Good afternoon, everyone. My name is John Clayton, and I'm vice-president of corporate and regulatory affairs at Imperial Tobacco Canada. Thank you for the opportunity to appear today to provide the following comments on the proposed tobacco product labelling regulations for cigarettes and little cigars.
I'm joined by my colleague Caroline Ferland, associate general counsel at Imperial Tobacco Canada.
At the outset I would like to say that we recognize the health risks associated with smoking. We support the placement of health warnings on cigarette packages. We do not object to the notion that health warnings could be occasionally updated. However, we continue to maintain that the increase from 50% to 75% in the proposed regulations constitutes an unjustified infringement on a manufacturer's right to communicate with its consumers and with consumers' freedom to receive information about the products they buy.
Having said that, we would like to share three specific concerns with the text of the proposed regulations as submitted to this committee today.
First, it is our view that the proposed six-month implementation date is too short. Based on information provided by the industry's supplier of rotogravure cylinders, Southern Graphics Systems, who will address you in a moment, we believe that a 12-month transition period is required in order to be completely compliant with the more than 600 different packaging materials we have. It is important to note that similar legislation in the United States requiring new graphic health warnings on cigarette packages will provide 15 months for manufacturers to be compliant.
As you consider the important issue of the implementation date, we also believe that the only approach that is competitively neutral is a single fixed date of application for all manufacturers, whether it be six, twelve, or nine months. Please remember that the Government of Canada's cabinet directive on streamlining regulations sets out the important principle that regulations must be designed to mitigate adverse impacts on competitiveness. Only by applying a single date of compliance will the regulations affect all manufacturers equally.
Our second point of concern is a specific change made between the February version and the one before this committee today. That change is the addition of the words "at least" in section 13 of the proposed regulations. With that change, section 13 now reads as follows: "The portion of a display area of a package on which a health warning must be displayed is at least 75% of each display area".
The addition of those two words brings with it a vagueness with respect to current and future requirements on the size of the health warnings. Could this change have been introduced as a way to provide Health Canada with the authority to unilaterally increase the size of the warnings beyond 75% in the future, without parliamentary review and scrutiny? If that is the case, then this committee should reject this change.
As you know, subsection 42.1 of the Tobacco Act was designed specifically to ensure that any and all changes to the regulations proposed under the act are reviewed by the health committee and vetted by Parliament. This very unique legislative feature is in place to give you, the elected officials, direct authority to approve, amend, and reject any proposed changes to these regulations. Providing Health Canada with the ability to change the source documents and increase the size of the warning labels beyond 75% without consultation with this committee will frustrate the intent of the statute and allow Health Canada to make changes without the oversight of elected members of Parliament.
Our third and last concern with the proposed draft of the regulations has to do with the qualification of wholesalers under section 32. Section 32 is the section that contains the transition provisions. It specifies that manufacturers have 180 days to comply, and retailers have 270 days. Because of what appears to be merely a drafting oversight, section 32 does not address the question of what transition period is applicable to wholesalers.
Members of this committee have already been made aware of the issue. I would simply refer you to the correspondence sent last week that invites Health Canada to make a very simple change to section 32 to clarify this matter.
I will not expand further on this, but we'd be happy to answer any of your questions.
There is an easy solution that would address two of the issues we have raised here today, the implementation date and the role of the wholesaler. The solution would be to have a single compliance date for all. This solution would not impact the consumer, and it would allow flexibility for the manufacturer to manage the particularities of their own supply chain.
Before we conclude, it is impossible to appear before this committee and not remind all the members that the federal government has still done very little to address Canada's contraband tobacco crisis. According to the RCMP, there are now as many as 50 illegal cigarette factories operating on first nations lands and over 300 smoke shacks selling tobacco outside of any legal or regulatory framework. The transparent plastic baggies of 200 cigarettes sell for as little as $5, carry no health warnings at all, and comply with none of the current regulations around tobacco. As a result, as much as 33% of the yearly Canadian tobacco market has been made up of contraband since 2006. We would urge the health committee to hold hearings on this issue as soon as possible.
In conclusion, I respectfully ask that committee members amend the regulations and/or seek clarifications from Health Canada about the three concerns we have raised here today.
Thank you for your time. I look forward to your questions.