CANADA:Ottawa plans to combat smuggling by using cigarette packages, but tobacco industry is wary (fwd)

[Robert Weissman <rob@essential.org>]

Ottawa plans to combat smuggling by using cigarette packages, but tobacco
industry is wary
Brand identity lost
by James Baxter Southam News
National Post (9012) 
CANADA;
Date: Thursday, 2/18/99

Revenue Canada is planning to use up to 10% of every cigarette package to
help combat the $200-million tobacco smuggling industry, Southam News has
learned. 

The government is studying proposals to require cigarette manufacturers to
print a message directly on the cardboard packaging that states "this
package to be sold in" followed by the name of the province. 

The printed bar or seal would replace the thin, brightly-coloured
tear-tape that currently goes around the package and states the province
of sale in small print. 

"We want to enhance the tobacco stamping and we're going to work with the
industry," Herb Dhaliwal, Revenue Minister, said yesterday. The
government's plans were mentioned deep in the text of the budget, which
was tabled Tuesday.

Tobacco taxes net the government approximately $2.4-billion a year, but
officials at Revenue Canada and the RCMP estimate that smuggling costs the
government between 8% and 15% of that amount. Criminal organizations are
purchasing cigarettes targeted for sale in Quebec, where taxes are lowest,
and then rewrapping them with counterfeit identification seals from other
provinces.

The fake seals are easily identified up close, but are not readily
apparent when viewed in a rack, enforcement officials said. 

Store owners who buy smuggled cigarettes also hide the altered packs
behind packs that have not been tampered with, in order to elude
detection. Mr. Dhaliwal said exactly how the government will better
enforce the anti-smuggling laws is still being considered, but added that
any measure must include improvements to the visibility of the provincial
identifiers. 

The move, coupled with an announcement in January by Allan Rock, the
Health Minister, that he plans to require 60% of the front panel of every
pack to carry a series of strong anti-smoking warnings, means the
government plans to leave as little as 30% of the pack for brand
identification.

"We've been working with Revenue Canada for months on measures to better
deal with smuggling," said Rob Parker, president of Canadian Tobacco
Manufacturers' Council. "But this is the first time I've heard anything
like 10%." 

Mr. Parker said tobacco companies are concerned that the government plans
to squeeze their brand names and graphic identities to the point where
they are no longer a useful marketing tool. 

"If this is a serious proposal and they are not just pandering to the
anti-smoking lobby, there is clear potential that this will, in effect, be
confiscation of the brand," he said.

"At that point, we will [legally] resist any efforts by the government to
do so." 

Michel Descoteaux, director of public affairs for Imperial Tobacco in
Montreal, said: "We are willing to work with government on any measures to
prevent smuggling as long as they will have an impact." 

He said he hopes Health Canada and Revenue Canada will co-ordinate their
efforts so that the manufacturers are not required to change their
packaging more than once.

"However, if they are serious about taking as much as [70%], we really
have to be concerned about it becoming an illegal expropriation of the
value of our trademark," he added. "We never envisioned our packages being
billboards for the government."