of its volume from Pinot noir grapes, Valdiguie grapes, or a 
combination of both. However, since the term will refer to a blend of 
two separate unrelated grape varieties, ATF believes that it is all the 
more important to ensure that there is sufficient

[[Page 16485]]

information on the brand label, in direct conjunction with the 
designation ``Gamay Beaujolais'' to ensure that consumers are not 
misled as to the varietal content of the wine. These requirements are 
discussed below.
    It should be noted that there were a few comments questioning ATF's 
exclusion of wines made with true Gamay noir grapes from the definition 
of ``Gamay Beaujolais.'' The evidence clearly indicates that American 
``Gamay Beaujolais'' wines have been made from grapes that were not 
true Gamay grapes. In T.D. ATF-370, ATF noted that it was listing the 
true Gamay grape as ``Gamay noir,'' in order to distinguish it from 
other wines which were labeled ``Gamay'' in the past. 61 FR 532. The 
true Gamay grape is a relative newcomer to the United States, and there 
is no reason to create any confusion between the wine known as ``Gamay 
Beaujolais'' and wines made from the true ``Gamay noir'' grape. 
Accordingly, wineries producing wines from the true Gamay noir grape 
and meeting the applicable percentage requirements for use of a single 
varietal type designation, may designate their wines as ``Gamay noir'' 
but not as ``Gamay Beaujolais.''
    Finally, wineries producing wine that meets the requirements for a 
single varietal designation of either Pinot noir or Valdiguie (``Napa 
Gamay'') may of course choose to use these varietal designations in 
lieu of the type designation ``Gamay Beaujolais.'' However, in 
accordance with the regulations at Sec. 4.23, the name ``Napa Gamay'' 
will no longer be accepted for wines bottled on or after January 1, 
1999; instead, the varietal name ``Valdiguie'' must be used to 
designate these wines.

Interim Labeling Statements

    The final rule will allow the use of the ``Gamay Beaujolais'' 
designation where there appears on the brand label, in direct 
conjunction therewith, the names of the grape variety or grape 
varieties used to satisfy the regulatory definition of ``Gamay 
Beaujolais'' (i.e., Pinot noir and/or Valdiguie). These varietal names 
must appear on a separate line from the ``Gamay Beaujolais'' 
designation, and must be separated from ``Gamay Beaujolais'' by the 
required appellation of origin. Where two varietal names are listed, 
they shall appear on the same line, in order of predominance.
    The appellation of origin shall appear either on a separate line 
between the name ``Gamay Beaujolais'' and the grape variety name(s), or 
on the same line as the grape variety name(s) in a manner that 
qualifies the grape variety name(s). Furthermore, the following 
statement shall also appear on the brand or back label: ``Gamay 
Beaujolais is made from at least 75 percent Pinot noir and/or Valdiguie 
grapes.''
    In Notice No. 793, ATF proposed a rule that would allow the name 
``Gamay Beaujolais'' only where the wine met the standards for use of 
either the Pinot noir varietal designation, or the Valdiguie (``Napa 
Gamay'') varietal designation, and where the type designation ``Pinot 
noir'' or Valdiguie (``Napa Gamay'') appeared in direct conjunction 
with the designation ``Gamay Beaujolais.'' As previously discussed, ATF 
has now concluded that during the 10-year phase-out period, it is 
reasonable to allow the existing industry practice of blending Pinot 
noir and ``Napa Gamay'' grapes to make up the 75 percent requirement 
for use of the ``Gamay Beaujolais'' designation. This is in accordance 
with the longstanding trade practice and industry understanding of the 
term ``Gamay Beaujolais,'' as well as the longstanding policy of ATF 
and its predecessor agency.
    However, since the term ``Gamay Beaujolais'' is now being defined 
to include a blend of two separate grape varieties, ATF believes that 
it is necessary to require more than just the appearance of one or two 
grape varieties on the brand label, in direct conjunction with the 
designation ``Gamay Beaujolais.'' The INAO and UIVB suggested that the 
use of two names such as ``Gamay Beaujolais'' and ``Pinot noir'' on a 
brand label might confuse consumers into believing that these two names 
represented separate grape varieties which had gone into the wine. ATF 
believes that this comment has merit. In other words, ATF is concerned 
that the appearance of the designations ``Gamay Beaujolais,'' ``Pinot 
noir,'' and ``Valdiguie'' together on a brand label might confuse some 
consumers, and tend to create a misleading impression that these three 
names each represented grape varieties that had been used in the 
production of the wine.
    Thus, the final rule will require that the varietal designations 
Pinot noir and/or Valdiguie appear on the brand label in direct 
conjunction with the designation ``Gamay Beaujolais,'' but on a 
separate line from ``Gamay Beaujolais,'' and separated from ``Gamay 
Beaujolais'' by the required appellation of origin. The appellation of 
origin shall appear either on a separate line between the name ``Gamay 
Beaujolais'' and the grape variety name(s), or on the same line as the 
grape variety name(s) in a manner that qualifies the grape variety 
name(s). This will ensure that the consumer is not misled into 
believing that Gamay Beaujolais represents just one of two or three 
grape varieties used in producing the wine.
    Where the wine is made from both Pinot noir and Valdiguie grapes, 
the two grape varieties shall appear on the same line, in order of 
predominance. Below are four examples of type designations on brand 
labels that will be allowed under the requirements of the final rule:

GAMAY BEAUJOLAIS, 1992 CALIFORNIA, PINOT NOIR/VALDIGUIE

GAMAY BEAUJOLAIS, NAPA VALLEY VALDIGUIE

1994 GAMAY BEAUJOLAIS, SONOMA COUNTY PINOT NOIR

GAMAY BEAUJOLAIS, CALIFORNIA, VALDIGUIE & PINOT NOIR

This requirement should leave no room for confusion on the part of the 
consumer as to the varietal content of the wine.

Additional Labeling Statement

    Notwithstanding the above, ATF believes that because ``Gamay 
Beaujolais'' wines are in something of a unique category, the consumer 
should be provided with more specific information as to the meaning of 
this designation. The vast majority of comments received in response to 
Notice No. 794 were in opposition to any requirement that grape variety 
percentages be listed on labels. These commenters cited the need for 
flexibility in the blending of grapes. ATF recognizes that if the 
regulations require wineries to list the percentage of each grape 
variety used in the blend, wineries will have to obtain new labels, as 
well as new certificates of label approval, for each different blend of 
``Gamay Beaujolais'' wine.
    In response to these comments, ATF is not requiring wineries to put 
grape percentages on the brand label, as they would be required to do 
if the wine were labeled with more than one grape variety under section 
4.23(d). ATF recognizes that the Gamay Beaujolais designation is not a 
multiple varietal designation, but is instead a type designation of 
varietal significance, which is indicative of a certain varietal 
content. The regulations will define what that varietal content is, and 
knowledgeable industry members and consumers are already aware of these 
requirements.
    However, in order to ensure that consumers are more specifically 
informed as to the varietal significance of the term ``Gamay 
Beaujolais,'' the final rule will require the following statement to 
appear on the brand or back label: ``Gamay Beaujolais is made from at 
least 75 percent Pinot noir and/

[[Page 16486]]

or Valdiguie grapes.'' ATF believes that this statement adequately 
informs the consumer as to the traditional meaning of the term ``Gamay 
Beaujolais'' as used on American wine labels for the past several 
decades. Wineries may use this statement without having to receive new 
certificates of label approval each time the percentages of grape 
varieties in their blends change.
    ATF believes that these new requirements will ensure that during 
the period of the phase-out, consumers will be adequately informed 
about the varietal content of the wine. Furthermore, ``Gamay 
Beaujolais'' wines will continue to be labeled with an appellation of 
origin to ensure that consumers are adequately informed as to the 
origin of the grapes. ATF believes that knowledgeable consumers are 
already on notice that ``Gamay Beaujolais'' wines are not made from the 
``Gamay noir'' grape. The interim labeling requirements will, however, 
help to educate all consumers as to the meaning of the term ``Gamay 
Beaujolais,'' and ensure that consumers have sufficient information as 
to what that term means.

Length of Phase-Out Period

    Since ATF did not specifically propose the option of phasing out 
use of the name ``Gamay Beaujolais'' in Notice No. 793, we did not 
solicit comments on the issue of the appropriate length of a phase-out 
period. However, when ATF first proposed to phase out use of this term 
in 1986, many wineries and grape growers suggested that this proposal 
would impose an undue economic burden on growers of Napa Gamay grapes. 
It was suggested that American consumers had come to know the term 
``Gamay Beaujolais'' as referring to a particular type of wine, and 
that the market for this wine would be severely impacted if it were not 
labeled under the ``Gamay Beaujolais'' designation.
    ATF's statutory mandate under the FAA Act is to regulate the use of 
terms on wine labels so as to avoid misleading the consumer. ATF 
recognizes that wineries who produce ``Gamay Beaujolais'' wines may 
have to make some marketing and labeling changes in connection with the 
phasing out of this term. ATF also recognizes that some wineries may 
have relied upon ATF's previous recognition of this term in making 
economic decisions regarding the planting of grapes and the marketing 
of wines. Many of the commenters to Notice No. 581 suggested that a 5-
year phase-out period would impose an undue economic burden on growers 
and wineries, due to the necessary adjustments with respect to planting 
and marketing decisions. Although a phase-out was not even proposed in 
Notice No. 793, ATF received one comment from a grape grower discussing 
the substantial investment in ``Napa Gamay'' grapes, and the cost and 
time that is involved in replanting vineyards.
    Accordingly, ATF has decided to allow the use of the term ``Gamay 
Beaujolais'' on wine labels for 10 years from the date of publication 
of this final rule. On the one hand, wineries and grape growers have 
been on notice since the formation of the Advisory Committee in 1982 
that the continued use of the name ``Gamay Beaujolais'' was in doubt. 
Thus, even though ATF did not specifically propose a phase-out in 
Notice No. 793, that issue has certainly been aired sufficiently to put 
all interested parties on notice that the future of the designation 
``Gamay Beaujolais'' was uncertain.
    On the other hand, since ATF proposed to continue to allow the use 
of this name in 1994, many domestic wineries may have relied upon this 
proposal in deciding to continue production of this wine, as have grape 
growers in the cultivation of the grapes used to make this wine. ATF 
wants to ensure that any such wineries and grape growers are given 
sufficient time to make any necessary changes required by this final 
rule. Many comments to the 1986 notice expressed concern that the 
market for ``Napa Gamay'' grapes would be severely affected by the 
elimination of the ``Gamay Beaujolais'' designation. ATF believes a 
reasonable phase-out period is necessary to avoid these economic 
consequences.
    Accordingly, American wineries may continue to use this term for a 
period of ten years, subject to the requirements previously discussed, 
in order to afford them adequate time to make any necessary changes in 
the marketing of their wines and the planting of their vineyards. ATF 
believes that this interim position will ensure that consumers who read 
the label will not be misled as to the true varietal composition or 
geographic origin of the wines in question. In fact, the interim rule 
will ensure that American consumers receive a great deal of information 
as to the meaning of the term ``Gamay Beaujolais'' on American wine 
labels. By the end of the ten-year period, consumers who enjoy ``Gamay 
Beaujolais'' wines will have sufficient information about the product 
that they will be able to make an educated choice about the product 
once the labeling terminology changes.

Effective Date

    The regulatory definition of ``Gamay Beaujolais'' as a type 
designation of varietal significance, which essentially codifies the 
past agency practice on this issue, will take effect May 7, 1997. Since 
this definition does not involve any change in past administrative 
practice, ATF does not believe that the new definition, in and of 
itself, will necessitate any labeling changes.
    However, the new requirements imposed by the final rule with 
respect to additional information on labels will necessitate labeling 
changes. These requirements are effective for wines bottled on or after 
January 1, 1999. This will provide wineries with ample time to make any 
necessary changes to the labeling of ``Gamay Beaujolais'' wines. 
Furthermore, this effective date will coincide with the date on which 
the name ``Napa Gamay'' will no longer be authorized on wine labels. 
Pursuant to T.D. ATF-370, the name ``Napa Gamay'' is listed as a 
synonym for the prime name ``Valdiguie;'' however, the name ``Napa 
Gamay'' may only be used for wines bottled prior to January 1, 1999. 
Since this final rule will require wineries to make changes to existing 
labels, ATF believes that it would be unduly burdensome to require 
industry members to change their labels twice. Accordingly, the final 
rule will allow wineries to begin compliance with the interim labeling 
requirements for ``Gamay Beaujolais'' at the same time that the term 
``Napa Gamay'' must be phased out.

Geographic Name Issues

    ATF would like to clarify that it does not agree with those 
commenters who suggested that use of the ``Gamay Beaujolais'' 
designation is misleading as to the origin of the wine, or that ATF's 
prior or interim policy with respect to this name is in violation of 
the international obligations of the United States.
    Two separate issues were raised with respect to the incorporation 
of the geographic name ``Beaujolais'' into the designation ``Gamay 
Beaujolais.'' On the one hand, as previously noted, commenters opposed 
to the use of ``Gamay Beaujolais'' and commenters in favor of the use 
of ``Gamay Beaujolais'' have separately suggested that recognition of 
this term would constitute the authorization of a new semigeneric 
designation for American wines. Commenters opposed to use of the term 
``Gamay Beaujolais'' have also suggested that use of the term is in 
violation of the FAA Act and its implementing regulations, because the

[[Page 16487]]

United States has already recognized the term ``Beaujolais'' as a 
nongeneric distinctive designation for wines, and thus the term 
``Beaujolais'' may not appear anywhere on the label of a wine 
originating anywhere outside of Beaujolais, France. These issues will 
be addressed separately.

Regulations

    ATF regulations at 27 CFR 4.24 provide several different categories 
of names of geographic significance. Section 4.24(a) provides that 
certain names, such as Vermouth and Sake, are generic names which 
originally had geographic significance, but which are also designations 
of a class or type of wine. Such names may be used to label wines 
coming from any geographic area.
    Section Sec. 4.24(b) also establishes semigeneric names of 
geographic significance which are also designations of a class or type 
of wine. Semigeneric designations may be used to designate wines of an 
origin other than that indicated by the name only if there appears in 
direct conjunction an appropriate appellation of origin disclosing the 
true place of origin of the wine, and if the wine so designated 
conforms to the standard of identity, if any, for such wine contained 
in the regulations, or to the trade understanding of such class or 
type. Examples of semigeneric names which are also type designations 
are burgundy, champagne, and sherry.
    Finally, Sec. 4.24(c) provides that if a name of geographic 
significance has not been found by the Director to be generic or 
semigeneric, it may be used only to designate wines of the origin 
indicated by such name. Furthermore, if the Director finds that such a 
name is known to the consumer and to the trade as the designation of a 
specific wine of a particular place or region, distinguishable from all 
other wines, then the name shall be deemed a distinctive designation of 
a wine. The names ``American'' and ``French'' are nongeneric names that 
are not distinctive designations of specific grape wines. The names 
``Bordeaux Blanc'' and ``Medoc'' are nongeneric names that are also 
distinctive designations of specific grape wines.
    In 1990, ATF issued a new part 12 in the regulations, listing 
examples of foreign nongeneric names of geographic significance. In 
keeping with the policy of the past several decades, the name 
``Beaujolais'' was recognized as a foreign nongeneric name of 
geographic significance which has also been recognized as a distinctive 
designation of a specific grape wine. See 27 CFR 12.31(b).

Semigeneric Name Issue

    The name ``Beaujolais'' has long been recognized by the United 
States as a nongeneric name that is also a distinctive designation of a 
specific grape wine. This means that the name ``Beaujolais,'' standing 
alone, can only be used to designate a wine that is produced in 
Beaujolais, France. However, certain commenters have suggested that 
``Gamay Beaujolais'' has become a semigeneric name that represents that 
a wine is made using the same production methods that are used in the 
production of Beaujolais wines. The suggestion has thus been made that 
ATF should authorize ``Gamay Beaujolais'' as a semigeneric name.
    ATF has never sanctioned the use of the name ``Gamay Beaujolais'' 
as a semigeneric designation. The geographic designation 
``Beaujolais,'' standing on its own, is a distinctive designation that 
has been recognized by American regulations for decades. There is no 
evidence that this term, standing alone, has lost its meaning as a 
distinctive, nongeneric geographic designation. To the extent that many 
comments in opposition to recognition of the name ``Gamay Beaujolais'' 
are based on the premise that the name would constitute a new 
semigeneric designation, ATF has concluded that such criticism is 
unfounded. The incorporation of a geographic name as part of a varietal 
designation, or as part of a designation of varietal significance, is 
completely different from the recognition of a geographical name in and 
of itself as a type of wine which has lost its geographical 
significance. If ATF decided to allow the designation ``Beaujolais'' to 
appear by itself on labels of wines originating outside of Beaujolais, 
France, then that would be a change in the status of the designation 
``Beaujolais'' as a nongeneric, distinctive designation of geographic 
significance. However, the incorporation of the name ``Beaujolais'' as 
part of a varietal designation, or as part of a designation of varietal 
significance, does not mean that a new semigeneric designation has been 
created. This final rule in no way changes the recognition accorded the 
designation ``Beaujolais'' as a nongeneric name under Sec. 4.24(c).

Use of Geographic Names in Varietal Designations

    Many comments to Notice No. 793 suggested that the incorporation of 
geographic names in varietal designations is somehow in violation of 
the regulations governing the use of such geographic names on wine 
labels. ATF does not agree with these comments.
    Many European geographic terms were originally incorporated into 
American varietal names for the purpose of conveying to the American 
consumer that these were the same grape varieties that were grown in 
the European geographic area referenced by the name. While our 
historical records are not clear on this issue, it seems likely that 
the distinctive designation ``Beaujolais'' was allowed as part of the 
original ``Gamay Beaujolais'' designation only as a descriptive term 
similar to ``French Colombard'' or ``Johannisberg Riesling.'' In other 
words, it was meant to convey one meaning--that this was the same 
``Gamay'' grape as was grown in Beaujolais, just as the ``French 
Colombard'' was the same Colombard grape grown in France, and the 
``Johannisberg Riesling'' was the same Riesling grape grown in 
Johannisberg.
    It should be noted that ATF has never taken the position that the 
incorporation of a geographic name in a varietal name is contrary to 
the regulations in Sec. 4.24 which govern the use of names of 
geographic significance. For example, Sec. 4.24(c)(2) specifically 
recognizes that the word ``French'' is a nongeneric name; it cannot be 
used on a wine label to designate a wine that originates outside of 
France. However, ``French Colombard'' is different from the single word 
``French,'' in the same way that ``Gamay Beaujolais'' is different from 
the single word ``Beaujolais.'' Thus, ATF does not agree with those 
commenters who suggested that ATF would be violating its own 
regulations by authorizing the use of a name of varietal significance 
that incorporated the name of a distinctive designation. The 
incorporation of a geographic name as part of a varietal name or a 
designation of varietal significance is different from the use of that 
same geographical name standing alone on a wine label.
    When ATF first proposed the establishment of Part 12, to list 
examples of foreign nongeneric names of geographic significance, it 
took the position that certain foreign denominations of origin that 
were identical to or similar to American grape varietal designations 
should not be published as examples of nongeneric names. When ATF 
promulgated these regulations in T.D. ATF-296, however, we concluded as 
follows:

    After consideration of the comments, ATF agrees that names of 
bonafide geographically demarcated areas or names which are used to 
designate a wine product from a particular country should be 
recognized as nongeneric

[[Page 16488]]

even if they are similar or identical to varietal names. In this 
regard, ATF believes that any potential for consumer confusion 
concerning the origin of the wine is obviated by the fact that the 
wine labeling regulations provide that the names of grape varieties 
may be used as a type designation of a wine only if the wine is also 
labeled with an appellation of origin. 27 CFR 4.23a. In addition, 
any questions concerning the potential for consumer confusion as to 
the identity of the wine that may arise when a foreign nongeneric 
name is similar or identical to a varietal name will be resolved by 
ATF on a case-by-case basis.

55 FR at 17966
    This same issue was presented when various foreign producers and 
governments objected to the use of foreign geographical terms in 
American grape varietal names. In T.D. ATF-370, ATF specifically 
rejected any blanket prohibition of foreign geographical terms in grape 
variety names, stating that it had already announced in Notice No. 749 
that ``there is no reason to deny use of a grape variety name to 
American winemakers simply because that name bears a resemblance to a 
foreign name of geographic significance.'' 61 FR at 534. ATF noted that 
the requirement to use an appellation of origin in direct conjunction 
with a grape variety name would prevent confusion between an American 
varietal wine and a wine labeled with a foreign appellation of origin. 
Finally, ATF restated its position that ``any questions concerning the 
potential for consumer confusion as to the identity of wine which may 
arise when a foreign geographic term is similar or identical to a 
varietal name would be resolved by ATF on a case-by-case basis.'' 61 FR 
at 534.
    In the final rule on grape variety names, ATF announced that it was 
phasing out use of the term ``Johannisberg Riesling,'' since that grape 
variety was known by two other names which did not incorporate 
geographical references--``Riesling'' and ``White Riesling,'' and these 
names were more correct than ``Johannisberg Riesling.'' 61 FR at 530. 
On the other hand, since the name French Colombard had become well 
known to the American consumer, it was retained as a synonym for the 
prime name ``Colombard.'' ATF did not believe that this name would 
mislead consumers as to the origin of the wine, as long as an 
appellation of origin appeared in direct conjunction with the name, in 
compliance with the requirements of Sec. 4.34(b).
    When ATF's predecessor agency originally allowed American wineries 
to use the name ``Gamay Beaujolais'' on labels, the decision was not 
made with the intention to thereby create a new semigeneric designation 
or to imply that the wine made from these grapes was somehow the same 
as wine coming from Beaujolais, France. Furthermore, since an 
appellation of origin has always been required to appear in direct 
conjunction with the varietal name, we do not believe that consumers 
have been misled about the origin of the wine.
    ATF does not agree that it is precluded by the FAA Act or its 
implementing regulations from approving the use of a grape varietal 
name or a type designation of varietal significance which incorporates 
a geographic reference, as long as that name is an accurate designation 
for the grape variety, or is a recognized name of varietal 
significance, and is known to the consumer. However, we agree that 
varietal names and type designations of varietal significance which 
incorporate geographic terms must be evaluated on a case-by-case basis 
to determine whether there is a potential for consumer confusion. In 
the case at hand, since there is no evidence that French wines are 
labeled as ``Gamay Beaujolais,'' and since it appears that American 
consumers associate this name with American wines, ATF does not believe 
that the name causes confusion as to the geographic origin of the wine.

International Issues

    It should be noted that while ATF has decided to phase out use of 
the name ``Gamay Beaujolais,'' we do not believe that either our past 
policy on this issue or our interim policy during the ``phase-out'' 
period is in violation of the international obligations of the United 
States.
    The provisions in TRIPS on geographical indications do afford 
certain protections for names of wines and distilled spirits in 
Articles 22 and 23. However, those protections are subject to the 
provisions in Article 24 that address and sanction the continued use of 
names in existence on or after the effective dates of the TRIPS 
provisions. Article 24(4) states as follows:

Nothing in this Section shall require a Member to prevent continued 
and similar use of a particular geographical indication of another 
Member identifying wines or spirits in connection with goods or 
services by any of its nationals or domiciliaries who have used that 
geographical indication in a continuous manner with regard to the 
same or related goods or services in the territory of that Member 
either (a) for at least ten years preceding the date of adoption of 
the Final Act Embodying the Results of the Uruguay Round of 
Multilateral Trade Negotiations or (b) in good faith preceding that 
date.

    Under this paragraph, an industry member that has been using the 
designation ``Gamay Beaujolais'' under the prescribed conditions is 
entitled to continue that use on the ``same or related'' wines after 
the effective date contained in the TRIPS provision. Additionally, 
Article 24(6) provides as follows:

Nothing in this Section shall require a Member to apply its 
provisions in respect of a geographical indication of any other 
Member with respect to goods or services for which the relevant 
indication is identical with the term customary in common language 
as the common name for such goods or services in the territory of 
that Member. Nothing in this section shall require a Member to apply 
its provisions in respect of a geographical indication of any other 
member with respect to products of the vine for which the relevant 
indication is identical with the customary name of a grape variety 
existing in the territory of that Member as of the date of entry 
into force of the Agreement Establishing the MTO.

This paragraph is not restricted to the continued use by a particular 
person or entity. Thus, under the provisions of the first sentence, 
since the designation ``Gamay Beaujolais'' is the term customary in the 
common language of the United States to describe the wine at issue, 
ATF's interim maintenance of the status quo with respect to the 
definition of ``Gamay Beaujolais'' wines does not violate TRIPS. It is 
also arguable that the second sentence in Article 24(6), which allows 
the continued use of grape variety names existing as of January 1, 
1995, applies to ``Gamay Beaujolais'' since ATF has determined that 
this name is a type designation of varietal significance. Furthermore, 
the final rule does not change the definition of ``Gamay Beaujolais'' 
which has been applied by the agency since well before January 1, 1995.
    Finally, even if the general application of Article 24(6) were 
disregarded for a moment, the proposal does not contradict the 
provision of Article 24(3) which provides that a Member shall not 
diminish the protection of geographical indications that existed in 
that member immediately prior to the date of entry into force of the 
agreement establishing the World Trade Organization. ATF's maintenance 
of the status quo constitutes an interim continuance of the existing 
practices governing the production of the wine bearing the designation 
Gamay Beaujolais. Thus, no protection has been diminished. Accordingly, 
ATF's maintenance of the status quo with respect to Gamay Beaujolais is 
consistent with the obligations of the United States under the TRIPS 
provisions.

[[Page 16489]]

The Wine Accord

    Several commenters suggested that the continued use of the 
designation ``Gamay Beaujolais'' is contrary to the commitment in Item 
III of the United States-European Economic Community Wine Accord of 
1983. In relevant part, that item states:

The EEC also notes with satisfaction the willingness of the U.S. to 
work within the regulatory framework of 27 CFR Sec. 4.24(c)(3) to 
prevent erosion of non-generic designations of geographic 
significance indicating a wine-growing area in the EEC.

The United States fulfilled the letter and spirit of this commitment in 
the promulgation of 27 CFR Part 12--Foreign Nongeneric Names of 
Geographic Significance Used in the Designation of Wines in T.D. ATF-
296, 55 FR 17967, April 30, 1990. Furthermore, at the time the 
commitment was made in the Wine Accord of 1983, the use of the 
designation ``Gamay Beaujolais'' on wines originating from other than 
the Beaujolais region of France was clearly established. Finally, even 
if the name ``Gamay Beaujolais'' were considered to be a nongeneric 
designation of geographic significance indicating a wine-growing area 
in the European Union, nothing in ATF's policy with respect to this 
designation erodes the Beaujolais appellation of origin in France since 
ATF's actions have merely maintained the status quo use of this 
designation, with further restrictions, pending the termination of the 
10-year phase-out period. Thus, ATF's actions have not violated the 
commitments of the Wine Accord of 1983.

Miscellaneous Labeling Issues

    Several commenters suggested that American producers of Gamay 
Beaujolais are deliberately trying to create an association between 
their wines and French Beaujolais wines by using the descriptive term 
``Nouveau'' to modify the designation ``Gamay Beaujolais.'' The term 
``Beaujolais Nouveau'' is used to designate the Beaujolais wine first 
released from each year's vintage, prior to any aging. French law 
prohibits the release of Beaujolais Nouveau wine until the third 
Thursday in November of each year, and the release of these wines on 
the third Thursday in November is an occasion which receives much 
publicity and attention throughout the world.
    Commenters such as INAO and UIVB suggested that the promotion of 
American ``Gamay Beaujolais Nouveau'' wines, often released on the same 
day in November as the French Beaujolais Nouveau wines, is evidence of 
an attempt by American wineries to create a false association with true 
Beaujolais wines. A comment from Georges Duboeuf, who exports French 
Beaujolais wines to the American market, made a similar argument with 
respect to the use of the term ``Nouveau'' to describe American Gamay 
Beaujolais wines. Mr. Duboeuf suggested that the popularity of French 
Beaujolais Nouveau wines had been skyrocketing in the United States, 
and that American wineries were trying to ``perpetrate [a] hoax on the 
American consumer to improve their sales'' of Gamay Beaujolais wines by 
appropriating the term ``Nouveau'' to describe their products. Mr. 
Duboeuf stated that ``[w]ine produced in California can never be 
Beaujolais Nouveau though they may try to appropriate the name.''
    ATF believes that these comments have raised valid issues regarding 
individual labels approved by ATF for ``Gamay Beaujolais'' wines. For 
example, some wineries have labeling statements that compare their 
wines to Beaujolais wines from France. Other wines are labeled as 
``Gamay Beaujolais Nouveau,'' in an apparent attempt to create a 
comparison to ``Beaujolais Nouveau'' wines.
    In general, ATF allows additional information on wine labels that 
is truthful, accurate and specific. Thus, it is not misleading for a 
winery to truthfully explain the type of production method used to make 
the wine at issue. Nor is it generally misleading to use a descriptive 
term such as ``Nouveau'' on a wine label. However, ATF will examine 
each application for label approval for ``Gamay Beaujolais'' wine 
received in the next 10 years to ensure that the label, taken as a 
whole, does not create the misleading impression that the wine is 
somehow the same as or similar to Beaujolais or ``Beaujolais Nouveau'' 
wines.

Litigation

    It should be noted that on February 21, 1996, the INAO and UIVB 
filed a complaint in the United States District Court for the District 
of Columbia. The two plaintiffs are organizations chartered under 
French law, and they allege that ATF's approval of domestic wine labels 
bearing the designation ``Gamay Beaujolais'' is contrary to the FAA Act 
and its implementing regulations. Plaintiffs also argue that ATF's 
approval of this term violates the international obligations of the 
United States. It is ATF's belief that the issues raised by the 
plaintiffs have also been raised in the comments submitted in this 
rulemaking proceeding, and are comprehensively addressed in this final 
rule.

Regulatory Flexibility Act

    It is hereby certified that this final rule will not have a 
significant economic impact on a substantial number of small entities. 
This final rule will allow domestic wineries to continue to use the 
labeling designation ``Gamay Beaujolais'' for a period of 10 years, 
although additional information on labels will be required. ATF 
believes that this phase-out period provides ample time for affected 
wineries to make any necessary labeling and marketing changes, 
especially in view of the fact that ATF first proposed in 1986 to phase 
out use of the name ``Gamay Beaujolais.'' Thus, by the time that the 
phase-out period will have expired, American wineries will have had 
over 20 years from the first phase-out proposal to make any necessary 
adjustments to the labeling and marketing of their wines. Furthermore, 
even after use of the name is phased out, wineries will still be able 
to produce the same wine, using the Pinot noir and/or Valdiguie 
name(s). By that time, consumers will have learned (if they do not 
already know) that the name ``Gamay Beaujolais'' has been used to 
designate a wine made from Pinot noir and Valdiguie grapes. Presumably, 
consumer loyalty to this product will continue even after it is 
marketed under a different name. Thus, the final rule will not have a 
significant economic impact on a substantial number of small entities.
    Accordingly, a regulatory flexibility analysis is not required 
because the final rule is not expected (1) to have significant 
secondary or incidental effects on a substantial number of small 
entities, or (2) to impose, or otherwise cause, a significant increase 
in reporting, recordkeeping, or other compliance burdens on a 
substantial number of small entities.

Paperwork Reduction Act

    The collection of information contained in this final regulation 
has been previously 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 1512-0482. 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.

[[Page 16490]]

Executive Order 12866

    It has been determined that this regulation is not a significant 
regulatory action as defined by Executive Order 12866. Accordingly, 
this final rule is not subject to the analysis required by this 
Executive Order.

Drafting Information

    The principal author of this document is Thomas Busey, Wine, Beer 
and Spirits Regulations Branch, Bureau of Alcohol, Tobacco and 
Firearms.

List of Subjects in 27 CFR Part 4

    Advertising, consumer protection, Customs duties and inspections, 
Imports, Labeling, Packaging and containers, Wine.

Authority and Issuance

    Accordingly, 27 CFR Part 4, Labeling and Advertising of Wine, is 
amended as follows:
    Paragraph 1. The authority citation for Part 4 continues to read 
as follows:

    Authority: 27 U.S.C. 205.

    Par. 2. Section 4.28 is amended by adding a new paragraph (e) to 
read as follows:


Sec. 4.28  Type designations of varietal significance.

* * * * *
    (e)(1) Gamay Beaujolais. An American wine which derives at least 75 
percent of its volume from Pinot noir grapes, Valdiguie grapes, or a 
combination of both.
    (2) For wines bottled on or after January 1, 1999, and prior to [10 
years from date of publication], the name ``Gamay Beaujolais'' may be 
used as a type designation only if there appears in direct conjunction 
therewith, but on a separate line and separated by the required 
appellation of origin, the name(s) of the grape variety or varieties 
used to satisfy the requirements of paragraph (e)(1) of this section. 
Where two varietal names are listed, they shall appear on the same 
line, in order of predominance. The appellation of origin shall appear 
either on a separate line between the name ``Gamay Beaujolais'' and the 
grape variety name(s) or on the same line as the grape variety name(s) 
in a manner that qualifies the grape variety name(s). The following 
statement shall also appear on the brand or back label: ``Gamay 
Beaujolais is made from at least 75 percent Pinot noir and/or Valdiguie 
grapes.''
    (3) The designation ``Gamay Beaujolais'' may not be used on labels 
of American wines bottled on or after April 9, 2007.

    Signed: February 21, 1997.
John W. Magaw,
Director.
    Approved:
Dennis M. O'Connell,
Acting Deputy Assistant Secretary (Regulatory, Tariff & Trade 
Enforcement).
[FR Doc. 97-8808 Filed 4-4-97; 8:45 am]
BILLING CODE 4810-31-U