BILL ANALYSIS ------------------------------------------------------------ |SENATE RULES COMMITTEE | AB 1798| |Office of Senate Floor Analyses | | |1020 N Street, Suite 524 | | |(916) 651-1520 Fax: (916) | | |327-4478 | | ------------------------------------------------------------ THIRD READING Bill No: AB 1798 Author: Evans (D), Chesbro (D) and Huffman (D), et al Amended: 8/11/10 in Senate Vote: 21 SENATE GOVERNMENTAL ORG. COMMITTEE : 9-0, 6/22/10 AYES: Wright, Harman, Calderon, Denham, Florez, Negrete McLeod, Padilla, Price, Yee NO VOTE RECORDED: Oropeza, Wyland SENATE APPROPRIATIONS COMMITTEE : Senate Rule 28.8 ASSEMBLY FLOOR : 76-0, 5/13/10 (Consent) - See last page for vote SUBJECT : Alcoholic Beverage Control Appeals Board: viticulture area designation: Sonoma County SOURCE : Author DIGEST : This bill increases from 60 to 75 days, the length of time that the Alcoholic Beverage Control Appeals Board has to enter an order after an appeal is filed. This bill also contains provisions that require all wines bottled or produced from any viticultural area of appellation located within Sonoma County to bear the designation "Sonoma County" on the label. Senate Floor Amendments of 8/11/10 add a provision that CONTINUED AB 1798 Page 2 establishes a "conjunctive labeling" provision in the Alcoholic Beverage Control Act for all wines made from grapes grown within recognized winegrowing areas, or American Viticultural Areas, in Sonoma County. This provision mirrors existing conjunctive labeling provisions for Napa, Lodi and Paso Robles. ANALYSIS : Existing law establishes in state government an Alcoholic Beverage Control (ABC) Appeals Board, of which the members are appointed and serve as provided in the Constitution, and receive an annual salary. Existing law provides that an appeal must be filed at the Appeals Board office within 40 days from the date of the ABC decision. However, if ABC's decision states it is to be "effective immediately," an appeal must be filed within 10 days after the date of ABC's decision. Documents not filed within the time limits are untimely and cannot be accepted by the Appeals Board. Existing law specifies that no decision of the ABC shall become effective during the period in which an appeal may be filed and the filing of an appeal shall stay the effect of the decision until such time as a final order is made by the Appeals Board. Existing law provides that the review by the Appeals Board of a decision by ABC shall be limited to specified questions. The Appeals Board is also required to enter its order within 60 days after the filing of an appeal. This bill requires the Appeals Board to issue an order within 75 days after an appeal is filed. Existing law requires that, when the word "Napa" (or any federally recognized viticultural region within Napa County) appears on a brand label, at least 75 percent of the grapes used to make that wine must be from Napa County. Existing law requires wines produced within the "Napa Valley" to be labeled as being derived from that valley, if the wine label indicates that they are produced within a separate viticultural area within the Napa Valley, in order to preserve consumer identification and understanding. Existing law prohibits the sale of wine produced, bottled, or labeled after December 31, 2008, in this state that CONTINUED AB 1798 Page 3 identifies, in a brand name or otherwise, on any label, packaging material, or advertising, the name "Sonoma," unless at least 75 percent of the grapes used to make the wine are from Sonoma County, as specified. Existing law requires all wines produced or bottled within the current Paso Robles appellation to be labeled with the designation "Paso Robles." Existing law requires all wines produced or bottled within the current Lodi appellation to be labeled with the designation "Lodi." Existing law stipulates that every person who, with intent to defraud, either falsely makes, alters, forges, or counterfeits the label for any wine or uses the label or bottle of any wine belonging to another, without his or her consent, is guilty of a misdemeanor. Federal law . The Federal Alcohol Administration Act establishes broad federal regulatory authority over the interstate trade in alcohol beverage products. The Secretary of the Treasury, through the Alcohol and Tobacco Tax and Trade Bureau (TTB), administers an extensive code of regulations governing, among other things, the contents of wine labels, including brand names, the name and address of the bottling winery, and indications of the wine's origin, as well as the use of such information in advertising. Under federal regulations, an "appellation of origin" is a geographic designation referring to the place where the grapes used to make a specified percentage of the wine were grown. For American wines, an appellation of origin includes the names of states (e.g., "California") and counties identified with the word "county" (e.g., "Napa County," "Monterey County," "Sonoma County," "Eldorado County," etc.) as well as all designated American "viticultural areas." An American Viticultural Area (AVA) is a grape growing region distinguishable by geographical area features, as recognized by the TTB pursuant to specified criteria and procedures. These criteria and procedures, and a complete list of AVAs, CONTINUED AB 1798 Page 4 are set forth in Part 9 of Title 27 of the Code of Federal Regulations. In brief, TTB may recognize an AVA area if it is locally or nationally known for grape-growing, has particular and definable boundaries, and has geographic features distinguishing it as a grape-growing area. As of 2007, there were 190 recognized AVAs nationwide - 107 of which are located in California. The 107 California viticultural areas recognized by the TTB include, among others, Alexander Valley, Anderson Valley, Chalk Hill, Clarksburg, Fair Play, Howell Mountain, Lodi, Los Carneros, Napa Valley, Paso Robles, Rockpile, Russian River Valley, Santa Lucia Highlands, Sonoma Valley, Spring Mountain, Stags Leap, and Wild Horse Valley. In certain circumstances, wine labels must bear an appellation of origin. For example, a label must bear an appellation of origin if the label states either the grape type ("varietal") used in the wine or the year in which the grapes were harvested ("vintage"). Recognized varietals include, among others, Cabernet Sauvignon, Pinot Noir, Merlot, Zinfandel, Malbec, Sauvignon Blanc, Chardonnay, Riesling and Pinot Grigio. The regulations mandate that the appellation appear in direct conjunction with and in lettering substantially as conspicuous as the varietal or other class or type designation. The regulations specify the conditions for use of each type of appellation of origin. A wine qualifies for a state or county appellation of origin if at least 75 percent of the volume derives from grapes grown in the area indicated by the appellation of origin. Thus, under TTB regulations the appellation of origin "California" signifies that at least 75 percent of the wine in the bottle was made from grapes grown anywhere in the state of California. Similarly, the appellation of origin "Napa County" or "Sonoma County" or "Mendocino County" signifies that at least 75 percent of the wine in the bottle was made from grapes grown anywhere in that particular County. To qualify for an appellation of origin consisting of an AVA, at least 85 percent of the wine must derive from grapes grown in the indicated area. Thus, the appellation of origin "Napa Valley" signifies that at least 85 percent of the wine in the bottle was made from grapes grown anywhere in Napa Valley. The regulations do not require disclosure of the place of origin of the CONTINUED AB 1798 Page 5 remaining portion of the wine. Federal regulations require the wine label to bear a "brand name." The regulations provide that, in general, "a brand name of viticultural significance may not be used unless the wine meets the appellation of origin requirements for the geographic area named." This prohibition is subject to an exception. If a brand name was in use before July 7, 1986, it is considered grandfathered. Grandfathered brand names of viticultural significance may be used for wines that do not meet the appellation of origin requirements for the geographic area named, provided the wine is labeled with a true appellation of origin consisting of a county or viticultural area (if the brand name refers to a geographic area smaller than a state) or a state or lesser appellation (if the brand name refers to a state). Federal regulations require that the name and address of the "bottling winery" appear on the wine label, accompanied, in certain circumstances, by a phrase such as "bottled by." There is no requirement that the bottling winery is located in the geographic area where the wine was made or the grapes were grown. Federal law also provides that wine may not be sold or shipped in interstate commerce unless it bears a label that TTB has previously approved. A certificate of label approval ("COLA") is obtained by submitting an application to the TTB. The application must include an exact replica of the label as well as other information regarding the wine covered by the label. This bill: 1. Requires, beginning on or after January 1, 2014, that any wine labeled with an AVA located entirely within a County of the 19th class (Sonoma County) must display the designation "Sonoma County" on the label, as specified. 2. Makes it explicit that this provision shall not apply to any wine labeled with a viticultural area appellation of origin when the name of the appellation includes the term "Sonoma County." CONTINUED AB 1798 Page 6 3. Provides that the ABC may suspend or revoke the license of any person who violates this requirement. NOTE: Please refer to the Senate Governmental Organization Committee analysis for background information. Comments According to the author's office, the Sonoma County Vintners along with the Sonoma County Winegrape Commission (representing over 170 wineries and 1,800 growers combined) recently reached consensus on a framework to standardize regional wine product labeling (the wine industry term is conjunctive labeling) for all wines made from grapes grown within recognized AVAs in Sonoma County. There are 13 AVAs located in Sonoma County (e.g., Dry Creek Valley, Russian River Valley, and Sonoma Valley). The purpose of conjunctive labeling is to build an association of quality in an increasingly competitive global wine market for the delivery of Sonoma County wines. The proposed language provides a three-year phase-in period to enable wineries to redesign their labels and get regulatory approval to use the new labels. FISCAL EFFECT : Appropriation: No Fiscal Com.: Yes Local: No SUPPORT : (Verified 8/11/10) Alexander Valley Winegrowers Bennett Valley Grape Growers Family Winemakers of California Russian River Valley Winegrowers Sonoma County Vintners Sonoma County Winegrape Commission Sonoma Valley Vintners and Growers Alliance The Petaluma Group Winegrape Growers of Dry Creek Valley ASSEMBLY FLOOR : AYES: Adams, Ammiano, Anderson, Arambula, Bass, Beall, CONTINUED AB 1798 Page 7 Bill Berryhill, Tom Berryhill, Blakeslee, Block, Blumenfield, Bradford, Brownley, Buchanan, Charles Calderon, Carter, Chesbro, Conway, Cook, Coto, Davis, De La Torre, De Leon, DeVore, Emmerson, Eng, Evans, Feuer, Fletcher, Fong, Fuentes, Fuller, Furutani, Gaines, Galgiani, Garrick, Gilmore, Hagman, Hall, Harkey, Hayashi, Hernandez, Hill, Huber, Huffman, Jeffries, Jones, Knight, Lieu, Logue, Bonnie Lowenthal, Ma, Mendoza, Miller, Monning, Nava, Nestande, Niello, Nielsen, V. Manuel Perez, Portantino, Ruskin, Salas, Saldana, Silva, Smyth, Solorio, Audra Strickland, Swanson, Torlakson, Torres, Torrico, Tran, Villines, Yamada, John A. Perez NO VOTE RECORDED: Caballero, Norby, Skinner, Vacancy TSM:do 8/11/10 Senate Floor Analyses SUPPORT/OPPOSITION: SEE ABOVE **** END **** CONTINUED