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Contraband
Tobacco
Threat Issue
Health Canada estimates the level of smoking has declined since 1999, and that as of 2003, it is estimated that over 5 million Canadians are current smokers, which represents approximately 21% of the population. This still represents a major market for tobacco products and, as was evident during the early 1990s, increasing levels of this smoking population will turn to the contraband market as the price of legitimate tobacco rises.The vast bulk of the tobacco price is made up of federal and provincial taxes, and given current levels of taxation currently surpass the levels of January 1994, when the historical high point of the tobacco contraband market was reached, it is likely that a market for contraband tobacco products will remain.
Overview of Criminal Activity
The current market consists of various components, that affect each region of Canada to varying degrees of magnitude, and includes: smuggled discount or Aboriginal-manufactured products from the United States; smuggled counterfeit U.S. or Canadian brand-name products; culturally-specific tobacco products from India and the Middle East that are in demand within certain ethnic communities in Ontario and Quebec; inter-provincial movement of Canadian products from low to high tax provinces; intra-provincially through the illegal diversion of domestic products from Aboriginal territories; domestic thefts from businesses; hijacking of tobacco-loaded tractor trailers; and small illicit tobacco manufacturing operations.
Various organized crime groups are involved in the contraband tobacco market often working in co-operation with Aboriginal crime groups and/or individuals.Aboriginal crime groups and/or individuals are linked to the smuggling and/or distribution of U.S. tobacco products.The Aboriginal U.S. products are manufactured on reserves near the border and often packaged in transparent bags.There are certain Aboriginal territories in Ontario and Quebec that are used as conduits of illicit tobacco into Canada, distribution and storage centres, and/or sites of illicit manufacturing.
In late 2004 and early 2005, over 23,000 cartons of cigarettes were seized in Ontario. In one seizure, 5,000 cartons were seized from a west-bound one-tonne rental truck driven by a British Columbia resident from Montreal to Ontario. In a second seizure, 16,823 equivalent cartons were seized near the Canada/U.S. border. In the third case, a transport van was found in Cornwall with 1,250 cartons of cigarettes. |
Smuggled tobacco products initially enter Canada, primarily in Ontario and Quebec, through customs ports of entry concealed in private and commercial vehicles and in between official ports of entry using all-terrain vehicles, snowmobiles and boats. These tobacco products are distributed across Canada, both west and east, through private and rented vehicles, and legitimate transportation systems.
In the past, these counterfeit products were often based upon the popular Phillip Morris “Marlboro” brand, a product not readily available in Canada. However, in recent years counterfeits of popular Canadian brands, such as DuMaurier and Players, have also been encountered by law enforcement. Many organized crime groups in Canada, such as Asian crime groups have been involved in the distribution of counterfeit Canadian-brand cigarettes, many of which are produced and packaged in Asia.
Negative Socio-economic Effects
Apart from the loss of tax revenues, there is also a potential for violence and/or intimidation within that criminal market.This violence/intimidation has already been exhibited through thefts at tobacco wholesalers and retailers, and the hijacking of tractor trailer tobacco loads.
A reduction in legitimate domestic tobacco sales could lead to a reduction in Canadians employed within the legitimate manufacturing and distribution tobacco market.The unfair competitive advantage contraband tobacco retailers have on their legal counterparts may also lead some of them into the contraband market.
