Canada's Wine Shipping Laws Go to Court

Dairy, egg and poultry producers worry about impact of interprovincial trade

by Peter Mitham
wine canada border crossing lcbo ontario new brunswick
Shea Coulson will represent five British Columbia wineries at a hearing about interprovincial shipping laws this week.

Ottawa, Ontario—Canada’s interprovincial trade laws head to the country’s Supreme Court this week for a hearing vintners hope will finally get wine flowing between provinces without interference from the country’s 13 provincial and territorial liquor boards.

“The moment for this case has arisen,” said Shea Coulson, a lawyer representing five British Columbia wineries that together received intervener status in the hearing that takes place in Ottawa this Wednesday and Thursday.

The five wineries (50th Parallel, Liquidity Wines, Noble Ridge Vineyard, Okanagan Crush Pad Winery and Painted Rock Estate Winery) are among 23 organizations granted intervener status in the two-day hearing. They represent the ad hoc Coalition of Small B.C. Wineries, a gathering of more than 100 British Columbia wineries seeking changes to interprovincial shipping laws.

An expensive beer run
The hearing is the culmination of years of efforts by industry to free the grapes (as one rallying cry put it), but the case is actually built on beer.

While winemakers quip it takes a lot of beer to make good wine, a 2012 trip by New Brunswick resident Gérard Comeau to stock up on cheap Quebec beer ended with the Royal Canadian Mounted Police pulling him over and ticketing him under New Brunswick’s liquor laws for transporting 14 cases of beer and three bottles of spirit. New Brunswick only allows resident to bring 12 pints of beer or a bottle of wine or spirit into the province, with infractions drawing a minimum fine of $240. Comeau, who lives two hours away from Quebec in Tracadie, N.B., was fined $292.50 for his beer run.

A fine was something broadcaster Terry David Mulligan didn’t garner in his high-profile 2011 trip across the B.C.-Alberta border, hoping to put matters to the test with a suitcase full of wine. Comeau made headlines, however, because Quebec beer runs were common practice locally, and the RCMP crackdown compounded anger against high liquor markups in New Brunswick.

The case became a national cause célèbre when Comeau argued his ticket was unconstitutional. Canada’s founding document, the Constitution Act of 1867, stated in section 121 that, “All Articles of the Growth, Produce, or Manufacture of any one of the Provinces shall, from and after the Union, be admitted free into each of the other Provinces.”

What does it mean to be free?
Whether “free” means simply free of duties and tariffs or of non-tariff barriers, too, including regulations mandating the use of specific import agents and in certain quantities, pushed the case to the Supreme Court of Canada. The prevailing interpretation stems from a 1921 case regarding Alberta liquor merchant Gold Seal Ltd., eventually entrenched in the federal Importation of Intoxicating Liquors Act (1928) that delegated control of liquor to the provinces and territories.

This week’s hearing questions the basis for the law.

“There’s never been a test case on this section of the constitution before. There have been attempts, but provincial governments have generally elected not to charge individuals,” Coulson said.

Comeau’s pushback against his ticket, combined with a report from Canada’s senate last year in the run-up to this year’s adoption of the Canadian Free Trade Agreement (which governs interprovincial trade), has put the issue front and center.

Senators “recommended that the provincial governments and the federal government work together to remove (trade) boundaries, and that if they didn’t do that they recommended that a reference be made to the Supreme Court of Canada on Section 121,” Coulson said.

The recommendation followed the federal government’s passage of Bill C-311 in June 2012, which made it legal (in the eyes of the federal government) to transport wine between provinces, “if the individual brings the wine or causes it to be brought into another province, in quantities and as permitted by the laws of the latter province, for his or her personal consumption, and not for resale or other commercial use.”

This in turn followed several decisions that suggested the prevailing interpretation of the constitution from 1921 is no longer acceptable.

“The courts have already indicated that in previous decisions,” Coulson said. “My view is that there will be change, because the Gold Seal case is almost certainly not good law anymore.”

What does change look like?
What the new liquor landscape will look like in Canada is anyone’s guess, because there are so many stakeholders. Canada’s provinces and territories want to maintain control over liquor sales, given the lucrative stream of tax income these provide. Concerns over the right to structure local markets is important, a concern raised by Canada’s supply-managed farm sectors: dairy, eggs and poultry.

If the court allows wine to flow between provinces, the supply-managed sectors feel the stable framework that regulates milk, egg and poultry production in each province could be at risk. Dairy, egg and poultry farmers have billions invested in their operations and already face pressure from international trading partners to cede shares of their industry to foreign product; discussions to restructure the North American Free Trade Agreement, for example, have called on Canada to scrap supply management altogether.

“What is the legal test going to be for Section 121? Because that determines the scope of these constitutional protections. Is it narrow or is it broad?” Coulson asks. “It’s uncertain, and that’s where the interest lies.”

Vintners are optimistic that change is in the works.

Christine Coletta of Okanagan Crush Pad is in Ottawa for the hearing and said recent polls indicate the public is on board with a more liberal shipping regime.

David Enns of Laughing Stock Vineyards near Penticton, B.C., told Wines & Vines last week that the deal he and his wife Cynthia struck to sell to Arterra Wines Canada Inc. sets the stage for them to focus on growing the business, particularly its wine club, as the country opens to direct-to-consumer (DtC) shipments.

“Think of the landscape five years from now when you have cross-border shipping opened up,” he said. “You have a winery that has 5,000 members, and you’re producing wines at a world-class level because your margins are there.”

Tinhorn Creek Vineyards in Oliver, B.C., marked the passage of Bill C-311 in 2012 with an offer of free shipping anywhere in Canada, and DtC sales now account for 23% of its business.

“The opportunity this brings is it opens up the potential of the DtC channel to the whole Canadian market, in particular, being able to get our wines in an affordable way to Ontario and Quebec,” said Jan Nelson, sales and marketing director at Tinhorn Creek.

Ontario-based Andrew Peller Ltd. acquired Tinhorn Creek earlier this year, and Ontario is a prime candidate for DtC shipments, but the province doesn’t allow them.

The risk of retribution from the tight-knit government liquor monopolies means few wineries will risk shipping direct to consumers in provinces that haven’t explicitly allowed it to date (those include British Columbia, Manitoba and Nova Scotia).

Some wine does flow between provinces now, despite the prohibitions, because there’s no way to police every shipment. The movement underscores the greater potential if everyone agreed it was OK.

“If the law changes, you’ll see the development of those channels relative quickly because they’re warm channels,” Nelson said. “We’re doing the groundwork now so that if a positive judgment comes through, we are ready to approach those markets.”

Posted on 12.06.2017 - 12:42:10 PST
I'm an American lawyer, with no knowledge of Canadian law, but I nevertheless find this interesting. In the US, by virtue of the 21st Amendment to the Constitution which repealed Prohibition, states have wide-ranging authority to regulate alcohol within their borders. The reason why there has been a loosening of restrictions on interstate shipment is because of cases applying another provision of the Constitution - the Commerce Clause. In Canada, not only is there not a provision in the Constitution like our 21st Amendment, there is the constitutional provision (Section 121) that runs counter to provincial control of alcohol shipment. In the US, when a constitutional provision and a statute conflict, the statute falls. I'm assuming that the same principle applies in Canada, so if the provincial laws on alcohol shipment and transportation conflict with Section 121, I assume they will be struck down.