January 9, 2008

Federal Government Hires Swiss-Based Firm to Help Fight Counterfeit Tobacco


The federal government has enlisted the help of a Switzerland-based company for a high-tech battle against counterfeit tobacco.

SICPA Product Security has been hired by the Canada Revenue Agency to help design new hidden security features such as holograms that will be mandatory on all cigarette packages and tobacco tins manufactured in or imported to Canada.

The new features will replace the current low-tech stamps that indicate federal taxes have been paid on the product - ones that counterfeiters have been able to easily duplicate.

Under a three-year contract finalized earlier this month, SICPA will be part of a joint venture with the Canadian Bank Note Company in Ottawa, which prints much of the country's paper currency.

While the exact size of the illegal trade is hard to pinpoint, governments, police and cigarette manufacturers agree it is a major problem.

Criminal Intelligence Service Canada, which represents law enforcement agencies across the country, has warned of cheap, foreign-made smokes being smuggled across the border, mainly in Ontario and Quebec. The packages are designed to look like legitimate brands such as Du Maurier and Players.

The provinces are working with the federal government on tobacco security, and may use the new federal stamps to replace the plastic tear-tape they currently require on tobacco products to prove that provincial taxes have also been paid.

"It's a national issue ... so we work together very closely with the federal government on all this stuff," said Barry Draward, assistant deputy minister of taxation in Manitoba's Finance Department.

"There's a question as to does the stamp replace or supplement the tear-tape, and that has yet to be decided."

SICPA has already developed tobacco security products for California, where information including the name and address of distributors has been encrypted into the tax stamps on tobacco products since 2005. The company also makes scanners which allow law enforcement officials and retailers to read the encrypted data to see whether the tobacco is legal.

The Canada Revenue Agency hopes to have its new system in place later this year.

The tobacco industry welcomed the crackdown on counterfeiting, but said a much larger issue is contraband tobacco, much of it manufactured on native reserves and sold in plastic bags. It's clear to buyers that the product is not legitimate. But consumers are drawn to the price - as little as $10, compared to a carton of cigarettes that can cost between $63 and $84 in different provinces.

"(They're) essentially Ziploc bags packed with 200 cigarettes and sold for just a few dollars," said Karen Bordisky, spokeswoman for Rothmans, Benson & Hedges Inc.

"It's a problem because it's so readily accessible now, it's becoming increasingly accepted that what it is essentially a criminal activity is becoming entrenched in Canadian society."

A survey released last year by the Canadian Tobacco Manufacturers Council suggested one in five cigarettes smoked in Canada was contraband.