Canada Drops Wine Barrel Tariff

Winemakers expect savings of CAN$30 per French barrel

by Peter Mitham
Quails Gate
International Trade Minister Stockwell Day speaks with Quails' Gate Winery owner, Ben Stewart.
Kelowna, British Columbia -- Canada has removed a 3% tariff on oak barrel imports, a move that will reduce costs to wineries by approximately CAN$30 a barrel ($23.61 USD). The move was announced during a press conference at Quails' Gate Estate Winery in Kelowna recently, where Canada's International Trade Minister Stockwell Day also announced the establishment of a $1-million fund (all amounts reflect Canadian dollars, unless otherwise specified) designed to help Canadian wineries cultivate export markets. Work on the initiative has been ongoing since last year, as Wines & Vines reported.

The import of barrels and barrel parts from France totaled $5.9 million last year, giving France approximately a quarter of Canada's barrel business. France is second to the U.S., which shipped $17.2-million worth of wood barrels and barrel parts to Canada in 2008. There is no import tariff on American oak barrels.

The elimination of the barrel tariff may sound small on a per-item basis, but it adds up to about $5,000 for Grant Stanley, winemaker at Quails' Gate. Quails' Gate imports about $150,000 of French oak barrels a year, entirely from agents in Oregon and California.

The lifting of the barrel tariff is prompting Quails' Gate to look for other savings in its barrel purchases, Stanley told Wines & Vines.

Direct from France?

"It's opened up some new equations for us," Stanley said of the federal announcement February 28. He pointed to the potential savings on port and customs costs as well as shipping north from California into a decision to import straight from France. "We are currently going through the possibility and the numbers of potentially consolidating all of our oak barrel purchases in France and shipping a container direct to Quails' Gate."

While the tariff savings are minor compared to transportation costs, for example, Stanley said it has given impetus to the winery's overall review of barrel costs, which have increased in recent years as the winery's Pinot Noir production has expanded.

"It's much more about not only saving a small amount of money on the actual taxation issue but also having less hands on them, less people dealing with them along the way," he said.

Pressure on Canadian cooper

Not everyone is happy with the move. Cal Craik at Canada's sole cooperage, Okanagan Barrel Works 2001 Ltd. in Oliver, B.C., said lifting the tariff will add extra pressure to his business at a time when many wineries, like Quails' Gate, are keeping tabs on expenses.

Craik makes barrels from French oak, staves of which enter Canada duty-free. While this has allowed him to stay competitive with the price of finished barrels imported from France (he sells some through the cooperage), Craik said that his local winery customers will now expect his prices to be lower this year.

"I don't like it," he said. "It's going to mean my customer is going to be looking at me to decrease my price by 3%." Craik typically sells French oak barrels for US$910 while American oak barrels sell for US$375.

Craik has voiced his concerns with Day, who also represents the Okanagan in Canada's parliament in addition to handling the international trade portfolio, but Day hasn't responded yet.

The good news is that even if he's got to drop his prices, demand for barrels remains strong. He recently received an order from California for 600 to 800 American oak barrels, which he said is "very good" for this time of year.
Posted on 03.15.2009 - 10:32:14 PST
$30 CAN; $39 USD doesn't make sense. Getting rid of the tax is a good idea. If the underdog Canadian wine industry can compete with the favorites of the world (value-wise)and make more sales, they will give Canadian coopers more orders down the road. It will all be good. Go Canada. Rick Schofield, CWE Hyde Park, NY
Rick Schofield, CWE
Hyde Park, NY USA