Canada's Wine Duties Hinder Trade

Wine-producing border states may take on northern neighbors' punitive taxes

by Peter Mitham
Bill Nelson Wine America
WineAmerica president Bill Nelson says the national trade association supports action to reduce Canadian duties on wines purchased in the U.S.
Kennewick, Wash. -- The joke among wineries in states bordering Canada is that the worst possible customer is a pregnant Canadian, because she has two reasons not to buy wine -- her child’s health and the markups border officials will levy on anything she buys for consumption later.

Residents returning to Canada receive no exemption for wine purchased during day trips; those who stay 48 hours or longer can bring home a maximum of two bottles of wine duty-free, after which duties of 80% or more are collected by border guards, based on provincial legislation.

“Canada’s border tax policies ensure that virtually no Canadian tourists will want to buy New York wine,” Sen. Charles Schumer (D-NY) said in a news release at the end of January, arguing that a $20 bottle of wine would be subject to a $16 to $20 mark-up because of taxes on entering Canada. Schumer’s intention to fight the mark-up has the support of wineries in Washington, Oregon, Michigan and California, as well as WineAmerica, the national trade association based in Washington, D.C.

WineAmerica is waiting for the issue to have “a little more traction” before launching its own campaign against the mark-ups, the group’s president Bill Nelson told Wines & Vines, but he said that WineAmerica is supportive of action.

“I think they’re very restrictive on wine, which is why there’s an issue here,” he said of Canadian import rules. “People love to visit wineries, and we love to encourage Canadians to visit wineries, and one of the things you do when you visit wineries is bring back a couple of bottles of wine.…That ought to be something easy and inexpensive to do, so long as you’re not doing commercial quantities.”

Nelson said a reasonable limit would be to allow travelers to bring home a case of wine, or some other modest amount. U.S. travelers are allowed to bring back a liter of alcohol duty-free, regardless of the length of their time outside the country, with excess amounts facing a nominal duty compared to what Canada levies.

Opportunities for the Pacific Northwest to enjoy a boon from the Winter Olympics currently taking place in Vancouver also point to the importance of improving cross-border policies, said Robin Pollard, executive director of the Washington Wine Commission (WWC).

“There are some opportunities to work closer together,” she said. “We just need to figure out the best way to approach that.” WWC staff members are targeting impediments to accessing the British Columbia market for retail sales in particular, given the province’s proximity to Washington state. “There are some real impediments to market access in that province,” Pollard remarked at during a forum about the wine commission at Washington Association of Wine Grape Growers' annual meeting this month.

While the commission has enjoyed some success opening up the Quebec market, hosting a tasting in Montreal last June and bringing representatives of the Société des Alcools du Québec west last fall, B.C. has been a harder market to crack. “Quebec’s been very open,” Pollard said, while noting that progress is being made on B.C. access.

The groundwork is also being laid for a showdown on restrictions on the movement of wine across provincial borders within Canada.
Toronto lawyer Ian Blue of the firm Cassels Brock and Blackwell LLP told a two-day conference in Vancouver last fall that current prohibitions on interprovincial shipments may be unconstitutional. A second paper published last month in the professional journal Advocates Quarterly provided further evidence supporting his claim.

A letter written four years after the 1921 decision that’s generally accepted as providing the judicial backing for limits on the interprovincial movement of alcoholic beverages within Canada calls into question the ethics of the judges deciding the case and the legitimacy of their decision. “It is not going too far to conclude that (the letter) now opens to challenge all of Canada’s federal-provincial agreements on liquor control,” Blue writes.

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