Canada - Import, Distribution and Sale of Alcoholic Drinks by Provincial Marketing Authorities
Canada - Provincial Liquor Boards (US) I (Source: GATT Analytical Index)
Products at Issue
|Products at issue||
Alcoholic and malt beverages
|Type of product||
Key legal aspects
|Chairperson||Ephraim F. Haran (Israel)|
|Other members||Jorge Vigano (Argentina), Elvezio Contestabile (Switzerland)|
|Legal basis at issue||
|Claims at issue||
|Defences at issue||
|No of Pages (total / legal reasoning)||51 (and 6 annex)|
|Request for consultations||
|Request for establishment|
|Adoption of report|
|Outcome of the proceedings||
|Additional Info||Note: Terms of reference announced at C/M/195 (06/03/1986) Minutes of Council Meeting (12/02/1986), one Council meeting after that of the establishment of the panel and prior to the composition of the Panel.
L/6304 (14/10/1987) Panel on Import, Distribution and Sale of Alcoholic Drinks by Canadian Provincial Marketing Agencies - Report of the Panel: The European Communities requested a Panel to examine whether certain practices of provincial agencies which marketed alcoholic beverages (i.e. liquor boards) were in accordance with the provisions of the GATT and whether Canada had carried out its obligations under the General Agreement. The Panel found that the Provincial Statement of Intentions concluded in the context of the Tokyo Round with respect to sales of alcoholic beverages by provincial marketing agencies in Canada and the related exchange of letters could not be held to constitute an agreement in terms of GATT Article II:4 and did not, therefore, modify Canada's obligations arising from the inclusion of alcoholic beverages in its GATT Schedule.
The Panel concluded that the mark-ups which were higher on imported than on like domestic alcoholic beverages (differential mark-ups) could only be justified under Article II:4, to the extent that they represented additional costs necessarily associated with marketing of the imported products, and that calculations could be made on the basis of average costs over recent periods. In this regard, the Panel considered that the phrase "a reasonable margin of
profit" had be interpreted in accordance with the normal meaning
of these words in their context of Article II and Article 31 of the
Havana Charter, and was a margin of profit that would be obtained under normal conditions of competition (in the absence of the monopoly). The Panel also found that the burden of proof would be on Canada if it wished to claim that additional costs were necessarily associated with marketing of the imported products.
Regarding the practices concerning listing/delisting requirements and the availability of points of sale which discriminated against imported alcoholic beverages, the Panel concluded that these measure were restrictions made effective through state-trading operations contrary to Article XI:1. The Panel considered that it was not necessary to decide in this particular case whether the practices complained of were contrary to Article III:4 because it had already found that they were inconsistent with Article XI. However, the Panel saw great force in the argument that Article III:4 was also applicable to state-trading enterprises at least when the monopoly of the importation and monopoly of the distribution in the domestic markets were combined, as was the case of the provincial liquor boards in Canada.
Finally, the Panel concluded that the measures taken by the Government of Canada were clearly not all the reasonable measures as might be available to it to ensure observance of the provisions of the General Agreement by the provincial liquor boards, as provided in Article XXIV:12 and that therefore the Government of Canada had not yet complied with the provisions of that paragraph.