G/STR/N/15/CAN
8 July 2014
(14-3740) Page: 1/33
Working Party on State Trading Enterprises Original: English/French
STATE TRADING
NEW AND FULL NOTIFICATION PURSUANT TO ARTICLE XVII:4(A) OF THE GATT 1994 AND PARAGRAPH 1 OF THE UNDERSTANDING ON THE INTERPRETATION OF ARTICLE XVII
CANADA
The following communication, dated 23 June 2014, is being circulated at the request of the Delegation of Canada.
______
Pursuant to the provisions of Article XVII:4(a) of the GATT 1994 and paragraph 1 of the Understanding on the Interpretation of Article XVII, Canada submits herewith its notification concerning state trading enterprises. This notification covers the Canadian Dairy Commission, the Canadian Wheat Board, the Freshwater Fish Marketing Corporation and the Provincial and Territorial Liquor Control Authorities for the period covering 2011/2012 to 2012/2013. G/STR/N/15/CAN
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1 ENUMERATION OF STATE TRADING ENTERPRISES
1.1 Identification of state trading enterprises
Canadian Dairy Commission (CDC).
1.2 Description of products affected (including tariff item number(s) encompassed in product description)
04.05 Butter and other fats and oils derived from milk; dairy spreads.
2 REASON AND PURPOSE
2.1 Reason or purpose for establishing and/or maintaining state trading enterprise
The statutory objectives of the CDC are to provide efficient Canadian producers of milk and cream with the opportunity of obtaining a fair return for their labour and investment, and to provide consumers of dairy products with a continuous and adequate supply of dairy products of high quality.
2.2 Summary of legal basis for granting the relevant exclusive or special rights or privileges, including legal provisions and summary of statutory or constitutional powers
Imports of butter are subject to control as items listed on the Import Control List under the authority of the Export and Import Permits Act. The Department of Foreign Affairs and International Trade is responsible for the administration of the Import Control List. Information respecting the importation of butter may be obtained at the website of the Department of Foreign Affairs and International Trade Canada, http://www.international.gc.ca/controls- controles/index.aspx?view=d.
Under the import regime in place until 1 August 1995, the CDC had exclusive or special privileges with respect to butter imports. Butter was on the Import Control List under the Export and Import Permits Act, with no existing quota provided for imports on a regular basis. Import permits were issued on occasion when the CDC determined that imports were necessary to relieve a temporary market shortage. By historical practice, when butter imports were allowed, the CDC acted as importer of record.
Since the implementation of the tariff rate quota (TRQ) for butter on 1 August 1995, import permits for the butter TRQ have been allocated by the Export and Import Controls Bureau (EICB) of the Department of Foreign Affairs and International Trade Canada to the CDC annually with the proviso that these imports be directed to the further processing sector.
3 DESCRIPTION OF THE FUNCTIONING OF THE STATE TRADING ENTERPRISE
3.1 Summary statement providing overview of operations of the state trading enterprise
The CDC is a government-owned corporation which advises the Minister of Agriculture and Agri- Food on matters relating to dairy policy. In carrying out its mandate, the CDC chairs and supports the work of the Canadian Milk Supply Management Committee (CMSMC). Its work includes providing the technical support necessary for the operation of Canada's milk supply management system, administering revenue pooling agreements on behalf of the industry, purchasing and storing dairy products for use in times of low milk production, establishing the target price for industrial milk, the assumed processor margin and the support prices for butter and skim milk powder, as well as administering other marketing programmes.
3.2 Specification of exclusive or special rights or privileges enjoyed by the state trading enterprise
Since the implementation of the tariff rate quota (TRQ) for butter on 1 August 1995, import permits for the butter TRQ have been allocated by the EICB of the Department of Foreign Affairs
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3.3 Type of entities other than the state trading enterprise that are allowed to engage in importation/exportation and conditions for participation
The CDC is not the sole importer of butter. Certain niche markets with specific requirements are supplied through specific import permits issued by the EICB. The allocation of import permits for other dairy products subject to TRQs is administered by EICB under the authority of the Export and Import Controls Act (information respecting the importation of dairy products may be obtained at the website of the Department of Foreign Affairs and International Trade, http://www.international.gc.ca/controls-controles/index.aspx?view=d).
3.4 How import/export levels are established by the state trading enterprise
Pursuant to Canada's Uruguay Round market access commitments, a butter tariff rate quota was established and implemented on 1 August 1995. To date, the CDC has acted as the first receiver of these imports, under permits issued by the EICB.
3.5 How export prices are determined
The CDC, in any export sale, receives prices resulting from normal commercial negotiations based on market conditions.
3.6 How the resale prices of imported products are determined
The CDC, in its sales of imported butter, generally prices this butter at prices comparable to those for butter in further processing uses.
3.7 Whether long-term contracts are negotiated by the state trading enterprise. Whether the state trading enterprise is used to fulfil contractual obligations entered into by the government
Not applicable.
3.8 Brief description of market structure
The major participants in the Canadian dairy industry are dairy producers and dairy processors. In 2013, dairy producers operated approximately 12,234 farms in Canada. Virtually all of these farms produce milk for two markets: the fluid market (table milk and cream) and the industrial market (manufactured dairy products such as butter, cheese, yogurt and ice cream). Dairy processors include dairies that process raw milk for fluid consumption or industrial use, and further processors who use dairy ingredients and products as inputs for other finished goods.
The marketing of fluid milk is regulated at the provincial level by producers through provincial milk marketing boards. Industrial milk production and management is governed by a federal/provincial agreement called the National Milk Marketing Plan overseen by the CMSMC. This committee, chaired by the CDC, is comprised of producer and government representatives from all provinces. Representatives of national producer, processor, and consumer organizations participate as non- voting members. Each year, the CMSMC sets a national industrial milk production target called the market sharing quota (MSQ), taking into consideration: stocks of dairy products, the estimated surplus butterfat from fluid milk processing, anticipated imports, planned exports, and domestic demand for industrial milk in the coming year. This target is monitored regularly and adjusted when necessary. The MSQ is distributed among the provinces according to the terms of the National Milk Marketing Plan, and allocated by each province to its producers according to its own policies. The share of the MSQ that each dairy producer receives sets the limit on the amount of industrial milk production that is eligible for sale.
Imports of dairy products are subject to control as items listed on the Import Control List under the authority of the Export and Import Permits Act. In keeping with Article 4 of the WTO Agreement on Agriculture, Canada established market access commitments in the form of TRQs for fluid milk, specialty creams, condensed milk/cream, yogurt, powdered buttermilk, dry whey,
G/STR/N/15/CAN
- 4 - other products of milk constituents, butter, cheese, other dairy preparations and ice cream. The Department of Foreign Affairs and International Trade is responsible for administering these TRQs.
4 STATISTICAL INFORMATION
See attached Tables I - III.
5 REASON WHY NO FOREIGN TRADE HAS TAKEN PLACE (AS APPROPRIATE)
Not applicable.
6 ADDITIONAL INFORMATION (AS APPROPRIATE)
Not applicable.
TABLE I
STATE TRADING: CANADIAN DAIRY COMMISSION STATISTICAL INFORMATION, IMPORTS
Quantity Average Total quantity imported by Average import representative National Description of product Year Mark-up imported1 state trading price domestic sales production enterprise price2 1 2 3 4 5 6 7 Butter and Other Fats and August-July >000 kg >000 kg CAD/kg CAD/kg … >000 kg Oils Derived from Milk 2011-2012 9,131 3,274 4.72 4.69 … 98,255 04.05 2012-2013 8,213 3,254 3.44 4.12 … 96,861
G/STR/N/15/CAN Notes: "…" indicates not applicable. 1. Total quantity imported includes supplementary imports, including products imported for further processing and re-export under the Import for Re-Export Program. - 5 2. Comprises the average representative domestic sales price for imported butter.
Sources: Column 2: Statistics Canada. Columns 3, 4, 5: Canadian Dairy Commission. Column 7: Statistics Canada, Table 003-0009 - Production of selected butter products, monthly (production of creamery butter and whey butter is included).
TABLE II
STATE TRADING: CANADIAN DAIRY COMMISSION STATISTICAL INFORMATION, EXPORTS
Description of product Year Total quantity Quantity Average Average Average export National exported exported by procurement representative price production state trading price domestic sales enterprise price1 1 2 3 4 5 6 7 August-July >000 kg >000 kg CAD/kg CAD/kg CAD/kg >000 kg Butter and Other Fats and Oils 2011-2012 394 0 0.00 9.66 0.00 98,255 Derived from Milk 04.05 2012-2013 3,092 2,438 3.48 9.59 3.40 96,861
Notes: 1. Comprises the average representative domestic retail sales price. G/STR/N/15/CAN
Sources: Column 2: Statistics Canada.
Columns 3, 4, 6: Canadian Dairy Commission. - 6
Column 5: Statistics Canada, Table 326-0012 - Average retail prices for food and other selected items, monthly (Canadian dollars). Column 7: Statistics Canada, Table 003-0009 - Production of selected butter products, monthly (production of creamery butter and whey butter is included).
TABLE III
STATE TRADING: CANADIAN DAIRY COMMISSION STATISTICAL INFORMATION, DOMESTIC ACTIVITIES
Domestic purchases Domestic sales by Description of National National Year by state trading state trading product production Consumption2 enterprise1 enterprise
1 2 3 4 5
Butter and Other Fats and August-July >000 kg >000 kg >000 kg >000 kg Oils Derived from Milk 2011-2012 25,671 98,255 18,710 100,745 04.05 2012-2013 23,687 96,861 24,918 101,571 G/STR/N/15/CAN
Notes: 1. Domestic purchases by state trading enterprise are comprised of CDC Plan A and Plan B purchases. 2. National consumption is represented by domestic disappearance calculated as the sum of net stocks, production and imports, less exports. Domestic - 7 disappearance represents the amount of a commodity that is available for all uses in Canada. It does not represent total supplies of a commodity actually consumed by individuals.
Sources: Columns 2, 4: Canadian Dairy Commission. Column 3: Statistics Canada, Table 003-0009 - Production of selected butter products, monthly (production of creamery butter and whey butter is included). Column 5: Statistics Canada, Table 003-0007 - Supply and disposition of milk products in Canada, monthly (whey butter net stocks and production are not included), imports and exports data source is Statistics Canada.
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1 ENUMERATION OF STATE TRADING ENTERPRISES
1.1 Identification of state trading enterprises
Canadian Wheat Board (CWB).
1.2 Description of products affected (including tariff item number(s) encompassed in product description)
10.01 Wheat 10.03 Barley 12.05 Canola
2 REASON AND PURPOSE
2.1 Reason or purpose for establishing and/or maintaining state trading enterprise
Prior to 1 August 2012, the statutory objective of the CWB was the marketing in an orderly manner, in inter-provincial and export trade, of grain grown in Canada.
As of 1 August 2012, the objective is to market grain for the benefit of producers who choose to deal with the Corporation.
2.2 Summary of legal basis for granting the relevant exclusive or special rights or privileges, including legal provisions and summary of statutory or constitutional powers
The CWB was established under the Canadian Wheat Board Act. Pursuant to that Act, the CWB's powers included the authority to buy, take delivery of, store, transfer, sell, ship or otherwise dispose of grain. Only wheat and barley produced in the CWB "designated area", which included Manitoba, Saskatchewan, Alberta and the Peace River area of British Columbia, were marketed by the CWB.
Effective 1 August 2012, the Canadian Wheat Board Act governing CWB operations was repealed and the Corporation became governed by the Canadian Wheat Board (Interim Operations) Act (the Act), and the Marketing Freedom for Grain Farmers Act, statutes of Parliament of Canada. Farmers can sell their Western wheat and barley to the buyer of their choice. The CWB is no longer restricted to marketing wheat and barley and has begun to expand marketing efforts, beginning in the 2012-13 crop year with canola.
3 DESCRIPTION OF THE FUNCTIONING OF THE STATE TRADING ENTERPRISE
3.1 Summary statement providing overview of operations of the state trading enterprise
Until 31 July 2012, the CWB marketed, on behalf of producers, wheat and barley grown in the designated area of western Canada for domestic human consumption and for export. The CWB also coordinated the delivery of wheat and barley into grain elevators and railway cars for inter- provincial movement and shipment to export position.
The CWB pooled the returns from sales of wheat and barley over the crop year. The pooled price for individual grades of wheat and barley was a weighted average price that reflected the prices received from buyers over the course of the crop year less selling costs. In 2000, the CWB introduced several payment option programs, including fixed price contracts and basis payment contract programs, which provided farmers with an alternative to price pooling.
The CWB could also sell feed barley and feed wheat into the domestic feed grain market. The CWB sourced this grain just as it would any other CWB grain, i.e., by producer delivery contracts. However, its domestic sales of feed grains, which were small, competed directly with private grain companies, which sourced their own grain and sold to domestic feed grain users.
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Beginning on 1 August 2012, the Canadian Wheat Board (Interim Operations) Act allows the CWB to operate competitively on a transitional basis for up to five years. During the 2012-13 period the Corporation continued to market grain in a manner that was similar to how it marketed grain in the past by using both pooling and cash options and leveraging its marketing experience to garner returns for producers.
3.2 Specification of exclusive or special rights or privileges enjoyed by the state trading enterprise
Up until 31 July 2012, the CWB was solely responsible for the sale of wheat and barley grown in the designated area to export markets as well as for human consumption in the domestic market. In addition, the CWB had legal authority to control the inter-provincial and export movement of wheat and barley and their products produced anywhere in Canada.
Effective 1 August 2012, the Marketing Freedom for Grain Farmers Act removed the CWB's marketing monopoly for Western wheat and barley. The operations of CWB changed to marketing grain in a commercial environment, for the benefit of producers who choose to deal with CWB. The CWB also has Government guarantees on certain initial payments, borrowings, and credit sales.
On or before 1 August 2017, the CWB will either become a private company or be wound up.
3.3 Type of entities other than the state trading enterprise that are allowed to engage in exportation and conditions for participation
Accredited exporters
Prior to 1 August 2012, export sales of western Canadian wheat and barley could involve the CWB only, or both the CWB and its accredited exporters (AEs). AEs were national and multinational companies authorized to purchase grain from the CWB for resale to customers and other exporters.
Whether a sale was completed directly by the CWB or through an AE depended primarily upon the customer. Often in a number of cases, negotiations to establish grade, quantities, prices, shipping periods and other terms and conditions were carried out directly between the CWB and the importer. The CWB negotiated these sales either free on board (FOB) or cost and freight (C&F).
For a significant number/proportion of sales, the CWB negotiated the basic parameters of the contract with the end buyer and then a contract was completed with an AE, and the AE in turn with the end buyer. The sale and shipment were then executed through the AE.
AEs also bought from the CWB for specific destinations and then re-sold the grain on their own. In this circumstance, the AE conducted all negotiations, bought the grain from the CWB on a cash basis, and assumed responsibility for its foreign exchange, documentation, and ocean freight, if required.
The CWB was in daily contact with AEs. Two-way communication with AEs kept the CWB abreast of price indications and market developments, and kept the export trade aware of CWB price levels by market and shipping period. In this respect, the CWB behaved just as any private grain company did, offering quotes and trading grain to interested parties, and was fully integrated as a commercial participant. As a result of this process, the private trade had comprehensive knowledge of what CWB grain was available at any time for any delivery period.
Post 1 August 2012, any company can export Canadian wheat and barley and no export permits are needed.
FARMERS – PRODUCER DIRECT SALE
Before 1 August 2012, farmers themselves could also export wheat and barley by using the CWB's producer direct sale (PDS) program. By using this program, the farmers essentially took on a role similar to that of an AE by purchasing grain from the CWB. After 1 August 2012, farmers can export their grain directly without consulting or working with the CWB.
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EXPORTS OF EASTERN CANADIAN WHEAT
Prior to 1 August 2012, exports of eastern Canadian wheat required export licenses obtained from the CWB. In practice, these were freely granted. This is no longer a requirement.
3.4 How export levels are established by the state trading enterprise
The CWB makes sales of wheat and barley for export in accordance with commercial considerations such as price, quality, availability, marketability, and transportation costs. The volume of grain exported is primarily a function of the quality and volume produced and offered for sale by farmers through the CWB and of demand. If market conditions warrant, the CWB can defer sales until the next crop year. This system of establishing export levels became open to any company after 1 August 2012.
3.5 How export prices are determined
The CWB determines export prices in line with prevailing market conditions, in order to maximize revenues from sales. Commercial considerations taken into account in this respect include relevant US futures exchange prices and those of competing suppliers from other origins. For example, depending on the type and quality of the grain involved, the CWB in many cases derives its prices from those established on the Minneapolis Grain Exchange, Chicago Board of Trade, and Kansas City Board of Trade. Where the relevant competition is wheat, from an origin other than the U.S., the price of that wheat must be considered. In these and other cases, for example, for malting barley and durum wheat, effective futures contracts do not exist. Therefore, CWB prices for these products are based on market intelligence from various sources regarding values at which the competition was offering and trading. This process is essentially the same as the process followed by other international traders. Post 1 August 2012, any company can export Canadian wheat and barley.
3.6 How the resale prices of imported products are determined
Imports of wheat and wheat products, and barley and barley products, are conducted by the private trade at prevailing market prices. The CWB has no authority over the importation of wheat or barley, nor did it import either product or any other grain in the 2011-12 and 2012-13 years.
3.7 Whether long-term contracts are negotiated by the state trading enterprise. Whether the state trading enterprise is used to fulfil contractual obligations entered into by the government
The CWB did not enter into long-term contracts for the sale of wheat and barley. While historically the CWB did enter into such contracts, long-term contracts in today's global marketplace are essentially non-existent.
The CWB was run by a farmer-majority board of directors in 2011-12 and a solely government appointed board of directors in 2012-13. However, the CWB was not used to fulfil contractual obligations entered into by government.
3.8 Brief description of market structure
Approximately 68,000 farmers in Alberta, Saskatchewan, Manitoba and the Peace River area of British Columbia produced most of Canada's wheat and barley, which is grown for both the domestic and export markets.
Domestically, Canadian cereal grains are used mainly in processing, such as flour milling and malting, and livestock feed. The CWB's domestic pricing practices, as with its export pricing, are market-based. Domestic prices are a function of the relevant US market prices.
Up until December 2013, the CWB did not own elevator facilities. Even now, grain handling facilities in Western Canada are primarily owned and operated by private entities. The primary elevator system in Western Canada has undergone massive consolidation during the past several years: As of 1 March 2012, there were 345 primary elevators that were licensed by the Canadian
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Grain Commission in Western Canada. This compares to 1,058 in existence at 1 August 1998, and 1,578 at 1 August 1990.
For Western Canadian wheat and barley destined for domestic livestock feed markets, grain companies buy and sell these commodities directly in the marketplace. For Western Canadian wheat and barley marketed for domestic human consumption or export prior to 1 August 2012, grain companies acted as handling agents for the CWB. The CWB directed the movement of wheat and barley through delivery contracts, and allocated shipping orders for rail cars to companies handling CWB grains. The CWB could either deal directly with the buyer or through an accredited exporter. The CWB dealt with approximately 20 accredited exporters who purchased grains from the CWB for resale to customers.
Starting 1 August 2012, the CWB is operating in competition with other grain handling companies for producers' grain and for customers to sell the grain to. In addition, the CWB is competing for the capacity to manage the logistics of receiving grain from farmers to delivering grain to customers.
To function in this environment, CWB has established agreements with grain handling companies in Western Canada to receive and ship grain. The CWB originates grain from farmers and offers farmers the pooling and cash options, and also trades directly with third parties. Also, the CWB has begun establishing a network of grain handling assets.
The CWB does not control imports of wheat and barley and their products. Tariff rate quotas for wheat, barley and their products are administered by the Department of Foreign Affairs, Trade and Development (DFATD), under the authority of the Export and Import Permits Act. Further information is available at the DFATD's Export and Import Controls Bureau web site, located at: http://www.international.gc.ca/controls-controles/index.aspx?lang=eng
4 STATISTICAL INFORMATION
See attached Tables I – III.
5 REASON WHY NO FOREIGN TRADE HAS TAKEN PLACE (AS APPROPRIATE)
Not applicable.
6 ADDITIONAL INFORMATION (AS APPROPRIATE)
Governance
Amendments to the Canadian Wheat Board Act in 1998 established a new governance structure for the CWB. This legislation continued the CWB as a shared governance corporation, without share capital. As a result of the amendments, effective 31 December 1998 the CWB ceased to be an agent of Her Majesty and a Crown corporation within the meaning of the Financial Administration Act. The Corporation was governed by 15 directors, 10 of whom were directly elected by farmers and other directors were appointed by the Government of Canada. The president and chief executive officer was appointed by the Government of Canada after consultation with the board of directors.
Effective 15 December 2011, as a result of the passage of the Marketing Freedom for Grain Farmers Act, the Corporation is governed by a board of directors that consists of four directors appointed by the Government of Canada and the President and Chief Executive Officer appointed by the Government in consultation with the board of directors.
The board of directors is responsible for directing and overseeing the business and affairs of the CWB.
Pooling and Producer Payments
At any given time during the crop year, producers participating in the pool received the same initial payment for the same grade of grain delivered to the CWB, on an in-store Vancouver or St. Lawrence basis, less deductions for transportation and handling to the producer's particular
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- 12 - delivery point. In the first phase of the pooling system, producers received an initial payment when they delivered grain to a primary elevator. The level of this initial payment was set and guaranteed by the Government of Canada based on its review of CWB recommendations and varied from year to year according to market conditions. The initial payment represented a portion, paid at time of delivery, of the total return the pool was projected to achieve over the marketing period. The initial payments were actually a schedule of payments specific to each class and grade of grain. Beginning 1 August 2012, to provide a higher upfront payment, CWB combined ongoing government guarantees with its own risk-management strategies.
At the end of a crop year, the net value of grain in each pool account was determined after all grain has been sold and all costs involved in marketing had been deducted. These costs included interest, insurance, storage, terminal elevators' handling charges and the CWB's own operating costs. All funds remaining in the pool after deduction of these costs were returned to producers in the form of a final payment. This payment was made in accordance with the number of tonnes and grade of grain each producer delivered during the crop year. Effective 1 August 2012, the CWB can retain earnings, in anticipation of becoming a private company in the near future.
Transitioning to a Commercialized CWB
The Marketing Freedom for Grain Farmers Act ended the CWB's marketing monopoly for Western Canadian wheat and barley as of 1 August 2012. This legislation also required the CWB to operate as a voluntary marketing entity for up to five years, and to develop a plan to commercialize as a non-government, private organization. During this period, under the authority of the Marketing Freedom for Grain Farmers Act, the CWB may be commercialized. If the CWB is not commercialized by 1 August 2017, the wind up provisions of the legislation will come into effect and the CWB will be dissolved.
Further information about the CWB and its operations, is available at http://www.cwb.ca/.
TABLE I
STATE TRADING: CANADIAN WHEAT BOARD (CWB) STATISTICAL INFORMATION, IMPORTS1
Quantity Average Total quantity imported by Average import representative National Description of product Mark-up Year imported state trading price domestic sales production enterprise price 1 2 3 4 5 6 7 August-July tonnes tonnes CAD/tonne CAD/tonne tonnes Wheat (including durum) 2011-2012 78,000 ------25,288,000
10.01 2012-2013 74,000 ------27,205,000 G/STR/N/15/CAN Barley 2011-2012 13,000 ------7,892,000
10.03 2012-2013 19,000 ------8,012,000 - 13 Canola 2012-2013 128,000 ------13,869,000 12.05
Notes: "-" indicates zero.
"---" indicates not applicable. 1. The Canadian Wheat Board has no authority over the importation of wheat or barley and no jurisdiction to import either product.
Sources: Columns 2, 7: Canada: Outlook for Principal Field Crops (2013-01-24 and 2014-01-28), Agriculture and Agri-Food Canada.
TABLE II
STATE TRADING: CANADIAN WHEAT BOARD (CWB) STATISTICAL INFORMATION, EXPORTS
Quantity Average Average Total quantity exported by representative Average export National Description of product Year procurement exported1 state trading domestic sales price production price enterprise price 1 2 3 4 5 6 7 August-July tonnes tonnes CAD/tonne CAD/tonne CAD/tonne tonnes Wheat (including durum) 2011-2012 17,506,000 not available not available not available not available 25,288,000 10.01 2012-2013 19,442,000 not available not available not available not available 27,205,000
Barley 2011-2012 2,154,000 not available not available not available not available 7,892,000 G/STR/N/15/CAN 10.03 2012-2013 2,059,000 not available not available not available not available 8,012,000
Canola 2012-2013 7,261,000 not available not available not available not available 13,869,000 - 14 12.05
Notes: 1. Exports include grain products, while excluding oilseed products.
Sources: Column 2, 7: Canada: Outlook for Principal Field Crops (2013-01-28 and 2014-01-24) Columns 3, 4, 5, 6: Canadian Wheat Board. As CWB is competing for grain with other entities, this information is not available as it is commercially sensitive.
TABLE III
STATE TRADING: CANADIAN WHEAT BOARD (CWB) STATISTICAL INFORMATION, DOMESTIC ACTIVITIES
Domestic Purchases by Domestic sales by Description of National National Year state state trading product Production Consumption2 trading enterprise Enterprise1 1 2 3 4 5 August-July tonnes tonnes tonnes tonnes Wheat (including 2011-2012 17,674,910 25,288,000 … 8,712,000 durum) 2012-2013 not available 27,205,000 … 8,712,000 10.01 2011-2012 1,307,417 7,892,000 … 6,140,000 Barley G/STR/N/15/CAN 10.03 2012-2013 not available 8,012,000 … 6,262,000 Canola
2012-2013 not available 13,869,000 … 6,834,000 - 15 12.05
Notes: "…" indicates not applicable. 1. Prior to 1998-99, grain sales to domestic processors for further processing and export were accounted for as export sales. Beginning in 1998-99, these sales are classified as domestic sales. 2. National consumption accounts for grain (including imports) used for human consumption, animal feed, seed requirement, industrial use, waste and dockage, and losses in handling.
Sources: Column 2: Canadian Wheat Board Annual Report, Statements of Pool Operations, Wheat = wheat + durum pool receipts. Barley= barley + designated barley pool receipts. Column 4: Canadian Wheat Board. Columns 3, 5: Canada: Outlook for Principal Field Crops (2013-01-28 and 2014-01-24)
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1 ENUMERATION OF STATE TRADING ENTERPRISES
Freshwater Fish Marketing Corporation.
2 REASONS AND PURPOSE FOR INTRODUCING AND MAINTAINING THE ENTERPRISE
The Canadian Freshwater Fish Marketing Corporation (FFMC) was established in 1969 for the purpose of trading in and marketing freshwater fish and fish products and by-products. As provided under the Freshwater Fish Marketing Act, and pursuant to bilateral agreements between the Government of Canada and the governments of Alberta, Saskatchewan, Manitoba, Ontario, and the Northwest Territories, the FFMC has the exclusive right in the inter-provincial and export trade to market and trade in fish and fish products from the freshwater commercial fisheries of those provinces and territories. Ontario (effective 30 March 2010) and Saskatchewan (effective 1 April 2012) have left the FFMC arrangement and deregulated their commercial freshwater fish markets. This notification will use the term "agreement areas" to denote areas within Canada covered by these agreements.
On 14 June 1995, the government announced the introduction of measures allowing fishermen in the agreement areas to sell their catch of certain under-utilized species through alternative channels if they so desire. The FFMC remains responsible for the inter-provincial and export marketing of the main commercial species from the agreement areas.
The objectives of the FFMC are: to market freshwater fish and fish products sourced in agreement areas in an orderly manner; to increase returns to fishermen; and to promote international markets for, and increase inter-provincial and export trade in, freshwater fish and fish products. The FFMC is required by statute to operate on a self-sustaining basis. It has been profitable since 1973 (with the exception of 2004 and 2009) with annual revenue which has ranged between Can$40 million and Can$68 million since 1990.
3 DESCRIPTION OF THE FUNCTIONING OF THE ENTERPRISE
Whether the enterprise deals with exports or with imports or both.
The FFMC is concerned with the orderly marketing of freshwater fish sourced in the agreement areas in the inter-provincial trade and in export markets. The FFMC does not deal with, govern or handle imports.
Whether private traders are allowed to import or export and, if so, on what conditions. Whether there is free competition between private traders and the enterprise.
The FFMC has the exclusive right to market fish from the agreement areas in inter-provincial and export trade. The Corporation competes with the private trade in marketing such fish in domestic and export markets. With respect to fish sourced from areas of Canada outside the agreement areas, the FFMC does not control or govern private traders' activities – including their exports and domestic sales. In all parts of the domestic market, private traders are free to market freshwater fish sourced from Canadian "non-agreement areas" or from imports.
The criteria used for determining the quantities to be exported and imported.
The FFMC sells fish for export as determined by commercial considerations such as price, quality, availability, marketability and transportation.
How export prices are determined. How the markup on imported products is determined. How export prices and resale prices of imports compare with domestic prices.
The FFMC determines exports prices in line with prevailing market circumstances in light of its legislated requirements to maximize returns to fishermen and operate on a self-sustaining basis.
Whether long-term contracts are negotiated by the enterprise. Whether the enterprise is used to fulfil contractual obligations entered into by the Government.
Not applicable.
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4 STATISTICAL INFORMATION
See attached Tables I – III.
5 REASON WHY NO FOREIGN TRADE HAS TAKEN PLACE (IF THIS IS THE CASE) IN PRODUCTS AFFECTED
The Freshwater Fish Marketing Corporation is not involved in the importation of freshwater fish.
6 ADDITIONAL INFORMATION
Not applicable.
TABLE I
STATE TRADING: FRESHWATER FISH MARKETING CORPORATION STATISTICAL INFORMATION, IMPORTS
Quantity Average Total quantity imported by state Average import representative National Description of product Year Mark-up imported trading price domestic sales production enterprise price 1 2 3 4 5 6 7 Freshwater Fish Within HS Codes 0302, 0303, 2012-2013 FFMC is not involved in imports 0304 and 0305
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TABLE II
STATE TRADING: FRESHWATER FISH MARKETING CORPORATION STATISTICAL INFORMATION, EXPORTS
Quantity Average Total exported by Average representativ Average Description of product Year quantity state procurement National production3 e domestic export price exported1 trading price2 sales price enterprise 1 2 3 4 5 6 7 Freshwater Fish May-April (000's lbs) (000's lbs) C$ per pound C$ per pound C$ per pound - Within HS Codes 0302, 2011-2012 43,755 16,076 1.24 3.22 3.53 -
0303, 0304 and 0305 2012-2013 38,726 13,775 1.28 3.80 3.73 - G/STR
Notes: 1. Total Quantity Exported is the total exports for the HS codes that include the products marketed by the FFMC. Saltwater fish and other freshwater items not - 19 /
marketed by the FFMC are captured in the quantity. The proportion attributable to FFMC is not known. N/15/CAN 2. Average Procurement Price does not include final payment (net income each year) distributed to fishers. 3. Statistics on national production of freshwater fish products are not collected.
Sources: Column 2: World Trade Atlas. Columns 3, 5 6: FFMC Sales Report. Column 4: FFMC Fish Purchase Analysis.
TABLE III
STATE TRADING: FRESHWATER FISH MARKETING CORPORATION STATISTICAL INFORMATION, DOMESTIC ACTIVITIES
Domestic sales by Description of Domestic purchases National National Year state trading product by state trading enterprise Production1 Consumption2 enterprise
1 2 3 4 5 May-April (000's lbs) (000's lbs) Freshwater Fish Within HS Codes 0302, 2011-2012 23,793 - 3,016 - 0303, 0304 and 0305 2012-2013 22,969 - 2,829 - G/STR/N/15/CAN
Notes: 1. Statistics on national production of freshwater fish products are not collected.
2. Statistics on national consumption of freshwater fish products are not collected. - 20
Sources: Column 2: Deliveries report to Transcona processing plant. Column 4: FFMC Sales Analysis Report.
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- 21 -
1 ENUMERATION OF STATE TRADING ENTERPRISES
1.1 Identification of state trading enterprises
Provincial and Territorial Liquor Control Authorities.
1.2 Description of products affected (including tariff item number(s) encompassed in product description)
2203.00 Beer from malt. 2204.00 Wine of fresh grapes, including fortified wines; grape must other than that of heading 20.09. 2205.00 Vermouth and other wine of fresh grapes flavoured with plants or aromatic substances. 2206.00 Other fermented beverages (for example, cider, perry, mead); mixtures of fermented beverages and mixtures of fermented beverages and non-alcoholic beverages, not elsewhere specified or included. 2208.00 Undenatured ethyl alcohol of an alcoholic strength by volume of less than 80% vol; spirits, liqueurs and other spirituous beverages.
2 REASONS AND PURPOSE
2.1 Reason or purpose for establishing and/or maintaining state trading enterprise
In Canada, the importation of and inter-provincial/territorial trade in alcoholic beverages is governed by the federal Importation of Intoxicating Liquors Act (IILA). The objective of the IILA relates to the control of the consumption of alcoholic beverages in Canada for the purpose of protecting public health and morals.
2.2 Summary of legal basis for gaining the relevant exclusive or special rights or privileges, including legal provisions and summary of statutory or constitutional powers
The IILA provides the provinces and territories, within their respective jurisdiction, with control over the sale of intoxicating liquor, and over the importation, sending, taking or transportation of such liquor into the provinces and territories. The provinces and territories have delegated this activity to the provincial/territorial liquor control authorities. The statute expressly provides that nothing in the IILA forbids the importation, sending, taking or transportation of intoxicating liquor for sacramental or medicinal purposes, or for manufacturing or commercial purposes not related to the use of liquor as a beverage.
As well, under the IILA, an exception exists for persons licensed by the Government of Canada under the Excise Act to carry on the business or trade of a distiller or brewer where the intoxicating liquor is imported solely for the purpose of being used for blending with or flavouring the products of the business or trade of that person.
3 DESCRIPTION OF THE FUNCTIONING OF THE STATE TRADING ENTERPRISES
3.1 Summary statement providing overview of operations of the state trading enterprise.
The provincial and territorial liquor control authorities deal with the importation and sale of alcoholic beverages within their respective jurisdictions. Exportation of alcoholic beverages is a private matter of beverage manufacturers.
3.2 Specification of exclusive or special rights or privileges enjoyed by the state trading enterprise
The IILA provides the provincial/territorial liquor control authorities with the delegated authority to import alcoholic beverages in Canada.
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- 22 -
3.3 Types of entities other than state trading enterprises that are allowed to engage in importation/exportation and conditions for participation
Private traders are allowed to import if they are licensed by the Government of Canada under the Excise Act to carry on the business or trade of a distiller or brewer where the intoxicating liquor is imported for the purpose of being used for blending with or flavouring the products of the business or trade of that person. Alcoholic beverages may be sold through stores operated by the provincial/territorial liquor control authority or through authorized private retailers or a combination of both.
The private trade determines its own criteria pertaining to exports.
3.4 How import/export levels are established by the state trading enterprise
Provincial and territorial liquor control authorities purchase or permit the purchase of alcoholic beverages in line with market needs as related to such commercial considerations as price, quality, availability, marketability, transportation and other conditions of purchase or sale.
3.5 How export prices are determined
Export prices are determined by the private trader.
3.6 How the resale prices of imported products are determined
The retail sales price of the imported product is a function of its landed cost (invoice price, federal customs and excise duties and taxes, and freight), to which are added the applicable provincial mark-up and federal and provincial sales taxes. The mark-up varies by product type and by jurisdiction. As a result of two GATT Panels1, liquor control authorities have modified mark-up practices on alcoholic beverages to bring them into conformity with the GATT.2
3.7 Whether long-term contracts are negotiated by the state trading enterprise. Whether the state trading enterprise is used to fulfil contractual obligations entered into by the Government.
Not applicable.
3.8 Brief description of market structure.
The alcoholic beverages sub-sector is made up of the brewery, wine and distilling industries. There are also a number of small firms producing cider and fruit wines across the country but this production is comparatively minor. Fruit wines are products produced from fruits other than grapes. In 2012, the value of all alcoholic beverages produced in Canada stood at $6.7 billion compared to $6.1 billion in 2010.3 Alcoholic beverage imports of all kinds amounted to $3.8 billion in 2013 while total exports stood at $919.8 million the same year.4
The brewing industry5 comprises those establishments primarily engaged in the steeping, boiling and fermenting of malt and hops to manufacture malt beverages. The industry produces a variety of beer, lager, ale, porter and stout, in bottles, cans and draught for the consumer market and for
1 Canada - Import, Distribution and Sale of Alcoholic Drinks by Provincial Marketing Authorities (1988). This panel resulted in the 1989 "Agreement between the European Economic Community and Canada concerning trade and commerce in alcoholic beverages" which requires the complete phase out of mark-up differentials between wine of the Community and Canadian wine by 1 January 1998. Mark-up differentials on distilled spirits were to be eliminated as of 1 January 1993. Canada - Import, Distribution and Sale of Certain Alcoholic Drinks by Provincial Marketing Agencies (1992). The US-Canada Memorandum of Understanding on Provincial Beer Marketing Practices (August 1993) resulted in the elimination of discriminatory differential mark-ups on beer. 2 The Canada-US Free Trade Agreement immediately eliminated discriminatory markups on distilled spirits and required a complete phase out of differential markups on wine by 1 January 1995. 3 Statistics Canada. Principal statistics for manufacturing industries, by North American Industry Classification System (NAICS). CANSIM, Table 301-0006. 4 Statistics Canada. 5 Canada’s brewing industry is defined by the NAICS (31212).
G/STR/N/15/CAN
- 23 - the food service industry. The Canadian beer industry has been subject to increased consolidation as the two major national brewers are now subsidiaries of foreign brewers. Production has remained within Canada with approximately 319 brewing and microbrewing establishments across the country.6 The microbrewery industry has steadily grown in Canada, catering to niche tastes and regional markets. Canada's geography and the fact that alcohol sales and production are controlled at the provincial level mean that the products of microbreweries are usually available only in the regions where they are produced. Canadians drink more beer than any other alcoholic beverage, however domestic per capita consumption of beer has declined steadily since the 1970s and reached a low of 70.5 litres in 2013.7
The Canadian wine industry8 continues to grow, evolving in response to rapid changes stemming from adjustments to trade liberalization under the Canada-United States FTA and GATT 1947. Domestic vintners now grow quality Vitis Vinifera and hybrid grapes which have resulted in a dramatic improvement in the quality of Canadian wine. Canadian Icewine, a sweet dessert wine, has won several prestigious awards at international competitions and has gained considerable international recognition. Among the larger firms there is a significant amount of production which involves bottling and blending of domestic and imported wines. However, most of these larger corporations have also acquired smaller estate wineries which have retained their own identity and which help them to define their "signature" premium products. In addition, there are many small family-oriented businesses which concentrate on the production of wine from Canadian grown grapes. Domestic per capita consumption of wine in Canada has increased steadily since the early 1990s and reached a high of 16.2 litres 2013.9
The distillery industry10 produces a variety of spirits (e.g. whisky, rum, vodka, gin, liqueurs, brandy, spirit coolers and basic ethyl alcohol) but its primary reputation, domestically and internationally, remains the production of distinctive high-quality Canadian whisky. The product is distilled from cereal grains (rye and corn primarily), aged in oak barrels for a minimum of three years, then bottled or sold in bulk. The industry is highly concentrated. Most companies are subsidiaries of multinational corporations with production facilities maintained in Canada in order to produce Canadian whisky, which has a registered geographical indication in Canada. Domestic consumption for spirits fluctuates from year to year, but does not display a clear long term trend. In 2013, Canadians consumed 7.3 litres of spirits per capita.11
4 STATISTICAL INFORMATION
The relevant statistical information is attached. See Tables I - III
5 REASON WHY NO FOREIGN TRADE HAS TAKEN PLACE (IF THIS IS THE CASE) IN THE PRODUCTS AFFECTED
Import data are given in Table I. Exporting is not within the mandate of provincial liquor control authorities.
6 ADDITIONAL INFORMATION
ALBERTA
The liquor authority in Alberta, namely the Alberta Gaming and Liquor Commission, does not make commercial decisions on the product selections for alcoholic beverages which are imported, nor on the quantities of those imports. However, it is including an explanatory text on the Alberta market environment for alcoholic beverages in the interest of full transparency.
6 Statistics Canada. Canadian business patterns, location counts, employment size and NAICS, national industries, by Canada and provinces, December 2013. CANSIM, Table 551-0005. 7 Statistics Canada. Food available in Canada, annual. CANSIM, Table 002-0011. Per capita consumption is measured as: available litres ale, beer, stout and porter, adjusted for losses, per person 15 years old and over. 8 Canada's wine industry is defined by the NAICS (31213). 9 Statistics Canada. Food available in Canada, annual, CANSIM Table 002-0011. Per capita consumption is measured as: available litres of wine, adjusted for losses, per person 15 years old and over. 10 Canada's distillery industry is defined by the NAICS (31214). 11 Statistics Canada. Food available in Canada, annual, CANSIM Table 002-0011. Per capita consumption is measured as: available litres of distilled spirits, adjusted for losses, per person 15 years old and over.
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- 24 -
ACTS AND REGULATIONS
Gaming and Liquor Act (c. G-1, RSA 2000). Gaming and Liquor Regulation (Alta. Reg. 143/1996).
SUMMARY OF LIQUOR MARKETING PRACTICES
All retail sales of alcoholic beverages in Alberta are privatized. Under the Alberta system, imported and domestic products are given the same treatment.
The Alberta Gaming and Liquor Commission (AGLC) regulates liquor and gaming activities in the Province. The AGLC administers and enforces the Gaming and Liquor Act and the Gaming and Liquor Regulation as well as related policies, and collects the government's flat mark-up on beverage alcohol.
In Alberta, private-sector liquor agencies determine what products will be brought into the province. Alcohol manufacturers and suppliers have the option of acting as their own liquor agent or employing the services of another liquor agent to expedite the process. Suppliers and agents are responsible for all aspects of ordering, consolidation, shipping, and marketing.
The AGLC is the Importer and Wholesaler of Record. All new orders are placed on consignment with the agent/supplier named as consignee.
Provincial mark-up rates under a wholesale pricing structure are a flat rate per litre. Retailers set retail prices according to market forces.
The warehousing and distribution of beverage alcohol products is managed by a private company, operating out of a warehouse and distribution facility in St. Albert, Alberta. Charges reflect the cost of receiving, storing and shipping products by the pallet or by the case. Beer suppliers may apply to establish their own warehousing arrangements. Final approval for such arrangements is required from the AGLC.
BRITISH COLUMBIA
ACTS AND REGULATIONS
- Liquor Distribution Act, R.S.B.C. 1996, c.238 as amended and the regulations thereto
SUMMARY OF LIQUOR MARKETING PRACTICES
The Liquor Distribution Branch (LDB) is the importer of record for all alcoholic beverages imported into British Columbia. Section 2(2) of the Liquor Distribution Act states that the LDB "has the sole right to purchase, both in and out of British Columbia, liquor for resale and reuse in British Columbia in accordance with the provisions of the Importation of Intoxicating Liquors Act (Canada)".
As of 31 March 2013 the LDB operated 195 government liquor stores. As of 31 March 2013 there was also a large private retail system consisting of 670 private liquor stores, 221 rural agency stores, 47 wine stores, and 279 manufacturer stores at wineries and breweries.
Most retail outlets, including all government liquor stores, private liquor stores and rural agency stores may sell any liquor product, regardless of category or origin. A limited number of privately- operated wine stores are restricted to selling British Columbia wines and manufacturer stores can only sell products made by that manufacturer.
All liquor products sold in British Columbia must be registered with the LDB. The LDB determines which products are sold in government stores based on customer demand and operators of private outlets determine which products they wish to sell in their stores.
Suppliers or their agents determine the prices at which products are sold to the LDB. The LDB applies standard pricing formulas to the supplier price to determine the retail price.
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- 25 -
MANITOBA
ACTS AND REGULATIONS
- The Liquor Control Act, R.S.M. 1988, c.L160 and the regulations thereto, and their amendments, including: - The Liquor Control Act and Consequential Amendments Act, S.M. 1993.
SUMMARY OF LIQUOR MARKETING PRACTICES
The Manitoba Liquor Control Commission (MLCC) is the importer of record for all liquor imported into Manitoba. All liquor sold in the Province must meet the MLCC's listing criteria. The criteria applies to all beverage alcohol in a uniform and non-discriminatory manner, irrespective of country of origin.
Spirits, wine, coolers and beer are warehoused by the MLCC and distributed to 56 government- owned stores, 170 privately-owned agency stores, 8 specialty wine stores, 4 duty-free stores, and 1,600 licensed premises. In addition, 5 privately-owned beer distributors warehouse and service the 56 government-owned stores, 252 privately-owned beer stores, and 1,600 licensed premises. Privately distributed beer, which may be either import or domestic, do not have any sales quotas applied, as the inventories are privately held and are the responsibility of the suppliers.
Beverage alcohol's retail price is determined by applying combination of a category ad valorem mark-up and a category flat rate per litre to the landed cost. Minimum mark-ups apply to all products but there are no minimum prices, with the exception of single serve beer. The same category and minimum mark-ups are applicable to like products regardless of country of origin for products warehoused by the MLCC.
Audited cost of service differentials (commercial considerations) are applied at a flat per litre charge per category.
NEW BRUNSWICK
ACTS AND REGULATIONS
- New Brunswick Liquor Corporation Act, R.S.N.B. 1973, c.N-6 and the regulations thereto, and their amendments. - Liquor Control Act, R.S.N.B. 1973, c.L-10, and the regulations thereto, and their amendments.
SUMMARY OF LIQUOR MARKETING PRACTICES
Importation of alcoholic beverages into New Brunswick is done through the New Brunswick Liquor Corporation (ANBL). All suppliers have full and equal access to the ANBL's listing process. Listed products receive distribution to the entire retail system, including agents and licensed establishments. Marketing programs are available to all suppliers on an equal access basis.
The ANBL maintains a retail system of 44 stores and 84 agency outlets. This system is the exclusive retailer of all alcoholic beverages in the province. In addition, approximately 1,531 establishments are licensed for on-premise consumption. These licensees buy exclusively through the ANBL retail system described above.
Suppliers of beer products have the option of establishing their own in-province warehouse and distribution or going through ANBL's central warehouse and distribution system. A service charge is applied to all beer products going through the ANBL warehouse and distribution system.
Retail price is determined by applying an ad valorem mark-up to the product's landed cost (at point of sale). Rates are listed in the Mark-up Structure document and are applied uniformly to all products regardless of origin. Minimum and maximum mark-ups, floor retail prices and minimum social reference retail prices, where applicable, are listed in the Mark-up Structure and Beer Listing Policy documents.
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- 26 -
NEWFOUNDLAND and LABRADOR
ACTS AND REGULATIONS
- The Liquor Corporation Act, R.S.N. 1990, c.L-19, and the regulations thereto, and their amendments. - The Liquor Control Act, R.S.N. 1990, c.L-18, and the regulations thereto, and their amendments.
Please note that there have been no major amendments to the above legislation over the 2011- 2013 time period.
SUMMARY OF LIQUOR MARKETING PRACTICES
Importation of alcoholic beverages to the province of Newfoundland and Labrador can only be done through the Newfoundland and Labrador Liquor Corporation (NLC). In order for the NLC to import alcoholic beverages for sale in the province, the producer must complete a listing application and the NLC must approve the application. Suppliers of spirits and wines are required to operate through the NLC warehouse and related distribution systems. The mark-up structure applied is the same regardless of product origin. The mark-up structure for spirits, wines and beer is applied to landed cost and consists of a combination of a flat fee and a percentage of landed cost. Provincial and federal taxes including the Harmonized Sales Tax and a recycling container deposit are also added to determine final retail price.
The following details the number of Agency Stores and Corporate Stores from Fiscal 2011-12 to 2012-13:
Year Corporate Agency
2011-12 24 131 2012-13 24 133
Note: Corporate includes retail outlets which serve the general public plus outlets which serve Agency Stores and the Licensee trade exclusively.
NOVA SCOTIA
ACTS AND REGULATIONS
- The Liquor Control Act, R.S.N.S 1989, c.260 and the regulations thereto, and their amendments.
SUMMARY OF LIQUOR MARKETING PRACTICES
Importation of liquor is done through the Nova Scotia Liquor Corporation (NSLC). In 2001, the NSLC was transformed from a Commission into a provincial Crown Corporation and renamed the Nova Scotia Liquor Corporation. The NSLC's listing policies provide equal access to all products regardless of origin based on category management principles. Suppliers, of both domestic and imported products, are required to operate through the NSLC central warehouse and related distribution system. All beer suppliers, regardless of origin, with sales of one million equivalent dozen are permitted to operate a separate warehouse facility. All products, regardless of origin, may be sold in the 106 liquor stores operated by the NSLC. There are also 52 small businesses serving as NSLC agency stores, 4 private wine and specialty stores, 12 manufacturer's on-site outlets (breweries or distilleries), and 14 farm-gate stores permitted to sell their own wine directly to consumers.
Mark-ups are established by package size within product categories and are the same regardless of product origin within a given category. All products which go through the warehouse are charged the same cost-of-service within a given category.
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- 27 -
ONTARIO
ACTS AND REGULATIONS
Liquor Control Act, R.S.O. 1990, c. L.18; Alcohol and Gaming Regulation and Public Protection Act, R.S.O. 1996, c. 26; Liquor Licence Act, R.S.O. 1990, c. L.19; and the regulations thereto, and their amendments.
SUMMARY OF LIQUOR MARKETING PRACTICES
Ontario's beverage alcohol distribution and retail system is characterized by a mix of private and public operations. The Liquor Control Board of Ontario (LCBO) and the Alcohol and Gaming Commission of Ontario (AGCO), both government agencies, are the primary bodies responsible for controlling the manufacture, movement and sale of beverage alcohol within the province, respectively through the Liquor Control Act (LCA), and the Alcohol and Gaming Regulation and Public Protection Act (AGRPPA). The Liquor Licence Act sets the conditions under which a person may keep for sale, offer for sale, or sell liquor under a licence or permit issued under the act. This includes, for example, manufacturers, manufacturers' representatives, bars, restaurants, hotels and persons selling or serving liquor on special occasions.
The LCBO is responsible for importing liquor into Ontario, transporting and selling domestic and imported spirits, wine and beer. The agency also tests products for quality control and safety, fixes liquor prices, and controls the warehousing of beverage alcohol.
The LCBO establishes and operates retail liquor stores across Ontario, including its agency stores in smaller communities. All suppliers, domestic and foreign, have equal access to LCBO's purchasing system. All liquor sold by the LCBO must meet its listing criteria and gross profit quotas. The LCBO shares marketing costs with suppliers. Suppliers or their agents determine the prices at which products are sold to the LCBO. The LCBO applies standard pricing formulas to the supplier price to determine the retail price.
Other authorized retailers include private beer stores, private duty-free stores and manufacturers' retail stores (winery stores on- and off-site, and on-site beer and spirits stores) authorized under AGRPPA to sell exclusively their domestic products. Sales of imported products not sold in LCBO stores can be ordered through LCBO's Private Order program and by LCBO-authorized sacramental wine vendors for sacramental purposes.
The number of private off-site stores is limited by the Canada-United States FTA and the NAFTA. Certain restrictions on the operation of off-site stores are also contained in the Canada-EC Agreement concerning Trade and Commerce in Alcoholic Beverages (as modified by the Canada-EC Agreement on Trade in Wines and Spirit Drinks).
Brewers Retail Inc. (BRI) is a privately owned company operating beer stores under the authority of AGRPPA. It sells domestic and imported beer to the public and is the primary distribution channel for beer in the province. BRI purchases its imported brands from the LCBO.
Foreign beer manufacturers, like their domestic counterparts, have the option of distributing from LCBO warehouses to retail outlets. The LCBO applies charges to domestic and imported beer based on the worldwide production volume of the supplier. Domestic beer sold in the Beer Store, an on- site manufacturer's store or in a licensed establishment is subject to beer taxes under AGRPPA. These volume taxes are equivalent to the volume charges applied by the LCBO.
PRINCE EDWARD ISLAND
ACTS AND REGULATIONS
- Liquor Control Act and Regulations, R.S.P.E.I. 1988, c.L-14 and the regulations thereto, and their amendments.
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- 28 -
SUMMARY OF LIQUOR MARKETING PRACTICES
Importation of alcoholic beverages into Prince Edward Island (P.E.I.) is done through the P.E.I. Liquor Control Commission. All suppliers have full and equal access to the P.E.I.L.C.C. listing process. Listed products receive distribution to the entire retail system. Marketing programmes are available to all suppliers on an equal access basis.
The P.E.I.L.C.C. maintains a retail system of 19 stores and 6 agency stores. This system is the exclusive retailer of all alcoholic beverages in the Province, with the exception of 11 manufacturers on-site outlets (breweries, distilleries or wineries), and 2 farm-gate stores permitted to sell their own product directly to consumers. In addition, approximately 436 establishments are licensed for on premise consumption. These licensees purchase exclusively through the P.E.I.L.C.C. retail system. The Province also licences 5 ferment-on-premises locations that provide facilities to the general public to brew their own beer or wine from kits.
The following mark-up structure is used to calculate the retail price of imported and domestic products: manufacturers' price, customs/excise, freight, an applicable mark-up applied to landed costs (differs per category), Provincial Health Tax (25%), Goods and Services Tax (5%), Provincial Sales Tax (10%), and bottle deposit.
QUEBEC
ACTS AND REGULATIONS
- Act respecting the Société des alcools du Québec (RSQ, c. S-13, s. 16)
SUMMARY OF LIQUOR MARKETING PRACTICES
The Société des alcools du Québec (SAQ) is an independent, publicly owned commercial corporation administered by a board of directors. It has sole authority over the importation, delivery, taking or transportation of any intoxicating liquor in Quebec, whether produced in Canada or abroad.
The SAQ distributes alcoholic beverages to its own network of 441 government stores and 443 agencies, as well as a network of grocery and corner stores that account for over 9,000 outlets. Products for distribution are warehoused in two distribution centres with a combined storage capacity of 4,400,000 cases.
The selection, purchase and merchandising of products are determined by principles defined in the SAQ's Purchasing and Merchandising Policy.
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 and spirits may only be sold in SAQ outlets.
Suppliers are responsible for promoting their products. The services of a marketing agent are also used. Market forces determine quantities to be imported. A uniform mark-up, by category of product, is applied to the cost price of the products, whether imported or domestic. Revenues are paid in the form of dividends to the sole shareholder, Quebec's Minister of Finance.
SASKATCHEWAN
ACTS AND REGULATIONS
- The Alcohol and Gaming Regulation Act, 1997 being Chapter A-18.011 of the Statutes of Saskatchewan, 1997 (1 February 2003) as amended by the Statutes of Saskatchewan, 1998, c.16; 2000, c.36; 2002, c.27 and 42; 2003, c.15; 2004, c.67; 2005, c.3 and 21; 2007, c.10; 2008, c.8' and 2010, c.25.
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- 29 -
SUMMARY OF LIQUOR MARKETING PRACTICES
The Saskatchewan Liquor and Gaming Authority (SLGA) has authority over the manufacture, possession, sale and delivery of beverage alcohol in Saskatchewan, and is the importer of record for all wine, spirits and beer imported into Saskatchewan. The SLGA maintains a broad listing policy that applies equally to both imported and domestic products. Further details are contained in the SLGA Listing Policy.
It is the policy of the SLGA to deal directly with the supplier in the country of origin. Listing application forms, and product and supplier profiles must be submitted or approved by the supplier.
The SLGA operates 79 retail outlets in Saskatchewan. In addition, the SLGA has granted authority to approximately 185 operators of private business establishments (agencies) in small rural communities to sell beverage alcohol products and to four full line private retail stores, two each in Saskatoon and Regina.
The rules governing access to points of sale apply equally to domestic (including in-province) and foreign suppliers. Audited cost-of-service charges are applied to all imported products distributed through the SLGA system.
NORTHWEST TERRITORIES
ACTS AND REGULATIONS
- Liquor Act, R.S.N.W.T. 1988, c. L-9 as amended by the Statues of the Northwest Territories 1991-92, c.38; 1994. c.19; 1995, c.11; 1998, c.17. c.21; 2002, c.10, c.20. - Liquor Regulations, R.R.N.W.T. 1990, c.L-34 as amended by the Statues of the Northwest Territories 1992, R-087; 1993, R-027; 1995, R-035, R-036; 1996, R-048; 1997, R-052; 2000, R-055; 2001, R-067; 2002, R-033, R-034, R-035, R-074; 2004, R-031.
SUMMARY OF LIQUOR MARKETING PRACTICES
The Northwest Territories Liquor Commission (NTLC) was established under Part II of the Liquor Act. It is responsible for the operation of liquor sales and the purchase and distribution of liquor in the Northwest Territories through the Liquor Revolving Fund.
The NTLC uses a flat rate per litre mark up to generate a specific level of revenue from the sale of liquor. Product cost, freight, container deposit, recycling fee, general sales tax, retail, warehousing and administrative costs are also included with flat rate mark-up when establishing a final price.
A person who is eligible to purchase and consume liquor in the Northwest Territories may personally import 1.5 litres of wine, 1.14 litres of spirits, or 8.52 litres of beer. An import permit is required to import quantities greater than the allowable amounts.
Retail and warehousing operations are carried out by 7 private sector contractors and 1 private warehousing outlet operators who are under license from the NTLC.
NUNAVUT
ACTS AND REGULATIONS
- Liquor Regulations, R.R.N.W.T. 1990, c.L-34, as duplicated for Nunavut by section 29 of the Nunavut Act.
SUMMARY OF LIQUOR MARKETING PRACTICES
The Nunavut Liquor Commission is responsible for the purchasing, warehousing and distribution of all alcoholic beverages as well as permitting and enforcement in Nunavut.
Alcohol is allowed to be purchased in 5 Nunavut communities. Those living in the 14 "restricted communities" are able to order alcohol products from warehouse distribution centres but require
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- 30 - approval from an alcohol education committee. There are 6 "dry communities" where alcohol is completely banned. Product price, freight and a refundable container deposit are included in the final price of any alcohol beverages.
The Nunavut Liquor Licensing Board is responsible for the issuance, renewal, transfer, cancellation or suspension of any liquor licenses, as well as, the enforcement of all liquor related regulations and restrictions.
YUKON
ACTS AND REGULATIONS
- Liquor Act, Chapter 140, R.S.Y. 2003, c.140. - Liquor Regulations Respecting the Sale and Consumption of Liquor.
SUMMARY OF LIQUOR MARKETING PRACTICES
The Yukon Liquor Corporation (YLC) is mandated with the purchase, distribution, and sale of liquor products in the Yukon. The YLC operates a central warehouse and distribution centre in Whitehorse, and six Yukon Liquor Stores. Five of these liquor stores are in rural locations and also provide specific Territorial Agent services on behalf of other government departments. The Corporation transfers all its net income to the Government of Yukon. It is responsible for the Liquor Act and Liquor Regulations. In addition, the Corporation collects and remits a 12% tax on the retail value of all liquor products sold in the Yukon, as required by the Liquor Tax Act.
Domestic products are purchased from various locations across Canada. All imported products are purchased through the British Columbia Liquor Distribution Branch, with the exception of special orders from customers which may be sourced directly by the YLC if not available through the BC Liquor Distribution Branch. There are no restrictions on imported liquor products considered for purchase by the YLC in relation to category or origin.
The YLC applies standard pricing formulas to the supplier price and to the BC Liquor Distribution Branch price to the YLC, in determining the retail price. The retail price includes the producer price, federal duty and excise tax, freight, YLC mark-up, refundable container deposit, and a non- refundable recycling surcharge, in addition to the federal Goods & Services Tax and the 12% Yukon liquor tax.
TABLE I
STATE TRADING: PROVINCIAL AND TERRITORIAL LIQUOR CONTROL AUTHORITIES STATISTICAL INFORMATION, IMPORTS
Total Quantity Average Description of the Per-unit import Mark- Year1 quantity imported by representative National production5 product price3 up imported2 STEs domestic sales price4 1 2 3 4 5 6 7 000' 000' litres CAD/Litre CAD/Litre CAD'000 Litre/LPA/KG
Beer 2012 337,346 323,051 1.76 4.38 … 5,025,976 22.03 2013 347,221 310,852 1.86 4.41 … 5,005,212
6 G/STR/N Wine 2012 393,853 286,420 5.16 15.69 … 833,980 22.04 22.05 - 31 22.06 2013 396,417 298,662 5.46 15.79 … 832,531
/ 15/CAN 2012 563,965 71,711 22.30 30.88 … 1,036,922 Spirits7 22.08 2013 643,250 74,403 17.15 31.58 … 1,003,342
Notes: "…" Indicates not applicable 1. Data in columns 3 and 5 are for fiscal years ending on March 31 (2011-12 and 2012-13). All other data is for calendar years. 2. Not all products referred to as beer, wine or spirits are measured in the same unit of measure. For beer, data includes all imports measured in litres. For wine, data includes all imports measured in litres and in litres of pure alcohol (LPA), and kilograms (KG). For spirits, data includes all imports measured in LPA and KG. Imports may include supplementary imports, including products imported for further processing and re-exported under the import for re-export program. 3. Average import prices are calculated as the value of imports by STEs (the price in the country of origin) divided by the quantity of imports by STEs. 4. Average representative domestic sales price is calculated as the value of domestic sales of imported products by the STEs (with the goods and services tax and container tax) divided by the volume of import sales by the STEs. 5. Production figures are represented by the value of shipments, and are calculated using the North American Industrial Classification System (NAICS) rather than HS codes. Quantity data is not available. Data for wine is a Statistics Canada estimate. 6. Wine includes vermouth, coolers and ciders (except Columns 3 and 5, which excludes vermouth). 7. Spirits under column 3 may also include some types of coolers.
Sources: Column 2, 4: Statistics Canada. Column 3, 5: Statistics Canada, "Sales of Alcoholic Beverages of Liquor Authorities, Wineries and Breweries". CANSIM, Table 183-0015. Column 7: Statistics Canada, Manufacturers' sales, inventories, orders and inventory to sales ratios, by NAICS, Canada. CANSIM, Table 304-0014.
TABLE II
STATE TRADING: PROVINCIAL AND TERRITORIAL LIQUOR CONTROL AUTHORITIES STATISTICAL INFORMATION, EXPORTS
Average representative Description Quantity Average Total quantity domestic sales price Per-unit export of the Year1 exported by Procurement National production4 exported2 for sales of Price product STEs3 price domestically-produced alcohol 1 2 3 4 5 6 7 '000 CAD/Litre/LPA/K '000 litres CAD/Litre CAD/Litre $CAD'000 litres/LPA/KG G
Beer 2012 249,428 - ... 3.88 0.78 5,025,976 G/STR/N/15/CAN 22.03 2013 237,404 - … 3.96 0.81 5,005,212
5 Wine 2012 31,886 - … 9.91 1.83 833,980 - 32
22.04 22.05 22.06 2013 49,058 - … 10.05 1.59 832,531 Spirits 2012 563,965 - … 20.97 0.91 1,036,922 22.08 2013 643,251 - … 20.65 0.99 1,003,342
Notes: "-" indicates zero. "…" indicates not applicable. 1. Data in column 5 is for fiscal years ending on 31 March (2011-12 and 2012-13). All other data is for calendar years. 2. Does not include foreign produce re-exported. 3. Provincial and Territorial liquor control authorities have no authority over the exportation of alcoholic beverages and no jurisdiction to export such products. 4. Production figures are represented by the value of shipments, and are calculated using the North American Industrial Classification System rather than HS coding. Quantity data is not available. Data for wine is a Statistics Canada estimate. 5. Wine includes vermouth, coolers and ciders (except Columns 3 and 5, which excludes vermouth).
Sources: Column 2, 6: Statistics Canada. Column 5: Statistics Canada, "Sales of Alcoholic Beverages of Liquor Authorities, Wineries and Breweries". CANSIM, Table 183-0015. Column 7: Statistics Canada. Manufacturers' sales, inventories, orders and inventory to sales ratios, by NAICS, Canada. CANSIM, Table 304-0014
TABLE III
STATE TRADING: PROVINCIAL AND TERRITORIAL LIQUOR CONTROL AUTHORITIES STATISTICAL INFORMATION, DOMESTIC ACTIVITIES
Domestic Domestic Sales of Description of National Year1 purchases by Domestically-Produced National Consumption3 the product production2 STEs Alcohol, by STEs 1 2 3 4 5 CAD'000 '000 litres '000 litres Beer 2012 … 5,025,976 1,994,465 2,317,516 22.03 2013 … 5,005,212 1,960,156 2,271,008 4 Wine 2012 … 833,980 201,341 487,761 22.04 G/STR/N 22.05 2013 … 832,531 207,941 506,603
22.06 - 33
Spirits 2012 … 1,036,922 144,872 216,583 / 15/CAN 22.08 2013 … 1,003,342 148,016 222,419
Notes: "…" not available. 1. Data in columns 4 and 5 are for fiscal years ending on 31 March (2011-12 and 2012-13). All other data is for calendar years. 2. Production figures are represented by the value of shipments, and are calculated using the North American Industrial Classification System rather than HS coding. Quantity data is not available. Data for wine is an estimate. 3. National consumption is represented by the total quantity of domestic sales of imported and domestic products. It does not include homemade beer and wine, wine and beer manufactured through brew-on-premises operations, all sales to Canadian residents in duty free shops and any other unreported transactions. Export sales are not included. 4. Wine includes vermouth, coolers and ciders (except Columns 3 which excludes vermouth).
Sources: Column 3: Statistics Canada. Manufacturers' sales, inventories, orders and inventory to sales ratios, by NAICS, Canada. CANSIM, Table 304-0014 Column 4, 5: Statistics Canada, "Sales of Alcoholic Beverages of Liquor Authorities, Wineries and Breweries". CANSIM, Table 183-0015.
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