Public Safety Committee on May 7th, 2008

[The Vice-Chair, Liberal, Roy Cullen]

Thank you very much, Mr. Bouchard.

Mr. Brown, please.

[Gord Brown, Conservative, Leeds—Grenville, ON]

Thank you very much, Chair.

I want to thank our witnesses for being here today. You all represent quite a number of agencies and departments that are committed to dealing with this problem.

I represent the border riding of Leeds—Grenville. It has two border crossings, at the Thousand Islands and at Johnstown, and I know there are some issues. We regularly hear of arrests made at the border and in the riding due to contraband tobacco, so I'm familiar with this problem.

The areas I want to explore a little are those of integration, cooperation, and trying to solve the problem between the agencies. Maybe we can hear about how there's coordination between the RCMP, Canada Revenue Agency, and CBSA.

[C/Supt Mike Cabana]

Is this open to anybody?

[Gord Brown, Conservative, Leeds—Grenville, ON]

Yes. Tell us more about how our government agencies are working together to solve the problem.

[C/Supt Mike Cabana]

Being from a border area, you realize that the relationship between CBSA and the RCMP has been long-standing; it actually precedes the creation of CBSA by a long time. That relationship is probably better now than it's ever been. As my colleague here mentioned, we are both involved in coordination of the tobacco diversion workshops that are taking place. This is the type of integration we're doing from a training and an operational perspective, keeping in mind the distinct and complementary mandates that both agencies have.

CBSA is part of the integrated border enforcement team, which I'm sure you're very familiar with. There are a number of integrated initiatives within the RCMP. You will find that CBSA and the RCMP are working hand in hand. In terms of tobacco, pilot projects that involve both agencies have been implemented in the high-risk area of Cornwall. CBSA participated in the development of the strategy, as part of the body that was consulted. There's also cross-training on the U.S. side.

So I think the relationship, both domestic and international, has been enhanced quite a bit. If you look at the strategy that was tabled again today, you will find that we are recommending this partnership be enhanced even more.

[David Quartermain]

I will just add that as an agency we have a number of officers embedded with various joint force operations, including the IBETs. That includes our U.S. partners: U.S. Coast Guard, ICE, and CBP. We have a very tight relationship, and we share information on a daily basis to interdict at ports of entry and in between the ports. We have an excellent working relationship.

As Chief Superintendent Cabana also mentioned, internationally we deal with international partners and international customs organizations and police organizations. We have an excellent working relationship.

[C/Supt Mike Cabana]

If I may build on what my colleague just said, the partnerships are also not strictly with CBSA. They are also with the policing jurisdictions and the police forces that operate within the aboriginal communities.

[Phil McLester]

I will mention that, similar to my colleagues, we participate at the same meetings with them. However, CRA's focus is the legal tobacco market. We try to support their enforcement activities as best we can with information and initiatives. In terms of getting together with our colleagues, we have a great deal in common with the provinces, and we attend quite a few meetings with their organizations, steering committees, and senior revenue officials. We work directly with the provinces to try to align our initiatives on gaining tobacco tax compliance and on monitoring the control of tobacco products in Canada.

[Gord Brown, Conservative, Leeds—Grenville, ON]

All right, we've heard quite a bit about how you're working together. Are there any additional ways we could have our agencies working together to help solve the problem?

[C/Supt Mike Cabana]

That is a very good question, but it's also a very difficult question to answer.

If you look at the agencies represented here at the table, each has, I would say, with the exception of CBSA and the RCMP, a different mandate and different responsibilities. I hate doing this, but if you look at the strategy, there is a recognition that it's not strictly enforcement agencies that have to be coordinated. There are also regulatory agencies, at all levels of government, that have to align their goals. If you are asking me where we could make things better and where we could operate better, it would be through greater integration of this range of agencies, both regulatory and law enforcement.

[The Vice-Chair, Liberal, Roy Cullen]

Thank you, Mr. Brown. Thank you very much.

We're now into the third round.

Ms. Brown, do you have any questions?

[Bonnie Brown, Liberal, Oakville, ON]

Thank you, Mr. Chairman.

I'm having trouble getting hopeful about stopping this criminal activity, because I keep thinking about things like this. You think about the aboriginal people, and you think that the growing of tobacco and the smoking of tobacco is pretty traditionally tied to their culture, as is the trapping of animals and the making of furs for purchase.

The book says that you can buy 200 cigarettes for $6. In the regular market, that is about $80 worth. So I think to myself, suppose I look for a fur coat, and the fur coat is priced at $8,000, and I hear that out at the Indian reserve they have a shop where I can buy the same coat for $600. I find it hard to see how they're making much profit. But it's pretty tempting for people, particularly people who want to smoke and can't afford $80 for their carton and people who would like a fur coat but can't afford $8,000. The market suggests to me that people are going to go to the places where they can get the best bargains.

So how are you going to stop that? As long as there is a market for these goods, people are going to provide to that market. It seems to me that we're beating our heads against the wall here.

Of course everyone is concerned about the tie-in to other things, like illegal guns and drugs and that sort of thing. But maybe these products are the loss leaders in those shipments, because they are such a bargain. If in fact on an Indian reserve they can manufacture 200 cigarettes, sell them for $6, and still make a profit, you wonder, as I said jokingly to my partners here, which one is the bandit. Is it the one selling it for $80 or the one selling it for $6? If $6 represents a certain profit, what does $80 represent?

That's just a different way of looking at it.

[The Vice-Chair, Liberal, Roy Cullen]

Who would like to have a go at that one?

[C/Supt Mike Cabana]

Madam, it's an excellent observation. The market is price driven, there's no doubt. This is what's attracting people to acquire this kind of tobacco. There's absolutely no doubt there. This is why we believe that enforcement alone is not the answer. There has to be a very significant education piece so that people understand that there's a collateral cost to funding this type of enterprise in terms of the organized criminality that is actually behind it. This is why, also, the same aboriginal communities that, to some extent, derive a certain benefit from these ventures are also victimized. These aboriginal communities recognize that. They recognize the impact and the other collateral activities that these organizations are bringing to their communities.

[Bonnie Brown, Liberal, Oakville, ON]

When we brought in prohibition, for example, in the thirties, we criminalized something that prior to that had been not criminalized. The minute we criminalized it we drove the prices up and we had shipments of guns coming across the Great Lakes with the boatloads of gin. It makes me wonder whether we should make all this criminal or just let it happen.

[C/Supt Mike Cabana]

This is a question that is much broader than I would be able to answer, because there are health and societal aspects to it, but you're absolutely right.

[Bonnie Brown, Liberal, Oakville, ON]

Yes, but we let people smoke even though there is a negative health effect. We let them pay the $80, which represents a very good profit for the legitimate companies and a big, big, big profit for government. There are many layers here. It isn't just simply that this is criminal, we have to catch them, they're all bad. There are all kinds of facets to this, as to what society decides to do.

I realize you have to enforce the law, but for us, we have to think about these other things as well.

Thank you.

[The Vice-Chair, Liberal, Roy Cullen]

Thank you, Ms. Brown.

I'll go now to Mr. Norlock.

Are you going to share with Mr. MacKenzie?

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

Yes. Mr. MacKenzie will go first.

[Dave MacKenzie, Conservative, Oxford, ON]

I think my friend has very much oversimplified the whole issue. The very first part is that legitimate manufacturers have costs that organized crime and other groups do not have when it comes to the price of cigarettes. One of them, of course, is in taxes and in other areas.

There are not a lot of $6 packs. There's a lot of $12 baggies out there, and that's probably where the profit is, far more than the $6 one. If for one minute we say to society, it's okay because you want to smoke and you want to smoke cheaply, then what's the difference between that and saying I want to have a Lamborghini so a stolen one, cheaper, is okay? And it's not okay. That's the bad message here. It's okay if you want to smoke and you smoke cheaply, but there are a whole lot of factors that end up in that $80 carton of cigarettes. We should be concerned about that kind of philosophy.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

I'd like to carry on with that philosophical outlook. There would be nothing illegal because everybody would be free to choose. I know that's not what Ms. Brown intended to say.

My question comes down to this. I suppose there could be some health components, but I think we need to understand. I think I do, but I just need you to help me here. I need to know what, in your opinion, is the difference between contraband cigarettes or tobacco and counterfeit tobacco. I don't know what agency is vested with that. I suspect CRA, because if you're going to tax it you have to know what you're taxing.

So we'll start with them, and then perhaps I can go to the RCMP.

When you're giving the difference, maybe you could talk about things that in the trade are called...how do you cut the tobacco? What do you cut it with when it's not the good stuff? Is it cut with sawdust, or whatever?

I think, Mr. McLester, that's your area.

[Phil McLester]

Actually I don't know that I'd want to take credit for knowing a great deal about contraband tobacco products since we generally treat the legal tobacco market. I can say that the counterfeit cigarettes are just a portion of the contraband, as we've heard from the members of the enforcement agencies today. It is a production. There are the baggies, which are the 100% complete contraband, and of course there's under-reporting of legal tobacco products. So they all take up a portion of the contraband that you mention.

I would defer to my colleagues to give you that definition.

[David Quartermain]

For our purposes tobacco is a legal commodity. It's only considered contraband when it's diverted from the legal market to illegal distribution. If individuals are declaring it as they enter the country, it's legal, but when it's diverted from that declaration, then it becomes contraband. Counterfeit is when it's manufactured outside the regular process, and you get consistently different byproducts.

[C/Supt Mike Cabana]

I absolutely agree with my colleague.

[Rick Norlock, Conservative, Northumberland—Quinte West, ON]

When you seize these things, there's no analysis done?