James Gallagher

As the last wine grapes of California’s unusually early and often lighter 2026 harvest are picked in the North Coast and beyond, Rep. James Gallagher is pressing federal trade officials to reconsider policies he said favor imported wine over American-grown grapes.

The recently seated Republican from California’s 1st Congressional District, which as of this year includes Lake and parts of Sonoma and Mendocino counties, sent a letter Wednesday to U.S. Trade Representative Jamieson Greer seeking changes in wine-origin labeling, tax refunds on imported bulk wine and the classification of Canadian alcohol products. He also wants expanded exports amid shrinking sales, unsold grapes and surplus inventories.

An early harvest, a lingering glut

At a California Association of Winegrape Growers briefing Thursday, Allied Grape Growers President Jeff Bitter described a harvest running about 10 days ahead of normal, with statewide yields potentially among the lowest in 15 years. Coastal yields fell more sharply, although he cautioned against applying reports of 30% to 50% losses statewide.

John Azevedo of Jackson Family Wines said during the CAWG briefing that his Sonoma County teams began picking in July rather than the typical mid-August. Some red varieties have been hit especially hard, while Chardonnay held up better. Smoke concerns also kept some Sonoma Pinot Noir unharvested. In Napa County, Kendall Hoxsey-Onysko of Yount Mill Vineyards reported a 41% drop in production at her operation.

“What we have heard is not a simple or uniform story,” association President Natalie Collins said at the briefing.

But a smaller crop cannot erase existing inventories. Industry analyst Jon Moramarco of Gomberg Fredrikson & Associates estimated California ended 2025 with 22.1 months of wine inventory, compared with a historical average of 18.5 months. His Thursday presentation on latest figures noted that nationwide wine shipments declined 6.5% over the 12 months through September.

Bitter said at the harvest briefing that the 2026 crush likely would be smaller than 2025’s 2.63 million tons, but warned that even a sharp reduction might not clear wine inventories accumulated during stronger production years.

What counts as American?

Federal rules allow wine labeled “American” or “United States” to include up to 25% foreign-grown agricultural products if the remainder is domestically grown and the wine is finished in this country. Gallagher wants that threshold raised to 100%.

“An American label should mean 100% American-grown grapes,” Gallagher told the Journal in an email Thursday .

The proposal revisits Assembly Bill 1585, sponsored by CAWG and Family Winemakers of California. The measure passed the Assembly 67-0 in May but stalled in June before a Senate hearing amid opposition from Wine Institute and major wine companies. Gallagher supported it while serving in the Legislature.

Collins said growers from California and other states had sought a similar federal labeling change around 2009, but the petition failed to advance. The organization is now returning to Washington. Collins told NBC Bay Area on Wednesday that growers have removed more than 45,000 vineyard acres over the past year.

Wine Institute’s Charles Jefferson, vice president of federal and international public policy, told the Journal that existing rules help wineries adjust to varying grape supplies, harvests and consumer demand. He noted the California appellation already requires 100% state-grown grapes, thanks to action by the Legislature.

Moramarco questioned whether a national labeling change would significantly increase grape purchases. Imported bulk wine largely goes into lower-priced products, he said, many already labeled with foreign origins rather than “American.”

Bitter, whose cooperative represents about 400 growers, a quarter in the North Coast, said that displacement of inexpensive domestic wine pushes surplus grapes and pricing pressure upward through the market, ultimately affecting premium regions as well.

“They don’t start drinking wine at $40 or $50 a bottle or higher,” Bitter said of consumers, underscoring the connection between everyday wines and Napa and Sonoma’s premium bottles.

A contested tax refund

Gallagher’s letter also targets “duty drawback.” That permits qualifying companies to recover most duties and taxes paid on imported wine when they export comparable wine. Under substitution rules, an excise-tax refund can be available even when the exported wine did not incur a corresponding tax.

Gallagher pointed the Journal to analysis by the Lodi Winegrape Commission estimating more than $204 million in duty drawback refunds from 2018 through 2024. Treasury and Customs and Border Protection attempted to restrict the practice in 2018, but a federal appeals court upheld the invalidation of that restriction in 2021.

Gallagher and Collins acknowledge that changing the underlying treatment could require Congress. A similar restriction on excise-tax refunds for tobacco products was included in the House-passed version of the One Big Beautiful Bill Act, the sweeping tax and spending law enacted July 4, 2025, but was removed by the Senate before final passage.

Collins said the refunds make foreign bulk wine more attractive while California growers struggle to sell their crops. Wine Institute countered in an email to the Journal that drawback encourages exports and helps U.S. wine compete abroad.

In a July analysis published by the American Enterprise Institute, UC Davis economists Daniel Sumner and Olena Sambucci argued the benefit may chiefly stimulate American bulk-wine exports rather than additional imports, because imports already outpace exports.

Moramarco likewise cautioned that eliminating drawback could reduce both imported wine and exports, leaving growers with less benefit than anticipated.

Canadian classification dispute

Gallagher in his letter also questioned Canadian imports classified as bulk wine that growers say do not meet the U.S. definition.

The Congressman cited figures showing the northern neighbor imported three times what he said Canada’s domestic grape crop could produce. That amounted to 53.6 million gallons in 2024, down from the 2023 peak of 59 million, according to Gomberg Fredrikson data provided to WineBusiness.

Collins told the Journal that this concern centers on alcohol fermented from sugar or grain-based ingredients and used in some wine-based cocktails or spirits products instead of grape-derived material.

Growers say that classification and associated tax treatment have eroded a traditional outlet for excess grapes destined for brandy and other uses. Gallagher seeks a federal review of the classification, not a finding that individual shipments broke the rules.

Buyers beyond the border

Gallagher’s request of the USTR also seeks restored access to Canada, historically the largest U.S. wine export market, and reduced barriers in India and Vietnam.

Wine Institute told the Journal it is working with trade officials on Canada’s provincial restrictions while pursuing marketing efforts in more than 40 countries. Its representatives plan to attend Vinexpo Mumbai next week, and the organization also hosted Vietnamese sommeliers in California last year.

Jefferson of the Wine Institute said that growing overseas sales would help both wineries and the growers supplying them, even as the industry debates import rules.

For Collins, though, stronger exports must be accompanied by policies that she believes give domestic grapes a fair chance in American markets.

“We want to ensure that our policies here at home are not incentivizing foreign products over locally grown products,” Collins said in an NBC Bay Area interview.

Jeff Quackenbush joined North Bay Business Journal in May 1999. Reach him at [email protected] or 707-521-4256.