Canadian Manufacturers & Exporters (CME) is happy to provide comments on the proposed Tobacco Products Regulations (the regulations) and the Order to amend Schedule 1 to the Tobacco and Vaping Products Act which were recently published in Canada Gazette, Part I.
These proposed regulations are of great concern to the manufacturing industry, particularly our members in the legal tobacco manufacturing sector. CME’s concerns specifically relate to the questionable wisdom of stipulating packaging requirement to reduce smoking rates, the increase in the illicit cigarette trade that these changes would engender, and the impossibility of industry compliance on the proposed timelines.
1. Packaging Requirement Concerns: The regulations state that going forward only ‘slide and shell’ packs will be allowed in the market. Slide and shell packs account for less than 15% of the legal market and the machinery used by manufacturers to create these packs are either obsolete or no longer exist. Therefore, to comply, manufacturers will be required to rebuild this production capacity to roll out the new packaging. These increased compliance costs aside, we worry about the unintended consequences of this policy shift.
2. Unrealistic Implementation Timeline: The proposed regulations state that manufacturers would have a transition period of 180 days (6 months) from the publication date for implementation and retailers would have an additional 90 days (3 months). Given the issues outlined above regarding manufacturing and supply chain process changes, the implementation period is not feasible if the government insists on slide and shell format.
3. Making the contraband and counterfeit cigarette problem worse: Illegal tobacco production is a big problem in Canada and CME is very concerned that these proposed regulations will exacerbate this serious problem. This thriving illegal trade is estimated to consume 2025% of the tobacco market, robbing governments of upwards of $2 billion in tax revenue annually.