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Cablegate: Brazil: Cachaga and Tennessee Whiskey

VZCZCXRO0347
RR RUEHRG
DE RUEHBR #1482 3181913
ZNR UUUUU ZZH
R 131913Z NOV 08
FM AMEMBASSY BRASILIA
TO RUEHC/SECSTATE WASHDC 2893
INFO RUEHRI/AMCONSUL RIO DE JANEIRO 6856
RUEHSO/AMCONSUL SAO PAULO 3041
RUEHRG/AMCONSUL RECIFE 8683
RUEHRC/DEPT OF AGRICULTURE WASHDC

UNCLAS BRASILIA 001482

SIPDIS
SENSITIVE

STATE FOR WHA/BSC, WHA/EPSC

E.O. 12958: N/A
TAGS: ETRD ECON BR
SUBJECT: Brazil: Cachaga and Tennessee Whiskey

SENSITIVE BUT UNCLASSIFIED

1. (SBU) Summary: William Foster, Assistant Administrator of the
Treasury Department's Alcohol and Tobacco Tax and Trade Bureau
(TTB), met with Agriculture, External Relations, and Receita Federal
(Brazilian Customs) on October 29th to propose a Memorandum of
Understanding, discuss new Brazilian alcohol regulations, and
exchange updates on pending rules governing market access of cachaga
(Brazilian rum) in the U.S. market and bourbon and Tennessee whiskey
in the Brazilian market. End summary.
2. (SBU) During Foster's technical meeting with Celio Porto, Under
Secretary for International Affairs in the Brazilian Ministry of
Agriculture (MAPA) and other MAPA officials on October 29, 2008,
Foster presented a draft information sharing Memorandum of
Understanding (MOU) for MAPA's review and consideration. Foster
highlighted TTB's MOUs with China and Italy and current negotiations
with France, noting an MOU with Brazil would increase communication
between the two governments and provide a forum for cooperation and
mutual understanding. Porto drew attention to the shared
responsibilities within the Brazilian government pertaining to an
MOU of this type, and stated that MAPA could not sign an MOU on
behalf of other Ministries. Foster offered the option of adjusting
the text as deemed appropriate by MAPA. MAPA agreed to review the
proposal and provide feedback.
3. (SBU) Foster raised USG concerns regarding Brazil's new
regulations for wine and distilled spirits. MAPA officials stated
that there had been several public hearings on these new norms and
many comments, both internal and external, were received. MAPA has
reviewed and started replying initially to the comments related to
mixed alcoholic beverages. Due to the large number of comments,
substantial changes had been made to the new regulations for mixed
alcoholic beverages, and a new public hearing will be conducted
soon. Porto noted that many Brazilian alcohol regulations were
out-dated, requiring that MAPA review these regulations and change
certain norms.
4. (SBU) When questioned about TTB's position on the recognition of
cachaga as a Brazilian product, Mr. Foster explained that U.S. law
makes distinctions based on class and type. Because cachaga is a
type of alcohol distilled from sugar cane, it currently falls under
the class of rum. Foster added that the proposed rule, which would
establish cachaga as new type of rum, and would permit labeling as
cachaga without reference to rum, had been written and was expected
to be released soon for public comment. Foster noted that if
Brazil's rules continued to omit bourbon and Tennessee whiskey from
the list of distinctive products, there would be opposition to the
law from the U.S. industry during the public comment period, making
implementation unlikely in that scenario.
5. (SBU) The discussions on cachaga and bourbon and Tennessee
whiskey continued during Foster's meeting with Mr. Philip
Fox-Drummond Gough of the Market Access Division at the Brazilian
Foreign Ministry (MRE). Gough confirmed that the GOB would establish
bourbon and Tennessee whiskey as distinctive products of U.S. origin
only, thereby protecting them in the Brazilian market. In return for
this concession, Gough expressed his hope that TTB would speed up
the passage of the rule identifying cachaga as uniquely Brazilian.
Foster confirmed that the processing time to publish a final rule
would be greatly reduced if bourbon and Tennessee whisky are granted
distinctive product status, given that there would then be fewer
objections raised during the public comment period on the cachaga
rule.
6. (SBU) Discussions with Dr. Marcelo Fisch of Receita Federal
focused on tobacco and alcohol where both sides agreed that
falsified undervaluing of imports for customs valuation purposes was
a challenge USG and GOB shared. Both sides agreed that TTB would
send to Receita Federal a draft of TTB's proposed
information-sharing MOU and a letter explaining the MOU's benefits
for Receita Federal's review.
7. (SBU) Comment: The concession by the GOB to work to add bourbon
and Tennessee whiskey to the Brazilian list of distinctive products
has been a helpful outcome of the Economic Partnership Dialogue
process. This concession, confirmed during the meeting with the
MRE, will help in finalizing the pending U.S. rule identifying
cachaga as distinctive Brazilian rum in the U.S. A TTB
information-sharing agreement with relevant GOB agencies would also
be helpful in fostering further Brazilian-US regulatory cooperation.
End comment.
SOBEL

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