G/STR/Q1/CAN/16  
 
20 Octob er 2016 
(16-5714) Page: 1/4 
Working Party on State Trading Enterprises  Original: English  
 
STATE TRADING  
REPLIES TO QUESTIONS POSED BY T HE EUROPEAN UNION1 
REGARDING THE NEW AND FULL NOTIFICATIO N OF CANADA2 
The following communication, dated 20 October  2016, is being circulated at the request of the 
Delegation of Canada . 
 
_______________  
 
 
Canada  (all jurisdictions, general ) 
 
Canada claims in its general statement that its mark -ups are calculated in a uniform, non -
discriminatory nature. However, in different Canadian provinces mark -ups are calculated as either 
ad valorem, flat rate, combination of  ad valorem and flat rate or volumetric taxes.  
 
Questions 1 -2 
 
In the light of the above, how does Canada ensure the uniform nature of calculating the 
mark -ups? How does Canada ensure the de facto non -discrimination towards high value 
and high priced impor ted products, such as wines, in case of application of the valorem 
based mark -ups?  
 
Reply to Question 1  
 
Canada notes that the general description on the Provincial and Territorial Liquor Control 
Authorities indicates that provincial mark -ups vary by produ ct type and by jurisdiction (page 22 of 
the notification). As the liquor boards are each managed separately the operations are not 
identical.  
 
Reply to Question 2  
 
Canada 's approach is fully consistent with its WTO obligations. The GATT does not prescribe  the 
use of any specific method or system for the calculation of mark -ups. Canada notes that where 
provinces calculate mark -ups on an ad valorem basis the same method of calculation is applied to 
both domestic and imported products, regardless of value/pri ce, and is non -discriminatory.  
 
Page 25, British Columbia  
 
According to the notification the new wholesale price system applies also to government liquor 
stores and mark -ups are applied universally to all products regardless of country of origin.  
 
Question  3 
 
Could Canada clarify in detail how the principle of uniform and non -discriminatory mark -
ups is respected by the government liquor stores in British Columbia when determining 
the retail price?  
 
                                                
1 G/STR/Q1/CAN/12.  
2 G/STR/N/16/ CAN. G/STR/Q1/CAN/16  
 
- 2 - 
 
  Reply  
 
The objective of the wholesale pricing model is to create a level playing field for all retailers, 
including both private retailers and B.C. Liquor Stores (BCLS) operated by the Liquor Distribution 
Branch. Under the wholesale pricing model, all liquor retailers, except duty free stores, purchasing 
their pr oduct from the Liquor Distribution Branch pay a common wholesale price for that product, 
which is calculated based  on a common wholesale mark -up. B.C. Liquor Stores (BCLS) and private 
liquor retailers may then determine the retail price of the product, sub ject to minimum pricing 
rules. B.C. Liquor Stores apply mark -ups in a non -discriminatory manner while having the 
flexibility t o compete with other retailers.  For example, if a private competitor offers a promotion 
on a particular product, BCLS may choose t o lower their margin on the same product or a similar 
product type, to help ensure they remain competitive.  
 
Page 25, Manitoba  
 
According to the notification, beverage alcohol 's retail price is determined by applying combination 
of a category ad valorem ma rk-up and a flat rate per litre to the landed cost.  
 
Question 4  
 
Could Canada clarify in detail how it ensures the de facto non -discrimination towards 
high value and high priced imported products, such as wines, in case of application of 
the valorem based mark -ups in Manitoba?  
 
Reply  
 
As indicated in the notification, mark -ups in Manitoba are non -discriminatory as they are applied 
universally to all products regardless of origin. For more information on Manitoba 's mark -up pricing 
structure, please refer to the Manitoba Liquor & Lotteries Pricing and Listing Information 
http://www.mbllpartners.ca/sites/mbll_b2b/files/pdf_pamphlets/ Pricing -Listing -Information -
Manual_2016 -01-04_v4.pdf  
 
Page 27, Nova Scotia  
 
According to the notification, mark -ups in Nova Scotia are established by package size within 
product categories and are the same regardless of product origin within a given categ ory. 
However, importers of EU products have encountered situations in which the mark -up applied to 
the liquor produced in Nova Scotia are lower that the mark -up applied to imported products.  
 
Question 5  
 
Could Canada explain and justify in which cases this  may happen and explain how it 
ensures non -discrimination against foreign products?  
 
Reply  
 
Nova Scotia 's Emerging Wine Regions  Policy  applies a favourable mark -up (43% compared to the 
standard 140%) to products from all wineries, both domestic and intern ational, belonging to 
emerging regions that produce 50,000 HL of wine or less. The policy was designed to recognize the 
higher cost of production and supply for smaller wineries, to give consumers access to 
competitively priced wines from small producers, and to allow wines from emerging regions to 
reach a larger consumer base. Suppliers must self -identify as meeting the policy 's criteria. The 
Nova Scotia Liquor Corporation (NSLC) does not discriminate in favour of local wine through this 
policy.  
 
On 1 April 2015, Nova Scotia implemented a new policy of mark -up reduction for commercial wine 
makers operating in the province. Any wine from a commercial winery that has been bottled in 
Nova Scotia – irrespective of the origin of the wine – will receive a mark -up reduction of 
20 percentage points from 140% to 120%. The policy benefits commercial wine, both imported 
and domestic, that is bottled in Nova Scotia. The Government of Nova Scotia committed to review 
this policy in 2016 -17. 
 G/STR/Q1/CAN/16  
 
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  Page 29, Quebec  
 
According to the notification, wines without a varietal indication or appellation of origin designation 
that are bottled in Quebec may be sold in grocery stores, along with beers and light ciders. Wines 
with a varietal indication or appellation of origin designation an d spirits may only be sold in 
SAQ outlets.  
 
Questions 6 -7 
 
Could Canada clarify whether this will change after the adoption of bill 88, an Act 
respecting development of the small -scale alcoholic beverage industry?  
 
Could Canada confirm that also locally p roduced wi ne sold in supermarkets will 
be subject to the same mark -up as imported products in accordance with the 
notification?  
 
Reply to Question 6  
 
When bill 88 enters into force, all wine sold in Quebec will be allowed  to be sold with their 
varietal  indication  and country of origin labeled on the bottle, including wine sold in grocery stores.  
 
Reply to Question 7  
 
Details on the mark -ups applicable to craft products sold in grocery stores are not yet available.  
 
 
**** 
 
Furthermore, the EU has also one follow-up question  with reference to the replies received from 
Canada to our previous questions (G/STR/Q1/CAN/10 and G/STR/Q1/CAN/10/Add.1) on the 
liberalisation process of alcohols sales and retail channels. In particular:  
 
Follow -up questi on to EU initial  question 8  
 
In October 2015 the EU asked Canada to explain the extent to which the planned new 
routes to market (sales and retail channels) could be consistent with international trade 
rules, insofar as they would appear to amount to discrimination betwee n imported and 
domestic products.  
 
As a preliminary reply, Canada informed that the provinces of Ontario and British 
Columbia are both in the process of adopting changes to their liquor distribution policies 
with a view to increasing efficiency and effecti veness and that the Government of 
Canada worked closely with the provinces to ensure consistency of any changes with 
Canada 's international trade obligations.  
 
Could Canada submit additional information on how the n ew sales and retail channels 
in Ontario a nd British Columbia provides non -discriminatory access to imported 
products?  
 
Reply  
 
Ontario:  Ontario Regulation 232/16, permitting the sale of wine in authorized grocery stores, 
entered into force on 23 June 2016. Under the regulation, authorized grocery  stores will 
immediately be allowed to sell both domestic and foreign wine with specific requirements that will 
help all small producers compete.  
 
British Columbia:  As a means of introducing the sale of alcohol into grocery stores in B.C., the 
pre-existing  framework for the sale of alcohol in B.C. was transferred directly to the grocery store 
model. The pre -existing framework for the sale of alcohol in B.C.  included the exclusive sale 
of B.C. wine at a limited number of locations (grandfathered through seve ral trade agreements to 
which Canada is a party) as well as private liquor stores and government -run liquor stores that 
could sell both imported and domestic spirits (i.e. hard liquor) in addition to imported and G/STR/Q1/CAN/16  
 
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  domestic wine. These full -service liquor st ores have the option to move to the store -within -a-store 
grocery model, and the B.C. government anticipates that there will be a significant uptake of this 
option over time. The regulations permitting the sale of alcohol in grocery stores provide for the 
transfer of existing licenses to new locations. No new licenses are being created.   
 
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