Public Safety Committee on May 12th, 2008

[Jerry Montour]

I believe that if we don't do something to bring a little more transparency to the industry as a whole, Honourable Member, you're going to have our kids in a very mixed-up state of mind. They are not sure what's legal, what's not legal, and where they're going with things in life.

If you come to some reserves—for example, Six Nations—it looks like a war zone right now. It truly does not look like the Canada that we all want our first nations kids growing up in. It's not a normal environment for a young person to grow up in, and if they have to work in a tobacco factory that's unregulated, how does anybody know whether there are firearms and other things and activities in there? Nobody will be able to answer that.

I'm not welcome in those factories, obviously, because it's very transparent that our companies pay federal taxes. I couldn't comment on what goes on in other factories.

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

Are you aware of any strategies that might currently be in place on reserves to combat this? Is there a movement from within the first nations?

[Jerry Montour]

One of the things keeping first nations communities from tackling this problem is that there seems to be a question of control, from the provincial government's perspective, about who has jurisdiction over the reservation. From the provincial government's perspective, they have jurisdiction over the reservation. But when it comes to land claims, they think it's the federal government's job, and they push the federal government in front. That's why I look to the federal government to help the people who want transparency in the industry, to help us survive in business and move forward.

I've done everything you've asked of us, as a company, and now I want you to help me, as a manufacturer. I want you to help our people.

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

I appreciate that.

On Friday, May 9, there was an article in The Hamilton Spectator by Leroy Hill, secretary for the Six Nations traditional government, indicating that the first nations are developing their own laws to deal with tobacco issues. Have you heard anything about these intended laws—how they'll be enforced or who'll enforce them?

[Jerry Montour]

I know they're not in place right now, so it would be irresponsible of me to comment. If it's a work in progress, they need to apply it.

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

Thank you.

[The Chair, Conservative, Garry Breitkreuz]

Mr. Easter.

[Wayne Easter, Liberal, Malpeque, PE]

Thank you, Mr. Chair. Thank you, folks, for coming.

I had several meetings with tobacco producers in Ontario. You're absolutely right that they're frustrated and disappointed. They actually believe that the government made a commitment to an exit strategy and that the government violated the commitment. They feel the current Minister of Immigration made a commitment to them that hasn't been lived up to. So there's a view that the government has let tobacco farmers down.

[Dave MacKenzie, Conservative, Oxford, ON]

Does this have something to do with them?

[Wayne Easter, Liberal, Malpeque, PE]

Yes, it has. Mr. Montour said earlier that he feels a lot of the illegal tobacco is coming from Canada. Mr. Kemball said a lot of the illegal tobacco is coming from the United States.

But regardless of that, Mr. MacKenzie, the government broke its word. That's what the tobacco industry is telling you, and that's what's been said in the press.

Regardless of where this illegal tobacco is coming from, it has to be loaded on a truck and taken to the illegal production plants. Why, from your perspective, has this not been stopped on the highways?

[Jerry Montour]

First of all, I'm not here supporting any particular government agency. I respect the current government for transparent answers. I took part in a meeting with the Minister of Agriculture, and there was no wishy-washy about it. No, the government is not going to buy out the Canadian tobacco farmer. The industry and all of us in this room have to look at a way to help the Canadian tobacco farmer, and job one is to get a handle on legitimate sales.

It's a big region out there in tobacco country. When you understaff law enforcement, when you have them running all over the place looking at all kinds of other activities, when you expect them to know what goes on in every single truck in a rural region, you are asking for the impossible. We have to come up with a sensible solution that we can get the farmers to buy into. The farmer grows the product. If he felt confident that there was an exit strategy—whether it was so many cents a carton or something else that would allow for a transition period—I don't think he'd be so inclined to involve himself in an illegal activity. That's just my perspective.

[Wayne Easter, Liberal, Malpeque, PE]

I'm not disagreeing with you on that point. I'm saying that one step has to be an exit strategy on the Canadian side. This won't deal with the illegal product coming in from the American side. But certainly a part of the problem has to be enforcement.

I'm a former solicitor general. I believe there's a lot of knowledge about where that product is on the roads, and I can't understand why it's not been stopped or why there are no arrangements with the United States that would stop the product from getting to source. We're not talking about a little bit of product here; we're talking about huge amounts that have to get to and from the production facilities. If law enforcement was doing its job, this business would be stopped at its source and in transit.

[Jerry Montour]

It would very irresponsible for me personally to sit here and critique law enforcement. I think they have an overwhelming job to do right now. I think they take the tobacco industry very seriously. Maybe they're undermanned; I don't know. I can't answer for law enforcement.

What I do know is that every time we've asked for a meeting, we've had a lot less trouble getting a meeting with law enforcement than we have with government agencies, in all honesty.

[Wayne Easter, Liberal, Malpeque, PE]

In terms of the product itself, is the package that went around the table here an illegal product?

[Donald McCarty]

May I comment on that, Mr. Chairman?

[The Chair, Conservative, Garry Breitkreuz]

Yes, go ahead.

[Donald McCarty]

I've been wanting to say this for some time. I've been waiting for the right question--that is, why is this product illegal?

First of all, it's sold for $6. It's manufactured in a facility that probably doesn't have a licence, which is an infraction. Once it was manufactured there, it was smuggled across the border. That's another law broken. Then the excise tax wasn't applied; another law broken. The provincial tobacco tax wasn't applied when sold off the reserve. That's another law broken--and we're not talking about the GST and the PST.

Then what happens? It's sold to the consumer. Is there a health warning? No. Do we have the constituents on the side? No, we do not. Is the paper of low-ignition propensity? No, it is not.

There are at least a dozen health-related infractions with this bag. Then there's the Consumer Packaging and Labelling Act, which the Competition Bureau has to apply.

What's in this? I don't know.

If this was beer--someone's selling beer in clear plastic bottles, let's say, that are unmarked--would you drink it? No. But everyone smokes this stuff.

The name of the manufacturer is not on it. That's another infraction. The Competition Bureau is supposed to enforce that. What's in it is not marked. Where it comes from is not marked.

Health Canada has a dozen, at least a dozen, infractions of health regulations and the Tobacco Act itself. These are all violated systematically. None of this is enforced.

So that's why this is illegal. It's illegal: let me count the ways.

[Wayne Easter, Liberal, Malpeque, PE]

Yes, and I appreciate that response--

[The Chair, Conservative, Garry Breitkreuz]

We have to wrap it up here.

[Wayne Easter, Liberal, Malpeque, PE]

Okay.

So it's not just a matter of law enforcement. It's a matter of customs officials, it's a matter of health officials, it's a matter at the retail level. Then why, from your perspective...?

If we know it's been illegally manufactured, I can't understand why it isn't being stopped more than it is.

[Donald McCarty]

The left arm of the government knoweth not what the right arm of the government doeth--which is why, when the suggestion is made for a task force set up by government, with a senior government official in charge to put together all of the enforcement arms of government, provincial and federal, we think it's a good step in the right direction.

[The Chair, Conservative, Garry Breitkreuz]

Thank you.

No one from this side?

Mr. Cullen, please.

[Roy Cullen, Liberal, Etobicoke North, ON]

Thank you, Mr. Chair.

Mr. Kemball, you mentioned the figure of $1.6 billion in lost revenue. That's provincial, but do you have an idea of what the federal component of that is, roughly?

[Benjamin Kemball]

I think it's roughly a third, given that in Ontario and Quebec the provincial tobacco taxes are higher, roughly double what the federal excise is.

[Roy Cullen, Liberal, Etobicoke North, ON]

Mr. Montour, I like your idea of trying to track the inputs, but I'm going to be the devil's advocate for the moment.

Colleagues were asking where these illicit manufacturers get their tobacco from. Well, they get it through black market transactions. I thought I heard someone say that you can only buy tobacco in Canada, leaf tobacco, if you are a registered manufacturer. So if they're not registered manufacturers, they're buying the tobacco on the black market. You can refute that if I'm wrong.

If you control the inputs, as you're suggesting--I think it's an idea very worthy of consideration--will that market go underground as well? That would include the papers, the filters. If someone's tracking that and saying, “Whoops, you're selling to someone who's illegally manufacturing cigarettes”, could that just go underground as well?