STATE TRADING

Questions Posed By the European Union
regarding the new and full notification of canada^[1]

The following communication, dated 27 September 2016, is being circulated at the request of the Delegation of the European Union.

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The EU would like to seek further clarifications on the new notification submitted by Canada on 4 July 2016 regarding its STEs (G/STR/N/16). In particular:

Canada (all jurisdictions, general)

Canada claims in its general statement that its mark-ups are calculated in a uniform, non-discriminatory nature. However, in different Canadian provinces mark-ups are calculated as either ad valorem, flat rate, combination of ad valorem and flat rate or volumetric taxes.

Questions 1-2

In the light of the above, how does Canada ensure the uniform nature of calculating the mark-ups? How does Canada ensure the de facto non-discrimination towards high value and high priced imported products, such as wines, in case of application of the valorem based mark-ups?

Page 25, British Columbia:

According to the notification the new wholesale price system applies also to government liquor stores and mark-ups are applied universally to all products regardless of country of origin.

Question 3

Could Canada clarify in detail how the principle of uniform and non-discriminatory mark-ups is respected by the government liquor stores in British Columbia when determining the retail price?

Page 25, Manitoba:

According to the notification, beverage alcohol's retail price is determined by applying combination of a category ad valorem mark-up and a flat rate per litre to the landed cost.

Question 4

Could Canada clarify in detail how it ensures the de facto non-discrimination towards high value and high priced imported products, such as wines, in case of application of the valorem based mark-ups in Manitoba?

Page 27, Nova Scotia:

According to the notification, mark-ups in Nova Scotia are established by package size within product categories and are the same regardless of product origin within a given category. However, importers of EU products have encountered situations in which the mark-up applied to the liquor produced in Nova Scotia are lower that the mark-up applied to imported products.

Question 5

Could Canada explain and justify in which cases this may happen and explain how it ensures non-discrimination against foreign products?

Page 29, Quebec:

According to the notification, wines without a varietal indication or appellation of origin designation that are bottled in Quebec may be sold in grocery stores, along with beers and light ciders. Wines with a varietal indication or appellation of origin designation and spirits may only be sold in SAQ outlets.

Questions 6-7

Could Canada clarify whether this will change after the adoption of bill 88, an Act respecting development of the small-scale alcoholic beverage industry?

Could Canada confirm that also locally produced wine sold in supermarkets will be subject to the same mark-up as imported products in accordance with the notification?

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Furthermore, the EU has also one follow-up question with reference to the replies received from Canada to our previous questions (G/STR/Q1/CAN/10 and G/STR/Q1/CAN/10/Add.1) on the liberalisation process of alcohols sales and retail channels. In particular:

Follow-up question to EU initial question 8

In October 2015 the EU asked Canada to explain the extent to which the planned new routes to market (sales and retail channels) could be consistent with international trade rules, insofar as they would appear to amount to discrimination between imported and domestic products.

As a preliminary reply, Canada informed that the provinces of Ontario and British Columbia are both in the process of adopting changes to their liquor distribution policies with a view to increasing efficiency and effectiveness and that the Government of Canada worked closely with the provinces to ensure consistency of any changes with Canada's international trade obligations.

Could Canada submit additional information on how the new sales and retail channels in Ontario and British Columbia provides non-discriminatory access to imported products?

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