CRIME

The smoke smugglers

Dealers prosper from contraband cigarettes

NORA UNDERWOOD April 15 1991
CRIME

The smoke smugglers

Dealers prosper from contraband cigarettes

NORA UNDERWOOD April 15 1991

The smoke smugglers

CRIME

Dealers prosper from contraband cigarettes

On the secondary roads leading into the Kahnawake reserve, seven kilometres southwest of Montreal, members of the Mohawk Warrior Society stand guard at security checkpoints. Signs by the roadside warn members of the Sûreté du Québec, the provincial police force, and RCMP officers that they are not welcome on the reserve. Inside the boundaries, about 30

abandoned cigarette stands signal the closure of the flourishing trade in contraband cigarettes that existed before last summer’s blockade of the reserve during the confrontation between Mohawks, police and Canadian troops. Now, police in Quebec say that the Mohawk trade in smuggled cigarettes has been revived in a different form, with trucks from the Mohawk reserves at Kahnawake and Akwesasne, which straddles the Canada-U.S. border near Cornwall, Ont., delivering hundreds of thousands of cartons of cigarettes a month to customers in Central Canada. At the same time, police forces across the country are contending with a growing number of breakins, truck hijackings and armed robberies as the soaring cost of tobacco makes the traffic in stolen or smuggled cigarettes an increasingly profitable enterprise.

The trade in contraband cigarettes has grown steadily as increased taxes drove the

price of cigarettes to the current level of almost $6 for a package of 25, in some parts of the country, from about $1 in 1980—or about $2,200 a year for a pack-a-day smoker. As a result, officials say, smuggling alone cost the federal government about $230 million in lost revenue last year. Thefts range from an incident in February when thieves broke into a grocery outlet in Brampton, Ont., 40 km north-

west of Toronto, and stole 25 cases of cigarettes worth about $33,000, to a robbery in Edmonton two weeks ago in which two men held a female clerk at gunpoint and got away with $25,000 worth of cigarettes from an east Edmonton warehouse. “Cigarettes are a prime target,” says Sgt. Alan Cox of the Vancouver police department. “They’re as good as cash and there are always buyers.” According to a study prepared by the Toronto-based accountancy firm of Peat Marwick Thome for Montreal-based Imperial Tobacco Ltd., about 11 million cartons of cigarettes were sold illegally in Canada last year, with an estimated retail value of more than $500 million.

What makes the trade in stolen or smuggled cigarettes so profitable is the fact that more than 70 per cent of the retail price of cigarettes is made up of federal and provincial taxes. Police say that stolen cigarettes, or cigarettes exported duty-free to the United States and

then smuggled back into Canada, are usually sold to comer-store operators, bars and other businesses that are able to make a handsome profit even after paying the smugglers or thieves for the cigarettes.

While the number of cigarette thefts is rising in most parts of Canada, federal officials say that the largest organized smuggling operations are based at the Mohawks’ Akwesasne reserve. At least one million cartons of cigarettes are manufactured in Canada for export to the United States every month. According to Cornwall-based RCMP Cpl. Michel Goulet, before they are distributed to stores in the United States, the untaxed cigarettes are stored in warehouses in New York state. Goulet says that licensed tobacco dealers from Akwesasne purchase cigarettes from the warehouses. Some of the legally purchased cigarettes are later smuggled back into Canada through back roads or across the river by boat or snowmobile. Said Danny Phillips, spokesman for the Mohawk Nation Office at Kahnawake: “The government views it as illegal because they do not receive tax dollars from us. In their own law, they have no business collecting taxes from natives.” Police say that because native dealers can purchase untaxed cigarettes for about $10 to $15 a carton in the United States and resell them in Canada for $26 to $30 a carton—compared with about $40 retail—they estimate that the dealers are able to earn more than $12 million a month in profits.

Police and other officials say that Asian criminal gangs in some parts of the country are involved in smuggling cigarettes, including the New York City-based Philip Morris Cos.’ Marlboro cigarettes, which cannot be sold legally in Canada because Imperial Tobacco holds a copyright on the name Marlboro. According to the Peat Marwick Thome report, 2.5 million cartons of American Marlboro cigarettes are smuggled into Canada each year. The report said that Asian gangs were directly involved in bringing the American cigarettes into Ontario.

While the police contend with the traffic in contraband cigarettes, several provinces have taken steps to single out smuggled cigarettes. Starting on Nov. 1, 1990, Ontario cigarette manufacturers placed a yellow band on cigarette packages to show that all provincial and federal taxes have been paid. Last month, Quebec’s revenue minister, Raymond Savoie, announced that beginning next year, cigarette packages in Quebec will bear a white cellophane strip on the wrapper for similar reasons. Despite steps by government and manufacturers, some police officers predict that as long as the price of cigarettes continues to rise, the trade in illicit smokes is likely to go on growing as well.

NORA UNDERWOOD

JOHN DeMONT

DAN BURKE

JOHN HOWSE

RIC DOLPHIN