Michael Perley, Director Ontario Campaign for Action on Tobacco

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

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

Canada: Federal Govt. (2) II.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. 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 Focus on large-scale illegal manufacturing and distribution involving organized crime Cooperation with Akwesasne Mohawk Police, border security officials Cooperation with Akwesasne Mohawk Police, border security officials No on-reserve action against unlicensed manufacturers No on-reserve action against unlicensed manufacturers Release of contraband tobacco enforcement strategy in May/08 (URL: tabac-strat-2008-eng.htm) Release of contraband tobacco enforcement strategy in May/08 (URL: tabac-strat-2008-eng.htm) tabac-strat-2008-eng.htmhttp:// tabac-strat-2008-eng.htm

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

Québec 2004: Tobacco Tax Act (URL: 2/ /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”) 2004: Tobacco Tax Act (URL: 2/ /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”) 2/ /whole.html 2/ /whole.html 2006: Tobacco Tax Act amended to ban possession and sale of counterfeit tobacco and to substantially increase fines for contraband-related crimes. 2006: Tobacco Tax Act amended to ban possession and sale of counterfeit tobacco and to substantially increase fines for contraband-related crimes.

Québec (2)  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)

Québec (3) 2008 (cont’d) 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.

Ontario Key legislation: Tobacco Tax Act ( laws.gov.on.ca/html/statutes/english/elaws_statutes_90t1 0_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. Key legislation: Tobacco Tax Act ( laws.gov.on.ca/html/statutes/english/elaws_statutes_90t1 0_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. laws.gov.on.ca/html/statutes/english/elaws_statutes_90t1 0_e.htmhttp:// laws.gov.on.ca/html/statutes/english/elaws_statutes_90t1 0_e.htm Applies to all tobacco products including chewing tobacco. Applies to all tobacco products including chewing tobacco. Retailers required to provide invoices to prove products purchased have had taxes collected. Retailers required to provide invoices to prove products purchased have had taxes collected. Authority to seize product such as baggies with no health warnings. Authority to seize product such as baggies with no health warnings.

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

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. 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. 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. 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. No one can possess unmarked/untaxed cigarettes, more than 50 unmarked/untaxed cigars or more than 1 kg of other tobacco.

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. 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 Could then turn product over to Ontario Ministry of Revenue for civil penalty or charges

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

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

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