American Vintners Association

1200 G Street, NW, Suite 360 u Washington, D.C. 20005 u www.americanwineries.org u Phone: (800) 879-4637u Fax: (202)347-6341

August 12, 2002

On August 20, Ms. Terri Lankford will join the AVA staff as Director of Communications & Membership Services. This is a new position that combines membership services with the critical functions of communications and media relations - capabilities that will be essential to increasing AVA's profile and effectiveness as the national voice for the American wine industry. Terri has substantial membership and communications experience working for non-profit organizations, and will be a tremendous asset to our efforts to strengthen and revitalize AVA.

The Senate Agriculture Committee is planning to mark up a bill in early September to provide assistance to farmers who suffered weather related losses in 2001 and 2002. AVA is trying to see if grape growers who had significant crop losses due to late spring frosts in those year could be helped. We understand that a late spring frost in 2002 did damage crops in Northeastern states. It would be most helpful if affected growers or state associations could fax or e-mail Bill Nelson with details including percentage of crop loss and approximate dollar value of those losses. FAX: 202 783-2756 E-mail: bnelson@americanwineries.org.

The Senate Agriculture Appropriations Subcommittee has now approved its version of the 2003 Agriculture Appropriation. Many items of concern to AVA were supported in the mark-up but in general the Senate bill is not as favorable as the House version. A summary follows:

Item	House	Senate
CSREES Viticulture Consortium	$2 million	$1.6 million
CSREES Pierce's Disease	$2 million	$2.5 million
ARS Grape Genetics at Geneva NY	+$300K
ARS Sustainable Viticulture	+$300K
ARS Pierce's Disease	+$600K	+$750K
ARS Viticulture Idaho		+$300K
ARS Northwest Viticulture		+$400K
APHIS Pierce's Disease Contain & Control GWSS	$17.5 million	$9.0 million

AVA expects both houses of Congress to pass bills in early September and for a conference committee to iron out differences later in the month. We will be trying to secure the highest possible funding levels for thee critical programs.

We believe that the only tax related bill which has a chance of passage for this Congress is likely to be a minimum wage increase with attached tax breaks for small business. We are trying to get repeal of the Special Occupational Tax included in this package. We are also trying to get H.R. 2354, Congressman Calvert's bill which would allow the partial expensing of capital costs of replanting after a disaster, included. Letters to your House and Senate members on these issues would be helpful at this time.

This summer AVA reviewed state winery statutes and conducted interviews with state liquor and agriculture regulators as part of an extensive survey to gain a broad picture of the laws that govern wineries and the support that states give them. Our goal has been to document and evaluate commonalities and provide a picture of practices that encourage a successful industry.

AVA is crafting this information into a model state winery law and an article which will summarize state practices. At least six states have expressed interest in using AVA's work as they are currently engaged in rewriting their winery laws. Expect to see the publication of the data and several articles on the subject in the coming months as well as the publication of the complete data on our website.

The FTC recently announced that it will hold a series of workshops in October to examine barriers to e-commerce for a variety of consumer product categories, including wine. The genesis for the workshops is a study conducted a few years ago by the Progressive Policy Institute ("Revenge of the Disintermediated: How the Middleman is Fighting E-Commerce and Hurting Consumers"), which documented efforts by bricks and mortar businesses to pass laws and impose other barriers to discourage on-line sales of automobiles, travel services, eyewear, wine and other products. One panel will examine the three-tier system, direct shipment and reciprocal laws, and the implications of the current system for consumers. The FTC has asked David Sloane to participate in the panel, and to document the market access problems of small wineries. If you have anecdotes or examples of market access problems that have hurt your winery, please contact David (x122) with that information.

The House and the Senate are moving quickly with legislation to establish a Department of Homeland Security, and hope to have a final bill on the President's desk by September 11^th. The House has already passed its bill, but the Senate did not get its bill to the floor prior to the August Congressional Recess. At issue for our industry is what happens to the Bureau of Alcohol, Tobacco and Firearms, which most observers agree will probably taken out of the Treasury Department and folded into the new Cabinet-level Department of Homeland Security. Some alcohol industry groups have explored separating the alcohol regulatory functions from the firearms and explosives functions performed by ATF, but there is little likelihood that Congress will do that in light of the pressure to complete work on the measure before the anniversary date of the terrorist attacks. Creation of the new department will be the largest consolidation and reorganization of U.S. government agencies in history.

American Vintners Association

1200 G Street, NW, Suite 360

Washington, D.C. 20005