The Canadian Food Inspection Agency (CFIA) is reversing an earlier decision that said wines from the West Bank labelled "Product of Israel" could no longer be sold in Canada.

The agency initially asked the Liquor Control Board of Ontario — which in turn asked liquor vendors — to stop selling and importing wines from the Psagot and Shiloh wineries labelled "Product of Israel."

The agency had said the label would not be an acceptable country of origin declaration for wine products that have been made from grapes in the West Bank occupied territory, which Ottawa does not officially recognize as a legitimate part of Israel.

The Canadian-Israel Free Trade Agreement was not fully considered when dealing with this matter, the CFIA said. (B'nai Brith Canada handout)

The decision drew condemnation from Jewish groups in Canada, as well as the Israeli embassy in Ottawa.

The CFIA said this afternoon that it had not fully considered the Canada-Israel Free Trade Agreement when dealing with the matter.

Under the agreement, Israel refers to any territory where the country's customs laws are applied.

The CFIA also says it regretted the outcome of the wine labelling assessment, and confirmed the products in question can be sold as currently labelled.