SPEAKERS CONTENTS INSERTS
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59–651 CC
1999
1999
THE STATUS AND PROSPECTS OF AMERICAN WINE PRODUCTION
HEARING
BEFORE THE
SUBCOMMITTEE ON
LIVESTOCK AND HORTICULTURE
OF THE
COMMITTEE ON AGRICULTURE
HOUSE OF REPRESENTATIVES
ONE HUNDRED SIXTH CONGRESS
FIRST SESSION
AUGUST 10, 1999, LODI, CA
Serial No. 106–33
Printed for the use of the Committee on Agriculture
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COMMITTEE ON AGRICULTURE
LARRY COMBEST, Texas, Chairman
BILL BARRETT, Nebraska,
Vice Chairman
JOHN A. BOEHNER, Ohio
THOMAS W. EWING, Illinois
BOB GOODLATTE, Virginia
RICHARD W. POMBO, California
CHARLES T. CANADY, Florida
NICK SMITH, Michigan
TERRY EVERETT, Alabama
FRANK D. LUCAS, Oklahoma
HELEN CHENOWETH, Idaho
JOHN N. HOSTETTLER, Indiana
SAXBY CHAMBLISS, Georgia
RAY LaHOOD, Illinois
JERRY MORAN, Kansas
BOB SCHAFFER, Colorado
JOHN R. THUNE, South Dakota
WILLIAM L. JENKINS, Tennessee
JOHN COOKSEY, Louisiana
KEN CALVERT, California
GIL GUTKNECHT, Minnesota
BOB RILEY, Alabama
GREG WALDEN, Oregon
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MICHAEL K. SIMPSON, Idaho
DOUG OSE, California
ROBIN HAYES, North Carolina
ERNIE FLETCHER, Kentucky
CHARLES W. STENHOLM, Texas,
Ranking Minority Member
GEORGE E. BROWN, Jr., California 1
GARY A. CONDIT, California
COLLIN C. PETERSON, Minnesota
CALVIN M. DOOLEY, California
EVA M. CLAYTON, North Carolina
DAVID MINGE, Minnesota
EARL F. HILLIARD, Alabama
EARL POMEROY, North Dakota
TIM HOLDEN, Pennsylvania
SANFORD D. BISHOP, Jr., Georgia
BENNIE G. THOMPSON, Mississippi
JOHN ELIAS BALDACCI, Maine
MARION BERRY, Arkansas
VIRGIL H. GOODE, Jr., Virginia
MIKE McINTYRE, North Carolina
DEBBIE STABENOW, Michigan
BOB ETHERIDGE, North Carolina
CHRISTOPHER JOHN, Louisiana
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LEONARD L. BOSWELL, Iowa
DAVID D. PHELPS, Illinois
KEN LUCAS, Kentucky
MIKE THOMPSON, California
BARON P. HILL, Indiana
Professional Staff
WILLIAM E. O'CONNER, JR., Staff Director
LANCE KOTSCHWAR, Chief Counsel
STEPHEN HATERIUS, Minority Staff Director
KEITH WILLIAMS, Communications Director
Subcommittee on Livestock and Horticulture
RICHARD W. POMBO, California, Chairman
JOHN A. BOEHNER, Ohio,
Vice Chairman
BOB GOODLATTE, Virginia
TERRY EVERETT, Alabama
FRANK D. LUCAS, Oklahoma
HELEN CHENOWETH, Idaho
JOHN N. HOSTETTLER, Indiana
BOB SCHAFFER, Colorado
KEN CALVERT, California
GIL GUTKNECHT, Minnesota
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BOB RILEY, Alabama
COLLIN C. PETERSON, Minnesota,
Ranking Minority Member
TIM HOLDEN, California
GARY A. CONDIT, Pennsylvania
CALVIN M. DOOLEY, California
MARION BERRY, Arkansas
MIKE McINTYRE, North Carolina
DEBBIE STABENOW, Michigan
BOB ETHERIDGE, North Carolina
LEONARD L. BOSWELL, Iowa
KEN LUCAS, Kentucky
(ii)
1\ Deceased July 16, 1999.
C O N T E N T S
Pombo, Hon Richard W., a Representative in Congress from the State of California, opening statement
Radanovich, Hon. George, a Representative in Congress from the State of California, opening statement
Thompson, Hon. Mike, a Representative in Congress from the State of California, opening statement
Witnesses
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Cotta, Joe, president, Lodi-Woodbridge Winegrape Commission
Prepared statement
DeLuca, John, president, Wine Institute
Downs, Pete, vice-president, government affairs, Kendall Jackson Vineyards
Prepared statement
Lange, Randall, chairman of the board, California Association of Winegrape Growers
Prepared statement
Lucas, David, Lucas Winery
Prepared statement
O'Connor, Kris, executive director, Central Coast Vineyard Team
Prepared statement
Olagaray, Diego, president, Lodi District Grape Growers
Association
Prepared statement
Schmidt, Herb, vice-president, public affairs, Robert Mondavi Winery
Prepared statement
Submitted material
Shelton, Tom, chief executive officer, Joseph Phelps Vineyards
Prepared statement
Villareal, Juan J., under secretary, California Department of Food and Agriculture
Prepared statement
THE STATUS AND PROSPECTS OF AMERICAN WINE PRODUCTION
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TUESDAY, AUGUST 10, 1999
House of Representatives,
Subcommittee on Livestock and Horticulture,
Committee on Agriculture,
Lodi, CA
The subcommittee met, pursuant to call, at 10:10 a.m., in the Hutchins Street Square, Lodi, CA, Hon. Richard W. Pombo (chairman of the subcommittee) presiding.
Also present: Representatives Ose, Radanovich, and Thompson.
Staff present: Christopher R. D'Arcy, subcommittee staff director; Brent W. Gattis, legislative assistant; and Danelle Farmer, minority consultant.
OPENING STATEMENT OF HON. RICHARD W. POMBO, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
Mr. POMBO. The subcommittee will come to order. Good morning.
I would like to welcome my colleagues here this morning and ask unanimous consent that they be allowed to sit with us to participate and work with this subcommittee.
This morning the Subcommittee on Livestock and Horticulture will exercise its oversight jurisdiction with regard to wine production in the United States and relating matters.
I would like to take this opportunity to welcome my colleagues, Representatives Radanovich and Thompson, to my district, to thank them for their interest in today's hearing.
At the start of the 106th Congress, this subcommittee expanded its jurisdiction to include, among other things, wine and wine grape production. I have specifically asked for this jurisdiction, because I want to bring increased attention to American wine production and to raise the profile of this very dynamic and productive sector of the agricultural economy of our Nation and especially to our State of California.
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In spite of the pride we all feel in American wine production, I was surprised at the lack of official attention paid to winemaking by the House Committee on Agriculture. In fact, after reviewing the entire record of this committee, there has been only one hearing devoted exclusively to wine production, and that was 8 years ago.
Today will be an important step toward giving your work the attention it deserves. There is no better place in America to hold today's hearing than right here in Lodi. I am proud to represent California's 11th district that includes the Lodi-Woodbridge region. In fact, it is the Lodi wine region where Robert Mondavi got his start. This region is the No. 1 producer of cabernet, zinfandel, chardonnay, and sauvignon blanc. As California leads the Nation in wine production, it also leads in innovation, marketing, and growing of wine grapes.
America's expanding production stands at about 531 million gallons a year, worth an estimated $17 billion. About 90 percent of America's wine is produced here in California, where it generates about 112,000 jobs annually with an additional 40,000 to 50,000 during harvest time, and where it attracts roughly 10 million visitors annually to our wine-growing areas, bringing with it an important revenue and economic development.
In the area of trade, U.S. wine exports represent an outstanding success story. In the last decade American wine exports have increased by an amazing 448 percent to a current level of $537 million a year. And the trend looks even better, with a 26 percent increase in the last year alone.
There are many reasons for the growth in America's wine production and the increased demand overseas, not least of which being the universal recognition of the quality of the products. But one aspect that I find especially interesting is the increased body of evidence pointing to specific health benefits associated with wine consumption. These studies document what many Europeans have always known: That moderate mealtime consumption of wine assists in digestion and could reduce the risk of a wide range of ailments, from cancer, heart disease to Alzheimer's.
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And since exceptional wine comes from exceptional grapes, it is my hope that the United States and more specifically California can be at a leading edge of viticulture fundamental research so important to grape production.
Your story, the story of winemaking and grape growing in America, is one of success, adaptability, sound marketing, and quality production.
Today's proceedings will enable us, Members of Congress, to better understand your work and help promote your continued success. I look forward to hearing your vision and goals for American wine production and ways that we can assist you in achieving them.
I welcome all of our witnesses and guests here this morning, and I look forward to today's testimony.
I would recognize Mr. Thompson for any opening remarks he may have to make.
OPENIG STATEMENT OF HON. MIKE THOMPSON, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
Mr. THOMPSON. Thank you very much. First, let me say thank you to the Chairman, Mr. Pombo, for having a hearing and having it here in Lodi. I couldn't agree more: It is a wonderful place to have a hearing.
I represent a wine-growing region myself, which would also be a pretty nice place to have a hearing, the Napa Valley, which makes some wine up there as well as you folks down here. As a matter of fact, last year we sold about 9 million cases for about $2 billion a year, and we did a pretty great job with the vintage coming up this year as well.
I also agree with the issue. It is very, very important. If you look at the multiplier factors and consider indirectly what California's wine district does for our economy nationally, it is pretty impressive. It is responsible for about 560,000 jobs, and it means about $45 billion of economic interest to the U.S. economy. And that is very, very important. On a State and local basis it is worth about $3.5 billion in State and local taxes, which is important to California and helps to—all of the good things that we all rely on, from transportation and infrastructure to education in California.
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I am also here not only as a member of the Agriculture Committee, but as the co-chairman of the congressional wine caucus. And I am glad Mr. Radanovich is with us, and hopefully we can use the wine caucus as a forum to be able to spread the good word that this wonderful industry is doing.
And I was particularly impressed when I came into town and saw the headline of your local newspaper that talked about the importance of this hearing as it pertains to direct shipping of wine, something that is important to all of the wine producers that I am familiar with, and something that we are battling right now in Congress.
And I would like to take this opportunity to publicly acknowledge and thank both Mr. Pombo and Mr. Radanovich for the great work they did, albeit we weren't successful on the floor of the House. But if there is anybody I would like to go over the cliff with, it is these guys. They did a great job. They were wonderful advocates for a wonderful industry.
We were able to get some amendments in that bill that I think will help us in the long run, and I think we laid the groundwork for trying to mitigate some of these problems in the conference committee. But, again, it is going to be an ongoing battle—a constant battle with Senator Thurmond and the Senate and in regard to the excise taxes, market accessibility programs.
We are in good company, though, and I look forward to working with both of you in something that we can do on a bipartisan level, and it is something that will not only benefit respective districts but California and the Nation. Thank you.
Mr. POMBO. Thank you very much. I had forgotten you grew a little bit of wine up there.
Mr. Radanovich.
OPENING STATEMENT OF HON. GEORGE RADANOVICH, A REPRESENTATIVE IN CONGRESS FROM THE STATE OF CALIFORNIA
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Mr. RADANOVICH. Thank you, Mr. Chairman, and I do represent an extremely fine wine district in California, and I am in Mariposa.
Good morning and thank you for holding this hearing today to provide us with the opportunity to hear from some individuals from the wine industry. I look forward to the testimony from my peers and other experts in the wine production community.
California has become synonymous with quality and excellence, and I am proud to represent the interest in the industry so essential to the economy of our State and Nation.
The supply of California wine has magnified in recent years. Nearly 80 percent of all counties in California produce wine grapes, and 90 percent of U.S. exports wine derive from California. Furthermore, over $10 million in economic activity is generated by the State wine industry each year. These conditions have led to 3 out of every 4 bottles of wine sold in the United States to originate from California.
Many issues surround wine and its production, but I want to focus on current and Federal actions impacting the individuals in the industry every day. Particularly I will require to alleviate the unnecessary burden of Federal taxes.
Wineries are especially impacted by heavy estate taxes. Passing a winery onto the next generation must not be wrought with this significant tax on taxes now in the way. My sudden desire to inherit my winery should be an easy transaction to complete. To achieve this end, the State tax relief is included in the tax cut bill just approved by both Houses in Congress.
The wine industry has been under attack for several months. The 21st Amendment Enforcement Act approved in the House last week will give State attorneys general the ability to take producers to Federal court for violating State alcohol laws.
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Fortunately, an amendment was approved to ensure that with our Nation's commerce clause, which the U.S. Supreme Court has stated must be applied with the 21st amendment.
With respect to exports, I believe the U.S. wine industry does an impressive job of marketing its product with the limited amount of Federal funds it receives from public and private partnerships associated with wine in foreign countries and allows it to compete in the global marketplace.
However, Federal funding for the Wine Market Access Program is in jeopardy due to an approved amendment last week under the Senate agriculture appropriations committee. I, along with my colleagues, will work to retain the over $300 million in back funds for fiscal year 2000 approved by the House.
On the positive side, Representative Thompson and Mr. Pombo and I formed an active wine caucus to ensure that the positive message of wine is brought to Capitol Hill. We have had wine tasting, educational seminars, and a valley of information network to ensure that the message of wine and wineries is widely accepted. We also firmly believe that positive legislative accomplishments will emerge in those wine caucus efforts.
Mr. Chairman, I look forward to hearing from our friends in the wine industry today and to working with you to spread the word about wine. And I appreciate the ability to do that. Thank you.
Mr. POMBO. Thank you.
For the sake of time, I would like to request that you limit your oral testimony to 5 minutes. The lights that are before you on the table will give you an idea of what the time limit is. It will turn red in 5 minutes, so that should give you a pretty good idea of when it is time to quit.
I would like to start with Mr. Villarreal.
Mr. POMBO. I welcome you here today. You're with the California Department of Food and Agriculture. Thank you very much for being here. You may begin.
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STATEMENT OF JUAN VILLARREAL, UNDER SECRETARY, CALIFORNIA DEPARTMENT OF FOOD AND AGRICULTURE
Mr. VILLARREAL. Good morning, Mr. Chairman and members of the committee. My name is Juan Villarreal, and I am with the Department of Food and Agriculture in California.
I was recently appointed as under secretary about 4 months ago, and I am very happy to be here this morning. Secretary Lyons asked me to express his apologies for not being able to attend. He is actually in Mexico this morning, working on a bilateral border education program.
I want to thank you for allowing me to provide testimony in support of California's wine industry. As both a resident of Lodi and a member of Governor Gray Davis's administration, it is indeed a pleasure to be here this morning.
We heard a few statistics this morning, and I have a few prepared as well I think I would like to mention to help underscore the importance of the industry and its economic contribution to the State of California. As many of you know, wine, winemaking, and wine production touches our lives through rich cultural, religious, and family traditions. But economically speaking, wine production indeed contributes quite a bit of money to the State's economy—approximately $11 billion in production, supports about 100,000 full-time jobs throughout the year, and can grow as high as 150- to about 200,000 on a seasonal basis, depending on production levels.
Many of these enterprises are family-owned. About 4,000 growers run approximately 800 family wineries. About 55 varieties of grapes are used in wine production throughout the State, with an estimated grape-crush value of $1.5 billion. The State's wine grape production covers about 43 of our 58 counties throughout California, and once again, 90 percent of all wine consumed in the United States comes from California.
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With respect to exports, again, California wine exports continue in their upward trend. They are the third largest export commodity in California, behind cotton and almonds. And again, it is the fastest-growing export commodity. Major markets to which we export these commodities—wine—to which we export wine production is Canada, Japan, and Europe. It is interesting to note that Europe, with a steady supply, continues to show strong demand for our production.
There are concerns with respect to wine production and the future of the industry in California. We have already mentioned the issue of Internet sales of wine. We are urging careful consideration of the impact this will have on small family-run businesses who currently sell via this distribution channel.
I do want to underscore the points of the market access programs. We discussed the growth of the export industry and wine being the key player in that wine exports have increased from 1986 from $35 million to approximately $415 million in 1998 due to the assistance of the Market Access Program.
It should be noted that $90 million are allocated for 1999 for all export trade-created programs, which include many other commodities, such as dried fruits and nuts, fresh produce, et cetera. Only about 5 million of that is allocated for wine and wine promotion.
In contrast to that, the European Union allocates $55 million of subsidy money to support export promotion of their wines, and so indeed it is a stark contrast to what we do in the United States.
These are just a few of the issues that do affect wine, wine production, and wine promotion in California. And in addition to that, the recent ban of pesticides affects several of the crops grown in California. I think table grapes will be impacted by that as well.
We urge that the EPA and other Federal agencies involved use strict science in determining which products they decide to ban and derive some type of economic impact to help growers, the farmers in finding alternate uses for their products.
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In conclusion, California's wine industry is truly a robust and contributing sector to the State's economy. CSFA would like to emphasize the importance of wine production and offer support to local, State, and national entities providing a beneficial future for this valuable commodity.
I appreciate the opportunity to speak to you this morning and welcome any questions you may have of me or my staff. And the Department of Food and Agriculture thanks you very much.
[The prepared statement of Mr. Villarreal appears at the conclusion of the hearing.]
Mr. POMBO. Thank you very much.
Mr. DeLuca is here representing wine as well.
STATEMENT OF JOHN DELUCA, PRESIDENT, WINE INSTITUTE
Mr. DELUCA. Thank you very much, Mr. Chairman, and members of the panel for inviting me to be on the distinguished panel. I have strong colleagues with whom I work very well in the State of California. I came here essentially this morning to say thank you, and let me put that into context with a metaphor.
Some of you know I served 8 years as a deputy mayor of San Francisco, the last 24 years with the Wine Institute. And in my days in San Francisco, we had a saying regarding our police department, and we went through Zebra, SLA, Black Panthers, strikes. We referred to them as the thin blue line that separated us and the city from chaos on the streets.
I consider the recent developments headed by the three of you with other colleagues who work very, very well with you to constitute the new thin blue line for our industry and the blue shield behind which we must operate. And in terms of the recent events, I want to thank you on behalf of our wineries, who represent 91 percent of the production in this State.
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What is going on at the Federal level cannot be enforced by the activities at the State level. We actually think that what is going on right now has muscle tone on the industry and that the achievement is really the struggle.
It shows people what we stand for, what we are facing both in the private as well as in the public sector.
But there is something, I think, very important going on. And that is slowly but surely the definition in the United States of our industry, the debate is slowly changing from just a few years ago, when we were a carcinogen, a reproductive toxogen, a gateway drug, a syntax to today, whether you can trust the public to handle the new information.
The new health information that is coming out from scientists, that is a sea of change in terms of our industry. At the same time, with regard to understanding the battle that we have had almost quietly for 65 years, since the ratification of the 21st amendment, for the first time in 60 years, major papers are editorializing this relationship, and it is coming about naturally, thanks to your work at the Federal level.
You are all aware of what occurred at the NCSL, the National Congress of State Legislatures: 41 of the 48 States there voted in favor of the position we have taken on Scarborough, on Byrd, also in favor of the Wright shipments. And so even though at the time the reporters are recording votes, something very fundamental is happening in mental attitudes. As I said, it is a sense of muscle tone.
In terms of reaching out to new reporters, I think the whole generation of reporters in governments right now is speaking in different terms, talking in different terms. What is happening on the Market Access Program also puts in relief, thanks to the newspapers.
What we do face internationally in terms of the trade barriers, in terms of the European Union, are represented here, as the State has already alluded to that. So I see a direction taking place, I don't want to beat on the ash. I adhere to what Matthew said, which was to look at life steadily and to look at life hard, not kidding yourselves, and not trying to sugarcoat it. But I think what is happening is a fundamental change in terms of perception, in terms of image, in terms of our place, in terms of issues in science and health.
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We used to have almost a media watch. If something came out about antioxidants and cardiovascular benefits, we sent it out to everybody. We got a little snippet in Time magazine or Newsweek. Now it is coming out so daily, we don't even have time to report it to our members. It is becoming an accepted fact. I see that as a monumental change which converts into public policy, the ability to represent us.
Mr. Chairman, you mentioned that it has been 8 years since we had a hearing. Herb Schmidt and I, Thelma Wong testified, when we had a committee on the Agriculture Committee, met as a whole. I had a dialog with Leon Panetta and Tony Coehlo at the time, asking that the Congress of the United States look into the health effects of drinking in moderation. The actual first time that that ever was launched was at that particular hearing.
So if you are the segue, if you are the inheritors of that tradition, this notion of you being there to solve it for us, I think, is a very major accomplishment, for which we are all very grateful.
Thank you for giving me this opportunity to testify.
Mr. POMBO. Thank you very much.
We have Mr. Schmidt, who is the vice-president of public affairs for the Robert Mondavi Winery.
Mr. Schmidt.
STATEMENT OF HERB SCHMIDT, VICE-PRESIDENT FOR PUBLIC AFFAIRS, ROBERT MONDAVI WINERY
Mr. SCHMIDT. Thank you, Mr. Chairman.
I also would like to add my thanks for having this hearing. I would also like to give you a heartfelt thanks for not having us travel to Washington in August.
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Mr. POMBO. We are glad to be here.
Mr. SCHMIDT. This also happens to be where Robert Mondavi went to high school at.
With your permission I would like to focus my testimony today on an overview of trade issues and recent developments. Trade is part of three areas which we call the public policy of wine, And we believe those three areas are beneficial to our States and to our country.
The other two areas are the environmental programs that the industry voluntarily participates in and also the health issues that are beneficial to our country and public helps our way. I think that others would be investing in those two issues, so I would like to discuss trade.
We learned an important aspect of trade just a few weeks ago at a wine meeting. Mr. Downs was there, Mr. DeLuca was there, and others. And that was a group to bring us all together for the future of the wine industry in the United States.
Ann Veneman, former U.S. Deputy Secretary of Agriculture and former Secretary for Department of Food and Agriculture, made a very profound statement. She said, when your companies discuss international trade in a global marketplace, they should include the United States as part of the global marketplace. It shouldn't be forced. It shouldn't be an export department and a domestic sales department, in other words.
If we do consider that the United States is part of the global marketplace, then our business decisions and public policy decisions should take into account the tariff and nontariff trade barriers that our very own country imposes on others.
The reason for that is simple. Many companies, including Robert Mondavi Winery, are now forming or have had partnerships with producers in other countries. Protective barriers will affect American companies, including ours. The wine industry, therefore, suffers dozens of trade barriers erected by our own Government, since each State can erect all types of barriers that limit free trade. The most recent example was the 21st Amendment Enforcement Act passed last week in Congress.
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As you know, the World Trade Organization meeting will be in November in Seattle. This is a mass-level conference, and it deals with agriculture for the first time.
As a member of the Agriculture Policy Advisory Committee, which I am a part of with John DeLuca, we are the two members that represent wine, we are now in representation for those meetings. The United States should be encouraged to follow the Golden Rule: Do unto others as you would have them do unto you, especially our wine and alcohol laws.
Our partners, who we meet with regularly, complain constantly. And I don't mean our partners from Robert Mondavi Winery; I mean our partners of other industry members from different parts of the world. They complain regularly about to import wine into the United States is easier than to import it to 50 other countries, which, of course, is unfair.
For the first time the U.S. Trade Representative Office and the Ambassador has elevated wine to a very, very high level in the trade negotiations. Never before has our industry enjoyed the response and opportunity to provide input in the trade negotiations. This is especially true in our negotiations with the European Union. Ambassador Barshefsky and Ambassador Scher deserve our thanks. Assistant USTR Jim Murphy deserves some type of medal for his creative and dedicated leadership on the wine trade issues with Europe.
A lot of us have tried to create things in this industry on a lot of different issues. Jim Murphy has managed not to trade issues, which is very important. Over the past few years, Mr. Murphy has encouraged us to participate in a very meaningful way. He developed a strategy, conveyed it to us, then got our input and followed through. While we are now in the middle of trade negotiations with Europe, we have come a long way from where we were 3 years ago.
The European and American industries now discuss the issues together on a regular basis. We have created a new industry group called the Worldwide Wine Producers solely to deal with the World Health Organization and the World Trade Organization.
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The Governments of the new Worldwide Wine Producers, which include everyone that produces wine except Europe, will meet on a regular basis, using industry representatives for periodic updates on market and trade issues. The key thing here is that our representatives are listening to us and responding, and that is a very strong step forward. Unfortunately, in Europe the negotiators are not as close in touch with their producers.
At any rate, my time is up, but I will be happy to answer any questions now or in the future. Thank you.
[The prepared statement of Mr. Schmidt appears at the conclusion of the hearing.]
Mr. POMBO. Next we have a Mr. Pete Downs, who is the vice-president for Kendall-Jackson. Mr. Downs.
STATEMENT OF EDGAR B. ''PETE'' DOWNS, VICE-PRESIDENT, GOVERNMENT AFFAIRS, KENDALL-JACKSON VINEYARDS
Mr. DOWNS. Mr. Chairman, thank you very much. Members of the committee, distinguished guests and staff, I am going to drop back a couple paces here and talk about something that is even more fundamentally interesting as a whole, and that is the ability for us to do research that can improve basic qualities of wine and grape production in the United States.
Today in the United States, grapes are grown in over 40 States, and there are wineries in 43 States; that is 86 Senators. That is pretty impressive. We have the opportunity through the American Viticulture and Enology Research Network, AVERN, and the American Vineyard Foundation, which is AVF, to really bring this country together over a single common issue, and that is research on the basics of grapes and wine.
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Australia currently contributes about $10 million per year to research for their grape and wine industry, which is less than a third the size of ours. The United States has been behind for a number of years in basic research that will help develop he fundamental things necessary to grow our industry. Grapes in the United States are the single highest value fruit crop in the United States and the sixth largest crop overall. That is a very, very powerful message.
The American Vineyard Foundation is a voluntary organization that last year was able to generate over a million dollars in voluntary funding from the industry that was then matched by some dollars that came to us both from the State level and the congressional level, which really made our research dollars go a lot farther.
AVERN is in the picture because we need to develop a national list of priorities for grapes and wine. Grapes in Lodi, we know, are grown differently than grapes in Temeca. And we know those grapes are grown differently than grapes in the central coast or north coast. But when you extend that to over 40 States that have a very, very diverse growing area, you look at how grapes are grown in New York versus California. Some of the basic research done needs to be done in those areas are fundamentally different, so AVERN came into place in 1996.
There were 17 people on the organizing committee that sat down and looked at national research priorities with the help of a survey that was done by the American Vineyard Foundation. From that meeting in 1996, we came up with the concept of six regional representatives, and those represent geographical areas in the United States.
Those six regional representatives are the ones that actually go to the people in the field, the growers and the wineries, and find out really what is important to you in your area. That survey then comes back, and we have developed a list of 10 priorities that you can—if you have access to the Web—you can locate it on the AVERN Web page. And those priorities go anywhere from cork taint, which is a big problem for wineries, to pest and disease control in the vineyard, including integrated pest management and sustained agricultural practices.
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I can't stress enough how important this basic research is. The reason that this came about was that we in the industry realized that we were falling seriously behind in our ability to stay up with some of the foreign producers.
Any help that we can get on a congressional or State level to assist us in really doing our own research, which we are funding, we are very grateful for that. In the last round of research that was funded through the American Vineyard Foundation, we received research proposals from 20 States. Not all of those were funded, obviously, but it is a step in the right direction.
I appreciate the opportunity to speak with you this morning and am happy to answer any questions.
[The prepared statement of Mr. Downs appears at the conclusion of the hearing.]
Mr. POMBO. Next we have Mr. David Lucas from Lucas Winery.
STATEMENT OF DAVID LUCAS, THE LUCAS WINERY
Mr. LUCAS. Good morning. And thank you for coming to Lodi; saved me a lot of driving time.
I have been in the wine business for 22 years and worked with growers and crops from apricots to zucchini. I have been involved with growers up and down California and India, Iran, Kenya, France, Italy, and South Africa, to mention a few, that taught me a great deal. I am also a third-generation grower whose parents and grandparents farmed in California, Canada, and Nebraska.
Presenting the following views of the small wineries, I contacted other small wine grape and winery owners around the State. All of these wineries grow their own wine grapes.
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Here today we have representatives from all size operations. The Lucas Winery represents the smallest of the small. I would like to put that statement, however, into a more positive context based on the popular Star Wars movie. That is, that the larger wineries need small wineries and vice versa. The larger are like the mother ship providing the energy for research dollars, political support, and spreading the positive health messages about wine. The smaller wineries are like the star fighters, providing and protecting image, consumer interests, and a high profile for California wines.
When we stand back and take a look at the big picture, we are all in this together. And if I may continue the Star Wars analogy, we are facing challenges from several regions of the dark side.
As you know, we have the subject called OTS wines. These are wines with artificial wine flavors. My concern is that they are being labeled with the varietal name of the grape. For example, zinfandel, the American pie of wine industry, a grape variety that we have adopted as our own, is being mixed with nongrape compounds. This is also happening to other wine grape varieties.
As a small winery, I am a little bit concerned regarding the production of these wines and the impact on my business. In fact, it is from a small winery's standpoint that I can spin this into a positive. My concern is that of integrity, that the label has integrity, that the consumer understands what they are buying, and that we protect the integrity of our wine industry here and abroad.
Wineries have been doing their duty of education and improving the consumer's knowledge about varietal wines. It was not too long ago that we wine consumers believed that all that existed were chablis, burgundy, and rose. Wineries, wine shops, wine indicators have spent years of time and energy educating consumers. Today's knowledgeable wine consumer is asking for and expects to get 100 percent variety of wine grape wines.
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As a grower, it was not too long ago that—in fact, as growers, it was not too long ago that we dealt with the issue of varietal integrity in the vineyard. We went through our vineyard vine by vine to replace vines to guarantee the varietal integrity of the fruit we were delivering to our wineries.
It was a very, very small percentage of wine, yet it was labor-intensive and expensive. It is not necessary for us as small wineries to be protected. It is as a consumer that I should know what I am buying. Varietal grape names cannot be allowed to be manufactured without a wine compound. We may have lost the fight on this one, but we do not want to lose the war of integrity and the high quality of American wine.
For small wineries another issue is that of interstate shipping, what the consumer is allowed to receive and how they are going to receive it. This is about free trade. There are dark-side forces that wish to legislate at the Federal level.
Last week the Congress passed something called the 21st Amendment Enforcement Act. That gives State attorney generals Federal jurisdiction to enforce their restraint of free trade in Federal courts. This is nonsense. It is an inappropriate use of the legislative process to enhance the monopoly of trade of one State's interests over those of another State.
I need to be able to reach the consumer with my product. And it was the wisdom of the Founding Fathers who created the commerce clause: that Congress shall have the power to regulate commerce with foreign nations and among the several—and I see there is a typo there. It states ''stare'' instead of ''States.'' Well, I do have a stare in place, so something is slippery there.
Having free access to the consumer is vital for a small winery. We cannot get the attention needed on this issue. Currently, some 30 States prohibit direct shipments, and more are thinking along those lines.
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The smokescreen provided by those who wish to legislate is that interstate shipping of wine can contribute to underage drinking. We have all heard this argument. Underage drinkers, as we have also said, do not pay $10 to $60 a bottle for wine, plus pay shipping and handling, and then wait 2 weeks to consume wine as a moderate mealtime beverage with proven health benefits. This is certainly not what I did on the beaches of California. But I should point out that on those beaches with my best friends that consumed in moderation were those from families who had a culture of serving wine at the table.
Note that what is happening to wine would and could happen to other products. This issue exists only because wholesalers and middlemen and a couple of legislators want to retain their piece of the pie, because these actions do not allow any free market access. I am used to being regulated in the wine industry. I am used to that aspect in the business. But do not prohibit what we have seen in past examples. This is never a solution.
As a grower and winemaker, my operation strives to be sustainable. All of the grapes from my vineyard used in the production of my wine are returned to the soil to improve the tilth and nutrients to the vine. I no longer, for example, till my vineyard.
Now, as a standard practice, I mow the natural weed and cover crops. I now have quail and dove living in the vineyard. It drives my dad nuts. But it is easier on the environment, takes less heavy equipment, and provides beneficial habitat, all of which have a significant environmental impact beyond those I can discuss today.
This was not an easy step to take for growers, for growers like myself, for growers like Stan Lange and John, Brad and Randy Lange of Lodi, Bob Donovich of Santa Maria, and Dan Merrill of Monterey, Robert Mondavi organization, and Napa and other wineries. They have taken this with their own funds and own risk and proceeded down this path because of what they believe in.
What these growers and others like them have learned, they have learned again through their own research, the expensive research of trial and error. Even today I am not sure if it is a correct step in my own independent operation. That takes increased monitoring, more water, and creates more competition for the vine.
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Be mindful of the impact also of legislation on small business owners, small winery owners, and a small farmer. I often hear we need to protect small businesses and the farmer. However, the legislation or requirements put forth do not have the means to measure the impact on my business.
I would propose that groups such as the EPA be required to do an environmental impact study on the economic impact for those who will have to deal with the regulations before those regulations are enacted.
The EPA needs direction from Congress. In fact, H.R. 1592, a recently introduced bill cosponsored by Mr. Radanovich, requires the EPA to use the latest and best science in evaluating pesticides. We need more of this. Organizations need direction from Congress. I need the continued support of Congress to provide the research that assists me down the path in sustainable farming practices, research that benefits and protects the vineyard environment, the community environment, and the global environment. It is about having the tools to change and stay in business, because once you lose a farmer, you never get him back. It is a set of skills that is passed down through generations.
Education. In the latest Star Wars movie there is a plant that is completely covered by a city. Now, think about that. We need to think about that in the contexts of children and their developing expectations. We need to be aware of the environmental message our children are being taught in schools about the environment and endangered species. And this is a positive message. I am very serious about this. Because of this expectation, they will have great expectations about the quality of the world they will inherit and live in. The public has great expectations as well.
Let me just say this, that we need to teach also in regard to the value of agriculture in our schools. I would propose that agricultural science be a required instruction, along with the environmental science. The agriculture network established by John Faust is a remarkable effort to pull together all the various agricultural interests in and
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around the State. What is also significant is that they have been successful through the Department of Education in funding the development of agricultural-related materials that can be incorporated in kindergarten through 12th-grade curriculum.
I also have a hidden agenda in this proposal and that is to create and provide professional career opportunities for people who normally would not be given the exposure to agriculture or give it a second look, such as the sons and daughters of farm workers.
Let's change the face of agriculture from the 1930 painting American Gothic, by Grant Wood, to that of a 30-something or X generation. Agriculture is not what it was 20 years ago or even 10 years ago.
We need to enhance the professional image that will attract highly-skilled people to do the research, manage the business, develop the technology, and market and distribute our products. Again, we need to teach the art and value of agriculture, of bringing together all the parts of production and the stewardship.
In closing, let me just say this: I want to have the tools to exceed expectations of my children and know that as a grower, I can grow environmental quality as well as the highest quality crop, that our vineyards can be a model for agriculture. Oh, and with all that being said, I
continue to look at my wine glass as half full. Thank you very much for your time.
[The prepared statement of Mr. Lucas appears at the conclusion of the hearing.]
Mr. POMBO. Next we have Mr. Shelton from the Joseph Phelps Vineyards.
STATEMENT OF TOM SHELTON, PRESIDENT AND CEO, JOSEPH PHELPS VINEYARDS
Mr. SHELTON.Thank you very much, Mr. Pombo. It's a great honor to be here this morning. I also represent the 156 members of the Napa Valley Vintners Association, and this year I am serving as the president.
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The issue I would like to confine my remarks to today deals with the 21st Amendment Enforcement Act, which is very much in the news these days. In our minds, the issue is a very simple one: That American wine consumers around the country are being denied local access to their crop, to the products that we produce here in California.
In response to this, the wine industry itself has developed a voluntary set of guidelines to help alleviate some of the problems associated with direct shipments. Unfortunately, our voice has not been heard effectively in Congress, and we are now facing new restrictions and new problems related to direct commerce.
We need quite simply a direct relationship to produce this product of wine of California and consumers of wine across the United States. When the 21st amendment passed in 1933, it dealt primarily to give the States rights and localities over the decision of temperance.
In our mind, that right has been taken away at a local level by local businesses who have used the 21st amendment to provide business protections for their enterprises at a global level.
In truth, for most States and localities, the social issues regarding temperance have long been decided. The only thing left is that great debate: Are these businesses protected?
Structurally, the 21st amendment created what is called a three-tier system. And under the three-tier system, our product follows from a licensed producer to a licensed distributor and State and locality and then on to a licensed retailer and then to the restaurateur.
This model, which is mandated, could not foresee the societal changes—and we are talking about a model that is close to 70 years old now. This model could not foresee the societal changes and attitudes toward wine. Nor could it predict the imbalance that would result from the influence of local businesses over the regulatory process.
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And it is very certain to me and to my colleagues and the Napa Valley that this model could not predict nor should it survive the development of electronic commerce over the Internet. It is the most egregious example of how these local regulatory processes have interrupted free interstate commerce, which are in the interstate shipping laws and also located in franchise law. That we'll see in many States around the United States.
We are well aware of how interstate commerce has been restricted. But I think you should also realize that in many States, when a winery like Joseph Phelps appoints a distributor, it often is appointing that distributor for life; they have a lifelong partner.
The State of Georgia is a very good example of this kind of regulatory abuse. In the State of Georgia, when I appoint that distributor I am with, that distributor is for life. He can trade with me, with another distributor, but I cannot terminate that distributor, regardless of sales and marketing performance and even regardless of that distributor meeting the terms of payment under our agreement.
So you can see that we face a number of abuses. And one of the other results of the 21st amendment is that there is a patchwork across the United States. It's almost impossible to fathom for small wineries what we are dealing with. We are dealing with hundreds of State and local laws, and most wineries have to have full-time compliance officers just to figure out when we are and when we are not in violation of specific State and local regulations.
Complicating the entire factor are the States themselves. They have become dependent on revenue generated from alcohol taxes. And this issue has often been brought up in Davis, where it should be, that wineries are trying to evade and avoid State and local taxes. Nothing could be further from the truth here. I am not here to say that the three-tier system will go away; I am here to say that the mandatory three-tier system should go away.
And I am also here to tell you that all the wineries are on board saying that State and local taxes will be honored. We do not need a middleman to collect taxes for us at the State and local level. A lot of this is combined really to create this crisis right now; that has been simmering for some time. Primary among those is the fact that there's been a massive consolidation of the distributors in the United States today.
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A couple of statistics to help you with that is that five distributors in the United States today currently represent 31 percent of the entire national wine, spirits and beer distribution. Twenty-five distributors represent more than 61 percent of that same distribution. This is an oligopoly. And this oligopoly is now seeking protection through Federal courts. And it is something that we must resist at all costs.
One other statistic that you should be aware of is that the 60 largest wineries now represent 90 percent of the total business in the United States. That leaves 5 percent of the business for 1,900 small wineries in California and other States.
We simply are not being represented effectively through distributors that are available to us, and many small wineries cannot survive without a direct link to their consumers. The process of the Internet is a wonderful vehicle. And currently we are being denied access to that new and emerging vehicle to our consumers.
After erecting the barriers at the State level, wholesalers found themselves frustrated, they could not enforce them because of jurisdictional issues. Having faced that frustration, many of them thought of even going to the extent of felony laws. Eight States now call it a felony if you have a direct shipment from a California winery to the consumer in their State.
When they were frustrated by jurisdictional issues, they turned to Congress to enact the Scarborough bill, the 21st Amendment Enforcement Act, which has a Senate version known as the Byrd amendment.
I think this is absolutely the wrong course of action. It is certainly going to encourage, I think, States to keep their local interests in mind and maybe rescind some of the reciprocity agreements that already exist with California wineries. Or it could encourage the States to stiffen their current restrictions on direct access to consumers in their State.
I represent the 156 members of the Napa Valley Vintners Association, and we are absolutely in opposition to the Scarborough bill and to the Byrd bill which currently exists in the Senate.
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We have responded to all of the charges of the wholesalers that have been brought against us. There is not a single winery in California who voluntarily or is willing to sell to a minor in another State. We are quite willing to adopt packaging requirements that would clearly show on any package that leaves our wineries that it is a package that contains alcohol and that it requires a signature of an adult recipient. We are willing to add age verification at the point of sale. And we are now exploring technology that will actually cross-reference driver's license information with credit card information to make that age verification process a lot more secure, a lot more meaningful. We are also willing to work only with shippers who will require age verification at the point of delivery.
And please remember the wholesalers and legislators who say we are willing to leave our product on the doorstep of a house—we have a couple things to worry about, because not only do we not wish to sell to minors, but our products are perishable. The last thing that I want is a $1,200 case of wine sitting on someone's doorstep in Florida in 90-degree heat. These arguments are illogical; they do not hold water. They never have.
In the absence of reason, the wholesalers have emotional tactics to convince Congress that they need these additional protections and restraints on trade. This has never been the intent of the 21st Amendment, and it certainly violates the protections that we have under the Commerce Clause of the Constitution.
We are in a time right now—and in my closing remarks I would like to say every industry, not just the wine industry, every single industry in the United States must now face the issues of this intermediation of the promise that the Internet provides.
In most industries this debate will be done on a business-to-business level. And what we are seeing in Congress right now is an attempt by the wholesalers to prevent a business-to-business discussion and to provide protection for their businesses through legislation that will delay our access to these new availabilities for 20, 30, 40, 50 years in the future.
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We need your help, gentlemen, and we need your help now to make sure that the wine industry has a seat at the table when these policies of this intermediation are discussed and resolved on a business-to-business level. Thank you very much.
[The prepared statement of Mr. Shelton appears at the conclusion of the hearing.]
Mr. POMBO. I thank all of you for your testimony. At this time I would like to recognize Mr. Radanovich for any questions that he may have on the panel.
Mr. RADANOVICH. Thank you very much.
Mr. Lucas, could you expand a little bit on the issue of flavor wines and how you think they might affect the integrity of the varietal label and give me an example of what your idea of a solution to the problem would be.
Mr. LUCAS. Well, the solution would be not to be able to put zinfandel with other flavoring additives such as berries or chardonnay with peach flavorings. I just don't think it's within the integrity of the industry. We have, and as I said, spent so much time and energy over the years to educate about the use of a variety of things.
I was at a conference in Davis about a month ago, and there was a gentleman from South Africa doing a presentation. And he couldn't believe it. He was a professor from South Africa, and he was just amazed that we would allow this to happen to the American wine industry.
So it's really an issue of where that information should appear. This is the first time we have really said zinfandel with other flavors added to it. In fact, there is a winery now with a bag-and-box product that is saying it actually assists in enhancing the characteristic in cabernet by adding these flavors.
So all of this is getting relatively distorted, and it don't look well for the future understanding for the American consumer. A lot of people say, ''Well, OK. We are going to get into the wine industry.'' This has not been the past history of beverages like this. I think it just muddies the water for future growth and people's understanding about the variety of grapes.
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So don't call it zinfandel; call it what it is. Call it a hundred another names, and I can think of a few. And that's the issue.
Again, it doesn't hurt me as a small winery. I can spin this into a very positive message that will help me sell a variety of wines. But my concern is more consumer understanding and that we protect the integrity of this wine industry.
Mr. RADANOVICH. As it affects the mother ship; is that what you are talking about?
Mr. LUCAS. Yes.
Mr. RADANOVICH. I got a question for one of the members of the panel to answer. But it's kind of where do we go now from the 21st Amendment Act?
To my knowledge, most people know that Byrd is stuffing that thing in the Juvenile Justice Act. And then with the vote on the Scarborough amendment, it gives the possibility that it goes in Congress along with the Juvenile Justice.
However, the House did not pass the Juvenile Justice bill with regard to gun control. It did pass a piece of legislation that dealt with the cultural effects of guns and juveniles in the United States. So there is a slight possibility, to my knowledge, that this thing may not go to conference or is conferenceable.
There's a slight possibility that a Juvenile Justice bill would never make it to the White House for a signature. But, in addition to that, we have been assured by the beer wholesalers and the wine and spirits distributors that Senator Byrd, being where he is in the Senate, can stuff this measure on any conference bill and something like this is likely to pass.
So I am just wondering, if anyone would like to volunteer, where do we go from here, and ask for an analysis.
Mr. DELUCA. First of all, if we are in any kind of shape right now to have further decisions, it's because of the work you and Mike and Chairman Pombo have given to this issue.
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We have mapped out all the scenarios. We know all the wholesalers don't like what came out of the House. Despite all the conversations to the contrary, those issues offering amendments that you and Mike worked on, do, in terms of due process, really raise the bar for any attorney general in the United States to have recourse to that.
The so-called Cox amendment, there are other members on that really do go to the heart of the constitutional issues and to Internet questions.
Congressman Thompson was absolutely right. We need to clean up some of that language, because the way it was crafted and how it was on the House floor, it does need refinement.
We have had meetings with Senator Hatch. We have had discussions with the ranking members, Conyers and Leahy, who might be the key principals with Hyde and Hatch, Conyers and Leahy, and any of the discussion should have some further safeguards to put in the measure.
I am not at liberty to discuss today in an open forum, because I think they need to be discussed and viewed privately rather than give away our game plan right now. But there are at least two further amendments that could be offered in conference that, I think, could give us the protection in terms of the ultimate outcome.
One of the benefits that's happening at the Federal level, however, is we are strengthening ourselves to do battle at the State level, which is where this is all supposed to take place, with the State legislature and the Attorney General. And I don't want to in any way dismiss that 41-to–7 vote that came out of the NCSL. And Mike was the former chairman of the wine task force in that group. That is very important in that all of our 48 contract lobbyists and law firms that work for us in seven regions that are overseeing this tell us that it will be very valuable if it goes State by State, issue by issue.
Mr. POMBO. Did you want to answer that question,
Mr. Downs?
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Mr. DOWNS. Yes. I just want to talk about this issue as it developed over the last year, with the wholesalers starting out—talking about almost exclusively about 121 purchases, throwing in the question of payment and taxes. Occasionally the industry addressed the payment of taxes, as Tom said.
You know, there's nothing in this industry that—we are so highly regulated we can't afford not to pay our taxes. So that issue subsided, and now the whole dialog has changed away from the under–21 question to a much broader issue of violation of any State law. And that's, in my view, is a big change in that—I am very concerned about that, because they're changing the way people are looking at this issue.
I think that Tom's suggestions about dealing with companies that will certify that they will get a signature at the other end, the question of wineries not really wanting your wine left on somebody's front porch, whether there's a potential for underage pickup or not. That's certainly a very good point. I think that this snake is getting so slippery, and it's gone in so many different directions.
My concern is with what is going on in Congress now with the Byrd amendment and whether it goes to conference or not. I think that the momentum is against us. And I am afraid that we are going to get ahold of the tail, and it's going to slip away again.
So I think that there needs to be a very thoughtful discussion with legislators on how to proceed. We need to sit down with the people that originally sponsored this legislation and really have a frank and serious discussion, because I think that many of them—and indeed some of the people that voted for Scarborough—don't understand the issue. And it's unfortunate that they don't, but I am very concerned with what's going to happen. I wish I had a crystal ball. I don't.
Mr. POMBO. I would like to recognize Mr. Thompson.
Mr. THOMPSON. Thank you. I just want to follow up on one point on the Scarborough bill.
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I don't want anyone to think it's anything other than
what it is, and that's a turf battle, plain and simple, no more, no less. It's the distributors not wanting to lose any partner share at all, which is actually a bit ridiculous. Because for those who use the distributors, they're not going to pull their wine out off those trucks. It's working well for them. We are going to keep it there.
We are talking about a measure that is going to stifle growth. It's going to stifle business growth. It's going to stifle economic growth. It's not going to allow people to expand. It's not going to allow people to buy the wine that they want to buy or wineries to sell the wine that consumers want in this State. It's anti-e-commerce. It's anti-California. It's antibusiness. It's a terrible, terrible, terrible bill, but it's all about turf.
And to think that the distributors are going to lose turf because of this is ridiculous. And they brought the beer wholesalers in on this, who could buy a truck and offer to deliver beer for free, and you can't do it. Those guys are locked in forever, and there's no way that it's going to affect them. They're very smart and clever in doing that.
And it's just as Pete pointed out. It's a slippery slope. It's been very dishonest. Up until the minute it was on the floor, all the talk from the proponents was that it was to stop kids from getting alcoholic beverages from over the Internet, which is ludicrous.
And as soon as they got on the floor, then they changed their arguments to the fact of just enforcing other laws. And as consumers, we ought to be concerned as well, because it doesn't just apply to wineries. It applies to the shipment and the transportation of alcoholic beverages in any State.
And any attorney general could go to Federal court for any violation of an individual driving with a case of wine in their automobile back to their home State that disallows more than a gallon of wine per month. They're subject to the same laws.
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And people say, ''Well, it's far-fetched to think an attorney general would do that.'' But please remember, it's equally as far-fetched to think that kids can buy a bottle of wine over the Internet. And it's just not going to happen.
And there's a lot of attorney generals out there who have their sights set on higher office. And if they can take down a major winery and get some publicity, it's not beyond them to try and do it.
So we need to really marshal our efforts. We need to—and I think everybody here, everybody that voted against the Scarborough bill also signed the letter to the President asking that when it gets there, he veto it. We need to make sure we increase the numbers there. And we need to work collectively to make sure that everybody knows exactly what this is and that we can build as much opposition with as many States as possible.
And I would like to just ask the representative of Food and Agriculture that it was pointed out that the National Council of State Legislators voted 41 to 7 against the Scarborough bill; that is a pretty strong opposition. And I know there's a National Governors Association, and it would be very helpful if we could get the Governor to pursue that organization's opposition to this antibusiness-anticonsumer bill.
Would you take that message back?
Mr. VILLARREAL. I can certainly do that, Congressman.
Mr. POMBO. Thank you.
I would like to recognize Mr. Doug Ose.
Mr. OSE. Thank you, Mr. Chairman.
Mr. Shelton, you mentioned the voluntary guidelines which you have.
Mr. SHELTON. Yes.
Mr. OSE. I don't have that in here. If you could leave a copy of that, if you have one.
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Mr. SHELTON. I can certainly do that. It should have been included as attachments.
Mr. OSE. I don't have that.
Mr. SHELTON. I appreciate the opportunity to do that.
Mr. OSE. Beyond that, Mr. Chairman, I want to apologize for being late. I was on the phone and had the opportunity to tour your district, as did my staff. We drove by the off-ramp numerous times. You do have a beautiful district, I would say.
Mr. DELUCA. Mr. Chairman, could I add an addendum to what Congress Thompson said?
Our organization actually has its preponderant people who use the distribution system. And we have had the wholesalers as our partners for the better part of a half century. And, therefore, it's very instructive that our organization has been out in the very front fighting the issue on behalf of our smallest members. And one of the reasons for it is not being discussed openly.
What is happening at the State level is the temptation within our own ranks to try to continue to criminalize this behavior. And in any other business in the United States, this would be seen as private enterprise, directly shipping to the consumer: music, books, stuff, food, clothes.
Here, to have this, particularly starting in the House and spreading, the idea that a felony could be, in fact, inflicted on you for shipping a product directly to a consumer who has asked for it puts us in jeopardy with the Federal Government in terms of our basic license.
So what you have here is double jeopardy, not only as a felony, a criminal act rising to the level of assault, murder, and mayhem, if you can think of that as an equivalent, but then to be subjected to the Federal Government in terms of a license that could actually be denied.
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So one of the things we have been doing in the different States has been to ask the different States, that those who are subject to the treasury be exempt from these laws.
Mr. THOMPSON. John, that's an important point that really hasn't had a lot of public discussion, but the potential for losing your Federal permit—you just alluded to that. Could you elaborate on that, please.
Mr. DELUCA. After the Volstead Act was rescinded, the Federal Alcohol Administration Act created basic licenses for producers. And their licenses are the sea of the problems today.
Basic licenses were mandated for wine and spirits, for wholesalers, and for importers, but not for beer and not for retailers. I think one of the reasons beer wholesalers are in this issue is because of their concern about beer across America, where beer and retailers are not subject to license revocation by the Treasury Department.
So the felony issue for beer is not to have the same kind of import as it does for us. Treasury, the Bureau of Alcohol, Tobacco and Firearms—issued a circular that said we have jurisdiction over the wineries and the other wholesalers as well as the spirits.
If your attorneys general have any information, any evidence that your State laws are being violated, bring that information to us and we will prosecute those who are, in fact, violating the law. So far we have had only one actual referral, and it was a wholesaler. It was not one of our producers.
Tom Shelton is absolutely right in terms of the environment. We not only need to be socially responsible but to be financially responsible.
In New Hampshire, in Louisiana, in Nevada, and in North Dakota in just these past 12 months, we have submitted to the laws in terms of having to pay licenses and having the excise taxes paid in the State where the consumer is. So at every point there is the reputation. But the thing that is critical right now, and we will try to explore further in Congress between the House and the Senate, is exactly the fact that right now there is jurisdiction over us.
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We don't need to use Federal district courts. In fact, you and Congressman Radanovich pointed it out to Senator Hatch in the hearing that fact, and it made an impact on him. There is a Federal remedy for all the different charges being made. And it is regulatory because there it is in place, and it needs to be implemented.
So the idea of having to force this issue to the Federal district courts is really not only redundant, but it raises the question of what is the agenda? And the agenda obviously, as you pointed out, is one of economic protectionism.
Mr. POMBO. I would just like to follow up on something Mr. Thompson said earlier in talking about e-commerce.
What this legislation is, is really the beginning of the end of e-commerce, and not just for you, because in this particular instance it may have been politically doable to go after wine because of the stars being aligned, and certain powerful groups decided this was the right thing to do it.
It may have been politically doable at this point to go after wine and to go after alcohol. But there are a number of States and local governments that have adopted laws to, say, have a boycott against the production of clothes that were produced in a particular country. There are local boycotts, local state laws that have restrictions against different things. Those products are sold over the Internet. Those products you can buy.
And what we have established is that the Federal Government can now step in and regulate commerce on the Internet and regulate sales on the Internet. And today it may be wine; tomorrow we don't know what it's going to be. And there will be an equally powerful group out there who decides for subpolitical reasons that they want us to now step in and regulate that.
When it comes to the tax issue, which I believe is really a big part of the driving force behind this legislation, is the collection of taxes. It leads to some type of a national regulatory scheme to tax the Internet. And I know many of the people who voted in favor of that legislation are opposed to taxing the Internet, and yet that's what this is going to lead to.
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So it is much more far-reaching. I know it's devastating for you, especially the smaller wineries that have been hit so heavily on the Internet sales for their very survival. But at the same time it is a much bigger issue that I don't think is fully thought out by the number of members in terms of what the direct impact could be.
Mr. DELUCA. I think you bring up a very good point, Mr. Chairman. And I think one of the things that was missing in a lot of this argument went—whether on the Senate side or House side, but more on the Senate side—was this effect, this is much broader than alcohol and that it does go to the Commerce Clause of the Constitution.
And there was a letter done by Professor Choper, and it was sent to Senator Hatch and Senator Leahy. There was some testimony about this in the Senate hearing, but I am not sure if anyone sought this on the House side. I can provide it; I just happen to have it in my pocket. But anyway, the letter doesn't say this, but it is an interesting thing. When brought up in The Chronicle the other day that there really are only two things that an individual citizen can do to violate the Constitution: One is keep a slave, and the other is import wine or alcohol illegally, which is a very interesting thing.
Mr. POMBO. Good point.
Mr. DELUCA. And it was the distributors or these people—maybe it is not the wholesalers, distributors; maybe it is a bigger issue—but they have their own constitutional amendment to protect their business. And that obviously was not the intent of the congressmen.
Mr. POMBO. We would be happy to include that particular letter as part of the record.
Mr. DELUCA. All right.
Mr. POMBO. That is one of the—of the articles he has in his pocket.
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Mr. DELUCA. I have a card catalog here.
Mr. POMBO. Mr. Villarreal, one of the topics that you touched on in your testimony dealt with some of the recent news on pesticides and EPA.
Mr. Lucas brought up my legislation, H.R. 1592, that deals with the process that EPA is going through right now called the Protection Act. I agree completely with what you said in your testimony about EPA using good science and making sure it works.
And my opinion is that if they go through the science and if they truly come up with an opinion that a particular chemical or crop-protection method is extremely hazardous, we would take it off the market. And I have no problem with that. My problem is with the level of science that they have done at this point.
Have you looked at the legislation that we put together—the Davis administration looked at that legislation? We would be very happy to have your support with the administration on that. We are up somewhere around 170 cosponsors in the House on the legislation right now, but we would be more than happy to have the administration on that.
Mr. VILLARREAL. Mr. Chairman, I have, for one, not looked at the legislation. And I can't speak for Governor Davis's direct support staff. I know within California we are quite busy just trying to implement Proposition 65, which has similar consequences up and down the State to what the EPA's program is designed to do as well.
We are actively trying to work on implementing Proposition 65 in such a way that it doesn't present such an economic hardship to growers, farmers throughout California. Perhaps there is a way we can look at your legislation and see how that supports or assists us in getting good science behind implementation of DBA regulations and maybe in assessing what we have in Proposition 65 within California.
In my few short months at SCDFA, we have looked at trying to have more of an interagency task-force approach to implementing Proposition 65. It seems like in the past it was handed down by California EPA single-handedly without looking at some of the economic impacts. The legislation does allow for economic hardships to be considered in making those determinations, you probably know. But I think there does need to be some weight given to the economic impact it does have to farmers within California.
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So I guess the long answer to your question is, I would like to look at the legislation, probably work with some of the Governor's administrative and legislative support people and see how maybe we can help you out in moving that forward. I think it is critical that we look at that now, because again we are getting into Proposition 65.
Mr. POMBO. It would be great if you could take a close look at the legislation. I gather many of us feel that California has some of the strictest standards in terms of pesticide use and herbicide use. And yet we are running into a situation where EPA is making decisions that go beyond what California has found to be safe, which is really an odd for us in California—an odd situation to be in. So we would really appreciate you looking at the legislation and possibly coming out for recommendation.
Mr. VILLARREAL. We will do that, and I will certainly get in touch with your staff and look at that issue.
Mr. POMBO. Thank you very much.
I do know that Mr. Radanovich had an additional question.
Mr. RADANOVICH. Not a question, but just to finish up on the Twenty-First Amendment Act.
There were two things that came to my mind, things that the industry can help out as we see this issue. The reason this picked up and happened so fast was because of the unfortunate circumstances that happened at Columbine High School which prompted the juvenile justice bill.
Prior to that time we had cooperation with the Judiciary Committee to the then previous carrier of the bill, which was Maryland, who was willing to wait until there was consent in the industry before they started moving this forward.
Then the criminal juvenile justice bill, that wasn't something that was required to go on the floor. The beer and spirits distributors dropped it like a hot rock and went with Scarborough. And that's how it happened.
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The reason why I am saying this is because when it passed the Senate, it passed by a margin of 8 to 1.
Mr. DELUCA. Eighty-one to 17.
Mr. RADANOVICH. Yes, 81–17. In the House we had a little bit more time, and so we got it to a three-to-one margin. But my point is the issues. The longer it's out there and people are informed of this—and it's a very technical issue—the more chances we have of winning, and with that, I would suggest the industry is going to own up to the underage drinking issue. And to say it doesn't happen very often, or yes, but it doesn't have to happen, because people like Hatch, who will say if one person gets it, that's one person too many. So we need to own up to it and the industry issue. And the way in which we do that is to voluntarily accept restrictions that would mitigate that.
The other issue that we are working against is the—I know that the Sacramento Bee came out with a good editorial on a lot of possibilities, and the New York and L.A. Times, and those who get it go out to work for the administration, because they will get the final say on something like this. So the more time we have, the better we are. But circumstances didn't allow that. But those are two things the industry has.
Mr. SHELTON. We have a good editorial responses in the Wall Street Journal and actually a wonderful feature article in the New York Times as well, and virtually all the editorials. I think I only heard one that was negative to the wine industry. But I would like to comment briefly on it. Unfortunately, underage consumption will remain as it always has been for some teenagers: Something of a rite of passage. And regardless of the safeguards that we attempt to build in, there will always be some way around it.
But let's not mistake the facts. And the facts are that for most teenagers the preferred method of underage access is one of two ways: You either misrepresent your age with a false ID and provide it to the local retail store, or you will find someone to make the purchase for you.
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In many ways e-commerce and direct mail are more secure. If we can tighten up the age verification a the point of sale and then tighten it up again at the point of delivery, I truly believe that the direction can be more secure than the current system.
Mr. DELUCA. We have that at the State level. And the bills that we have drafted in 16 States with four attorneys' general opinions and it states that we have had that; we do have those safeguards in there.
So if the battleground right now is in the 30 States where it is not legal—and I find it really disingenuous that on one hand, for wholesalers to say, ''Why are you worried about what is happening at the Federal level? We are only addressing the issue of what's legal and what's not legal. And why are you guys battling to support something that's illegal?''.
To say that on one hand and then to spend hundreds and thousands of dollars per State to try to make a felony out of this at the same time that they're arguing that this only applies to where it is illegal. They're trying to make it illegal all over the United States and trying to roll back what we started in 1985, which is reciprocity agreements, State by State, under the 21st amendment, with California leading the way.
So on one hand to say no, it is only going to apply to where it is legal, and then to try desperately throughout the whole country to try to make it illegal, I think undermines their credibility.
Mr. POMBO. All right.
Mr. THOMPSON. I just want to add one thing on the minors buying alcoholic beverages over the Internet. Just remember that in California we have the ability to sell direct within our State borders for 20 years. And the Alcohol Beverage Control folks at the State level warn us that the abuse is not measurable. So it may happen, but it's just not reality.
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Mr. Shelton's right. If you are a youngster and you want to buy an alcoholic beverage and get somebody older to buy it or you buy it in a place where you can buy, if you can buy it, for yourself, and that's what the problem is.
But Mr. Radanovich is correct. We do need to be able to have something imposed to have this argument. And I think it would be in everybody's best interest if we could figure out how we can require a wholesaler upon delivery require marks on the box indicating that it is an alcoholic beverage, something to be able to show folks that, in fact, this is a strong personal argument; it doesn't really happen. And until that happens, not only are your businesses going to be impacted, I just heard yesterday from one of my friends in the auction business who auctions fine wines. And he is very, very troubled by this. It is going to impact his business. We have had calls from E-Bay. They are very, very concerned about this. It is going to impact their business. And anybody who visits a winery from Florida and buy a bottle of wine, not only will the winery not be able to ship it back, but you can't even ship it back.
Mr. SHELTON. I would like to add that we are very proud of the Napa Valley Wine Auction, which was in June of this year, raised $5.5 million for local healthcare services in our county. And this auction faced severe restrictions under the Scarborough bill.
Mr. DELUCA. Mr. Chairman, the Senate Judiciary Committee meeting and then ultimately the whole Senate at the same time, that it was adopting the so-called Byrd amendment, which really Senator Byrd high-jacked from the original Hatch bill, it does also carry the Feinstein amendment. I have talked with Diane, and it's not crafted well. It's in the wrong section of the United States Code, but it has in there this question of credibility and verifiability. And we are just being very sensitive about the effects on carriers.
One of the things we are concerned about is, ultimately whatever we pass ultimately, what effect it will have on the distributing of our products, even if it is illegal on the laws.
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We have right now authorized technical assistance by people who are expert on the Internet and how we can put on safeguards ourselves without legislation. And I have a number of proposals that are coming my way to evaluate. I don't think we are far away from having the ability ourselves, independent of law, on how we can monitor and govern it. I think we know we have to be socially responsible on every front, whether it's underage Internet sales, hours of sales. We work under this mine field of laws that everybody knows about. But only now are they coming to the recognition of the country. I think, in response to Congressman Thompson, we put together that list of all the laws that we have to abide with the United States.
When I first started as president of the Wine Institute, when flying over Kansas and Nebraska, they used to stop serving wine because of the air rights of those States. And in Iowa, you used to have to carry a personal permit. Every time you bought a bottle of wine or beer, they used to record it. And when you would have to show up for an interview for a job with your own personal permit, showing when you bought the wine and how much volume. Utah used to have specially colored bags. Talk about identification, the scarlet letter. You used to have to walk out with a specially colored bag to show that you are carrying out an alcoholic beverage.
Well, it is that same mindset with all these really abhorrent laws that go back to the deals that FDR made in 1933 and prohibition. And so what we are seeing today—electronic commerce, Internet, all these different laws—derives from the fact that what we have from the better part of a half century belongs to a political process called the United States but not the common market of the United States.
And little by little we are trying to chip away at that with the Supreme Court decisions and hopefully even with the Scarborough bill that we can work on trying to bring us back to where we belong, which is free enterprise in the United States along with everybody else. But you have to be mindful of social responsibility.
We do have alcohol in our product. We can't dismiss that. So I totally accept what Congressman Radanovich said about our need to address these issues and not sweep them up under the rug. But I think we are all united on that front. And we are showing that in States when we are passing these laws.
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Mr. POMBO. Thank you. Thank you very much. I am going to dismiss this panel. Thank you very much for your testimony and the answers to the questions.
If there are any further questions of this panel, they will be submitted to you in writing and you can answer them in writing for the committee record. That would be appreciated.
[The information appears at the conclusion of the hearing.]
Mr. POMBO. I'd like to call up our second panel. This is Mr. Randy Lange, Mr. Diego Olagaray, Mr. Joe Cotta, and Ms. Kris O'Connor, the second panel.
[Recess.]
Mr. POMBO. I call the hearing back to order. I would like to welcome our second panel. And we had a special request. I am going to start with Ms. O'Connor. I don't have to tell you what the request was, but somebody wanted you to go first. If you are ready to begin. STATEMENT OF KRIS O'CONNOR, EXECUTIVE DIRECTOR, CENTRAL COAST VINEYARD TEAM
Ms. O'CONNOR. You caught me a little off guard. I want to thank you very much for having me speak to the group. I appreciate the opportunity.
My name is Kris O'Connor. I am with the Central Coast Vineyard Team, and we are a local grower group on the Central Coast of wine grape growers, and the subject is pretty much represented by Santa Barbara, San Luis Obispo, Monterey County; that's the area that has most of the acreage. And we really have grown a lot in the last decade. We currently represent, depending on the numbers that you look at, maybe 20 percent of the acreage, total, for the State. And our acreage has doubled approximately in about the last 10 years. The mission of our group is to promote sustainable vineyard practices on the Central Coast.
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Our grower group represents more than 30,000 acres of wine grapes. We have large growers, small growers, so we really represent a large cross-section of the types of winery growers. And while the group is primarily a grower group, we welcome collaborative partnerships from cooperative extensions, University of Cal Poly, environmental interests, agriculture commissioners. So we have welcomed input from a lot of different groups.
The group's claim to fame is that they created a Positive Point System, which is a thousand point evaluation system for evaluating the extent of sustainable practices on the farm. It's divided into six categories: soil, water, pest, viticultural management, wine quality, and continuing education. And it's primarily a series of yes or no questions: Do you manage cover crops for weed control? Do you monitor your soil moisture and use that information for irrigation scheduling practices? Do you monitor beneficial insects in your vineyard, just to name a few. So it's a series of yes or no questions about farming. And one of the great things about it is, we can quantify that. And so we received a grant from the Department of Pesticide Information in the last few years and evaluated acreage.
And the way it worked was, John carried around a book in his truck, and he would hand it over to his neighbor. And they would get together for coffee and read the evaluation, and we would tally it up. And the end result was, they evaluated over 10,000 acres, which, considering it was kind of a word-of-mouth effort, we felt was very significant, and we learned a few things. We learned that scores were improving over time, maybe by one or two or three practices the growers were incorporating. We learned that husks, soil, viticultural, and continuing education increased over about 10 percent, but we still needed soil and water management. And so those were basic things that we learned from the 3 years.
And it makes an interesting point. It really points out that wine grape growers are willing to voluntarily incorporate reduced risk practices into their own operation, that the Central Coast vineyard operators are increasing their adoption of sustainable practices, and that growers are willing to learn about progressive management approaches.
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So, you know, we have talked to different growers. Why did you do it? Why did you think it was helpful? What did you think was helpful? The growers said, ''We really appreciated having a network of other growers to talk about these practices: What was working, what wasn't working.''
It was a great education tool; just the process of going through these questions was very educational. And also it helped growers to kind of put on one page the management practices: ''Scores are very good, but maybe I need to focus on more of my soil management in helping my soil practices.''
So the team really worked very hard in about the first 3 years of developing this protocol, really building the foundation for the team. And once they really decided that it was solid, they decided to take it on to the next level, to really promote it or do demonstration projects, outreach, and education about specific practices. So in the last year, these are different things that we have done.
We have recently completed the first tailgate meetings in each county. And in that, we had over a hundred people show up, which we thought was really great for our first meeting. We had one in each county. And it was, again, one grower talking to another grower about the practices that he was using on his farm.
We have had monthly forums in which we invite maybe environmental interns to our group to talk about maybe habitat issues or oak conservation or land-use concerns. On the Central Coast there's a big threat in terms of several environmental issues with regard to law enforcement, pollution, all of the watersheds that have been listed for steelhead.
We, within a few years, would really face the threats of adjudication from the Water Quality Control Board. And, also, just driving down the roads, you can see the vineyards developing all along the highway. It's really taken a front focus in environmental issues as it pertains to vineyard development. So we have addressed those basically, again, from a grower-to-grower approach, and we really built up a lot of bridges with other groups.
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We established template farms that highlight just excellent practices. And, again, we can share with growers what works, what doesn't work. We distribute newsletters to over 300 people. We have also made several presentations at industry meetings. Just in the last year alone we met over 1500 people by appearing at different meetings on different topics.
I'll finish up on a few points. The key to our effectiveness, I believe, is the grower-to-grower approach. We could be effective and carry a message that will be more effective than other people carrying that message. And this is what we've shown by our tailgate meetings. People just hang out to see how Steve was applying compost in his farm. They wanted to ask him how he did it. So he can talk about things where maybe our cooperative extension person wouldn't have that same credibility for the grower. So that's been key.
Because we are both a regional group and a national group, we can focus on issues which are of concern to our growers, and we can address those. We have also bridged a strong collaborative tie with various groups and agencies. We have NRCS with wetland restoration, habitat restoration, oak preservation, short courses. So we are building ties with different groups for more educational programs. And, again, the team is willing to listen to a revision of the Positive Point System to include oak habitat issues, recycling issues on the farm, but there are several things that we need.
We have put a lot of cash in trying to find a grower and winery who will receive grants. But in order to take it to this next level and in order to really capitalize on the momentum that we have gained in the last few years, we need to continue to build more partnerships with government and private industry in order to help support our efforts.
And also, as it was said earlier, we need better information about these practices. It's good to have anecdotal information as a foundation about the growers, well, has there been a study? We would like to have good science to back up what we are trying to support.
I really want to thank you for the time and allowing
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us to participate here. And come and visit one of our vineyards. Thank you.
[The prepared statement of Ms. O'Connor appears at the conclusion of the hearing.]
Mr. POMBO. Thank you very much. Mr. Lange.
STATEMENT OF RANDALL LANGE, PRESIDENT, CALIFORNIA ASSOCIATION OF WINE GRAPE GROWERS
Mr. LANGE. Thank you. My name is Randall Lange, and I am a third-generation wine grape grower in the Lodi-Woodbridge area. My brother Brad and myself formed our farming vineyard management business about 25 years ago.
I am currently chairman of CAWG, California Association of Wine Grape Growers, which represents more than 60 percent of the State's annual tonnage of grapes crushed for wine and concentrate. I am also vice-chairman of Wine Grape Growers of America, and that is an organization of State associations representing wine grape growers throughout our Nation.
Competitive global markets, falling quantity prices, and higher U.S. production costs are driving changes in our rural landscape. Wineries have been under a bright light here in California these past few years, increasingly more important because of a necessity to look at high values, especially crops, to keep our agricultural land in production.
The Lodi district here is a very perfect example of the change that is going on in our agriculture and, of course, of wineries of the local economy. Remember that wine is the ultimate value-added product.
Wine production adds value of approximately $2 for every $1 of farming. The winery industry contributes to the U.S. economy in many diverse ways: It generates jobs, exports tax revenues, tourism, and, of course, great wines. It also is the center of intense global competition that may seriously affect the future of this business. The industry's future success will hinge on public as well as private policies that will facilitate rather than impede responses to these new competitive conditions.
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The wine and winery business has enjoyed tremendous growth and success in recent years. Wine grapes are now grown in 45 out of the 58 counties in the State of California and covering more than 427,000 acres and also is in the top 10 agricultural products in this State.
However, we cannot expect these good times to continue by maintaining the status quo. There are a number of challenges facing this industry which I will—and the other speakers of this panel will—briefly outline.
America's consumer base is one of our biggest challenges. Our consumer research conducted by the Wine Markets Council indicates that 11 percent of the adult population consumes over 88 percent of the wine sold. We will need to expand that base, or we will easily have our hands full of unsold wine.
We are part of a dynamic global wine market, and it requires constant change to meet the future. Although the total market has been increasing slowly, the way wine is sold has changed substantially toward varietal, more expensive wines. Table wines are coming away from the jug wines and wine coolers.
And California has showed the world how to market wines by using widely recognized and easily remembered varietal names like chardonnay, merlot, cabernet, and zinfandel. The response has been a huge increase in varietal planting here and throughout the world.
A major concern for growers right now is the potential erosion in the value of the varietal name by allowing new fruit-flavored wines to carry varietal names in a way that implies that they are premium varietal wines. We believe ATF should establish guidelines to clearly distinguish this type of product from regular varietal wines, which are required to have a minimum of 75 percent of the wine derived from the grape of the variety before being named on the label.
We believe the consumers benefit by labeling that clearly describes what is in the bottle, whether it is 100 percent grape wine or a beverage wine with fruit flavors added. And it has been very frustrating for us, because Cotta brought this to the attention of the ATF about this issue 2 years ago. And please understand, these labels that are currently on the market are there with ATF approval. So our argument is with ATF. We need new consumers, and we need new, innovative products to sell wine. We cannot afford to do it at the expense of what made it successful so far.
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We are also facing tremendous pressures that change the way we farm as urban areas continue to grow into traditional farming areas. Wine grapes have a tremendous story to tell, whether it's about our aggressive pursuit of farm systems in great pest management or our efforts to maintain/restore wildlife habitat and/or conserve water use through irrigation systems. But it takes time to change, and we need technical support to help make it happen. And it needs to happen without impacting our ability to be productive and profitable. The life of a vineyard is about 25 years. Ours is an industry that requires a long-term vision and commitment, not to mention considerable financial investment.
The U.S. wine industry has undertaken a unique exercise to work together to sustain the success that we have enjoyed thus far. This strategic planning process, called WineVision: American Wine in the 21st century, began more than a year ago. And next month we will need to establish an objective to achieve our stated goals, which are to make American wine an integral part of the American culture, to be a preeminent supplier to the global market, and to be the leader in sustainable practices.
The change in business and political climate for wine coupled with wine grape production has led to a decision to move forward with this plan a very easy one. Our willingness to go through this exercise signals a strong desire to be a significant contributor to a thriving economy, a growing rural job base, and a healthy environment for all of us to enjoy.
However, we can't do it alone. We need government to be our partner, not our adversary. We need your help to make sure our policy is as fair as it is for our competition. We need your support to invest and research and provide matching funds to the industries committed to research. That will keep us competitive. And in particular, we ask for your support, for a new long-term position with the Agricultural Research Service to focus on development of sustainable vineyard practices.
We urge you to maintain catastrophic profit-sharing and expand it to meet the needs especially agriculturally. But it really won't matter if we don't have profitable farms and profitable businesses if they must be sold to make huge cash payments when they are passed down to the next generation. We support efforts to enact further estate tax relief and protect our family farms.
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We appreciate your support for the industry and invite you back here as often as you can visit and watch the continued evolution of wine and wine grape growing in California and especially here in Lodi. Thank you.
[The prepared statement of Mr. Lange appears at the conclusion of the hearing.]
Mr. POMBO. Thank you, Mr. Lange. Mr. Olagaray.
STATEMENT OF DIEGO OLAGARAY, PRESIDENT, LODI DISTRICT GRAPE GROWERS ASSOCIATION
Mr. OLAGARAY. Yes. Thank you, panel and committee Chairman. My name is Diego Olagaray. I am a wine grape grower. I am here representing the Lodi District Grape Growers. I am the current president.
And just to give you a little bit of background on the grape growing business, it was founded back about 40 years ago. And the reason it's a voluntarily grower organization and the reason it was formed is that it deals with political issues of wine grapes in our region.
Some of the issues that we deal with on a daily basis include land-water use, labor, research, and over the past 10, 15 years there's been a considerable amount of change that has taken place in our district, at one time the thriving table-grape industry. Specifically today I am going to be testifying on the issue of labor and how it relates to our local district grape growers.
One of the biggest concerns we have got in our region is the available supply of skilled farm workers, and especially when it is being utilized in our cultural practices. Harvesting and pruning of wine grapes are some of the largest uses of skilled farm laborers. I mean there's also a fair number of acreage of new development production which requires a lot of hand labor and planting, trellising and vine training.
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Our districts have emphasized a quality that has greatly increased our product awareness and also our reputation of wine. To keep a success of that ability is to be able to harvest the grapes in a timely manner, at optimum maturity levels, which, in essence, make wine grapes an actual perishable commodity, since in a matter of days it could reflect high sugar levels.
It's also very, very important, since 50 percent of our wine grapes are locally harvested by hand, that we have an active supply of skilled labor force. In the past years our industry has been without a large supply of skilled farm laborers for an industry that is highly labor-intensive. However, we foresee the potential in the near future of the need for skilled farm workers due to several reasons.
One of the reasons is, as these new vineyards come into development, there is definitely going to be a need to warrant hand pickers. Another reason is, one of the concerns is with the high number of invalid or false Social Security numbers, and growers are starting to be faced with getting phone calls from the Social Security Administration on this. Another concern is the cumbersome and ineffectiveness of the H–2A guest-worker program. And then, finally, I'll address the need for research funding for trying to provide additional funds for research.
Currently, a GAO study showed that 40 percent of the current field workers have some type of invalid or false Social Security number. The numbers don't correspond with the names. And soon-to-be released figures by the Department of Labor indicates as high as 50 percent. And, as I mentioned earlier, growers are receiving letters from the Social Security Administration regarding this issue.
And there is also concern about the degree that the INS is going to take to enforce their laws. More particularly during the harvest time, are they going to go in and raid some of the harvest fields.
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Currently, the H–2A guest-worker program—the labor certification progress of that program is cumbersome, and the program basically doesn't work for wine grape growers. Just a little personal experience, our family just doesn't grow wine grapes; we also raise sheep. And in that business we have labor associates where we obtain—steal shepherds from other countries through the H–2A program. Even with a staff that does this on a daily basis, it takes them anywhere up to 3 months to break in a shepherd for us. And the only reason we are doing that is we have no other available choices.
Where with the grape industry, we haven't got 3 months or 6 months to deal with it. There's a labor shortage. We need it in a day or two, because of the perishability of the crop.
And then, finally, there's a need for research funding. America has somewhat moved away from the skilled labor force and moved on to better-paying jobs and other industries. We are going to lose that group of skilled labor farm workers. And eventually we are going to have to mechanize our operations. And there are some instances where we are capable of doing that. And there's also a concern by certain wineries that couldn't honestly go pick by hand because of the volume.
And, finally, I just want to propose a few solutions as far as the H–2A guest-worker program. We are requesting that we work together and try to work toward some kind of basic reform where we would have a timely access to these workers, to where it won't happen to our harvest.
And then as far as research, for that, we want to see if we could form a joint partnership to match funds with. We could work together on that. In conclusion we have got a challenge ahead of us, and we are willing to work with you to try to achieve these goals.
Thank you.
[The prepared statement of Mr. Olagaray appears at the conclusion of the hearing.]
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Mr. POMBO. Thank you. Mr. Cotta.
STATEMENT OF JOE COTTA, PRESIDENT, LODI-WOODBRIDGE WINE GRAPE COMMISSION
Mr. COTTA. Mr. Chairman, committee members, thank you for this opportunity. I have been a Lodi district California wine grower for more than 20 years, and I am a past president of Lodi District Grape Growers Association.
Eight years ago the Lodi growers of Crush District 11 passed a referendum to establish the Lodi-Woodbridge Wine Grape Commission. Completely funded by all district growers, the Commission's mission is to enhance the profitability of winery production with the promotion of research and education. I have been an elected commissioner since 1993, and I will be serving as chairman for this year.
The commission conducts extensive practical research trials and demonstration projects in cooperation with the University of California, California State University, and local growers. The on-farm approach we have developed within our extensive Integrated Pest Management Program has grown beyond my dreams. The program has been recognized numerous times through various awards, grants, and media coverage. It has been well-known and highly successful not only conducting effective research, but also at delivering relevant information to nearly 700 grape growers in our district.
I am one of those growers. And some of my personal experiences with IMP include predator mite releases, close monitoring of both harmful and beneficial insects in the field, cover crop to reduce dust and provide refuge for those beneficial pests, using environmentally softer and more pest-specific materials, owl boxes for rodent control, manual leaf removal to reduce leaf-hopper population, and increase in pesticides effectiveness; also newer advanced electrostatic spraying equipment that allows us to use pesticides at lower rates, developing vineyards and farms around the old oak tree and not through them. I feel that all these practices are allowing our natural habitat for both man and wildlife.
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All of us involved in farming are scientists in one form or another, but IPM programs cannot be operated as an exact science. As we study the pieces to the puzzle, they don't always fit. Sometimes we have to turn them around and look at them from another perspective in order to do that.
IPM should be thought of more as a concept, where one idea may work while the other may not. You need to take into account the fact that soils, climates, native trees and plants and native pests are beneficial and will vary from area to area to area. Oftentimes there may be an area within a parcel, and compensations need to be made.
But when we begin to cooperate and work together, we can see the results that will ultimately be a reduction in chemical usage and dependency. The reason this IPM program has been accepted with open arms is because growers like myself are starving for site-specific information. We can see the logic in using less chemicals both environmentally and financially. Also, we have an awareness of future restrictions, which are imminent.
In an effort to stay ahead of the game, our IPM program has been a response to the implementation of FQPA. We feel that though FQPA's requirements are strict, for us they are achievable, providing for two things happening: First, that the EPA does not interpret the requirements under FQPA to unnecessarily restrict agricultural chemicals without proven evidence, citing actual health risks. And, second, that if the FQPA takes action resulting in restriction or cancellation of essential crop protection products because of factual health risks, that the EPA should provide for emergency, time-limited registrations until new, safer products are registered and made more available to us.
Also, as new and safer materials are developed, the registration needs to be expedited, because for us, FQPA departs from business as usual. The FQPA will cause grief among growers, suppliers of agricultural products, and others in relation to this industry.
Pesticide availability is constantly threatened, but little is ever said about replacement products and strategies that will successfully prevent destructive pest damage. These replacements could include more important and understood components of IPM, such as more efficient management, better understanding about crops and how pests interact, stimulus to breed or create pest-resistent crops, the expansion of consulting services, and development of retail markets that cater to the consumers.
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The EPA and USDA could provide funding or alternative funding through the UC system in California. Currently, in the development stage is a project called I