South Africa bids a final farewell to Port

South African ‘port’ and South African ‘sherry’ are illegal on liquor store shelves as of 2012.

The reason of this regrettable state of affairs is that the naming provisions of the Wine and Spirits Agreement (as part of the Trade Development & Cooperation Agreement (TDCA) between the European Community (EC) and South Africa) takes final effect in denying South Africa the use of these terms effective as of 1 January 2012.

The TDCA was negotiated in the late 1990’s and came into force on 1 January 2000. It was the first free trade agreement that the EC had ever negotiated. The port and sherry debacle is a telling example of the asymmetry in negotiation ‘smart’ when a small country negotiates unilaterally with a large power. It is now well understood that the EC obtained a highly favourable deal for its agricultural sector at South Africa’s expense, especially as far as the wine industry is concerned. This is evidenced in the wine industry by the fact that South Africa conceded so-called ‘WTO Plus’ concessions, meaning that the EC was able to extract better terms than are provided for in the multilateral trading rules under the WTO, to which both countries are, and were then, party to.

The port and sherry debacle relates to the EC laying claim to the terms as geographical indications. A geographical indication (GI) means an indication, including an Appellation of Origin, used for the purpose of the identification of a wine originating in the territory of a country. In the WTO GI’s are addressed by the Agreement on Trade Related Intellectual Property Rights (TRIPS). In relation to the WTO rules the TDCA went beyond the WTO in 2 key aspects. Firstly the TDCA firmly defines the terms port and sherry (among others that is) as GI’s when it is questionable that these are actually GI’s; and secondly the TDCA waives the WTO provision which allowed countries to continue using GI’s which they adopted and used in good faith in 10-year or longer period prior to the conclusion of the TRIPS Agreement in 1994. In South Africa port and sherry had been used for at least 100 years, well within the WTO’s 10-year minimum requirement.

Back in 1999 South Africa contended that ‘port” and sherry’ are not GI’s as defined in the WTO as they do not describe any particular region or location in the EC (notably in Spain or Portugal in this case). South Africa contended that the terms were simply vaguely derived from regions in Spain and Portugal. For ‘sherry’ the word is drawn from ‘Jerez’ in Spain, defined as ‘Jerez, Xérès and Sherry in the TDCA. For ‘port’ the word is drawn loosely from ‘Oporto’ in Portugal, defined as ‘Oporto/Portwein/Portvin/Portwijn’ in the TDCA. Note that the latter incarnations look decidedly non-Portuguese. Wine aficionados have also pointed out that the products do not even necessarily originate in Jerez or Oporto within EC. Portuguese port is not produced anywhere near the town of Oporto although it is often aged and blended there. Sherry is made from grapes farmed in the Jerez area, but much of the actual manufacture happens in other Spanish towns. These vagaries are now part of trade legend, but have no legal value today as ‘port’ and ‘sherry’ have been directly conferred GI status in the text of the TDCA.

In terms of the TDCA’s final deal the following timeframes were applied as regards the future use of the terms ‘port’ and ‘sherry’:

• For exports to the EC, the use of the terms would cease as of January 2000.
• Use of the terms for exports to the rest of the world (outside of SADC) would cease as of January 2005.
• Use of the terms for exports to SADC countries would cease as of January 2008.
• Use of the terms on the domestic market in South Africa (and the Member States of SACU) would cease as of 1 January 2012.

Is it all gloomy? Well, there is a quid pro quo that was supposed to ameliorate the strong medicine to some extent. This sugar with the medicine was in the form of a grant of Euro 15 million for the restructuring of the South African wines and spirits sector and for the marketing and distribution of South African wines and spirits products. This grant was supposed to have been made available in 2000. To date none of this grant has been forthcoming. The overall answer is thus that ‘yes’ things are fairly gloomy.

The good news is that the South African liquor products formerly known as ‘port’ or ‘sherry’ are still excellent quality products at good value for money and will no doubt still enjoy a dedicated consumer following. Note that there is a short window of opportunity for buyers wanting to get a ‘port’ label as a collector’s item – products placed on the shelves in the local market prior to today, may still be sold until these stocks on hand are exhausted.

Businesses requiring advice on the labelling implications for stocks of these wines on hand, and future marketing considerations, are welcome to approach Hilton Zunckel for guidance.