Bill C-10 (Historical)

Tackling Contraband Tobacco Act

An Act to amend the Criminal Code (trafficking in contraband tobacco)

This enactment amends the Criminal Code to create a new offence of trafficking in contraband tobacco and to provide for minimum penalties of imprisonment for repeat offenders.

[Michael Perley]

I think it is extremely important that we have a clear message about contraband, and by clear message I don't simply mean a message about the new deterrent penalties and so on, but a message about what contraband actually is. While I'm sure most people know something is wrong or perhaps illegal with buying contraband from the smoke shack on reserve, the fact remains that most people who do it get away with it. That's not to criticize our law enforcement personnel, it's just that the numbers are what they are.

If I'm driving to Smokin Joes on Highway 2 outside Belleville, just inside the Tyendinaga line and buying contraband every week and no one bothers me about it, because I'm small fry, do I think it's really illegal? I'm not sure I know whether it's illegal or not. The bottom line is I can get away with it. If I can buy a carton or two from somebody with a truck outside Loblaws—I know several locations in Toronto where that happens—do I think that's illegal? Probably, but again, I'm getting away with it.

I think part of the challenge for law enforcement with its resources that are somewhat straightened, is getting to these many instances of local purchase. But if there is no message from the government about what is illegal and what isn't.... Especially now with Bill C-10, with the criminalization of trafficking and the whole contraband trade, this is a wonderful opportunity to say that the game has changed. You may have thought that contraband was this or that these cigarettes were not precisely illegal, now they are, now there's jail time, now the game has changed, and then something about the health effects.

It's a wonderful opportunity to change the whole way we look at contraband.

[David Wilks, Conservative, Kootenay—Columbia, BC]

Thank you, Mr. Chair.

Thank you, witnesses, for being here today.

Mr. Perley, you touched on something that was interesting, and that was public education. I want to go down that road a little further.

Should this bill be passed and enacted, what do you see as a public education tool not only from the Ontario perspective but from the federal perspective that we could utilize to educate people with regard to the enforcement of Bill C-10?

[Françoise Boivin, NDP, Gatineau, QC]

When Bill S-16 was tabled, Vic Toews, the Public Safety Minister at the time, said that he would simplify the investigation procedure by allowing provincial and municipal police forces to lay charges.

Do you feel that Bill C-10 is actually going to make your investigation work easier because you will be able to become directly involved in criminal matters?

[Michael Perley, Director, Ontario Campaign for Action on Tobacco]

Thank you, Mr. Chairman, and members of the committee, for this opportunity.

On behalf of the Heart and Stroke Foundation's Ontario office, the Ontario division of the Canadian Cancer Society, the Ontario Medical Association, and the Non-Smokers' Rights Association in Ontario, I'd like to offer some comments on Bill C-10. I'm Michael Perley, and I'm the director of the Ontario Campaign for Action on Tobacco. The agencies I mentioned have been working together since 1993 on tobacco control issues.

The Ontario campaign strongly supports Bill C-10. On the earlier panel, Rob Cunningham, François, and Manuel Arango gave you a detailed analysis of why the bill is so important, and I'd just like to add some additional perspective and perhaps answer some questions later about the Ontario situation.

Today, the total Canadian tobacco market is about 40 billion sticks annually. The most serious phase of the current contraband problem occurred in 2007-08 when major tobacco companies estimated that between 32.7% of the market, British American Tobacco's estimate, and 35%, Philip Morris International's estimate, was contraband. Three years later, British American estimated the illegal market had fallen to 18.75% of the total market, and Philip Morris estimated that contraband had fallen to 20% of the total market. The reasons for this decline can be found in the aggressive actions of the federal, Quebec, and Ontario governments and their law enforcement agencies in attacking the contraband problem.

Today, I think as François mentioned earlier, the Quebec finance ministry estimates that contraband makes up 15% of its total market in Quebec. We do not have a similar reliable estimate for Ontario's market, although it appears to be somewhat higher. Thus, overall, the problem persists, but we are making progress. I would like to underline that because I think, as some comments have indicated, the tobacco industry and its retail allies put forward a somewhat different picture of the state of the contraband problem.

The authority Bill C-10 gives to all Ontario municipal and provincial police officers has an importance beyond the purely additional enforcement capacity it provides. Criminalization of contraband tobacco trafficking will send an important deterrence message to those who transport and supply large volumes of contraband off reserve that they can no longer expect to simply pay fines—or not pay fines as Mr. Cunningham underlined—as a form of a business licence to deal in contraband. Equally important, the bill will send a message to police themselves that contraband is now deemed to be criminal activity by the federal government and should be treated as such.

Bill C-10 also provides an important opportunity for public education when it is implemented with the message, of course, that trading in contraband is now a more serious offence with jail time at the end of the road.

Another argument in favour of quick passage of Bill C-10 is that the implementation of regulations governing the proposed Ontario provincial raw leaf tobacco management system has been delayed, and this was referred to earlier as well. I can speak to it in more detail during questions. These regulations, which will require marking and tracking of all raw leaf shipments in the province were originally to come into force this past September, then were put back until January 2014, and now have been delayed again, this time until January 2015. Over 60 million pounds of tobacco will be grown in Ontario this year, and some of it is bound to make its way into the contraband manufacturing system. The need for the sanctions in Bill C-10 assumes additional urgency in this context.

One final issue that does not bear directly on Bill C-10, but which has been mentioned previously, is the move of the eastern Ontario U.S.-Canada border post from Cornwall to Massena, New York, and the impact this move may have on contraband supply. I have with me a coloured map, but I'm unable to distribute it because unfortunately it's not in two languages, and I haven't been able to find a bilingual version of it. But perhaps I can show it a little later during questions because it's a little easier to understand the importance of this border post issue when you see where it's located. Let me perhaps just show you briefly.

This red section here is Cornwall Island in the middle of the St. Lawrence River. This is on the New York side of the river where the new border post is going to be, and this is where the current border post is in Cornwall.

If the border post is moved here, this leaves Cornwall Island basically unsupervised. What that does is create the potential—I underline that word—for Cornwall Island to become a contraband trafficking zone again, somewhat similar to the way it was a few years ago. If there is no Canadian inspection facility beyond the proposed U.S.-side post, Cornwall Island may again become a focal point for contraband trafficking. A two-part inspection system, as Mr. Cunningham mentioned, would avoid this potential problem in the first place.

In closing, while we don't often agree with the groups representing the tobacco industry and retailers, I would like to mention a comment made by the head of the Ontario Convenience Stores Association at a news conference in Toronto yesterday. He pointed out that the contraband problem “is not driven by taxes, but is driven by cheapness and delivery”.

We agree. We believe effective implementation of BillC-10 will strike an important blow against both the low prices and the extensive supply lines of the contraband market in Ontario.

Thank you very much.

[The Chair, Conservative, Mike Wallace]

Ladies and gentlemen, we're going to call this meeting back to order. We are continuing to deal with Bill C-10, An Act to amend the Criminal Code (trafficking in contraband tobacco).

If our panellists would join us, that would be great.

Just before we introduce the second panel, our clause-by-clause will be on Thursday morning. We're going to start at the regular time of 8:45 regardless of the House schedule, unless we're adjourned. The meeting is in Centre Block, so remember that, 8:45 a.m.

So far, committee members, you should know that three amendments have been submitted, two from an independent and one from the New Democratic Party. The timeframe is coming to a close for any independents, but of course, based on any input we get today, we'll still accept amendments from the parties at the table.

With that, for the last hour on this we have from the Ontario Campaign for Action on Tobacco, Mr. Perley; and from the Ontario Provincial Police, Chief Superintendent Gary Couture, Regional Commander, East Region Headquarters.

Gentlemen, thank you for joining us, and Mr. Perley, the floor is yours.

[François Damphousse]

Bill C-10 is very important because it provides police forces with additional tools to do their job. I think it will have an impact on contraband. For example, as mentioned a number of times, contraband measures should include the control of inputs to prevent illicit manufacturers from getting supplies.

As for the legal market, we think the most important measures for reducing tobacco use would be generic packaging and eliminating flavours from combustion products. Considering these two measures would be very important. Australia just adopted something similar. The fact that the tobacco industry was strongly against it is a clear indication that it will work.

[Pierre Jacob, NDP, Brome—Missisquoi, QC]

Thank you very much.

This question is for all three of you. Will Bill C-10 be a sufficient initiative to fight against tobacco use among Canadians? If not, what do you suggest?

[Pierre Jacob, NDP, Brome—Missisquoi, QC]

Thank you, Mr. Chair.

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

Mr. Arango said that young people get addicted to cigarettes for at least 20 years.

My question is for all the witnesses, starting with Mr. Arango. Is Bill C-10 a solution? Will it help reduce tobacco use in young people?

It's important to note that a number of witnesses told us that, as with clothing, young people are attracted to brand-name cigarettes, legal cigarettes, particularly flavoured cigarettes.

We know that fear campaigns aren't a solution. Young people are drawn to danger, alcohol, speed, and so on.

Will Bill C-10 help reduce tobacco use in young people? What might the solution be? What do you think, Mr. Arango?

[Manuel Arango]

I would just add that I think deterrence is part of the solution. It is clearly not going to be the magic bullet as I indicated before.

However, I think one thing about Bill C-10 is it does have a graduated approach. I think that approach can help mitigate the impact of criminalization on youth, etc.

Clearly, it's not a perfect solution. Perfect solutions aren't out there. We just have to make sure if someone comes out of jail, you have to have programs in place to ensure these people can reintegrate into society, and have employment, etc.

It's part of the solution, but not the entire solution.

[François Damphousse]

We obviously have contacts with different police officers and with the RCMP specifically, and one of the things I’ve learned—it was quite interesting—is that they’re frustrated. They are really frustrated because one of the things that's happening is they are catching many of the smugglers coming up, for example, from Akwesasne. They lay charges against them, they have fines to pay, but they don't pay them. They just go back on Akwesasne. So I find that very strange. We never go, and get them back, and force them to pay their fines.

This bill will change that. It will have a much greater deterrent effect by having minimum jail time, and I think that's very important.

Something I did not know even though I worked in tobacco control for 20 years was contraband was not part of the Criminal Code so police officers at the municipal or provincial level are very limited in what they can do. In Quebec they have amended the Tobacco Tax Act so police officers can at the very least immobilize a vehicle, and if they suspect it has contraband in it, they could ask for a warrant and search the vehicle.

But they can't arrest the individual. It's the revenue department afterwards that lays charges against that individual, but they can't arrest them. This will change with Bill C-10. It will provide the necessary authority for the police officers to arrest the individual if they have a minimum quantity of contraband tobacco, which is a big help.

In Ontario it's even worse than in Quebec because they don't even enforce their Tobacco Tax Act.

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

Thank you very much, Mr. Chair. Thank you all for coming today and sharing your thoughts on Bill C-10. Like Mr. Casey, I was struck by all three of you commenting, using almost the same language, about the need for a comprehensive tobacco control strategy. I want to unpack that a little bit, but first I'd like to talk a bit about where Bill C-10 fits in all of that.

As I understand your response to Bill C-10, I think all three of you have referred to it as a deterrent. I'm wondering, because we've talked about other things like tax policy, how much thought from you has actually gone into how that's going to work as a deterrent, whether you have considered such things as differential impact on different parts of society, about the mandatory minimums involved in Bill C-10, and criminalization of possibly youth, and possibly some sections of society.

Have you guys given any thought to that?

[Sean Casey, Liberal, Charlottetown, PE]

Thank you, Mr. Chairman.

Welcome.

All of you have talked about Bill C-10 as one component in a bigger strategy. Mr. Cunningham, you had some specific examples. And Mr. Damphousse, you have with you a list that I think you're going to leave behind.

My question is for Mr. Arango. You have heard the others flesh out a little bit what a more comprehensive strategy would look like. You referred to it. I'd be interested in hearing your further comments as to what else government and others should be doing over and above Bill C-10.

[Françoise Boivin, NDP, Gatineau, QC]

We could have it translated later. The information would be extremely interesting and would let us see all the steps that have been taken. Bill C-10 is part of a whole.

[Françoise Boivin, NDP, Gatineau, QC]

Thank you, Mr. Chair.

I would like to thank the three witnesses for being here this morning to help us as we consider Bill C-10.

I appreciate that all three of you support this bill. In fact, I would be surprised if you didn't. I am convinced that Bill C-10 is not an end in itself for you and your organizations.

It's not an end to the problem of combatting tobacco use because it's more the name of the game of your associations, I'm pretty sure.

The headline this morning on my local newspaper, Le Droit, read “Illegal Cigarette Butts by the Ton”. The Canadian Convenience Stores Association commissioned a study, and tons of cigarette butts were collected at the Rideau Carleton Raceway. They found that 46.6% were from contraband cigarettes. That shows us just how much of a concern it is.

We have heard from a number of witnesses, and I still don't know how we can solve this problem, strictly from the perspective of contraband. Some people say that if we raise taxes, there would automatically be more contraband. Should we lower taxes to ensure that there is no contraband? But then cigarette use would increase.

Mr. Cunningham, I am pleased that you made other suggestions to indicate that Bill C-10 is not an end in itself. Some witnesses told us that there was less contraband. I would like to hear what you have to say about that. This aspect is important and needs to be studied. When we analyze the methods that the current and previous governments have used, it would help us determine whether Bill C-10 is fine in itself.

My question is for all three of you. Do you agree that there is less contraband, or do you think there is more? Please give us your thoughts.

I'll start with Monsieur Damphousse.

[Rob Cunningham, Senior Policy Analyst, Canadian Cancer Society]

Thank you, Mr. Chair.

My name is Rob Cunningham, lawyer and senior policy analyst with the Canadian Cancer Society.

Thank you for the opportunity to testify before you today.

We support Bill C-10. We urge all parties to support adoption of the bill as soon as possible.

At the outset, let me emphasize the crucial role that higher tobacco taxes play in reducing tobacco use, especially among youth who have less income. There's a vast body of evidence that confirms the obvious: as prices go up, tobacco consumption goes down. Through the clerk, we've provided to the committee for its review extensive studies, reports, and other evidence to this effect, including a 2001 evidentiary compilation—I am showing you the first volume here—as well as a 2011 evidentiary review.

Contraband undermines the public health and public revenue benefits of higher tobacco taxes. Contraband may provide direct access to lower-priced product and may be a concern impeding governments from increasing tobacco taxes.

The cause of contraband as we have it in Canada today is not high tobacco tax rates, but rather proximity to the source of supply: the illegal factories on a handful of territories in or near Ontario and Quebec. This is key to the problem.

In the white binder that has been distributed to you, you will see in tab 1 a tax map, and you can see the comparative tobacco tax rates for provinces and territories in Canada. In western Canada, tobacco taxes are far higher than in Ontario and Quebec, but in Ontario and Quebec, contraband is far higher than in the west. This demonstrates that the cause of contraband in Canada today is not higher tobacco taxes but proximity to illegal sources of supply, as we see in Ontario and Quebec. We can have high tobacco taxes with low contraband, as has been sustained in western Canada.

The tobacco industry acknowledges that contraband has decreased substantially. I invite you to turn to tab 2 in the binder. In a presentation from British American Tobacco, they indicate that there was an increase in contraband through to 2008—33%—but by 2010, it declined to 19%. There are further indications of decline since then. If you turn to the next page, you will see that Philip Morris has some data through to 2011, with very significant declines in contraband.

Bill C-10 will be beneficial to efforts to combat contraband. The bill is reasonable and justifiable.

Bill C-10 is in fact necessary and essential as a mechanism to help drive contraband volumes down further and to do so on a sustained basis. It will provide a prosecutorial option for stronger penalties. Right now, fines are too often simply treated as a cost of doing business, and fines that are imposed are far too frequently ignored and never paid. There needs to be an adequate deterrent available, and Bill C-10 will provide a new optional mechanism. The penalties in existing excise legislation are not doing the job. The bill will also provide new authority to provincial and municipal police officers.

There are 37,000 Canadians who die each year because of the tobacco epidemic, 47 times the total number of homicides, which in 2011 was 598. By reducing contraband and sustaining further tobacco tax increases, lives will be saved and fewer kids will be addicted.

We must recognize that contraband is, in part, an aboriginal health issue. One study found that smoking prevalence among on-reserve first nations was a shocking 59%, compared to the Canadian average, which is now 16%. Illegal factories and other contraband sources provide aboriginal kids and adults with direct access to cheap cigarettes with no taxes paid.

Contraband must be tackled. At the same time, we must not allow the tobacco industry and the associations they fund to use contraband as a public relations tactic to oppose other much-needed tobacco control measures.

Beyond Bill C-10, further federal action measures on tobacco contraband should be implemented.

First, while the RCMP has done considerable good work, we believe that the RCMP should pay more attention to blocking the supply of raw materials, such as leaf tobacco, cigarette paper, and cigarette filters, intended for illegal reserves. We urge the RCMP to gather intelligence and then intercept, off reserve, these shipments that are illegally aiding and abetting the unlicensed factories. This is key in terms of an effective strategy to deal with illegal factories located in Canada.

Second, there is no doubt that relocating the Cornwall border post in 2009 to the bottom of the bridge in Cornwall reduced contraband. It became a choke point for previous smuggling routes from the U.S. side of Akwesasne. The government now intends to move the border post to Massena, New York. We suggest a modification. Instead of simply moving, a better approach would be a two-part border post, with the primary checkpoint in Massena and a secondary checkpoint at the current location in Cornwall. This is similar to arriving in Canada after an international flight, when in the airport there is a two-part check system.

Third, the federal government needs to persuade the U.S. government to shut down the illegal factories on the U.S. side of Akwesasne.

Fourth, the Canadian Cancer Society recommends that Canada sign the Protocol to Eliminate Illicit Trade in Tobacco, an international agreement under the WHO Framework Convention on Tobacco Control.

We need a comprehensive strategy to combat contraband, and we need a comprehensive strategy to reduce tobacco use.

In closing, we reiterate our support for the bill. We look forward to your questions.

Merci.