Michael Perley, DirectorMichael Perley, DirectorOntario Campaign for Action on TobaccoOntario Campaign for Action on Tobacco

CONTRABAND TOBACCOCONTRABAND TOBACCO: : Ontario, Québec And Federal Ontario, Québec And Federal

Enforcement Tools And Enforcement Tools And ResponsibilitiesResponsibilities

“A Taxing Issue: Public Health and Contraband Tobacco”

University of Buffalo Center for TomorrowFebruary 4-5, 2009

Michael PerleyMichael PerleyDirectorDirector

Ontario Campaign for Action on Ontario Campaign for Action on TobaccoTobacco

Canada: Federal Canada: Federal GovernmentGovernment

I.I. Canada Revenue Agency (CRA)Canada Revenue Agency (CRA)

Issues licenses for cigarette manufacturing Issues licenses for cigarette manufacturing and conducts inspections of growers, and conducts inspections of growers, manufacturers and retail outletsmanufacturers and retail outlets

Revenue Minister has authority under Revenue Minister has authority under Excise Excise Act 2001 Act 2001 (URL: (URL: http://laws.justice.gc.ca/en/ShowFullDoc/cs/e-1http://laws.justice.gc.ca/en/ShowFullDoc/cs/e-14.1///en4.1///en) to revoke manufacturing and license if ) to revoke manufacturing and license if access to manufacturing facilities is refusedaccess to manufacturing facilities is refused

Excise ActExcise Act also prohibits possession or also prohibits possession or importation of tobacco manufacturing importation of tobacco manufacturing equipment by unlicensed manufacturers equipment by unlicensed manufacturers (parallel measure in Ontario legislation)(parallel measure in Ontario legislation)

Canada: Federal Govt.Canada: Federal Govt. (2)(2)II.II. Royal Canadian Mounted Police (RCMP)Royal Canadian Mounted Police (RCMP)

Key legislation: Key legislation: Excise ActExcise Act prohibits unlicensed prohibits unlicensed manufacturing manufacturing ANDAND the possession, transportation, or the possession, transportation, or sale of unstamped cigarettes – that is, excise duty not sale of unstamped cigarettes – that is, excise duty not paid.paid.

Focus on large-scale illegal manufacturing and Focus on large-scale illegal manufacturing and distribution involving organized crimedistribution involving organized crime

Cooperation with Akwesasne Mohawk Police, border Cooperation with Akwesasne Mohawk Police, border security officialssecurity officials

No on-reserve action against unlicensed No on-reserve action against unlicensed manufacturersmanufacturers

Release of contraband tobacco enforcement strategy Release of contraband tobacco enforcement strategy in May/08 (URL: in May/08 (URL: http://www.rcmp-grc.gc.ca/ce-da/tobacco-tabac-strat-http://www.rcmp-grc.gc.ca/ce-da/tobacco-tabac-strat-2008-eng.htm2008-eng.htm) )

Canada: Federal Govt.Canada: Federal Govt. (3)(3)

III.III. OtherOther

Interdepartmental Task Force created to look Interdepartmental Task Force created to look for further enforcement options; $20 million in for further enforcement options; $20 million in additional enforcement funding announced in additional enforcement funding announced in July/08.July/08.

Improved tax marking system to be Improved tax marking system to be introduced in 2010 with additional covert introduced in 2010 with additional covert security features to combat security features to combat counterfeit counterfeit tobacco products.tobacco products.

QuébecQuébec 20042004: : Tobacco Tax ActTobacco Tax Act (URL: (URL:

http://www.canlii.org/qc/laws/sta/i-2/20080818/http://www.canlii.org/qc/laws/sta/i-2/20080818/whole.htmlwhole.html) amended to control importation, ) amended to control importation, transportation, storage and sale of raw transportation, storage and sale of raw tobacco; power to seize shipments of raw tobacco; power to seize shipments of raw tobacco to unlicensed manufacturers created tobacco to unlicensed manufacturers created (applied to “tobacco leaves that have not been (applied to “tobacco leaves that have not been processed beyond the drying stage and processed beyond the drying stage and fragments of such tobacco leaves”)fragments of such tobacco leaves”)

20062006: : Tobacco Tax ActTobacco Tax Act amended to ban amended to ban possession and sale of counterfeit tobacco and possession and sale of counterfeit tobacco and to substantially increase fines for contraband-to substantially increase fines for contraband-related crimes.related crimes.

QuébecQuébec (2)(2)

20082008Tobacco Tax ActTobacco Tax Act amended to make provision amended to make provisionof services to an unlicensed party by a licensed of services to an unlicensed party by a licensed manufacturer illegal;manufacturer illegal;

Québec budget requires manufacturers makingQuébec budget requires manufacturers makingcigarettes under contract for someone elsecigarettes under contract for someone elseandand the other party to the other party to bothboth have manufacturer’s have manufacturer’spermits; permits;

Purchasing or taking delivery of tobacco via aPurchasing or taking delivery of tobacco via aparty without a license is prohibited (complementsparty without a license is prohibited (complementsprohibition on supply of raw tobacco)prohibition on supply of raw tobacco)

QuébecQuébec (3)(3)

2008 (cont’d)2008 (cont’d)

Importers of raw tobacco required to keep Importers of raw tobacco required to keep registers and file reports.registers and file reports.

May 2008: Québec Health Department May 2008: Québec Health Department and Laval police departments launch and Laval police departments launch Operation “VITAL” to counter illegal Operation “VITAL” to counter illegal tobacco trade in Laval: first instance of tobacco trade in Laval: first instance of joint program between health and police joint program between health and police ministries/departments in Canada.ministries/departments in Canada.

OntarioOntario Key legislation: Key legislation: Tobacco Tax ActTobacco Tax Act ( (

http://www.e-laws.gov.on.ca/html/statutes/english/ehttp://www.e-laws.gov.on.ca/html/statutes/english/elaws_statutes_90t10_e.htmlaws_statutes_90t10_e.htm): creates the authority to seize contraband, assess ): creates the authority to seize contraband, assess penalties for possession of unmarked product, and penalties for possession of unmarked product, and unpaid taxes (3-8 times unpaid tax depending on unpaid taxes (3-8 times unpaid tax depending on offence). Fines start at $500 and can reach offence). Fines start at $500 and can reach $50,000 per offence.$50,000 per offence.

Applies to all tobacco products including chewing Applies to all tobacco products including chewing tobacco.tobacco.

Retailers required to provide invoices to prove Retailers required to provide invoices to prove products purchased have had taxes collected.products purchased have had taxes collected.

Authority to seize product such as baggies with no Authority to seize product such as baggies with no health warnings.health warnings.

OntarioOntario (2)(2)

Special Investigations Branch conducts Special Investigations Branch conducts investigations in collaboration with other investigations in collaboration with other enforcement agencies.enforcement agencies.

Applies to retailers and wholesalers, importers Applies to retailers and wholesalers, importers and exporters.and exporters.

Prohibits supply of tobacco manufacturing Prohibits supply of tobacco manufacturing machinery to unlicensed persons (parallel with machinery to unlicensed persons (parallel with federal legislation)federal legislation)

Manufacturing, wholesaling and retailing Manufacturing, wholesaling and retailing permits and certificates may be cancelled if a permits and certificates may be cancelled if a person designated under the person designated under the ActAct fails to fails to comply with its conditions.comply with its conditions.

OntarioOntario (3)(3)

All persons who produce, purchase, sell, or stamp All persons who produce, purchase, sell, or stamp cigarettes must provide security equal to the cigarettes must provide security equal to the greater of three months tax that would be greater of three months tax that would be collectable or up to $1 million, whichever is collectable or up to $1 million, whichever is greater. greater.

Retail sales prohibition can last up to six months.Retail sales prohibition can last up to six months.

Authorized persons with reasonable/probable Authorized persons with reasonable/probable grounds may stop any vehicle, examine it and grounds may stop any vehicle, examine it and seize “more than 200 unmarked cigarettes”. seize “more than 200 unmarked cigarettes”. Penalties can reach 3 times tax due plus up to Penalties can reach 3 times tax due plus up to $5,000 in fines.$5,000 in fines.

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

Ontario Provincial PoliceOntario Provincial Police

If authority is obtained from RCMP or Ontario If authority is obtained from RCMP or Ontario Ministry of Revenue to search vehicle and/or Ministry of Revenue to search vehicle and/or seize product, OPP can seize contraband seize product, OPP can seize contraband under the federal under the federal Excise Act Excise Act (Policy: 50+ (Policy: 50+ cartons/bags only), and possibly lay charges cartons/bags only), and possibly lay charges under the Ontario Tobacco Tax Act.under the Ontario Tobacco Tax Act.

CouldCould then turn product over to Ontario then turn product over to Ontario Ministry of Revenue for civil penalty or Ministry of Revenue for civil penalty or chargescharges

Ontario Municipal PoliceOntario Municipal Police

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

Ontario Public Health Ontario Public Health Inspectors and Tobacco Inspectors and Tobacco

Enforcement OfficersEnforcement Officers No authority now available to search No authority now available to search

for/seize contraband.for/seize contraband.

Wednesday-Thursday February 4-5, 2009Center for TomorrowUniversity at BuffaloBuffalo, New York