Tobacco manufacturers JTI-Macdonald and RJ Reynolds agreed on Tuesday to pay Canada's federal and provincial governments CAD 550 million (EUR 404 million) to settle longstanding cigarette smuggling suits.

Canada's government said the deal was a step forward, but a health association that led a campaign to persuade the government to sue tobacco companies criticised the payment as too small. In a statement, National Revenue Minister Keith Ashfield said the settlement agreements drop the curtain on civil claims related to the movement of contraband tobacco in the early 1990s. "Our government is actively working to make sure that companies in Canada do not profit from illegal activity," Ashfield said. "The settlement agreements bring closure to issues that have been outstanding for more than a decade so that governments can focus on tobacco tax compliance and contraband tobacco."
In addition to the civil settlements, JTI-MC pleaded guilty in the Ontario Court of Justice to a single count of "aiding persons to be in possession of tobacco not packaged in accordance with the Excise Act".
Northern Brands International, a company linked to RJR, also pleaded guilty to a criminal conspiracy offence.
Taken together with previous agreements reached with other tobacco manufacturers in 2008, Canada's federal, provincial and territorial governments will now reap a total windfall of CAD 1.7 billion (EUR 1.25 billion).
Imperial Tobacco Canada Limited and Rothmans Benson and Hedges pleaded guilty in July 2008 to customs charges related to contraband cigarettes and paid record fines of CAD 1.15 billion (EUR 0.84 billion). The charges involved illegal activity between the years of 1989 to 1994, when cigarettes produced in Canada were shipped to locations in the United States near the Canada-US border. From there, the cigarettes were distributed to smugglers or black market distributors who brought them back into Canada for illegal distribution, without payment of tobacco taxes and duties. As part of Tuesday's settlement, JTI-MC also agreed to put in place "effective internal compliance controls" and "assist governments in the battle against contraband tobacco", according to a statement. These measures include anti-money laundering procedures, enhanced information sharing, and increased oversight of tobacco production at companies' foreign facilities. (pi)