(WineSpectator) - A proposal before the federal agency in charge of wine labeling has vintners in emerging regions complaining that Napa Valley is trying to hurt their businesses. But supporters of the idea, including the trade group Napa Valley Vintners (NVV), argue that it’s about closing a loophole that damages the credibility of American wine appellations. Is it protectionism or protecting terroir?

Under current law, a wine labeled with an appellation—whether it’s Napa Valley, Finger Lakes or Rocky Knob—must be made with fruit primarily from that appellation (at least 75 percent in some areas, 85 percent in others) and be “fully finished” within that state or a neighboring one.

But there is an exemption: If you are an out-of-state winemaker in, say, New York, and make a wine from at least 85 percent Napa Valley AVA fruit that you purchased and transported to New York, you can call it Napa Valley on the label as long as you only sell it in New York. Wineries do this for multiple reasons: Their vineyards are not producing enough fruit yet; a bad harvest has led to a small crop; or they depend primarily on tasting-room sales and a Napa wine has cachet.

Proposal 160, now being considered by the Alcohol and Tobacco Tax and Trade Bureau (TTB), looks to end the exemption. “It’s about ensuring that wines sold in a given state comply by the same rules of a given AVA, regardless of whether the wine is sold in New York or Texas,” said Richard Mendelson, chief counsel for the NVV. “That when the name Napa Valley is on the label, it means the same thing everywhere. If you don’t meet the requirements for the AVA, you cannot use the AVA on the label. One of those requirements is that the wine is fully finished in the state the AVA resides in.”