Wine and bioterrorism?!

[Dr Vino]

Next Friday (Dec 12) new regulations will go into effect that make foreign wine producers perform bureacratic filings with the FDA. Why? In the prevention of bioterrorism of course. Here are two links to stories on the issue, one from Agence France Presse and the other from Wine Spectator

These new regs threaten to take our good, cheap wine imports away as smaller producers may not be able to handle the administrative load. With the dollar hitting new lows against the euro every day, this is the last thing we need!! What will we be stuck with--oaky California Chardonnays?!?

[ivan]

What will we be stuck with--oaky California Chardonnays?!?

Now THAT would be bio-terrorism.

[ivan]

Or bio-terroirism.

[pierreverte]

>bio-terroirism

that was excellent!

unfortunately, the only funny thing that i have seen associated with the situation...

[wineserver]

I know what I am about to say will cause great controversy, but damn the torpedos and full speed ahead. I am in the employ of one of the big, bad US importers that limits supply and protects its margins. Yeah right! In the most competitive wine market in history we are purposely limiting availability. As a sales represetative, I have for the last two years been adversely affected by the growing number of gray marketers in California specifically. I am the duly appointed, exclusive US importer for a number of superlative international producers, yet I must compete with retailers that only exist through a loophole in the laws of California. Please do not misunderstand. I fully support the right of consumers to shop the country on price and exercise their constitutional right to interstate commerce. I strongly believe that the three tier distribution system can coexist with complete consumer freedom to directly purchase and ship wine from the producer. The fact remains, however, that these small gray market retailers were not appointed by the producers. They are opportunistic pirates of a sort. This is not about the big corporate giant vs. the last of the small entrepeneurs. We were chosen by these producers because we can provide national distribution for all their wines not just their small production cherries. Importers like Kermit Lynch, Eric Solomon, Marc de Grazia, and many others that specialize in importing small estate producers from Europe will hardly be affected by this. The consumer in search of the best buy between $10 and $15 a bottle will not be affected by this measure. However, those wine enthusiasts in search of a back alley bargain on Europe's best small estates might be disappointed by the results of this security measure.

[ctgm]

I have received an e-mail from my shipper who says

Firstly, the Prior Notice process will go into effect on 12 December as originally planned. There has been no change in that. The good news relayed by Ms. XXX and documentary evidence supplied since, was that, through till March at least, US Customs will allow entry to shipments even if no producer registration number is provided. This is because of the "grace period" that was established. Importers are still asked to supply registration numbers, but their shipments will not be impounded if information is missing or inaccurate.

Secondly, Ms. XXX represents US Customs, not the FDA. While Customs would like to see a database of registration numbers, FDA oppose it (and they unfortunately write the rules). Also, FDA have not budged from their insistence that, once the rules are finalized this spring, producer registration numbers will be required for all goods. It is important that we continue to work hard to gather as many producer registration numbers as we can, while lobbying FDA to relax its rules

[Dr Vino]

What will we be stuck with--oaky California Chardonnays?!? 

Now THAT would be bio-terrorism. Or bio-terroirism.

Indeed! Someone should alert Homeland Security!!

[Dr Vino]

while lobbying FDA to relax its rules

That's reassuring to hear about the grace period (a delay is as good as a victory)... Do you have any news on the lobbying thus far? Or tips for any consumers who would like their voice heard?

[ctgm]

Don't know what is happening your side of the pond but this shipper is UK based.

[LOS]

I am the duly appointed, exclusive US importer for a number of superlative international producers, yet I must compete with retailers that only exist through a loophole in the laws of California.  Please do not misunderstand.  I fully support the right of consumers to shop the country on price and exercise their constitutional right to interstate commerce.  I strongly believe that the three tier distribution system can coexist with complete consumer freedom to directly purchase and ship wine from the producer.  The fact remains, however, that these small gray market retailers were not appointed by the producers.  They are opportunistic pirates of a sort.  This is not about the big corporate giant vs. the last of the small entrepeneurs.  We were chosen by these producers because we can provide national distribution for all their wines not just their small production cherries. 

Oh, I don't misunderstand. What you've got in most states is a legally-enforced monopoly, and you're whining that you don't have one in California. This whole monopoly structure only exists because of the abnormal powers to regulate alcohol given to the states by the amendment that repealed prohibition. For any other good, this monopoly structure would be blatantly unconstitutional. I'm so sorry you much compete in the California market just like any other importer of any other good must do.

The only reason you can call them 'opportunistic pirates' is because you've talked the government into enforcing your piracy for you.

Lee

[ctgm]

Wineserver, I am a "small gray market retailer" (actually wholesaler) and think that your argument is ,shall we say it, flawed. You are an appointed agent for some products and therefore should get preferrential prices from your suppliers. If I can buy the same goods on the open market (presumably thru another agent)and sell cheaper than you then it is possibly a reflection on the mark up that you are putting on your goods. If you still feel that you cannot compete with parallel traders then maybe you shouldn't think that they are being the "pirates" but look towards your supplier and ask how this is possible. More oftn than not he is offering better prices somewhere else.

The argument that the agents do a lot of work and spend money promoting the brands doesn't really hold either as the gray market isn't really interested in products that don't sell themselves.

Sorry if this sounds like a personal attack, it's not meant to be.

[wineserver]

Finally a challenge...Unfortunately you do misunderstand. I am not a wholesaler. The company I work for is an importer. We sell to the wholesaler and I was very clear in my previous statement about the three tiered system of distribution and consumer's rights. What we have in California is a system that allows the circumvention of a legally binding contract between my company and the producers we represent from the international market. As previously stated, we are the appointed, exclusive, legal importer for the United States with the exception of California where a loophole allows the exploitation of the gray market. I could be mistaken, but I belive this is the only state in the nation where this is legal. The District of Columbia has an unusual set of circumstances as well though I am not as familiar them. Are you saying that the producer of a product does not have the right to appoint a exclusive representative for its product?

[ctgm]

Are you saying that the producer of a product does not have the right to appoint a exclusive representative for its product?

No, but look it the other way. What right has the producer got to stop me selling his product where I want to if I bought it legitamately? And when taking a vintage into consideration, how long does this exclusivity you so want last for? (eg if you had an exclusive agreement on Chateau Plonk and were currently selling the 2000 vintage, would you be looking to stop people importing the Ch. Plonk 1980?)

The gray market is out there and you just have to accept it. Seems strange that the only people who have really acceopted it are the Bordelais!!

[wineserver]

I have no problem with the sale of a private cellar through a legally appointed auction. I do not believe I have the right to prevent a consumer from selling a wine through legally accepted means. That is not the case here. There is a difference between secondary market and gray market. The reason you can acquire the same Bordeaux chateau through a number of different importers is an antiquated system that I believe actually results in additional costs and collusion.

[LOS]

What we have in California is a system that allows the circumvention of a legally binding contract between my company and the producers we represent from the international market.

You have a legally binding contract with the producer. You do not have a legally binding contract with the producer's european retailers which prevents them from selling the wine to a gray market importer. You do not have a legally binding contract with the gray marketeer to keep them from selling the wine to US consumers. Your argument is a smokescreen; no one in the gray market chain has broken a contract of any kind.

Are you saying that the producer of a product does not have the right to appoint a exclusive representative for its product?

As cgtm points out, a contract between you and a wine producer is not legally binding on said producer's European retailers nor on gray market retailers. Just because every state other than California gives you a legalized monopoly, does not mean that California should.

If the producer of a product wants to appoint an exclusive representative for his product, the producer needs to take steps to insure that exclusivity. That would involve the producer not selling wine to outside channels, the producer stipulating to his European channels that they cannot sell to US merchants, and the producer taking steps to ensure that this is enforced. US federal and state government regulations should not be involved in any way.

Lee

[ctgm]

Do you think that it is wrong for an importer (who is not the agent) to buy wine off a consumer on the secondary market (whichever country that might be in) and then sell it wherever?

As for Bordeaux, antiquated- perhaps, collusion- yes, but no problems with a gray market. The fact that you can only buy from a negociant in France rather than directly from the chateaux is in my view anti-competitive and something the EU could easily sort out should they so wish.

[LOS]

What we have in California is a system that allows the circumvention of a legally binding contract between my company and the producers we represent from the international market.

You have a legally binding contract with the producer. You do not have a legally binding contract with the producer's european retailers which prevents them from selling the wine to a gray market importer. You do not have a legally binding contract with the gray marketeer to keep them from selling the wine to US consumers. Your argument is a smokescreen; no one in the gray market chain has broken a contract of any kind.

Not only that, but the states' enforcement of your importation exclusivity is not at all dependent on an exclusivity clause in your contract with the producer. Even non-exclusive contracts between producer and importer still result in the state enforcing exclusivity. In fact, there are many many such contracts which are intentionally non-exclusive. As you well know, whether or not an importer has an exclusive contract is very much an item for negotiation with the producer.

The states' exclusivity clauses are clearly not based in the contract between the producer and the importer -- even when those contracts are intentionally nonexclusive, the importer still has a legal exclusivity.

Lee

Edited December 9, 2003 by LOS (log)

[wineserver]

I understand why serious wine enthusiasts have issues with state regualtions on beverage alcohol. State legislatures have become the well rewrded guard dog for the WSWA. Since the repeal of the 21st Amendment the wholesale industry has helped shape state laws to their best advantage. However, even if the problems that exist today are corrected, alcohol is a narcotic and as such will always fall under governtmental regualtion. There is not a civilized country on the planet where this is not the case. Not only is alcohol a drug, it is a recreational drug making it the perfect target for tax revenue generation at the state and federal level. There will never be a completely free market for beverage alcohol.

Meanwhile, the fact remains the gray market problem can be solved by the producers themselves. They must cease selling wine to those that erode their ability to protect their wines integrity and yes, part of integrity is price point. We have adressed this issue with two of our producers directly and they are aware of the problem and needless to say they are not pleased by the Califronia situation. We are currently exploring all legal remedies and the producers plan to exercise greater due diligence in to whom they sell their wines.