Michael Perley, Director Ontario Campaign for Action on Tobacco

1. Michael Perley, Director Ontario Campaign for Action on Tobacco

2. CONTRABAND TOBACCO: Ontario, Québec And Federal Enforcement Tools And Responsibilities “A Taxing Issue: Public Health and Contraband Tobacco” University of Buffalo Center for Tomorrow February 4-5, 2009 Michael Perley Director Ontario Campaign for Action on Tobacco

3. Canada: Federal Government • Canada Revenue Agency (CRA) • Issues licenses for cigarette manufacturing and conducts inspections of growers, manufacturers and retail outlets • Revenue Minister has authority under Excise Act 2001 (URL: http://laws.justice.gc.ca/en/ShowFullDoc/cs/e-14.1///en) to revoke manufacturing and license if access to manufacturing facilities is refused • Excise Act also prohibits possession or importation of tobacco manufacturing equipment by unlicensed manufacturers (parallel measure in Ontario legislation)

4. Canada: Federal Govt.(2) • Royal Canadian Mounted Police (RCMP) • Key legislation: Excise Act prohibits unlicensed manufacturing AND the possession, transportation, or sale of unstamped cigarettes – that is, excise duty not paid. • Focus on large-scale illegal manufacturing and distribution involving organized crime • Cooperation with Akwesasne Mohawk Police, border security officials • No on-reserve action against unlicensed manufacturers • Release of contraband tobacco enforcement strategy in May/08 (URL: http://www.rcmp-grc.gc.ca/ce-da/tobacco-tabac-strat-2008-eng.htm)

5. Canada: Federal Govt.(3) • Other • Interdepartmental Task Force created to look for further enforcement options; $20 million in additional enforcement funding announced in July/08. • Improved tax marking system to be introduced in 2010 with additional covert security features to combat counterfeit tobacco products.

6. Québec • 2004: Tobacco Tax Act (URL: http://www.canlii.org/qc/laws/sta/i-2/20080818/whole.html) amended to control importation, transportation, storage and sale of raw tobacco; power to seize shipments of raw tobacco to unlicensed manufacturers created (applied to “tobacco leaves that have not been processed beyond the drying stage and fragments of such tobacco leaves”) • 2006: Tobacco Tax Act amended to ban possession and sale of counterfeit tobacco and to substantially increase fines for contraband-related crimes.

7. Québec(2) • 2008 • Tobacco Tax Act amended to make provision of services to an unlicensed party by a licensed manufacturer illegal; • Québec budget requires manufacturers making cigarettes under contract for someone else and the other party to both have manufacturer’s permits; • Purchasing or taking delivery of tobacco via a party without a license is prohibited (complements prohibition on supply of raw tobacco)

8. Québec(3) • 2008 (cont’d) • Importers of raw tobacco required to keep registers and file reports. • May 2008: Québec Health Department and Laval police departments launch Operation “VITAL” to counter illegal tobacco trade in Laval: first instance of joint program between health and police ministries/departments in Canada.

9. Ontario • Key legislation: Tobacco Tax Act (http://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_90t10_e.htm): creates the authority to seize contraband, assess penalties for possession of unmarked product, and unpaid taxes (3-8 times unpaid tax depending on offence). Fines start at $500 and can reach $50,000 per offence. • Applies to all tobacco products including chewing tobacco. • Retailers required to provide invoices to prove products purchased have had taxes collected. • Authority to seize product such as baggies with no health warnings.

10. Ontario(2) • Special Investigations Branch conducts investigations in collaboration with other enforcement agencies. • Applies to retailers and wholesalers, importers and exporters. • Prohibits supply of tobacco manufacturing machinery to unlicensed persons (parallel with federal legislation) • Manufacturing, wholesaling and retailing permits and certificates may be cancelled if a person designated under the Act fails to comply with its conditions.

11. Ontario(3) • All persons who produce, purchase, sell, or stamp cigarettes must provide security equal to the greater of three months tax that would be collectable or up to $1 million, whichever is greater. • Retail sales prohibition can last up to six months. • Authorized persons with reasonable/probable grounds may stop any vehicle, examine it and seize “more than 200 unmarked cigarettes”. Penalties can reach 3 times tax due plus up to $5,000 in fines. • No one can possess unmarked/untaxed cigarettes, more than 50 unmarked/untaxed cigars or more than 1 kg of other tobacco.

12. Ontario Provincial Police • If authority is obtained from RCMP or Ontario Ministry of Revenue to search vehicle and/or seize product, OPP can seize contraband under the federal Excise Act (Policy: 50+ cartons/bags only), and possibly lay charges under the Ontario Tobacco Tax Act. • Could then turn product over to Ontario Ministry of Revenue for civil penalty or charges

13. Ontario Municipal Police • Same as OPP but authority usually obtained from Revenue Ministry – policy also for quantities of 50+ cartons only.

14. Ontario Public Health Inspectors and Tobacco Enforcement Officers • No authority now available to search for/seize contraband.

15. Wednesday-Thursday February 4-5, 2009 Center for Tomorrow University at Buffalo Buffalo, New York