Justice Committee on Dec. 3rd, 2013

[The Chair, Conservative, Mike Wallace]

Thank you, sir.

Thank you for those questions and answers.

The next questioner from the New Democratic Party is Mr. Kellway.

[Matthew Kellway, NDP, Beaches—East York, ON]

Thank you very much, Mr. Chair. Through you, I would like to thank Mr. Saint-Denis for being with us today.

I was struck by your response to Madame Péclet's question and your response to the question about the differential impact of this law in certain parts of Canadian society.

I'm going to focus on the first nations piece, because when I read the legislative summary from the Library of Parliament, the first nations stuff runs throughout the discussion and the analysis and the talk about the Cornwall-Valleyfield territory there.

Your response was, as I understand it, that you don't know if there's going to be a differential impact. Is that correct?

[Paul Saint-Denis]

I don't know. I'm not sure to what extent there is aboriginal involvement in the trafficking of tobacco. We know there is a lot of manufacturing activity, but manufacturing is not covered by this legislation. Then we're left with some of the prohibited activities such as the transport, for instance. I do not know to what extent—

[Matthew Kellway, NDP, Beaches—East York, ON]

Here's the follow-up question then. Don't you have an obligation to know? Doesn't the government when making law.... Even if it's criminal law, you can put it in the code, but there's a social context for this law. In the absence of consultation, in the absence of that kind of social knowledge, and in the absence of knowledge about how this actual criminal activity works—and I know you can't know it in sufficient detail, or you probably would have put it out of business already—it seems to me that you are taking an enormous risk on the effectiveness of the law and the potential for a significant differential impact on certain constituencies in our society.

Perhaps it's as obvious as forcing police forces to start enforcing this law. You're putting crowns in provinces into a position where they have to deal with mandatory minimums, and how are they going to respond? I'm struck by how you make a law without taking all of that into consideration, because I don't know how you can know the effectiveness of that law in the absence of that consideration and knowledge.

[Paul Saint-Denis]

I think you're right. It would have been useful to be able to consult broadly outside the government, but this was not the case. We were asked to do a particular job under particular circumstances, and that's what we were left with.

[Matthew Kellway, NDP, Beaches—East York, ON]

Perhaps in your position you could share with us, in general terms, your thoughts on the potential risks of proceeding in this absence. I don't want to put you on the spot, but in general terms, what are the risks of proceeding in the absence of that kind of consultation and knowledge?

[Paul Saint-Denis]

Well, I guess the risk is not getting as much information as one can. In that regard, we do try to anticipate the kinds of reactions and problems that may arise and try to tailor our legislation according to what we believe would be problems. That being the case, we put together legislation that we hope will respond to those concerns. At the same time, we're asked to prepare legislation in light of the government's directives, so that's our first and foremost obligation.

[Matthew Kellway, NDP, Beaches—East York, ON]

I'm just looking at the legislative summary we received from the Library of Parliament. It refers to a Mohawk Council of Akwesasne press release announcing the receipt of a grant from the Government of Ontario to assist in developing a tobacco law and regulatory framework and calling on the federal government to work with them to address tobacco concerns rather than increasing sentences and the enforcement presence around their community. So, it's in that kind of context where you have a province and first nations working—it would appear from that—in a completely contrary direction to this law. I wonder how this then gets received, what police forces do with that, what a community does with that, and what the Government of Ontario does with that in the absence of any consultation and discussion about this.

[Paul Saint-Denis]

I'm not a hundred per cent convinced that this necessarily is working in contradiction to what's written in that document. You have to remember that under the Excise Act, 2001 there is a regulatory regime that allows for the obtaining of permits and authorizations to manufacture, to possess for the purpose of selling, and so on and so forth. This is all done through the Excise Act and through the Canada Revenue Agency and, I guess, the Department of Finance. But if a group of individuals wish to get involved in the legitimate manufacture, sale, and distribution of a tobacco product, they can work it through that regime.

[The Chair, Conservative, Mike Wallace]

Okay. Thank you very much.

[Paul Saint-Denis]

In the statement you read out, the suggestion was that the government develop a regulatory approach for dealing with this, but there already exists a regulatory approach. It's in the Excise Act.

[The Chair, Conservative, Mike Wallace]

Thank you for those questions.

Thanks for those answers.

We have now exhausted our speakers list. Because our next panel has three groups, my suggestion is that we suspend now. If they're all here and we get settled in and ready to go before 9:45, we can get the meeting started. That will give them their full time for their presentations, and it will give us more chances to ask questions—because we only had one panellist today in this first panel, and we're going to three.

With that, merci beaucoup, Monsieur Saint-Denis, for your presentation this morning.

We will suspend for a couple of minutes.

[The Chair, Conservative, Mike Wallace]

I'm going to call to order the second half of today's meeting. This is meeting number eight.

Just so committee members know, the clerk has done a fantastic job of lining up witnesses for us from everyone's lists. There was a lot of crossover. We have two full panels for Thursday: two on each side, two in the first half and two in the second. We have full panels for Tuesday. We're waiting to hear from one more group.

It looks as though we will be meeting on Thursday morning. Just so members are aware, there hasn't been any decision about what Thursday's schedule will look like. But we will be meeting and we will be doing clause by clause. If you have any amendments that you're interested in, please give them to the clerk as soon as possible, preferably by Friday. I know that we have another panel to see, so you can do some things after that. But the sooner, the better, so that we are prepared.

With that, we will go to our next panel. We have, from the National Coalition Against Contraband Tobacco, Gary Grant, spokesperson. From the Ontario Korean Businessmen's Association, we have Don Cha. And from the Coalition québécoise pour le contrôle du tabac, we have Flory Doucas, co-director and spokesperson.

We're going to start with the Coalition québécoise pour le contrôle du tabac.

Thank you very much.

[Flory Doucas, Co-Director and Spokeperson, Coalition québécoise pour le contrôle du tabac]

Thank you, Mr. Chairman.

Ladies and gentlemen, members of Parliament, my name is Flory Doucas. I am the co-director and spokesperson for the Coalition québécoise pour le contrôle du tabac. On behalf of the over 460 organizations which form the coalition, I would like to express my gratitude for the opportunity to present the views of my organization today on Bill C-10.

Despite what you may have heard in the media and elsewhere, in reality, less contraband tobacco is being trafficked, and this has been confirmed by several sources, including tobacco multinationals. Year after year, these multinationals, when making presentations to investors, have confirmed the fact that less tobacco is being trafficked in Canada.

I would like to draw your attention to pages 3 and 4 of the brief, which refer to a presentation made in 2012 by Philip Morris International, which owns RBH in Canada. In the PowerPoint presentation made to investors, Philip Morris admits that there was a huge decrease in trafficking between 2007 and 2011 in Canada, and the market share of contraband tobacco fell from 14% to 8%. The presentation also documented this decrease in Quebec and in Ontario, and it mentioned that trafficking fell from over 40% of market share to 15% in Quebec, and just a bit more than that in Ontario. I would ask you to keep in mind that these documents are available online and that they are public documents, but they have not been widely disseminated.

In an even more recent presentation in 2013, British American Tobacco, the mother company of Imperial Tobacco, pointed to the fact that trafficking levels have remained stable—"flat" is the word that was used—between the winter of 2012 and 2013. This is not surprising. Understand that in Quebec alone, the Government of Quebec invests nearly $18 million per year in the fight against trafficking by implementing several programs and measures.

Yet despite these findings and despite tobacco manufacturers' own declarations, groups purporting to represent retailers, such as the Canadian Association of Food Retailers and the National Coalition Against Contraband Tobacco, almost always systematically omit to acknowledge the substantial decline of contraband levels in Ontario and Quebec which have occurred in the last few years.

On page 6 of my brief, it says that Mr. Grand, as recently as last August, was quoted by the Edmonton Sun as saying that the contraband problem in Quebec and Ontario was "huge" and of "epidemic proportions":

With contraband tobacco sales already a huge problem in Ontario and Quebec, more and more of it is being seen in western Canada. It’s an epidemic back east.

There is no mention of the decrease in contraband.

This type of statement is not surprising, in light of the impression created by the evasive answers given by Mr. Rouillard, the francophone spokesperson for the National Coalition Against Contraband Tobacco, or the NCACT, to the members of the Senate Committee last May, when he was asked what proportion of the NCACT's budget came from tobacco manufacturers. After an inquiry we made last month, we found out that the members of the senate committee still had not received an answer, although they had been promised they would get one.

I would like to draw your attention to the exchange between Honourable Senators Cordy and Fraser and the spokesperson for the NCACT. In that exchange, it was revealed that a public relations firm hired that spokesperson and that it also developed the campaigns of the so-called coalition. Those exchanges are contained on page 7 of our brief.

In the middle of the intervention, following a question by Ms. Cordy, Mr. Rouillard said this:

The members of the coalition contribute to a kitty. They created a coalition and they appointed me, through a public affairs company, to be their spokesperson and to stand up for the coalition's interests. That is my role. I do not meet directly with these people. We propose public awareness campaigns and we appeal to parliamentarians and governments to help fight contraband and make the public aware of the negative impacts of contraband. That is the type of work we do.

Then the senator said:

“What is your total budget and what portion of this budget comes from the tobacco industry?” He replied that he did not have the information.

She then asked if he would be able to get them that information, and he said, “Yes”.

I am wondering why you have not invited this public relations firm or the financial backers of this coalition.

Groups are constantly sounding the alarm with regard to contraband, especially with reference to the closing of convenience stores. Page 8 of my brief shows an excerpt from a report by the Canadian Convenience Stores Association showing that the number of convenience stores has remained stable in recent years. Those are the association's own figures.

We support Bill C-10. It is an additional tool in the toolkit available to the police, and it should be reserved to fight major tobacco traffickers. It should be noted that this government has never arrested any executive of the tobacco companies involved in the contraband crisis of the 1990s. No executive involved in this major crisis ever went to prison.

Selling tobacco to minors is punishable by fines, not prison sentences, and will not lead to a criminal record. Each year, 15% of Canadian retailers sell tobacco to minors.

At the height of the contraband crisis, around 2008-2009, legal products were the most popular among young people. Young people prefer legally recognized brands. It's not very cool to be seen with a Ziploc bag or an unknown brand.

Bill C-10 is a good start, but a number of other promising measures have been shelved. The federal government should be more focused on the introduction of game-changing, developmental measures that affect the supply at the source, for example by controlling raw materials such as tobacco leaf, something that Quebec has already done. The federal government has not done so and neither has it forced the other provinces to do the same. We must also ensure that cigarette manufacturers who operate without federal or provincial licences do not have ready access to cigarette papers and filters.

We are worried about the announcement of another possible move of the border post to the United States, to Massena, more specifically. Moving the Cornwall border crossing to the United States would be unwise. Should this unfortunate decision materialize, Canadian authorities should consider the establishment of a second border crossing at the current temporary border post located in Cornwall.

In almost all Canadian airports, passengers flying to the United States are often obliged to report to both Canadian customs and then to United States customs. In the same way, people coming into Canada through the Massena border crossing should also be required to go through a second border post, that is, in Cornwall. In addition, criteria could be established to ensure that shipments that are likely to contain contraband tobacco are targeted, thereby expediting the passage of other cargo.

In closing, it should be noted that tobacco kills 37,000 Canadians per year. Over 50% of young people in grades 9 to 12 having smoked tobacco in the past month have used flavoured tobacco products.

We await the reaction of the federal government to the real tobacco epidemic in Canada, which lures hundreds and thousands of young people into the trap of tobacco use each week.

Thank you.

[The Chair, Conservative, Mike Wallace]

Thank you very much.

Our next presenter is from the other coalition, the National Coalition Against Contraband Tobacco, and Mr. Grant.

[Gary Grant, Spokesperson, National Coalition Against Contraband Tobacco]

Good morning, Mr. Chair.

Good morning, everybody.

I am Gary Grant, and I'm the national spokesperson for the National Coalition Against Contraband Tobacco, the NCACT.

I'm a thirty-nine-year veteran of the Toronto Police Service, and I'm also the founder and chair of Toronto Crime Stoppers. My involvement with Crime Stoppers also means that I'm one of the coalition's members.

The NCACT is a non-profit, non-partisan organization that works to make the public more aware of the problem of illegal cigarettes and contraband tobacco. The coalition is made up of 16 organizations from across Canada representing industry, business, and law enforcement. Beyond Toronto Crime Stoppers, these organizations include retail organizations such as the Canadian Convenience Stores Association and the Retail Council of Canada, chambers of commerce at the federal and provincial levels, and the Customs and Immigration Union. A full list is available on our website at www.stopcontrabandtobacco.ca.

I became involved in the coalition because the growing accessibility of illegal cigarettes is a serious problem in all communities across Canada, big and small. Whether it's along the St. Lawrence River, in southwestern Ontario, the rural areas of northern New Brunswick or the Gaspé, illegal cigarettes are flowing freely from the hands of criminals directly into the hands of Canadians.

In fact, it may surprise some members of the committee where we have seen busts in recent months. In Charlottetown in January of this year, police seized more than 100,000 contraband cigarettes. In February, a Moncton man was arrested near Edmunston, New Brunswick, with 200,000 illegal cigarettes and pills believed to be methamphetamines. In October two men from Magog, Quebec, were fined more than $100,000 for smuggling tens of thousands of illegal cigarettes, and in western Canada, particularly Alberta and Manitoba, millions of cigarettes have been seized in raids over the past several years.

Just a few weeks ago Quebec newspaperLa Presse highlighted the involvement of Hells Angels in the illegal cigarette trade in Montreal. It outlines the elaborate criminal distribution network these gangsters use to move, distribute, and sell cigarettes in Quebec. It also makes clear how the Hells Angels were being supplied by an illegal cigarette factory. The Hells Angels still have a major presence in Canada. This was reinforced through police raids in Gatineau last week, and they are being funded in part by illegal cigarettes. I brought copies of this La Presse article in English and French for members of the committee.

I think it's worthwhile to outline what we mean when we refer to contraband. It's any tobacco product that has not followed proper government regulations or properly paid federal and provincial tobacco taxes. Illegal cigarettes are often sold in transparent plastic baggies where 200 cigarettes can cost less than $15. These are smuggled through criminal distribution networks across the country. They are all sold via hundreds of smoke shacks that are located near major Canadian cities. These smoke shacks have become more elaborate in recent years demonstrating just how profitable they are. However the product they sell still does not pay both federal and provincial taxes so it's still contraband tobacco.

Why should we be concerned about contraband tobacco? Well, as I've already suggested, it is a cash cow for organized crime. The RCMP has estimated there are about 175 criminal gangs that use the trade in illegal cigarettes to finance their other activities including guns, drugs, and human smuggling. We cannot tolerate some of the worst elements of Canadian society being allowed to effortlessly profit from this criminal activity.

Contraband tobacco is also a prime source for youth smoking. Criminals who sell illegal cigarettes don't care how old their customers are, and they certainly don't check for ID. Given the ridiculously cheap price of contraband cigarettes, these are readily accessible to our teenagers. Remember, a baggy of 200 illegal cigarettes can cost less than the price of a movie ticket.

Tobacco smuggling also has a negative impact on good government. It makes a mockery of tobacco control efforts. If bags of cigarettes can be bought from dealers on street corners easily, all of our efforts to restrict youth access are undermined. Similarly, governments in Canada lose an estimated $2.1 billion a year in tax revenue as a result of tobacco smuggling. That's a lot of money that could be better spent in the government treasuries such as on roads, police, and health. It's money that belongs to the Canadian taxpayers.

The National Coalition was very happy to see this legislation reintroduced as quickly as it was. It is an important step in the fight against contraband tobacco, and a reminder that this issue remains a significant and growing problem in Canada.

There are still 50 illegal cigarette factories operating in this country. There are more than 300 smoke shacks. In Ontario some are even now operating off reserve. Meanwhile, organized crime benefits from the proceeds of contraband tobacco. Government tobacco control regulations, especially those focused on youth, are undermined.

The bill shows that the government is listening to the appeals of the public, law enforcement, the provinces, and retailers with regard to illegal cigarettes. The government's announcement earlier this year that a special task force of 50 RCMP officers will be deployed to deal with tobacco smuggling is most welcome. But more remains to be done; government action can't stop here. Remember, contraband arrests represent only the tip of the iceberg of the larger problem. The RCMP estimates that they capture as little as 5% of the total trade.

There are a number of things that the government can do.

Contraband tobacco is an issue that reaches across political and jurisdictional boundaries. The organized crime groups that benefit from contraband cigarettes operate without any regard for political, departmental, or territorial boundaries. We should work together. Smugglers do not stop at provincial borders. They benefit every time the different levels of government fail to work together to stop tobacco smuggling. All levels of government will also need to remain diligent and continue to monitor and act on this problem. With so much money involved, criminals are bound to innovate and we must be ready to respond.

To conclude, the NCACT is very pleased to see that the government is taking this issue seriously. We are confident that this legislation will make a difference.

Thank you for your time.

[The Chair, Conservative, Mike Wallace]

Thank you very much, sir, for that presentation.

Our next and final presentation is from the Ontario Korean Businessmen's Association.

Mr. Cha, the floor is yours. You have 10 minutes, sir.

[Don Cha, General Manager, Ontario Korean Businessmen's Association]

Good morning, Mr. Chair and members of the committee.

My name is Don Cha. I am the general manager of the Ontario Korean Businessmen's Association, also known as OKBA.

On behalf of our entire 1,500-plus members, I would like to thank you for the opportunity to speak to you today on Bill C-10, and more specifically on how the problem of contraband tobacco impacts our members' businesses and livelihoods. It is a very important issue to our membership.

The OKBA was originally established in 1973 as a not-for-profit association for independent convenience store owners throughout the province of Ontario. Our typical member operates a store that is a family-run business. It employs three or four people, and the store is usually open seven days a week, 14 hours a day.

In many cases our store owners, most of whom are immigrants to Canada, choose to invest their life savings to operate their own businesses and provide a better future for themselves and their families. Undoubtedly, you all have independent convenience stores operating in your ridings, and for those of you representing ridings in Ontario, many of those stores are owned and operated by members of the Korean community.

Our members work hard. We play by the rules and we respect and appreciate the laws that Canada has in place to protect society from criminals and the crimes they commit.

Contraband tobacco has been an ongoing problem that has critically impacted the livelihood of many of our store owners over the last several years. Since 2006 we have seen approximately 700 of our members' stores close, probably due to the easy access to and cheap price of unregulated and illegal tobacco.

We know that contraband tobacco exists and it is available in just about every community across the province and increasingly across Canada. Where contraband is present and readily available, our members have experienced up to a 50% drop in gross sales for their stores.

In addition to lost tobacco sales, less food traffic results, and fewer purchases overall, as those lost customers are no longer entering our stores to pick up their bags of milk, loaves of bread, or chocolate bars for their families.

While the smoking level has been steadily and slowly declining over the years, our members have diversified the range of products and services they sell to stay afloat. However, when our members play by the rules, collect and remit all necessary taxes, and ensure that minors are not purchasing tobacco, we lose hope when we see contraband being sold openly in our communities, right in front of our stores, seemingly with impunity. Something must change.

We applaud the government's decision to introduce Bill C-10 and its proposed amendments to the Criminal Code as it relates to trafficking contraband tobacco. We believe that up until now there has not been enough public deterrence against the many criminal groups that participate in this illegal trade.

In addition, smokers need to realize that purchasing and consuming even small quantities of unregulated and unlicensed tobacco is illegal. Contraband tobacco is not a victimless crime. Contraband trafficking presents a serious threat to our businesses, results in a sizeable loss of tax revenue to government, and provides minors with easy access to unregulated and illegal tobacco products.

We realize that dealing with the problem of contraband tobacco is not easy, and that it requires cooperation between the various levels of government and law enforcement. However, we hope that with the passing of this legislation and, more importantly, the additional resources for law enforcement, the fight against contraband tobacco can be won.

The OKBA and its membership have become increasingly politically active on the issue of contraband tobacco. We look to support good government policy that, first and foremost, recognizes the threat contraband tobacco has on our society, and secondly, enhances the tools and resources that our law enforcement and our courts have to fight the problem and do what's right for Canada.

Thank you for your time and interest.

[The Chair, Conservative, Mike Wallace]

Thank you, sir, for that presentation.

That concludes our presentations.

Our first questioner for the first round is Madame Boivin from the New Democratic Party.

We have three panellists, so perhaps members could identify who they're directing their questions to.

[Françoise Boivin, NDP, Gatineau, QC]

I would like to thank the witnesses for being here this morning.

The issue of contraband tobacco is a very complex one. The bill is one thing, but the entire problem of tobacco smuggling is another.

I found one thing fascinating in your presentations, especially those of Ms. Doucas and Mr. Grant. Both of your organizations are called coalitions, but if I understand correctly, you don't exactly have the same interests in this regard. Let's just say that I would not invite both of you to supper at the same time, unless I wanted a bit of excitement.

Mr. Grant, I'm trying to understand something about the people who are part of your coalition.

Am I correct in assuming that you have in your coalition a lot of the industry that produces the tobacco, that sells the legal tobacco?

[Gary Grant]

Madam, the 16 members are pretty broad-spectrum. We do have the Canadian tobacco manufacturing council and the Canadian association—

[Françoise Boivin, NDP, Gatineau, QC]

Okay. I'm just trying to reconcile both—

[Gary Grant]

We also have the border guards—

[Françoise Boivin, NDP, Gatineau, QC]

It's not a reproach.

[Gary Grant]

No, no, I realize that. It is part and parcel of our coalition, and it's a broad-based coalition.