A new policing strategy seeks to curb the illicit tobacco market in Canada, but a 200-year-old treaty may give the growing, highly lucrative trade a legal loophole.
Announced last week by public safety minister Stockwell Day, the strategy includes dismantling manufacturing facilities, disrupting distribution supply lines and seizing illicit tobacco and the related proceeds generated by organized crime.
It also includes a task force involving a number of government departments and agencies such as the RCMP, the Canada Border Services Agency and the Department of Indian Affairs.
Police say most contraband cigarettes enter Canada through Mohawk territories which straddle the Ontario, Quebec and New York State borders near Cornwall, Ontario: the Akwasasesne, Kahnawake and Tyendinaga reserves.
One of the main goals of the tobacco strategy, says Sgt. Michael Harvey of the Cornwall RCMP detachment, is to open up the dialogue with not only the aboriginal communities but "every stakeholder who is involved in the tobacco trade be they legal or illegal," to work together toward a solution.
"The main thing with this tobacco strategy is for public awareness, education and then enforcement. Enforcement alone is not going to solve the problem but obviously opening up dialogue and educating and becoming more aware of each other's situation is certainly going to help us in the long run."
Harvey says organized crime networks take advantage of the geography of the region and the "political sensitivities" involved, and are using the illicit tobacco trade to exploit aboriginal communities.
It is estimated that contraband tobacco is costing federal and provincial governments $1.6 billion annually in lost revenues.
According to a study by Canadian Imperial Tobacco, 96.9 per cent of contraband cigarettes are sold in Quebec and Ontario, putting the sale of illegal smokes in these two provinces well ahead of many legal manufacturers.
The underground industry is also spreading across the country, with seizures being made in Atlantic Canada and Manitoba as well as in Ontario and Quebec. Cornwall RCMP says over 600,000 cartons were seized last year, surpassing 2006 seizures by 30 per cent.
The increase in seizures, says Sgt. Harvey, is the result of "integrated policing operations" between law enforcement agencies on both sides of the border.
More than 100 organized crime groups are involved in the illegal tobacco trade, he says, with the traffickers also dealing in firearms and drugs, mostly marijuana, cocaine and ecstasy. The majority of the cigarettes are manufactured on the U.S. side of the border.
"On the American side, there are over a dozen [cigarette] factories that the organized crime groups are funding through their drug trade — they're laundering the proceeds of their money from drug exportation from Canada to the U.S."
Laundering drug proceeds in this way enables the factories to produce a carton or a "baggie" of cigarettes for $2. These in turn retail from the "smoke shacks" on the reserves for $6, with the price increasing to around $30 once the cigarettes reach urban areas. A carton of legal cigarettes costs $50 to $80, depending on the province.
"We're at the source of it on a daily basis and we're making these seizures but in order to be able to make a dent we have to shut down the organizations behind this," says Harvey.
Numerous raids have been conducted on the Akwesasne Reserve over the years, the most recent being in March when cash, drugs and firearms were seized and 29 suspects arrested.
John Thompson, president of the Toronto-based Mackenzie Institute, says that historically aboriginal peoples considered tobacco a sacred product, which was why in 1794 the Jay Treaty was implemented exempting them from duties on raw tobacco leaves.
"The Jay Treaty was the loophole that was exploited," says Thompson. "The treaty never got updated, and they weren't expecting cigarettes back then."
Natives involved in the tobacco trade are not technically doing anything illegal in bringing tobacco across the border into Canada, adds Thompson. Only if they sell tax-free cigarettes to non-natives are they breaking federal laws.
Mike Delisle, grand chief of the Mohawk Council of Kahnawake, told the Ottawa Citizen recently that the band doesn't consider the sale and manufacture of tobacco products on their land illegal and warned that "confrontation" can be expected if more raids are carried out.
However, John Beaucage, grand council chief of the Anishinabek Nation, thinks he has a solution. He wants to implement a "made in First Nations" self-regulation process which he believes would help avoid confrontation and legitimize tobacco produced on reserves.
Beaucage is proposing controls such as restricting tobacco advertising including "Cheap Smokes" signs on reserves and prohibiting the tobacco-only smoke shacks. Retailers would be required to have a license to sell tobacco products from stores that also sell a variety of other products.
"The better way is to let us as First Nations regulate the business and let us legitimize the tobacco business on First Nations. And if we're able to take a little bit of revenue out of that then that's fine. What's wrong with that? We are a third level of government." He also suggests levying a "health tax," which would go directly to First Nations government and health programs. This would discourage tobacco consumption and "bring First Nations tobacco products in line with mainstream tobacco pricing." Non-natives who buy their smokes on-reserve would also be taxed.
"We've grown tobacco for thousands of years and what we want to be able to do is to regulate it ourselves so for all intents and purposes, for any government, then it is legitimized," says Beaucage.
A member of the Smoke-free Ontario Campaign Committee, Beaucage says the majority of First Nations tobacco producers and marketers are "just regular business people" who recognize a market niche and are serving it.
"The only problem is that it's still not seen as a legitimate business on the part of the federal government so they have had to go kind of underground, which provides an opportunity for people to bring in other materials and other goods that are not legal…. Certainly that's something we want to get rid of as much as anybody else."
Beaucage adds that he has had some preliminary talks with the provincial government about his proposal. In 2006, the Anishinabek Nation unanimously passed a resolution calling for the establishment of a smoke-free First Nations.
Uncontrolled tobacco products do not comply with regulations governing health messages or disclosure of ingredients; these products also undermine the government's efforts to curb tobacco use, especially among cash-strapped young people.
A 2007 study by the Canadian Convenience Stores Association found that 24 per cent of high school smokers' cigarette butts in Ontario and Quebec were contraband.
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