Just Don’t Call It Tequila ...

As trade squabbles go, it’s a tempest in a margarita glass.

But for Temecula resident John B. Wagoner, the cross-border quarrel over his homegrown liquor business is turning into a major headache.

In October, when the 44-year-old finally perfected his recipe for an alcoholic beverage distilled from the pina, or core, of blue agave plants, he knew he faced a potential legal problem. Just as the French own the name Champagne, the Mexican government holds -- and vigorously protects -- the rights to the name tequila.

So Wagoner came up with Temequila, a play on the name of his adopted hometown that he hoped would forestall a legal challenge.

The name “kind of flowed nicely,” said Wagoner, who plans to start selling his 100-proof concoction next month for $58 per 750-milliliter bottle.

But in Mexico, Wagoner’s wordplay is seen as a distinction without a difference.

A Guadalajara-based group that represents agave growers, tequila producers and distributors sent a letter last month that warned him to stop using the name by Monday or face legal action.

Making a spirit called tequila is “impossible to do in any other part of the world than Mexico -- not in South Africa, not in Europe, not in the United States,” said Ramon Gonzalez, director of the Tequila Regulatory Council.

Temequila, he said, is “phonetically similar” enough to fool tequila buyers into thinking it’s the genuine, Mexican-made article.

The Mexican government, which contends that the name tequila is specifically protected by the North American Free Trade Agreement, is also weighing in.

“We don’t see it as a minor problem,” said Salvador Behar, general counsel for trade at the Mexican embassy in Washington. “Whoever is trying to mislead the consumer is a threat and we take it seriously.”

The small scale of Wagoner’s operation is not an issue, he added. “If it’s one bottle or 10,000 bottles, the problem is the same.”

More than 8.5 million cases of tequila were sold in the U.S. last year, according to the Distilled Spirits Council of the United States. That was up 5.8% over 2003 -- the fastest growth of any major category of distilled spirit. And nearly 78% of the 109 million liters of tequila that Mexico exported last year went to the United States, the tequila council reported.

“This is a very important matter for [Wagoner],” said Tom Pirko, president of Santa Barbara-based consulting firm Bevmark. “But it’s much more important for Mexico.”

Wagoner, a Compton native who owns a staffing agency in Long Beach that finds jobs for developmentally disabled people, was an unlikely candidate to start an international trademark dispute when he bought land in the rugged hills near Temecula in 1996. The divorced father of two was in search of fresh air and open spaces -- and he also was looking for something to grow on his five-acre parcel; his motivation more aesthetic than agricultural.

Wagoner’s neighbors were partial to avocado or citrus groves, but he settled on the low-sprouting blue agave, a cousin of the wild variety that dotted the hills near his land.

“I didn’t want something that would block my view,” Wagoner said.

The prickly plant would thrive, he surmised, because the local climate, elevation and soil -- a reddish-brown volcanic variety -- were similar to conditions in the Mexican state of Jalisco, the center of the country’s tequila industry.

Wagoner bought about 100 2-year-old agave “pups” from a plantation near Guadalajara, the capital of Jalisco. At around the same time, Wagoner said, he learned there was a shortage of blue agave on the market, caused by the plant’s long growth cycle -- eight to 12 years -- and the spread of a pesticide-resistant weevil. The expanding U.S. taste for tequila, the main ingredient in margaritas, added to the demand.

Tossing his landscaping plans aside, Wagoner at first considered selling his agave plants to Mexican tequila producers. Then he decided it would be more lucrative to make his own.

After a few years of studying distilling texts, numerous visits to distilleries in the United States and Mexico, lots of Googling and dozens of test runs, Wagoner had his agave spirit. With money from his savings -- he won’t say how much -- Wagoner established Skyrocket Distillers.

Only the problem of the product’s name remained.

In 1974, “tequila” was the first trademark granted protection by the Mexican government as an appellation of origin, which said only agave spirits made in the city of Tequila in Jalisco state could bear the name. The designated area has since been widened to include the entire state, as well as 56 towns and villages in four other states.

Mexico’s protection is similar to the European Union’s Protected Designation of Origin, which defends the names of products that are geographically distinct such as wines, cheeses, hams, sausages and oils.

The French version of the legislation, the Appellation d’Origine Controlee, covers several dozen regional products, including Champagne, which can only be produced in the Champagne region, and Roquefort cheese, which can only be made from the milk of a specific breed of sheep and processed by spores in certain caves near the small town of Roquefort.

Trading partners stipulate in international trade pacts that geographic appellations must be respected. Just as clauses in NAFTA protect tequila, Gonzalez of the producers’ council said, other parts of the agreement bar Mexican manufacturers from using American trademarks such as bourbon and Tennessee whiskey.

Behar, the embassy counsel, said his government was still evaluating its legal options under NAFTA. One possibility: filing a complaint with the Alcohol and Tobacco Tax and Trade Bureau, which vets labeling of alcoholic beverages intended for interstate sale.

Wagoner, meanwhile, is pursuing his own options. His attorney wrote to the producers’ council Friday, asking for more time to respond to its ultimatum. Wagoner also is pleading his case to California’s congressional delegation, and Rep. Darrell E. Issa (R-Vista) is looking into the matter.

“Obviously we have an interest in ensuring the rights of our constituents,” said Dale Neugebauer, Issa’s chief of staff. He said the congressman planned to meet with the tax and trade bureau this week.

Wagoner also is talking to the tax and trade bureau, even broaching the idea of changing his product’s name to Temequela in hopes of mollifying the Mexicans.

The suggestion was a non-starter with the agency, he said. The bureau declined to comment on the case.

Even with help from Congress, Wagoner faces formidable foes in the tequila industry and the Mexican government, said Bevmark’s Pirko.

“I wouldn’t want to be a little guy fighting that,” he said.

Despite the tequila council’s threats, Wagoner said he was sticking to his mid-April launch date. To that end, he has just replaced his old 25-gallon still with a new 300-gallon version he designed himself, financed with money from outside investors. Last month, 20,000 bottles arrived from a factory in China, squat, bell-shaped and painted red, white and blue with “Made in the United States” emblazoned on the front.

In total Wagoner has about 3,000 plants on his land and his parents’ 20-acre plot nearby. One plant, he said, is enough to make about 50 bottles of liquor, and he’s reached agreements with two other landowners in Temecula to help him grow more. His goal for the first year is to produce 120,000 bottles, or 90,000 liters. (Jose Cuervo, Mexico’s oldest tequila maker, sold nearly 30 million liters in the U.S. in 2003.)

Wagoner said his product, a clear, or blanco, agave spirit, is aimed at the “sophisticated connoisseur.” Most high-end tequilas are only 80-proof, he said, and many of the cheaper brands mix the agave with other vegetable sugars. His spirit’s selling points are its distillation from 100% blue agave sugars and its high alcohol content.

Emulating the wineries that dot the Temecula area, Wagoner wants to open a tasting room. He hopes to line up distributors and have his product on liquor store shelves next to high-end Mexican tequilas.

If, of course, he can come up with a name that won’t cause an international incident.

“Just to get my product on the market,” Wagoner mused, “we’re thinking about calling it Temecula.”