Health Committee on June 20th, 2011

[Dany Morin, NDP, Chicoutimi—Le Fjord, QC]

My question is for Mr. Clayton.

I understand perfectly that you and Mr. Haslam would have preferred to have a 12-month timeframe to really change your practices.

However, your industry is very lucrative, and your profits are enormous. You surely have the financial resources to invest in the manufacturing process and thereby accelerate the pace in order to meet the six-month deadline.

[Caroline Ferland]

Could I answer instead?

There are two fundamental elements that play a part in the ability to comply with such regulations by the deadline.

First, we must produce and buy the packaging materials that will carry the health warnings. That's what Mr. Haslam is here to testify about. That's an important part of the process for us. The result is greatly affected by the timeframe our suppliers—like Mr. Haslam—can give us.

Second, once we have our packaging materials, we can use them in our plants to produce compliant cigarette packs from then on.

We have already been asked whether we could comply with the regulations in time by investing all our financial resources into that process. Mr. Haslam would be better suited to answer the question, since our ability to meet the deadline greatly depends on when suppliers can provide us with compliant packaging materials.

As he was explaining earlier—and perhaps he would like to add something else—buying the machinery and training employees in order to meet the requirements within a shorter deadline is not a matter of money. As he was explaining, the issue is rather the three-year training period.

Therefore, it is currently more about resources and resource specialization than about money.

[Dany Morin, NDP, Chicoutimi—Le Fjord, QC]

I have a quick question.

Could I go as far as to say that your failure to anticipate this move is somewhat due to a lack of planning? We know that Canada has been investing increasing amounts of money in tobacco control for many years.

So, should you not take some of the blame owing to a lack of planning?

[Caroline Ferland]

Once again, I am going to pick up on the remarks made by Mr. Haslam earlier.

Clearly, we knew that proposed regulations of this nature were being considered. You are asking us whether we started preparing. I will tell you that we tried to start working on it. Faced with a possible six-month timeline, a huge challenge for us, we tried to do as much work as we could.

Your first question was whether it is normal for an industry to start working on something even before the legislation is in place. Let's put that aside for a moment.

It is also important to understand that, even if we do want to start the work, the essential tool we need to manufacture these packaging materials is what we call the source document. It is actually the binder you have in front of you containing the new health warnings.

Not only do we need a hard copy of the document such as the one you have there—which we have already received—but we also need an electronic copy containing highly specialized technical files so that Mr. Haslam can work from it.

So even though we are already doing everything we can to prepare, as long as we do not have the electronic version of the source document, we cannot unfortunately start the most difficult part of the process.

[Dany Morin, NDP, Chicoutimi—Le Fjord, QC]

I have one last quick question for you. I am trying to find a solution to your problem.

Besides Mr. Haslam, are there other suppliers who could help you meet the deadline in the short term, ideally in Canada but anywhere in the world? Are there new suppliers who could help you with that?

[Caroline Ferland]

Mr. Haslam talked about that a number of times today. For him, there are no other Canadian suppliers. For us, we give all of our business to SGS, Mr. Haslam's company. If he wants to be able to deliver the product by the deadline, he has told us that he must outsource part of the work outside Canada. There are no other Canadian suppliers we can work with.

It is also worth mentioning that the company Mr. Haslam is here representing provides these services not only to us, Imperial Tobacco Canada, but also to JTI and RBH. Together, we are Canada's top three tobacco companies. We cover just about all of the legal market.

[The Chair, Conservative, Joy Smith]

Thank you very much.

We will end our round by going to Mr. Strahl.

[Mark Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

Thank you.

My question is for Mr. Haslam. What percentage of the entire cigarette packaging industry in Canada does your company hold? What percentage of the packages would you say that you print?

[David Haslam]

We don't print anything. We supply the tooling to the printers, but we do supply probably 98% of the legal tobacco trade.

[Mark Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

What the committee should understand, from your point of view, is that there is no other capacity in Canada that could be used in addition to your company to meet the requirement.

[David Haslam]

No, there is really no other available capacity. There are four engraving shops in Canada; we're the largest one. We engrave about 90% of the Canadian cylinders. The three other companies specialize either in wall coverings, floor coverings, pool liners, or decorative work. They don't really go into the high-end packaging that we're engaged in.

[Mark Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

Mr. Cunningham, to switch gears a little, what has your research shown in terms of the shelf life of these picture warnings? How long are they effective before people start to look past them? How often would your organization think they need to be renewed in order to be effective?

[Rob Cunningham]

Ideally you'd see a new set of warnings every two years or so, or some period in that range. There's not a straight answer, because different consumers respond differently. There're always new young people coming along and new Canadians exposed to them for the first time. As well, when you or your wife or your daughter becomes pregnant, you're going to look at an existing warning in a different way. That life-changing event may suddenly prompt the warning to have a renewed impact for that particular individual.

We're seeing more countries that change warnings after a period of time--12 months, 18 months, two years, two and a half years, and so on.

[Mark Strahl, Conservative, Chilliwack—Fraser Canyon, BC]

With regard to the briefing material we received in advance, one of the things that jumped out to me was Imperial Tobacco's statement that the increased size of the warning may drive people to the contraband market. I'd like, first of all, Imperial to discuss that and perhaps help me understand. Are they really saying that smaller warning labels will limit contraband tobacco?

Maybe Mr. Cunningham could address that part of the brief that we received as well.

[Caroline Ferland]

In answer to your question, I want to raise two points. The first is what we have been saying. We are currently up against some stiff competition from the Canadian black market. Increasing the size of health warnings means less and less room on our packaging to provide those adults who choose to smoke with information about the cigarettes they want to buy. And in that sense, this may initially lead some of those people to take the view that there is less reason to buy legal cigarettes as opposed to illegal ones.

There is another consequence that may lead people to turn to the black market: the less space we have to be competitive on our packs and encourage consumers to choose our brand over our competitors', the more competitive we have to be with our pricing. But lowering prices goes against one of the policies set out by Health Canada in its tobacco control strategy. Furthermore, no matter how much we reduce the price, we will never be able to compete with the black market. Since consumers who choose that option do not have to pay taxes, the price is really too difficult to touch.

[Rob Cunningham]

Contraband is clearly an important problem. We've had recommendations to have measures to prevent contraband.

I don't accept Imperial Tobacco's argument that the warnings would lead to an increase in contraband.

The problem is one of a source of supply. It's interesting that Ontario and Quebec have the lowest tobacco taxes in Canada, but the biggest contraband problem. Why? It's the proximity to the source of supply, the illegal factories on a handful of first nations in Ontario and Quebec and on the U.S. side, such as Akwesasne near Cornwall. Provinces like Alberta and British Columbia have a comparatively very low level of contraband, but much higher tobacco tax rates. It's quite a complex issue in some respects, but it's associated with source of supply.

[The Chair, Conservative, Joy Smith]

Thank you, Mr. Cunningham.

We have ended this round. I want to thank the witnesses very much.

Dr. Fry would like to ask a quick question. Although Mr. Williamson was next on the docket, is it the will of the committee to allow Dr. Fry one minute?

[Hedy Fry, Liberal, Vancouver Centre, BC]

No, that's fine.

[The Chair, Conservative, Joy Smith]

It's okay that we pass?

[Hedy Fry, Liberal, Vancouver Centre, BC]

Yes.

[The Chair, Conservative, Joy Smith]

Having said that, I want to thank the panel very much for coming and giving us their expert advice. It's very much appreciated.

I will suspend the committee for two minutes, after which I will ask Health Canada to come forward.

[The Chair, Conservative, Joy Smith]

Good afternoon to Health Canada. We welcome you. We've very happy you could make it today to make a presentation and answer some questions.

We have with us Hilary Geller, assistant deputy minister of the healthy environments and consumer safety branch. Welcome.

We also have Cathy Sabiston, director general of the controlled substances and tobacco directorate of the healthy environments and consumer safety branch, and Louis Proulx, acting director in the controlled substances and tobacco directorate of the healthy environments and consumer safety branch. Welcome to you both.

You will have a 10-minute presentation. Who would like to begin? We'll have one representation.

Hilary, go ahead, please.

[Hilary Geller, Assistant Deputy Minister, Healthy Environments and Consumer Safety Branch, Health Canada]

I will.

Thank you, Madam Chair.

We appreciate the invitation to speak to the standing committee about Health Canada's tobacco labelling regulations.

Health Canada is committed to helping the five million Canadians who continue to smoke to kick the habit. We know that smoking is responsible for the premature death of 37,000 Canadians a year and causes chronic diseases like lung cancer and cardiovascular disease. We also know that health warning labels on tobacco packaging are one of the most effective ways to warn smokers of the health hazards of smoking. Research has shown, however, that the current messages in place since 2000 have reached their maximum effectiveness.

Last December the Minister of Health announced regulatory changes to introduce new and larger health warning messages that include a toll-free quit line number for all cigarette and little cigar packages. In February of this year the department published the proposed regulations in Canada Gazette part 1, and the minister laid the regulations before the House of Commons on June 9. These regulations are entitled, first, Tobacco Products Labelling Regulations (Cigarettes and Little Cigars); second, Regulations Amending the Tobacco Products Information Regulations; and third, Promotion of Tobacco Products and Accessories Regulations (Prohibited Terms).

I am pleased to provide you with a brief overview of the proposed regulations.

Canada was the first country to require pictorial health warnings on tobacco packaging when it adopted the Tobacco Products Information Regulations in 2000. Since then, research has shown that larger warnings with pictures are more likely to be noticed, better communicate health risks, provoke greater emotional response, and further motivate tobacco users to quit.

I will first mention the proposed tobacco products labelling regulations for cigarettes and little cigars. These regulations will increase the size of the health warnings from 50% to 75% of the front and the back of the package. These regulations include 16 new high-impact health warnings that cover a wide variety of messages. For example, there will be warnings about tobacco-related diseases that have not been featured in the past, such as bladder cancer and age-related macular degeneration, and for the first time Canadian health warnings will feature testimonials from individuals affected by tobacco use, such as the late Barb Tarbox.

Also included are eight new pictorial health information messages placed in the interior of the pack, and four easier to understand toxic emission statements.

Changes to the design of the health information messages make them more engaging, and they encourage users to read the information. The four text-based toxic emission statements provide clear, concise, and easy-to-understand information about the toxic substances found in tobacco smoke. They will be found on the side of cigarette and little cigar packages. Research indicates that having both positive and negative messages is important in motivating behavioural change. This balanced approach will provide Canadians with information on both the health risks of smoking and the health benefits of quitting.

The proposed new labels also feature a pan-Canadian toll-free quit line number and Web portal to inform tobacco users about the availability of smoking cessation services.

Health Canada is working with its provincial and territorial counterparts to establish the quit line and web portal that will seamlessly connect smokers to their local cessation services.

I will just say a word on the issue raised by Mr. Clayton. The inclusion of the words “at least 75%” makes the proposed regulations consistent with the current regulations, which say “at least 50%”. I'd like to assure the committee that this does not alter the requirements set out in the Tobacco Act for all regulations to be laid in front of the House.

Second, Health Canada is also proposing regulations amending the Tobacco Products Information Regulations. These regulations currently establish the requirements for information that must be displayed on tobacco product packaging for retail sale in Canada. The proposed changes will remove their application to cigarettes and little cigars, which will be regulated by the new tobacco products labelling regulations. The amendments will also remove the obligation to list numerical values for toxic emissions, which many smokers found confusing. Other modifications address housekeeping changes in response to issues identified by Parliament's Standing Joint Committee for the Scrutiny of Regulations.

The third set of proposed regulations deals with prohibited terms in the promotion of tobacco products and accessories. These regulations would prohibit the use of the “light” and “mild” descriptors and related terms on various tobacco products; on their packaging, promotions, and retail displays; and on tobacco accessories.

This last set of regulations would reinforce the Competition Bureau's previous agreement made in 2006 and 2007 with nine tobacco companies, representing approximately 98% of the Canadian cigarette market, to voluntarily remove the misleading terms from their products and packaging. These regulatory changes would prohibit these terms from all relevant products.

As part of the regulatory process, Health Canada consulted Canadians on these three regulatory packages.

Following a 75-day comment period, we received 54 submissions from the tobacco industry, from retailers, from non-governmental health organizations, and from individual Canadians. Health Canada has considered these comments and integrated them, where appropriate, to improve the effectiveness of health messages and to facilitate their implementation. For instance, Health Canada changed some font colours and the layout of the quit line number to improve readability. You'll notice that it's now a yellow font over a black background. Some images were also changed to ensure that health messages were more representative of the diversity in Canadian society. Technical changes, such as the colour processing, were made to facilitate implementation and printing of packages by manufacturers.

Building on the success of the Cracking Down on Tobacco Marketing Aimed at Youth Act, the regulations laid out and referred to you propose changes to tobacco packaging that complement new and existing cessation and prevention initiatives, resulting in a comprehensive and integrated approach to tobacco control.

Thank you. My colleagues and I welcome your questions.

[The Chair, Conservative, Joy Smith]

Thank you so very much.

With the permission of the committee, we'll go into one round of questions. I'm understanding that the questions are running out now, and we're being a little redundant.

With the permission of the committee, we'll do one round, which will be representative of all parties. Is that okay with you?

[Some hon. members]

Agreed.