On April 8th, Bill Morneau, Canada’s Minister of Finance, introduced the Budget Implementation Act, 2019 (the “Budget Bill”). Included in the Budget Bill is an amendment to the Importation of Intoxicating Liquor Act (the “IILA”) that will remove all remaining federal barriers to interprovincial trade of alcohol and permit direct-to-consumer shipping of alcohol across provincial borders to the extent that the receiving province also permits such transactions.
Concretely, this means that the federal government will no longer restrict Canadian wineries, breweries, and distillers from shipping their products to consumers across Canada, allowing restaurants, hotels, and private consumers to access Canadian products not sold by their provincial local liquor authority. This is an exciting opportunity for the Canadian alcohol industry which employs nearly 20,0000 people and had sales exceeded $8 billion in 2018, including exports of almost $1 billion.
Previously, section 3(1) of the IILA prohibited both the importation and inter-provincial transport of alcohol by anyone except the Crown and provincial liquor authorities. So, if the LCBO or the SAQ did not carry that exceptional Okanagan Pinot Noir, or the surprisingly good IPA from a small brewery in North Bay, you had to apply to the provincial liquor authority for a licence to purchase it. Now, only importation without a licence will be prohibited, allowing for “direct-to-consumer” sales across provincial borders.
Here is the text of the proposed changes to subsection 3(1):
A catalyst for this revised thinking on the interprovincial trade in alcohol was the case of Gerard Comeau, 64, a resident of New Brunswick. Gerard was arrested in 2012 after buying beer in Pointe-à-la-Croix, Quebec, and trying to bring it home to Tracadie, New Brunswick. He was fined $292.50 for violating New Brunswick’s limits on the possession of alcohol that had not been purchased from the New Brunswick Liquor Corporation. Mr. Comeau challenged the fine and the case went all the way to the Supreme Court. The Court held that provincial restrictions on the trade in alcohol could be constitutional if those restrictions were incidental to another valid legislative purpose. The Court upheld New Brunswick’s restriction on out-of-province alcohol because the objective of the law was “not to restrict trade across a provincial boundary, but to enable public supervision of the production, movement, sale, and use of alcohol within New Brunswick.”With this amendment, the Federal government is abandoning the field of interprovincial trade in alcohol to the provinces, who will continue to enact whatever rules they believe are appropriate.
As a result of the Comeau decision, direct-to-consumer sales of alcohol within Canada are still subject to applicable provincial laws that can validly restrict interprovincial sales of alcohol providing those restrictions are incidental to another valid legislative purpose. These provincial legislations on direct-to-consumer shipping of alcohol vary greatly in form and content. For instance, from West to East:
- British Columbia: Only 100% Canadian wine can be directly shipped to consumers from a licensed winery, as provided by the Liquor Possession Regulation
- Alberta: Liquor for personal use or consumption can be imported from another province if it is in the direct possession of the individual or as part of the individual’s baggage
- Manitoba: Any Canadian wine for personal consumption can be directly shipped to the consumer into the province
- Ontario: LCBO prohibits private individuals to import wine from another province except if personally carried and for personal consumption
- Quebec: Direct-to-consumer shipping of alcohol is prohibited, unless the alcoholic beverages are in the direct possession of the individual or as part of the individual’s baggage when brought into Quebec and intended for personal consumption;
- Nova Scotia: permits direct-to-consumer shipping of Canadian wine for personal consumption if the winery is duly licensed under the laws of the province, if 85% of the agricultural products used to make the wine are from the province in which the winery produced the wine, and if the individual buys the wine directly from the winery that produced it.
Since inter-provincial shipments of alcohol continue to be subjected to provincial legislation that varies from one province to the other, it is recommended that you consult an advisor to determine how your business could benefit from the change in federal law while also complying with provincial laws.