Please note that the following document, although correct at the time of issue, may not represent the current position of the Agency. / Veuillez prendre note que ce document, bien qu'exact au moment émis, peut ne pas représenter la position actuelle de l'Agence.
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CASE NUMBER: 111115
March 13, 2009
Subject:
_Excise Interpretation
New Tobacco Stamping Regime
Dear XXXXX
I apologize for the delay in responding to your XXXXX letter - concerning the proposed enhanced tobacco stamping regime (regime). It is hoped that this letter XXXXX and the Canada Revenue Agency (CRA) since the date of that letter.
Thank you for the package samples, it is confirmed that they have been shared with Health Canada only. As well the break down of projected production is appreciated and will assist in the planning of stamp production.
CRA has maintained an open communication policy to facilitate the implementation of the regime in early 2010. Following the official announcement on January 3, 2008 of the awarding of the contract to develop, produce and distribute the new tobacco stamp (stamp), CRA held an information session for industry on January 30, 2008 for the purposes of discussing the implementation of the regime.
During the information session, CRA presented, and subsequently confirmed in writing that our proposed regulations will in effect carry the same main points as they do now as it relates to stamp placement:
Current regulations proposed to remain
• All packages of tobacco products (domestic or imported) must be stamped in a conspicuous location
• In a manner that seals the package
• The stamp must be applied directly on the smallest tobacco package available to the consumer
• The stamp must not interfere with any other federal or provincial government packaging or labeling requirements. This is inferred today, but will be specified in the new regulations
Proposed new items to be added
• Placement must not negatively affect the security features of the stamp
• Stamp will be placed under the cellophane over-wrap.
CRA's proposed regulations will provide tobacco manufacturers with the flexibility to determine their preferred placement of the stamp according to specifications of their various packaging formats and production lines while complying with government packaging and labelling requirements.
Since the information session CRA has had on-going discussions with individual members of the tobacco industry (importers and producers). Based on submissions from Industry XXXXX and their suppliers of stamp application equipment, the dimensions of the stamp were changed from the initial 20x35 mm to 20x40 mm. To maintain the stamp security and minimize costs it was determined that the stamp would be available in: one size only, in single format and dry.
On September 18, 2008, CRA met with Industry members and the stamp provider to test the readability of the stamp. The stamp was applied to industry identified "problematic" packs and tested to insure that the security features were not compromised. As you are aware, no significant readability issues were identified. This meeting also gave industry a new opportunity to identify issues and explore options to meet the proposed implementation date.
XXXXX Specific concerns not covered above:
a) Your letter outlined a cutoff date to order equipment. As previously stated and publicized:
The enhanced stamp is expected to be fully implemented in early 2010, with a target implementation date to be announced. As of that date, all packaged and imported tobacco products will require the enhanced stamp to enter the Canadian market.
XXXXX, representations were made stating that the initially proposed July 2008 implementation date was not reasonable, but a late 2009 implementation would be. Based on these representations (copy of XXXXX timetable Summary is attached) and other considerations, the revised implementation date of early 2010 was established and announced by the Minister of National Revenue on September 4, 2008.
As mentioned above the size of the stamp is by request of Industry and it is slightly smaller then most other stamps used by other countries.
b) CRA and Health Canada are taking a coordinated approach.
XXXXX of Health Canada, CRA XXXXX reconfirmed that the two government bodies will work together to ensure that if there are any changes to the size or placement of the Health Warnings Messages (HWM), they will take into consideration the stamp. As is now the case, the stamp placement must respect the current HWM.
c) Canadian vs International Placement
XXXXX to apply the stamp in the usual international location on tobacco packages. This was extensively reviewed at senior levels.
Canada's Health policy is that HWM must be at the top of tobacco packaging unlike most other countries where it is currently at the bottom. The HWM and the stamping regime are two separate government initiatives that must co-exist per government decision. The Canadian environment for tobacco is different from most other countries. That said, it is understood that there is a proposal at the World Health Organization to place all HWM at the top of tobacco packages.
The amount of space used by the stamp and the current HWM is similar to many other countries as no country permits a stamp to be placed on its HWM.
d) Expenditures
Since the consultation period in 2005 leading to and following Budget 2005 announcements, stakeholders have presented their concerns with a proposed new stamping regime, including cost of implementation. It is appreciated that Industry will need to undertake a redesign of packaging processes including in some cases the redesign of packaging to accommodate the stamp. The design of the regime tries to minimize the potential cost of implementation.
The request to use the common international placement for the stamp on the hinge packaging was reviewed in great detail in early 2008. XXXXX, CRA confirmed that the placement of the stamp must not conflict with other federal or provincial requirements.
e) Implementation
XXXXX. CRA will have a transition period where tobacco products may bare either the old tear-tape stamp or the proposed stamp. Once CRA has officially announced an implementation date, all packaged and imported tobacco products will require the stamp to enter the Canadian market.
XXXXX. As indicated above CRA timetables were adjusted accordingly. As well CRA had clearly indicated from the January 2008 that the stamp could not be applied on HWM.
It is understood from the Health Canada/CRA and Industry XXXXX that the stamp placement on Soft Packs may be less problematic then first thought. The stamp has been found to be much more flexible in it's bendability and Health Canada appeared to indicate that the HWM may be moved down slightly to accommodate the stamp. The final change to the HWM placement may need to be submitted to Health Canada for their review.
Overall the number of problematic packages appears to be limited to packaging that is too small to accept a stamp. During previous conversations, it was outlined that these package sizes may need to be transitioned out.
In general, CRA has designed and adapted the regime with Industry input. CRA has extended the implementation start up date by more than eighteen months. The stamp is flexible in its ability to be applied. And CRA and Health Canada have provided greater certainty that the stamp placement will not be affected by any future change to the HWM.
I hope that this information is helpful and should you require additional information, please do not hesitate to contact us.
Preston Gallant
Manager
Strategic Policy and Program Improvement
Excise Duties & Taxes Division
Canada Revenue Agency
UNCLASSIFIED
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