Technical Briefing on Proposed Legislative Amendments to the Tobacco and Vaping Products Act: Cost Recovery – December 8, 2023

Subject:

Technical Briefing on Proposed Legislative Amendments to the Tobacco and Vaping Products Act: Cost Recovery

Date:

December 8, 2023

Participants:

Health Canada (HC) presenters:

• Sonia Johnson, Director General, Tobacco Control Directorate (TCD)
• Laura Smith, Director, Office of Policy and Strategic Planning, TCD

Industry representatives:

• Adam Nielubowicz, Owner, Boardwalk Falls Co Inc.
• Daniel More, President, Brigham Enterprises Inc.
• Kyle Wilcox, General Manager, Brigham Enterprises Inc.
• Richard Edelstein, President, Century Tobacco Company
• Yelenny Castillo Pérez, President, Havana House
• Nelsen Ferreira, Accounting Manager, House of Horvath Inc.
• Veronica Atsaidis, Legal Counsel, Imperial Tobacco Canada
• Elaine McKay, Head of Corporate Affairs and Communications, JTI-Macdonald Inc.
• Brittney Green, Fiscal & Regulatory Affairs Manager, JTI-Macdonald Inc.
• Jasmine Odlin, Director, Government and Corporate Affairs, National Smokeless Tobacco Company
• Sabrina Sotiriu, Federal Lead, Government and Regulatory Affairs, Rothmans, Benson & Hedges Inc.
• Katherine Ridings, Regulator Compliance Supervisor Canada, Rothmans, Benson & Hedges Inc.
• Mischa Armin, Counsel, Rothmans, Benson & Hedges Inc.in
• Darryl Tempest, Government Relations Council, Canadian Vaping Association
• Samuel Tam, President, Canadian Vaping Association
• Christina Pan, COO, 180 Smoke Vape Store, Canadian Vaping Association
• Danielle Chesney, CEO, Alt Vape Inc., Canadian Vaping Association
• Jason Flynn, Owner, Refined Liquid Labs, Canadian Vaping Association
• Meshaila Sinnis, Executive Director, Vaping Industry Trade Association
• Brad Jemmett, GM, SnowPlus, Vaping Industry Trade Association
• Jesse Tucker, Director of Finance and Operations, EZ-Vape Canada Inc, Vaping Industry Trade Association
• Joel Verburg, VP – Science & Technology, Dvine Laboratories, Vaping Industry Trade Association

Introduction:

The Tobacco Control Directorate invited tobacco industry representatives and vaping industry association representatives to a technical briefing on the proposed legislative amendments to the Tobacco and Vaping Products Act (TVPA) related to cost recovery, included in Bill C-59, Fall Economic Statement Implementation Act, 2023.

The Tobacco Control Directorate reminded participants that this meeting is subject to disclosure as per HC's Openness and Transparency policies. In the interest of transparency, the Department stated that it would be making a record of the meeting publicly available. The handling of information and privacy notice was mentioned and acknowledged.

HC also referred to Article 5.3 of the World Health Organization Framework Convention on Tobacco Control (WHO FCTC), its international obligation to protect tobacco control policies from the vested interests of the tobacco industry. Participants were also informed of this policy in the invitation, and accepted these terms by registering to the event.

Subjects:

TCD welcomed participants and stated the objective of this technical briefing was to provide context and an overview of the proposed legislative amendments to the TVPA relating to fees and charges. Health Canada said that, should the proposed legislative amendments be adopted, the department would consult with partners, stakeholders, and other interested parties prior to making any regulations.

TCD presented the background and next steps regarding the proposed legislative amendments to the TVPA:

• The Government of Canada committed to "require tobacco manufacturers to pay for the cost of federal public health investments in tobacco control" in the Minister of Mental Health and Addictions and Associate Minister of Health's 2021 mandate letter and again in Budget 2023.
• The Government of Canada committed $330 million over five years starting in 2018 and $66M per year thereafter to help achieve its target of less than 5% tobacco use by 2035 as part of Canada's Tobacco Strategy (CTS).
• If adopted, the proposed legislative amendments would provide the Minister the regulation-making powers necessary to develop, implement, and administer cost recovery frameworks to recover the costs of federal tobacco and vaping activities.
• Health Canada is considering a phased approach to tobacco and vaping cost recovery, and is following the established fee development process. The department would proceed with consultations on any details of the cost recovery frameworks before making any regulations. This process takes at least 18 months.

The Chair then opened the floor to questions.

Timelines

• Industry representatives asked for clarification regarding the 18-month timeline provided. TCD clarified that this timeline would begin when the bill receives Royal Assent.

Eligible activities

• Industry representatives sought further information on proposed "eligible activities" for the cost recovery framework. TCD notified participants that this analysis is ongoing and the list of activities would be subject to consultation.

Amount to be recovered

• Industry representatives asked TCD what amount would be recovered in the proposal. TCD reconfirmed that approximately $66M is currently allocated to federal tobacco and vaping activities per year. TCD said that departmental guiding principles for cost recovery include accountability and transparency. TCD reiterated that the fee proposal, which would be subject to consultation, would include further details.

Consultation

• Industry representatives asked when there would be another briefing or further consultations. TCD confirmed that the next briefing and consultations would take place at the fee proposal stage.
• One representative asked whether TCD would engage with industry in-person, individually, as part of the consultation. TCD confirmed that the approach to consultation and engagement on the fee proposal is still in development.

Fee proposal

• Industry representatives requested a number of details related to the fee proposal:
• When asked whether fees would be sought proactively or retroactively, TCD confirmed costs would be recovered retroactively.
• In regards to the impacts on Indigenous-owned manufacturers, TCD recognizes that tobacco plays a different roles in different communities. TCD would hold meaningful consultations where details of the proposal will be clarified.
• In regards to illicit products, TCD noted that Public Safety Canada, the Royal Canadian Mounted Police, and the Canadian Border Services Agency receive funding to detect and prevent illicit tobacco.
• In response to questions regarding details of the fee proposal, TCD said it is not able to provide further details at this time. More information will be provided in the fee proposal, which will be subject to consultation.

Vaping

• Industry representatives had questions regarding how the proposed legislative amendments relate to vaping products. TCD confirmed that the objective of the proposed legislative amendments is to provide the regulations-making powers necessary to develop, implement, and administer cost recovery frameworks to recover the costs of federal tobacco and vaping activities.
• In regards to timelines associated with a vaping cost recovery framework, TCD clarified that implementing a cost recovery framework for tobacco would be the initial priority.

Taxes

• Industry representatives asked TCD about the impact on taxes from the proposal (e.g. excise taxes or provincial/territorial taxes). TCD noted that taxation and cost recovery frameworks do not serve the same purpose. Cost recovery is the practice of establishing and collecting fees to recover part or all of the costs associated with eligible services or activities.

Other

• Industry representatives asked how the cost recovery framework advances the CTS objectives. TCD noted that the objective of the proposed amendments is to recover part or all of the costs associated with eligible services or activities.
• One participant asked whether there are any future cost recovery proposals in development for alcohol. TCD was unable to provide this information as this file is led by a separate team at Health Canada.
• One participant asked if there are cost recovery frameworks in place for other industries in Canada. TCD identified some examples at Health Canada, including: cannabis, pesticides, human and veterinary drugs, medical devices, hazardous materials, and national dosimetry services.

In closing, the Chair thanked participants for their time and their questions and reiterated there will be future opportunities to provide feedback.

Conclusion:

The briefing was then concluded.

Documents:

• Presentation as prepared by TCD