National Overview

Over the last twenty years, tobacco and alcohol products have been subject to various levels of criminal exploitation. In some cases it is to supply a product not readily available in Canada, but primarily the illicit markets exist to avoid high levels of federal and provincial taxation.

Since 2001, federal and provincial tobacco taxes have gradually increased. Despite this increase, there has been no apparent surge in illicit tobacco activities comparable to 1993, the historical smuggling high point. However, illicit activities are occurring in various forms including: cross-border smuggling, continuing illicit manufacturing, a declining but continuing interprovincial movement, and, domestic thefts. The participants in these activities are more often independent entrepreneurs or small groups as opposed to major organized crime groups.

In the early to mid-1990s, the smuggled tobacco products were predominantly legitimately exported Canadian manufactured brands that were shipped to the United States and then smuggled back into Canada. In February 2003, criminal fraud charges were laid against JTI-MacDonald Corp, related companies, and former employees, concerning allegations of complicity in the smuggling of contraband Canadian blend tobacco products between 1991 and 1996 inclusive.

Currently, the smuggled tobacco is mostly illicit Aboriginal manufactured products, discount U.S. brands, or other foreign products from South America, Asia, and the Middle East. Counterfeit cigarettes, particularly the Phillip Morris ‘Marlboro’ brand, have been encountered in Canada, believed to be smuggled from China.

The illicit alcohol market continues to be supplied by a variety of means, including: cross-border movement, illicit manufacture (either illicit stills or re-bottling operations), and, retail/wholesale thefts. There is a wide mix of participants in these activities including independent entrepreneurs and loosely organized crime groups. The United States continues to be a major source of illicit alcohol smuggled into Canada. In November 2002, law enforcement disrupted a criminal network in Southern Ontario that had been allegedly smuggling 200 cases per week from the U.S. concealed in tractor trailers.

Illicit manufactured alcohol poses a public health concern due to the potential for bacterial contamination and/or methanol poisoning. Serious medical repercussions, ranging from blindness to death, could be the consequences of consuming alcohol from illicit sources.