Contraband Tobacco on Post-Secondary Campuses in Ontario (part 3)

Smokers' Use of Contraband Tobacco


The 2009 report, "Prevalence and correlates of purchasing contraband cigarettes on First Nations reserves in Ontario, Canada", provided evidence of the prevalence of contraband use in Ontario. The researchers used the 2005-2006 data from the Ontario Tobacco Survey (OTS) (Luk et al., 2009) to analyze the prevalence of contraband use as well as characteristics of Ontarians who use contraband tobacco and how they access it. The data were generated from a cross-sectional telephone survey of Ontario residents, 18 years of age and older. The final sample included 1,382 smokers.

Defining contraband tobacco strictly as cigarettes purchased on a Native reserve, the researchers found that that 25.8% of smokers surveyed indicated they had purchased cigarettes on a reserve in the previous six months while 11.5% revealed they usually purchased their cigarettes on reserves. The researchers estimated that 14% of the total cigarettes consumed by current smokers in Ontario between January 2005 and June 2006 were purchased on reserves.

Although Native reserves are one of the more popular places for contraband purchase (GfK Dynamics, 2008), there are other sources of contraband tobacco (RCMP, 2008). The researchers acknowledge this and speculate that their definition of contraband could lead to a conservative estimate of contraband use in Ontario. Additionally, Luk et al. (2009) note that the OTS data is based purely on self reports leading to the possibility that figures are an under-representation of actual amounts of tobacco being purchased on reserves given that people may not want to disclose their participation in an illegal activity. Finally, information on ethnicity was not collected so researchers were unable to determine if some of the reported purchases of reserve cigarettes were by First Nations people buying the product legally (Luk et. al., 2009).

Other national studies reviewing Canadian smokers' cigarette purchases from First Nations reserves have found varying prevalence. Using 2002 data from the International Tobacco Control Four Country Survey (ITC-4) Hyland at al. (2005) found that approximately 2% of current adult smokers had made their last cigarette purchase from a First Nations reserve. In comparison, more recent data from the 2008 CTUMS survey found that less than 20% of current Canadian smokers had purchased cigarettes from a First Nations reserve in the past 6 months (Reid & Hammond, 2009). As Luk at al. (2009) note, the difference in prevalence of reserve purchases found in these two studies may be a result of the different reference and survey periods used.

Use of contraband by smokers in Quebec reflects similar patterns. A study commissioned by the Quebec Ministries of Finance and Health and Social Services found that in 2006,14% of smokers had either bought or smoked contraband cigarettes within the three months prior to the November telephone survey (Luk et al., 2007). It was further noted by 45% of these smokers that their contraband consumption was at least half of their total cigarette consumption (Luk et al., 2007).

In an extensive review of contraband use, Imperial Tobacco Canada commissioned the GfK Research Dynamics group to conduct a national survey on the use of illicit Tailor-Made cigarettes in Canada. (Tailor-Made is a brand of contraband cigarettes.) A Canadian sample representative of age, gender and household income was selected. Beginning in 2006, adults (19 years of age or older) who smoked more than five cigarettes a day were recruited by random digit dial to do a 30 minute in-home interview.


Researchers concluded the interview by asking participants for permission to take their current pack of cigarettes. In total 2,300 smokers from across Canada participated in the study. Analysis of the collected cigarettes showed that 16.5% were illegal - defined as cigarettes sold without appropriate payment of taxes (GfK Dynamics, 2006). Of those cigarettes branded as illicit, 95% were found to be manufactured on reserves (GfK Dynamics, 2006).

Significant differences in prevalence of contraband use existed between the provinces. Of particular note, Ontario and Quebec were found to have the highest proportions of smokers using contraband tobacco (GfK Dynamics, 2006). In both provinces illegal tobacco was determined to be the second leading "brand" of cigarettes (GfK Dynamics, 2006).

Imperial Tobacco Canada conducted follow up studies in 2007 and 2008. In each consecutive year the prevalence of contraband tobacco in Canadian homes increased. In 2007, 22%o of the past seven day purchase volume was found to be illegal and this number increased to 32.7%> in 2008 (GfK Dynamics, 2008). Ontario continued to show the highest past seven day purchasing volume of illegal tobacco with 31.6%> of tobacco in 2007, and 48.6% in 2008 being classified as illegal (GfK Dynamics, 2008).

Limited details about the methodology used in this study demand that results are interpreted with some caution. For example, the pack-swap design could allow for a more reliable review of the cigarettes and their make in comparison to self-report contraband use, but only if all participants agreed to swap all cigarettes. If participants chose not to swap their contraband cigarettes then the results would be an under-representation of the amount of contraband tobacco in homes.

Most recent data on contraband tobacco use in the province of Ontario come from a small scale cigarette butt study conducted by NIRIC (2010a) on behalf of the Canadian Convenience Stores Association. Government buildings and public locations (such as the train station) in the city of Ottawa were surveyed and results showed that 15%-32% of cigarettes at the sites were classified as illegal (NIRIC, 2010a). The demographics of the individuals who discarded the surveyed butts is entirely speculative, however it could likely be presumed that butts collected from public places like the train station would be from a heterogeneous group of smokers; likely mainly adults. Limited details of the methodology used for this study makes it difficult for comparisons to be made to other studies that have reviewed illegal tobacco use in Ontario such as those done by Luk at al. (2009) and GfK Dynamics (2008).

Contraband Tobacco on Post-Secondary Campuses in Ontario (part 2)

The relationship between tobacco use and price

The empirical data, historical analysis, government documentation and investigative news reports examined in the previous section revealed that the price of legal tobacco influences the availability of contraband tobacco. Not surprisingly, the price of legal tobacco also influences patterns of tobacco use and consumption.

In Canada and other countries, increased taxes on tobacco have been found to decrease cigarette consumption rates, encourage smokers to quit or cut down and make cigarettes less accessible to young age groups (Ontario Tobacco Research Unit, 2008).

Tobacco price and use: adults. Numerous studies have examined the relationship between price of cigarettes and tobacco purchasing patterns of adults. For example Gruber, Sen and Stabile (2003) used Statistics Canada data (for average prices of cigarettes), the National Clearinghouse Tobacco and Health Program data (for statistics on legal sales of cigarettes) and The Canadian Survey of Family Expenditure data to calculate price coefficients, price elasticity rates and tobacco consumption in all ten provinces. Using this data Gruber et al. (2003) found an estimated price elasticity1 for cigarettes in the range of-0.45 to -0.47.

Stephens, Pederson, Koval and Macnab (2001) also determined that when the price of cigarettes increases, the odds of Canadians being non-smokers increases. Using Canada's National Population Health Survey data and statistics on tobacco prices, the authors determined price elasticity to be -0.5 for men and -0.3 for women. Data from the year 1994, when there was a significant decrease in taxes in some provinces (including Ontario), revealed that men and women living in provinces that had decreased tobacco taxes smoked more than their counterparts living in provinces that did not experience this tax decrease (Stephens et. al., 2001).

Tobacco price and use: adolescents. In a review of research examining the impact of price on adolescents' tobacco consumption, Leverett, Ashe, Gerard, Jensen and Woolery (2002) concluded that youth are more Likely to initiate smoking when tobacco is available at a low cost. Leverett et al. (2002) further noted that teens are less likely to quit when low-cost tobacco is available.

Using Youth Risk Behaviour Survey data collected from 1991 to 2005 in the

United States, Carpenter and Cook (2008) attempted to determine tobacco price

' Price elasticity is a measure of how much the demand for a product changes when the price of the product is changed. It is "calculated by dividing the proportionate change in quantity demanded by the proportionate change in price. Proportionate (or percentage) changes are used so that the elasticity is a unit-less value and does not depend on the types of measures used (e.g. kilograms, pounds, etc)" (NetMBA, 2007). A price elasticity of 0 would mean that the product is perfectly inelastic, responsiveness of high school aged youth. This analysis, which included both national and state data, concluded that an increase in cigarette taxes reduced the probability of high school aged youth reporting past 30 day smoking and frequent smoking. They also estimated that a one dollar increase in cost of tobacco would reduce smoking among United States youth by 23.6% (based on national data). These statistics point to the continued use of taxes as an effective policy strategy to increase the price of cigarettes and thus reduce smoking rates and frequency in youth.

Studies of adolescents' price sensitivity are not without limitations. For example surveys are usually administered in school settings. Youth who do not attend school on the day the survey is conducted, and youth of high school age who have dropped out of school are not represented. While this may lead to an underrepresentation of the smoking rates for this group, the strength and consistency of findings showing youth's sensitivity to tobacco price suggests the relationship is valid.

Tobacco price and use: young adults. Price sensitivity of the young adult population has been investigated, usually in the form of studies examining samples of college and university students. Two such studies found that an increase in cigarette prices decreased not only consumption levels (i.e. the number of cigarettes smoked per day), but also the prevalence of U.S. college students who smoked (Czart, Pacula, Chaloupka & Wechsler 2001; Chaloupka & Wechsler, 1997). Using the 1997 Harvard College Alcohol Study which surveyed 15,699 students from 130 colleges across the United States, Czart et al. (2001) estimated that a 10% increase in cigarette prices would reduce smoking participation by 2.6% and reduce consumption among those who still smoked by 6.2%.


Consequences of Price Sensitivity

Research with youth, adults and young adults indicates that all age groups are sensitive to tobacco prices: increasing the price of tobacco is associated with reductions in smoking prevalence and consumption. Thus, imposing higher taxes on tobacco products has the positive consequences of reducing tobacco use (and its related health and economic burdens), and increasing tax revenues for government (Cunningham, 1996). Unfortunately, higher taxes on tobacco often triggers a shadow market of much lower-priced contraband tobacco products.

The availability of inexpensive (including contraband) cigarettes has detrimental effects on public health efforts to reduce smoking prevalence and rates. For example, research suggests that people who purchase contraband tobacco tend to smoke more and have lower intentions to quit. When looking at the demographic characteristics of smokers who did and did not purchase reserve cigarettes, Luk, Cohen, Ferrence, McDonald, Schwartz and Bondy (2009) reported that "current smokers who smoked more cigarettes per day, did not plan to quit smoking, had not completed high school, and resided in Northern Ontario were significantly more likely to report usual purchasing of cigarettes on reserves." Furthermore, a 2006 Canadian study done by Imperial Tobacco found that of those individuals possessing illicit cigarettes in their home, 61.7% smoked more than 20 cigarettes a day on average (GfK Dynamics, 2006).

Studies in the United States have found similar patterns. In a study reviewing the purchasing patterns of U.S. smokers, Hyland et al. (2005) found that higher daily cigarette consumption was a predictor of purchasing less expensive cigarettes (e.g. low/untaxed, discount/generic brands or cigarettes purchased with the use of discount coupons). A study comparing quit rates of individuals who smoked discount/generic cigarettes and those who smoked premium cigarettes found that discount/generic brand smokers were less likely to quit compared to smokers of the premium brand (Cummings, Hyland, Lewit and Shopland, 1997). Hyland, Hastings, Ross, Chaloupka, Fong & Cummings (2006) also found that the likelihood of making a quit attempt is decreased in those smokers who report purchasing cigarettes that are either untaxed or have a low tax. Patterns of Contraband Tobacco Use

Estimating the market share of contraband tobacco is difficult due to the lack of sales data and the probable reluctance of some smokers to admit their participation in illegal purchases. Prevalence of contraband use in Canada has been examined through a variety of methods.

Contraband Tobacco Market Share

In 2007, a report titled "Estimating the volume of Contraband Sales of Tobacco in Canada" was released by the group "Physicians for a Smoke Free Canada". Using the Canadian Tobacco Use Monitoring Survey data and federal/provincial data for legal tobacco sales they estimated the size of the contraband market. The group determined that 27% of total cigarette sales in Canada (40% in Ontario and 39% in Quebec) were contraband (Physicians for a Smoke Free Canada, 2008).

Figures released by the RCMP similarly suggest that contraband tobacco is prevalent in the market. In 2006, RCMP seizures of contraband tobacco reached an all time high in Canada and were said to have increased by 1700%» since 2001 (McLaughlin, 2007; RCMP, 2008).

Contraband Tobacco on Post-Secondary Campuses in Ontario (part 1)

Chapter I: Introduction
Following the publication of the Royal College of Physicians & Surgeons' report on Smoking & Health in 1962, Canada began its first tobacco control and public education campaign in an attempt to decrease smoking rates and tobacco related illness and deaths (Health Canada, 2008a). In 1986, multi-year federal strategies were implemented, leading to the creation of the National Tobacco Control Strategy (NTCS) in 1999. The NTCS, which was supported and enforced by both the federal and provincial/territorial levels of government, emphasized smoking prevention, smoking cessation, protection from environmental tobacco smoke, and denormalization of tobacco products and tobacco industry practices. The NTCS further set forth five strategic directions which included: policy and legislation; public education; industry accountability and product control; research; and, building and supporting capacity for action (Health Canada, 2007a).

Tobacco control advocates, health professionals, policy makers, researchers, and stakeholders generally agree that a number of initiatives set out by the NTCS have been particularly effective. These include education programs; provincial and national legislation restricting tobacco sales to youth; control of second-hand smoke through workplace and public area smoking restrictions; graphic warning labels on cigarette packages; and the introduction of provincial telephone help lines (Public Health Agency of Canada, 2004). Since the initiation of the NTCS, Canada has successfully decreased the population prevalence of tobacco use in those 15 years of age and older from 25% in 1999 to 18% in 2008 (Health Canada, 2009a). In Ontario, smoking prevalence for the same age group has decreased from 23% in 1999 to 17% in 2008 (Health Canada, 2009a)

Despite this success, numerous tobacco control issues remain. In 2007, Health Canada introduced new goals in the Federal Tobacco Control Strategy (FTCS) announcing a greater emphasis on decreasing smoking rates among youth, young adults, First Nations, Inuit, and other Aboriginal groups (Health Canada, 2008b). Additionally, contraband tobacco became an area of focus with monitoring contraband activities becoming one of six objectives outlined in the FTCS.

Currently, the Canadian and Ontario governments continue to focus on young adult smoking rates, and both levels of government are busily working toward immediate action strategies for this population. Contraband tobacco also remains under close scrutiny as tobacco control advocates, law enforcement officers, and politicians draw attention to the growing availability of inexpensive contraband tobacco products, particularity in the provinces of Ontario and Quebec. However, despite government attention to young adults and contraband tobacco, large gaps remain in our understanding of the prevalence of contraband tobacco use by young adults.

In an attempt to better understand the issue of contraband tobacco, this study examined to what extent contraband tobacco was used by young adults attending post-secondary schools in Ontario.


Chapter II: Literature Review

Legal Tobacco

Federal regulation of tobacco growing, manufacturing, transportation and

sales in Canada

Growing tobacco. In 2008 the Canadian federal government announced a Tobacco Transition Program (TTP) designed to financially assist farmers wishing to leave the tobacco industry. Prior to the TTP farmers were not required to have a license to grow tobacco (Canada Revenue Agency, 2003a), but were required to keep records of the amount of tobacco they grew, received and disposed of, as well as the type and source of their tobacco manufacturing equipment (Department of Justice Canada, 2009a). New regulations now state that farmers who do not participate in the TTP must apply for a license if they wish to continue producing tobacco (Agriculture and Agri-Food Canada, 2009). Further regulations state that tobacco farmers can only sell their raw tobacco to licensed tobacco packers and/or manufacturers (Canada Revenue Agency, 2003a).

Manufacturing Tobacco Products. Canadian tobacco packers and manufacturers must be licensed. The Canadian Revenue Agency (CRA) is responsible for issuing this license. The license covers all steps associated with preparing tobacco for sale, including packing, stemming, converting and packaging (Department of Justice Canada, 2009a; Canada Revenue Agency, 2003b). To comply with regulations of this license, manufacturers must mark packaged tobacco products with either a tear tape (used on packaged cigarettes) or a rectangular stamp (used on other tobacco products) to indicate that Excise Duty has been paid (Canada Revenue Agency, 2005). All regulations pertaining to packaging and stamping of tobacco products by tobacco manufacturers are contained in the Excise Act and the Stamping and Marking of Tobacco Regulations (Department of Justice Canada, 2009a; Canada Revenue Agency, 2005). In 2008, the Canada Revenue Agency announced a new excise stamping regime for tobacco products, due to be implemented in 2010 (Canada Revenue Agency, 2008).

Selling Tobacco Products. The Federal Tobacco Act (FTA), which is administered and enforced by the Health Canada Tobacco Control Programme, "regulate[s] the manufacture, sale, labelling and promotion of tobacco products" (Health Canada, 2008c). The FTA regulates substances in tobacco products, their emissions, information displayed on tobacco packaging, signage required in tobacco retail space and several other aspects of product design and sale (Department of Justice Canada, 2009b). FTA regulations also require that any person and/or organization wishing to purchase bulk tobacco intended for resale must apply for a Wholesalers Permit, which is obtained through the individual's provincial government (Ministry of Revenue, 2009). Provincial Regulation of Tobacco Sales in Ontario Tobacco Product Sales and Taxes. In Ontario, the Tobacco Tax Act (TTA) outlines regulations associated with the sale and tax of all tobacco products including cigarettes, cigars, loose tobacco, chewing tobacco, leaf tobacco and blunt wraps (Ministry of Revenue, 2008a). Ontario retailers wishing to sell tobacco must apply for and be granted a valid Retail Sales Tax Vendor Permit, which is distributed by the Ontario Ministry of Revenue (Ministry of Revenue, 2008b). This vendor permit allows retailers to sell tobacco that has been purchased from an Ontario-registered tobacco wholesaler (i.e., individuals or organizations holding a valid Wholesalers Permit). It is the responsibility of the retailer to ensure that the wholesaler is in fact registered. In Ontario, tobacco which meets the legal regulations of the Tobacco Tax Act can be identified by the presence of a yellow tear strip on the packaging (see Figure 1) (Ministry of Revenue, 2008a). Tobacco packaging with a peach coloured tear strip is intended for sale in some duty free stores to the general public or on reserves to First Nations people. Any tobacco without the yellow tear strip on the packaging (or peach in duty free stores or on reserves), or with any other colour of tear strip on the package is illegal. Cigarettes sold in clear plastic bags with no tear strip are also illegal (Ministry of Revenue, 2008a). Contraband Tobacco

Definition and Examples of Contraband Tobacco

Definition. Contraband tobacco can be defined as "any tobacco product that does not comply with the provisions of all applicable federal and provincial statutes" (RCMP, 2008). This non-compliance can occur any time during the importation, stamping, marking, manufacturing, distributing and payment of duties and taxes (RCMP, 2008).

There are a variety of ways that contraband tobacco is produced, enters the market and is purchased by consumers. These are described below.

Smuggling. Large scale/wholesale cigarette smuggling. Large scale or wholesale cigarette smuggling "involves the illegal transportation, distribution, and sale of large consignments of cigarettes and other tobacco products, generally avoiding all taxes" (Joossens, Chaloupka, Merriman & Yurekli, 2000). This illegal activity is commonly run by large organized crime networks allowing cigarettes to be smuggled over large distances and distributed widely (Joossens et al., 2000; Luk, Cohen & Ferrence, 2007).


ONTARIO - CANADA DOTY PAID - DROITACQUITTE - ONTARIO - CANADA DUTY PAID -DROIT

Figure 1. Yellow tear strip found on cigarette packages in Ontario, indicating Excise Duty paid.

Adapted from "Summary of Tobacco Tax Rules for Retail Dealers". Ontario Ministry of Revenue. Retrieved July 22n , 2009 from http://www.rev.gov.on.ca/english/bulletins/tt/l_2008.html


In Canada during the early 1990s, availability of contraband tobacco was largely a result of wholesale smuggling (Luk et. al, 2007). During this time an increase in the excise tax assigned to domestic cigarettes, and the lack of taxes assigned to tobacco destined for foreign countries, prompted Canadian tobacco manufacturers to export billions of domestic cigarettes to United States wholesalers (Cunningham, 1996). Through the use of organized crime networks, these Canadian cigarettes were then smuggled back into Canada through First Nations Reservations along the Canada-U.S. border from where they were then distributed to wholesalers, retailers, street vendors and ultimately, to consumers (Luk et al, 2007, Schneider, 2000).

Officials report that contraband tobacco is still being smuggled through First Nations Reservations, however the tobacco is no longer mainly Canadian-manufactured. Instead, American First Nations manufacturers supply the majority of Canada's contraband tobacco. In Ontario this supply of contraband tobacco comes mostly from the Akwesasne Reserve (which straddles the borders of Ontario, Quebec and the U.S.) and the Tyendinaga and Six Nations reserves. In Quebec the supply emanates from the Kahnawake reserve. (Figure 2 and figure 3 show the locations of these reserves). The U.S. side of the reserves act as the major point of entry for smuggling these illegal products into Canada (Health Canada, 2007b).

Bootlegging. Bootlegging occurs when cigarettes are smuggled from a low-tax jurisdiction to higher tax jurisdiction and typically involves areas within close proximity to each other such as neighbouring jurisdictions or countries (Joossens et al., 2000). Due to the small scale and low investment requirements of bootlegging, it is commonly organized by small groups of individuals (Joossens et al., 2000).


Kahanwake

AkwBSasrte {U5 Side)

Tyendlnada

Six Nations

Figure 2.  Locations of First Nations reserves identified as largest sources of illegal tobacco in Canada

Adapted from Central Canada: Brock University Map Library. Available: Brock University Map Library Controlled Access ht^L//wv/w.brocku.ca/maplibrary/^                                                                                 August 23 L 2009).

Figure 3. Locations of Akwesasne, Tyendinaga. and Si* "Nations reserves

Adapted from Southern Ontario: Brock University Map Library, Available: Brock University Map Library Controlled Access httpi//www.bmcku.L3/maplibrary/ma^^                                                                                  August 23t 2009)L

Like wholesale smuggling, bootlegging also occurred in Canada during the early 1990s. In some cases cigarettes exported from Canada to the U.S. retail outlets were purchased by individuals and small gangs who took advantage of the low U.S. tax rate. These individuals then smuggled the cigarettes back into Canada where they sold them for profit (Luk et al., 2007). Cross provincial smuggling also occurred in Canada throughout the 1990s when the price of tobacco varied greatly across provinces (Square, 1998).

To avoid discovery, bootleggers sometimes use counterfeit tax stamps, allowing contraband cigarettes to be sold alongside legal tobacco in the higher-tax locales (Thursby & Thursby, 2000).

Casual smuggling. Casual smuggling occurs when individuals either travel to or use the internet to purchase cigarettes for personal use from a low-tax state or province (Joossens et. al, 2000; Luk et al., 2007). For example, during the early 1990s individuals living in Windsor, Ontario crossed into Detroit, Michigan and purchased cigarettes that included all applicable state and U.S. taxes but were still cheaper than cigarettes in Ontario (Joossens et. al, 2000).

Illegal purchase and manufacture.

GST/HST relieved and provincial tax exempt tobacco. Currently in Canada, status Natives are exempt from paying provincial taxes and the federal GST/HST on tobacco purchased on a First Nations Reserve. Non-native Canadians are not exempt, no matter where or from whom they purchase tobacco. Nevertheless many non-native individuals are now getting illegally sold tax-exempt cigarettes from smoke-shops on reserves

(Canadian Cancer Society, 2008; RCMP, 2008). These cigarettes are purchased for persona] use as well as for resale (Luk et al., 2007).

Illegal tobacco manufacturing plants. The majority of contraband tobacco entering the Canadian market is coming from American First Nations manufacturing sites on the US. side of Akwesasne reserve as well as from illicit and licit manufacturers on reserves in Canada, including the Kahnawake reserve in Quebec and the Tyendinaga and Six Nations reserves in Ontario (RCMP. 2008). These manufacturing sites range "from small ad-hoc operations to fully equipped manufacturing plants" (RCMP, 2008).

Counterfeit, international and criminally-obtained.

Counterfeit and international tobacco. In Canada, both counterfeit and international tobacco products are being smuggled into the country through sea containers. Counterfeit products involve both domestic and international brands. The majority of these counterfeit and international products are coming from China though some specialty tobacco products such as water-pipe tobacco are being imported from United Arab Emirates, Jordan, Egypt, and Saudi Arabia (RCMP, 2008).

Criminally obtained tobacco. Some of the contraband tobacco in the Canadian market is also being acquired through illegal activity such as convenience store and cargo thefts (RCMP, 2008). For example in Vaughan, Ontario a truck driver was shot and the $200,000 worth of cigarettes he was transporting were stolen (RCMP, 2008).

Tobacco Taxes and Contraband

Patterns of availability of contraband tobacco.

History of contraband tobacco in Canada. In 1951, the federal government of Canada increased tobacco taxes by three cents (Cunningham, 1996). This increase, combined with an additional two cent increase from manufacturers, resulted in a large difference in cigarette prices between Canada and the United States. The significantly higher price of Canadian cigarettes led to an increase in the smuggling of lower-priced tobacco from the United States into Canada. The flow of contraband tobacco into Ontario and Quebec during this time marked the first real surge in Canada's contraband tobacco market (Cunningham, 1996). Ultimately, it led to the Finance Minister's decision to roll back tobacco taxes in 1952, and again in 1953 in hopes of bringing an end to the cross border smuggling (Cunningham, 1996). Reducing taxes on Canadian cigarettes did produce the desired consequences of eradicating the cross-border smuggling. The higher prevalence of cigarette smoking during the 1960s and 1970s suggest that the low cost of cigarettes also contributed to the widespread use of tobacco by Canadians (Cunningham, 1996).

As the years progressed, the incomes of Canadians grew, but tobacco prices (i.e., taxes) were not equivalently maintained. As a result of this situation, the Canadian tax rate prior to the 1980s was the lowest among wealthy countries (Sweanor, 1994) making cigarettes in Canada relatively inexpensive. Health and medical organizations responded to this situation by persistently and loudly pointing to the relationship between cost and consumption of cigarettes, and by calling on Canadian governments to raise the price of cigarettes. Through a combination of federal and provincial tax increases, cigarette prices were raised by a total of 170% during the ten years spanning from 1982 to 1992 (Sweanor, 1994). The higher taxes were associated with decreased tobacco consumption, particularly among youth (Cunningham, 1996; Sweanor, 1994), and also increased government revenues.

Despite these positive consequences, however, the availability and use of contraband tobacco also increased during this time (Kelton & Givel, 2008). It is now known that, to avoid the increased taxes being charged to cigarettes intended for the domestic market, Canadian tobacco manufacturers began taking advantage of low export taxes assigned to cigarettes destined for foreign countries. They did so by legally exporting their cigarettes to the United States and then illegally smuggling them back into Canada (Breton, Richard, Gagnon, Jacques & Bergeron, 2006; Schneider, 2000; Kelton & Givel, 2008; Cunningham, 1996). The large majority (80%) of this contraband tobacco entered Canada through the Akwesasne reserve (which straddles the United States-Canada border) and was then distributed to major Canadian cities for sale (Cunningham, 1996). Other points of entry included the Kahnawake reserve located in Quebec and the Six Nations reserve in Ontario (Cunningham, 1996).

In response to the increasing exportation and smuggling of Canadian tobacco, the federal government imposed an export tax of $8 per carton of cigarettes in February of 1992. This increase in the export tax effectively decreased Canadian export shipments by 67% (Sweanor, 1994). After strong protests by the tobacco industry and threats of moving their manufacturing to the United States, the Canadian government conceded to the industry's pressure and removed the tax, a mere two months after its implementation (Cunningham, 1996).

This wave of tobacco smuggling into Canada peaked in 1993- a year after the government backed down from its initial stance against smuggling (Cunningham, 1996). According to Sweanor (1994) a combination of factors contributed to the relative ease of smuggling tobacco into Canada during the late 1980s and early 1990s. For example, tobacco smuggling was facilitated by the high volume of the Canadian population living within a two hour drive of the Canada-U.S. border and the frequency of border crossings between the two countries. This situation afforded Canadians many opportunities to engage in casual smuggling and bootlegging. The unique Canada-U.S. border, which is the longest undefended border in the world, may have contributed to larger scale, organized smuggling. Along these lines, there is no doubt that the AJkweasne Indian Reservation which includes parts of Ontario, Quebec and New York State became a prime location for large-scale movement of contraband tobacco from the USA into Canada (Sweanor, 1994). By 1994, it was estimated that 25% of the Canadian market share was held by contraband tobacco (Sweanor, 1994).

Due to the criminal element of smuggling, and the deceptive practices of the tobacco industry, the government sought to reduce cross-border smuggling of tobacco (Cunningham, 1996). In an attempt to stem the flow of contraband tobacco, in 1994 the federal government reduced federal taxes on tobacco by five dollars a carton immediately and promised to match provincial-reductions to a maximum of five dollars (Cunningham, 1996, Sweanor, 1994). In the provinces of Ontario and Quebec, the retail costs of cigarettes decreased by more than half (Cunningham, 1996).   This tax rollback decreased smuggling from the United States into Canada as the legal price for cigarettes in Canadian provinces such as Ontario and Quebec was lower than in neighbouring states (Cunningham, 1996). Of interest, not all provinces reduced their taxes though, and this led to further smuggling, this time interprovincial, as lower priced cigarettes from Ontario and Quebec were exported and sold in provinces that had maintained higher taxes (Square, 1998).

Despite the desired effect on smuggling, a significant health price was paid for the decrease in tobacco taxes. Tobacco consumption increased across the country, particularly in the youth population (Joossens & Raw 2000). Provinces with greater tax cuts had higher proportions of smoking initiation among young adults (Zhang, Cohen, Ferrence, Rehm, 2006). On top of the health burden created by increased tobacco use, 1.2 billion in taxation revenue was lost by the government (Joossens & Raw 2000). These issues led to an agreement between the federal and provincial governments to gradually and simultaneously increase tobacco taxes until they reached levels that existed prior to the rollback (Canadian Coalition for Action on Tobacco, 2007). By 2002, the excise taxes and duties on tobacco had returned to the levels they were prior to the 1994 decrease. While federal taxes have not changed since 2001, provincial tax increases have continued since then (RCMP, 2008).

Not unexpectedly, given the historical pattern of rising tobacco prices triggering more smuggling activity, Canada is once again experiencing growth in the contraband tobacco market. In the 1990s, smuggled tobacco represented the majority of contraband product. Smuggling operations were supported and orchestrated by the tobacco industry. Today the majority of contraband tobacco in Canada is still being smuggled through the Akwesasne First Nations Reserve from the United States (Health Canada, 2007b), the Kahnawake reserve in Quebec, and the Six Nations reserve in Ontario. This time, however, the tobacco industry does not seem to be involved. The 2008 Contraband Enforcement Strategy issued by the RCMP states that "the current trend of manufacturing, distributing and selling contraband tobacco products, which has developed exponentially over the last six years, involves organized crime networks exploiting Aboriginal communities." Despite the change in suppliers of contraband tobacco, it is clear that growing availability of contraband tobacco is associated with higher prices of legal cigarettes.

Criminal aspects of contraband tobacco. According to the RCMP (2008), there are four main sources of contraband tobacco in Canada at this time. First, the largest source of illegal tobacco in Canada is manufacturing operations on the U.S. side of Akwesasne reserve, the Kahnawake reserve, the Tyendinaga reserve, and the Six Nations reserve. These operations supply the largest portion of contraband tobacco in Canada. Second, counterfeit products (mainly from China) and international tobacco products are being smuggled into Canada via sea containers. Third, tax exempt tobacco products meant for sale on First Nations Reserves to status Natives are being illegally purchased on reserves by non-natives and illegally diverted for sale in cities. Fourth, a portion of the current contraband tobacco on the market is being obtained through criminal activity such as convenience store and cargo theft.

Arrests, confiscation. Health Canada (2007b) states that the most commonly confiscated illicit tobacco product in Canada is bags of cigarettes in quantities of 200, which originate from a variety of manufacturing locations found on First Nations reserves. This information is repeated in the 2008 Imperial Tobacco report which found that 63.3% of the illegal tobacco examined in their study was loose cigarettes (GfK Dynamics, 2008).

According to the report "Health Concerns: Report to the Conference of the Parties on the Implementation of the Framework Convention on Tobacco Control." (Health Canada, 2007b) in 2005, a total of 135,895 cartons of cigarettes were seized at marine ports of entry by the Canada Border Services Agency (CBSA). The majority of these cartons were either counterfeit or Chinese brand cigarettes. A total of 71 postal/courier seizures, 75% of which originated from China, were also made in 2005. Additionally, 105 seizures of Egyptian water type tobacco were made in 2005. Between ports of entry, 233,376 cartons were also seized by the RCMP in 2005. In the first 9 months of 2006 the number of counterfeit and Chinese brand cigarettes entering marine ports had already doubled what was seized in 2005. Overall, 6% of RCMP seizures made in 2006 were foreign tobacco products (RCMP. 2008).

Recently, stories of arrests and seizures of contraband tobacco have flooded the news. In May, 2009 alone Ontario RCMP officers reported the following seizures of contraband cigarettes: 23,750 bags from a tractor trailer in Cornwall Ontario (RCMP, 2009a); 1,000 bags from a driver in Cornwall, Ontario; 1000 bags from a driver in South Glengarry, Ontario (RCMP, 2009b); 14,250 bags from a van in South Stormont Ontario (RCMP, 2009c); and 65,700 cartons or resealable bags from a tractor trailer in South Stormont, ON (RCMP, 2009d).

"We believe we intercept about 15 contraband cigarette crossings per week, while there is an average of 110 per day, seven days a week" says RCMP officer Sgt. Michael Harvey when discussing contraband tobacco crossing from the US side of the Akwesasne Mohawk reserve into Cornwall, Ontario (Doucet, 2009).

Beyond just illegal tobacco, there is a growing concern surrounding the amount of other criminal activity associated with contraband smuggling. The 2008 Contraband Tobacco Enforcement Strategy put out by the RCMP stated that there has been an increasing amount of multi-commodity seizures linking those responsible for tobacco smuggling with drugs, weapons, and counterfeit money.

Summary. Empirical, anecdotal and historical data show a strong relationship between tobacco prices and contraband tobacco: as the price of legal tobacco increases, contraband tobacco increases its share of the market. As has been demonstrated throughout Canada's history, finding the appropriate tax level for cigarettes is difficult. Although the RCMP and other agencies such as Finance Canada continuously review tobacco tax levels across the country in order to determine their effectiveness in addressing both smoking consumption and the illicit tobacco market (RCMP, 2008), it appears that Canada has not yet found the price point that will lead to reduced smoking consumption without encouraging expansion of the contraband market and its related criminal tobacco market (RCMP, 2008). Understanding the Impact of the Contraband Tobacco Market on Public Health.

TOBACCO COMPANY QUOTES: NICOTINE AS A DRUG

Here are a few of the many quotations from the tobacco companies’ own archives that show the industry
knows nicotine is an addictive drug and their products are nicotine-delivery devices.
“In a sense, the tobacco industry may be thought of as being a specialized, highly ritualized, and stylized
segment of the pharmaceutical industry. Tobacco products uniquely contain and deliver nicotine, a potent
drug with a variety of physiological effects.”
1972 Claude Teague memo, “RJR Confidential Research Planning Memorandum on the Nature of the
Tobacco Business and the Crucial Role of Nicotine Therein,” Bates No. 2072555994/5997
“I would be more cautious in using the pharmic-medical model--do we really want to tout cigarette smoke
as a drug? It is, of course, but there are dangerous F.D.A. implications to having such conceptualization
go beyond these walls. . . Perhaps this is the key phrase: the reinforcing mechanism of cigarette smoking.
If we understand it, we are potentially more able to upgrade our product.”
Philip Morris memo from William L. Dunn to Dr. Helmut Wakeham, February 19, 1969
“Different people smoke cigarettes for different reasons. But, the primary reason is to deliver nicotine into
their bodies . . . .Similar organic chemicals include nicotine, quinine, cocaine, atropine and morphine.”
1992 Memo from Barbara Reuter, director of portfolio management for Philip Morris’ domestic tobacco
business, Bates No. 2065387288/7290
“We have, then, as our first premise, that the primary motivation for smoking is to obtain the
pharmacological effect of nicotine.”
1969 Philip Morris draft report by Thomas Osdene, “Why One Smokes,” Bates No. 2046754810/4822


“The cigarette should be conceived not as a product but as a package.  The product is nicotine.  The
cigarette is but one of many package layers.  There is the carton, which contains the pack, which contains
the cigarette, which contains the smoke.  The smoker must strip off all these package layers to get to that
which he seeks…Think of a cigarette pack as a storage container for a day’s supply of nicotine…Think of
a cigarette as a dispenser for a dose unit of nicotine…Think of a puff of smoke as the vehicle of
nicotine…”
 William Dunn, Jr., of the Philip Morris Research Center, “Motives and Incentives in Cigarette Smoking,”
Bates No. 1003291922/1939
“A cigarette as a “drug” administration system for public use has very very significant advantages: Speed.
Within 10 seconds of starting to smoke, nicotine is available in the brain.  Before this, impact is available
giving an instantaneous catch or hit, signifying to the user that the cigarette is “active.”  Flavour, also, is
immediately perceivable to add to the sensation.  Other “drugs” such as marijuanha, amphetamines, and
alcohol are slower and may be mood dependent.”
 C.C. Greig in a BAT R&D memo, Bates No. 100515899/5910
“Moreover, nicotine is addictive. We are, then, in the business of selling nicotine, an addictive drug
effective in the release of stress mechanisms.”
July 17, 1963 report by then Brown & Williamson general counsel/vice president Addison Yeaman, Bates
No. 1802.05
“Let’s face facts: Cigarette smoke is biologically active. Nicotine is a potent pharmacological agent. Every
toxicologist, physiologist, medical doctor and most chemists know that. It’s not a secret.”  
1982 Memo by Philip Morris researcher Thomas Osdene
 “The view has been elaborated that nicotine is the primary reinforcer of continued smoking, and that this
reinforcement value is in large part due to the functional contribution that the arousal modifying properties
of nicotine makes to the negotiation of everyday life (coping).  Two major research objectives are seen to

be appropriate:  1) Fuller understanding of the effects of manipulating nicotine to tar ratio in cigarettes
otherwise equated on all parameters.  Such inquiry should be closely linked to the contribution of nicotine
manipulations (i.e. enhanced nicotine to tar ratios) to producing cigarette designs which require less effort
to deliver the required reward.”
R.P. Ferris in a memo for BAT, September 12, 1985, Bates No. 101513832-101513836
“If the nicotine level of cigarettes fails to completely achieve the desired mood change that cigarette will
be drawn on deeper, the smoke held longer and consumption will rise (but consumption won’t rise at the
same rate nicotine declines).
The rush of nicotine into the blood stream and nervous system is short-lived; therefore, reducing
consumption would cause withdrawal and all of its unpleasant side effects so long as the smoker is restricted
from smoking.  Nicotine vacates the system in 30 minutes or so and at that time withdrawal starts.”
1974 Brown & Williamson, “Young Adult Smoker Life Styles and Attitudes,” Bates No. 170040977-170041001
“It is my conviction that nicotine is a very remarkable beneficent drug that both helps the body to resist
external stress and also can as a result show a pronounced tranquilizing effect. You are all aware of the
very great increase in the use of artificial controls, stimulants, tranquilizers, sleeping pills and it is a fact
that under modern conditions of life people find that they cannot depend just on their subconscious
reactions to meet the various environmental strains with which they are confronted, they must have drugs
available which they can take when they feel the need. Nicotine is not only a very fine drug, but the
techniques of administration by smoking has considerable psychological advantages and a built-in control
against excessive absorption. It is almost impossible to take an overdose of nicotine in the way it is only
too easy to do with sleeping pills.”
BAT memo, “The Smoking and Health Problem,” May 29, 1962, Bates No. 100427861-100427883

“We now possess a knowledge of the effects of nicotine far more extensive than exists in published
scientific literature. . . for good reasons the results of Battelle’s work have been kept at a high level of
secrecy…In the last few years there has been a quite remarkable increase in the production of
tranquilizer drugs, and while most of these need a doctor’s prescription there is already one on free sale
in Switzerland. If such drugs become more freely available they will compete with nicotine, which was a --
which is a natural tranquilizer, and will leave smoking primarily dependent on its psychological effects for
the maintenance of the habit.”
BAT memo, “The Effects Of Smoking, Proposal For Further Research Contracts With Battelle,” by Sir
Charles Ellis, director of research, February 13, 1962, Bates No. 301083820-301083835

“The hypothalamo-pituitary stimulation of nicotine is the beneficial mechanism which makes people
smoke; in other words, nicotine helps people to cope with stress. In the beginning of nicotine
consumption, relatively small doses can perform the desired action. Chronic intake of nicotine tends to
restore the normal physiological functioning of the endocrine system, so that ever-increasing dose levels
of nicotine are necessary to maintain the desired action. Unlike other dopings, such as morphine, the
demand for increasing dose levels is relatively slow for nicotine…In a chronic smoker the normal
equilibrium in the corticotropin releasing system can be maintained only by continuous nicotine intake. It
seems that those individuals are but slightly different in their aptitude to cope with stress in comparison
with a non-smoker. If nicotine intake, however, is prohibited to chronic smokers, the corticotropinreleasing ability of the hypothalamus is greatly reduced, so that these individuals are left with an
unbalanced endocrine system. A body left in this unbalanced status craves for renewed drug intake in
order to restore the physiological equilibrium. This unconscious desire explains the addiction of the
individual to nicotine.”
May 30, 1963 report, A Tentative Hypothesis on Nicotine Addiction produced for BAT by C. Haselbach and
O. Libert, Bates No. 1200.01
“In view of its preeminent importance, the pharmacology of nicotine should continue to be kept under
review and attention paid to the possible discovery of other substances possessing the desired features of
brain stimulation and stress-relief without direct effects on the circulatory system. The possibility that
nicotine and other substances together may exert effects larger than either separately (synergism) should
be studied and if necessary the attention of Marketing departments should be drawn to these possibilities.”
 Conclusion from 1968 BAT Research Conference, Bates No. 1112.01

“The most direct solution to the problem of increasing nicotine delivery in the new product would be to
add nicotine alkaloid directly to the tobaccos used in the new blend. The direct approach involves
determining at which point in the manufacturing process the nicotine could be added, and secondly,
determining where the necessary quantity of nicotine to support a major brand could be obtained. The
direct approach involves some serious problems, mainly centering around the intensely poisonous nature
of nicotine alkaloid.”
April 13, 1977, report by Lorillard official H.J. Minnemeyer, Bates No. USX095991-USX0951003
“The major goal of the Nicotine Program is to develop nicotine analogues which will have desirable
effects on the central nervous system (CNS) without the undesirable effects of nicotine on the peripheral
nervous system (PNS).  We would like to understand at the molecular level where and how nicotine
exerts its beneficial effects on the CNS.  During the last year we have made excellent progress in the
Nicotine Program.  Investigations of the chemistry, pharmacology, behavioral pharmacology and
psychological effects of nicotine and nicotine analogues are all making contributions toward the
accomplishment of our goals.”
Thomas Osdene in a memo entitled “Status of Nicotine Program,” 11/3/80, Bates No. 2056145895-5896
“Smoking is then seen as a personal tool used by the smoker to refine his behavior and reactions to the
world at large. It is apparent that nicotine largely underpins those contributions through its role as a
generator of central physiological arousal effects which express themselves as changes in human
performance and psychological well-being.”
1984 presentation by Rob Ferris of BAT, Bates No. 500866208-500866233

INFORMATION ON SMOKING FOR YOUNG PEOPLE

It's common knowledge that cigarette smoking is not good for you. Younger people, especially, might shrug this off without having a full grasp of exactly how bad it is. Smoking now will not only affect you as you age, but there are immediate ramifications as well. If you smoke, it's already taking a severe, though maybe silent, toll on your health, even if you are a teenager

IMPACT ON HEALTH
f you are in your teens, you are still growing. According to the World Health Organization, smoking now will stunt the growth of your lungs. If you continue smoking, they will never develop as fully as they might have. This can be a lifelong disability. WHO also indicates that early signs of heart disease and stroke have been found in teenagers who smoke, so these are not necessarily problems that will only happen to later in life.

IMPACT ON FINANCES
As of 2009, the average cost of a pack of cigarettes--midway between generic and premium brands--was $5.51. Also in 2009, minimum wage was $7.25 per hour. If you're a high school student who works, chances are that you have a minimum-wage job. Smoking means that you must put in approximately three quarters of an hour in order to buy a pack of cigarettes.

IMPACT ON SPORTS
If you're active, smoking has probably already taken a toll on your performance sports-wise, even if you haven't noticed it yet. According to WHO, the resting heart rate of a teenager who smokes is two to three beats faster than her non-smoking friend. Teenagers who smoke also exhibit shortness of breath when exerting themselves three times more often than teenagers who don't smoke.

IMPACT ON SOCIAI LIFE
Smoking is highly addictive. According to Kids Health, you can become addicted to nicotine after just a few days of using it. It can become very disruptive to your social life. Most states have laws banning smoking in public places and many people don't want guests to smoke in their homes. This won't stop you from experiencing cravings when you're out, however. In order to satisfy the craving, you may have to leave the party or gathering--repeatedly--and go stand outside by yourself to smoke. And if you can't slip away for some reason, you'll suffer withdrawal symptoms and feel miserable until you can.

IMPACT ON APPEARANCE
Smoking also makes you look bad. In turns your teeth and fingernails yellow, and it makes your hair smell, not to mention your clothing. It can also affect your complexion.

IMPACT ON SEXUALITY
IF YOU ARE IN A RELATIONSHIP WITH A NONSMOKER, ANTICIPATE THAT HE MIGHT NOT LIKE KISSING YOU BECAUSE HE CAN TASTE THE CIGARETTES ON YOUR BREATH. SMOKING LONG-TERM CAN ALSO REDUCE YOUR FERTILITY, SO IF YOU THINK YOU WANT KIDS OF YOUR OWN SOMEDAY, YOU MAY HAVE PROBLEMS CONCEIVING THE LONGER YOU SMOKE

Electronic cigarette.

An electronic cigarette, or e-cigarette, is an electrical device that simulates the act of tobacco smoking by producing aninhaled vapor bearing the physical sensation, appearance, and often the flavor (with or without nicotine content) of inhaled tobacco smoke, without its odor or, ostensibly, its health risks. The device uses heat (or in some cases, ultrasonics) to vaporize a propylene glycol- or glycerin-based liquid solution into an aerosol mist, similar to the way a nebulizer or humidifier vaporizes solutions for inhalation.

The device's components usually include a small liquid reservoir, a heating element, and a power source, which may be abattery or a wired USB adapter. Most electronic cigarettes are portable, self-contained cylindrical devices in varying sizes, and many are designed to outwardly resemble traditional cigarettes. Most are also reusable, with replaceable and refillable components, though some models are disposable. Liquids that produce vapor for electronic cigarettes are available in many different flavor varieties and nicotine concentrations, including nicotine-free versions.

The primary stated use of the electronic cigarette is an alternative to tobacco smoking, or a smoking cessation device: It endeavors to deliver the experience of smoking without the adverse health effects usually associated with tobacco smoke, or to at least greatly reduce those risks.

The possible benefits or adverse effects of electronic cigarette use are a subject of disagreement among different health organizations and researchers. Controlled studies of electronic cigarettes are scarce due to their relatively recent invention and subsequent rapid growth in popularity. Laws governing the use and sale of electronic cigarettes, as well as the accompanying liquid solutions, currently vary widely, with pending legislation and ongoing debate in many regions. Concerns have been raised by anti-smoking groups that use of the device still might carry health risks and that it could appeal to non-smokers, especially children, due to its novelty, flavorings, and possibly overstated claims of safety.

The modern electronic cigarette's design was devised by Chinese pharmacist Hon Lik in 2003, though the earliest known description of its concept was authored by Herbert A. Gilbert in 1963.

Non-cigarette tobacco taxes.

Taxes on smokeless (chewing) tobacco, as well as (and often concurrent with) snuff, cigars and pipe tobacco, are also common in the United States. Forty-nine states and the District of Columbia have such a non-cigarette tax(es), Pennsylvania being the sole exception, having no smokeless or cigar tax at all (though it considers small cigars to be cigarettes for taxation purposes). Of the 49 states that do impose in this category, Florida does not tax cigars, though all other tobacco products are taxed. The U.S. federal government charges different non-cigarette excise taxes, according to the following 6 categories: snuff, chewing tobacco, pipe tobacco, roll-your-own, large cigars, and small cigars. Cigarette papers and tubes are also taxed.