811.114 Liquor/1223
The Secretary of State to the Secretary of the Treasury (Morgenthau)
My Dear Mr. Secretary: Referring to a telephone conversation between an officer of the State Department and Assistant Secretary Wayne Taylor, I wish to submit the following comment in supplement to the information contained in my letter of May 5, 1938 on the question of continuing the present temporary authorization of the Federal Alcohol Administrator of the use under certain restrictions of the term “Cognac” in labeling brandies produced in this country.
[Page 346]Over a long period of years the French Government has sought to obtain protection in this country for French geographic appellations of origin of wines. Originally it sought protection for all such appellations, but recently it appears to be inclined to accept at least tacitly the contention of the American authorities that such names as Sauterne and Chablis have become generic in the United States. However, it continues strongly to maintain that “Cognac” has not become a generic term, and it feels that the only reason why a domestic producer could conceivably want to use that term would be in order to deceive the consumer into believing that his product was the same as brandy produced in the Cognac region of France. It feels that this representation of a domestic product as being the same as its brandy, which to a considerable extent owes its qualities to the soil of the Cognac region and which has reached a high state of perfection through many generations of production by the same families, has a definitely adverse effect upon the consumption in the United States of French Cognac brandy.
During the conversations preliminary to the negotiations for a trade agreement with France and during the early stages of the negotiations, the French Government sought to obtain in the proposed agreement adequate protection for French geographical appellations of origin, particularly “Cognac”. However, it was not legally feasible to include in the Franco-American Trade Agreement any provision which would prohibit the use of the term “Cognac” to describe domestically-produced brandy. Nevertheless, the French Government proceeded to the conclusion of that agreement which became effective June 15, 1936 and is still in force.
I have been informed by the French Embassy that in proceeding with the negotiation of the agreement notwithstanding our inability to accord satisfaction in the matter of the protection of French appellations of origin, the French Government was influenced by the fact that regulations then in force in the United States effectively prohibited the use of the words “Cognac” or “Cognac brandy” except for brandies distilled in the Cognac region of France.
As stated in my letter of May 5, the third paragraph of Article XI of the Trade Agreement was intended to protect each Government against subsequent legislative or administrative acts of the other which would “have the effect of nullifying or materially impairing any important object of the agreement”.
The French Government has made it abundantly clear to us that it considers the action of the Federal Alcohol Administrator in modifying the regulations governing the use of the words “Cognac” and “Cognac brandy” as action on our part which adversely affects the [Page 347] concession on brandy accorded to France in the Trade Agreement. As evidence of this, there is enclosed a copy of the translation of a note from the French Embassy dated May 20, 1936,16 written at the time the Congress was considering the Liquor Tax Administration Act.
We found it impossible to obtain a modification of that Act, and after its passage we received further oral representations from the French Embassy but were able to persuade it to defer any formal representations in the matter as the section of the Act which would permit the use of the word “Cognac” in labeling domestic brandies (Section 506) would not become effective until the President had appointed a majority of the members of the Federal Alcohol Administration contemplated in Section 501.
When the Federal Alcohol Administration began to approve labels bearing the word “Cognac” in spite of the fact that Section 506 of the Liquor Tax Administration Act had not become effective, the French Embassy renewed its complaints; but we were again able to dissuade it from immediate formal representations because of the temporary character of the Administration’s action.
I can assure you that the concession on brandy which we accorded to France in the Trade Agreement is considered by the French Government as one of the important concessions accorded to France. The brandy interests in France form a strong and articulate minority able to bring great pressure upon the French Parliament. While of course the specific concession relating to brandy consisted in a reduction in the import duty, the French Government nevertheless attaches great importance to retaining the prohibition of the use of the word “Cognac” which existed at the time of the signature of the Trade Agreement.
If Section 506 of the Liquor Tax Administration Act should become effective in its present form and the Commission should then find it proper to permit the use of the words “Cognac” or “Cognac brandy” in labeling domestic products, there would of course be nothing we could do other than accept the fact and face the situation which would then arise.
I wish to repeat my hope, however, that pending the coming into effect or the amendment of Section 506 of the Liquor Tax Administration Act, the Federal Alcohol Administrator will not find himself under the necessity of taking any action which might prejudice the trade agreements program.
Sincerely yours,