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.

[Françoise Boivin, NDP, Gatineau, QC]

Mr. Cormier, there is talk of collaboration and police services joining forces, but do you have the necessary resources? We know there have been significant cuts to border services. Do you have the necessary resources required to act under Bill C-10 when it is passed, with respect to increased penalties, repeat offences and so on?

[Françoise Boivin, NDP, Gatineau, QC]

Thank you, Mr. Chair.

I would like to thank the two witnesses for being here with us this morning and for arriving on time. You never have to apologize for being on time, but anyway.

Inspector Cormier, my first question is for you. The RCMP already has the power to make arrests. How will Bill C-10 change the work that you are already doing in the area of contraband cigarettes?

[Insp Jean Cormier, Director, Federal Coordination Centres, Royal Canadian Mounted Police]

Good morning, Mr. Chair, and members of the committee. First, I would like to apologize for my just-in-time arrival.

Thank you for inviting me here today to speak about Bill C-10, the tackling contraband tobacco act. As director of the RCMP federal coordination centre, I oversee the RCMP's enforcement activities with respect to contraband tobacco. Bill C-10 would create a new offence for trafficking in contraband tobacco and increase the associated penalities.

To assist the committee in its study of Bill C-10, I would like to provide you with a general overview of the current scope of the problem from the RCMP's perspective, as well as an overview of our enforcement activities.

Contraband tobacco remains a serious threat to public safety and if left unchecked, criminal organizations will continue to profit at the expense of the safety of Canadians.

Contraband tobacco has long been a standing enforcement priority for the RCMP. As the level of criminal involvement began to rise, the Minister of Public Safety launched a contraband tobacco enforcement strategy in 2008. Known as CTES, it sets out priorities for the objective of nationally reducing the availability and decreasing demand for contraband tobacco. The RCMP's CTES has had a positive and measurable impact on the contraband tobacco market in Canada. Since its inception in 2008, the RCMP has laid approximately 4,925 charges and has disrupted approximately 66 organized crime groups involved in the contraband tobacco market.

Criminal organizations are involved in the production, distribution, and trafficking of contraband tobacco and are exploiting first nations communities. Violence and intimidation tactics continue to be associated with illegal tobacco in first nations communities.

In addition to the tobacco smuggling encountered at Canada-U.S. ports of entry, extensive smuggling continues to occur in the Cornwall-Valleyfield corridor area, with the majority of activities occurring between the ports of entry, presenting unique enforcement challenges for law enforcement. In 2012, tobacco products seized while in transit involved automobiles, snowmobiles, all-terrain vehicles, and boats.

The RCMP has also seen contraband tobacco transported using postal delivery and air services.

Cornwall, Ontario is within the most active region for tobacco smuggling in Canada. Because of this, the RCMP participates in a number of joint investigative units with partner agencies. For example, in Cornwall the RCMP works with the Akwesasne Mohawk Police, the Ontario Ministry of Finance, and CBSA to combat organized crime and its involvement in contraband tobacco and other forms of criminality.

In April 2010, the RCMP established a combined special enforcement unit contraband tobacco initiative. Based in Cornwall, the unit was specifically mandated to target organized crime involved in the manufacturing and distribution of contraband tobacco, and works with its law enforcement partners.

In 2011 the government committed to addressing contraband tobacco by establishing a new RCMP Anti-Contraband Force (ACF). The RCMP is in the process of implementing the ACF and it is expected to be fully staffed and operational by the spring of 2014. The ACF will increase the RCMP's capacity to investigate organized crime and cross-border smuggling as well as target unscrupulous tobacco growers and illicit manufacturers. The ACF will also establish a dedicated outreach team to engage tobacco growers and suppliers of raw materials used in the tobacco manufacturing process.

As I have just outlined, the RCMP works with other law enforcement partners on multiple fronts to address the problem of contraband tobacco.

I would like to thank you for this opportunity, and I look forward to answering your questions.

[Geoffrey Leckey, Director General, Enforcement and Intelligence Operations, Canada Border Services Agency]

Thank you, Mr. Chair and members of the committee, for the opportunity to provide testimony in your consideration of Bill C-10, the tackling contraband tobacco act.

I'd like to begin by noting that the specific amendments to the Criminal Code proposed in Bill C-10 will have only a slight impact on the daily activities of the Canada Border Services Agency. However, we take the issue of contraband tobacco very seriously and we are supportive of the bill's intent to signal the seriousness of trafficking in contraband tobacco.

The illicit cigarette market in Canada has changed markedly since the 1990s. Back then the majority of the contraband market consisted of duty-free and exported Canadian cigarettes. Currently, the market in Canada comprises illicitly manufactured native brand cigarettes that are transported by land, as well as Chinese and other international brands of tobacco products entering Canada through postal, marine, and air modes.

From January 2013 to October 2013, the CBSA made approximately 1,900 tobacco seizures totalling over 21,000 cartons of cigarettes, 192,000 kilos of fine cut tobacco, 29 kilos of cigars and 1,235 kilos of other tobacco products such as chewing tobacco and snuff.

The contraband tobacco trade is a lucrative one, and activities to disrupt and prevent the flow of illicit goods from entering the country require active participation with partners, both at home and abroad.

The CBSA works with other government departments, law enforcement agencies, international organizations and foreign governments on operational and analytical issues related to organized crime and contraband criminal markets. Of our many partners, the agency works daily with the RCMP and the U.S. Customs and Border Protection on enforcement matters. The cooperation and collaboration between our organizations is longstanding and transcends tobacco issues.

Together with our U.S. partners, the CBSA and the RCMP participate in integrated border enforcement teams. The CBSA and the RCMP also work side by side within a number of other joint forces operations targeting contraband. As a result, we have a common understanding of the capabilities, intentions, vulnerabilities, and limitations of organized criminal networks, and we apply that intelligence to disrupt them and their supply chains.

Disrupting the criminal networks that engage in the cross-border movement of illicit tobacco is dependent on solid information and intelligence.

The CBSA maintains a robust and comprehensive Intelligence Program, which contributes to, and is informed by, the broader intelligence community. This allows for timely, accurate and relevant information to support our enforcement activities.

Through the U.S.-Canada beyond the border action plan and the CBSA's border modernization initiative, the CBSA is modernizing its operations with the aim of having decisions sequenced and made before people and goods arrive at the border. The Government of Canada's efforts to curb trafficking in contraband tobacco are well served by this initiative, as it aims to promote better intelligence-led enforcement activities. This in turn will facilitate legitimate trade and travel. At the end of the day, modern border management is about meeting our broader responsibilities for Canada's security and prosperity.

Information and intelligence, while necessary, is not in and of itself sufficient for effective border enforcement. The agency also relies on a combination of officer training and technology to interdict illicit goods, including tobacco products attempting to cross the border.

In conclusion, Mr. Chair, the CBSA recognizes the challenges associated with the cross-border movement of contraband tobacco and the need for a multidisciplinary approach to combat it. We will continue to leverage all resources available to us to identify and interdict contraband tobacco at the border. We will continue working with our partners, particularly the RCMP, to help implement this bill when it becomes law.

I would be pleased to answer any questions you may have.

[The Chair, Conservative, Mike Wallace]

I call this meeting to order.

This is the Standing Committee on Justice and Human Rights, meeting number 9. Pursuant to the order of reference of Tuesday, November 5, 2013, this morning we will be discussing Bill C-10, an act to amend the Criminal Code (trafficking in contraband tobacco).

We have two panels, two sets of witnesses. Our first set of witnesses are, from the Royal Canadian Mounted Police, Inspector Cormier; and, from the Canada Border Services Agency, Mr. Leckey. Each of them will have a presentation of about 10 minutes.

Since you were here first, Mr. Leckey, you may begin.

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

Thank you, Mr. Chair.

Mr. Grant, given that you are a former police officer, and with respect to your comments in your opening statement and in response to subsequent questions, I was surprised to hear from Mr. Saint-Denis, the senior counsel for the department, in his testimony earlier about not just the lack, but the absence of consultation with police forces. You made a point, I think quite strenuously, about the necessity for cooperation and collaboration amongst the various parties, both federal and provincial, but also the engagement of police forces directly into solving these issues. I'm wondering what recommendations you have, not even necessarily specific to BillC-10, around processes for cooperation and collaboration and for the introduction of new criminal provisions.

[Flory Doucas]

That is an excellent question. Bill C-10 can definitely reduce contraband by providing other tools to police forces, especially when they are fighting organized crime. It will also be useful for them when it comes to dealing with reoffenders and when they have to deal with armed persons, violence, and so forth. In that sense, yes.

However, as concerns reducing the rates of tobacco use, it is indisputable. There are documents about this. Products that initiate people to tobacco use in Canada are flavoured tobacco products and cigarillos. There is a good reason why the study of butts in Ontario and Quebec did not include cigarillos. It is because they wanted to put aside data on legal products and focus on illegal products.

I don't think that we are going to get anywhere unless the government tackles flavoured tobacco products, whether it be shisha, menthol cigarettes or strawberry-flavoured and chocolate-flavoured cigarillos. These products are technically not covered by the definition of cigarillo. The manufacturers have managed to circumvent the regulations.

Now, we have to look at the products, as is done elsewhere in the world where neutral packaging has been adopted, among other things. This is what we will have to do if we really want to reduce the rates of tobacco use in Canada.

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

There are 16 members.

Very well. As you suggest, I will check who these members are.

Ms. Doucas, do you believe that Bill C-10 will reduce tobacco use?

[Françoise Boivin, NDP, Gatineau, QC]

You are speaking to a former smoker. I can say publicly how difficult it was for me to overcome this dependence. You are talking to someone who consumed Nicorette products for 14 years and who has just recently stopped doing so. If I sound aggressive sometimes, it is because I am still trying to quit. All that to say that I understand very well.

We must be logical. We live in a world that is slightly hypocritical. Indeed, all of us around this table recognize that this product kills. At the same time, we benefit from it economically, especially thanks to taxes. We cannot criticize other people for our system and our laws in this regard, that is true.

Something in your brief struck me. It makes us see the headlines differently. Last Thursday, an article on the Radio-Canada website was entitled: One out of every five cigarettes in New Brunswick is contraband. I think that this will interest my friend Robert Goguen. I read the article, I was shocked and then I remembered that we were about to begin the study of Bill C-10. I thought that it was going to be interesting to study it and that people would try and prove that contraband is a terrible thing.

In any case, things are not going well in New Brunswick. I made the connection between that article and your brief. The article says that in March, the provincial government had increased taxes on tobacco products in order to try to replenish its coffers.

If I understand correctly, you are telling us that there is not as much contraband as the headlines would have us believe. Every time governments raise taxes to generate more revenue—because that is a real cash cow—Mr. Grant's coalition sounds the alarm. They say be careful, contraband is a serious matter, and so forth, whereas all associations benefit from the sale of tobacco. Have I understood your basic message? You are telling us that contraband is not as serious as we think.

[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.

[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.

[Paul Saint-Denis]

It's certainly done in every case where an MMP is being contemplated. You may recall that Bill C-10 had, for instance, in the case of drug offences, a number of MMPs dealing with schedule 1 and schedule 2 substances for things like trafficking and so on. For all of those offences, all of these penalties were available but only in the presence of aggravating factors. The use of aggravating factors is something that bolsters the argument that this is a reasonable penalty in light of the presence of the aggravating factors and this particular substance.

That particular legislation has been in force for just under a year now. I'm not aware of any successful charter challenge, but these are still early days, so there may be a successful charter challenge to those penalties. We think the regime and structure we put together was rational and defendable before the courts.

[Ève Péclet, NDP, La Pointe-de-l'Île, QC]

I am sorry to interrupt, but you might well know that in its most recent report, the Office of the Correctional Investigator pointed to a disproportionately high rate of aboriginals in prisons. Therefore, we might ask ourselves what the impact of Bill C-10 would be on the incarceration rate of aboriginals, since it calls for imposing mandatory minimums, which might go against the provisions in section 718.2.

[Paul Saint-Denis]

Thank you, Ms. Boivin.

We consulted people from Revenue Canada, from the Department of Finance, from the Department of Public Security and from the Department of Justice. Our consultations were with government bodies only. We also consulted with the RCMP.

I will now talk about the overlap of the offence contained in the Excise Act of 2001 and the offence contained in Bill C-10. Some activities are similar, including the sale, of course, but this bill does not contain minimum sentences, which are found in the 2001 Excise Tax Act. However, the 2001 Excise Tax Act contains minimum fines for that offence. Under the 2001 Excise Tax Act, only the federal government may prosecute this offence, whereas under Bill C-10, the federal government and the provinces may do so.

That is the gist of it.

[Françoise Boivin, NDP, Gatineau, QC]

Thank you, Mr. Chairman.

Mr. Saint-Denis, thank you for being here this morning.

I will begin by wishing Ève Péclet a happy birthday, as she has reached the ripe old age of 25 this morning. It certainly makes the rest of us around this table feel old, but it's all good.

Mr. Saint-Denis, can you briefly talk about the consultations which were held around Bill C-10? The Excise Act, 2001, already contains an offence for that. Can you explain to us the difference between the two provisions? Are they similar? Is there not a risk that it is in conflict with the act? With whom did the department discuss this risk?