could clear the way for progress on cigarette smuggling
Posted: February 09, 2009, 6:20 PM by Kelly McParland
Full comment , John Ivison
One Saturday evening late last month, Warren Allen, a 35-year-old from
Rooseveltown, N.Y., was driving his Ford Expedition out of Cornwall, Ont.,
when he was stopped by an OPP RIDE program. Mr. Allen was arrested, police
said, after they discovered 1,230 resealable bags of contraband cigarettes,
worth $27,000, in the vehicle. Further investigation revealed that he had
already been deported from Canada once, after entering the country illegally
via the ice bridges that form on the St. Lawrence River.
This was an unremarkable arrest — certainly it lacked the drama and
tragedy that accompanied a high-speed police chase that saw an elderly
couple from New York State and a suspected tobacco smuggler die in a car-van
crash near the Akwasasne reserve last November.
Mr. Allen’s arrest was merely the latest in a steady stream of contraband
smuggling incidents that have seen the sale of plastic resealable bags of
200 cigarettes, which sell for as little as $6, steal up to 50% of the
Ontario tobacco market. The cost to Canadian taxpayers could be as much as
$2.4-billion in lost revenue, according to industry estimates.
Last May, the Canadian government launched a campaign to disrupt the
supply of illicit tobacco being trafficked into cities across the country by
organized crime networks. But there is little the government can do about
the manufacture of cheap smokes, 90% of which originate from factories on
the U.S. side of the Akwasasne reserve, which straddles the American and
Canadian sides of the St. Lawrence.
Until now, the U.S. authorities have been less enthusiastic than Canadian
law enforcement agencies about cracking down on illegal factories operated
by the St. Regis Tribal Council in New York State. “Tobacco is not a high
priority for my agency,” Chief Andrew Thomas of the St. Regis Tribal Police
told The Associated Press, stating that his officers are focused on the drug
trade, weapons and illegal immigrants coming south from Canada. The U.S.
District Attorney’s office has complained it does not have the resources to
deal with contraband smuggling.
But the new U.S. government might soon start to take a very different
view of the illegal tobacco industry, because President Barack Obama has
just introduced a new $32.8-billion children’s health insurance program that
will be funded almost entirely by an increase in tobacco tax. The State
Children’s Health Insurance Program was signed into law last week and has
committed the federal government to match state funds to provide health
insurance to four million more children. The measure will be paid for by a
US62¢ increase in the tax levied on each pack of cigarettes, taking the
total to US$1.01 per pack.
The increase in tax is sure to make the huge U.S. market all the more
attractive to the criminal groups that have concentrated almost exclusively
on the lucrative Canadian market to this point. The new tax will take the
price for a carton of 200 Marlboro or Newports up to US$90 in some high tax
jurisdictions like New York City. By comparison, legal cigarettes sell for
$65-85 per carton of 200 in Canada. “There is a concern that when taxes do
go up, we’ll be seeing the baggy type of cigarette supplied in both
countries,” said Sgt. Michael Harvey, of the RCMP’s Cornwall Detachment.
The prospect that the Americans might soon start to see their own cities
infested with cheap bags of smokes has raised hopes among some health groups
that the problem might be raised at next week’s meeting between Stephen
Harper and Mr. Obama — a meeting at which border issues are said to be high
on the agenda.
“Two sentences from the Prime Minister and two sentences form the
President and we could have some real action,” said Rob Cunningham, senior
policy analyst with the Canadian Cancer Society.
There’s no doubt that the issue needs to be raised at the highest levels
before ministers and bureaucrats further down the ladder will take it
Despite the Canadian government paying lip-service to a crack down on
smuggling, the problem continues to get worse. The responsibility for
contraband tobacco straddles six departments — Health, Justice, Indian
Affairs, Revenue, Finance and Public Safety — all of which have been content
to shuffle the problem off to someone else.
Current Public Safety Minister, Peter Van Loan, who should be taking the
lead on the file, is seen to have little interest in it.
Mr. Van Loan did not return calls seeking comment but his office issued a rather hopeful statement that said the contraband tobacco enforcement strategy, launched last year, has seen some success already and more success is anticipated.
The big fear, of course, is that determined action might spark an
Oka-type stand-off with militant Mohawks on reserves like Akwasasne, who do
not consider themselves subject to Canadian law, even though they receive
millions of taxpayers’ dollars every year to fund schools, hospitals and
The best prospect for success remains an agreement with Mohawk First
Nations that would give them the authority to regulate and tax tobacco
products that pass through their reserves. The resulting funds could be used
to finance social services, with the idea that every dollar in revenue
raised would see government funding reduced by an equal amount.
The prospect of ceding sovereignty may be distasteful to some but the reality is, while generally in favour of the rule of law, many people on the Akwasasne reserve are not dogmatic about it. Creating a real partnership between the Mohawk authorities and Ottawa might mean that someone like Warren Allen doesn’t enter Canada illegally a third time.