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In its rush to pull American alcohol products from store shelves, the B.C. government appears to have overlooked a key issue: importers are now stuck with inventory they’ve already purchased, unable to move much of it due to new restrictions. The policy has also created an interprovincial trade barrier—despite Premier David Eby’s commitment to reducing such obstacles.
Importers are now left with products in “lockdown,” according to businessman Ashok Fogla.
“It’s OK for Canada to put tariffs on, I support that. But what about the product I’ve paid for and brought in here prior to the tariff war and product ban? Why am I being subjected to a financial penalty now?” asks Fogla, owner of AFIC EXIM Canada Corp., a registered Canadian company.
Fogla said not being able to sell much of his pre-purchased American products has led to cash flow problems and accelerated laying off sales staff.
Importer says U.S. alcohol in bureaucratic ‘la-la-land’
At issue is how the supply chain works for importing American alcohol into B.C., Fogla said.
The provincial government operates 198 retail BC Liquor Stores across the province. Consumers also have private retailers, pubs and restaurants from where to purchase alcohol products.
However, the province’s B.C. Liquor Distribution Branch manages distribution of most imported products through its central warehouses.
When a private retailer wants to sell a product imported from the U.S. it must purchase it from the branch, which in turn purchases it from an importer such as Fogla.
It is the importer who makes the original purchase from the American producer. But to maintain a smooth flow of products, importers keep an excess of product in a private warehouse before they are purchased by the BCLDB.
When the government pulled all American alcohol products off its store shelves earlier this month, those products had already been purchased by importers.
Fogla said it's unclear if he will be able to keep the money paid to him by the branch for the products the BCLDB has purchased, as unsold stock is normally charged back to the importer.
This has left private retailers to buy up those products remaining in warehouses.
Fogla estimates he has about $320,000 worth of alcohol products sitting in private warehouses, both in B.C. and other provinces. Close to 45 per cent of this inventory was destined for B.C. stores.
Meanwhile, B.C. and other provinces have enacted policies to stop interprovincial sales of U.S. products.
Fogla sent a truck to Alberta on March 4. But the shipment was turned away because it arrived on March 5, when the ban went into effect.
“My trucker was told to take it back, but I can’t take it back because it’s a controlled substance and interprovincial transfers are not allowed. I cannot ship it back to the U.S. because I would need an import licence in America, which is a long process. B.C. said they won’t take it either and they won’t create a new purchase order. So it’s in la-la-land now,” said Fogla.
The 20-year veteran importer is still allowed to sell his inventory to private B.C. stores. But there are two problems.
First, he needs to pivot his government store sales to private stores, and some are not taking more orders on principle. And since sales will be drawn out, it will create cash flow problems for the business.
The second problem is that a lot of his product is craft beer, which has a shelf life of three to six months.
“Spirits and wine are OK. They can sit in a warehouse, but not craft beer,” Fogla explained.
“What do I do? I will have to destroy some products as they reach the end of their shelf life but who will pay for it? But why punish me?” said Fogla, directing his question to the government.
The government’s U.S. alcohol ban has been spearheaded by Eby and Housing Minister Ravi Kahlon, the latter of whom chairs a special tariff response committee. Minister of Public Safety and Solicitor General Gary Begg oversees the BCLDB.
The trio did not respond to BIV for an opportunity to comment.
The ministry provided some background information, saying its government stores “account for less than half of retail alcohol sales in B.C.”
Industry consultant Mark Hicken, principal of Alca Intelligence Inc., told BIV he has heard similar concerns as Fogla’s.
“It is definitely causing some grief, and generally they’re small Canadian businesses,” said Hicken.
Those importers with more diversified portfolios will be better able to pivot to promote non-U.S. products, said Hicken, but a more unfortunate fate may be in store for those who rely heavily on American products.
“I do feel sorry for many of them,” said Hicken.
