Proceedings of the Standing Senate Committee on
Legal and Constitutional Affairs
Issue 17, Evidence - September 24, 2014
OTTAWA, Wednesday, September 24, 2014
The Standing Senate Committee on Legal and Constitutional Affairs, to which was referred Bill C-10, An Act to amend the Criminal Code (trafficking in contraband tobacco), met this day at 4:15 p.m. to give consideration to the bill.
Senator Bob Runciman (Chair) in the chair.
[English]
The Chair: Good afternoon. Welcome colleagues, invited guests, members of the general public who are following today's proceedings of the Standing Senate Committee on Legal and Constitutional Affairs. We're continuing our consideration of Bill C-10, An Act to amend the Criminal Code (trafficking in contraband tobacco).
According to its summary, Bill C-10 would amend the code to create a new offence of trafficking in contraband tobacco and provide for mandatory minimum penalties of imprisonment for repeat offenders dealing in large quantities of contraband. This is our second meeting on Bill C-10.
For our first panel today we welcome, from the Assembly of First Nations, Stuart Wuttke, Legal Counsel; from Mohawks of the Bay of Quinte, Donald Maracle, Chief; from the Iroquois caucus, Gina Deer, Chief; Allen McNaughton, Chief, Haudenosaunee Confederacy Chiefs Council and Aaron Detlor, Legal Counsel; and from the Haudenosaunee Trade Collective, Kris Green, Representative.
We'll begin the opening statements with Mr. Wuttke.
Stuart Wuttke, Legal Counsel, Assembly of First Nations: Good afternoon. I'm counsel with the Assembly of First Nations. I'd like to thank the Senate committee for inviting us to make a presentation on this bill.
At the outset, the Assembly of First Nations is opposed to the proposed amendments for a number of reasons, which I'll get into. On a quick examination of the facts and the bill, it's clear to the Assembly of First Nations that this matter is really a taxation matter, not necessarily one that's for the criminal courts and the criminal law.
With respect to tobacco itself, it is an indigenous resource of the Americas, which First Nations and other indigenous peoples have traded and cultivated for centuries prior to the arrival of the Europeans. The tobacco trade was well documented and exercised by indigenous peoples throughout history. As a result, many First Nations feel that the right to tobacco is an Aboriginal, perhaps a treaty right. There is, we feel, a duty to consult with respect to the proposed amendments being pursued under the Criminal Code.
We feel that should these amendments be enacted, they essentially infringe the First Nation right to trade in tobacco. That's the first reason the Assembly of First Nations is opposed to that.
With respect to tobacco tax revenue, we note that the core of this is really a taxation matter as far as the Assembly of First Nations is concerned. We know that the tobacco tax brings in significant amount of revenue for both the federal and provincial governments. Between 2001 and 2008, the federal government collected about $204 billion in federal taxes from tobacco alone, according to the information we received. The annual federal tax revenue was about $31.1 billion in 2005, but that has decreased over the years.
We feel that contraband tobacco may contribute to the loss of that. One report shows that Canada lost about $2.5 billion yearly in contraband trade. Ontario and Quebec alone lose between $500 million and $300 million, respectively.
We feel that governments are clearly feeling the pressure with respect to contraband tobacco, but again it's a taxation issue, not one that we feel warrants criminal charges. As far as we're concerned, putting someone in jail for driving tobacco across certain boundaries does not warrant a criminal sentence, criminal charges or imprisonment.
With respect to the criminalization of tobacco, we feel Bill C-10 predominantly would target and criminalize First Nations peoples. This follows from the very definition of contraband tobacco that's used by the RCMP, and that's in some of your documents and reports.
Proposed amendments to the Criminal Code require the courts to impose mandatory minimum sentences with respect to contraband tobacco, whether as a result of transport, sale, possession or for the purpose of sale of unstamped tobacco. The AFN opposes mandatory minimum sentences because we feel they do not advance the goal of deterrence, as longer periods of incarceration increase the probability that the offender will reoffend. It will result in lengthy incarcerations of less culpable offences, also grossly affecting the poor and marginalized people, such as First Nations people. It will disproportionately impact on First Nations people already grossly overrepresented in penitentiaries with harsher sentences, and it and will subvert the principles or proportionality of individualization of sentences.
We note that in 1995, Parliament enacted section 718 of the Criminal Code. Subsection 718.2(d) requires that the courts look at an offender and that the offender ''should not be deprived of liberty.'' Subsection 718.2(e) of the Criminal Code states that ''all available sanctions other than imprisonment that are reasonable in the circumstances should be considered for all offenders, with particular attention to the circumstances of Aboriginal offenders.''
We feel that mandatory minimum sentences may impede the application of this particular aspect of the Criminal Code and that sentences should be tailored to First Nation offenders, who will, as a result of many policies by the federal government, whether they be the residential schools, the 1960s Scoops, the poverty that many First Nations find themselves in, all those factors should be taken into account when any First Nations person goes before the courts. We feel that the imposition of mandatory minimum sentences may prevent that from happening or may prevent a judge from considering those factors.
We have a written brief, which our office has sent to the clerk, so hopefully you'll get copy of that in the near future.
In conclusion, the Assembly of First Nations has provided written submissions and a number of recommendations for your consideration, which I would direct you to consider; they're in our written brief. In short, the Assembly of First Nations is opposed to the bill for the following reasons: Canada is criminalizing activity where we believe the matter is a taxation matter, not a criminal matter; there's no evidence that minimal sentences will reduce tobacco use or deter crime; the fact that growing tobacco itself is not a crime in Canada; amendments will have a disproportionately negative impact on Aboriginal peoples; the greatest impact will be against communities that historically have been among the most active in asserting sovereignty and their rights; and Canada could impede the economic development of First Nations, which may result from targeting this type of activity in First Nation communities.
We note there are a lot of spinoff activities as a result of tobacco sales in First Nation communities, and I know your committee has heard about that from other witnesses.
Thank you.
R. Donald Maracle, Chief, Mohawks of the Bay of Quinte: Good afternoon. I'm the elected chief for the Mohawks of the Bay of Quinte. Thank you for accepting our request to appear before the Senate committee today.
The federal government has a duty to consult. In this particular instance, the legislation directly impacts our community and rights. We were not consulted on the proposed legislation prior to its drafting. Previously, the Iroquois Caucus requested an appearance before the standing committee of the House of Commons and was denied. Only Akwesasne and Kahnawake were able to appear and make presentations at that point in time.
The federal government views adequate consultation as an appearance before a couple of committee hearings of the Senate and the House of Commons prior to the passage of proposed legislation. This is not meaningful consultation; in fact, it is not any form of consultation. We had to request an appearance before a committee, be it a House of Commons or Senate committee, and hope we are selected to voice our concerns. Any participation in the standing committee process does not constitute consultation. Consultation is not to be selective; it is to include everyone who wishes to participate, as well as those most directly impacted.
The government is not following any of its own policies that are in place regarding consultation and with respect to this legislation are not following the policies they have in place regarding consultation with First Nations. Consultation should occur, not only with First Nations organizations and governments, but also with the First Nations businesses and their employees who will become unemployed as a result.
Tobacco historically has been grown and traded for many centuries. The proposed bill does not take into account the historical trade that our people engaged in with other nations, as well as with the Europeans who came to the new land. The historical trade has evolved into today's economy in First Nations communities. We have never surrendered our right to trade tobacco. The government has simply found that our people are making a viable living from the trade, and the government is earning fewer tax dollars. This is an economic issue being criminalized by this bill.
Our people have the right to engage in the production, transportation, trade and sale of tobacco products, whether for personal, ceremonial or economic purposes. Since tobacco is part of our culture, the trade of tobacco is an Aboriginal right within the meaning of section 35 of the Constitution Act.
Canada is concerned that Native-manufactured cigarettes causes a loss of tax revenue and a loss of political support from the non-Native businesses and their supporters. First Nations see the tobacco trade as an economic engine, the exercise of rights to create an economy and to alleviate First Nations poverty. The regulation and licensing of the tobacco trade is within the purview of First Nations' jurisdiction. The Mohawks of the Bay of Quinte currently license businesses to trade tobacco pursuant to a convention that has been in place with the Ontario Ministry of Finance Tobacco Branch since the early 1980s.
The passage of Bill C-10 will negatively impact on our families, communities and increase unemployment and poverty. It also has the potential to generate much social and political unrest.
We currently have 41 registered businesses that sell tobacco through the quota system. Some of these businesses only sell quota cigarettes, while others sell Native-manufactured cigarette products that Bill C-10, by definition, will legislate and define as ''contraband'' tobacco.
Any enforcement in regard to what the government considers contraband tobacco will impact businesses, individuals, families, our community and ultimately our neighbouring communities. Members working in the tobacco trade will lose jobs and income, and some will be forced into bankruptcy. Even those members who are transporters may decide not to participate in the cigarette trade and lose the income they were earning. Some of these people participate in this trade activity because they cannot find work elsewhere.
The economic impact of Bill C-10 will result in an increase in social assistance payments and place many families in economic crisis, unable to pay rents, mortgages and utility bills. Currently, our social assistance rates are lower than Hastings County. The loss of employment income will be felt not only in our own community but in neighbouring businesses external to our community that benefit from trade with First Nations communities. Unemployment will cost the Government of Ontario more for Ontario Works. Unemployment will cause a strain in family relationships, family breakdown and could potentially increase family domestic violence.
The federal government should work with First Nations to put a regulatory process in place that supports and strengthens Native economies instead of the oppressive and punitive measures proposed in Bill C-10.
First Nations economies are not as valued by the Government of Canada and the provinces as businesses off reserve are. One example would be when the federal government encouraged farmers in southwestern Ontario to change their crop from tobacco to anything else; they paid them to do it. However, when you are affecting an economy of First Nation communities, government's response is to criminalize the business. It should be noted that most reserves have very high unemployment rates and are highly dependent on social supports for many aspects of their life. The Mohawks of the Bay of Quinte have low unemployment, good housing and a successful mortgage program.
In 1996, the federal government imposed a 2 per cent budget cap that was to be in place for a short period of time but was never lifted by Indian Affairs. The 2 per cent cap in budget growth is still in effect almost 20 years later. This has caused financial shortfalls for program services, which affects the service delivery to a growing population.
Bill C-10 will perpetuate the continued marginalization of First Nations peoples. Bill C-10 is viewed by First Nations as harsh and unusual punishment for the exercise of the right to create a local economy.
This bill puts in place minimum penalties for repeat offenders. The provisions for mandatory minimum imprisonment violate the Gladue decision and section 718.2 of the Criminal Code. The Criminal Code was previously amended to accommodate the principles under Gladue.
The imposition of minimum sentences has the potential to send more of our people into the justice system and incarceration, where First Nations people are already overrepresented. The potential social and economic impacts of Bill C-10 are widespread, severe and damaging to the relationship with First Nations and the federal and provincial governments.
First Nations communities are already experiencing the multi-generational impacts of the residential school system and the 1960s Scoop. Children who were taken into care suffered self-identity issues and sometimes found it challenges to develop parenting skills. The same effects can potentially happen with a number of our people if they become unemployed and incarcerated. This effect lasts for several generations.
The Mohawks of Bay of Quinte are opposed to the passage of Bill C-10 because it infringes on our traditional use and right to trade in tobacco. This right has never been surrendered.
The impacts to our economies will be devastating. The tobacco trade has created employment opportunities that have wide ranging benefits for all of our people's economic well-being and future growth.
The Mohawks of Bay of Quinte are opposed to the passage of Bill C-10 and it should be withdrawn. Proper consultation is required of First Nations governments and businesses so that the legislators can make informed decisions about the infringement on First Nations' rights and jurisdiction and the economic harm to First Nations people. Working together to develop a regulatory process that respects the rights of First Nations will have a more positive outcome and a better relationship with the First Nations and the governments.
Gina Deer, Chief, The Iroquois Caucus: Good afternoon. Thank you for having me. I'm here today on behalf of the Iroquois Caucus, which consists of seven Iroquois communities, representing around 70,000 First Nations peoples.
The concern with this bill that the Iroquois Caucus has is, again, at the risk of sounding repetitious, about our rights. Historically, First Nations were the owners of tobacco. We feel that we have an Aboriginal right, an inherent right — outright owners of tobacco. Now we're being criminalized by this bill for utilizing tobacco in the fashion that we have throughout history, because it has been used for many purposes, not just ceremonial. It was used for trade and barter as well as for personal use.
Bill C-10 has a direct impact on First Nations because throughout these hearings you will have heard that the hot spots are Ontario and Quebec. Those hot spots consist of most of these communities that are part of the Iroquois Caucus. Those communities have people who are working in this industry who know that it is their inherent right and that they are not breaking the law because of our history with tobacco. These people are the ones who transport tobacco from First Nations communities to other First Nations communities. These are the people being pulled over and arrested. This is why we say there's a duty to consult because, yes, it's going to directly impact our communities and our people.
We as First Nations people have been repeating this over and over at these hearings. I was told by somebody, ''Why are you going? It's pointless. Little has been done. This bill is moving along.'' But then I was told by an elder who called me and said, ''Yes, Gina, you go. This is a track record of our resistance here.''
When we speak of duty to consult, the Supreme Court of Canada in recent decisions has talked about that. They've mentioned it: the honour of the Crown and the duty to consult. And that's not what is happening by us being here today. This is not consultation, because consultation is in the beginning, before the bill is submitted to this point. That hasn't happened here. And this is coming from the Supreme Court of Canada, as well as First Nations.
We look at international laws, for example, the United Nations Declaration on the Rights of Indigenous Peoples. It states that the international community recognizes, acknowledges and supports the rights to pursue our economic, social and cultural development.
This touches on those rights — culturally, socially, economic development.
We talk about the cost to government. Where do you begin, because the cost has become astronomical? Not only do you have the losses in taxes; you have the monies that have been put into policing. We as First Nations have capped out on government funding, yet the cost of living has been increasing. In my community specifically, we have a 10-year agreement that's frozen. We're not going to receive any additional funding other than what we have in the agreement. So we have to supplement that income, and we are doing that by using a traditional practice, which is in the tobacco industry.
So when you talk about organized crime and eliminating organized crime, within my community specifically we are working on regulations and a law, because we also feel that no organized crime should benefit from what is our right to industry.
This process has begun within Kahnawake, and all the Mohawk communities are looking upon what we're doing. We think the government needs to sit down with us and negotiate some sort of agreement to recognize, first of all, our rights, and to start with the duty to consult from here on in on any decisions that will directly impact First Nations. The government needs to sit down and have dialogue, because let's not forget that the federal government gave permits in Kahnawake to manufacture tobacco, but they did not consult with the provinces. We were essentially set up for failure by doing so, because once that tobacco went to be transported, it became a crime.
I'm asking that this bill not move forward because of decisions made by the court and, specifically, by the Supreme Court of Canada saying there is a duty to consult that hasn't been done and that needs to be done before this bill moves forward.
Allen MacNaughton, Chief, Haudenosaunee Confederacy Chiefs Council: Greetings. I hold the title Tekarihogen from the Confederacy Chiefs Council, which is the legislative arm of the Haudenosaunee. My nation is Mohawk, and I have been the principal representative of the Haudenosaunee in land rights negotiations with both the Crown in the right of Canada and Ontario. I am grateful for the opportunity to be able to voice the thoughts of our council here.
Our treaty relationship and long history of trade and commerce have historically been negotiated with internal and external discussions intended for peaceful resolutions. Many indigenous nations have treaty rights with each other that predate contact with Europeans and continue to be applicable today. These treaties include trade relationships that are pipelines between our communities where trade and commerce interchange. We are here to remind you that our history together provides a mechanism by which we can engage in open, honest and respectful dialogue.
It is evident through these Senate hearings that there has been no prior consultation, no prior discussions or meetings with our Haudenosaunee Confederacy Chiefs Council. The Canadian government's historically oppressive arbitrary imposition of unilateral laws is no longer a tolerable practice in this day and age of human rights.
In the absence of such meaningful consultations with the Haudenosaunee Confederacy Chiefs Council, we identify that the Canadian Department of Justice and the Bill C-10 legislation are not in compliance with our treaty relationship as reflected in the treaties of peace, friendship and non-interference as laid out in the Covenant Chain in Two Row Wampum, nor are they aligned with international laws.
May I remind you that after years of international public pressure, Canada agreed to adopt the United Nations Declaration on the Rights of Indigenous Peoples. These Senate hearings are not to be interpreted or construed to be any form of meaningful consultation with the Haudenosaunee Confederacy Chiefs Council. There has been no consideration of our inherent treaty rights to commerce, which are existent within treaty or international laws or within the United Nations Declaration on the Rights of Indigenous Peoples, which addresses the right to individual and collective economy, and your Supreme Court's interpretation of your Constitution.
Senators, as political representatives of the Crown, have a responsibility to uphold the honour of the Crown. The honour of the Crown is not upheld when governments have not fulfilled constitutional responsibilities with respect to our treaty relationships or by imposing arbitrary and unilateral laws. In reality, Bill C-10 is another attempt to criminalize Aboriginal rights and people, a colonial practice in which Canada has prospered from politically, financially and internationally to become one of the wealthiest countries in the world. Such oppressive acts continue to perpetuate the colonial practice that oppresses and destroys Aboriginal rights, economies and ethnicity.
The approach Canada is taking now is confrontational and could provoke responses that will do no one any good. Any attempt to enforce such a plan surely will be met with resistance in both the courts and on the land. The reality of this bill breaches a financial outcome that protects the interests of large foreign tobacco companies. These companies have affected our economy, our jobs and our domestic trade, and we need to discuss that impact. These issues are a real concern to us as peace chiefs.
The indigenous peoples of these lands have grown, harvested and used tobacco for ceremonial and trade purposes since time immemorial. The Six Nations Confederacy Chiefs Council has indicated this in the Covenant Chain and Two Row and continues to carry the right and responsibility to make laws for and about their own citizens, lands and commerce.
Today, we believe the time has come for us to work honorably, diplomatically and peacefully for the best interests of each of our nations' peoples and livelihoods. We encourage you to enter into a peaceful, respectful dialogue with the confederacy.
That is all I have to say for now.
The Chair: Thank you, chief.
Kris Green, Representative, Haudenosaunee Trade Collective:
[Ms. Green spoke in an aboriginal language.]
My name is Kris Green and I'm a Mohawk from the Bear Clan. I'm also the spokesperson from the Haudenosaunee Trade Collective. We are a group of manufacturers within the Six Nations territory that produce a domestic tobacco product for a domestic market. I have provided a brief from the trade collective that provides a lot of information. I hope you actually take the time to read it, because it tries to dispel some of the myths that are happening and some of the things that have been said about our people in terms of what we do and what we have been doing in the tobacco trade.
I've had the opportunity to review the transcripts from the presentation on September 18, specifically the evidence that Mr. Saint-Denis provided. He indicated that there was no provincial or Aboriginal consultation whatsoever, point-blank. It was just a straight statement. What Mr. Saint-Denis and the Senate now have is evidence before them that establishes that this bill will have significant impacts within our communities, on our people, and on our rights. You haven't had a conversation with us, and all we want is to talk to you. As Chief Deer said, we would have talked to you before this happened, not at the end, not when it's a done deal, but now — well, actually, years ago.
Senators, you and this committee have an independent obligation to uphold the honour of the Crown, where the legislative branch and the executive branch have not. You have that obligation. You can have that piece said on an independent basis. We've heard that with some of the senators we spoke with. We hope you will take that obligation seriously and that you will give sober second thought to how the Senate as a whole and this government have engaged with First Nations on this issue and other issues.
How are you going to discharge your obligations to Aboriginal peoples when you have evidence that you haven't talked to us? Coming to us now or letting us come to you, because that's what you've done — you've let us come to you — is not enough.
I was pleased that Senator Tannas was actually in the community last week. I wish I had had time to meet with him and show him what we're doing. We like when that happens. There's nothing wrong with that. We want you to see the good things that are happening in our communities and the things that we can do on our own. We can be self-sufficient. We can be self-sufficient without interference, without criminalization, without laws that are taken and put into place without any consideration of our rights as people. We're the First Peoples. All we're asking for is that you honour the obligations that have been set out in many laws, the Constitution and in decisions of the Supreme Court.
We ask that you take a serious look at what you're going to do to our communities. You've heard from many people this week and last week, and that's just the tip of the iceberg. If you go to other First Nations communities in this country, we always hear about our poor conditions. We have an economy that we're taking forward.
Therefore, our recommendations to this Senate committee and the Senate are: that this committee recall Mr. Saint-Denis to determine why Justice Canada has failed to uphold the honour of the Crown, where Justice Canada and this committee have knowledge, both real and constructive, that the proposed bill will impact upon asserted and established rights of Onkwehonwe peoples; and that this committee exercise its jurisdiction to uphold and fulfill the honour of the Crown by adjourning the current proceedings until the Senate and this committee have discharged their respective obligations to enter into good faith engagement that upholds consultations and fiduciary responsibilities and obligations and which advances reconciliation between all our governments so that the First Nations people can recognize that the Senate is a body independent of the federal executive.
I thank you for your time because, like I said, it is important; we just want to be heard. We want to have a conversation. We want to talk with you.
Aaron Detlor, Legal Counsel, Haudenosaunee Confederacy Chiefs Council: My name is Aaron Detlor, and I'm a lawyer and a Mohawk. I'm very honoured to have here my chief from the Mohawks of the Bay of Quinte and my chief from the confederacy.
The only thing I really want to make a point with you about is in looking back on the evidence of Mr. Saint-Denis. Just before he made the comment about no consultation at all, he said something indicative of this government's approach to this issue. He said, ''We talked to the federal family.'' He went through and listed a number of ministries they spoke to, such as Public Safety and Justice Canada. Guess who he left out of the federal family? He left out his federal counterparts, the Onkwehonwe, the indigenous people of this land. He left them out completely, and it was extremely telling of his approach. He said, ''We spoke to the federal family.'' Well, he did not speak to everyone. He specifically left out one of the most important founding members of what is supposed to be the federal family: the indigenous peoples of Canada. That's what was not addressed.
The question now becomes: What is the role of the Senate? It's interesting times for the Senate. Is it an independent body? Is the Senate an independent body that's going to uphold the honour of the Crown? As you heard from my friend, it's a specific issue that we're looking at right now. What is really on trial right now for the indigenous people of Canada is whether the Senate will step up and start to honour the relationship, to really look at themselves as a Senate, as a body and how they can fulfill that role.
[Mr. Detlor spoke in an aboriginal language.]
The Chair: We have a long list of senators wishing to pose questions. I'm going to encourage senators and witnesses to be as concise as possible. It will be a challenge sometimes to abbreviate the responses, but we'd like to have as many senators have the opportunity to ask questions as we can fit in this tight time frame. We will begin with the deputy chair of the committee, Senator Baker.
Senator Baker: Thank you to the witnesses for their excellent presentations. I would like to commend the chiefs for the job they are doing in First Nations communities.
I'll ask my questions together and then allow you to answer them so I won't have to come back a second time.
First of all, you're absolutely right that this bill negates section 718.2(e) of the Criminal Code of Canada, completely negates it. So you're absolutely right. And let us hope that the Supreme Court of Canada will have an opportunity to pass judgment on whether or not it is legal to do so.
What you're saying is that this bill is directed towards creating a criminal offence for tobacco that is not packaged unless it's stamped within the meaning of section 2 of the Excise Act. What you're saying is the very tobacco that it's aimed at is the tobacco that you would find in use in First Nations communities in that the requirement of stamping is different if it's used within the community rather than outside the community. So the bill would affect you more than any other people in Canada.
Chief Maracle, you said that two types of tobacco are in a retail outlet, and you said the second type of tobacco is what will be criminalized. I'd like for you to identify that.
Chief Deer, you said that the federal government gave licenses for manufacturing in First Nations. It was our understanding that the manufacturing permit you get is from the provincial authority and not from the federal authority.
My final question is: Do the First Nations have the capacity and the autonomy to be able to regulate tobacco and maintain public order? Ms. Green and Mr. Detlor, I guess you're the experts in this area, so perhaps we could start with you.
Mr. Detlor: Since time immemorial, you've seen indigenous people maintain public order. If the purpose of the bill is to create safe environments and safe communities both for indigenous peoples and their neighbours, then history has shown us that the best way for that to happen is to work together in good faith to come up with a regulatory process that can work on and within the Indian communities. I'll use the word ''Indian'' for the moment.
Senator Baker: Yes, under the Indian Act.
Mr. Detlor: That's how you move forward because that's what has proven most effective, not a top-down approach that simply says, ''We will criminalize your conduct and activity, and what we're really trying to do by criminalizing it is secure a market share for foreign multinational companies.'' Really, at the end of the day, what this is about is trying to find a back-door exemption to sections 87 and 89 of the Indian Act, which say if a status Indian wants to buy tax-exempt tobacco, I'm entitled to that. Now if I actually want to go forward with my section 87 and 89 rights under the Indian Act, I'm a criminal; I can go to jail.
I'm going to leave that part of the answer on public order and turn the first part of your question over to either Ms. Green or Chief Deer.
Mr. Maracle: In the early 1980s, the issue of tobacco became an issue for First Nations communities. First Nations understand, under Canada's Constitution, the Royal Proclamation, which is a document referenced in Canada's Constitution, that there's a guarantee, and that guarantee is that First Nations have the right to have trade relations with British subjects provided they take out a licence for that purpose. As far as I know, it is still part of Canada's Constitution.
To that end, we had a meeting with the Crown, which was the regulatory body, the Province of Ontario. Don Roselle was the assistant deputy minister at the time. Chief Earl Hill and I and council met with him, and the convention established at that time was that First Nations elected council would give a licence to retailers to engage in the tobacco trade. All the Province of Ontario asked the council to do was to recognize who had the right to go to a wholesaler to buy tobacco for retail and commercial purposes. That has been the convention in Ontario since the early 1980s. We take it to be a constitutional guarantee that we have the right, as a First Nation, to have trade relations with other people who live in this country.
The quota system developed —
The Chair: We have to move on. Again, I remind you all to try to tighten this up as much as possible.
Senator White: Thanks to each of you for being here today. My question will surround where the tobacco that is presently subject to this legislation, if passed, is grown today; not where it's necessarily sold but where it's grown and from where it originally derives. Chief Maracle, if you would like to respond, it would be helpful to start there.
Ms. Green: In terms of the tobacco from our community, we are actually growing our own tobacco within Six Nations territory.
Senator White: Secondly, how many operators are presently operating within the law, regardless of whether this legislation passes? What is the percentage of operators?
Ms. Green: It depends on how you define it. As far as we're concerned, all of us are operating within the law.
Senator White: Within the law as far as we are concerned.
Ms. Green: Then I guess we have a difference of interpretation.
Senator White: I understand that.
Ms. Green: In terms of permits, you have GRE and there is one other licensed manufacturer within Six Nations.
Senator White: Do you know the name of that?
Ms. Green: M1, I believe.
Senator White: Not 100 per cent of tobacco produced or being sold on Six Nations is grown on Six Nations.
Ms. Green: No. They actually have the ability to purchase their tobacco from wherever.
Senator White: The vast majority, though, would be found outside?
Ms. Green: Yes.
Senator Cordy: The fact there was no consultation whatsoever is troubling and disappointing because, as you've all said, sitting before a committee is not consultation; consultation should take place when the bill is being drafted.
Also, to quote Mr. Saint-Denis, because I read the minutes of the last meeting, to think there was no consultation with the justice ministers of the provinces is also troubling. Thank you very much for bringing that to our attention.
I would like to raise a couple of points. Number one is mandatory minimums. A couple of you spoke about that and the effect it will have on young Aboriginals, because that is the fastest growing demographic. I think it was you, Mr. Wuttke, who asked if there was evidence that mandatory minimums will actually reduce contraband tobacco.
Chief Deer, I'm paraphrasing here, but I thought you said that no organized crime should be benefiting from the sale of tobacco, yet all of the First Nations and Aboriginal groups are going to be brought in if this bill passes. I wonder if you could talk about some of the things you are doing to ensure that people are not breaking the law as you see it.
I had the privilege of meeting with Six Nations and speaking with Chief Hill, so I certainly heard a lot about the impact this bill will have on Six Nations. They said upwards of 2,000 people will be directly impacted, and the areas around the reserve will certainly be impacted because of less buying power. I wonder if you could deal with those questions.
Ms. Deer: I can talk about the situation in Kahnawake currently, which is to have tobacco laws and regulations. In order to implement that, the community that takes part in this — it's not just people within the industry; the entire community has input. One of the main goals is to eliminate anyone who is not First Nations from benefiting. You cannot have an outside partner. It has to be somebody from the community who can get a permit to operate or sell, whether you are a wholesaler or a retailer, and try to bring it down to one source so that people will be accountable.
In our community, we're talking about price parity. It's a big issue because the non-Natives are making most of the money, not the Natives. They're benefiting from us, and they want to eliminate that. We also need help from the government to get this to a point where — we cannot entirely eliminate organized crime. Nobody can ever entirely eliminate organized crime, if we look at Montreal's Charbonneau commission. They're just everywhere.
Senator Cordy: Good point.
Ms. Deer: It is our intent, though, to have price parity and to eliminate the outside —
Senator Cordy: So you're working on it.
Ms. Deer: Yes, currently it's in progress.
Mr. Wuttke: With respect to mandatory minimum sentences, as you know, if someone is pulled over by an officer, they have a number of options. They can provide a warning, or they can provide a charge under the Excise Act and now potentially the Criminal Code or even provincial regulations. We're not confident that when it comes to a First Nation offender they will be given any leniency by police officers or other officials. We feel that, as you see in other criminal circumstances, they're overcharged, given the most serious charges for the offence and not a lot of leeway. That's at the outset, from the police. After that, it goes to the Crown prosecutors, who have a number of discretions, and it goes to the judges themselves.
In the end, due to mandatory minimum sentences, right off the bat, from the instance of charging, First Nations people will not be given a fair shake and will be treated adversely, differently from other offenders.
Senator McIntyre: Thank you all for your presentations and for being here today. My question has to do with tobacco business regulated by band councils. I note that, sometime last year, the Mohawk council of Akwesasne, received a grant from the Government of Ontario to assist them in developing an Akwesasne tobacco law and regulatory framework. Would you like to comment on this framework, please?
Ms. Deer: Yes. They've actually come to the end of that project. It should be posted soon in Akwesasne. I recently spoke with them, so any time now it should be posted on their website. But again, I need to mention that the Government of Ontario recognizes the need for regulations on First Nations communities. They supported this; they gave the funding for this project. So there's a disconnect when you have a bill like this at a federal level and the provincial level is being ignored in the work that they're doing to regulate the industry.
I think it's really important that you need a tripartite agreement with the First Nations, the provinces and the federal government. As I stated earlier, federal permits were given in Kahnawake. They weren't provincial. When those individuals tried to transport that on provincial highways, that's where the crime was, not in producing it in the community. Provincial agreements were not there. So that's why I talk about how we were set up, really, to fail.
Something needs to be done here. We would rather have it done at a governmental level than having to go to the courts. The courts do recognize the duty to consult and the honour of the Crown.
Senator Joyal: Welcome. I want to come back to the fundamental issue at stake here, in my opinion, which is treaty rights.
When Mr. Saint-Denis testified here on September 18 — and those of you who have read the testimony have alluded to it — he mentioned that there was no provincial-Aboriginal consultation at all. I'm quoting verbatim from the testimony. He was answering one of my questions.
Later on, in answering a very wise question from Senator McInnis, Mr. St. Denis stated the following, which totally contradicts what you ascertained, that here we are dealing with treaty rights:
. . . the Aboriginal position, as I understand it, is that they're entitled to certainly be in possession for their own consumption. The government's position has been traditionally, and I think is now, that the sale of the tobacco product is not covered by Aboriginal rights and so their activities are caught by the Excise Act, and that would be caught by these provisions.
If I read the government's position, because he was speaking on behalf of the Justice Department, what you claim as being a treaty right — and I don't say that I'm of the opinion of Mr. Saint-Denis — is not covered by section 35 of the Constitution that affirms the existing Aboriginal and treaty rights of the Aboriginal peoples of Canada, nor is it covered, time immemorial, by the Royal Proclamation. I checked the text of the Royal Proclamation to make sure that what you claim as being a treaty right might be interpreted by the Supreme Court as a treaty right. Nobody will dispute the consumption immemorial of tobacco. Champlain, the first time he met with Aboriginal people, sat and they smoked. We can read that in all of the history textbooks.
In terms of the legal basis on which you establish your claim, could you expand on how you will be able to prove to the Supreme Court, at the end of the process, that we're dealing here with treaty rights? The government's position as Mr. Saint-Denis has stated it is totally contrary to what you affirm as being your position.
Mr. Detlor: We'll answer in two parts. First, I'm going to provide a technical, legal answer, and then I'm going to turn it over to Chief Deer.
When the Supreme Court of Canada in Haida and Taku, laid out the process for upholding the honour of the Crown, they talked about just that, a process. The first is how the right gets triggered. That's by knowledge, real or constructive.
The government is then obligated to do what's called a prima facie assessment of the right. That prima facie assessment of the right is then shared with the First Nations. The Department of Justice says, ''We don't believe you have a treaty right, or we don't believe you have this type of right. You can use it for ceremonial purposes but not for economic purposes.''
The Crown is then obligated to give the First Nation participant the ability to ''set out and clarify their rights,'' exactly what you're talking about. This is exactly what the Supreme Court has said is supposed to happen: to engage reconciliation, to engage discussions and to engage partnerships. That's how the first part is addressed.
The second deals with what the court recently said in the William, or the Tsilhqot'in, case.
Senator Joyal: Last summer's case.
Mr. Detlor: The first Aboriginal title case.
What the court said there, though, is they made an important distinction between established rights and asserted rights. On the one hand, we have asserted rights that aren't proven. What we're talking about here is actually constitutionalized rights. We're not talking about merely asserted rights. We're talking rights that are entrenched.
What the Supreme Court has just said in Tsilhqot'in is that that triggers a fiduciary duty, not just consult and accommodate but a fiduciary duty, which is even higher. The fiduciary duty would compel the Department of Justice to say, ''We need to have a long talk about this. We need to have a serious discussion. Tell us why you believe you have these rights, and then we can have that discussion.'' If there's no solution, the nature and scope of consultation is narrowed, and then you can have a fight about it. You can go to court. You can have a discussion about it, but those preliminary steps, I don't think, have been followed to date.
Ms. Deer: I guess I could speak for the everyday Mohawk person in my community who operates. They've always utilized tobacco, as I've said, for trade, for gain, for ceremonial use. Now, they look to be criminalized, and they're saying, ''We've always done this.''
It's about education also and understanding First Nations people. I think that's what needs to happen here. Because First Nations have never, ever given up that right, they're saying, ''We've always utilized tobacco in some form. Where did we ever give that up and where did we ever lose that?''
Senator Batters: I'm not sure if this question would be more appropriately addressed to Chief Deer or to Ms. Green, but it's to whichever one of you would like to answer these questions. I'm just looking for answers to some practical questions about the operation of this particular business, so I'll throw a few questions out.
I'm wondering if you inspect factories for health reasons and what sort of measures you take to ensure product safety. Do you monitor where the cigarettes end up? And who owns the factories?
Ms. Deer: I can speak for Kahnawake. When there were federal permits, the federal government was sending inspectors to the factories, yes.
Senator Batters: What about now?
Ms. Deer: Currently there are no federal permits, and that's what the law and regulations we are creating now are going to do.
Senator Batters: What happens right now? Who inspects those factories? Anybody?
Ms. Deer: Right now they use the standards that are listed already for cigarette factories. Because everybody is related and linked to each other there is a very high standard to ensure that everybody is cared for and their safety and health issues are covered.
Senator Batters: Does anyone monitor that, though?
Ms. Deer: The individual manufacturers monitor their own facilities right now.
Senator Batters: Do you monitor where those cigarettes end up?
Ms. Deer: No, we don't monitor where the cigarettes end up. They're purchased within the community. And where they're taken, that's part of what we're looking at as far as regulations right now.
Senator Batters: Who owns the factories?
Ms. Deer: There are private individuals within the community.
Senator Batters: Non-Natives?
Ms. Deer: They're Natives, yes.
Senator Batters: Do you have anything further to add?
Ms. Green: At the trade collective, the common practice is we will follow health and safety standards and make sure that our employees are provided with safe environments to work. That's what will become the basis for the laws and regulations that we're also working on. We are in a very similar situation to Kahnawake.
Senator Batters: You follow health and safety standards set by whom?
Ms. Green: That will be set through the Haudenosaunee chiefs' council.
Senator Batters: But what is the standard that you're following right now?
Ms. Green: Right now basically it's common practice in terms of the providing safe environments. So it would be common standards, similar to what the province is providing but not exactly the same.
Mr. MacNaughton: When there is no problem pointed out in manufacturing or what's in it or no concerns, there is no need for any regulations. Some time can go by, a short time hopefully, when there are concerns expressed about these things, such as you've expressed.
I want to point out right now that the trade collective at Six Nations has been mandated by the confederacy council to come up with a list of regulations. We will look at that, examine it, and then make our own legislation on how things are to be run and who will administer it.
Senator Batters: What is the timeline given to them as far as their mandate?
Mr. MacNaughton: The first timeline was three months, and we've extended it by another three months about three weeks ago. It takes a little time to do this.
I would like to say we're looking at what's happening in other Haudenosaunee communities. We're looking at everything.
I'll tell you this much about the Haudenosaunee, and both the provincial and federal governments will tell you this. When they deal with us and they come to an agreement with us, they find that we have a habit of meeting or exceeding the standards that are in place already because we want better. We want everything better for everybody.
Mr. Maracle: The evidence given at the House of Commons committee from the testing that was done is that Native tobacco was no more harmful than the tobacco being used by larger cigarette companies.
The other thing is that Grand River Enterprises operates under a federal licence. I believe that the federal government would prescribe the conditions that must be met to keep that licence in good standing.
Senator McInnis: Thank you very much for coming. I have a question, but I just want to make a comment.
I was the recipient, in a prior life, of the royal commission report on the wrongful conviction of Donald Marshall, Jr. One of the 82 recommendations was that we would put in place a tripartite forum that would include the federal government, the province and the Native community, and we followed that. I raise that because it was put in place so that there would be consultation on all aspects of Native rights. We tried, to the extent possible, to live up to the spirit of that. I think it's extremely important that there always be consultation.
I don't know the genesis, what the background of this bill was. I think I know, reading it, but in any event consultation is extremely important.
I wanted to quote the comments made by Doug George-Kanentiio, a Native rights advocate from Akwesasne, where he compared the current defence of contraband tobacco to arguments made by Pablo Escobar, and other Colombian drug lords, in the 1980s to defend the trade. He says that it does provide an income, it does employ people, but at its heart it is not something that is good for the Iroquois people to base your entire economic well-being on, first, a single product, and second, a product that kills.
I want to just tie in this study that was done sometime in 2009, 2010 and 2011. I think it was done over a three-year period. Hundreds of high schools were surveyed in Ontario and Quebec, and one third of the cigarettes found in Ontario schools and over 40 per cent in Quebec high schools were contraband products. They were sold to students because IDs are not checked when contraband cigarettes are sold, and they're inexpensive. I think I read in an article that can you get 200 cigarettes for $10 and for the same amount of cigarettes legally produced, with regulations and permits, it would be something like $88.
The Chair: I did ask for brief questions.
Senator McInnis: And you're going to get it. My comment did destroy me.
Someone mentioned parity and you're mentioning regulations. Can you elaborate on this, because this is something that hits the health of youth? Can you talk about parity and regulations that are across the board, to the extent that you can control them?
Ms. Deer: I would like to touch first on the comment of having our whole economy based on one product. I can tell you, in my community, we haven't. We have industry, and we also have gaming, which we've been told we're not allowed to engage in. Again, we can prove throughout history we have conducted gaming for gain and wager.
So in our community there are many things, but for the Mohawk Council of Kahnawake there are other industries that, again, we are told we're not allowed to partake in. We need negotiations at many levels for many things.
Also I talked about price parity. Yes, non-Natives are the ones coming into the community to buy the cigarettes because, yes, they are cheaper. But because of the way the industry is, without the regulation that we are currently trying to get together, people are playing with the prices. They're trying to compete, so they keep cutting and cutting. So it's very attractive for people to come and buy in bulk. It's the people bringing it outside the community to those schools and high schools. They're not coming into our community and purchasing it, because we have a lot of respect, as First Nations, for our children. We don't sell to children in our community. Those cigarettes are getting way outside of Kahnawake, throughout the whole province, not by First Nations peoples.
We would like to raise the price so that it's less attractive and less accessible to youth. I, as the First Nations tobacco portfolio chief in Kahnawake, encourage people not to smoke because I don't smoke myself.
Mr. Maracle: I don't smoke either and never have, but I went to a public school off reserve in Belleville before there were ever Native cigarettes, and there were an awful lot of young people smoking cigarettes in Grades 7 and 8. That has been going on now for years.
The other thing is that Dr. Richard Schabas, the Medical Officer of Health for Hastings County, presented similar statistics to our council that you just mentioned about Native cigarettes finding their way into the hands of young people. We asked him for some information, and we particularly asked for police information as to who had been prosecuted for these offences and how the Medical Officer of Health was handling this concern in cooperation with the police. They were not able to furnish us with any information, with any charges, so it was just nothing more, in our view, than a good media story.
The Chair: We really have exhausted the time, but I think there is an interest. If members concur, we'll go for another five or six minutes and try to have the opportunity for a second question. Are we agreed?
Hon. Senators: Agreed.
Senator Baker: On the question of the constitutionality, I give my time to Senator Joyal for a supplementary question on his original one.
Senator Joyal: I would like to come back to the decision of the Supreme Court last summer that you quoted, and I'm sure you are well aware of the decision. The court recognized the title of the claim, but they also recognized justification of infringement.
If we accept your premise that a treaty right governs the trade of tobacco on the historical basis you have described, could the government sustain that the infringement contained in Bill C-10 is acceptable or justifiable within the limits established in the decision of the court? The court has recognized that there could be exceptions or, in other words, an infringement like the one of Bill C-10.
Mr. Detlor: You very much could, but then it turns into a question of process. The court said in Tsilhqot'in or the William case that first you go through the process of consultation, the procedural aspect, and then you trigger the fiduciary obligation. The fiduciary obligation and the impairment or infringement can be justified on a three-stage test. If we look at what the three-stage test says, does the Crown action minimally impair the right? That's the first one. My question back to you, which is rhetorical in essence, is whether putting people in jail minimally impairs or is that the most extreme thing that can be done right off the hop, right from get-go, go to jail. In my submission, that's the first one.
Senator Joyal: The second one.
Mr. Detlor: The first one is the government objective. Is there a legitimate and valid government objective? If the government objective is health and welfare then yes, it is; but if the government objective is to advance one economic interest over another, then perhaps not. If the government objective is truly to advance the market share of JTI and RBH versus the indigenous manufacturers, it would fail on the first test.
Second, we've already discussed the minimal impairment.
Third, on a balancing of the interests, the harm and the benefit, does it make sense? When we balance out the goal of the legislation with the harm that it's going to cause to communities, people, families, putting people in jail, does that make sense? That's really when it's an equitable decision. It's a very tough one to nail down as a lawyer, but in my heart, in my gut, I just don't see that this makes sense.
[Translation]
Senator Dagenais: My question is addressed to Ms. Deer. You are surely aware that a few years ago on the Kanesatake territory, Chief Gabriel's home had been set on fire because he objected to the trade in contraband tobacco. In fact, the Mohawk police corps was ejected from Kanesatake. I think that the police corps managed to get back onto the territory approximately a year and a half later.
Are you telling us that the contraband tobacco trade represents such an important economic value in your communities that that type of situation is accepted? Mr. Gabriel was threatened as chief, and he was not able to return to his community before approximately one year.
[English]
Ms. Deer: I can tell you that yes, I am aware of that because at the time I was a police officer for the Kahnawake Mohawk Peacekeepers and I ended up going to that community and policing it while the Kanesatake police had been removed. It was not solely for that purpose that it happened. There were underlying issues within that community and there are still today. They haven't been resolved. So that type of activity, it wasn't just that activity that happened. There's a great deal of politics going on and there's great division. We can't blame the contraband situation on that because today they are still having those same issues. There's a lot of unrest in that community, unfortunately.
[Translation]
Senator Dagenais: Am I to understand that you were a police officer at that time in Kanesatake?
[English]
Ms. Deer: No. I was with the Kahnawake Mohawk Peacekeepers who took over from the Kanesatake Peacekeepers.
Senator White: This is a bit of a supplementary question, chief, if you don't mind. I chase back a question put to you earlier. You responded that when you spoke to the local police, they had no statistics surrounding charges being laid. Would it have helped you, as you walk through this, to have that type of information?
Mr. Maracle: The council has always asked for validation for the link to organized crime. We have asked for a report from the police. We're not prepared to accept a political statement at face value when there are so many competing financial interests at play here. There never has been any information put forward to our council from the OPP, the Medical Officer of Health or our local police.
Senator White: One of the pieces of this legislation would allow police services who now can't operate under the Excise Act — it is federal only — to have that contact and investigate those types of crimes under the Criminal Code of Canada, whether it be municipal or provincial, which presently is allowed only for the RCMP. It's one of the challenges that not having legislation like this in place makes it —
Mr. Maracle: The council regulates the retail aspect of tobacco retailers by issuing a permit. If somebody's permit should be taken away, there must be evidence presented to the council. Neither the Medical Officer of Health nor the police provided any evidence to the council that warranted removal of the retail permit to sell tobacco.
The Chair: I'll have to jump in there and thank you all for being here this evening. We very much appreciate your contribution to our deliberations.
Mr. Maracle: Very quickly, the Supreme Court of Canada has always found that the Government of Canada has a very stingy interpretation of rights. The Assembly of First Nations has consistently asked for a rights table to be established, to come to an understanding about the interpretation of rights. The government has avoided creating such a table. The —
The Chair: I can't allow you to give us another speech. I've been generous with you with time.
Mr. Maracle: The court has also said when there is a disagreement that the rights issue should be interpreted favourably for the Native person.
The Chair: Thank you very much.
For our second panel today, please welcome, from Imperial Tobacco Canada Ltd., Éric Gagnon, Director of Government and Regulatory Affairs; and from FrontLine Security magazine, the editor of that publication, Ed Myers.
Mr. Gagnon and Mr. Myers, I understand you both have opening statements. We will begin with Mr. Gagnon.
[Translation]
Éric Gagnon, Director, Government and Regulatory Affairs, Imperial Tobacco Canada Ltd.: I want to thank the Legal and Constitutional Affairs Committee for its invitation to appear to discuss Bill C-10.
[English]
I'll start by saying that Imperial Tobacco Canada Ltd. offers its full support for this legislation, and we encourage its quick passage. Before addressing it, however, I want to clearly state that our company recognizes the health risks associated with smoking, and we also recognize the need for proper, balanced and evidence-based regulation.
That said, the choice facing decision-makers in Canada is whether to have a legal, regulated tobacco industry or an untaxed, unregulated free-for-all. That is the reality facing governments due to Canada's contraband tobacco crisis, and it is the lens through which all tobacco policy, including Bill C-10, should be viewed.
As mentioned, we believe this legislation is an important step in tackling contraband, which robs governments of billions of dollars every year, profits organized crime groups and undermines efforts at tobacco control, particularly as they relate to sales to youth. Make no mistake about it: Contraband tobacco is big business and a major threat to public safety.
To its credit, the Government of Canada has recognized the problem, and Bill C-10 will provide new tools to combat those trafficking contraband tobacco to communities across Canada. This is truly a national problem, with contraband from Quebec and Ontario ending up as far east as Newfoundland and as far west as British Columbia. However, Bill C-10 is only a first step, and further action is needed to address the root causes of the contraband crisis, which lie in simple supply and demand economics.
On the demand side, repeated studies have shown a direct link between successive and substantial tobacco tax increases and the growth of contraband tobacco. Governments' addiction to tobacco taxes, as demonstrated through countless federal and provincial increases in past years, has resulted in consumers turning to the illegal market for cheaper alternatives, thereby creating demand. The unlimited supply then comes from illegal manufacturing operations in Canada, plus upwards of 300 smoke shacks selling tobacco outside existing legal, regulatory and tax frameworks.
Don't get me wrong: We are not opposed to fair competition, including from First Nations communities. However, as a legal and law-abiding company, we would expect that everyone making and selling tobacco in Canada apply and respect the same rules and for governments to enforce those rules.
To put the size of the illegal supply in perspective, consider that the RCMP has stated that there are upwards of 50 illegal manufacturing operations in Canada. If each of those had only one cigarette manufacturing machine — and we suspect many of them have more than that — they could supply the entire Canadian market many times over.
In addition, the 2013 RCMP Illicit Tobacco Strategic Report stated that at least 20 illegal manufacturers are associated with organized crime groups, and there was a case just last May involving a major tobacco smuggling operation run by the Mafia and members of the Akwesasne reserve.
That same RCMP report also noted a troubling trend of illegal manufacturers growing their own tobacco without any oversight. The report suggests that the Six Nations reserve has 200 acres of unregulated tobacco crops, which would generate enough raw leaf to produce at least 200 million cigarettes, based on last year's yields.
Finally, in demonstrating the enforcement challenge presented by this issue, the RCMP report also states: ''Officer safety is identified as the primary concern related to law enforcement action targeting illicit tobacco manufacturers.''
That begs the question of whether Bill C-10 addresses these fundamental supply and demand dynamics behind the contraband trade. To that, I would say yes, to a certain degree. If people trafficking contraband face harsher penalties like mandatory minimum sentences, it could push some of them out of business, which would have an impact on supply.
However, Bill C-10 probably won't address the demand, since the threshold of 10,000 cigarettes, or 50 cartons, to which this legislation applies, would not capture your average smoker looking for a cheaper alternative. As a result, the existing penalties for possession of smaller amounts of contraband would still apply, and clearly those have not been acting as a deterrent. As long as there is demand, there will be supply — especially with so many illegal manufacturing operations and smoke shacks, combined with concern about officer safety in enforcing existing laws.
Therefore, while we fully support Bill C-10, we offer three additional recommendations to fight contraband tobacco.
First, consumers need to be educated about the illegal tobacco trade and its links to organized crime, the penalties associated with its use, and the lack of any quality or content control in its manufacturing process. We believe that investing in such a campaign would be a good use of the new money set aside in last year's budget to fight contraband.
Second, to have an impact on the demand side, governments must recognize the existing price gap between legal and illegal products and take that into consideration when making decisions about tax policy. The positive effects of a measure like Bill C-10 can quickly be undermined by tax increases that will further widen the price gap between legal and illegal products and drive more consumers to contraband.
Finally, for contraband to ever be truly addressed for the long term, the illegal manufacturing operations and smoke shacks have to be brought under the law. This must happen if the supply side of the equation is to be addressed. Ultimately, that does not require new laws but the enforcement of existing ones.
Thank you again for the opportunity to appear, and I look forward to your questions.
The Chair: Thank you, sir.
Mr. Myers, the floor is yours.
Ed Myers, Editor, FrontLine Security: Thank you, Mr. Chair and distinguished members of the standing committee. I've been the editor of FrontLine Security magazine since 2008. FrontLine Security is a quarterly magazine in print and electronic forms that has a controlled distribution of 20,000 readers and an estimated 50,000 e-viewers comprised mostly of law enforcement, security personnel, including border security, as well as government policy professionals from all government levels.
We have consistently pursued an editorial policy with FrontLine Security that is designed to raise the level of discourse in this country around issues of public safety and national security. Early in my tenure at FrontLine Security, I came across a report by the Criminal Intelligence Service Canada on organized crime and some of the issues surrounding contraband tobacco. More investigation into this area pointed to the links between the illicit trade in tobacco and organized crime, specifically biker gangs. The potential links to public safety and national security look compelling.
By the summer of 2012, we decided to publish our findings and thoughts on the matter and produced the first of a series of three articles beginning in the fall of 2012. The next two quarterly editions each contained the subsequent article in the series. I provided a compendium of these publications to the committee for your reference.
Feedback from the first article was much more vocal than I had anticipated, including from individual farmers who were not even on our distribution list. One farmer called me and complained that his neighbour in the Tillsonburg region was selling his crop overages for four to five times what the legitimate market was offering. The other strong message that came back from our readership was a sense of surprise and alarm at the ties to organized crime that come with the production or selling of contraband tobacco.
In further research conducted last year, we determined money ties from contraband proceeds to Hamas, and this was documented in a video called Smoke and Terror. Once we established the scope of the problem, we went to look for how law enforcement was responding to the situation. I could not find a single credible law enforcement voice on the subject that understood the extent of the contraband activity or the reach of the criminal networks that were involved.
My conclusions by the time I finished with the three-part series were that, one, the illicit trade in tobacco in Canada is costing $3.5 billion annually in lost tax revenue.
Two, organized crime groups drive the entire contraband tobacco market and provide the financial incentives and coercion to attract co-conspirators.
Three, there were insufficient penalties for trafficking in contraband tobacco to deter offenders.
Four, law enforcement has neither the mandate nor the motivation to provide a meaningful response to the illicit trade in tobacco and its public safety or national security implications.
Five, the illicit tobacco trade has major corruption influences that are sometimes inflicted on otherwise law-abiding community members, including farmers and corner store operators among others.
Six, purveyors of contraband are indiscriminate in terms of whom they sell to, including minors.
Seven, the complexities of the environment with tobacco must take into account the legitimate interests of First Nations communities.
Eight, local and provincial law enforcement need the mandate and resources required to stop the flow of contraband tobacco.
Finally, to properly manage the complex response to the contraband tobacco problem in Canada, a federal investigative ombudsman position should be created and provided with sufficient resources to carry out its mandate.
Thank you for the opportunity to appear in front of the committee. I would be pleased to answer any questions.
The Chair: Thank you. We'll begin questions with the deputy chair of the committee, Senator Baker.
Senator Baker: Thank you to the presenters for their interesting presentations to the committee.
It's indeed a complex matter that we're dealing with as far as trafficking or smuggling tobacco is concerned. As you know, sometimes legitimate large tobacco companies in Canada sell to the duty-free market in the U.S. and the tobacco ends up in Canada in the regular market. That's the subject of civil action right now on behalf of tobacco producers against the major companies. It's rather complex.
What I find complex about it, and perhaps you can answer this question, is that when one reads case law on the numbers of arrests of persons charged with having illegal tobacco in their possession, you see one of two scenarios: A police officer stops a van or a truck when they see cigarettes in plain view or when they have a customs officer with them who, on a suspicion, can seize the cargo.
The other scenario is when the police officer, say in Ontario or Quebec, stops a van and checks to make sure they have the seven or eight permits that they must have to transport tobacco. One is federal legislation under the Excise Tax Act and the other is provincial.
Under this bill, the same basis for stopping and arresting are still there. It's only the amount that's being transported that's changed and it adds an additional charge under the Criminal Code rather than under a regulatory regime. How would this have any effect to deter illegal activity in contraband?
Mr. Gagnon: I would like to clarify one point. When you refer to legal products making their way back to Canada, you're referring to an old story that has been settled already with the Government of Canada. I can assure you that today there are no legal products that are making their way back to Canada.
Senator Baker: The civil action remains, though.
Mr. Gagnon: Fair enough, but the situation is that there are no legal products making their way back to Canada.
Senator Baker: No, no. I'm not accusing Imperial of anything they weren't accused of years ago.
Mr. Gagnon: In terms of Bill C-10 specifically, like I said in my opening remarks, it's going to deter some of the traffickers to take some of the products and take them off the First Nation reserves where they are produced. The fines are going to be so important that some of the illegal traffickers might actually find this to be a deterrent.
But to your point, the challenge is that normally right now in Canada, you're not allowed to transport tobacco from one location to another, or from one province to another province, if you don't have the right permits. We're seeing that there is no collaboration between federal and provincial governments to try to get a solution on the contraband problem.
Senator Baker: That's your point.
Mr. Gagnon: Imperial Tobacco Canada believes that in order to solve this issue, there will have to be a concerted effort from Ontario and Quebec, because that's where the illegal manufacturing is operating, and the federal government to really try to address this. Bill C-10 is a first good step, but I think the efforts combined by the provincial and federal governments will be needed moving forward.
Mr. Myers: We have called for everyone to get in a room and figure this thing out. It is probably high time that happens. Our call for a federal ombudsman with investigative powers would go a long way toward sorting out the jurisdictional issues.
Quite frankly, I agree with my friend over here about the problem with heavy levels of taxation driving the illegal market and the lack of criminal penalties promoting illegal activity in the community.
The bill is starting to get where it needs to get to, but it's going to take the cooperation of a bunch of groups — the First Nations communities, law enforcement. There are lots of groups that need to be involved in this — and health, as well. It's time to get it all sorted out.
Senator White: Thanks to both of you for being here. I want to start by saying I hate tobacco. It makes it sound like I'm supporting it every time I ask a question, even though I'm the sponsor of this bill. I could not be more anti-tobacco. I thought I would throw that out.
We talk about powers. Today under the Excise Act, police services don't have the power they need — and that was my point with the earlier panel — to actually investigate those who are selling, transporting or anything else when it comes to illegal tobacco. I believe this bill will give us the ability to share the powers with other police agencies. Mr. Myers, I've read your articles previously, but I think you would agree that the power of this bill is that it actually allows agencies who otherwise were exempt from the opportunity to actually investigate to do so.
Mr. Myers: Absolutely, sir.
Senator Cordy: Senator White, it would be a toss-up as to which one of us dislikes tobacco more: the critic or the sponsor. I will try to get the aversion to smoking out of my head when I'm asking these questions so that I can be objective.
I like your idea, Mr. Myers, about getting everybody in a room to talk this out and figure out how best to make this work. We had a number of members of the Aboriginal community here earlier. They were very upset, understandably so, that there was a total lack of consultation, and there was no consultation with the provinces. The three levels have to work together if we're going to deal with the issue of contraband tobacco. Perhaps putting them in the room would be a great idea. However, I agree totally with you that it's important that consultation take place.
I was interested, Mr. Gagnon, when you said that tax increases mean more contraband. That was certainly my understanding, but the last time this bill came around, I thought it was convenience stores. Do you have statistics to bear out your comments about tax increases leading to more contraband? If you do, I would love to have it.
Mr. Gagnon: First, we need to understand the price difference between legal and illegal products. You can purchase what is called a ''baggy,'' which is 200 cigarettes, for approximately $15 in the illegal trade. If you buy the same amount of cigarettes on the legal side, you would pay on average $65 to $80. In some provinces, it is all the way to $100.
The price difference is so big that if you're a consumer, at some point you reach a tipping point where you say, ''This is too much money for me. There is an illegal trade available, so I will buy my products illegally.''
Senator Cordy: But you do have stats to show that the increase in taxation creates more contraband?
Mr. Gagnon: Yes, I'd be more than happy to forward that to you.
Senator Cordy: I would love to have that.
You also talked about this being a first step in terms of dealing with contraband tobacco. You both talked about the tie-in between organized crime and contraband tobacco. I wonder if you could go over some of the steps you talked about — education. I've seen television commercials that were absolutely dreadful — not in a good way — because I thought they really aren't going to do anything to make people more aware of the tie-in between criminal elements and contraband tobacco.
But you've come forward with something that is extremely important, because we've done a good job with advertising in diminishing the number of people who are smoking. Do you have a scenario in place for that?
Mr. Gagnon: I don't know if it's a scenario. The federal government has promised an education campaign on contraband for many years and we haven't seen it, to be fair. We believe that with the passage Bill C-10, in order for illegal traffickers to be aware of it, they need to be aware of increased penalties and fines.
By educating the people and targeting those individuals who are dealing illegal tobacco, and also maybe the people who are in the grey zone — those who are not illegal traffickers but who are law-abiding citizens in some cases, but when they purchase their tobacco, they are doing an illegal act. We believe those people need to be made aware that it is illegal and that there are penalties and fines associated with it. So education would be an important component in terms of trying to deter some consumers to purchase the illegal product.
Senator Cordy: And the federal government certainly has the jurisdiction to do that?
Mr. Gagnon: Of course. Like I said, in the last federal budget, if I recall, $91 million was announced to fight contraband tobacco over the next five years, and it's going to be important to use that money wisely and in concrete actions that will have an impact in the marketplace. We believe an education campaign on the consequences of buying contraband tobacco is one of them.
[Translation]
Senator Boisvenu: Welcome, gentlemen. Mr. Gagnon, I have a few questions to ask you. The contraband trade in cigarettes is not an activity that is unique to Canada. Trafficking in contraband cigarettes is a global activity, is it not?
Mr. Gagnon: As far as we know, that is true; there is a great deal of contraband. Tobacco is probably one of the products that is the most illegally traded throughout the world. The difference in Canada as compared to other countries is that these are legal products in the countries they will enter. That is one of the problems. Another problem are the counterfeit products; this issue is not all that prevalent in Canada. The problem that is particular to Canada is that there are illegal manufacturers who are making products here and selling them in the communities. That is specific to Canada.
Senator Boisvenu: And is this mostly being done in aboriginal communities?
Mr. Gagnon: The RCMP says that the 50 illegal plants are on First Nations reserves at this time.
Senator Boisvenu: Legal tobacco businesses such as yours — and do correct me if I am mistaken — have in the past provided raw material to aboriginals, have they not?
Mr. Gagnon: In fact, we did not provide raw material in the 1990s and 1980s; we pleaded guilty to a breach of the Excise Act. That problem was settled with the federal government and today the problem we are facing is entirely different, given the 50 illegal plants and the 175 organized crime groups who are managing the tobacco contraband.
Senator Boisvenu: So, the aboriginal plants are causing an imbalance in connection with normal trade operations involving cigarettes. What is the percentage of cigarettes on the market in Quebec or in Canada that were produced by legal businesses such as yours, and the percentage that come from aboriginal undertakings, and others? What would that percentage be?
Mr. Gagnon: It is very difficult to know. We would like to be able to determine a level. Since this is an illegal activity, it is very difficult to arrive at an exact figure. Nationally, several groups seem to agree on a percentage of between 20 and 30 per cent. However, yesterday again, a study was published according to which in Ontario 42 per cent of cigarettes that are sold are illegal, and in Quebec, we are looking at between 15 and 25 per cent.
Senator Boisvenu: What kind of dollar amounts are generated by sales? You said that 40 per cent of cigarettes being sold were illegal; what kinds of illegal amounts of money are we talking about?
Mr. Gagnon: I would expect that we are talking about billions of dollars. I do not know if my colleague has a figure but I do not have a specific figure to give you. In terms of revenue for the governments of Canada, this represents over $2 billion a year. Governments in Canada are already making $7 billion in revenue from the taxes on tobacco. From one end of the country to the other, we are looking at $2 billion that is not being collected because of contraband tobacco.
Senator Boisvenu: Is your business growing or declining?
Mr. Gagnon: The industry is declining by about 1 per cent per year.
Senator Boisvenu: What market share have you lost over the past 10 years?
Mr. Gagnon: Imperial Tobacco is the market leader. Our business has about 50 per cent of the market.
Senator Boisvenu: So your business is stable.
Mr. Gagnon: Yes, it is relatively stable. The market is going down year after year. Because of recent tax increases in Quebec, in Ontario and at the federal level, there are increasing illegal sales according to the data we have obtained. This decline in sales has accelerated in all sales outlets, particularly in those that are the closest to First Nations reserves.
To come back to the comment that was made earlier, there is indeed a very direct correlation between tax increases, the cost of the product and contraband. This is not just the opinion of Imperial Tobacco; according to third parties, particularly health groups, the biggest problem is caused by contraband tobacco.
Senator Joyal: My question is for you, first of all, Mr. Gagnon.
[English]
Maybe Mr. Myers will want to comment after that.
[Translation]
When Mr. Saint-Denis, the Department of Justice Senior Counsel, appeared last September 18 to introduce the bill, I asked him what studies the federal government had to back up its conclusion that the bill was necessary, and whether this bill addressed the recommendations or comments that had been made concerning contraband or the increase in contraband.
I would now like to read you the question I put to Mr. Saint-Denis, as well as the reply he gave:
Mr. Saint-Denis, since you did not consult First Nations' representatives, or provincial attorneys general, which factual study did you use to lead you to the conclusion that it is important to amend the Criminal Code with the provisions that you are presenting to us today?
And this is his answer:
We did not come to that conclusion based on a study. We received directives to create a new offence and we followed them.
I asked him next where these directives were coming from. He replied that they came from the minister, that is to say, from a political source.
I will continue:
Mr. Saint-Denis: The minister set the policy he wanted us to follow, so we followed it.''
Senator Joyal: So this was not the result of an RCMP report that concludes that, for some contraband products, setting harsher penalties is appropriate because it would be an effective way to attain the objectives they are not reaching in the context of the current legislation.
We have before us a bill and we are supposed to examine its impacts, even though we do not know the premise of the research, nor the facts that could pressure the government to act immediately, as the bill suggests. The same goes for the sanctions that are defined in the bill following the recommendations that were made.
[English]
For instance, Mr. Myers might have made in his study of the contraband.
[Translation]
Can you give us your comments on the strange origin of the bill, as compared to the objectives we would like to attain?
Mr. Gagnon: Firstly, I cannot answer on behalf of Mr. Saint-Denis, but several studies show that there is an important contraband problem in Canada. We do not lack for studies. In my opinion, the most important report is the RCMP report. At the time, the federal government had created a contraband strategy and the RCMP had updated that study. It established a close link between contraband tobacco and organized crime.
According to Mr. Myers, it has been proven that some of the profit and a part of the money collected from contraband in Canada winds up in other countries to fund organized crime. I would be happy to forward various studies that confirm the need for different initiatives.
Senator Joyal: Are you referring to the 2008-09 report?
Mr. Gagnon: Correct. The 2008 report was the initial one. The last revision of the strategy was in 2013. However, many studies reveal that contraband tobacco is a great scourge in Canada. And what is more important is its link with organized crime.
[English]
Senator Joyal: Mr. Myers, do you want to comment or add to the answer given by Mr. Gagnon?
Mr. Myers: No, I don't think I have much to add to it except that one of the things we did when we were researching for our articles in FrontLine Security is we looked at other jurisdictions as well, including in the U.S., and we saw a lot of instances where there was a connection between contraband tobacco and organized crime. We've seen a lot of the studies as well from the U.S., including butt studies and things like that, that talk about the prevalence of contraband tobacco in communities.
One of the things that worries me about this stuff is that what we've seen it do is people's moral compass get way out of whack on this stuff. We see these farmers that are otherwise law-abiding citizens and they're turning themselves into criminals. We've seen this a lot in the States, the bodega owners in New York selling contraband tobacco, because otherwise they go out of business.
We've seen similar issues in Canada where retailers are going out of business because the convenience stores depend on cigarette sales to keep their businesses afloat. They may sell a few bottles of Coke and stuff in the meantime, but it's really the smokes that make their business.
If somebody is down the road selling cartons of fake cigarettes out of the back of a van, it will affect their business, and it has. Some studies have said it has caused the closing of 40 per cent of some retail stores in certain areas. It's a big problem.
To me, the problem is that the impact is on communities. It drives crime into the communities. If you're in tobacco country in southern Ontario, late at night you can see the trucks scurrying away with lots of tobacco that will end up in illegal markets.
Senator Batters: Thank you very much, both of you, for coming here today and providing us with an important perspective that we heard a lot about when our committee was first dealing with this particular bill in a previous iteration, but we haven't heard that much of it so far.
What we heard before is that there is significant organized crime involvement with contraband tobacco. Previous testimony we heard was that the same pipelines that are used to smuggle tobacco are also used to smuggle drugs and guns. Mr. Myers, I'm wondering if you have any further comment on that.
I also think that this particular bill sends a very strong signal that this is serious criminal activity. This is not just a taxation matter. This is serious criminal activity with serious consequences for Canadians. My question to Mr. Myers is if he could expand on that.
Mr. Gagnon, you indicated that one of your recommendations would be for the federal government to educate consumers about contraband tobacco and the link to organized crime, amongst other things. How would you suggest best accomplishing that?
Mr. Myers: Can you give me that question again?
Senator Batters: Talk about the link between contraband tobacco and organized crime. You've touched on it and dealt with it in a brief way, but could you expand on that? Also, can you specifically expand on anything that you found in your significant research about the same pipelines being used to smuggle contraband tobacco being used to smuggle drugs and guns?
Mr. Myers: As a matter of fact, I was a participant in putting together a video last winter. We got people who had been charged with using the proceeds of contraband sales to fund Hamas organizations. We have them on tape doing this. The faces are blackened and their voices are changed, but they're admitting to the fact that what they're doing is using the illegal proceeds from this to fund terrorist organizations.
We've heard that the trap lines that are used to run tobacco between Canada and the U.S. over the Akwesasne area is the same channel used to bring guns up to Canada, marijuana down to the U.S. and cocaine back up to Canada.
We have seen footage of speedboats taking off with loads of tobacco from the Canadian side at midnight, shooting across the St. Lawrence River to the U.S., where it's quickly unloaded and then sent down. The margins on this stuff in New York State are phenomenal, just because of the tax rates down there. They pay enormous amounts in taxes, so these are really cheap alternatives for them.
We see a lot of that stuff. In fact, in terms of doing our work on this stuff, we have come across lots of data that proves that, and I would be happy to share what we have with this committee.
Senator Batters: That would be helpful. Thank you.
Mr. Gagnon: To be fair, I don't think we've fleshed out what the educational campaign would look like, but a couple of key elements would be, first of all, there are hot spots. We have talked about Quebec and Ontario as being the hot spots of contraband. If there's an educational campaign, probably these markets would have to be high on the list.
Also, for consumers, a lot of people think it's an unpunished crime. People need to understand that it's not. It's not because it's tobacco that it's unpunished legally, and that's what happened in Canada over the last decade or so. A lot of people think that they can buy it from friends and family, and people go and buy a case and bring it back to the communities and sell it left and right, and they feel that that's okay. I think people need to recognize that it's not unpunished. There are a lot of good examples from seizures and people who have been recognized guilty of dealing contraband tobacco, and there are consequences of doing it.
Senator McIntyre: In your opening statements, you both raised the issue of law enforcement. Today, we're dealing with Bill C-10, but before Bill C-10, we dealt with Bill S-16, which did not become law because of the prorogation of Parliament.
With Bill S-16, a new 50-officer RCMP anti-contraband tobacco force was to be created to target organized crime groups engaged in the production and distribution of contraband tobacco. Now, this 50-officer RCMP anti-contraband tobacco force is not part of Bill C-10. However, keeping that in mind, in your opinion, is this the type of law enforcement needed to fight contraband tobacco? Is this what is needed?
Mr. Gagnon: I said it, I think, in the remarks. It is a good step in the right direction, but I think that law enforcement will only attain a certain level of success. Until we're able to address the supply of the illegal trade, it's going to be challenging, to be honest. It's going to help. I think a good business case of it is Quebec. Quebec is a good example. They have put in place good efforts, and it has paid off, but we need to make sure that even if there are law officers dealing with contraband, that they have the right power. If they arrest people, they're allowed to seize the product and they're allowed to take the permit away. There is a lot of regulation in Quebec that probably could also be replicated in Ontario specifically, for example.
Again, specifically to your question, yes, we welcome any regulation that will address enforcement, but if that could be combined with addressing the supply, then that would be even better.
Mr. Myers: If I may, I would like to disagree a little bit with whether that's a good measure or not. At the risk of offending Senator White, I'd like to say that I don't think the RCMP have been terribly effective in dealing with the problem of contraband tobacco in Canada. When we've tried to talk to them, they don't see it as a problem. If it isn't involving huge amounts of conspiracies and big deals and murders and things like that, they're not that interested. I think that the key part of the proposed legislation is that it would give powers to law enforcement personnel at the community level and the provincial level.
What we've noticed in the past, by the way, is that forces like the Sûreté du Québec have been very effective at going after a lot of these criminal networks that are involved in contraband tobacco. I think the OPP is gearing up for the same sort of thing.
Again, my view would be that instead of spending $90 million on the RCMP, take half that money and create an investigative ombudsman position and give him the powers to investigate contraband tobacco and its ancillary issues at the federal, provincial and local levels.
Senator Lang: I want to follow up on Senator Batters. She brought up the question of organized crime, and also made the point, and I think made the point very well, that this is a very serious issue that faces Canadians. You were talking about drugs and the smuggling of guns, and it's obviously a very serious issue when it comes to health. We have to remember that that has to be paramount from a general public policy point of view. When a young person can buy cigarettes for $15 versus $88, it doesn't take you too long to figure out where they're going to buy the cigarettes and obviously get addicted that much quicker if they do go in that direction.
There is an area here we have glossed over. I would like to ask Ed Myers about this. You talked about your video called Smoke and Terror, and you determined that there were money ties from contraband proceeds going to Hamas, to terrorist groups.
Mr. Myers: Yes.
Senator Lang: That has to be a very major concern for us. Perhaps you could expand on this. As far as you know, because of the intelligence that's required to capture and to bring these people to justice, have there been any charges laid against individuals involved in contraband cigarettes?
Mr. Myers: Not in Canada, as far as I know, but in the States there have been. In fact, I can make that video available to the committee, if you'd like. It's a very powerful video that clearly points to these connections. How widespread it is, I'm not sure, but it's very clear that there's a money line between the people who are doing the contraband trade in the United States for sure and these terrorist groups. I'll produce the video for you, if you'd like, sir.
Senator Lang: Mr. Chairman, I don't think my question was answered. Were charges ever laid?
Mr. Myers: Yes.
Senator Lang: Successfully laid?
Mr. Myers: Yes.
Senator Lang: Perhaps you can indicate for us the amount of money that was involved.
Mr. Myers: I'm sorry; I don't know the details about that offhand. I can find out for you, though.
Senator McInnis: My question was basically asked, but I have a quick one that I should have asked of the previous panel.
It seems to me that some non-Native corporations may be implicit in the production of contraband cigarettes. Where do they get the paper, the filters, the ingredients that allegedly go in along with the tobacco? Does anyone know?
Mr. Myers: Probably from China. Mostly from China, I think.
Mr. Gagnon: We know for the tobacco itself, there have been a lot of seizures coming in from North Carolina or Ontario. That's where they buy it. Mr. Myers said that some illegal traffickers are buying tobacco from Ontario growers and some from the Carolinas. Making a cigarette is simple; you need tobacco —
Senator McInnis: I know it's simple. You can buy those rollers. I've seen them. But you need paper and you need filters.
Mr. Myers: Senator, there's a website on the Internet called TradeKey, and you can go on there and say, ''I want a million filters or cigarette papers.'' No problem. You will get all kinds of people from overseas — India, Pakistan and China, mostly China — who would be more than happy to sell you all the paper you want.
Mind you, this paper is not the paper that legitimate companies use, wherein if you don't keep smoking the cigarette, it will go out. These other papers are not treated in the same way; they will burn regardless of whether you're puffing on it or not, so it's a fire hazard. They are inferior products that are sourced overseas and become further inferior when it's sold to whoever buys it.
The Chair: Mr. Myers, since they closed down the Tobacco Growers' Marketing Board in Ontario a couple of years ago, there has been no oversight of production, sales or marketing of raw tobacco leaf.
You talked earlier about a moral compass, and I've heard, especially in southwestern Ontario, about good people being infected by this. What impact do you think it's having on the growth of the illegal market in Ontario especially?
Mr. Myers: Sir, I think that whole area is a big problem down there. I think the Ministry of Finance in Ontario has really dropped the ball on this thing. They were supposed to be regulating that industry. They've booted that problem down the road several times, and now it looks like it's going to be a minimum of January 2015 before any regime is in place to regulate this industry. In the meantime, it's like a free-for-all out there; nobody is counting their crops and their yields and things like that.
So from what we've been able to discern from people who are out there, there's a lot of unspoken-for tobacco that's coming out of those farms and getting into the wrong areas.
Mr. Gagnon: What Mr. Myers is relating to is Bill 186, which is supposed to be moving forward in Ontario in January. I would strongly encourage the federal government to ensure that Ontario regulates its leaf control. That's a major problem on the contraband file.
The Chair: Has there been any publicity surrounding this?
Mr. Myers: Yes, sir.
The Chair: There has been.
Mr. Myers: I wrote an article that appeared in a couple of the southern Ontario newspapers within the past month or so called ''Tillsonburg Tragedy.'' It's all about how this kind of Wild West environment has taken hold down there. I'd be pleased to provide a link to that article to the committee as well, if you'd like.
The Chair: That's kind of hypocritical for the provincial government to be railing about contraband tobacco and at the same time allowing this Wild West environment to continue.
Mr. Myers: Exactly.
The Chair: We'll have to wrap up because we have another committee coming into the room. Gentlemen, thank you very much for appearing tonight and assisting us in our deliberations.
(The committee adjourned.)