Proceedings of the Standing Senate Committee on
Legal and Constitutional Affairs
Issue 35 - Evidence for May 2, 2013
OTTAWA, Thursday, May 2, 2013
The Standing Senate Committee on Legal and Constitutional Affairs, to which was referred Bill S-16, An Act to amend the Criminal Code (trafficking in contraband tobacco), met this day at 10:30 a.m. to give consideration to the bill.
Senator Bob Runciman (Chair) in the chair.
[English]
The Chair: Good morning. Welcome, colleagues, invited guests and members of the general public who are following today's proceedings of the Standing Senate Committee on Legal and Constitutional Affairs.
We are meeting today to continue our consideration of Bill S-16, An Act to amend the Criminal Code (trafficking in contraband tobacco). To begin our deliberations today, I am pleased to introduce for our first panel. From the RCMP, we have Superintendent Guy Poudrier, Director, Federal Policing Criminal Operations. From Public Safety Canada, we have Trevor Bhupsingh, Director General, Law Enforcement and Border Strategies Directorate. From the Canada Border Services Agency, we have Geoff Leckey, Director General, Enforcement and Intelligence Operations. Welcome, gentlemen.
Mr. Bhupsingh, I believe you will lead off. The floor is yours.
Trevor Bhupsingh, Director General, Law Enforcement and Border Strategies Directorate, Public Safety Canada: Honourable senators, I would like to thank you for the opportunity to speak before this committee hearing today in support of the study of Bill S-16, the Tackling Contraband Tobacco Bill.
Let me begin by stating that the contraband tobacco issue is a serious and significant problem in Canada. Although the actual size of the illicit market in Canada is debatable, there is no doubt it poses a threat to both the health and public safety of Canadians, and there are economic implications related to taxes and excise duties. Over the years, the problem has evolved from sporadic smuggling activities to the infiltration by organized crime groups that reinvest the profits into drugs, guns and other forms of illegal criminality.
In response to the problem, in 2008 the Government of Canada announced the creation of a task force on illicit tobacco products. Public Safety Canada led the efforts of the task force, which was comprised of senior officials from nine different federal departments and agencies. Their mandate was to develop concrete and effective measures to address contraband tobacco in Canada.
[Translation]
In 2010, on the work and advice of the Task Force, the Government of Canada, with a $20 million dollar investment, launched several key measures to reduce the supply and demand of contraband tobacco.
One of the key measures was the establishment of a Combined Forces Special Enforcement Unit — Contraband Tobacco Initiative led by the Royal Canadian Mounted Police to target criminal networks engaged in the production and distribution of illicit tobacco products.
In addition, the Alcohol and Tobacco Section of CBSA's Science and Engineering Laboratory has been developing advanced methods for determining the origins of seized contraband tobacco. Isolating its origin and potential links to specific countries, manufacturers or growers, would allow for more effective targeting of contraband importers and exporters.
[English]
Cumulatively, the benefit of these actions has been an increased enforcement presence in regions and areas vulnerable to contraband activity.
However, enforcement alone cannot solve the problem. The demand side of the equation must also be addressed. For this, the task force recommended a targeted awareness campaign to educate current and potential consumers on the impact of contraband tobacco in Canada and its links to organized crime.
The Canada Revenue Agency led an awareness campaign, which was launched in Ontario and Quebec, the provinces with the highest rates of contraband tobacco consumption. To complement the CRA public awareness campaign, key messaging by law enforcement agencies has underscored the involvement of organized crime and how consumers of contraband are financially contributing to criminal networks.
Taken together, these actions to reduce both the supply and demand of contraband tobacco have built on and strengthened federal tobacco control efforts that are already in place. They include the RCMP's Contraband Tobacco Enforcement Strategy and the Federal Tobacco Control Strategy, which has established a comprehensive approach to tobacco control under pillars of prevention, cessation, protection and harm reduction.
Organized crime networks involved in the production and distribution of contraband tobacco are exploiting, to their advantage, First Nations communities and the jurisdictional and politically sensitive relationship between these communities, governments and enforcement agencies.
[Translation]
First Nations communities are receptive to working with federal and provincial governments to address organized crime. To this end, consultations will continue with First Nations leaders to build and strengthen our partnerships in an effort to combat organized crime.
Public Safety Canada and its federal partners will continue to explore additional counter-measures to address contraband tobacco, in partnership with provincial, territorial and First Nations governments, law enforcement agencies, industry stakeholders and the international community.
[English]
In terms of law enforcement capacity initiatives, the RCMP is establishing a strengthened 50-officer anti- contraband tobacco force. In addition, 10 new First Nations police officers dedicated to address organized crime in First Nations communities will be added to increase the policing partnership investigative capacity.
Several groups have expressed their support for these measures, including the National Coalition Against Contraband Tobacco and the Canadian Convenience Stores Association. Both acknowledge that the measures will provide ``a necessary resource for the RCMP so that they can continue to keep our communities safe.''
To conclude, the implementation of Bill S-16 would provide an additional tool to both federal and provincial enforcement agencies to address trafficking in contraband tobacco. The purpose of this legislative proposal is to criminalize the act of trafficking in contraband tobacco by creating a new Criminal Code offence. This bill would ensure that the penalties reflect the seriousness of this crime by providing mandatory jail time for repeat offenders.
Before I turn to my colleagues, I would like to thank you again for providing me with the opportunity to speak to this important issue, and I look forward to assisting with your questions.
The Chair: Thank you.
Superintendent, please go ahead.
[Translation]
Superintendant Guy Poudrier, Director Federal Policing Criminal Operations, Royal Canadian Mounted Police: Thank you for inviting me here today to speak on Bill S-16, the Tackling Contraband Tobacco Act. Bill S-16 would create a new offence for trafficking in contraband tobacco and increase the associated penalties. To assist the committee in its study of the bill, I would like to provide you with a general overview of the current scope of the problem from the RCMP's perspective, as well as an overview of our enforcement activities.
[English]
Contraband tobacco remains a serious threat to public safety, and if left unchecked, criminal organizations will continue to profit at the expense of the safety of Canadians and government tax revenues. A Macdonald-Laurier Institute study estimates the potential losses in tax revenue at approximately $900 million to $1.2 billion a year.
[Translation]
Contraband tobacco has been a long-standing enforcement priority for the RCMP. In 2008, to cope with this growing crime, the Department of Public Safety launched the Contraband Tobacco Enforcement Strategy.
The strategy sets out priorities for reducing the availability of, and decreasing demand for, contraband tobacco across the country. The strategy has had a positive and measurable impact on the contraband tobacco market in Canada. Since its inception in 2008, the RCMP has laid approximately 4,925 charges and has disrupted approximately 66 organized crime groups involved in the contraband tobacco market.
[English]
Criminal organizations are involved in the production, distribution and trafficking of contraband tobacco and are exploiting First Nations communities. Violence and intimidation tactics continue to be associated with illegal tobacco in First Nations communities.
In addition to the tobacco smuggling encountered at Canada-U.S. ports of entry, extensive smuggling continues to occur in the Cornwall and Valleyfield border area, with the majority of activity occurring between the ports of entry, presenting unique enforcement challenges for the RCMP. In 2012, tobacco products seized while in transit involved automobiles, snowmobiles, all-terrain vehicles and boats. The RCMP has also seen contraband tobacco transported using postal delivery or air services.
Cornwall, Ontario, is one of the most active regions for tobacco smuggling in Canada. Given that, the RCMP participates in a number of joint investigative units with partner agencies. For example, in Cornwall, the RCMP works with the Akwesasne Mohawk Police, the Ontario Ministry of Finance and the CBSA to combat organized crime and its involvement in contraband tobacco and other forms of criminality.
[Translation]
In April 2010, the RCMP established the Combined Special Enforcement Unit-Contraband Tobacco Initiative based in Cornwall. The unit was specifically mandated to target organized crime involved in the manufacture and distribution of contraband tobacco in collaboration with its law enforcement partners.
The government recently announced that it was establishing a new RCMP Anti-Contraband Force comprised of 50 officers. The RCMP is currently finalizing its implementation plan for this force, which is expected to be fully staffed and operational by the fall of 2013.
[English]
We do not comment on deployment numbers or the makeup of the Anti-Contraband Force, but we expect to deploy officers to areas that require an enhanced capacity to investigate organized crime and cross-border smuggling and to target unscrupulous tobacco growers and illicit manufacturers. The ACF will also establish a dedicated outreach team to engage tobacco growers and suppliers of raw materials used in the tobacco manufacturing process.
As I outlined, the RCMP works with other law enforcement partners on multiple fronts to address the problem of contraband tobacco.
Thank you again for inviting me to participate in these important hearings.
Geoff Leckey, Director General, Enforcement and Intelligence Operations, Canada Border Services Agency: Thank you, Mr. Chair and honourable senators, for the opportunity to provide testimony in your consideration of Bill S-16. I would like to begin by noting that while the specific amendments to the Criminal Code proposed in Bill S-16 will have minimal impact on the daily activities of the agency, we are supportive of the bill's intent to signal the seriousness of trafficking in contraband tobacco.
[Translation]
The contraband tobacco market is a lucrative one, and activities to disrupt and prevent the flow of illicit goods from entering the country require active participation with partners, both at home and abroad. The CBSA works with other government departments, law enforcement agencies, international organizations and foreign governments on operational and analytical issues related to organized crime and contraband criminal markets.
Of our many partners, the Agency works daily with the RCMP and the U.S. Customs and Border Protection on enforcement matters. The cooperation and collaboration between our various organizations is longstanding and go well beyond tobacco issues.
[English]
Together with our U.S. partners, the CBSA and the RCMP participate in Integrated Border Enforcement Teams. There are 15 IBET teams that work in 24 locations to enhance the integrity and security of the Canada-U.S. border. They do this by understanding the capabilities, intentions, vulnerabilities and limitations of organized criminal networks and applying that intelligence to disrupt them and their supply chains.
Disrupting criminal networks that engage in the cross-border movement of illicit tobacco is dependent on solid information and intelligence. The illicit cigarette market in Canada has changed since the 1990s, when the majority of the contraband market consisted of duty free and exported Canadian cigarettes. Currently, the market in Canada is comprised of illicitly manufactured native brand cigarettes that are transported by land, as well as Chinese and other international brands of tobacco products entering Canada through postal, marine and air modes.
[Translation]
The CBSA maintains a robust and comprehensive Intelligence Program, which contributes to, and is informed by, the broader intelligence community. This allows for timely, accurate and relevant information in support of our enforcement activities. Information and intelligence, while necessary, are not in and of themselves sufficient for effective border enforcement.
The agency also relies on a combination of officer training and technology to intercept illicit goods, including tobacco products, before they get across the border.
[English]
For example, the CBSA uses large-scale imagery equipment to inspect marine containers and transport trucks and provides its front-line officers with counterfeit detection kits for a quick determination in the field as to whether a tobacco product is counterfeit.
[Translation]
From January 2012 to March 2013, the CBSA made approximately 3,000 tobacco seizures totalling over 30,000 cartons of cigarettes, 164 kilograms of cigars and 2,800 kilograms of other tobacco products such as chewing tobacco and snuff.
[English]
The CBSA recognizes the challenges associated with the cross-border movement of contraband tobacco and the need for a multidisciplinary approach to combat it. We will continue to leverage all resources available to us to identify and interdict contraband tobacco at the border.
I would be pleased to answer any questions you may have.
The Chair: Thank you. We will begin questions with the Senator Fraser, Deputy Chair of the Committee.
Senator Fraser: Mr. Leckey, is your activity in this regard confined to the formal border crossing posts, or do you get involved with operations on the St. Lawrence River, for example?
Mr. Leckey: The authority of the CBSA, with one exception, is limited to the border.
Senator Fraser: It is at the border but is it always at formal border posts?
Mr. Leckey: Yes. The RCMP has jurisdiction between ports of entry. The one exception I was going to mention is our involvement with colleagues in the police services in what we call ``controlled deliveries.'' That is when an illicit shipment is knowingly allowed to proceed inland for the purpose of identifying the intended recipient of the delivery.
Senator Fraser: It is a case of catching the bigger fish.
We heard yesterday, and we have heard again from you this morning, about the sustained efforts to build cooperation among the different police forces. How well is that succeeding? What are the problems? It is not easy to get different institutions to cooperate and to work together. What difficulties arise?
[Translation]
Mr. Poudrier: We have had effective partnerships in place for years that have been very successful. In Montreal, for instance, we have brought municipal and provincial partners into partnerships with the Kanawake police, the RCMP, and the SQ. In Cornwall, there are joint task forces working together on dealing with contraband and the criminal activity around contraband tobacco.
These teams have been quite successful in the past few years. We think this new initiative by the Anti-Contraband Force will support and enhance our effectiveness at identifying and neutralizing organized crime around contraband tobacco.
Senator Fraser: In terms of daily operations, do the different forces have procedural rules that they have had to adjust because not everyone was being treated the same way? I am trying to understand how this works in the day-to- day. I am not a police officer, so I do not know.
Mr. Poudrier: In partnerships like this, each police force is sure to have its own way of doing things. The important thing is that they exchange information and are able to possibly apply a number of provincial, municipal and federal laws at the same time, which helps us to be more effective when dealing with smugglers. Each police force and each group involved makes an important contribution to the team, which enhances our ability to and effectiveness at controlling and reducing the threat of organized crime.
Senator Fraser: One last question. What aspect of this specific bill is going to be of use to you?
Mr. Poudrier: In terms of the new bill?
Senator Fraser: Yes.
Mr. Poudrier: Not a lot will change in terms of the investigations. It is just an additional tool for the prosecution team. This might help us establish longer-term investigations that could be effective in fighting organized crime. However, generally speaking, the investigation techniques will change very little, if at all. This is an extra tool for Justice Canada's team of investigators and lawyers.
Senator Fraser: Someone suggested to us that it would benefit the provincial and municipal police forces to have something in the Criminal Code because the Excise Act is strictly federal. Will this help?
Mr. Poudrier: Yes, absolutely. I do not want to speak for my provincial and municipal colleagues, because at the RCMP we already have this authority under the Excise Act, which is not the case for the provincial and municipal police forces. So, for them, it is certainly beneficial.
[English]
Senator White: My question will focus on whether or not this legislation will assist us when it comes to proceeds of crime investigations. You talk about longer-term investigation but also the opportunity for us to seize assets — because they will have Criminal Code convictions under the proceeds of crime legislation — and lay other charges, if necessary, as a result of proceeds of crime. Do you see that as being helpful as well?
[Translation]
Mr. Poudrier: You are absolutely right. In order to apply proceeds of crime provisions, a change to the Criminal Code would be very helpful.
[English]
Senator White: Would a conviction allow us to look at whether or not someone could be charged under criminal organized crime charges if convicted under this offence? Would that have been true under the Excise Act, or will it be true in the future?
[Translation]
Mr. Poudrier: For the first part of your question, you are right. This will support evidence for criminal organized crime charges under the Criminal Code, because that is the type of investigation the team will focus on, longer-term investigations, the kind we refer to as project-status investigations. A number of investigative methods will be introduced for gathering enough evidence to lay charges under the Criminal Code.
Senator Joyal: Welcome. I have a number of questions for each of you. Mr. Poudrier, I have had a chance to go over your group's annual reports since 2008. I have the ones from 2008 and 2009 as well. I have the one from 2011 in particular, entitled on page 30, Priority 6 ``Contribute to the development of legislative and regulatory tools.'' Does that say anything to you? It is your August 2011 report entitled, Contraband Tobacco Enforcement Strategy.
Mr. Poudrier: Okay, I must have a copy with me. However, that report was drafted before I arrived.
Senator Joyal: I can ask the clerk to get you a copy. I am familiar with the content of the report. I have been reviewing these annual reports ever since you have been issuing them, since the strategy was formulated in 2008. From what I read, none of these reports include specific recommendations calling on Parliament or the government to amend the penal code the way this bill does. That surprised me because I thought who better than the RCMP or your unit to make this recommendation, since you are the ones in charge of the fight against contraband tobacco?
Were you involved in the preliminary stages of drafting the bill before us, since your annual reports make no mention of this specific request to serve you better?
Mr. Poudrier: I would like to clarify, senator, that the memorandum to Cabinet was an initiative led by public safety and that our involvement in this initiative centred on developing law enforcement options.
Senator Joyal: But you did not previously recommend such an initiative. That is what I am trying to understand. This does not seem to be coming from you. The request to amend the penal code does not seem to be coming from the RCMP unit responsible for the fight against contraband tobacco. Am I wrong?
Mr. Poudrier: It is possible that this was left out of the strategy report. Unfortunately, I do not have an answer for you on this or any further explanation.
Senator Joyal: The March 2013 announcement at introduction of this bill mentions — and a number of your colleagues mentioned this as well — that there will be a unit comprised of 50 more RCMP officers.
Again, I did not find any recommendation in your annual reports about the lack of officers specifically assigned to this fight against contraband tobacco. How is it that you are suddenly getting 50 more officers under your charge? Is this manna from heaven or is it part of the recommendations you made but did not specifically include in your annual reports? Again, I did not find any recommendations in your annual reports.
Mr. Poudrier: First of all, senator, it is not customary for the RCMP to ask for additional funds or resources. The RCMP is committed to the appropriate and more strategic use of current employees, and to their reassignment.
Senator Joyal: Therefore, these new officers will come from within the RCMP?
Mr. Poudrier: They are not new officers.
Senator Joyal: No new officers are being added to the Force and officers are being reassigned internally?
Mr. Poudrier: It is a priority-based reassignment. It is up to the RCMP to make the best possible use of our officers, and to assign them to the fight against organized crime.
Senator Joyal: How many more officers will be added to your unit, and how many people are currently working with you in this unit? In other words, I am trying to understand what having 50 additional officers represents for you, unless this is secret information?
Mr. Poudrier: We had already determined today that we would not comment on the number of officers and their specific assignments. For operational reasons, I will not be answering the question.
[English]
Senator Batters: With the contraband tobacco busts in the last several years, could you give our committee examples of other things that have been seized in busts, such as drugs or guns?
[Translation]
Mr. Poudrier: Absolutely, I will check my notes for the exact number. For example — sorry, but the figures are available in English only. I will give an overview.
[English]
Project OSTONE commenced in 2011 and was initially focused on a group allegedly involved in the smuggling of contraband tobacco. As the investigation evolved, the police discovered other individuals who were involved in trafficking of all sorts of items — marijuana and firearms. Throughout this 12-month investigation, police from Canada and the U.S. worked both sides of the border. As a result of the investigation, 12 people from Cornwall and Akwesasne Mohawk territory faced 83 charges: activities of a criminal organization, possession of proceeds of crime, as well as offences related to the smuggling of contraband tobacco and trafficking of marijuana and firearms. In addition to these charges, the Ontario Ministry of Finance has laid an additional 115 charges under the Ontario Tobacco Tax Act. Among the items seized during the course of the investigation were 401 cases of contraband tobacco products and 11 pounds of marijuana.
This is a very nice example and indication of how the partners work together to tackle organized crime.
Senator Batters: Thank you very much. I appreciate that.
Senator Cordy: It seems that successive governments have been trying to do away with contraband tobacco, and yet the criminal element seems to always be a step ahead of us in determining how they can get around the laws that we bring in. I think senators, regardless of political party, are interested in doing away with contraband tobacco because it is a serious threat.
Do mandatory minimums work? When I asked this question of a department official earlier, their comment was that the deterrent effect is speculative. Will mandatory minimums work in stopping contraband tobacco?
Mr. Bhupsingh: We certainly hope that they will. I do not have a specific answer. I do not have the studies before me that would show that in jurisdictions where mandatory minimums are used there is a deterrence effect in terms of what they are trying to stop. I do not have anything that would proactively suggest that.
We are moving forward with mandatory minimums with this. We think it is part of a solution in terms of a broader perspective of trying to address contraband tobacco but with a nexus to organized crime. We think it is a serious problem.
Organized crime, as you mentioned, is very flexible and adaptable; it is agile. In order to stop organized crime, we need as many measures as possible to address the issue.
With respect to mandatory minimums, we think that contraband tobacco has health issue implications, economic implications, and I think having mandatory minimums addresses the seriousness of the crime.
Senator Cordy: We have no witnesses before us from Health Canada, but perhaps you can answer this question. Certainly, television ads to reduce regular tobacco smoking have been fairly effective. It is not down to zero and I am not sure it ever will be, but they have been effective, other than with young girls, and that number seems to be increasing.
I am not sure that people realize what is in contraband tobacco. As Senator White said earlier, it is different than in the late 1980s. It is not manufactured by a tobacco company — not to say that would make it good tobacco. Nonetheless, contraband tobacco, when you look at what is in it, is disgusting. Has there been any thought of doing a program, television or print ad to let Canadians know what contraband tobacco contains?
Mr. Bhupsingh: In the past we have had awareness campaigns about the problems with contraband tobacco and its nexus with organized crime. We know the health impacts of tobacco in general. To underline your point, yes, we are finding that the grade of contraband tobacco is not what people would expect it to be, and mixed in with that are all sorts of other substances that I do not think the average Canadian necessarily knows about.
On a go-forward basis, yes, part of the solution is not only dealing with the criminality or law enforcement issue. There is an awareness component to this, especially with our youth. Going forward, I would like to think that some sort of awareness about the dangers of contraband tobacco should be highlighted.
Senator Cordy: Perhaps if people knew there were rat and mouse droppings in these contraband cigarettes they might think twice.
I wonder, too, about the alcohol and tobacco section of CBSA's Laboratory and Scientific Services Directorate. You talk about isolating the origin and potential links to specific countries and manufacturers to allow for more effective targeting. Where is most of the contraband tobacco? I would have thought it would be Canada, the United States. Are other countries sending it to Canada?
Mr. Leckey: Yes. Another component of the contraband tobacco problem in Canada involves large amounts of counterfeit and contraband cigarettes being imported by container load from countries such as China.
Senator Cordy: I did not realize that.
[Translation]
Senator Dagenais: Thank you to our three guests. My first question is for Mr. Poudrier. I believe you mentioned that, in the absence of support from certain communities on the reserves, you nevertheless have the support of the Akwesasne and Kahnawake police services.
Have you managed to identify who is involved in contraband smuggling, in Akwesasne for example? You have the support of the police services. Have you been able to identify who is involved?
Mr. Poudrier: As mentioned in our 2008 report and the contraband tobacco enforcement strategy, for the past three years, and since the strategy was implemented in 2008, we have disrupted 66 criminal organizations.
This tells us that there has been an exchange of intelligence and remarkable information resulting in the identification and disruption of these organizations. There has been significant progress at this level. By continuing with our effective partnerships, and also adding the Anti-Contraband Force, we are building on the strong foundation and the solid partnerships, which will increase our capacity to deal with organized crime.
Senator Dagenais: You also spoke about the success of your seizure activities. Can you tell us about the amount of contraband cigarettes seized in comparison to the amount on the market? Can we talk about a percentage at this point?
Mr. Poudrier: Unfortunately, it is difficult to determine. The only statistics available on our strategy are the number of seizures since 2008, which declined until 2011. That is the only information I have at present.
[English]
Senator McIntyre: We have the Excise Act and now we have Bill S-16, an amendment to the Criminal Code calling for mandatory minimum sentences. On top of that, the Minister of Public Safety recently announced the 50-officer RCMP Anti-Contraband Tobacco Force.
As you have rightfully pointed out, no single agency can tackle this issue alone; cooperation among all agencies and departments of our American partners is essential to reduce the contraband tobacco market in Canada.
Apart from a public awareness campaign, are there other changes to laws, policies and enforcement measures that need to be made in order to wrestle the monster of contraband tobacco to the ground?
Mr. Bhupsingh: I will refer back to the point that Senator Cordy made, which is that organized crime is very, I would say, intelligent in the sense that it looks for gaps, so they are very flexible and agile. Now that we are potentially adding tools with respect to criminality on trafficking in contraband tobacco, I think we have a regime that will allow law enforcement to target where we think there is a problem with contraband tobacco, and that is with organized crime. That is what this particular bill is all about.
Outside of that, with other things that could be done, certainly there is awareness with the general public around the health aspect with respect to contraband tobacco. There may be others things; we will have to see how it evolves.
At Public Safety Canada, we have a task force that I mentioned in my opening comments. We have nine federal government departments, and we have discussions regularly with Aboriginal policing organizations and leadership, the provinces and the territories. As this issue evolves and we identify where the gaps are, we will come forward with other proposals.
Senator McIntyre: There is no question that we need the cooperation of the public to wrestle this problem.
[Translation]
Senator Boisvenu: Thank you very much, gentlemen, for your very interesting presentations. I believe that the contraband trio has greatly contaminated the social and economic fabric of many communities, especially aboriginal communities. You said that the cooperation of the reserves' political leaders with law enforcement agencies is vital.
I would like to go back to yesterday's presentation and the answers given by Chief David of Akwesasne. A senator asked him a question, and I was surprised to see that the chief's response was that he opposes this bill. When asked whether he would be open to major operations on his reserve if traffickers were known to be hiding there, he did not seem to be in agreement. That is what I was able to decipher.
How can we eradicate contraband if the reserve's political leader is opposed to the bill and to major operations? I am trying to understand what cooperation looks like and how we can succeed?
Mr. Poudrier: You are quite right. It is not easy. You realize that we discussed this a little earlier. We said that the tobacco market and industry are an important part of the economy on reserves. However, we can make progress by cutting off distribution, the distribution networks to reserves.
We can fight organized crime, which controls these broader networks. In that way, we can deal a serious blow to organized crime. If we reduce the percentage of the product headed to illegal manufacturers, it is difficult for them to manufacture the final product.
From what I understand, police services on reserve want to get rid of criminal organizations that benefit from or exploit their territories and geographic location. We have to take advantage of these elements.
Senator Boisvenu: Last question, Mr. Chair. I was surprised by the chief's statement that, in Canada, our officers deal with contraband tobacco whereas, in the United States, officers deal with contraband marijuana, as though contraband tobacco were secondary. When working with the Americans, do you feel that they are concerned with marijuana and you are concerned with tobacco?
Mr. Poudrier: No, my view is that the investigations target criminal organizations no matter the quantity transported across the border.
[English]
Senator Frum: We received a note from the Library of Parliament suggesting that since 2008-09, the RCMP has seized less contraband tobacco. Is that accurate? If so, how would you explain that?
[Translation]
Mr. Poudrier: Yes, absolutely, our figures have been dropping since 2009. It is difficult to explain. Seizures are declining, legitimate sales are increasing and smoking rates are stable. We believe that the investigate techniques used are effective, and that the contraband tobacco enforcement strategy is working.
[English]
Mr. Leckey: If I might weigh in on the number of seizures that have recently been made, one reason for the decline is that there was a large spike in 2011 due to a major operation that seized 11 marine containers full of tobacco. It will be an exceptional year any time that happens, so that would partly explain why figures for cigarette seizures have been in decline since then.
I will give you our perspective, if you do not mind, for the last year. In 2011, the CBSA seized 35,000 kilograms of fine-cut tobacco. Fine-cut tobacco is what the illicit product is manufactured from. Last year, that quadrupled to 148,000 kilograms, and in the first three months of this year, we have seized 110,000 kilograms, which would put us on track for 440,000 kilograms this year. We are currently seeing a significant surge in seizures, which may or may not indicate the volume of importation of fine-cut tobacco.
The Chair: I have a question for the superintendent. In the federal budget this year, I think several million dollars are allocated to be spent over two years to hire additional First Nations police officers to focus on the contraband tobacco issue. Will that be aligned with your new team? How would you coordinate that effort?
Mr. Poudrier: Without going into further detail on the implementation plan, First Nations resources will be integrated with ours.
The Chair: How big a problem are smoke shacks in terms of the sale of contraband product? I see there are at least 350 so-called smoke shacks in Ontario and Quebec. How big a problem are they in terms of selling illicit or illegal products? What can you do about it, or is that a provincial matter? I see Manitoba has done something with respect to addressing that issue, but do you see this as a provincial responsibility?
Mr. Poudrier: It is tough for me to answer that question.
[Translation]
We need an approach that brings together all levels of government and all law enforcement services in order to come up with a viable, long-term solution in order to put an end to the sale of illicit tobacco on the market.
[English]
The Chair: You did not specifically respond to my question about the smoke shacks. Are they a big source of illicit product being sold to Canadians?
Mr. Poudrier: Yes.
The Chair: With respect to the Cornwall border crossing and the change of the checkpoint off of the island onto the mainland, has that had a positive impact with respect to smuggling or any impact at all?
Mr. Poudrier: Our intelligence indicates that the route for smuggling has changed.
The Chair: I think the chief last night indicated it is more river transport now.
Mr. Poudrier: You are absolutely right.
The Chair: If the checkpoint is located in Massena rather than on the Canadian side, do you have concerns?
Mr. Poudrier: I would be speculating. The transportation mode would probably shift to other means of transportation.
Senator Fraser: My last question on the first round had to do with the ability of provincial and municipal police forces to act under the Excise Act. They cannot. However, is it not possible for the federal authorities to delegate the power to those police forces to act under the Excise Act?
[Translation]
Mr. Poudrier: I believe it is possible.
[English]
Mr. Bhupsingh: I am not sure. I would have to check with my justice colleagues to give you an answer.
Senator Fraser: I think it is.
Second, in Eastern Canada, clearly a great deal of this situation is bound up with Aboriginal reserves. How is the cooperation going between the non-Aboriginal and the Aboriginal police forces?
[Translation]
Mr. Poudrier: The police forces have an excellent relationship. We have officers, Peacekeepers, who have been assigned to CFSEU since 2002. They are responsible for enforcing the law and criminal offences in all territories. It is a development opportunity for our First Nations police who work under and in partnership with seasoned police officers of the RCMP, Sûreté du Québec, Ontario and municipal police forces. It is a group undertaking.
[English]
Senator White: Superintendent, you made reference to 66 criminal organizations. How many of those were involved in other criminal activities, such as drug trafficking, firearms trafficking as well as contraband tobacco?
Mr. Poudrier: I do not have an exact number, but I would say that criminal organizations are involved in all sorts of commodities smuggling.
Senator White: My point is that this is not just tobacco.
Mr. Poudrier: Absolutely not.
Senator Joyal: Mr. Bhupsingh, at page 3 of your brief you mentioned that, taken together, these actions to reduce both the supply and demand of contraband tobacco.
[Translation]
This concerns the availability and, obviously, the consumption of tobacco. In your group, Mr. Poudrier, are there any officers assigned to suppressing the consumption of contraband tobacco, or do you focus instead on the arrival in Canada of contraband tobacco?
Mr. Poudrier: You are quite right.
Senator Joyal: Do you have any officers responsible for suppressing the consumption of contraband tobacco on the market?
Mr. Poudrier: I would say that it is the jurisdiction of the Department of Health.
Senator Joyal: Thus, it is the Department of Health that is responsible for this aspect of the general program?
Mr. Poudrier: With respect to consumption, yes.
[English]
Senator Joyal: Mr. Leckey, what is the link between the illegal drug traffic and tobacco traffic in your operation?
Mr. Leckey: It is our experience, speaking in general terms, that whenever an organized crime network operates a supply pipeline, they are very unlikely to restrict themselves to one illicit product. If they use it for tobacco, the same pipeline will be used for drugs and guns.
Senator Batters: A little earlier, my colleague Senator Joyal was asking you some questions about where this particular initiative came from. This is more of a comment than a question. For your information, this particular initiative fulfills a specific promise that the Conservative Party made in the last election campaign. Coincidentally, that election happened two years ago today. In that election, the Canadian people awarded the Conservative government a majority government, endorsing that election platform. That is where that came from at that time.
The Chair: Thank you for that, Senator Batters.
[Translation]
Senator Boisvenu: Is tobacco grown on aboriginal reserves?
Mr. Poudrier: According to police information, there are tobacco fields on aboriginal reserves.
Senator Boisvenu: I read an American report on contraband tobacco. China is a rising producer as it exports tobacco, via Vancouver, to the United States, where it enters the aboriginal reserve and then makes its way to Canada. Is one of your concerns for the future that the supply of these goods will grow substantially?
Mr. Poudrier: Yes, it is a concern. However, to date, contraband tobacco predominantly comes from within Canada and from the United States. We are working closely with CBSA to develop strategies to neutralize imports at ports of entry. As Mr. Leckey mentioned, there were many seizures of containers of contraband tobacco in 2011.
[English]
The Chair: Thank you, gentlemen. We appreciate your assistance with our deliberations.
Our next witness is Superintendent Carson Pardy, Director of Operations for the Ontario Provincial Police East Region.
I appreciate your appearance here today. Do you have any opening comments you wish to make?
Superintendent Carson Pardy, Director of Operations, OPP East Region, Ontario Provincial Police: Yes, sir, if I may.
The Chair: Please proceed.
Mr. Pardy: Mr. Chair and committee members, it is my pleasure to appear before you today on behalf of Ontario Provincial Police Commissioner Chris Lewis. We are thankful for the opportunity to provide you with information about how the Ontario Provincial Police contributes to the efforts to control the manufacture, distribution and sale of contraband tobacco.
Contraband tobacco is, of course, closely linked to smuggling and organized crime; in fact, it is impossible to separate the three. Since these activities cross many jurisdictions, the fight against contraband tobacco, smuggling and organized crime requires effective partnerships on the part of all police services.
In 1996, the RCMP, the OPP and Revenue Canada, now known as Canada Revenue Agency, partnered to fight these types of crimes by forming the Cornwall Regional Task Force. A significant amount of contraband tobacco smuggling was taking place on the St. Lawrence River near Cornwall, and through the Akwesasne First Nation territory.
There was a period of a few years after 2000 when taxes on cigarettes were equalized on both sides of the border and smuggling dropped to almost nil. However, the problem quickly resurfaced when the tax break ended in Canada. By 2009, growing concerns about these activities motivated enforcement agencies to meet, discuss our concerns about public safety, and establish best practices for countering contraband tobacco and related criminal activity. In 2010, we expanded our policing partnership within the Cornwall Regional Task Force team, which now consists of officers from the RCMP, Ontario Provincial Police, Cornwall Community Police Service, the Ontario Ministry of Revenue and Canada Border Services Agency. Public Prosecution Services Canada and provincial prosecutions are also part of this team.
The Cornwall Regional Task Force is an effective joint forces operation. From 2008 to 2012, 36.2 per cent of all confiscated cartons of contraband tobacco nationwide were seized by RCMP and joint partners in the Cornwall area. During this same period, 28.7 per cent of all confiscated loose, fine-cut tobacco nationwide was seized in the Cornwall area.
Under current law, police services cannot conduct search and seizure of contraband tobacco unless Ministry of Revenue representatives are present. However, in 2011, much-needed changes to the provincial legislation gave police in Ontario the authority to directly seize illegal, unmarked tobacco if it is in plain view and to lay appropriate charges without Ministry of Revenue involvement. This change was important. It meant that a front-line officer with a sharp eye and good instincts could sometimes counteract this criminal activity during a routine traffic stop. New, more severe fine levels for possessing illegal cigarettes in Ontario were also introduced with the new legislation in 2011.
The current fine levels for possessing illegal cigarettes in Ontario are $100 plus three times the tax for possessing up to 200 illegal cigarettes; $250 plus three times the tax for possessing between 201 and 1,000 illegal cigarettes; and $500 plus three times the tax for possessing between 1001 and 10,000 illegal cigarettes.
From the beginning of 2010 to present, OPP Highway Enforcement Teams have laid 265 charges for possession of contraband cigarettes under section 29(1) of the provincial Tobacco Tax Act. Over that same period, the OPP Highway Enforcement Teams have confiscated more than 100,000 cartons of contraband cigarettes.
The OPP recognizes that smuggling is linked with organized crime, which poses a serious threat to the safety and well-being of all Ontario citizens and visitors. Applying the principles of tactical priority setting, the OPP aligns its limited resources to proactively address criminal activities. Much of the enforcement responsibility has been assumed by front-line uniform members, complemented by the dedicated operational teams previously mentioned.
Through highly specialized, multi-jurisdictional and joint forces capability, the OPP provides specialized support to border agencies in both Canada and the U.S.A., including the Border Enforcement Security Teams, known as BEST, led by the United States Department of Homeland Security, or DHS and the Immigration and Customs Enforcement Agency, ICE.
The OPP also provides resources to support the missions of the RCMP-led Integrated Border Enforcement Team, IBET; the Integrated National Security Enforcement Team, INSET; the Marine Security Enforcement Teams, MSET; and other joint forces operations to safeguard against cross-border organized crime and terrorism. The OPP believes border security demands a concerted, rigorous and coordinated approach to be successful.
Municipal and provincial police services have a role to play in maintaining border security. They respond daily to incidents at border crossings. As the price of contraband tobacco has soared, increasing criminal profits for those involved in its smuggling and distribution, public safety concerns have also increased.
Smugglers have taken to using private property, such as docks and waterfront homes, to break the law. Smugglers have been known to act aggressively with anyone who tries to stop or challenge them. They also use high-powered boats at night and at great speeds without running lights, creating a navigational hazard.
Of course, problems with contraband tobacco are not limited to smuggling in the Cornwall region. After Cornwall in the East Region, the area of Ontario where OPP Highway Enforcement Teams have laid the most charges relating to contraband tobacco is in the southwestern part of the province.
The contraband cigarettes confiscated in many of these stops were worth tens of thousands of dollars. In several cases, the contraband cigarettes were manufactured in the large Six Nations of the Grand River community south of Hamilton and the vehicles were registered to businesses located in this First Nations community.
Southwestern Ontario has also seen the phenomenon of ``smoke shacks'' springing up, mostly along the Highway 6 corridor, which borders the Six Nations community. Properly taxed cigarettes that are legal to sell in Ontario have a yellow band that clearly says ``Ontario-Canada Duty Paid.''
In Ontario, some on-reserve retailers are authorized to purchase limited quantities of cigarette packages with peach- coloured tear tape or a peach-coloured stamp that are to be sold only on reserves to First Nation consumers who are Indians as defined under the federal Indian Act for their conclusive use. However, it is clear that these smoke shacks on Highway 6 and elsewhere in the province are strategically located so non-natives can purchase untaxed cigarettes, an illegal act.
However, it is the possession of the contraband cigarettes by non-natives that is clearly illegal and enforced to the best of our ability. The sale of tobacco from smoke shops is a multi-agency issue and not one that the OPP alone can address. The OPP does not enforce federal tobacco legislation and provincial tax laws, but we do work in cooperation with the agencies that are responsible.
When enforcement action is taken by the federal Ministry of Revenue, OPP provides support to ensure public and traffic safety. While anyone can smuggle or sell contraband cigarettes, the activity in Ontario is often tied to residents of various First Nations communities. This can complicate enforcement as the issues can be compounded with claims of treaty rights and traditional Native practices.
Contraband tobacco is a complex issue, and I have only touched on a few aspects of the problem and the OPP role in my opening remarks. The OPP enforces laws; we do not make them. We do support any legislative change that can be shown to reduce and deter the smuggling, distribution and sale of contraband tobacco. The OPP is also pleased to make a contribution here as you consider this bill.
Thank you. I would be very happy to answer any questions that you may have.
The Chair: Thank you, superintendent. We will begin the questioning with Senator Fraser, deputy chair of the committee.
Senator Fraser: Thank you for being here, Superintendent Pardy. I have two questions. First, do you think the bill before us will assist you in doing your job?
Mr. Pardy: I guess the best way to answer that is to say that any tool we get in law enforcement does assist us in deterring criminal activity. Specifically here, as we heard from previous witnesses, there are strong links to organized crime. Any measure that we have at our disposal is to counteract, so it certainly will deter certain criminals from participating, but alone it will not fix the problem.
Senator Fraser: I was interested in your presentation when you talked about the fact that smuggling dropped to almost nil after 2000, when taxes were equalized along the border.
Mr. Pardy: Yes.
Senator Fraser: However, taxes have gone up again and indeed will be going up again, according to the most recent budget. Is the situation still the same as it was when taxes were low? I took from what you said that the fact that taxes were equalized meant that people started buying legal cigarettes again rather than illegal ones. However, we have also been told a number of times that other elements of the contraband tobacco trade have changed and that now we are dealing with actual illegal tobacco as distinct from what was previously contraband selling and smuggling of what were otherwise legal cigarettes.
Mr. Pardy: You are correct. When the taxes went down, the incentive was not there for many organized crime groups to participate. We certainly did see examples of very dangerous situations where they resorted to hijacking loads of cigarettes manufactured in Canada at gunpoint, holding the drivers hostage until they emptied the vans and then releasing the drivers with the trucks. Yes, they have adapted and resorted to other tactics. While that was not a huge problem in terms of specificity to cigarettes, it is one example of how they adapted.
Senator Fraser: I think the tax thing has to do more with the consumer end than with the production end of the business.
Mr. Pardy: I would agree.
Senator Fraser: As taxes go up now, given that we are now talking about illicit activity from the growing of the tobacco on up, would you expect the rise in price to have an effect on the market for illicit tobacco?
Mr. Pardy: Yes. Again, as the profit margin increases for organized crime and those involved in this trade, the incentive also obviously increases for them.
Senator White: I have two quick points. From your evidence, I take it that provincial, regional, municipal and First Nation police agencies will now be able to use the Criminal Code legislation to investigate contraband tobacco, where in the past they had to either work in conjunction with federal agencies or in some cases be appointed under the RCMP Act as ex officio special constables. They will actually be able to do it themselves now?
Mr. Pardy: Correct.
Senator White: The complaints that many police agencies, including Ottawa, have had from store owners about illegal contraband tobacco could now be investigated more efficiently, effectively and quickly.
Mr. Pardy: Yes, sir, depending upon resources of course.
Senator White: It would also give access to proceeds of crime legislation. From assets that were seized by your agency or other agencies in conjunction with them, I know the Ontario Provincial Police would gain access to the revenue generated from proceeds of crime seizures and the potential charges under proceeds of crime legislation.
Mr. Pardy: That would be correct, sir.
Senator Baker: Keeping in mind that the Ontario Provincial Police already make numerous arrests for trafficking in tobacco, let us not leave the impression that this legislation will create a new opportunity for you to charge.
Let me ask you just two questions. The first one is a case from the Ontario Court of Justice, in which two of your police officers were able to stop two vehicles loaded with contraband tobacco. Of course, it went to court and it was thrown out. The reason it was thrown out is interesting. It said that you do not have certain powers that the RCMP has.
I will refer to two sentences. One says that the police thought they had the right to perform their statutory duty, under 99(1)(f) of the Customs Act, to search the vehicle because they were suspicious, and suspicion only is a requirement under that act. Then we go to the judge saying that the Customs Act authorizes an officer to search. ``Officer'' is defined under the act as a person employed in the administration or enforcement of the act. It also includes a member of the Royal Canadian Mounted Police. Paragraph 37 the judge says that these OPP officers, in their jurisdiction, did not have the authority to conduct a search of the vehicle.
Could you explain to us what this means? If an RCMP officer had stopped that vehicle, fine, but the OPP does not have the authority, on their own, to carry through this particular investigation so that these people will be brought to justice? What does the judge mean here that you do not have the authority?
Mr. Pardy: Sir, you have given an accurate assessment in terms of what actually happens out there. As Senator White mentioned, we can be appointed as ex officio special constables when we work in partnership with the RCMP. Working in that scope, we have the powers of the RCMP under this legislation. We must be working in partnership with them, in a concerted effort as in our joint forces task force that exists in the Cornwall region. Our officers working on our Highway Enforcement Teams along the 401 corridor and elsewhere in the province of Ontario do not have that power, which means that if they stop a vehicle and they see contraband in plain view, they will take action and seize the contraband and notify their nearest RCMP to assist them.
Senator Baker: If it is in a bag, no.
Mr. Pardy: As I said in my remarks, with the new powers under the Ontario Tobacco Tax Act, we are also permitted to seize that in plain view. What we do not have is the investigative authority of search and seizure.
Senator Baker: In other words, you could not issue a search warrant, under the Customs Act, for a warehouse here in Ottawa, as the RCMP can on an investigation of a customs violation because they would have powers under the act.
Superintendent, I imagine that, if we give Senator White another couple of years here, he will have this changed.
My second question relates to what you said was the new punishment under the provincial legislation. We have here a piece of legislation that deals with trafficking to sell the contraband tobacco. You are right; 29 is the section of your provincial legislation. You go to 29(13) of your provincial legislation, and you get where you sell it. Someone is convicted of selling if they have over 10,000 unmarked cigarettes. There is a minimum fine.
Mr. Pardy: Yes.
Senator Baker: And then three times the value of the tax on what the cigarettes would have cost if it were sold legally.
Mr. Pardy: The tax, yes, sir.
Senator Baker: That is mandatory. It refers to ``a term of imprisonment of not more than two years.''
The first conviction here is just a prison sentence of up to five years. You and I know that a person does not go to jail for a first conviction. If you are going to charge someone, why would you charge someone under the Criminal Code? If you wanted to mete out some real punishment, you go to the provincial legislation and make the exact same charge. You cannot charge under both sets of legislation for the same delict. To me, that would create a little bit of a problem.
Mr. Pardy: Sir, the provincial Tobacco Tax Act is tax legislation, and the deterrence there deals with the evasion of the taxes associated with the activity. This proposed legislation is essentially criminalizing that same process, and in my respectful opinion the criminalization of this will do more to deter than the fines will alone.
Senator Baker: Do more to deter, yes, but it is still under the Fraud of Government section of the Criminal Code. This is being brought in.
[Translation]
Senator Boisvenu: I will return to a matter that I addressed earlier with the other police representatives, which is the cooperation of police forces. In your presentation, you list the police services that have been working together for years. However, I did not see the actual name of the aboriginal police service. Is there a police service, an aboriginal police service, on the Akwesasne reserve?
[English]
Mr. Pardy: Yes, there is an Aboriginal police service, the Akwesasne Mohawk Police Service. We work in partnership with them on a myriad of issues. They are currently not a member of the Cornwall Regional Task Force, but they do participate in other intelligence functions within that region. They are certainly concerned about the criminal activity that occurs, and in fact they are quite passionate about deterring crime on the territory. They do work in concert with us, but they are not a formal partner on this task force, largely due to police resourcing issues.
[Translation]
Senator Boisvenu: Legislation that is enforced unilaterally is not effective legislation. It requires political cooperation and the collaboration of police services. Yesterday, I did not sense from the chief's testimony that there is political cooperation. He has a very different view of the problem. What is the operational contribution of the aboriginal police service to the prosecution of traffickers?
[English]
Mr. Pardy: I am sure you heard from your presentations yesterday that the First Nations communities view the sale of tobacco differently than many other people. I can tell you unequivocally that we foster our relationships and build them on an ongoing basis as part of our strategic goals in the province of Ontario. Our relationships with the Akwesasne Mohawk Police Service, the Tyendinaga Police Service and Six Nations Police Service are good, bearing in mind that they are first at the table to assist us if there is any connection to a crime happening on one of the territories that involves smuggling.
As I said, we have a very strong relationship with all these police services that we are very proud of. It is an ongoing relationship. They have to balance their rights and what happens on their territory with the broader public concerns and work in partnership with us.
[Translation]
Senator Boisvenu: Has the aboriginal police service conducted investigations of traffickers?
[English]
Mr. Pardy: I could not respond to that, sir. Not that I am aware of, but I am not qualified to answer in terms of what they have been doing in that regard.
Senator Joyal: I will follow up on that. You mentioned that the major issue is police resources, availability. Could you explain what you mean in that context with the Akwesasne police force?
Mr. Pardy: The Akwesasne Police Service is a stand-alone agency, so they are funded separately from the Ontario Provincial Police. They have resource challenges like the RCMP, the Ontario Provincial Police and all police services. As I mentioned, we look at our tactical priority setting and all agencies do the same. We have a finite number of resources. Every time a new issue arises, we do not get more resources. We look to streamline and make the best use of the resources we currently have.
That problem transcends all police agencies, so it is not unique to Akwesasne; it is across the border.
Senator Joyal: What is the main obstacle that would make the Akwesasne Police Service more effective with your own operation?
Mr. Pardy: The Akwesasne Mohawk territory is a very unique jurisdictional issue and a complex one. One portion of the territory is in the U.S., a portion is in the province of Quebec and there is portion in Ontario, separated by water. In and of itself, the geography of the situation compounds the issues. Aside from that, we continue to work closely with the Akwesasne Police Service. For example, this past week we participated in a joint forces operation to dismantle marijuana grow operations happening on the territory, led by the Akwesasne Mohawk Police, with our assistance. That partnership exists on a day-to-day basis.
On these broader issues, it is a fair assessment that tobacco is a complex and political issue on the territories as much as it is in the rest of Canada. Without a doubt, it has an impact on the Akwesasne Police Service and their ability to respond to the day-to-day public safety concerns that exist in the territory.
Senator Joyal: Would you say that the Akwesasne territory is mainly a transit site for illegal tobacco coming from the United States rather than for illegal tobacco coming from elsewhere in Canada?
Mr. Pardy: I think it would be fair to say it is a combination of both. Our intelligence would indicate that although the raw product may come from the States, the cigarettes are produced on Akwesasne territory and they are smuggled from there.
Senator Joyal: In other words, it is an operation that is very complex to try to prevent in terms of the various interests you have to face in that context.
Mr. Pardy: I would agree. When we look at the principles of intelligence-led policing, the most effective way to deal with the problem is to look at the root of it. In many respects the root of some of the problem is in another country in terms of the source of the tobacco.
Senator Fraser: Are cigarettes that are produced on the Akwesasne territory produced on Canadian side or the American side?
Mr. Pardy: On the American side.
[Translation]
Senator Dagenais: Could you give us an idea of the sentences handed down to the cigarette traffickers you have arrested?
[English]
Mr. Pardy: The sentences have largely been monetary in nature. In our partnership with the RCMP and our joint partners in the Cornwall area, we have looked at every tool available to us under criminal law to ensure that we can place conditions on the people responsible. They get bail, but it is generally under the Excise Tax Act that the enforcement occurs. It is generally fines that largely, I must admit, go uncollected.
[Translation]
Senator Dagenais: I understand that you are open to bills with harsher sentences. These would be tools available to you.
Can you tell me whether traffickers would be more afraid of the police if there were harsher sentences in a tougher bill, and would that help you do your job?
[English]
Mr. Pardy: I would agree. Deterring criminals from engaging in criminal activity certainly would enhance public safety in Ontario and elsewhere in this country. There is absolutely no doubt that when criminals engage in criminal activity they look at the risks involved. The profits are what really drive them, but they do look at the risk; and when the risks are minimal, they engage in the activity. The higher the risk, the less likely they are to engage in the criminal activity. Will it stop the activity? Absolutely not.
Senator Cordy: Superintendent Pardy, thank you for the work you are doing in trying to stem the sale and trafficking of contraband tobacco and other criminal activities, of course.
We heard from you and other witnesses that the main areas for trafficking of contraband tobacco are Ontario and Quebec. You mentioned Cornwall specifically. However, since Ontario is one of the major areas, was there consultation with the OPP before this bill was drafted?
Mr. Pardy: I apologize, but I cannot answer that question.
Senator Cordy: I had the opportunity a couple of years ago to meet with the police chief of New York City. The discussion and questions were concerning how the crime rates in New York went down from being a very unsafe city to being quite a safe city to move around in. The police chief told us the best solution that they found in New York City was more police officers on the ground and meeting with people. In terms of trafficking of contraband tobacco, what would you and your officers find most helpful in stemming — probably not stopping — the trafficking?
Mr. Pardy: This proposed legislation would certainly be of help. I also believe that greater focus on the regulations regarding the growing and sale of the raw leaf product at its origin and controls in that regard would be of assistance, but equally important for us is resources. As I mentioned earlier, we have a finite number of resources we can assign and we have to set our priorities. Frankly, when you look at guns, gangs, illicit narcotics on our streets, the identity theft problem that is growing exponentially, and all of those things together, tobacco looks pretty mild in comparison.
We have to focus our resources and priorities. In the Cornwall area, tobacco smuggling has been a priority because of the significant public safety impacts that we have encountered with this trade. Those same concerns do not exist elsewhere in the province, but there are significant public safety risks in the Cornwall area.
Senator Cordy: When you talk about resources, you are talking about personnel resources, one would assume. However, what else would you classify as resources?
Mr. Pardy: In combatting crime, resources are primarily the actual bodies on the ground. Boots on the ground would certainly be the number one focus. However, as we have heard here today, criminal organizations adapt very quickly and try to stay a few steps ahead of us. We are constantly looking at technology answers that could assist us in deterring and preventing crime, and in stopping criminals in their tracks.
There is a myriad of technology out there that we learn the criminals have that we then have to counteract, and vice versa. There are technologies. For much of the smuggling occurring now, they have adapted to our daytime approach, and so they have moved it in the middle of the night. We have to be able to see them. We do look at technology and what is out there and available to assist us in the apprehension of these criminals.
Senator Cordy: They certainly have the financial resources.
Mr. Pardy: Yes, they certainly do.
Senator McIntyre: As I understand the market of contraband tobacco in Canada, there are basically three primary sources of illicit products: illegal importation from the United States in and around the city of Cornwall and, as you have just indicated, the southwestern part of Ontario; illegal importation of counterfeit cigarettes and other licit products in marine containers, which often comes Asia; and, finally, illicit manufacturing in Central Canada.
In order to combat this market, I understand that you are getting good cooperation from police forces in both the United States and the First Nations. However, how much cooperation, if any, are you getting from police forces in Asian countries?
Mr. Pardy: I believe that the RCMP would be better positioned to address that question, sir. Regarding high-level investigations of that nature, unequivocally we are largely involved with them in our organized crime enforcement efforts, but I certainly cannot speak to the level of cooperation that we have.
We do work with Interpol on all of our investigations of that nature, but I cannot speak specifically to the level of cooperation that we receive.
Senator Batters: Earlier in your opening statement you outlined the very small current penalties for amounts of contraband tobacco less than 10,000 cigarettes, which really illustrates the need for this much tougher approach. Would you agree that the small penalties currently in effect for those amounts make paying just a minor cost of doing business for organized criminals? Also, you were just saying that it is largely uncollected, so they are not even paying this cost of doing business.
Mr. Pardy: I would agree that it is certainly one of the deterrents. We had concerns expressed by some provincial counterparts and municipalities of the large value of uncollected fines currently in the system. There are efforts under way constantly to combat that and to bring that number down to make the offenders compliant — to pay. For example, when fines are levied against an offender, if you want to keep your driver's licence and keep your vehicles registered, you must pay.
There are mechanisms in place, but they are not as effective as we would like to see.
Senator Batters: When you are evaluating where to allocate your resources and you are looking at the contraband tobacco trade, you say that it might be considered to be less crucial in comparison to some other types of crime. However, as you were saying, organized or criminal organizations plus the pipelines that are used to funnel the contraband tobacco back and forth — those are the same groups and the same channels that are used to deal with contraband tobacco as they are for drugs or guns or other things, correct?
Mr. Pardy: That is correct.
Senator Batters: When you are evaluating resources, it has to be an overall picture.
Mr. Pardy: It does.
The Chair: The Cornwall Regional Task Force is not just focused on contraband tobacco. I assume it is for guns, drugs, people, et cetera.
Mr. Pardy: It is for any commodity, sir. For example, we are seeing a rise now in the traffic of illegal aliens, largely into the U.S., but in both directions.
The Chair: Chief David of Akwesasne was here yesterday. One reason he suggested for the change in modus operandi was that the border checkpoint had been moved off the island to the mainland in Cornwall. He indicated that an OPP officer had indicated that the bulk of the smuggling, especially when talking about contraband tobacco — I am not sure about the other commodities — had shifted up into the Thousand Islands area. He indicated that Wolfe Island was a bigger challenge with respect to many of these issues. Do you share that view; is that accurate?
Mr. Pardy: No, I would not share the view that it is a bigger problem. Our officers have indicated to me that there are over 1,500 points of ingress along the St. Lawrence Seaway where criminals have been docking, so I do not think it is unique. It is unique in Cornwall because of the geography, but in terms of elsewhere along the St. Lawrence Seaway, I do not think is as big a problem as we are seeing in Cornwall.
The Chair: How big a role does the OPP have in trying to police that corridor? Is it primarily leaning on the feds? You talked about priorities. What is your role in trying to combat that?
Mr. Pardy: As it stands now, as we know, the enforcement of the acts that affect tobacco products is largely either a federal jurisdiction or under the Ministry of Revenue in Ontario. We work in partnership with our law enforcement partners — not as formally as Cornwall, but right along the 401 corridor.
The Chair: Can you give us an example? If there is a call about a suspicious boat at two o'clock in the morning moving along the river, are you the first responders?
Mr. Pardy: We will be a first responder, but I spoke earlier about MSET. We are in partnership with the marine component of the RCMP on the St. Lawrence Seaway. We do have a dedicated marine component along the St. Lawrence Seaway, and we would respond.
Of course, on the highway portion, we have highway enforcement teams that target contraband in general. Today it is cigarettes; tomorrow it is a dangerous drug; the next day it is $1 million in cash that we seized, or cocaine. It knows no boundaries.
Senator White: I think if you had the former Solicitor General of Ontario now as Solicitor General, maybe resources would not be such an issue, Senator Runciman.
There has been discussion around the ability for police agencies to respond today, and an understanding maybe around how difficult it is to operate. For OPP officers to work with the RCMP even now, they would have to be sworn in under section 7 of the RCMP Act as a supernumerary special constable. Every 12 months it would have to come up for review. It is the same with every other police agencies. They are almost connected at the hip just to perform their work.
One way of expanding resources is to give more powers to more people, and I think you would agree that this would give more powers to more people to do the job they have been trying do. Right now they are hindered by the way they do not all have the same level of power; is that correct?
Mr. Pardy: That would be a fair statement, sir.
Senator Baker: In other words, under the federal Customs Act, it is a reasonable suspicion. Your enforcement would be reasonable doubt or reasonable belief. Reasonable suspicion and reasonable belief are two entirely different things.
Superintendent, I have listened to you very carefully and I have come to the conclusion that you will have a choice when someone asks you, ``Under what piece of legislation will you be charging people who have broken the law in this particular case?'' You are a police officer, and it is a choice between four pieces of legislation on the books. You have authority in two of those areas.
I get from you that your explanation to the committee was that you regard the other pieces of legislation to be related to tax matters and that this legislation relates to criminal matters. Therefore, I presume you are saying that your officers will charge perhaps under both pieces of legislation and let the courts — the Crown prosecutor or judge — make a decision as to whether it is the same delict and you can only convict one time. However, because one is a tax matter and the other is a criminal matter, you will be charging both for the same offence. Is that right?
Mr. Pardy: That is correct. However, there is a difference. The tax legislation is for the commodity that is going unchecked and untaxed. The criminal legislation as proposed is about the act itself, and these acts are committed by criminals who are out for profit, for gain. They have an impact on our communities, on our economy and on our health.
Senator Baker: Yes, but both of them carry possible jail terms. The federal one has a first offence of up to five years, and under your provincial legislation, it is up to two years plus these mandatory fines. The same penal consequences result. I do not see how you can separate one from the other. I respect you for doing it, and I can see where you are trying to stop criminal activity.
The conclusion is that they will charge under as many sections as they can and let the cards fall where they may.
[Translation]
Senator Boisvenu: I only have one brief question. You undoubtedly work very closely with your American counterparts. I would like you to tell us how they approach this matter. Do they take it as seriously as we do? Are U.S. sentences harsher than Canadian sentences?
[English]
Mr. Pardy: Sir, I can only speak anecdotally to that question. We do have a close working relationship, as I alluded to earlier, with the Border Enforcement Security Task Force, BEST, where we have officers embedded in these agencies in the U.S. in three strategic locations along the Ontario and New York borders.
The sharing of information is critical. We see that we have a lot of issues in common, and we are able to contribute to investigations on both sides of the border to curb criminal activity. However, I am not in a position today to speak to the level of sentencing that occurs in the U.S. other than what I see in the media, which does appear to be much harsher, but I cannot speak specifically to the penalties.
Senator Joyal: I would like to come back to the issue of smoke shacks that you mentioned in your brief. You mention at the top of page 7 that it is the possession of contraband cigarettes by non-Natives that is clearly illegal and enforced to the best of our ability. Do I understand from that that a person who frequents those smoke shacks is non- Native, buys illegal tobacco and would fall under your jurisdiction to be charged with possession of contraband cigarettes?
Mr. Pardy: Technically under the provisions in 2011, in the amendments, if you are in plain view, then technically yes. It is ultimately the responsibility of the Ministry of Revenue investigators.
Senator Joyal: Suppose you arrive at the moment that the cigarettes are already in the trunk, so they are not in plain view. You see the car leaving the smoke shack, but there is no RCMP officer in the area or any other representative of the Ministry of Revenue. What do you do in those circumstances?
Mr. Pardy: Let them go. We have no authority to search and seize from the vehicle under those circumstances. Unless there is some other authority that we have in law, we have no authority to search the vehicle if we believe it is carrying contraband tobacco.
Senator Joyal: In other words, if we — ``we'' meaning the government — want to fight smoke shack illegal activities, we would need to dispatch RCMP agents regularly to watch, as the chair said, 350 smoke shacks along Highway 66.
Mr. Pardy: Yes, sir.
Senator Joyal: Which means that part of the equation goes unchallenged most of the time; is that right?
Mr. Pardy: There are currently legislative barriers, for certain.
Senator Joyal: What is your recommendation to us in order to address that situation?
Mr. Pardy: In my recommendation, of course, resourcing is a concern for us. We are maxed out with the resources we have for our current mandates, so resourcing is an issue.
Our partnerships and relationships with our First Nations communities, the long-standing issues that exist under treaty rights, would certainly be a step in the right direction to address these sorts of issues. Of course, enforcement authorities would also go a long way to helping deter criminals that would get involved in this sort of activity.
Senator Joyal: Yes, because it is almost an incitement to crime, in a way, in order for someone to make sure there is a person who is on lookout for any RCMP officers in the area. If there are none or you do not happen to be there on the spot, the person could go unnoticed.
Mr. Pardy: That is true, sir. In fact, our intelligence based on what we have seen in the Cornwall area is precisely that; these criminal organizations have hired watchers, and we know what they get paid. They just watch for us, so counter-surveillance has been stepped up on our activities immensely.
Senator Joyal: That is very helpful. We should maybe append observations when we vote on this bill.
The Chair: Superintendent, you would agree there is a provincial role here. For the edification of members who may not have this information, the Manitoba government sought and received a court order allowing the government to take ownership of the very controversial smoke shacks. The government says that the court ruling ``further validates our position that the possession and sale of non-Manitoba `marked' tobacco products are illegal.''
That is a first step by a provincial government. What has happened since? That was late last year, so I am not sure whether it is actually in force.
I have a quick question about Six Nations. You talked about Akwesasne and how their production facilities are on the American side. You felt that most of the raw product was originating in the United States, I think North Carolina. What about the Six Nations? They have their own manufacturing facilities. Where does their raw material come from? Do Ontario tobacco producers provide that to these operations?
Mr. Pardy: A fair assessment would be to say that it is coming from both imported — some legally imported — and Ontario.
The Chair: Is there any monitoring of producers with respect to where their product goes? I am talking about Ontario now. Is it quite legal for them to sell their product to Six Nations producers? Is there no question about how it is used?
Mr. Pardy: I believe the amendments to the Ontario Tobacco Tax Act regulations have enhanced that, but I cannot speak specifically to it. I know in other forums that I have been involved in, there has been much discussion about the next step in the legislation that came into force, I believe, in April of this year, to enhance the regulations and monitoring of where the tobacco goes.
[Translation]
Senator Rivest: When American and Canadian police services must collaborate — for example, in Akwesasne — can a person be charged under U.S. law because the criminal offence was initially committed in the United States, and then under Canadian law? How do you sort that out when the criminal act initially occurs in the United States and then continues in Canada? How do you determine where the person will be charged?
[English]
Mr. Pardy: We are two separate nations with two separate constitutions and laws.
Speaking from the contraband tobacco perspective, I cannot give you one example where that occurred. Our enforcement activities happened here in Ontario, in Quebec and elsewhere in the country, and the charges are preferred here. However, we have had organized crime investigations that recently saw a round-up of a number of organized criminals that were also charged in the U.S. I cannot speak to whether there is a link that makes it the same crime in both countries. They have different charges and different laws on their books, some of which mirror ours while some are very different than ours.
The Chair: Superintendent, thank you for your contribution to our deliberations. It was very informative, helpful and much appreciated.
Our next witnesses are Alex Scholten, President of the Canadian Convenience Stores Association; and Michel Rouillard, National Spokesperson for the National Coalition Against Contraband Tobacco.
Mr. Scholten, please proceed.
Alex Scholten, President, Canadian Convenience Stores Association: The Canadian Convenience Stores Association was established to represent more than 23,000 convenience retailers operating in Canada who employ in excess of 165,000 Canadians. On behalf of those small business owners, I would like to thank the committee for the invitation to appear here today.
One of the challenges facing convenience stores in Canada is the persistence of contraband tobacco, an illegal industry supported by organized crime that threatens the livelihood of our law-abiding retailers and threatens the safety of our communities. There are several financial and social consequences from the continued sale of contraband tobacco, including lost revenue for government whereby millions of dollars are lost every year as a result of tax avoidance in this illegal industry. The Department of National Revenue has estimated this to be as high as $2.5 billion per year.
To illustrate the scope and scale of this illegal activity, we have included at the back of our brief a map and a report on seizures reported in the media since January 2012, realizing that what gets reported is the tip of the iceberg of total seizures and what is seized is actually the tip of the iceberg of the total illegal activity. In that period of time, over 150 seizures were reported in eight provinces over the 16-month period. The seizures accounted for almost 17 million contraband cigarettes and in excess of 60,000 kilograms of fine-cut tobacco.
The second consequence of contraband tobacco activity is greater tobacco accessibility to young people. Convenience store owners must follow strict tobacco control measures designed to prevent tobacco sales to minors. Responsible retailers train their staff and ensure that they complete age-verification checks. Contraband traffickers will sell to anyone who is willing to buy their products. Furthermore, because contraband tobacco is sold without collection of federal or provincial taxes, the price is far more attractive and accessible to youth.
The third consequence is that contraband tobacco trade supports organized crime, putting our communities at risk. The RCMP previously estimated that over 175 organized crime groups participate in this illegal activity and that with seizures of contraband, police forces have also confiscated large quantities of drugs and illegal weapons.
Going back to the media reporting that is in our brief, of the seizures noted, not only has contraband tobacco been seized but also drugs, including marijuana, ecstasy, methamphetamine, cocaine and heroin, and weapons such as long guns, handguns and knives. This is not low-level criminal activity conducted by petty criminals. As a result, our communities are put at great risk.
The Canadian Convenience Stores Association welcomed the announcement by government to introduce tougher penalties for those convicted of contraband offences. Increased penalties and enforcement measures dedicated to fighting contraband tobacco were key pillars of our 2012 pre-budget submission. As an industry association, we recognize that the issue of contraband tobacco is complex because it spans federal and provincial borders and Aboriginal territories, making it extremely difficult for government and law enforcement to take a stand. However, an indifferent attitude and soft approach to dealing with contraband tobacco has resulted in a perception that tobacco control, taxation and reduction laws are being applied in two very different ways.
Convenience store retailers abide by the rules set out by Health Canada, the Canada Revenue Agency and others to ensure that legal tobacco products carried in our stores are in compliance with the law. The products sold in our stores are subject to all levels of taxation. We enforce age-verification checks to ensure that the products do not end up in the hands of youth. If our retailers fail to abide by tobacco control measures, they are subject to significant fines and legal penalties, sometimes resulting in the closure of their stores. To be clear, our association has no problem with that. Those who choose not to follow the law should be penalized.
Contraband traffickers and sellers have not complied with those same rules and penalties. These criminals do not abide by the health or legal regulations as our retailers do. Their products are sold without taxes collected, and they are willing to sell to anyone who is willing to buy, whether they are of age. Our association and its retailers are hopeful that the harsher penalties being considered would act as a deterrent for those selling contraband tobacco, ultimately addressing the unequal application of tobacco laws between law-abiding retailers and illegal traffickers.
Contraband tobacco has hurt our businesses and communities for a long time. We applaud the government for taking a step forward in addressing this serious public safety issue.
[Translation]
Michel Rouillard, National Spokesperson, National Coalition Against Contraband Tobacco: Good afternoon, Mr. Chair. My name is Michel Rouillard, and I am the spokesperson for the National Coalition Against Contraband Tobacco.
I am a retired Sûreté du Québec sergeant who spent more than 30 years in various positions, on the beat and in crime prevention. As a very active retiree, I train various prevention and client service teams for a number of organizations. I am also the chair of the board of directors for my local chamber of commerce, and I am a senior mentor for entrepreneurs.
The National Coalition Against Contraband Tobacco is a non-profit, non-partisan organization that works to make the public more aware of the problem of illegal cigarettes and contraband tobacco.
The coalition is made up of about 15 organizations across Canada that operate in all sectors. These organizations include: the Canadian Convenience Stores Association, which is represented here today; the Retail Council of Canada; the Fédération des chambres de commerce du Québec; Toronto Crime Stoppers; the Customs and Immigration Union; and a number of convenience store, grocer and convenience store distributor associations.
As a retired police officer, a father and a grandfather, I am involved in the coalition because the growing accessibility of illegal cigarettes is a serious problem in all communities in Canada, big and small. Whether it be in the Lanaudière region, southwestern Ontario, rural areas of northern New Brunswick or the Gaspé, illegal cigarettes are flowing freely from the hands of criminals directly into the hands of reckless and ignorant Canadians. Criminals are the ones who benefit most from tobacco smuggling and the trafficking of illegal cigarettes.
These individuals, who are members of organized crime groups, are very well equipped. They are involved in the production and trafficking of synthetic drugs, such as methamphetamines. They are armed with long guns and handguns. They are also involved in procuring, prostitution and human trafficking. These individuals represent the worst Canada has to offer.
Tobacco smuggling also has a major impact on youth smoking. Cigarette smugglers who sell illegal cigarettes do not care how old their customers are. Since contraband cigarettes are sold at a much lower price than cigarettes that are sold legally in legitimate businesses, they are much more accessible to young people under the age of 18. A small bag of 200 cigarettes costs $15, which is the same price as a movie ticket.
Tobacco smuggling also has a negative impact on the government. By regulating the tobacco industry and the sale of tobacco, the government seeks to regulate the production and sale of cigarettes in Canada while acquiring a significant amount of revenue that is reinvested in social programs, infrastructure and other services for taxpayers.
The Government of Canada loses an estimated $2.1 billion dollars a year in tax revenue as a result of tobacco smuggling, and so once again taxpayers pay the price.
Bill S-16 is an important step forward in the fight against tobacco smuggling. The fact that it was introduced shows that the government is listening to the appeals of the public, law enforcement, the provinces and retailers with regard to this problem. However, Bill S-16 does not solve all the problems. For example, the new Criminal Code offence of trafficking contraband tobacco sets much too high of a threshold for the quantity of cigarettes that must be found in an individual's possession in order for that individual to be found guilty of an offence. The threshold of 10,000 cigarettes set out in subsection 121.1(4) of the bill is clearly excessive. Ten thousand cigarettes make up 50 cartons. In response to the question of how many cigarettes a person needs to be in possession of to be found guilty of the offence of tobacco smuggling, we think that the amount should be significantly less. Should the possession of 5,000 contraband cigarettes constitute an offence? Perhaps. Should the possession of 25 cartons of contraband cigarettes be considered smuggling? It very likely should be.
All in all, the National Coalition Against Contraband Tobacco is pleased that this bill has been introduced. The March 5 announcement that a new 50-new RCMP officer unit will be deployed to deal with tobacco smuggling is also a good thing. Undeniably, illegal cigarettes remain an attractive alternative because of their price. The reason why that alternative is so attractive becomes obvious when one realizes that the difference in price between a legal carton of cigarettes and an illegal carton is close to $90.
I would also like to take this opportunity to talk about how this is an issue that reaches across borders. The organized crime groups that benefit from contraband cigarettes operate without any regard for political, departmental or territorial boundaries. Smugglers do not stop at provincial borders. They benefit every time the different levels of government fail to work together to stop tobacco smuggling.
In conclusion, it is extremely important that the Government of Canada work more closely with its provincial and First Nations partners in order to find sustainable solutions to the problem of illegal cigarettes in our communities.
We are very pleased to see that the Senate of Canada is taking this issue seriously, and we hope that this parliamentary work will make a difference.
[English]
The Chair: Thank you, sir. We will begin the questions with Senator Fraser, deputy chair of the committee.
[Translation]
Senator Fraser: Thank you, gentlemen, for being here.
[English]
Obviously your testimony is very important to us. I have one quick question for each of you.
Mr. Scholten, the interesting statistics and maps you have provided, which you point out are not complete and go from east to west, suddenly stop in Manitoba. Is that because you did not do tracking or you do not have members in the West?
Mr. Scholten: No, we do tracking across the country and we found the incidence west of Manitoba is very low.
Senator Fraser: Though I gather it is growing. We hear about the importation of tobacco from China. I assume a fair amount of that would be coming in through Vancouver.
Mr. Scholten: It is, yes.
Senator Fraser: You have not tracked that, have you?
Mr. Scholten: No.
[Translation]
Senator Fraser: Mr. Rouillard, you mentioned that it costs $15 for a small bag or carton of 200 cigarettes. How much would a carton cost on the legitimate market?
Mr. Rouillard: It varies from province to province, but a carton usually costs between $80 and $90.
Senator Fraser: You know that taxes on cigarettes have gone or are going to go up. Will that hurt legitimate business? Will it push clients toward the black market?
Mr. Rouillard: We hope not. The coalition does not want to interfere in the processes of the various provinces or in the tax legislation that is there for the public's benefit. Money is needed for infrastructure. We are not interested in getting involved in the issue of whether or not taxes should be raised. We would rather help organizations, such as police forces, do away with organized crime and contraband, and work on public prevention.
One of the major problems that the police officers mentioned earlier is that people who sell cigarettes in different areas of small towns are not always aware that they are part of the large network of organized crime. The same is true of buyers. These are people who would not steal five cents from anyone but who buy contraband cigarettes without knowing that, by so doing, they are supporting organized crime.
[English]
Senator White: Mr. Scholten, if this legislation passes, is there a plan in your organization to educate your membership on the interaction again with the police? I know the frustration from your membership with the fact that most police agencies have not been able to respond to complaints in the past because the legislation did not allow it. Is there an education program ready to be launched to re-engage your membership going forward?
Mr. Scholten: Yes. We have done a couple of things recently. When the announcement was made on the new harsher penalties, we immediately had press releases circulated amongst our membership across the country. Also, we have just started a contraband awareness website for retailers across the country. However, as far as the efforts go with police and working more closely with them, that is something we encourage. We have four regional associations in addition to our national association. We encourage that across the country and they are working closely with the RCMP and local police forces to do that.
Senator White: Secondarily to that, there was some good evidence and questions raised around the increased harmful effects of contraband tobacco compared to the harmful effects of tobacco. Have you also considered educating the public overall about what contraband tobacco entails? It is less about tobacco in some cases and more about many other things. Has your organization considered doing some proactive work in relation to that as well?
Mr. Scholten: Yes. We have actually done quite a bit of work in that area, including billboards in Ontario and Quebec to contraband brochures we have circulated to our members and to politicians across the country. We continue to try to raise the level of awareness. As far as the ingredients in contraband tobacco, we have certainly pointed out to the public the fact that there are rodent droppings and insect parts and things like that. We hope that resonates with them as another means of discouraging their use.
Senator White: I might suggest some of that material going to schools as well would be helpful. Tobacco alone is certainly an issue for educators, but I think this is an increased issue that might be shared with schools across the country as well.
Mr. Scholten: It is a good suggestion. One of the challenges we face, though, in Ontario, for example, with their tobacco reduction strategy or Smoke-Free Ontario, some of our retailers were reprimanded when they tried to put up awareness posters in their stores because they are not allowed to say the word ``tobacco'' or have an image of tobacco at all, be it against contraband tobacco or otherwise. They were threatened by fines and they had to take the materials down. If we went to schools we would run the same challenge.
The Chair: I have a quick supplementary question in terms of educating the public. How much of a deterrent in terms of the public accepting your message is the fact that we have over 350 smoke shacks operating in Ontario and Quebec without any action being taken? Joe or Jane Citizen say, ``You consider me part of organized crime because I am buying this, but at the same time we see all these smoke shacks operating unfettered.'' That must have some impact on your efforts.
Mr. Scholten: It certainly does, not only frustrating retailers, but the main concern we have is consumers do not see this as an illegal activity. They see it as tax avoidance. They do not view it as criminal, so they are frequenting these smoke shacks. It takes a lot more awareness to show them exactly the implications with organized crime, youth access and so forth, and we try to promote that message as much as possible.
[Translation]
Senator Boisvenu: I was looking at a very interesting website the other day that mentions a tax for terrorism. It was the Center for Public Integrity's website.
The site indicates that the production of cigarettes has exploded in the area near the border between Afghanistan and Pakistan. Fifteen billion cigarettes per year are being produced there and exported mainly to Africa, the Americas and Asia. The money from the sale of these cigarettes accounts for approximately 20 per cent of al Qaeda's revenue.
I did not see many prevention campaigns. If cigarettes are being sold, then buyers will purchase them. I did not see many government ads such as the one regarding illegal work, which had some success. I did not see many ads to make young people aware of the fact that these cigarettes are toxic. We have talked about this. There are two to ten times more carcinogens in contraband cigarettes than in legal ones. That is not to say that regular cigarettes are good. Not at all. The money from the sale of contraband cigarettes benefits organized crime, such as al Qaeda. That means that smokers in Quebec and Ontario are funding terrorist groups.
Given your organization's mission, would you ever consider making buyers aware of the drastic action that they are taking when they buy illegal cigarettes instead of legal ones?
Mr. Rouillard: Are you asking me that question?
Senator Boisvenu: I am asking both of you because I saw that part of your mandate also involves education. I am not seeing much advertising in this regard.
Mr. Rouillard: I have been working for the coalition for five months. What you just said about al Qaeda and funding for terrorism is valid. I think that television advertising or another form of visual advertising always has more of an impact on the public. I was in New Brunswick earlier this year and I visited some radio stations and newspapers to make people aware of this problem.
If the information regarding al Qaeda is true, then people should know about it. However, I also think that major organized crime groups here in Canada, such as the Hells Angels, are directly involved. People know that it is true and it bothers them. I recently read in the paper that a woman was fined a hundred thousand dollars — a huge amount — and that she was an executive head who, once again, relied directly on the Hells Angels.
All that to say that, when an ordinary person buys a package of cigarettes or when a child buys cigarettes in the school yard, they are providing direct support for organized crime. People do not realize it. They think that they are just avoiding paying taxes, that they are saving $70 or $75 and that life is good. Your suggestion is excellent.
[English]
Mr. Scholten: As far as I know, there has not been a study done in Canada on the terrorist activity connection. I do know of some studies in the United States. There is a U.S. senator who completed one, I believe in 2006, pointing to very specific connections to terrorist organizations. I like the idea as well, and I think that is information that we would like to get out there, but as you said, there are no studies at this point. Perhaps we can speak with the RCMP and others, such as CBSA and Public Safety, about getting something like that in place.
Senator Boisvenu: I invite you to visit the website. It is the Centre for Public Integrity.
Mr. Scholten: Thank you.
[Translation]
Senator Joyal: Welcome, Mr. Rouillard. I was not aware of the existence of your collation. You say that you have been actively involved in the collation for five months. When exactly was the coalition established?
Mr. Rouillard: It was established a few years ago. I do not know the exact date.
Senator Joyal: Was it approximately three, four or five years ago?
Mr. Rouillard: The coalition is relatively new. It has likely been three or four years since it was created.
Senator Joyal: You mentioned in your presentation that the coalition has about fifteen members.
Mr. Rouillard: Yes.
Senator Joyal: Are tobacco companies members of this coalition?
Mr. Rouillard: Yes. Tobacco companies and producers form part of our membership.
Senator Joyal: This is because they have an interest in doing away with illegal tobacco since they produce and sell a legal product themselves. They have a true interest in ensuring that their illegal and unfair competition — if I can use that term — is punished to the extent possible.
Mr. Rouillard: They are members of the coalition just the same as the 14 others. We have no control over tobacco smuggling. Other associations that are trying to do away with tobacco completely are not affiliated with us. Personally, I am a non-smoker, but I am saying this as a former police officer who has dealt with contraband and other types of criminal activity.
Senator Joyal: So, the coalition's activities are mainly focused on doing away with contraband?
Mr. Rouillard: Yes. One of the reasons is that tobacco smuggling makes it too easy for young people to get access to cigarettes.
Senator Joyal: So, the purpose of your education initiatives would be to make people aware that they should not consume an illegal product?
Mr. Rouillard: Exactly.
Senator Joyal: That is your specific niche?
Mr. Rouillard: Yes. Earlier, you spoke about manufacturers. Convenience stores, grocers and anyone involved in the legal sale of tobacco pay taxes and abide by the legal standard under which tobacco is sold only to individuals who are 18 years of age or over.
Senator Joyal: Exactly.
[English]
I am not sure whether you were in the room, Mr. Scholten, when we heard about the superintendent of the Ontario police patrol, the smoke shack phenomenon and our chair raising it also through a question.
Mr. Scholten: Yes.
Senator Joyal: It seems to me one of the major stumbling blocks that we are facing is that, in fact, those operations are in full view. Everyone sees them; everyone knows them.
As we heard this morning, provided that no RCMP are around, the chance that someone will go away with a carton or 12 cartons and resell that to relatives or family or friends is an operation open to everyone. If someone steals from one of your convenient stores, unless there is a camera, he or she would try to evade the surveillance, of course, but, in that case, the operation is illegal per se. That is where, in my opinion, we have a major problem that is not addressed by your recommendations or any of the witnesses' testimony we have heard. How do you suggest that we approach this issue?
Mr. Scholten: That activity, as I said before, is very frustrating for our retailers, especially. With respect to the report that has been quoted here about 350 smoke shacks, we were the ones that generated that report by going to the reserves and pinpointing where each of those are. We know very intimately the activity going on.
With respect to the complexity of the issue of contraband tobacco with federal, provincial and Aboriginal governments having some say in this, we have been recommending for some time that this issue cannot be solved by any one of those entities in and of itself. It must involve a very cooperative, concerted approach with all stakeholders at the table.
We have been recommending for some time opening a committee, having hearings or bringing together federal and provincial government officials, Aboriginal representation and representation from the United States to look at the issue as a whole. We heard earlier that fines and penalties being proposed today are focusing on the symptoms and not the disease. Unless we bring everyone to the table and start discussing that, it will not solve the problem.
[Translation]
Senator Joyal: Mr. Rouillard, you are from Quebec and so you are familiar with the phenomenon that is occurring on the Mohawk reserve near Montreal and how this business is perceived by the Quebec public. Could you comment on that?
Mr. Rouillard: When I introduce myself as a spokesperson for the National Coalition Against Contraband Tobacco, people regularly ask me why nothing is being done about the reserves. That is the big question that keeps coming up. Having worked for the Sûreté du Québec for 30 years —
Senator Joyal: Yes, how do you see this situation based on your experience as a police officer?
[English]
The Chair: We have to move on. Senator Dagenais.
[Translation]
Senator Dagenais: My first question is for Mr. Rouillard. In passing, it is always nice to see a former colleague again. You mentioned that the bill that is before us is an important step forward, but do I understand correctly that, if the government chose to introduce a tougher bill, then you would also support that?
Mr. Rouillard: Yes. When I spoke about the number of cigarettes, that is what I was getting at. I think that if someone has 5,000 cigarettes in his possession, they are not for his personal use.
Senator Dagenais: My other question is for Mr. Scholten. You represent retailers' associations, including convenience stores. We both know that many convenience stores that sell cigarettes also sell gasoline. Would you say that a convenience store located near an Indian reserve also influences the sales of gasoline? We know that gas is cheaper too.
[English]
Mr. Scholten: That is a very good question and I am glad you raised it. One of the implications of contraband tobacco, and the smoke shacks showing up and becoming bigger and bigger operations, is that by using those profits they have started getting into gasoline; they are not charging taxes on gasoline. That is having a significant impact on our retailers across the country. We have had some discussions in Thunder Bay, for example, where some of our retailers have been severely impacted by that happening. What frustrates them in Thunder Bay, the municipal government has said that they are going to start sourcing gasoline from the reserve because the price is much better than the legal retail in the city. That is in media interviews and things like that. Our retailers are very frustrated by that. If the issue of contraband tobacco is not taken care of, it will expand much more into gasoline.
Senator Cordy: In response to Senator Joyal's question, Mr. Rouillard, I was quite surprised when you said that one of the members of your coalition is actually the tobacco industry, because while we are all against contraband tobacco, I think most of us around the table — and I do not want to speak for anybody else; I speak for myself — certainly I am not in favour of people smoking tobacco, period, because of what it does to the health of Canadians. I was quite surprised to learn that they are part of your coalition. Does your organization receive funding from the tobacco manufacturers?
[Translation]
Mr. Rouillard: The 15 members of the National Coalition Against Contraband Tobacco fund the coalition, so we receive money from convenience stores, grocers, and legal producers of tobacco. As I told Senator Joyal earlier, when I talk about tobacco producers, I am talking about legal tobacco. Yes, they are currently part of the coalition.
[English]
Senator Cordy: Does your organization seek funding from the tobacco industry? Do you receive money from the tobacco industry?
[Translation]
Mr. Rouillard: Yes. The tobacco industry participates in the coalition and so it contributes to the kitty, as we say.
[English]
Senator Cordy: How many executive members of your organization would be from the tobacco industry?
[Translation]
Mr. Rouillard: The members of the coalition contribute to a kitty. They created a coalition and they appointed me, through a public affairs company, to be their spokesperson and to stand up for the coalition's interests. That is my role. I do not meet directly with these people. We propose public awareness campaigns and we appeal to parliamentarians and governments to help fight contraband and make the public aware of the negative impacts of contraband. That is the type of work we do.
[English]
Senator Cordy: I am still surprised that the tobacco industry is part of your coalition.
Mr. Scholten, thank you for your excellent explanation of the challenges that convenience store owners and small business owners have in earning money when contraband tobacco sales are happening on the sideline.
I was quite surprised when this bill was brought in that at the same time the recent budget increased the taxes for tobacco. What I have read and what I have heard, and what we have heard this morning in fact, is that an increase in taxes on tobacco products makes the sale of contraband tobacco more lucrative. People are more inclined to buy, and the sales of contraband tobacco, if I am not mistaken, go up with an increase in sales tax on legal tobacco. Would you comment on that?
Mr. Scholten: The correlation between taxes going up and contraband tobacco activity going up is direct. We see that every time there is an increase in taxes. Our sales go down, and we understand from discussions with the RCMP, or others, that contraband activity increases. The differentiation between the price of legal tobacco and contraband becomes that much more exaggerated and consumers are that much more likely to go to the contraband market.
To give you the best example I would have, recently in New Brunswick we met with the Minister of Finance in pre- budget consultations. We talked to him about potential tax increases in the province. He made it very clear that the tax increases that New Brunswick had implemented the year before had not resulted in any additional taxes for the province. They recognized the reason for that was because contraband activity increased and picked up the entire amount.
Senator Cordy: Because the provinces are losing all the taxes on the —
Mr. Scholten: Yes, on the sale of contraband. They do not get any taxes.
Senator Cordy: What I have read was exactly what you stated today. Thank you.
[Translation]
Senator McIntyre: I do not plan on repeating everything that is in your briefs. Contraband tobacco is indeed a serious problem in Canada.
There is existing legislation. I see that both of you support Bill S-16. We have had some awareness campaigns. What other measures do you think we should take to eliminate this problem once and for all?
Mr. Rouillard: That is quite the question. I heard the same question earlier regarding police forces, and it is not a simple question.
Senator McIntyre: Mr. Rouillard, in your brief you mentioned sustainable solutions.
Mr. Rouillard: One of the best ways to develop sustainable solutions — and this is true of any type of problem — is to bring together all those who are affected by this problem. In the brief I mentioned working together, at the federal and provincial levels and with Aboriginal police forces. All of these people must be able to work together. We should even speak directly to people who are affected by the phenomenon. For example, ask consumers for their reasons, to find solutions that will last. This is similar to a strategic problem-solving approach. The same solution can apply with this crime.
[English]
The Chair: I see on one of the sheets in the data you provided, just looking at 2013 and the seizures and the number of cigarettes in ridings, that there has been quite a significant number of seizures this year and many of them in Cornwall, or in the Cornwall area, where we have a joint task force which is supposed to be coping with this challenge. Would that not suggest to you that the current laws are not acting as a deterrent and it simply is a cost of doing business?
Mr. Scholten: I would definitely agree. I think the comment was made by Superintendent Pardy that the existing legislation, under the Excise Tax Act, putting fines in place is just seen as a cost of doing business and really does not create the deterrent that is necessary. Cornwall is and has been ground zero on the issue as far as we are concerned, and having added police force presence there and more harsh penalties are all necessary to bring this under control in that area.
We are also very concerned about the movement of the border checkpoint from mainland Cornwall to Massena. When the border was moved from Cornwall Island to the mainland, we saw an increase, almost instantly, in legal tobacco sales, and the movement back to Massena is causing us great concern because we feel that that is opening up the Canadian border again to the contraband that was really displaced with the movement onto the mainland.
The Chair: Have you conveyed that concern to the government?
Mr. Scholten: We have.
The Chair: Was it your organization that did the butt study a number of years ago?
Mr. Scholten: Yes.
The Chair: Could you speak to that, because it is about the impact on kids, assessing the number of butts in schoolyards.
Mr. Scholten: Thank you for that.
We conduct butt studies across the country. The process of doing this is not very glamorous. We have independent researchers go to sites in various provinces and collect cigarettes butts from locations like schoolyards, government office buildings, health buildings and public places. Then, those cigarette butts are sealed and analyzed at an independent scientific research location to assess what is contraband and what is legal tobacco. Through those studies, we have been able to point out significant amounts of contraband tobacco found on schoolyards. We know, anecdotally, that vans are driving up to the schools and selling tobacco to youth. We also hear reports of seizures within the schools, with students bringing contraband tobacco into their lockers and selling out of their lockers. We felt that the butt studies were an excellent means of illustrating the concern and showing that this is happening at schoolyards across the country.
The Chair: Thank you. We have a lot of interest.
The bells are ringing, but we still have a number of people who would like to ask questions in the second round. I will ask them all, and those responding, to be as concise as possible.
Senator Fraser: I have one question for each of you.
[Translation]
Mr. Rouillard, what is your total budget and what portion of this budget comes from the tobacco industry?
Mr. Rouillard: I do not have that information.
Senator Fraser: But you are the director of your organization?
Mr. Rouillard: No, I am the spokesperson.
Senator Fraser: You are the spokesperson?
Mr. Rouillard: Yes.
Senator Fraser: Would you be able to get us that information?
Mr. Rouillard: Yes.
[English]
Senator Fraser: Mr. Scholten, Mr. Rouillard has already said that this is not the business of your group, but does your group participate in general anti-smoking campaigns? The lasting solution to contraband tobacco is to remove the market for cigarettes.
Mr. Scholten: We do not contribute to cessation campaigns. We are, however, the mechanism for any tobacco control strategy or any tobacco control laws to be implemented. Our retailers comply with all legal measures that are in place to prevent tobacco sales to minors. We have tobacco display bans, and we have age testing that has to be done.
Senator Fraser: That is what the law says.
Mr. Scholten: Yes, we cannot advertise. We comply with all of those laws.
[Translation]
Senator Joyal: Mr. Rouillard, we were cut off when you were about to answer my question about your views on the illegal trade of tobacco near reserves. Based on your experience as a former police officer with the Sûreté du Québec, what is your opinion on that situation?
Mr. Rouillard: The situation is complicated. What I was going to say, Senator Joyal, is that the public is aware. They are not blind to this issue. Some benefit from the situation, if I may say that. However, as I was saying earlier in response to a question asked by another senator, if we want to eliminate the problem, we must bring together everyone involved. Otherwise, it is always one person against another and we create a type of war. The only way to find a solution is with a lot of information.
Aboriginal reserves are referred to as being hubs of contraband cigarettes. However, we all agree that all Aboriginals are not smugglers. I would hope that most of them want to live in an honest community where people abide by the laws and regulations of society. That is what we will have to focus on.
Of course, we focus on police forces — and we saw that earlier this morning — and they do their best. We will have to focus on governments — bother federal and provincial. The federal government has a huge role to play. When we are talking about Aboriginal reserves, this affects all of Canada.
I do not want to pass the buck, but one day someone will have to step up and make sure we are headed in the right direction. The problem persists, and it is still complicated and sensitive. This was evident in the responses of OPP and RCMP representatives. This is a complex issue. It was 20 to 30 years ago, and it still is today.
[English]
Mr. Scholten: One thing I wanted to point out was that the Fraser Institute and the Macdonald-Laurier Institute have both prepared studies on contraband tobacco. In both cases, they have identified certain things that could be done, but the one point that they made that would eradicate contraband tobacco altogether is the elimination of tax. This is what was done by the Chrétien government several years ago, and, overnight, contraband tobacco was cut out completely. Is that an option, at this point, with health concerns and things like that? It would be a very difficult decision for any government to make.
The Chair: Thank you, gentlemen. We very much appreciated your appearance here today and your contribution to the deliberations of the committee.
Next week, we will continue with Bill S-16. On Wednesday, we will have three panels again. The plan is to deal with the clause-by-clause consideration of this legislation on Thursday and then move into further consideration of Bill C- 299.
(The committee adjourned.)