Meeting of the Committee on Wines and Spirits

(5 and 6 October 2020, by videoconference)

Report

The third meeting of the CETA Joint Committee on Wines and Spirits was held on October 5–6, 2020 via videoconference.

The Parties discussed envisaged amendments of the annexes to the Agreement between the European Community and Canada on Trade in Wines and Spirit Drinks (hereinafter the 2003 Agreement), incorporated into CETA, with regard to geographical indications (GIs) and oenological practices. The EU referred in this context to Article 9 of the 2003 Agreement and the fact that amending the Annex on oenological practices would ensure legal certainty for the operators. The parties exchanged preliminary ideas on possible ways forward to facilitate the amendment of the annexes. The co-chairs agreed to continue their exchanges on this issue.

The EU raised concerns on the misuse of certain EU geographical indications protected in Canada. The EU asked for information on how Canada had followed up on the notifications it issued under Article 28 of the 2003 Agreement concerning “Irish Cream” and “Brunello di Montalcino”, respectively. On Brunello di Montalcino, Canada informed the EU that the product in question is no longer available for purchase on the notified website. In addition, Canada highlighted that the product was a wine kit, and as such fell out of scope of the Agreement even when available for purchase. On Irish Cream, Canada stressed that the right holders have not asserted their rights in the context of Canada’s intellectual property (IP) based GI regime or submitted any formal labelling complaints in Canada. Canada offered to speak directly to the rights holders to provide an overview of these tools. Canada expressed the view that the existence of only a handful of alleged instances of misuse of GIs is not indicative of a systemic issue in Canada. Canada noted that individual instances of misuse have also been reported in the EU marketplace, and expressed the view that, just as in the EU, the Canadian GI regime is designed to address individual instances of misuse. Canada noted that the Canadian and EU GI regimes operate differently; right holders must take action to assert their rights in order to address individual instances of misuse in Canada, but Canada considers that its IP regime nonetheless provides EU right holders an effective mechanism to enforce their GIs. Canada noted that, historically, EU GI right holders have very rarely attempted to assert their GI rights in the context of Canada’s IP based GI regime, which has been in place for wine and spirit GIs since 1996. Separate from Canada’s IP framework, the EU requested Canada to provide the information on the methodology and criteria of the CFIA complaint system, in particular, as regards claims on misleading origin.

The EU called upon Canada to amend two pieces of regulations regulating the terms “méthode champenoise” and “cidre champagne” to align rules to practice and respect the protection of the geographical indication “Champagne”. Canada expressed the view that the amendment of the federal regulation which refers to “cidre champagne” was not necessary, as the term in the regulation relates to production methods and, to Canada’s knowledge, has never been used for marketing purposes. Canada confirmed that Quebec does not allow the marketing of products whose labels use the term “Champagne Method / méthode champenoise” in the province and that the Québec government has committed to amend the province’s regulation which refers to “méthode champenoise” at the opportune moment.

The EU provided an update on EU policies on ingredients and energy labelling for alcoholic beverages, COVID19-related support measures for wineries, and the Common Agricultural Policy. Canada sought assurances that industry support provided by the EU respect international trade obligations.

Canada highlighted industry concerns respecting the Product Environmental Footprint and requested information on the avenues available for interested parties to provide comment. The EU provided an update on policy developments in that field and pointed to the ongoing open consultation.

Canada informed the EU about the partial settlement it reached with Australia in WTO dispute DS537 in which the EU intervened as an active third party largely supporting the claims of Australia. Canada confirmed that the outcome of this settlement will apply to all imported products. The EU welcomed the commitment taken by Canada to eliminate the discriminatory element of the federal excise duty that has been a long-standing EU request. The EU also welcomed the commitment regarding the elimination of the emerging wine regions policy in Nova Scotia that was a matter of concern for the EU. The EU invited Canada to move forward with those commitments as soon as possible. As regards Nova Scotia, Canada informed the EU that the Province intends to implement its commitment to eliminate the Wine Emerging Region Policy as part of a broader policy review, which might affect also other measures regarding the distribution and pricing of alcoholic beverages within the Province. There is no information yet about the timing of these reforms. Canada confirmed also that the WTO dispute is still ongoing as regards the measures in Quebec. On the commitments taken by Ontario in the context of the same WTO dispute, Canada explained that, as regards to the elimination of tax differentials, Ontario’s commitment was to eliminate difference in the rates of the wine tax that apply to VQA wines and non-VQA wines respectively, for wines sold in private off-site winery stores. As regards Ontario’s definition of small wineries in the context of the reserved shelf space in grocery stores, Canada confirmed that the new definition was based on Australia’s definition of a small producers and that this new threshold would allow 90% of Australian producers to qualify. The EU invited Canada to provide information on the respective shares of EU and domestic wines currently eligible to the scheme and expected impact of the announced changes. Canada explained that it lacked data to assess the impact on EU producers and clarified that EU producers may contact the LCBO and demonstrate that they meet eligibility requirements.

The EU raised concerns with a range of measures maintained by certain provinces and stressed the importance for the parties to work toward the full elimination of discriminatory practices within the next two years, in line with the CETA declaration on wines and spirits. Canada stated that many of these measures have very limited commercial impact and that the Committee could consider targeting a narrower range of measures to focus discussion at future meetings. The EU welcomed the attendance of representatives of provincial authorities as observers at the meeting. Among others issues, the EU notably reiterated its concerns on the differential markups applied in certain provinces, such as in Nova Scotia though the Craft Distillery Policy, and in Ontario. The EU referred to its letter expressing concerns over Ontario’s recent decision to restrict a call for tender for bag-in-box wines to domestic wines only. Canada assured that Ontario intended to launch a separate call for non-domestic bag-in-box wines in the near future and the EU welcomed this announcement and will monitor developments. The parties agreed on the need to continue working on the implementation of the CETA joint declaration on wines and spirits. As a way to acknowledge progress in that direction, the EU invited Canada to provide updates to the EU on a regular basis on the steps taken or expected towards the removal or amendment of the various measures. Such reports would be a basis for the EU to update its list of remaining EU concerns.

The EU thanked Canada for providing audit reports on the cost of services differentials (COSD) charged in Ontario and Quebec and stressed the need to adapt the applied COSD fee rates to those new audited figures without any further delay. Canada confirmed its commitment to implement the new rates but was not in a position to announce when the change would occur, in light of the delays caused by the ongoing Covid-19 pandemic. The EU thanked Ontario for providing a non-confidential summary of the audit and invited Quebec to also improve transparency in that process, in order to improve understanding of the costs charged among industry. At the EU’s request, Canada provided information on the cost of service differentials applied in Nova Scotia, Manitoba and Saskatchewan.

Canada provided an update on the work of the Alcoholic Beverages Working Group created pursuant to the Canadian Free Trade Agreement. The EU stressed that, in line with the National Treatment principle, any policy change that would facilitate inter-provincial trade in Canadian alcoholic beverages should apply equally to EU products. The EU welcomed the development of the alcohollaws.ca website as a means to improve transparency and clarity on the regulation and management of alcoholic beverages markets across Canada; the EU encouraged all Provinces and Territories to align their approaches to that of the most transparent ones, e.g. by publishing the rates of the applicable taxes, levies, markups and other pricing elements.

The EU updated Canada on recent developments in the EU excise tax regime, notably as regards changes introduced by Council Directive (EU) 2020/1151, which Canada highlighted extends the possibility for EU Member States to set out differential excise rates in the EU for independent small producers. The EU assured Canada that wherever EU Member States choose to apply reduced excise duty rates to eligible small producers, the reduced rate will equally be applied to eligible foreign small producers. The Commission is currently developing a framework to facilitate the recognition of small producers, including foreign small producers. Canada also requested updates on the reduced excise duty rates applied to certain products produced in the outermost regions of Portugal and France and in certain regions of Greece and Italy. The EU explained that the reduced rates for the limited volume of products produced in the outermost regions of Portugal and France have been extended for a further seven years. The EU highlighted that the differential rate for ethyl alcohol in certain regions of Italy and Greece must be applied equally to all ethyl alcohol regardless of origin. However, Canada highlighted Ouzo’s status as a protected Geographic Indication as limiting the availability of this reduced rate to products produced in Greece.

Canada asked for an update on the Irish Public Health (Alcohol) Act 2018 and asked for an update on the implementation of the act, as far as labelling is concerned. The EU recalled its reply to the comments Canada issued on the draft bill under the WTO TBT agreement, which referred to Ireland’s commitments to abide by its obligations under that agreement. The EU highlighted that health warnings on alcoholic beverages are not covered by EU rules on food labelling and may thus fall under the authority of EU Member States.

Canada updated the EU about an ongoing review of the list of Canadian competent bodies to establish the V.I.1 certificate that must accompany wines imported into the EU.

The co-chairs agreed to consider adding a regular update on trade developments as a regular agenda item of this committee.

Participants

Canada

Co-chair: Deputy Director, Technical Barriers and Regulations Division, Global Affairs Canada
Global Affairs Canada: Technical Barriers to Trade, Intellectual Property Trade Policy, Trade Agreements Secretariat, Mission of Canada to the EU

Agriculture and Agri-Food Canada: Technical Trade Policy; Europe, Middle East and Africa
Innovation, Science and Economic Development Canada
Canadian Food Inspection Agency
Provincial authorities: British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Quebec, New Brunswick, Prince Edward Island, Nova Scotia, Newfoundland

European Union

Co-chair: European Commission, DG Agriculture and Rural Development, Head of unit A3
European Commission services: DG Agriculture and Rural Development, DG Trade, DG Taxation and Fiscal Union, DG Environment
Delegation of the European Union to Canada