Tobacco troubles: Law enforcement has not kept up with the illegal trade in cheap cigarettes

Almost exactly two years after the Conservative government launched a sweeping strategy to combat the rapid growth of illegal cigarette trafficking, Parliament and the public got their first look at the government's progress so far.

Many were left unimpressed.

At a Standing Committee on Public Safety and National Security hearing last week members questioned the nearly two years it took to issue the annual progress report, and raised concerns that enforcement was falling behind the flourishing black market in unregulated cheap cigarettes that have flooded the central Canadian market and, more recently, the Atlantic and Western provinces.

"The progress is inadequate," said Mark Holland, federal Liberal critic for public safety. "The number of seizures is not keeping up with the growth of the contraband market and so the result is that ... the problem with contraband is out of control."

In announcing the RCMP Contraband Tobacco Enforcement Strategy in 2008, then public safety minister Stockwell Day warned of the deepening role of organized crime in the contraband tobacco trade.

Revenue from the cigarette trade was "enhancing [the] capability" of criminal organizations to deal illegal guns, drugs and other crimes, he said, noting that the Mounties had identified up to 100 criminal groups producing and dealing contraband cigarettes. A priority of the strategy must be to "dismantle the illegal manufacturing of these cigarettes and disrupt the supply lines," he said.

The report reveals that the number of criminal organizations profiting from contraband tobacco has mushroomed since 2008 from 100 to 175. And while the bulk of illegal cigarettes had in recent years been imported into Canada, usually channeled through First Nations reserves along the St. Lawrence, the report says there are now approximately 50 illegal factories operating on this side of the border.

The ministry of public safety was unable to comment by press time.

Testifying to the committee, Superintendent Joe Oliver, director of the RCMP's border integrity program, defended the strategy's progress as a "success," though he testified that the RCMP not yet succeeded in shuttering a single illegal cigarette factory.

"I can't go into the circumstances as to precisely why," he said, though he alluded to the challenge of securing warrants and "public and officer safety" issues. The report also identifies "operational pressures and resource-related challenges" as constraints on the police force's effectiveness.

And while some First Nations have been co-operative, some have shown a "refusal to accept that contraband tobacco is an illegal activity," the report says. "There's different perceptions about tobacco in the various First Nations. Some do speak to traditional values and their inherent right to deal, trade, be in possession of tobacco products," said Derek Simmonds, director of the RCMP customs and excise branch. "It's difficult."

Seizures of illegal cigarettes did reach record highs in 2008, up more than 50% from 625,659 cartons in 2007 to 965,688 cartons, but the contraband market is growing even faster, said Eric Gagnon a spokesman for Imperial Tobacco. "How can you stand up and say we're claiming success, things are good, when we haven't shut down a factory, the number of organized crimes has increased from 100 to 175, and the contraband is at an all-time high?"

Studies commissioned by the National Coalition Against Contraband Tobacco estimated that in 2008, 48.6% of cigarettes purchased in Ontario and 40% in Quebec were illegal. While legal cartons typically sell for $80 or $90, illegal cigarette cartons are usually offered for as little as $6, and are frequently available to minors. The RCMP estimates that provincial and federal governments lose roughly $2.5-billion in annual taxes to the underground trade.

"Governments are forgoing a massive amount of revenue," Mr. Holland said. "And we're losing all of the ground we've made in blocking access to cigarettes for young people. It's now becoming easy and cheap for adolescents to get access and get addicted to cigarettes."

Representatives of the Canadian Cancer Society and the Customs and Immigration Union as well as the Canadian Convenience Stores Association and the National Coalition against Contraband Tobacco all told the committee that they saw in the report little progress in reversing the growth of illegal cigarettes in Canada.

"Everybody's spoken out about this," Mr. Gagnon said. "When you have tobacco control groups and the [tobacco] manufacturing industry asking for the same thing I think it's time for the government to listen because it doesn't happen often."