Public Safety Committee on April 27th, 2010

[The Chair, Conservative, Garry Breitkreuz]

I call this meeting to order. This is the Standing Committee on Public Safety and National Security, meeting number 12, and today we are dealing with a study of contraband tobacco.

We have quite a large number of witnesses, so we need to proceed expeditiously here.

Do you have a point of order, Madame Mourani?

[Maria Mourani, Bloc, Ahuntsic, QC]

Mr. Chair, I just wanted to tell you that I have a motion to make today. I would hope we can finish around 5:00 so we can deal with the motion.

[The Chair, Conservative, Garry Breitkreuz]

Would we need half an hour? You don't think we could do it in maybe five or 10 minutes at the end? We have--

[Maria Mourani, Bloc, Ahuntsic, QC]

Fifteen minutes, if my colleagues like. It may be five minutes if everyone agrees. I was proposing it more for security. I think everyone has seen my motion, it has been circulated in both languages. It could be right away, we might all agree, by consensus, and accept the motion.

[The Chair, Conservative, Garry Breitkreuz]

Can I get the committee to agree to the last five minutes? I know we have witnesses prepared for the last--would 10 minutes do it?

[Maria Mourani, Bloc, Ahuntsic, QC]

I would say 15 or 20 minutes, that would suit me.

[The Chair, Conservative, Garry Breitkreuz]

Okay, it's 15 minutes. Should we continue with the first hour as scheduled and then just cut back the second hour to 45 minutes? Is that agreeable to the committee?

[Some hon. members]

Agreed.

[The Chair, Conservative, Garry Breitkreuz]

Okay. That's what we're going to do. Thank you.

We will proceed, then.

We have with us the Royal Canadian Mounted Police, the Canada Border Services Agency, the Canada Revenue Agency, the Department of Health, and the Department of Public Safety and Emergency Preparedness.

You may proceed in whatever order you wish. I don't know if you've discussed this with each other. Please introduce yourself at the beginning, and then you have 10 minutes for an opening statement if you wish. Shall we proceed in the same order as we have on the list here, or is there a different order in which you'd like to go?

Go ahead, Mr. MacKillop.

[Barry MacKillop, Director General, Law Enforcement and Border Strategies Directorate, Department of Public Safety and Emergency Preparedness]

Thank you, Mr. Chair.

Actually, we were asked to limit our opening comments, given the size of the panel, so we have asked Joe Oliver to do an opening comment on behalf of the panel, and then we'll be open for questions from the members.

[The Chair, Conservative, Garry Breitkreuz]

Thank you very much.

Mr. Oliver, maybe you would like to introduce everybody, which would not count as any of your time, and then go ahead and make your opening remarks.

[Chief Superintendent Joe Oliver, Director General, Border Integrity, Royal Canadian Mounted Police]

My name is Joe Oliver. I'm with the Royal Canadian Mounted Police. I'm director general of border integrity.

Brenda Paine is with Health Canada; Steve Sloan is with the Canada Border Services Agency; Phil McLester is with the Canada Revenue Agency; and Pierre Bertrand is with the Canada Revenue Agency. You've already been introduced to Mr. MacKillop.

[The Chair, Conservative, Garry Breitkreuz]

Go ahead, sir.

[C/Supt Joe Oliver]

Thank you, Mr. Chair and honourable members. I am very pleased to have the opportunity today to speak to you with regard to the current trends in the Canadian contraband tobacco market and the RCMP's ongoing efforts to reduce this illicit trade. Equally important are the enhanced partnerships and increased coordination, domestically and internationally, that are key in disrupting contraband tobacco manufacturing and distribution in Canada.

With that in mind, I am pleased to appear before this committee with my colleagues from the Canada Revenue Agency, Health Canada, Public Safety Canada, and the Canada Border Services Agency.

By way of background, I should note that the RCMP's Customs and Excise Program is mandated to enforce laws both within Canada and between the ports of entry governing the international movement of dutiable, taxable, controlled or prohibited goods and the manufacture, distribution or possession of contraband products including tobacco and spirits. The investigation of contraband tobacco offences has been, and continues to remain, a priority of our Customs and Excise Program.

Currently, the market for contraband tobacco has adapted to include three primary sources of illicit products: illegal importations from the United States in and around the city of Cornwall, Ontario; illicit manufacturing in central Canada in first nations territories; and the illegal importation of counterfeit cigarettes and other illicit products in marine containers, which often come from Asia.

The present trend of manufacturing, distributing, and selling contraband tobacco products, which has developed exponentially over the last six years, often involves organized crime networks that are exploiting geopolitically sensitive areas. Traditionally seen as a victimless crime, tobacco trafficking is now regarded as a significant source of income for all levels of organized crime. In fact, some organized crime groups reinvest the substantial profits derived from tobacco trafficking to support other criminal activities.

Recent intelligence identifies approximately 175 organized crime groups as being involved to varying degrees in the contraband tobacco market in Canada. Seventy-four percent of these organized crime groups were also involved in a wide range of other forms of criminality, such as drug trafficking and/or weapons trafficking. Nearly half of identified crime groups are based in central Canada, the region where most of the contraband tobacco originates and where illicit tobacco manufacturing operations are located.

Although the number of illicit manufacturers constantly fluctuates, the RCMP estimates that there are approximately 50 unlicensed manufacturers in Canada. Through intelligence gathering and cross-border investigations undertaken with U.S. enforcement agencies, it is also estimated that 10 unlicensed and two licensed manufacturers are operating on the U.S. side of the Akwesasne Mohawk territory.

The availability of contraband is at a historical high, as demonstrated by the fact that seizure levels made by the RCMP and its investigative partners for 2009 have surpassed the 1994 benchmark by 114%. With a total of approximately 975,000 cartons or resealable bags of cigarettes seized, 2009 seizures represent an increase of 1% over those in 2008. A total of almost 34,000 kilograms of fine-cut tobacco and 10 kilograms of raw leaf were also seized in 2009.

To tackle this growing crime in the coming years, the RCMP developed its Contraband Tobacco Enforcement Strategy following consultations with over 70 partners and stakeholders. The Strategy, released in May 2008, aims to reduce the availability of, and the demand for, contraband tobacco nation-wide. It also serves as a guide to provide national direction to front line officers. Key components of the RCMP's approach include disrupting organized crime and thus, the supply chain; increased coordination and partnership; outreach with First Nations communities; and education and awareness.

Last week, the contraband tobacco enforcement strategy progress report, which highlights our activities since the strategy was launched in May 2008, was released. While acknowledging that more work remains to be done, the report demonstrates the RCMP's commitment to tackling this form of criminality and the progress achieved during the first year of strategy execution. Importantly, RCMP coordinators have been appointed across the country to strengthen national and regional implementation of the strategy.

As mentioned, one of the strategy's key priorities is targeting organized crime and those key figures involved in overseeing illicit tobacco networks and operations. The RCMP's approach has yielded results. Between April 2008 and May 2009, 25 organized crime groups of various levels of sophistication were disrupted. Furthermore, over 740 criminal charges under the Excise Act, 2001 were laid against approximately 650 individuals in 2008, and more than 560 vehicles and two boats were seized. In 2009, over 770 charges were laid under the Excise Act, 2001, and an additional 403 vehicles and 18 boats were seized. Just last month, a man who had been charged by Valleyfield RCMP under subsection 412.12(1) of the Criminal Code of Canada, otherwise known as gangsterism, was found guilty by the court for his involvement in an organized crime group smuggling contraband tobacco. This is the first time someone charged for gangsterism has been sentenced for a tobacco-related offence.

Increased coordination and partnership were similarly identified in our strategy as a priority for the RCMP. Across Canada, and to some extent across the border into the United States, the RCMP has strengthened its partnerships in combatting contraband tobacco, enabling it to share information and improve target identification. One such example is the Canada/U.S Tobacco Diversion Workshop, which partners the Canada Revenue Agency, the U.S. Bureau of Alcohol, Tobacco and Firearms, the U.S tobacco and taxation bureau, the Canada Border Services Agency, and the RCMP, to discuss various topics of common interest, best-case practices, and the overall effects this illicit market has on both sides of the border.

Other significant partnerships include the Cornwall Regional Task Force, launched two weeks ago, which brings together the RCMP, the OPP, the Cornwall Community Police Service, and the Ontario Ministry of Revenue; and the RCMP's involvement in Project Access, a joint task force led by the Sûreté du Québec to combat illicit activities, such as the manufacture and distribution of contraband tobacco. Impressively, between April 9 and April 21, 2010, the Cornwall Regional Task Force made 11 seizures and eight arrests. The RCMP also works closely with aboriginal police services in Ontario and Quebec, and our partnership has resulted in successful operations targeting the illegal tobacco market.

The RCMP's Strategy recognizes that enforcement alone is not sufficient to dismantle the contraband tobacco market. Raising education and awareness amongst the public is crucial to reducing consumer demand for illicit tobacco.

Working with partners, such as Crime Stoppers, the RCMP is also raising awareness in a number of provinces as to the consequences of purchasing and possessing contraband tobacco products.

The RCMP's efforts are only part of an overall Government of Canada strategy to reduce the illegal tobacco industry. The RCMP and the other agencies represented today are active participants within the Public Safety-led government task force on illicit tobacco products, which is mandated to provide the Minister of Public Safety with proposed concrete measures that will help disrupt and reduce the trade in tobacco.

As you can see from the number of agencies and departments invited here today, no single agency can tackle this issue alone. Cooperation amongst all agencies and with our American partners is essential to reduce the contraband tobacco market in Canada. The RCMP remains committed to addressing this serious form of organized criminality.

Thank you. We look forward to your questions.

[The Chair, Conservative, Garry Breitkreuz]

Thank you very much.

Without any hesitation, we'll go over to the official opposition and Mr. Holland, please.

[Mark Holland, Liberal, Ajax—Pickering, ON]

Thank you very much, Mr. Chair, and thank you so much to the witness for appearing today on an issue that is of great frustration, not only because it's growing but because it's serving as a gateway for a lot of young people who wouldn't otherwise have access to tobacco.

In 2008, the RCMP reported that they had seized one million cartons of cigarettes, which would be about 200 million cigarettes. That was about 15% of the $13 billion illegal cigarette trade in 2008. Do you have any updated figures since 2008?

[C/Supt Joe Oliver]

In terms of the volume seized?

[Mark Holland, Liberal, Ajax—Pickering, ON]

The volume seized versus the estimated size of the overall market....

[C/Supt Joe Oliver]

I don't have an estimated size of the overall market, but last year, in 2009, we seized 975,000 cartons of cigarettes. It's up slightly, 1%, from 2008.

[Mark Holland, Liberal, Ajax—Pickering, ON]

So seizure is up 1%.

[C/Supt Joe Oliver]

Yes.

[Mark Holland, Liberal, Ajax—Pickering, ON]

I read in an article recently that the RCMP believes it's catching about one in fifty criminals involved in the contraband trade. Is that an accurate figure the RCMP is estimating?

[C/Supt Joe Oliver]

That's not a figure I'm familiar with.

[Mark Holland, Liberal, Ajax—Pickering, ON]

Do you have a figure in that regard?

[C/Supt Joe Oliver]

No, I don't.