
39th PARLIAMENT,
2nd SESSION
Standing Committee on Public Safety and National Security
EVIDENCE
CONTENTS
Wednesday, May 7, 2008
|
 |
The Vice-Chair (Hon. Roy Cullen (Etobicoke North, Lib.)) |
|
 |
Mr. Dave MacKenzie (Oxford, CPC) |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
Mr. Dave MacKenzie |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
Mr. Dave MacKenzie |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
Hon. Sue Barnes (London West, Lib.) |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
Chief
Superintendent Mike Cabana (Chief Superintendent, Director General,
Border Integrity, Federal and International Operations Directorate,
Royal Canadian Mounted Police) |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
Mr.
Pierre Bertrand (Director General, Excise and GST/HST Ruling
Directorate, Legislative Policy and Regulatory Affairs Branch, Canada
Revenue Agency) |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
Mr.
David Quartermain (Director, Borders Intelligence Division,
Intelligence Directorate, Enforcement Branch, Canada Border Services
Agency) |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
Hon. Ujjal Dosanjh (Vancouver South, Lib.) |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
Hon. Ujjal Dosanjh |
|
 |
C/Supt Mike Cabana |
|
 |
Hon. Ujjal Dosanjh |
|
 |
C/Supt Mike Cabana |
|
 |
Hon. Ujjal Dosanjh |
|
 |
C/Supt Mike Cabana |
|
 |
Hon. Ujjal Dosanjh |
|
 |
C/Supt Mike Cabana |
|
 |
Hon. Ujjal Dosanjh |
|
 |
C/Supt Mike Cabana |
|
 |
Hon. Ujjal Dosanjh |
|
 |
C/Supt Mike Cabana |
|
 |
Hon. Ujjal Dosanjh |
|
 |
C/Supt Mike Cabana |
|
 |
Hon. Ujjal Dosanjh |
|
 |
C/Supt Mike Cabana |
|
 |
Hon. Ujjal Dosanjh |
|
 |
C/Supt Mike Cabana |
|
 |
Hon. Ujjal Dosanjh |
|
 |
C/Supt Mike Cabana |
|
 |
Hon. Ujjal Dosanjh |
|
 |
C/Supt Mike Cabana |
|
 |
Hon. Ujjal Dosanjh |
|
 |
C/Supt Mike Cabana |
|
 |
Hon. Ujjal Dosanjh |
|
 |
C/Supt Mike Cabana |
|
 |
Hon. Ujjal Dosanjh |
|
 |
C/Supt Mike Cabana |
|
 |
Hon. Ujjal Dosanjh |
|
 |
C/Supt Mike Cabana |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
Mrs. Ève-Mary Thaï Thi Lac (Saint-Hyacinthe—Bagot, BQ) |
|
 |
C/Supt Mike Cabana |
|
 |
Mrs. Ève-Mary Thaï Thi Lac |
|
 |
C/Supt Mike Cabana |
|
 |
Mrs. Ève-Mary Thaï Thi Lac |
|
 |
C/Supt Mike Cabana |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
Staff Sergeant Timothy Ranger (RCMP, As an Individual) |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
Ms. Penny Priddy (Surrey North, NDP) |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
Ms. Penny Priddy |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
Ms. Penny Priddy |
|
 |
C/Supt Mike Cabana |
|
 |
Ms. Penny Priddy |
|
 |
C/Supt Mike Cabana |
|
 |
Ms. Penny Priddy |
|
 |
C/Supt Mike Cabana |
|
 |
Ms. Penny Priddy |
|
 |
C/Supt Mike Cabana |
|
 |
Ms. Penny Priddy |
|
 |
C/Supt Mike Cabana |
|
 |
Mr. David Quartermain |
|
 |
Ms. Penny Priddy |
|
 |
Mr. David Quartermain |
|
 |
Ms. Penny Priddy |
|
 |
C/Supt Mike Cabana |
|
 |
Ms. Penny Priddy |
|
 |
C/Supt Mike Cabana |
|
 |
Ms. Penny Priddy |
|
 |
C/Supt Mike Cabana |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
Mr. Dave MacKenzie |
|
 |
Mr. Pierre Bertrand |
|
 |
Mr. Dave MacKenzie |
|
 |
Mr. Pierre Bertrand |
|
 |
Mr. Dave MacKenzie |
|
 |
Mr.
Phil McLester (Director, Excise Duties and Taxes Division, Excise and
GST/HST Rulings Directorate, Legislative Policy and Regulatory Affairs
Branch, Canada Revenue Agency) |
|
 |
Mr. Dave MacKenzie |
|
 |
Mr. Phil McLester |
|
 |
Mr. Dave MacKenzie |
|
 |
Mr. Phil McLester |
|
 |
Mr. Dave MacKenzie |
|
 |
C/Supt Mike Cabana |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
Hon. Sue Barnes |
|
 |
C/Supt Mike Cabana |
|
 |
Hon. Sue Barnes |
|
 |
C/Supt Mike Cabana |
|
 |
Hon. Sue Barnes |
|
 |
C/Supt Mike Cabana |
|
 |
Hon. Sue Barnes |
|
 |
C/Supt Mike Cabana |
|
 |
Hon. Sue Barnes |
|
 |
C/Supt Mike Cabana |
|
 |
Hon. Sue Barnes |
|
 |
C/Supt Mike Cabana |
|
 |
Hon. Sue Barnes |
|
 |
C/Supt Mike Cabana |
|
 |
Hon. Sue Barnes |
|
 |
C/Supt Mike Cabana |
|
 |
Hon. Sue Barnes |
|
 |
Mr. Phil McLester |
|
 |
Hon. Sue Barnes |
|
 |
Mr. Phil McLester |
|
 |
Hon. Sue Barnes |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
Mr. Robert Bouchard (Chicoutimi—Le Fjord, BQ) |
|
 |
C/Supt Mike Cabana |
|
 |
Mr. Robert Bouchard |
|
 |
C/Supt Mike Cabana |
|
 |
Mr. Robert Bouchard |
|
 |
Mr. Pierre Bertrand |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
Mr. Gord Brown (Leeds—Grenville, CPC) |
|
 |
C/Supt Mike Cabana |
|
 |
Mr. Gord Brown |
|
 |
C/Supt Mike Cabana |
|
 |
Mr. David Quartermain |
|
 |
C/Supt Mike Cabana |
|
 |
Mr. Phil McLester |
|
 |
Mr. Gord Brown |
|
 |
C/Supt Mike Cabana |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
Ms. Bonnie Brown (Oakville, Lib.) |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
C/Supt Mike Cabana |
|
 |
Ms. Bonnie Brown |
|
 |
C/Supt Mike Cabana |
|
 |
Ms. Bonnie Brown |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
Mr. Rick Norlock (Northumberland—Quinte West, CPC) |
|
 |
Mr. Dave MacKenzie |
|
 |
Mr. Rick Norlock |
|
 |
Mr. Phil McLester |
|
 |
Mr. David Quartermain |
|
 |
C/Supt Mike Cabana |
|
 |
Mr. Rick Norlock |
|
 |
Mr. David Quartermain |
|
 |
Mr. Rick Norlock |
|
 |
Mr. David Quartermain |
|
 |
Mr. Rick Norlock |
|
 |
Mr. David Quartermain |
|
 |
Mr. Rick Norlock |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
Mr. Geoff Trueman (Chief, Air Travelers Security Charge, Sales Tax Division, Tax Policy Branch, Department of Finance) |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
Mr. Geoff Trueman |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
Mr. Phil McLester |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
Ms. Penny Priddy |
|
 |
Mr. Geoff Trueman |
|
 |
Ms. Penny Priddy |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
Mr. Ken Medd (Senior Tax Policy Officer, Aboriginal Tax Policy Section, Department of Finance) |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
Ms. Penny Priddy |
|
 |
Mr. Ken Medd |
|
 |
Ms. Penny Priddy |
|
 |
Mr. Ken Medd |
|
 |
Ms. Penny Priddy |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
C/Supt Mike Cabana |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
C/Supt Mike Cabana |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
C/Supt Mike Cabana |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
Ms. Bonnie Brown |
|
 |
C/Supt Mike Cabana |
|
 |
Ms. Bonnie Brown |
|
 |
The Vice-Chair (Hon. Roy Cullen) |
|
 |
Ms. Bonnie Brown |
|
 |
The Vice-Chair (Hon. Roy Cullen) |

CANADA
Standing Committee on Public Safety and National Security
|
EVIDENCE
Wednesday, May 7, 2008
[Recorded by Electronic Apparatus]
* * *
(1530)
[English]
The Vice-Chair (Hon. Roy Cullen (Etobicoke North, Lib.)):
Ladies and gentlemen,
mesdames et messieurs, I'd like to bring the meeting to order.
Welcome to meeting 28 of the Standing
Committee on Public Safety and National Security. We're doing a study
of contraband tobacco. We're looking at contraband tobacco, not in the
sense of smoking and the ills of smoking—I don't think many of us here
need to be reconvinced of that—but in the context of contraband. I'm
sure that's been explained to the witnesses.
I welcome all of you, and the members.
If I could indulge the witnesses for
one moment so I can do a bit of planning here, we understand that the
minister will not be available to come to our committee next week
within the context of our review of tasers. So I have a suggestion to
make. The panel meeting that we had originally planned for the other
stakeholders on the contraband tobacco question had to be cancelled
because of the water problems on the Hill on Monday. So with your
agreement, we'll reschedule that panel, if there's sufficient time, for
this coming Monday.
Is that okay?
Mr. MacKenzie.

Mr. Dave MacKenzie (Oxford, CPC):
I
don't disagree with that at all, but that panel is way too big to have
here on one day. This room was full, and there wouldn't have been room
for the panel to be here in the room. I really think it should be
divided in half, and that the meeting should have been for two days. I
don't think it would be fair to the panellists, otherwise.
An hon. member: Agreed.

The Vice-Chair (Hon. Roy Cullen):
Is that agreed?
Okay, that might make it easier to
schedule as well. If anyone has some scheduling problems, we'll split
it up. Does it matter which pairs or—

Mr. Dave MacKenzie:
I think
we should have the tobacco industry people here separately from the
other group. It's not that there's anything untoward about the second
body, but it was just way too big.

The Vice-Chair (Hon. Roy Cullen):
You don't have to call them with the order?

Mr. Dave MacKenzie:
No, absolutely not.

The Vice-Chair (Hon. Roy Cullen):
It's a matter of the practicalities of who we can get—

Hon. Sue Barnes (London West, Lib.):
Why don't you just let the concordance group do our scheduling?

The Vice-Chair (Hon. Roy Cullen):
Yes.
Okay, thank you. We'll proceed on that basis.
I believe we will now have statements
from the RCMP, the Canada Revenue Agency, and the Canada Border
Services Agency, as I understand it. We will start with the usual five-
to ten-minute presentations, and then we'll open it up to questions.
Could we start with Mr. Cabana, chief superintendent from the RCMP.

Chief Superintendent Mike Cabana (Chief Superintendent,
Director General, Border Integrity, Federal and International
Operations Directorate, Royal Canadian Mounted Police):
Thank you very much.
As director general of the RCMP border
integrity program, I'd like thank the committee for this opportunity to
meet and discuss the illicit tobacco trade.
Briefly, and by way of background, a
large portion of the RCMP's border integrity mandate is to enforce laws
within Canada and along the uncontrolled border, and to govern thereby
the international movement of dutiable, taxable, controlled, or
prohibited goods; and the manufacture, distribution, and possession of
contraband products, including tobacco and spirits.
Historically, like other criminal
trends, the illicit tobacco trade ebbs and flows. Over the years, we've
seen periods of sharp spikes and sharp declines. Today, it is not only
flowing, but also hemorrhaging, and it has flourished into a key
business enterprise for many criminal groups. Since 2001, our
contraband tobacco seizures have rapidly and steadily climbed. Last
year, our seizures reached an all-time high. We seized more than
618,000 cartons of illegal cigarettes, a 21-fold increase over 2001,
which totalled 29,000 cartons at that time. Equally concerning are the
large bags of illegal raw leaf and loose tobacco seized. Again, last
year our seizures reached 37 metric tonnes.
Clearly it's big business for
criminals. In fact, intelligence assessments, along with seizure rates,
indicate three things: the trade is growing, it is no longer
centralized in only Ontario and Quebec, and more than 150 organized
crime groups are involved. But they are not only involved in
trafficking contraband tobacco.
(1535)
[Translation]
These are criminals who also deal in
drugs, firearms smuggling and money laundering. It's not uncommon to
have our investigators seize other illegal commodities along with
tobacco, today.
[English]
Last summer, through a marine security
initiative called Shiprider, the RCMP and the U.S. Coast Guard worked
in partnership on the same vessels along our shared marine border. The
project resulted in the seizure of more than 1.4 million contraband
cigarettes, 200 pounds of marijuana, and $38,000 in illicit cash, and
contributed to dozens of arrests. All this occurred in a two-month span
in a relatively small marine corridor in the St. Lawrence Seaway.
Given its growth, proliferation, and
connection to organized crime, contraband tobacco is a major priority
of the RCMP customs and excise program. To further focus our efforts on
effectively attacking the market, the Minister of Public Safety and our
deputy commissioner of federal policing officially released the RCMP's
contraband tobacco enforcement strategy this morning. While a big part
of the strategy is the disruption of criminal organizations, success
will require more than enforcement alone.
In this regard, in developing our
strategy we met with over 70 partners and stakeholders that have an
interest in the contraband tobacco trade. Through this consultation and
dialogue, we believe our strategy responds to the various challenges
before us.
Decades of experience dealing with
this illegal market, however, indicate that enforcement efforts alone
will not resolve the issue. Making an impact will require a
multi-layered approach encompassing a number of initiatives, including
raising public awareness. The public needs to understand that
purchasing contraband tobacco directly supports organized crime. We
believe that knowing the consequences will help reduce the demand.
We'll strive for more open dialogue
with aboriginal governments on issues associated with contraband
tobacco trade. We will monitor and evaluate programs to keep pace with
the evolution of the illicit trade and adjust our approach as required.
We are committed to expanding
partnerships and improving international cooperation and training. For
example, last week close to 150 representatives from several countries
met in Toronto for the sixth annual tobacco diversion workshop. This is
perfect example of international cooperation. This is more than a
Canadian problem; it's a global problem requiring a global solution.
In closing, based on the growth of the
illicit market, it's evident that the current deterrents have to be
enhanced and expanded. I can assure you that the RCMP will continue to
pursue criminal organizations involved in illicit tobacco manufacturing
operations and large-scale distribution networks.
[Translation]
The Strategy is our continued
commitment to targeting this crime and it will build on the actions we
are already taking to ensure the safety and security of our
communities.
[English]
I would like to thank you for inviting
me to appear before this committee. I am prepared to take any questions
you may have.
[Translation]

The Vice-Chair (Hon. Roy Cullen):
Thank you, Mr. Cabana.
Our next witness is Pierre Bertrand,
Director General, Excise and GST/HST Ruling Directorate, Canada Revenue
Agency.
Mr. Bertrand.
[English]

Mr. Pierre Bertrand (Director General, Excise and GST/HST
Ruling Directorate, Legislative Policy and Regulatory Affairs Branch,
Canada Revenue Agency):
Good
afternoon, and thank you, Mr. Chairman and members of the committee,
for the opportunity to appear today and explain Canada Revenue Agency's
role in this file under discussion.
With me today is Phil McLester, who is the director of the excise duties and taxes division.
The CRA is responsible for the
administration of the Excise Act of 2001, which establishes the
framework for licensing tobacco manufacturers, regulating tobacco
products in Canada, and applying excise duties to tobacco products
manufactured in Canada or imported. Our focus is maintaining compliance
in the legal tobacco market. To this end, we interpret the act and its
regulations, and we create policies and other administrative procedures.
On the tobacco file, one of our
important roles is the issuance and renewal of tobacco manufacturing
licences. Without a tobacco licence, the company does not have the
right to manufacture tobacco products, will not have legal access to
raw leaf tobacco, and cannot import tobacco without the imposition of
excise duty. The licensing function can be described as an important
first step in gaining compliance with the legislation.
The act and the regulations respecting
excise licences and registrations contain strict requirements for
obtaining and maintaining a licence, and these are applied diligently
to all applicants. Prior to issuing a licence, the CRA undertakes
criminal background checks, ensures a history of compliance with
federal tax legislation, contacts provincial authorities to verify
compliance with their legislation, and verifies the financial and
economic viability of the enterprise.
An important criterion for obtaining
and maintaining a licence is that an applicant or licensee must comply
with any act of Parliament or of the legislature of a province
respecting taxation of tobacco or controlled items. The CRA consults
with the province in which an applicant is located. The information
provided is evaluated, along with all the information available when
assessing the issuance of a licence, or when considering possible
suspension or revocation of a licence. In addition, the CRA advises
licensees of the need to comply with provincial permit requirements by
way of outreach packages, licensing notifications, and visits to
manufacturing premises.
A licence has a maximum duration of
two years. To be renewed, it must pass through the same stringent
requirements noted above. Once a licence has been issued, if the
licensee fails to meet the conditions of the licence—e.g., maintaining
satisfactory security or complying with the act—a licence may be
suspended or revoked. We have suspended and revoked licences when
licensing conditions are not met. There are currently 46 tobacco
licences in Canada. While we do not specifically track or report on the
locations or premises associated with these licences, I can say that
there are currently 14 tobacco licensees on first nations reserves.
The CRA undertakes numerous
activities to ensure that licensees are in compliance with the
legislation, including audits to confirm revenue and regulatory
activities to ensure compliance with the control of tobacco products.
There are many examples of this activity, such as reviewing internal
controls, touring premises, inventory verifications, stamping and
marking verification, etc.
In respect of the recent history of
federal excise revenues collected on tobacco products, it is public
information that over the four years from 2003-04 to 2006-07, federal
excise revenues have declined from $3.35 billion to slightly under $2.5
billion. This relates specifically to legitimate tobacco manufacturing
production.
Budget 2005 announced funding for a
number of tobacco compliance activities, and the CRA has used this
funding to advance its tobacco compliance strategy. This encompasses
enhanced audits of tobacco manufacturers, tobacco grower outreach and
compliance monitoring, and the establishment of an enhanced stamping
regime.
(1540)
We have implemented the first two
elements of our strategy. As well, we have completed contracting for a
new tobacco stamp that will contain state-of-the-art overt and covert
markings to combat counterfeiting and discourage the illicit
manufacture or under-reporting of tobacco production. The new stamp
will be another tool in the arsenal of federal and provincial
enforcement agencies to address a portion of the contraband tobacco
challenge.
Government has long recognized that
the subject of legislative compliance and contraband tobacco is
far-reaching and complex, involving the cooperation of several partner
government organizations. To ensure that Canada's tobacco tax laws are
effectively applied, CRA works with the RCMP, CBSA, Finance Canada, and
the provinces and territories. In terms of our overall administrative
role, we also work with Health Canada and Agriculture and Agri-Food
Canada. In fact, the CRA participates in numerous fora with provincial,
national, and international representation, including the tobacco
diversion workshop mentioned by my RCMP colleague. There are a number
of other ones.
In terms of our future activities, the
CRA will continue to advance our new enhanced stamping regime; support
our partners in combating contraband tobacco products; advance
collaboration with band councils and manufacturers in the tobacco
industry; participate in the World Health Organization Framework
Convention on Tobacco Control's intergovernmental negotiating body
toward the drafting of an international protocol on illicit trade in
tobacco products; and defend, in collaboration with Justice Canada,
Canada's interests before the courts to ensure that revenue is
protected and compliance objectives are met and maintained.
Mr. Chairman, thank you for this
opportunity to speak to you today. We would be pleased to answer any
questions you may have.
(1545)

The Vice-Chair (Hon. Roy Cullen):
Merci beaucoup, monsieur Bertrand. I'm sure we'll want to know more about this decline in the tobacco federal excise revenues. I was surprised by your comment.
Nonetheless, we'll move on to the Canada Border Services Agency. Mr. Quartermain, please.

Mr. David Quartermain (Director, Borders Intelligence Division,
Intelligence Directorate, Enforcement Branch, Canada Border Services
Agency):
Thank you, Mr. Chairman and members of the committee.
On behalf of the CBSA, I am pleased to
appear before the committee to explain to you how the CBSA addresses
the contraband tobacco situation in the context of our border mandate
and to respond to any questions you may have.
The mandate of the CBSA is to provide
integrated border services that support national security and public
safety priorities. The CBSA is responsible for managing, controlling,
and securing Canada's borders by ensuring that all people coming into
Canada are admissible and comply with Canadian laws and regulations,
and for processing all commercial shipments that cross our ports of
entry to ensure that Canada's laws are adhered to.
Under the Customs Act, we are also
responsible for investigation and prosecution of border security
offences, such as the smuggling or unlawful import or export of
controlled, regulated, or prohibited goods, including contraband
tobacco. The CBSA investigates commercial fraud, smuggling, and other
import- and export-related offences and ensures that the business
community complies with Canada's trade and border legislation.
The agency administers more than 90
acts and regulations on behalf of other federal departments and
agencies, the provinces, and territories. Where there is a
contravention under these authorities, such as the unlawful importation
of tobacco products, the CBSA will prosecute offenders, or we will call
on our law enforcement partners to lay criminal charges under the
Criminal Code of Canada.
The agency works in close partnership
at the federal level with our partners represented here at this table:
the RCMP, the Department of Public Safety, the Department of Justice,
and the Canada Revenue Agency, as well as a variety of partners beyond
our borders, including U.S. Customs and Border Protection, the U.S.
Immigration and Customs Enforcement, and of course, the U.S. Bureau of
Alcohol, Tobacco, Firearms and Explosives.
Regarding tobacco, the CBSA
administers its responsibility in accordance with the provisions set
out in the Customs Act; the Customs Tariff; Excise Act, 2001; and the
Criminal Code of Canada.
With respect to the current situation,
it is notable that the price of Canadian cigarettes has increased by
approximately 45% over pre-1994 levels. While this may have motivated
some smokers to quit, others seek out lower-cost sources of tobacco. In
2007, CBSA officers made over 3,800 seizures of illicit tobacco,
totalling 268,754 cartons of cigarettes, 225 kilograms of cigars, close
to 17,000 kilograms of fine-cut tobacco, and just under 3,000 kilograms
of pipe and other tobacco products.
Compared to 2006, the number of
tobacco seizures in 2007 increased by 43%. This is primarily due to a
greater number of seizures made in the postal and courier modes. The
total seizures in 2007 represented the highest number of annual tobacco
seizures made by CBSA officers since the implementation of the federal
tobacco control strategy. This increase can be attributed to better
targeting due to intelligence development through monitoring and
assessing the contraband tobacco market as required by the strategy.
Counterfeit Canadian and American
brand cigarettes, primarily from China, as well as Chinese brand
cigarettes are being seized from marine containers and comprise the
majority of contraband cigarettes intercepted by the CBSA. Extensive
smuggling by organized crime groups continues to occur in the
Cornwall-Valleyfield area, both at and between the ports of entry, and
this remains a challenge for law enforcement personnel.
Between 2003 and 2007, the CBSA seized
approximately 18,000 cartons of cigarettes, as well as carton
equivalents in zip-lock bags, at the port of Cornwall, consisting
mainly of native brand cigarettes produced on the U.S. side of the
Mohawk community of Akwesasne. However, the majority of tobacco
smuggling in these areas continues to occur between the ports. Here,
the CBSA supports its law enforcement partners by providing resources
to assist in intelligence-gathering initiatives.
The CBSA is also noticing that
smugglers are making increasing use of the courier and postal systems
to move illicit tobacco products into Canada. This mode of smuggling
has seen a dramatic increase over the years, but most notably this past
year. In 2006 there were 641 seizures as compared to 1,610 seizures in
2007. This is an increase of 151% in one year.
To detect tobacco smuggling at the
border, the CBSA uses state-of-the art technology and intelligence
information to assess and target shipments coming into Canada.
(1550)
The CBSA continues to successfully
intercept illicit tobacco at the Canadian border. A notable success
occurred in July 2007, when the agency seized 49,000 cartons of Chinese
brand cigarettes from a marine container originating in China. The
cigarettes were discovered during a mobile VACIS scan and a physical
examination of the container. The seizure occurred following a
cooperative joint enforcement effort involving the CBSA and the RCMP in
the Greater Toronto Area, and it resulted in the arrest of seven
individuals.
Also, in October 2007, more than 15
metric tonnes of fine-cut tobacco, valued at over $1.5 million,
originating in North Carolina and South America, were seized in two
separate shipments at two ports of entry in Quebec. The seizures were
the result of a joint force operation involving the CBSA, the
Integrated Border Enforcement Team, and U.S. Customs and Border
Protection agents.
Our largest seizure occurred in
December 2007, when four persons in Markham, Ontario, were arrested
following a joint CBSA-RCMP enforcement operation. A marine container
originating in China arrived containing 51,600 cartons of counterfeit
Marlboro brand cigarettes valued at over $3.6 million. Also in
December, at the port of Vancouver, CBSA intercepted another container,
again originating in China, with 48,950 cartons of Chinese brand and
Canadian and American counterfeit brand cigarettes valued at $3.4
million. Duties and taxes evaded were approximately $1.2 million.
In 2001, the Government of Canada
introduced the federal tobacco control strategy to improve the health
of Canadians by discouraging tobacco consumption. Health Canada is the
lead agency in this initiative, and the CBSA is a partner along with
the RCMP and other partners seated at this table.
In support of furthering cooperation
between domestic and international enforcement partners, I am pleased
to say that the CBSA recently co-hosted, along with the partners at
this table, the sixth annual Canada/U.S. Joint Tobacco Diversion
Workshop. Participants met over three days to discuss tobacco diversion
issues. This year's attendees included representatives from various
U.S. and Canadian federal agencies and provincial ministries, as well
as international guests from the World Customs Organization, the
Australian Customs Service, French customs, Her Majesty's Revenue and
Customs, the U.K. Border Agency, the New Zealand Customs Service, and
the OLAF.
Through the collaborative partnership
of the Canadian host agencies—CBSA, the RCMP, CRA—and our American
counterparts at the Bureau of Alcohol, Tobacco, Firearms and Explosives
and the Alcohol and Tobacco Tax and Trade Bureau, this workshop has
become an important forum for exchanging intelligence between
enforcement partners, for the building of international relationships,
and for the development of both strategic and technical intelligence
related to the domestic and international contraband tobacco market.
While the above successes are
noteworthy, we at the CBSA recognize our contraband tobacco market
continues to be of great concern, and I can assure you, Mr. Chairman,
that the CBSA continues to address the contraband tobacco market as an
agency, in cooperation with our partners.
(1555)

The Vice-Chair (Hon. Roy Cullen):
Thank you very much, Mr. Quartermain.
Now we'll start with a round of
questions. The first round, seven minutes per questioner, will start
with Mr. Dosanjh.

Hon. Ujjal Dosanjh (Vancouver South, Lib.):
Thank you.
I see this document that we just
received. Not to be critical of the presenters from the RCMP, but this
suddenly appears on the day of this hearing. Call me an unbeliever, but
I just find that not very persuasive, and I don't know how much went
into printing this.
Here are my questions. We know there
is contraband smuggled into the country and manufactured in this
country. I'd like to know what percentage of the total tobacco trade is
contraband, what part of that is smuggled into the country, what part
of that is manufactured in the country, where it is manufactured, and
why you have not done anything about it—about the manufactured part.

The Vice-Chair (Hon. Roy Cullen):
Who would like to start with that? Monsieur Cabana.

Hon. Ujjal Dosanjh:
It's the RCMP.

C/Supt Mike Cabana:
Certainly,
sir. I'm afraid that in terms of being able to provide you with
percentages of contraband tobacco in Canada that originates from
manufacturers here in the country compared to what originates in the
U.S., I'm not in a position to provide you with those statistics. Those
statistics would be based on seizure levels and would be—this is my
personal opinion—somewhat speculative.

Hon. Ujjal Dosanjh:
I am
assuming that there are manufacturers within this country that may be
engaging in illicit trade as well. I am assuming that. You can correct
me if I am wrong.

C/Supt Mike Cabana:
No. You're absolutely right.

Hon. Ujjal Dosanjh:
I am also
assuming that there are unlicensed manufacturers. I'd like to know both
what you are doing with respect to the licensed manufacturers that are
engaging in this and where the unlicensed manufacturers are located,
and what have you done about them?

C/Supt Mike Cabana:
As for
unlicensed manufacturers that we have identified to date in the
Akwesasne territory, we believe that between 11 and 13 factories exist.
In the Kahnawake territory, there would 11. In the Six Nations, there
would be seven.

Hon. Ujjal Dosanjh:
And these are unlicensed?

C/Supt Mike Cabana:
These are unlicensed premises.

Hon. Ujjal Dosanjh:
Are there any other unlicensed premises off reserves in this area?

C/Supt Mike Cabana:
There may very well be, sir. This is based on--

Hon. Ujjal Dosanjh:
But you're not aware of them.

C/Supt Mike Cabana:
This is based on the intelligence that we have.

Hon. Ujjal Dosanjh:
And tell
me, what steps have you taken within the last six months to deal with
the unlicensed manufacturers that you know of, which is 24 plus seven;
that's 31.

C/Supt Mike Cabana:
Yes, sir.
Actually, a number of steps have been taken, one of which.... And I
realize you might find today's release of the tobacco strategy
questionable. The timing of the release of this strategy was not
really--

Hon. Ujjal Dosanjh:
It wasn't you. I understand that.

C/Supt Mike Cabana:
It was released today.
The strategy, though, is something
we've been working at for quite some time. This strategy has been in
development for well over a year. There has been extensive
consultation. So this is more on the preventative side; this is sort of
the way forward.
What we've been doing, aside from
developing a strategy and doing the consultation, is basically
analyzing the intelligence that we have and trying to identify the
criminal organizations that are actually operating these facilities
that are located within the different native communities. The vast
majority--and I guess this will partly answer your original
question--of contraband tobacco that is seized across Canada originates
from central Canada and is manufactured on the U.S. side of the border
in licensed and unlicensed manufacturing facilities.
We're enhancing the cooperation that
already exists between the Canadian agencies, which are represented
here at the table, to make sure the intelligence is fully shared and
that the targeting is done at the appropriate level.
(1600)

Hon. Ujjal Dosanjh:
I
understand. That's what's coming across the border, and you're
integrating your efforts, coordinating them.
What are you doing with respect to the
31 locations that are within Canada, within your own jurisdiction? Why
have you not enforced the law?

C/Supt Mike Cabana:
Well, I
would beg to differ on that point, sir. A number of projects have
actually come to fruition over the past year, targeting some of those
facilities.

Hon. Ujjal Dosanjh:
How many have you put out of business in the last two years?

C/Supt Mike Cabana:
Actual facilities?


C/Supt Mike Cabana:
I'm afraid I can't provide you with that answer.

Hon. Ujjal Dosanjh:
Is it none, or one?

C/Supt Mike Cabana:
The facilities themselves? I don't know, sir. I don't know.
But what I can tell you is that there
have been quite a few individuals charged. There have been a total of
918 people charged in the course of the past two years. The individuals
who have been charged--and you have to understand, we focus on
targeting the highest level of the organizations--

Hon. Ujjal Dosanjh:
Absolutely.

C/Supt Mike Cabana:
So
whether the manufacturers are still operating.... I know some of them
are operating and I would suggest to you, sir, that probably the
majority of them are operating.

Hon. Ujjal Dosanjh:
You have
known this information about organized crime being part of all of this,
either in terms of the smuggling of manufactured stuff elsewhere and
otherwise. And no reflection on you individually, but I just want to
tell you that as a former attorney general for British Columbia, I've
been very proud of the RCMP. They serve much of British Columbia. But I
am actually flabbergasted with the lack of action on this file that all
of the law enforcement agencies--none excluded--have exhibited. I don't
know what else to say.

C/Supt Mike Cabana:
In
response to your comment, sir, I would suggest to this honourable
committee that we have to recognize that the agencies that are sitting
at the table here, over the past many years, have been focused on
trying to eradicate the problem. If you look at the seizure levels over
the past several years, seizures are increasing exponentially. It's
clear the problem is not getting resolved.
This is why the document you have in
front of you, which was distributed.... That's why we now recognize
that enforcement alone is not the solution to the contraband tobacco
problem.

Hon. Ujjal Dosanjh:
And what is?

C/Supt Mike Cabana:
It's a
combination, sir, of different initiatives. It's education within the
communities and it's also enforcement and regulation of the industry.

The Vice-Chair (Hon. Roy Cullen):
Thank you very much, Mr. Dosanjh.
Madam Thaï Thi Lac, s'il vous plaît.
[Translation]

Mrs. Ève-Mary Thaï Thi Lac (Saint-Hyacinthe—Bagot, BQ):
Good
afternoon. I would like to thank the witnesses for being here today to
talk about the smuggling that is happening in Quebec and across Canada.
Most of my questions are for Mr.
Cabana. You said that over 900 people have been prosecuted. When
prosecuting people for tobacco smuggling, the Crown prosecutor can
choose to proceed by summary conviction or indictment. Do you have any
statistics on the number of people who were charged on summary
conviction, and those who were indicted?
You said that you target the upper
levels of organizations. We know that no business can operate without
clients or buyers. I agree that you do need to dismantle the upper
levels of these organizations. But are any consumers ever brought
before the courts? Are there any penalties that dissuade consumers from
buying illegal tobacco products?

C/Supt Mike Cabana:
Thank you for that very good question.
Unfortunately, I don't have the
figures on how many people have been brought before the courts on
summary conviction or indictment. However, we can find those figures
and convey them to you.
Ms. Ève-Mary Thaï Thi Lac: Thank you.
C/Supt Mike Cabana: We are
focusing on the upper levels of criminal organizations. If most of our
people were to focus on the lower levels, the impact on the
organizations would be minimal. However, we do recognize that a
balanced approach is needed.
In answer to your question, I can say
that some customers who support the industry are targeted
strategically, so that we can develop intelligence and be in a position
to identify the upper levels of the organization.
(1605)

Mrs. Ève-Mary Thaï Thi Lac:
In
the early 1990s, there was a surge in tobacco smuggling. I studied
criminology, and I remember that a major awareness campaign was
launched to help people understand that if they were caught smuggling
or carrying smuggled products in their vehicles, the products would be
seized. The purpose of that measure was to dissuade people from
carrying three or four cartons or even whole boxes full of cigarettes
for resale. The point was to hurt the organization. There were severe
penalties in place, to make it perhaps more difficult to recruit
people.
If smugglers or others engaged in
smuggling are brought before the courts on summary conviction, doesn't
that send a message that it's no more serious than a fine for going
through a red light or speeding? Since that is not necessarily a
criminal act, don't we trivialize the fact that tobacco smuggling is
wrong?

C/Supt Mike Cabana:
Indeed.
However, one must understand that the decisions to proceed by summary
conviction or indictment must be based on evidence available to the
Crown attorney at that time. I do not think that I'm able to speak for
justice. However, you are absolutely right with respect to the
deterrent effect of certain police action against these clients. Last
year, in 2007, we seized 257 vehicles, some of which belonged to
these clients.
Another feature that must be
acknowledged is that during the 1990s, crime associated with contraband
tobacco was not at the level we are experiencing today. During the
1990s, as you said, much emphasis was placed on clients. Through an
analysis of the causes, we realized that the majority of people
arrested for possession of contraband goods, were not paying their
fines. This placed an additional burden on the judicial system and had
a very minimum impact on an organization's operation.
