The Ontario Provincial Government has brought new liquor regulations into force that effectively block (at least temporarily) the recent federal shipping law reforms (see earlier article). The recent federal reforms removed the 91 year old federal prohibition on the interprovincial shipment of alcohol. As a result of those reforms, the only restrictions on interprovincial alcohol shipment are now any applicable provincial laws. Up until now, Ontario\’s provincial laws did not specifically address the importation of alcohol into that province (the LCBO had issued a \”policy\” on this matter but a policy is not a law). However, the Ontario government has now introduced a new regulation (Importation of Liquor into Ontario) that prevents the importation of alcohol into Ontario from other provinces unless the alcohol is imported by the LCBO or under its authority. This change will make it illegal for Ontario consumers to import wine directly from wineries in other provinces (since the importation would not be authorized by the LCBO). Nevertheless, on an interesting and potentially positive note, the new provision is scheduled to be repealed on January 1, 2020. Presumably, the Ontario government is intending that prior to that time, they will introduce additional changes or systems such that the blanket prohibition is no longer needed.
Author: MarkH
On Friday, June 21st, Bill C-97 (the 2019 Budget Implementation Act) was given Royal Assent, which means that the Bill became law in Canada. One of the sections of this Bill amended the Importation of Intoxicating Liquors Act so as to completely remove the federal restriction on the interprovincial shipment and transport of alcohol which has been in place since 1928. As a result of these changes, there is no longer any federal prohibition on the movement of alcohol between provinces. Customers of wineries (or of other alcohol shippers) may still be subject to any relevant provincial laws on the possession of alcohol that has been imported from another province but the federal law is no longer. This is a very positive step in the long fight to reform Canada\’s post-prohibition shipping restrictions. More analysis in the days and weeks ahead.
This regulatory update covers a recent policy change that may affect BC wineries. The policy change relates to the permissible uses for alcohol production (i.e. wineries) on property that is contained in the Agricultural Land Reserve (ALR).
ALR Policy Change. In December 2018, the Agricultural Land Commission posted a new policy that covers the operation of alcohol production facilities (including wineries) that are located on ALR land (\”Policy L-03 – Alcohol Production Facilities in the ALR\”). This applies to many, if not most, BC wineries. The new policy can be read and downloaded here: ALC Policies and Bylaws. The change that wineries may wish to review is the addition of new criteria relating to the allowable \”development area\” for a winery on the particular parcel of ALR land upon which the winery facility is located. The new policy permits a maximum of 5% of the parcel to be used for the \”development area\”. The calculation only includes the parcel on which the production facility is located and does not extend to other land owned or leased by the winery. The definition of development area is very broad and includes all buildings, roads, parking areas and landscaping. For example, if a winery is located on a parcel of ALR land that is 10 acres, it would be permitted a development area of 0.5 acres. Many existing wineries may be off-side with this new rule. While I would not expect the ALC to enforce the policy change in respect of existing facilities, this change may affect new winery projects and any proposed changes to existing wineries.
BCLDB Manufacturer Info. I also note that the BCLDB has now added a section to their web site that provides information and documentation on some of the policies that they administer that relate to BC manufacturing: Info for BC Liquor Manufacturers. Particularly, there is now publicly available information relating to the categorization of wineries in BC as either \”commercial\” or \”land-based\”. For example, the sales agreements for both types of wineries are now available as well as the land-based winery criteria and direct delivery information (see BC Manufacturers – Sales Agreements). This is a positive step in respect of the availability of this information to industry (although I note that the 2018 BTAP report, which I chaired, recommended that all manufacturer regulation be centralized at the BC LCRB).
As noted here earlier, the Canadian Government indicated in its Federal Budget 2019 that it would amend the Importation of Intoxicating Liquors Act (\”IILA\”) so as to remove the federal prohibition on the shipment of alcohol between provinces. The actual text of the Budget implementation bill was released last night. As indicated, the Budget Bill carries through on what was promised. Section 3(1) of the current version of the IILA prevents the shipment or transport of any alcohol into Canada or between provinces unless the alcohol is sent to the liquor authority (liquor board) in the destination province. Amendments made to the IILA in 2012 and 2014 created a limited exemption from this prohibition if the alcohol was intended for personal use and if the provincial laws in the destination province permitted it. Few provincial laws were changed to allow for the exemption (see Shipping Laws Article).
The Budget Bill proposes a more substantive change. It changes the IILA such that it only applies to shipments coming into a province from outside Canada. In other words, inter-provincial shipments of alcohol are no longer subject to the IILA prohibition at all. The earlier exemptions are removed because of this change in approach. These reforms would mean that if a winery is making a DTC shipment, then it would no longer be subject to any federal restriction on the shipment itself. The customer in the receiving province might be subject to any relevant provincial laws on the possession of imported alcohol (the constitutionality of such laws was upheld in the recent Comeau case) once the alcohol was received, but the actual shipment between provinces would no longer be prohibited. This is a positive change which will be welcomed by the wine industry if the Budget Bill passes and the changes are brought into effect.
I note on a practical level, that if these changes are to proceed, the federal government will have to pass the Bill before the end of June, when the House of Commons breaks for a summer recess. This is the last scheduled sitting of Parliament before the next federal election. There is also a news release on this issue: Canada Acts to Eliminate Barriers to InterProvincial Trade in Alcohol.
The Federal Budget 2019 was tabled in Ottawa today. Of note to the wine (and alcohol) industry, the Budget Document promises at p.119 to change the federal law (the Importation of Intoxicating Liquors Act or \”IILA\”) that restricts the shipment of alcohol between provinces. Specifically, it states:
To facilitate internal trade, the Government intends to remove the federal requirement that alcohol moving from one province to another be sold or consigned to a provincial liquor authority. Provinces and territories would continue to be able to regulate the sale and distribution of alcohol within their boundaries.
This promise has the potential to positively impact the regulatory restrictions that currently prevent consumers from purchasing wine or other alcohol from other provinces. The federal restriction is a core part of the regulatory regime that prevents DTC sales and shipment and if the federal restrictions are changed, then DTC could conceivably become easier. The devil is in the details … and, of course, in whether this promise results in actual legislative changes (particularly given the fact that an election is looming). Don\’t hold your breath … but hang tight for the details and cross those fingers.
The upcoming Vancouver International Wine Festival\’s trade conference will host a symposium on February 27th dedicated to discussing the place of Canadian wine in global wine markets. This should be a fascinating discussion moderated by WineFest keynote speaker, Jon Bonne, and including panelists Chris Coletta (OK Crush Pad), Nik Darlington (UK importer), Janet Dorozynski (Trade Commission, Global Affairs Canada), Dr. Jamie Goode (UK wine writer and academic), as well as Sebastien LeGoff (well-known sommelier and director of Cactus Club\’s wine program). There are many other excellent events of interest to the trade all of which are listed on the WineFest\’s trade conference agenda here.
The annual BC Wine & Liquor law conference will be held on Monday February 25th in Vancouver, which is the beginning of the week of the Vancouver International Wine Festival. Great line-up of topics and speakers this year including analysis of this year\’s liquor policy priorities from government, a report on the work of the Business Technical Advisory Panel, an update on interprovincial shipping, international trade developments, and a summary of the progress being made on geographical indicators in BC. As this will be the 10th anniversary of the conference, there will also be a special closing address from industry pioneer, Harry McWatters. Full details of the conference including registration links are here: BC Wine & Liquor Law Conference. Chris Wilson and myself will be chairing this year\’s conference.
There is a \”50% off\” discount for wine industry members: if you use the online registration form, change the Rate on the form (dropdown box) from \”regular\” to \”industry member\” and the reduced conference fee will apply.
The proposal to create a sub-geographical indicator for the Naramata Bench area in the Okanagan has received approval from those wineries and growers who qualified to vote. The BC Wine Authority has issued the results here: Naramata Bench Ballot Results. The Yes vote ranged from 71% to 81% in favour depending upon the categorization of the results. However, in all cases, it exceeded the minimum 2/3 threshold required for approval. The BCWA will now submit a report and recommendation to the Minister of Agriculture.
The Alberta Government has indicated that it is filing a trade challenge (presumably under the Agreement on Internal Trade) aimed at opening up the Ontario market for small liquor manufacturers from Alberta. The news release (Trade Challenge Launched to Support Small Brewers) indicates that only 20 Alberta products are currently sold in Ontario while 745 Ontario products are sold in Alberta.
At the same time, Alberta has indicated that it is canceling its Small Brewer Development Program which provided grants to small local breweries. This program (and an earlier preferential markup system) were the subject of legal challenges, two of which found that the programs discriminated against out-of-province producers by providing financial incentives to small in-province manufacturers. In its place, Alberta will introduce a volume-based \”universal small producer\” markup such that small producers from anywhere can receive lower markup if they produce less than 50,000 hectoliters of annual worldwide production.
One of the earlier legal decisions was the Steam Whistle case which applied reasoning set out in the Supreme Court of Canada\’s Comeau decision (previously discussed on this blog). The Alberta government had previously indicated that they would appeal Steam Whistle. While there is no mention of the appeal in the news release, it appears from these developments that the Alberta government has determined that it cannot implement preferential markups and is now switching to a non-discriminatory markup system.
This is an “early fall” update on the legal issues arising from the Supreme Court of Canada decision in R. v. Comeau which was handed down in April of this year.
The full decision is located here: R. v. Comeau (2018 SCC 15). As is widely known, the case dealt with an individual (Gerard Comeau) who drove to Quebec from New Brunswick, purchased some beer and spirits, and then brought them back to New Brunswick. After being stopped by the RCMP, he was charged with a provincial offence since the amount of liquor that he ‘imported’ from Quebec exceeded the amounts permissible under the applicable provincial law. Mr. Comeau’s lawyers argued that the provincial laws were unconstitutional because they violated a section of the Constitution that relates to free trade between the provinces. The Court rejected this argument and upheld the ability of a provincial government to place legal restrictions on the inter-provincial trade in alcohol (which could also include DTC shipments) so long as the primary purpose of the law is not to restrict trade. Nevertheless, the Court also stated that such restrictions may not be permissible if they discriminate as between “in-province” producers and “out of province” producers.
This latter issue could end up being important in respect of provincial policies or laws that treat wineries (or other liquor manufacturers) from one province differently than those from other provinces. A summer decision (Steam Whistle Brewing Inc v Alberta Gaming and Liquor Commission, 2018 ABQB 476) in Alberta applied the reasoning in Comeau and found that preferential markups and grant programs for beer in Alberta were unconstitutional since they provided beneficial treatment to local in-province producers over those from out-of-province producers (i.e. an impermissible ‘trade restriction’). This decision, if upheld, means that the Alberta government cannot impose a different markup regime on producers from another province if it provides better treatment for its local producers. The Alberta government has indicated that it will appeal this decision.
If the trial level decision is found to be correct then the end effect could be that a provincial government would have to “level up or level down” in regards to markup treatment. In other words, if a government provides lower markups, exemptions or grants to local producers, then it would have to either extend those benefits to all Canadian producers (regardless of provincial origin) or eliminate them entirely. Such a result would have the potential to affect markup policies in a number of provinces.