- Friday, 11 December 2009 09:58
- Written by Mark Hicken
I spoke about the issues surrounding "host liability" for wineries at the recent wine law conference that was held in November here in Vancouver. Those of you that were there will have heard my warnings regarding a winery's potential legal liability if an individual who has been served alcohol at the winery is in an accident later that injures either himself or another person.
While I am unaware of any B.C. wineries being in this situation recently, a news story from California illustrates the expensive consequences of a failure to live up to the applicable legal standards. In this case, the Sonoma County winery had hosted a wedding event and served numerous beers to a guest who was, in fact, under age. That guest ended up in a car accident later in the night in which his passenger was seriously injured. The passenger sued the winery, 7-Eleven (who later had sold some additional alcohol to the pair), and the driver. The eventual settlement ended up with the winery shouldering the bulk of the costs.
- Tuesday, 16 February 2010 00:00
- Written by Mark Hicken
This article discusses the current structure of the BC wine industry and Canada's various trade agreements such as NAFTA and GATT. I haven't written about this issue before because it is a tricky one for the BC industry. However, I have recently been asked many questions on these issues by various players in the industry as well as by lawyers and wine consumers. I am aware that a number of our trading partners are pursuing these issues.
The Problem: I'll explain in greater detail below but there are potentially serious trade agreement problems with the current structure of the BC wine industry because the current system provides preferential treatment for BC wine (with respect to liquor board markups and distribution) which is not provided for imported wine. Why is this a problem? It's a problem because two of Canada's most important trade agreeements, NAFTA and GATT, only allow preferential treatment in very limited circumstances. Generally, we are obliged to treat domestic wine and imported wine the same. This issue is of particular concern to me because much of the BC wine industry seems unaware of the issue and particularly unaware of the potential economic consequences of changes that may be required to comply with our trade obligations.
- Wednesday, 02 December 2009 16:05
- Written by Mark Hicken
Effective Dec 2, 2009, licensee retail store (LRS) licenses (the newer private retail store licenses) have been decoupled from the liquor-primary (LP) licenses with which they were formerly required to be associated. See the LCLB LRS Policy Directive for details. From now onwards, the continued operation of the LP license is not required for the LRS license. Other restrictions on the operations of the LRS (including the "standalone" building requirement) remain but this change will allow greater freedom for LRS operators to move their operations and/or transfer them to other parties.
Update (Dec 10, 2009): I have now reviewed the regulation that implements these changes. Although the liquor-primary coupling is removed, there is a new requirement that "in the opinion of the general manager, the licensee retail store does not appear to be associated with another business in the near vicinity". From a policy perspective, this seems rather odd ... the likely reason for this is to try and stop the transfer of LRS licenses to supermarkets and big box stores so that the Alberta experience is not repeated here. As you may be aware, Superstore, Costco and Safeway all have freestanding liquor stores in Alberta located near or next to their main stores and branded similarly.
- Monday, 30 November 2009 10:36
- Written by Mark Hicken
As you may have read here recently, FedEx recently announced that it was implementing a new "direct purchase" system so that consumers in British Columbia, Alberta and Ontario could order wine direct from U.S. wineries and have it delivered to their homes or businesses following payment of applicable liquor board markups/fees/taxes. The FedEx announcement was exciting for Canadian wine consumers because it seemed to indicate a new era of more open wine purchasing (albeit with rather steep fees in B.C.). Regrettably, it appears that FedEx did not obtain regulatory approval for this system in B.C. before announcing it (at least that's what the LCLB tells me). As such, it is unclear whether FedEx will be able to proceed with their plans in B.C. or in the other provinces.
However, this story highlights the major problems with Canada's wine shipping laws and policies. Here is a summary of the regulatory mess that we currently have.
Shipments Entirely Within a Province. Provinces such as B.C. and Ontario, which have wine industries, currently permit their own wineries to ship directly to customers but only within the same province (i.e. B.C. wineries can ship to B.C. customers but not to Ontario customers).
Shipments Between Provinces. The liquor boards in Ontario, Manitoba, and Alberta have recently threatened British Columbia wineries with "criminal enforcement" action under an archaic 1928 prohibition-era statute which prohibits the shipment of wine between provinces. As a result, B.C. wineries are unable to legally ship Canadian wine to the majority of Canadian wine lovers.
Shipments From Outside Canada. Wine lovers in B.C. are currently able to order wine from outside Canada and have it sent to them. However, upon arrival in B.C., the shipment will be held at Customs until the customer clears the shipment with the BCLDB. This is a cumbersome and expensive process under which the customer will be required to pay all of the various LDB fees, markups and taxes (which will be applied to the full retail price of the wine). One person who recently went through this process told me it was "nightmarish" - it took him hours to get the necessary paperwork right including multiple personal trips to Customs and the LDB. However, once all the money is paid, the wine will be released. I understand that there are similar processes in other provinces (although in Alberta, for example, the fees are much, much lower).
Wine Imported by Travellers. Consumers can also personally bring wine back with them from outside Canada if they do so while travelling (i.e. if you drive down to the U.S., you can bring wine back with you). As most people are aware, there is a miserly duty-free allowance of 2 bottles (750ml) per person. After that, you will have to pay liquor board fees based on the province into which you are bringing the wine. See "Bringing Wine Back to Canada After a Trip" for more info.
It appears that the FedEx "direct purchase" system is a streamlined version of the process described above for "Shipments From Outside Canada". Basically, FedEx is trying to lessen the regulatory burden by taking care of some of the paperwork and then delivering the wine directly to you once it is cleared. This seems to be a sensible goal. At first glance, one would think that nobody would care about this since the relevant government (liquor board) is getting all of its money. However, the system poses problems for the liquor boards because they are still taking the position that Canadian wineries can't ship directly at all. It doesn't look too good when U.S. wineries can ship and Canadian wineries cannot.
However, the underlying problem remains. For U.S. wineries, the liquor boards have effectively permitted a direct delivery system so long as the consumer agrees to pay the applicable fees and puts up with the cumbersome process (FedEx was just trying to make it easier). However, for Canadian wineries, the liquor boards have rejected their overtures to set up a similar reporting system and have instead relied on IILA to stop inter-provincial direct to consumer shipments completely.
Legally, I find this fascinating because there are no exemptions in IILA for shipments where the purchaser intends to pay the markups/taxes. Theoretically, the level of legality or illegality under IILA is the same if a consumer brings or ships wine across an international border versus an interprovincial border. The collection of markups/taxes at the border is a separate legal issue from the shipping prohibition in IILA. The practical reality has been that the liquor boards have allowed the international shipments because they have a way of enforcing the tax/markup collection at customs. Of course, they have no mechanism for guaranteeing that a customer pays the markups for an interprovincial shipment so they have tried to stop those completely.
This quagmire is all about the money. Isn't it about time we sorted it out?
- Saturday, 28 November 2009 09:21
- Written by Mark Hicken
FedEx has just announced that it will be part of a new "direct purchase" system which will allow U.S. wineries to direct ship wine to consumers in British Columbia, Alberta and Ontario. This groundbreaking announcement will allow individuals in these provinces to purchase wine direct from U.S. wineries. FedEx will retain control of the shipment at all relevant times and, for B.C., will calculate and will remit the applicable taxes and liquor board markup (in AB and ON it appears that the buyer will have to do this while FedEx holds the shipment). The system will be "transparent" for the consumer with the wine arriving direct to their home or business from the winery and FedEx taking care of most of the customs issues (in B.C., consumers will be charged by credit card for the various fees). Turnaround times are impressive ... FedEx's process chart indicates that the BC LDB will provide clearance charges to FedEx typically within 24 hours
FedEx's web site has an extensive description of the new "direct purchase" system including a FAQ, flow chart of the purchase process and calculators which enable consumers to figure out liquor board markups and fees ahead of time.
This announcement is groundbreaking and appears to be the harbinger of a new system of more open access to wine retailing for consumers. Some major questions remain though. I can't imagine that these three liquor boards would permit U.S. wineries to direct ship to consumers and still prohibit inter-provincial shipment of wine. My guess (and hope) is that this is part of a broader system which will also permit the inter-provincial shipment of wine between the provinces in question. The achilles' heel of the system for B.C. may be the provincial markups though ... it doesn't take much playing with FedEx's calculator to realize that the markups applied in B.C. are absurdly high compared to the other participating provinces. Still though, this is a major step in the right direction in terms of consumer access to wine. I am anxious to see confirmation of this and additional details from the BCLDB.
[Update: I have just confirmed that the BC LDB and LCLB have not approved the "direct purchase" system. As such, it appears that this was a FedEx initiative alone. I'll update this story as things develop but it now seems that FedEx may have announced this without regulatory approval. Please see this updated FedEx story for more information]