Public Safety Committee on May 12th, 2008

[Penny Priddy, NDP, Surrey North, BC]

Mr. Montour, I wonder if I might ask you a question.

You said earlier--and I take your point, and I agree with you--that you have warning labels on packages as companies do, and you're not here to say whether it's good or it's bad, or whether tobacco is good for us, not good for us, or whatever. Nor am I, by the way. I would like everybody not to smoke, but that's not my job here on this committee; my job is to look at what provides a fair and legal playing field for people.

So we take these producing machines, which don't have licences. They're not licensed, so clearly they're now illegal. If we could remove that from the argument for a minute, how much of the rest of the product—the filters, papers, etc.—would taking the machines away take care of? Would we still have a fairly large chunk to deal with, as it relates to the things that go into the cigarette other than the tobacco?

[Jerry Montour]

First of all, let me give you a little bit of a strategy on your first question, because I would like to give a little bit of input on it too.

I think there's another strong strategy that the industry as a whole could help out with. If you really want to stop the amount of raw material that gets out from a tobacco perspective, the large tobacco companies, including ourselves, could commit to buying more of the domestically grown tobacco, as opposed to getting it from cheaper alternative sources. If we all purchased domestically grown tobacco and allowed them to have a long-term phase-out program, even if it meant additional amounts of money on each carton, it would help the Canadian tobacco farmer. My personal belief is that that's where about 80% of the actual tobacco is coming from in this contraband activity anyway. You can't have people growing 70 million pounds and all of a sudden just abandon them because tobacco is cheaper in Brazil or someplace else. We have a responsibility to help them in their phase-out program, as Canadian tobacco manufacturers, if we truly are interested in tackling the problem.

Second, there is no possible way in the world that anybody can tell you that.... I've got it outlined here, but I'll just show everybody a picture, just to show you. You can see that cigarette paper is clearly defined for one use. Tipping paper, the brown cork stuff on the edge of the cigarette, is clearly defined for one use. Acetate tow, to the best of my knowledge, is only.... If it is for alternative uses, then identify what those uses are and restrict it.

I still stand firmly in the position I had when I walked into this meeting, which is that if you control the raw materials, you'll control the activities, because anyone who is doing it in a legal form is not afraid of transparency.

[Penny Priddy, NDP, Surrey North, BC]

Thank you.

Mr. Kemball--it's not a question, and I thank you, Mr. Chair, for the time--I think you mentioned the Duncan tax treaty that was in existence. I think we mentioned last week that there are 19 actual tax treaties working, and working fairly well--albeit on the west coast, where perhaps we have less of a problem. They are working quite successfully and doing in some ways what Mr. Montour talked about, which is paying the tax and then having the tax go back into community development and into areas that are making a difference in the lives of first nations people, which is logical.

Thank you.

[The Chair, Conservative, Garry Breitkreuz]

We'll have to wind it up here.

Did anybody have a brief comment? Our time is up, but go ahead.

[Benjamin Kemball]

In answer to the first question, which was concerning tobacco, by far most of the tobacco we use is Canadian tobacco. We are committed also to working with the farmers to help find solutions to the problems they face.

Much of the problem they face occurs because 8% of the market, the largest markets of Ontario and Quebec, is shifting every year to the illegal market. Tobacco consumption in total is declining, along with the rest of Canada, at about 2% to 3% per annum--that has been going on for decades now--but in Ontario and Quebec we've seen declines of as much as 11% every year. The difference is that consumers are switching, and 8% of the market is shifting every year into the illegal trade.

[Penny Priddy, NDP, Surrey North, BC]

Is that in your presentation?

[Benjamin Kemball]

Yes, it is.

[The Chair, Conservative, Garry Breitkreuz]

Thank you.

We're going to go over to the government side in a minute.

Mr. Montour, you can actually give that report to me today, if you wish, and I can have it translated. You've referred to it a couple of times, and I think you're showing it to us there. It's not a problem. You can give us that report, and it'll save you the translation--

[Jerry Montour]

I'll do it, Chair, but with the greatest apologies to the Bloc for not respecting their....

[The Chair, Conservative, Garry Breitkreuz]

Thank you.

Let's continue. We'll now go over to the government side.

Go ahead, Mr. MacKenzie, please.

[Dave MacKenzie, Conservative, Oxford, ON]

Thank you, Chair. Thank you to the panel for being here today.

This is an extremely important issue, and I think some in the past have looked at it as being a small issue. The very first statement I'd like to make is that I do not see the aboriginal community as being the big villains in this whole picture. What we're hearing now is that they've been used by organized crime, perhaps. The Americans are saying terrorist organizations are using it to fund terrorist activity; I don't think we have that evidence, but the Americans are saying that. Part of this whole picture has obviously been the enabling of some of this stuff to go on, and not for one minute would I want the first nations people to think this focuses purely on the first nations.

Mr. Montour, I think as a first nations manufacturer you have already hit on part of this issue, which is that not very much of the ingredients in cigarettes.... In that baggie that went around, how much of the ingredients would come from a first nations community?

[Jerry Montour]

Zero. We don't make acetate tow, we don't make tipping paper, we don't make cigarette paper. I'm not sure of the marginal amounts of tobacco that is grown in our communities--and that has been an inherent right, and I don't think there is a charter argument in the world that will win against that one because we've employed it in ceremonial use for years--but it would represent minuscule amounts compared with what we're here to deal with today.

The raw materials that are needed in order to flourish in this industry, which plagues us all, come from off the reservation.

[Dave MacKenzie, Conservative, Oxford, ON]

How does it come in, then, to the first nations people who are in the business of manufacturing cigarettes?

[Jerry Montour]

Right now, it's unrestricted by any guidelines. In other words, anybody can order acetate tow, tipping paper, cigarette paper, any of those raw materials that you need. It could be a first nations or a non-first nations Canadian citizen who would have no problem whatsoever ordering those raw materials.

[Dave MacKenzie, Conservative, Oxford, ON]

How about ordering tobacco?

[Jerry Montour]

Tobacco is under restricted guidelines. You're supposed to have a Canadian tobacco manufacturer's licence in order to obtain tobacco on the reservation.

[Dave MacKenzie, Conservative, Oxford, ON]

But is tobacco not, in its raw form, controlled by the Flue-Cured Tobacco Growers' Marketing Board? I guess my question would be, can I go up to a farmer and order 50,000 pounds of leaf tobacco?

[Jerry Montour]

Not legally, sir, no.

[Dave MacKenzie, Conservative, Oxford, ON]

So how does it get from whoever grows it, whether they grow it in Canada or grow it in the United States or grow it in China, to the first nations? If that's where the legal manufacturing takes place, how does it get into that process?

[Jerry Montour]

In different climates...say, around seven years ago when the tobacco farmers as a whole didn't feel so abandoned, that activity did not take place in the format it does today.

But right now, as you know, they've gone to the ministry of agriculture and asked for some sort of phase-in bio-program, because they're destitute. A lot of those farmers are in really, really dire straits right now. It's their opinion that big industry as a whole has abandoned them in order to acquire a lot of their product in Brazil and other such countries.

It was one of my suggestions a long time ago to the minister to allocate the amount of tobacco that's in a Canadian manufactured or sold-in-Canada product. I know they'll bring up world trade arguments, but I think we have an obligation to protect the Canadian tobacco farmers as well. I don't think we should abandon them.

Right now they're a bit more easy victims of prey from organized crime because they're destitute.

[Dave MacKenzie, Conservative, Oxford, ON]

So if I look at that aspect, then, the next part is that after it's manufactured--I think, Mr. Kemball, you indicated that a big percentage of the illicit tobacco is then sold through contact. Who are those contacts, and is it an organized...? I know it's certainly not the variety store owners, who are legitimate in Canada, but where do those contact sales originate? When we talk about organized crime, is it done by organized crime? Are they the beneficiaries of the proceeds?

[Benjamin Kemball]

What we're picking up in the survey--and this was in face-to-face interviews with consumers who showed what they were smoking at the time--those numbers take you to that total level of 22% across Canada. These are smokers who actually had illicit product with them.

The larger segment say they're buying it through contacts--through friends, through relatives--and having it delivered to them. That group is not buying it from a convenience store and they're not going on to the reserves to buy it.

It means there is a network out there. Anecdotally, we hear all sorts of accounts in terms of people leaving $10 in their mailbox and coming back that evening and they have their baggie of 200 in there. In parts of Montreal, and indeed in other parts of Quebec, you have a card under your door saying, “Firewood, so much a cord; cigarettes $6, $8, $10”. So there is that network out there. How much of that is actually organized crime, in terms of the mob or the gangs, and how much of it is entrepreneurs getting into the illegal market, we don't know. Either way, it's bad news.

If it means there are new criminals coming into the market and setting up distribution networks, or whether it's organized crime in the sense that that is widely known, either way it's very bad news.

[Dave MacKenzie, Conservative, Oxford, ON]

It would seem to me that one of the concerns we have to have going forward—all of society—is that when there's lots of money in it and it's all cash money, unreported, that's where criminal activity certainly moves in. Combined with that, when you have the pipelines that allow for illicit cigarettes, it's only natural, it would seem to me, that the parallels with it are illicit drugs, firearms, and human trafficking, and that's when the wars break out among the gangs.

Is that not a major concern—and maybe Mr. Montour would be in the best position to answer it—in the future for the first nations communities?

[Jerry Montour]

That's absolutely true. At the end of the day, if you are not allowed to conduct activities that are deemed to be in a lawful environment, the element of people you allow yourself to work with just becomes lower and lower. As a first nations businessman, I have a responsibility to all the people who are currently working in the industry and to people who are thinking of getting into it to make everything as transparent as I can about the good things that have happened in our business and the bad things that have happened in our business.

At the end of the day, I would say it could never benefit first nations people if all their activities are not totally transparent. If you can't conduct a sale for which you can take the money and place it in a bank and go around and buy products like any other consumer, then there's no way in the world I could possibly condone that activity, because it makes my people look like criminals.

[The Chair, Conservative, Garry Breitkreuz]

Before we begin our second round, Mr. Montour, maybe I'm a little thick, but I didn't get your answer to Mr. MacKenzie's question about how the tobacco gets to the reserves. Could you clarify that a little for me?