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As the American wine industry began its march to becoming the $1 billion-a-year export industry it is today, the federal government established a system in 1978 to recognize the country's distinct grape-growing areas. The appellation system creating American Viticultural Areas, or AVAs, is popular in the wine industry, which uses it as a marketing tool.

Now the tiny federal agency that oversees the program has triggered an uproar within the industry because it wants to make it tougher to win an AVA designation -- a move highly unpopular with many vineyards. The Alcohol and Tobacco Tax and Trade Bureau, an obscure agency of the Treasury Department, thinks that the changes are needed to protect existing brands that use a region's name in their labels even if their grapes do not come from that region. But opponents say that by protecting those brands, the government would be misleading consumers as to the origins of the grapes.

This issue is at the heart of a controversy surrounding the proposed creation of a Calistoga AVA.

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The TTB argues that AVAs can be misused by wineries to limit competition. "We believe that preserving the integrity of the AVA program mandates clarifying the standards for AVAs to foster greater scrutiny on the establishment of new AVAs," agency administrator John J. Manfreda said in a written response to questions.

The TTB has proposed that Calistoga Cellars be granted a "grandfather" exemption that would allow it to continue to use the Calistoga name but with a disclaimer on the label to make it clear the wine does not meet the AVA standards.

Manfreda said such exemptions should be granted "only in the rarest of cases" and only with disclaimers providing adequate assurance that consumers would not be misled as to the origin of the grapes.