Shipping Laws on Wine within Canada

This article provides a summary of the shipping laws regarding wine (and other liquor) within Canada.This article has been updated on August 7, 2009 in order to deal with the recent threats against BC wineries from the Alberta Liquor Board (AGLC). It includes a temporary work-around for shipping compliance and discusses longer term solutions. If you are interested in wine shipping issues related to bringing wine from a foreign country to Canada, please see this article: Bringing Wine to Canada After a Trip.

PLEASE ALSO SEE THIS UPDATE: Shipping Law Update August 2011.

The shipping of wine from one province into another province or from another country into Canada is generally prohibited (with some exceptions noted below) by a federal law (which stems from the prohibition era) called the Importation of Intoxicating Liquors Act (Canada).

1. Current Law on Shipping

The important part of this law is section 3(1) which states:

Notwithstanding any other Act or law, no person shall import, send, take or transport, or cause to be imported, sent, taken or transported, into any province from or out of any place within or outside Canada any intoxicating liquor, except such as has been purchased by or on behalf of, and that is consigned to Her Majesty or the executive government of, the province into which it is being imported, sent, taken or transported, or any board, commission, officer or other governmental agency that, by the law of the province, is vested with the right of selling intoxicating liquor.

This section effectively makes it illegal to ship wine from one province to another or into a province from another country unless the wine is going to, or is otherwise authorized by, the governmental agency responsible for selling liquor within that province (e.g. the provincial liquor control board - in BC, that's the BC LDB). In other words, the federal law basically bans all shipment of liquor/wine across provincial borders or national borders unless the importation is authorized by the receiving province's liquor board.

As a result, it is technically illegal, to ship wine from one province to another province (unless the destination province's liquor distribution authority permits the transaction). As you may have guessed, nearly all Canadian provincial liquor boards severely restrict such transactions.

On a practical level of course, there are no routine inspections at provincial borders so such transactions are rarely detected. However, some national shipping companies such as FedEx will not knowingly ship wine or other liquor across provincial borders.

However, you should note that it is legal for a winery to sell wine to a customer who is located in another province. It is only illegal to "send" or "cause to be ... sent" the wine across provincial borders. As a result and from the winery's perspective only, a BC winery can sell a case of wine to a customer from Ontario ... the problem is just what to do with the wine once it is sold to the customer. If the Ontario customer wishes to assume the legal risk of shipping the wine once it is sold to them, then they should do so by arranging for their own shipping but the BC winery should be careful not to send it and not to assume any legal obligation to make the shipment. In this regard, it is important for the BC winery to structure their terms of sale such that title to the wine passes to the buyer in British Columbia, that the winery makes no representations regarding the legality of any shipment outside of BC and that the winery then does not "send" the wine out of province (or assist with sending it). Any delivery commitments or obligations for the winery should be restricted to destinations within British Columbia. Any delivery commitments or obligations outside BC should be made by the customer.

So, the short summary is as follows:

Legal: To ship wine or liquor within a province so long as the wine or liquor is "authorized" by the LDB. As an example, a winery that has a license to sell wine in BC can ship wine to a customer within BC.

Illegal: To ship wine or liquor from one province to another if it isn't authorized by the liquor board in the receiving province. As an example, it is not legal for a BC winery to ship wine from BC to an individual customer in Ontario without the approval of the LCBO.

Illegal: To import wine or liquor from another province whether a customer brings it with them personally or has it shipped. If a customer does this, they are legally required to declare it to the relevant liquor board in the destination province and pay the applicable charges and taxes.

Legal for the Winery: To sell wine to a customer located in another province so long as the terms of sale transfer title to the wine within the province of sale and the winery does not send the wine to the other province. If the customer then arranges for the transfer or shipping of the wine then the customer will be assuming the legal risk of the shipment.

Obviously, the end result of these restrictions is rather foolish in that wineries within Canada cannot legally ship their products to Canadians in provinces other than their own province. In addition, these laws are perceived to be ridiculous by the general public since it is technically illegal to buy wine while on vacation in another province and take it back home with you to a different province.

2. Recent Liquor Board Actions and Reform of Shipping Laws

The AGLC, LCBO and Manitoba Liquor Commission have threatened wineries in BC with respect to shipping directly to customers in Alberta, Ontario and Manitoba. There are a number of initiatives under way at the present time to try and create a solution (none of them have had much success to date). The two leading solutions seem to be the following.

a) Personal Exemption

An exemption could be created for personal use. This could be accomplished by amending IILA (probably not a quick process) or simply by the relevant liquor boards changing their policies and rules such that out of province purchases within the exemption amount are authorized by the relevant liquor board. For example, IILA would not apply to up to 2 cases of wine per month shipped to an individual for personal use. This is an attractive solution from the consumer perspective. A personal exemption is the preferred solution for most wineries and for the BC Wine Institute. However, it remains an issue as to whether the liquor boards are progressive enough (or accountable enough to the taxpayers that own them?) to adopt such a solution.

You should be aware that there is already a type of an exemption under Alberta law. Section 77 of the Gaming and Liquor Act says that liquor may be imported if it goes through AGLC or if the importation is otherwise permitted by the Act. Section 86(3) of the Act permits adults to import liquor in amounts permitted by regulation. Sections 89 & 90 of the Regulations says that adults can import any amount for personal consumption from another province (no mention of markup being paid) and up to 45.45 litres from another country if markup is paid above the duty free allowance. So on its face, the Alberta laws seem to permit importation without markup from another province. (See s.89 of the Gaming and Liquor Regulation). I have corresponded with AGLC about this recently and their position is that the federal and provincial laws should be interpreted together such that importation is allowed but only if it goes through AGLC. As a result, they are, in effect, relying on the federal law (IILA) to counteract the meaning of their own law. I have problems with this interpretation but that is AGLC's position. You should contact me directly if you want more information on this. On this issue, you may also wish to read this update: Shipping Law Update August 2011.

b) Shipping Permit System

A shipping permit system has also been suggested along the lines of the one used in the U.S. Under this model and for example, a BC winery would have to obtain a permit from the LCBO in order to ship to Ontario. However, the liquor boards would likely then require that the shipping winery remit certain taxes or fees as a result of each shipment. If the liquor boards tried to charge board markup, this solution would probably not work because the end cost of the wine would be too high for consumers. Alternatively, it has been suggested that the boards should require only the payment of relevant taxes (PST & GST).

c) Legality of Solution

Without getting into the details, there is a legal argument that it is unconstitutional for a liquor board to levy markups on Canadian wine coming from another province if it does not levy those same markups on wine that is produced within the province. This argument is likely applicable as between British Columbia and Ontario because each of those provinces permits certain methods of retail distribution for home-grown wines which avoid liquor board markups and fees. If successful, this argument would prevent the imposition of a permit system which charged liquor board markup. If you would like more information on this argument, please contact me.

There are also other grounds of challenge which could be made to restrictive liquor board policies including under administrative law, constitutional law, and trade agreements such as NAFTA.

3. Effect on Consumers

This is obviously a problem on the consumer side because, on average, I get 1-2 emails per day from consumers trying to figure out how to ship wine from one province to another.

The law in most provinces is also draconian for the consumer receiving the wine at the other end. In British Columbia, the relevant law is the Liquor Distribution Act . This law maintains complete government control over wine and liquor sales - a consumer is not allowed to possess any liquor unless it came from an authorized source (see section 4 ). However, there is a limited exception for "casual import" of a limited quantity of wine or liquor if the person brings the liquor from outside Canada, declares it at customs, and pays the applicable duties and taxes (see section 19 ). There are also some limited exceptions which result from rules made by the LDB. For example, if a wine collector is moving to BC from another country, they could import their wine cellar at fairly minimal cost if they followed the procedure which I have outlined in my article: Moving to Canada with your Wine Cellar. Theoretically, individuals moving wine within Canada are also caught by the shipping prohibition and, in most provinces, also by the statutory requirement to report liquor obtained from "unauthorized" sources and pay the taxes and markups (see, for example, s.65 of B.C.'s Liquor Control & Licensing Act). However, in B.C. it is, in fact, impossible to comply with this requirement because the "prescribed form" necessary for reporting under s.65 has actually never been prescribed.

4. Issues with Enforcement

Jurisdiction. Issues of enforcement arise because liquor boards in other provinces do not have jurisdiction over wineries located in BC. Do the other liquor boards intend to pressure the BC LCLB to take enforcement action against the wineries that they license? Are they planning to make formal complaints to the RCMP and try to get crown counsel to press charges?

Constitutionality of IILA. The federal law (IILA) that they claim to be relying on is over 80 years old and was passed at the end of prohibition for reasons which are unrelated to the current liquor distribution system. One prominent Toronto lawyer has recently written an article arguing that IILA is unconstitutional. I agree with that conclusion as do many other lawyers who are knowledgeable in this area. The main argument that has been advanced to date is that IILA and the provincial markup policies are in violation of s.121 of the Constitution Act which guarantees a free trade zone within Canada for Canadian produced products such as wine. However, there are also possible arguments under the Charter of Rights ... under IILA, a person could potentially be imprisoned for a violation as simple as carrying one bottle of wine for personal consumption across a provincial border ... I personally find it hard to believe that this does not violate my rights to liberty and security of my person.

What is also really interesting is that the foundation for the provincial liquor monopolies is based on this archaic law. If the AGLC or other monopolies actually took enforcement action, there would no doubt be an immediate constitutional challenge to the law (as well as exceptionally bad press and media coverage for the monopolies). If the law was struck down, the AGLC and the other liquor boards would lose their monopolies. That's a big gamble for a monopoly to take.

History of Liquor Monopolies. The AGLC and the other liquor monopolies might well consider the fate of the Washington state liquor monopoly after it took similar enforcement action decades ago. Back then, Washington state had a liquor distribution system similar to BC's current one. A prominent Seattle physician hated the fact that the importation of wine (even U.S. wine) into Washington state was restricted and subject to mark up by the liquor board. As such, he bought a lot of wine from out of state and imported it (technically illegal). The Washington liquor board raided his house, seized the wine and charged him. The subsequent public outcry was so great that the Washington state government decided to reform the entire system, effectively eliminating the import restrictions and privatizing wine and beer sales.

PLEASE ALSO SEE THIS UPDATE: Shipping Law Update August 2011.

Please contact me for more info, questions, comments or a formal legal opinion. I have advised a number of BC wineries on these issues so I can likely provide answers to your questions quickly.