Part I - Notices

Tobacco Charges Regulations: SOR/2025-80

Canada Gazette, Part II, Volume 159, Number 7

Registration
SOR/2025-80 March 6, 2025

TOBACCO AND VAPING PRODUCTS ACT

Whereas, under subsection 42.1(2)^a of the Tobacco and Vaping Products Act ^b, the Minister of Mental Health and Addictions and Associate Minister of Health has consulted with any persons or entities that that Minister considers to be interested in the matter;

Therefore, the Minister of Mental Health and Addictions and Associate Minister of Health makes the annexed Tobacco Charges Regulations under subsection 42.1(1)^a of the Tobacco and Vaping Products Act^b.

Ottawa, March 3, 2025

Ya’ara Saks
Minister of Mental Health and Addictions and Associate Minister of Health

Tobacco Charges Regulations

Definitions and Application

Definitions

1 The following definitions apply in these Regulations.

annual charge

means the amount, in Canadian dollars, that a designated manufacturer is required to pay during a fiscal year for the purpose of allowing His Majesty in Right of Canada to recover the annual cost base for the previous fiscal year. (redevance annuelle)

annual cost base

means the amount, in Canadian dollars, representing the costs incurred by His Majesty in right of Canada during a fiscal year in relation to the carrying out of the purpose of the Tobacco and Vaping Products Act. (frais de base annuels)

cigar

means a roll or tubular construction intended for smoking, other than a little cigar, that contains a filler composed of natural or reconstituted tobacco and has a wrapper, or a wrapper and a binder, composed of natural or reconstituted tobacco. (cigare)

cigarette

includes any roll or tubular construction that contains tobacco and is intended for smoking, other than a cigar, little cigar, tobacco stick or bidi. (cigarette)

civic address

means

• (a) for an address in Canada, the unit number, civic number, street name, municipality name, province name and postal code; and
• (b) for an address outside Canada, the unit number, civic number, street name, municipality name, province or state name, postal or ZIP code and country name. (adresse municipale)

designated manufacturer

means an entity in Canada that manufactures or imports tobacco products for retail sale in Canada. It does not include an entity that only packages, labels or distributes those tobacco products. (fabricant désigné)

fiscal year

means the period beginning on April 1 in one year and ending on March 31 in the next year. (exercice)

heated tobacco product

means a tobacco product intended for use with a device that is necessary for its use and that heats the tobacco. (produit du tabac chauffé)

net sales revenue

means the value, in Canadian dollars, of a designated manufacturer’s sales of tobacco products — excluding any taxes or duties — during a fiscal year minus the value of any returns of tobacco products during the same fiscal year. It includes the value, in Canadian dollars, of monetary and non-monetary consideration received by the designated manufacturer for sales of tobacco products. (recette de ventes nettes)

smokeless tobacco

means chewing tobacco or snuff. (tabac sans fumée)

tobacco product

does not include papers, tubes or filters intended for use with a tobacco product, a device that is necessary for the use of a tobacco product or the parts that may be used with that device. (produit du tabac)

Application

2 These Regulations apply to designated manufacturers in respect of tobacco products sold

• (a) at retail in Canada;
• (b) as ships’ stores, in accordance with the Ships’ Stores Regulations; and
• (c) to an accredited representative, as defined in section 2 of the Excise Act, 2001.

Sales and Revenue

Statement of sales and revenue

3 (1) A designated manufacturer must submit to the Minister, no later than April 30 of each fiscal year, a statement of sales and revenue for the previous fiscal year that includes the following information:

• (a) the designated manufacturer’s name, telephone number, email address and the civic address of its principal place of business in Canada;
• (b) the name, telephone number and email address of the individual who prepared the statement of sales and revenue and the civic address of their workplace;
• (c) the name, telephone number and email address of the individual who is responsible for the designated manufacturer’s financial affairs and the civic address of their workplace and, if that individual works for an entity other than the designated manufacturer, the name of the entity, as well as the telephone number, email address and civic address of its principal place of business in Canada;
• (d) the name, telephone number and email address of the individual responsible for communications respecting payment of the annual charge and the civic address in Canada of their workplace;
• (e) the business number assigned to the designated manufacturer by the Minister of National Revenue;
• (f) the date of the statement of sales and revenue and the fiscal year to which it relates;
• (g) the designated manufacturer’s net sales revenue for each of the following categories as well as its total net sales revenue:
• (i) cigarettes,
• (ii) cigars,
• (iii) little cigars,
• (iv) cigarette tobacco,
• (v) leaf tobacco,
• (vi) pipe tobacco,
• (vii) water pipe tobacco,
• (viii) smokeless tobacco,
• (ix) heated tobacco products, and
• (x) all other types of tobacco product; and
• (h) for each category referred to in subparagraphs (g)(i) to (x):
• (i) in the case of a tobacco product sold by weight, the total weight in kilograms of the tobacco products sold during the fiscal year minus the total weight in kilograms of the tobacco products returned during the same fiscal year,
• (ii) in the case of a tobacco product sold as a unit or as a package containing more than one unit, the total number of units sold during the fiscal year minus the total number of units returned during the same fiscal year, and
• (iii) the total value, in Canadian dollars, of any excise duty imposed during the fiscal year on the tobacco products sold minus the total value, in Canadian dollars, of any excise duty imposed during the same fiscal year on any returns of the tobacco product.

Attestations

(2) The statement of sales and revenue must include the following signed and dated attestations:

• (a) an attestation by the individual who prepared the statement that the information in the statement is correct and complete to the best of their knowledge and belief and is provided in good faith; and

 

(b) an attestation by the individual who is responsible for the designated manufacturer’s financial affairs that the statement was prepared in accordance with generally accepted accounting principles.

Electronic submission

(3) The designated manufacturer must submit the statement of sales and revenue using the form established by the Minister entitled Statement of Tobacco Sales and Revenue, as amended from time to time, and must send it electronically in the manner specified in the form.

Clarification

(4) A designated manufacturer must, within ten days of the day on which the Minister makes a request, submit to the Minister any information that is necessary to clarify information in the statement of sales and revenue.

Estimated total net sales revenue

4 (1) If a designated manufacturer did not submit a statement of sales and revenue for a given fiscal year or if the Minister has reasonable grounds to believe that the information provided by a designated manufacturer in its statement is incorrect or incomplete, the Minister may estimate the designated manufacturer’s total net sales revenue using any relevant information that is available to the Minister.

Reference to total net sales revenue

(2) If a designated manufacturer’s total net sales revenue has been estimated, a reference in these Regulations to that designated manufacturer’s total net sales revenue is to be read as a reference to its estimated total net sales revenue.

Annual Charge

Calculation

5 A designated manufacturer’s annual charge for each fiscal year is to be calculated according to the formula

A ÷ B × C

where

A

is the designated manufacturer’s total net sales revenue for the previous fiscal year;

B

is the aggregate of the total net sales revenue of all designated manufacturers for the previous fiscal year; and

C

is the annual cost base for the previous fiscal year.

Previous annual charges

6 (1) If the Minister becomes aware that an annual charge was not previously calculated for a designated manufacturer but should have been calculated, the Minister must calculate that annual charge according to the formula in section 5.

Correction

(2) If, based on new information, the Minister has reasonable grounds to believe that it is necessary to correct an annual charge that was previously calculated for a designated manufacturer, the Minister must

• (a) use the new information to recalculate the annual charge according to the formula in section 5; and
• (b) subtract the amount of the annual charge that was previously calculated from the amount of the annual charge that was recalculated under paragraph (a).

Time limit

(3) Subsections (1) and (2) do not apply if more than seven years have elapsed since November 30 of the fiscal year following the fiscal year to which the new information relates.

Payment due date

7 A designated manufacturer must, no later than November 30 of each fiscal year,

• (a) pay the annual charge that was calculated according to the formula in section 5 and any annual charge that was calculated under subsection 6(1) if, in the calculation of the annual charge, the designated manufacturer’s total net sales revenue was at least 0.001% of the aggregate of the total net sales revenue of all designated manufacturers; and
• (b) in the case of an annual charge that was recalculated under paragraph 6(2)(a) and where the subtraction made under paragraph 6(2)(b) results in a positive amount,
• (i) pay that positive amount if, in the previous calculation of the annual charge, the designated manufacturer’s total net sales revenue was at least 0.001% of the aggregate of the total net sales revenue of all designated manufacturers, or
• (ii) pay the recalculated annual charge if,
• (A) in the previous calculation of the annual charge, the designated manufacturer’s total net sales revenue was less than 0.001% of the aggregate of the total net sales revenue of all designated manufacturers, and
• (B) in the recalculation of the annual charge, the designated manufacturer’s total net sales revenue was at least 0.001% of the aggregate of the total net sales revenue of all designated manufacturers.

Amount credited

8 No later than November 30 of each fiscal year, the Minister must credit to a designated manufacturer any negative amount resulting from the subtraction made under paragraph 6(2)(b) if, in the previous calculation of the annual charge referred to in subsection 6(2), the designated manufacturer’s total net sales revenue was at least 0.001% of the aggregate of the total net sales revenue of all designated manufacturers.

Disclosure of Information

Public disclosure of information

9 The Minister must make the following information available to the public no later than November 30 of each fiscal year:

• (a) the names of designated manufacturers that failed to submit a statement of sales and revenue during the previous fiscal year or that provided incorrect or incomplete information in the statement, as well as any measures that were taken in respect of those designated manufacturers;
• (b) the names of designated manufacturers that were required to pay, by November 30 of the previous fiscal year, an annual charge referred to in paragraph 7(a) or subparagraph 7(b)(ii) or an amount referred to in subparagraph 7(b)(i); and
• (c) the names of designated manufacturers that failed to pay, by November 30 of the previous fiscal year, an annual charge referred to in paragraph 7(a) or subparagraph 7(b)(ii) or an amount referred to in subparagraph 7(b)(i), as well as any measures that were taken in respect of those designated manufacturers.

Documents

Documents to be kept

10 (1) A designated manufacturer must keep the documents it used in order to submit the statement of sales and revenue required under subsection 3(1) and any clarifying information requested by the Minister under subsection 3(4) for a period of at least seven years after the day on which the statement to which the documents relate was submitted to the Minister.

Accessibility of documents

(2) The documents must be kept in paper or electronic form at the designated manufacturer’s principal place of business in Canada in such a way that they are readily accessible at all times and can be submitted to the Minister on written request.

Coming into Force

May 1, 2025

11 (1) These Regulations, except section 9, come into force on May 1, 2025, but if they are registered after that day, they come into force on the day on which they are registered.

April 1, 2028

(2) Section 9 comes into force on April 1, 2028.

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the Regulations.)

Issues

Tobacco use is the leading preventable cause of illness and premature death in Canada. It is a known or probable cause of more than 40 debilitating and often fatal diseases of the lungs, heart, and other organs, and is responsible for approximately 46 000 premature deaths every year in Canada.¹ The health and economic costs associated with tobacco use in Canada were estimated at $11.2 billion in 2020, with direct health care costs of $5.4 billion.²

For decades, the Government of Canada has and continues to undertake activities to address the national public health problem of tobacco use and to protect the health of Canadians from tobacco-related disease and death. The costs of these investments, which include compliance and enforcement activities, public education, and development and implementation of regulations, are not currently recovered from tobacco manufacturers that cause the need for the regulation of tobacco products.

Background

In Budget 2018, the government committed $331.6 million over five years, starting in 2018–19, and $66.2 million annually thereafter for Canada’s Tobacco Strategy (CTS), the current federal strategy to address tobacco use in Canada. The $66.2 million annual amount encompasses the costs associated with the majority of tobacco and vaping-related activities undertaken across the federal government. These include costs for the activities undertaken by Health Canada, the Public Health Agency of Canada, Indigenous Services Canada, Public Safety Canada, the Royal Canadian Mounted Police, the Canada Border Services Agency, and the Canada Revenue Agency. The majority of the funding committed to Canada’s Tobacco Strategy in Budget 2018 (approximately 85%) is allocated to Health Canada, the Public Health Agency of Canada, and Indigenous Services Canada.

The Minister of Mental Health and Addictions and Associate Minister of Health’s 2021 mandate letter included a commitment to require tobacco manufacturers to pay for the cost of federal public health investments in tobacco control. Budget 2023, the 2023 Fall Economic Statement and Budget 2024 reiterated the government’s commitment to implementing a tobacco cost recovery framework that requires tobacco manufacturers to pay for the cost of federal public health investments in tobacco control.

The Government of Canada has cost recovery frameworks in place for other regulated products such as cannabis products, drugs, medical devices, and pesticides. However, the government does not currently have a cost recovery framework to invoice fees or charges to tobacco manufacturers to recover costs for tobacco products. This includes costs to administer and enforce the federal legislative and regulatory framework in place to address the health risks of tobacco use. The tobacco industry, which causes the need for the regulation of tobacco products, currently paid for by taxpayers in Canada, continues to benefit from the ability to sell their products to Canadians.

Legislative framework and regulatory landscape

The Tobacco and Vaping Products Act (TVPA) and its supporting regulations lay a strong foundation for the Government of Canada’s activities to address the health hazards caused by the use of tobacco and vaping products. The TVPA regulates the manufacture, sale, labelling and promotion of tobacco and vaping products. The overall purpose of the TVPA, as set out in subsection 4(1) of the Act, is to provide a legislative response to a national public health problem of substantial and pressing concern and to protect the health of Canadians in light of conclusive evidence implicating tobacco use in the incidence of numerous debilitating and fatal diseases. With respect to tobacco products, the purpose of the Act is to support the overall tobacco control objectives, and in particular, it aims to

• (1) protect young persons and others from inducements to use tobacco products and the consequent dependence on them;
• (2) protect the health of young persons by restricting access to tobacco products;
• (3) prevent the public from being deceived or misled with respect to the health hazards of using tobacco products; and
• (4) enhance public awareness of the health hazards of using tobacco products.

Bill C-59, the Fall Economic Statement Implementation Act, 2023 (FES 2023) received royal assent on June 20, 2024, and amended the TVPA to include provisions that enable the Minister to make regulations respecting fees or charges to be paid by tobacco and vaping product manufacturers for the purpose of recovering the costs incurred by the Government of Canada in relation to the carrying out of the purpose of the TVPA. The amendments to the TVPA also included new authorities for related compliance measures to administer and enforce the tobacco and vaping cost recovery frameworks.

Additional legislative amendments to the TVPA were included in Bill C-69, the Budget Implementation Act, 2024, No. 1 (BIA 2024), to support the cost recovery framework, which also received royal assent on June 20, 2024. These amendments authorize the provision of customs information collected under the Customs Act to Health Canada for the purpose of the administration and enforcement of the TVPA. They also authorize Health Canada to disclose information collected under the TVPA to other federal ministers for certain purposes. The amendments also include provisions to allow certain information collected under the Excise Act, 2001 to be provided to Health Canada for the purposes of the administration or enforcement of the TVPA.

Objective

The objective of the Tobacco Charges Regulations is to require designated tobacco product manufacturers, which includes importers, to pay an annual charge to recover the costs of the tobacco-related activities undertaken by the Government of Canada in relation to the carrying out of the purpose of the TVPA, thereby minimizing the cost burden on taxpayers of funding these activities.

Description

The Tobacco Charges Regulations (referred to as the “Regulations”), sets out the calculation of an annual charge, in Canadian dollars, for each designated manufacturer (referred to as “manufacturer”) in Canada that is involved in the manufacture or importation of tobacco products for retail sale in Canada in a fiscal year (April 1 to March 31). Entities that only package, label or distribute tobacco products including those that do a combination of these activities, are not a subject to the Regulations. Tobacco retailers are also not subject to the Regulations. The calculation of a manufacturer’s annual charge will include their total net sales revenue of tobacco products that are made in whole or in part of tobacco for retail sale in Canada (e.g., in gas and conveniences stores, tobacconists, duty-free shops, online stores, etc.), as ships’ stores (e.g., on passenger ships, fishing ships and international aircrafts), and to accredited representatives (e.g., to embassies and foreign missions).

Annual cost base

To calculate the annual charge, Health Canada must determine the annual cost base to be recovered each fiscal year. The annual cost base is the amount, in Canadian dollars, representing the costs incurred by the Government of Canada during a fiscal year in relation to the carrying out of the purpose of the TVPA. This annual cost base includes a range of tobacco-related activities undertaken by Health Canada, the Public Health Agency of Canada, and Indigenous Services Canada such as compliance and enforcement activities, laboratory analysis, development and implementation of regulations, public education and awareness on the health hazards of tobacco use, supporting improved services and resources to help people quit smoking, and providing funding to First Nations, Inuit and Métis Nation to develop and implement approaches to reducing commercial tobacco use. The costs to administer the tobacco cost recovery framework will also be included.

Activities undertaken in relation to vaping are not included at this time, except if they are for the purpose of helping Canadians quit tobacco. Activities for which costs are recovered under another cost recovery provision or framework, such as costs incurred in relation to anything required or authorized under section 39 or subsection 41(4) of the TVPA, including the storage, movement or disposal of a thing or conveyance, are also not included.

Tobacco product net sales revenue

To calculate the annual charge, Health Canada must also determine each manufacturer’s total tobacco product net sales revenue and the total domestic tobacco product market net sales revenue. Manufacturers must submit a statement of sales and revenue (referred to as “statement”) on or before April 30 of each fiscal year that accounts for their tobacco product net sales revenue in the previous fiscal year. The submitted statements must include signed and dated attestations that the provided information is prepared in good faith and in accordance with generally accepted accounting principles.

The information that manufacturers are required to submit in the statement will include the manufacturer’s total domestic net sales revenue for the following tobacco product categories:

• Cigarettes
• Cigars
• Little cigars
• Cigarette tobacco
• Leaf tobacco
• Pipe tobacco
• Water pipe tobacco
• Smokeless tobacco
• Heated tobacco products
• All other types of tobacco product that are made in whole or in part of tobacco.

Papers, tubes, or filters intended for use with a tobacco product, a device that is necessary for the use of a tobacco product or the parts that may be used with that device are not subject to the Regulations and therefore, net sales revenues of those products are not required to be included in the statement.

There may be situations that require Health Canada to request that the manufacturer provides a clarification about the information submitted in the statement. If a clarification request is sent by the Minister, manufacturers will have 10 calendar days of the day on which the Minister makes a request to submit the clarifying information. Since the information in the statement is used to calculate a manufacturer’s annual charge, it is essential that a timely response is received to avoid delays and to identify whether the statement contains errors that might impact the annual charge calculations.

Manufacturers are required to use the form established by the Minister entitled Statement of Tobacco Sales and Revenue that is incorporated by reference in the Regulations as amended from time to time. The form must be used as provided without any modification to the format. The required use of the electronic form is expected to assist manufacturers in providing the information in a consistent manner and to help Health Canada process the information received in order to calculate the annual charge. If the form is amended by Health Canada, the Department will notify and distribute the new electronic form to manufacturers and provide them with sufficient time to prepare the information to be submitted. The manufacturer must ensure that the latest form is used. The statement must be sent electronically in the manner specified in the form.

The form is available and currently can be requested by sending an email to the following address: tcr-rct@hc-sc.gc.ca.

Record keeping

Manufacturers must keep documents they used in order to submit the statements or any clarifying information for a period of at least seven years after the day they were submitted to assist with compliance verification by Health Canada. The documents must be kept in a paper or electronic form at the manufacturer’s principal place of business in Canada and in such a way that they are readily accessible at all times and can be submitted to the Minister upon written request.

Calculation of annual charge

The annual charge calculated for each manufacturer is proportionate to their domestic market share of total tobacco product net sales revenue in the previous fiscal year (from April 1 to March 31). Tobacco product net sales revenue excludes the value of any taxes or duties paid and the value of tobacco products returned to the manufacturer during the same fiscal year period. Net sales revenue must also include the value of monetary and non-monetary consideration received by a manufacturer for sales of tobacco products. The addition of the value of all consideration in the net sales revenue is to address strategies that could be used by manufacturers to reduce their sales revenues through means such as discount pricing in their retail supply chain where a manufacturer may reduce the normal price of their tobacco products, for example to a distributor, in return for larger order volumes, early payment, or additional services. The inclusion of monetary and non-monetary consideration is to ensure that these pricing strategies do not allow them to reduce their net sales revenues that would result in a lower assessed annual charge.

The annual charge for each manufacturer is calculated by the following formula:

A ÷ B × C

where

A

is the manufacturer’s total net sales revenue for the previous fiscal year;

B

is the aggregate of the total net sales revenue of all manufacturers for the previous fiscal year; and

C

is the annual cost base for the previous fiscal year.

Based on the formula, the calculation of each manufacturer’s annual charge is dependent on the annual cost base from the previous fiscal year and each manufacturer’s domestic market share of the aggregate of the total tobacco product net sales revenue in Canada for the same fiscal year.

If the manufacturer did not submit a statement for a given fiscal year, or if the Minister has reasonable grounds to believe that the information provided by a manufacturer in its statement is incorrect or incomplete, the Minister may estimate the manufacturer’s total net sales revenue using any relevant information that is available to the Minister to calculate the annual charge.

Annual charge

Every manufacturer must pay an annual charge if their total net sales revenue for a previous fiscal year was at least 0.001% of the aggregate of the total net sales revenue of all manufacturers for that fiscal year. This exception aligns with the United States (US) Food and Drug Administration’s tobacco user fees for domestic manufacturers and importers of tobacco products, where a manufacturer or importer does not have to pay an assessment if their percentage share calculated is less than 0.0001%, accounting for the larger size of the US market.

The payment due date to pay an annual charge in full is November 30 of the fiscal year in which it was charged.

Correction of annual charge

If, based on new information, the Minister has reasonable grounds to believe that it is necessary to correct an annual charge that was previously calculated for a manufacturer, the Minister must use the new information to recalculate the annual charge according to the formula introduced above and subtract the amount of the annual charge that was previously calculated from the recalculated amount, which could result in an additional amount owed or a credit. If the new information also impacts the tobacco product market share of other manufacturers, their annual charge could be corrected for a previous fiscal year. New information that could lead to a correction of the annual charge can be identified through several means, such as by notification from a manufacturer that there was an error in their submitted statement, as a result of an inspection or after a review of the statement against other relevant sources of information. The Minister can correct an annual charge up to six years from the payment due date of the fiscal year that was corrected. Any annual charge correction (additional amount owed or credit) will be assessed at the time of the next annual charge.

Public disclosure of information

The Regulations require the Minister to make certain information available to the public every year for accountability and transparency purposes. The disclosure will include the names of manufacturers that were required to pay an annual charge for a fiscal year that failed to pay their annual charge or amount resulting from correction and that failed to submit a statement or provided incorrect or incomplete information in the statement. In addition, measures that were taken in respect of non-compliance will also be disclosed. This information will be made available to the public no later than November 30 of each fiscal year. The first public disclosure will occur on or before November 30, 2028, and will disclose information for the 2027–28 fiscal year.

Regulatory development

Consultation

Technical briefings on the proposed legislative amendments to the TVPA related to tobacco cost recovery included in the 2023 FES were held in December 2023 with public health non-governmental organizations (NGOs) and representatives from the tobacco and vaping industry. As per Health Canada’s Regulatory Transparency and Openness Framework, a record of the meeting was made publicly available.³

On August 1, 2024, Health Canada launched a public consultation to solicit feedback on the proposed approach to recovering federal government costs for certain tobacco-related activities. A consultation document, Proposed tobacco cost recovery framework, was made available to interested stakeholders. The consultation was open for comments for a 70-day period ending October 10, 2024.

Consultation sessions were held in September 2024 with public health NGOs and the tobacco industry to solicit feedback on the proposed tobacco cost recovery framework and answer questions about the proposal. For transparency, the summary of the consultation session on September 19, 2024 between Health Canada and the tobacco industry is publicly available. A draft of the proposed Regulations for a public consultation was shared for feedback with public health NGOs and the tobacco industry following the consultation sessions in September 2024.

During the public consultation, Health Canada received 298 submissions (239 from a letter-writing campaign) from academia, the general public, provincial/territorial governments, regional health authorities, the tobacco industry, and public health NGOs. Overall, the majority of respondents expressed support for the proposal. Most of the support was from the general public, regional health authorities and public health NGOs, but support also came from academia and provincial governments. Respondents indicated strong support for imposing a charge on the tobacco industry to recover the costs incurred by the Government of Canada in relation to the carrying out of the purpose of the TVPA.

Summary of feedback

The following provides the major themes from the consultation and outlines Health Canada’s response.

Recovery of vaping costs

Public health NGOs, the general public and regional health authorities firmly expressed that the Government of Canada should also be recovering the costs of vaping-related activities. Some respondents recommended the currently proposed framework be expanded to recover both tobacco and vaping-related costs from the industry. Other respondents recommended that Health Canada put in place a separate vaping cost recovery framework.

Health Canada response

While the TVPA provides the authority to develop and implement tobacco and vaping cost recovery frameworks, Health Canada is pursuing a phased approach to the implementation of cost recovery frameworks for tobacco and vaping. For decades, the Government of Canada has undertaken activities to address the national public health problem of tobacco use and to protect the health of Canadians from tobacco-related diseases. Implementing a cost recovery framework for tobacco products is the Government’s initial priority. At this time, further analysis is required to develop an appropriate approach for recovering the federal government’s costs for vaping-related activities from vaping product manufacturers.

Implementation timelines

The majority of respondents recommended implementing the tobacco cost recovery framework as soon as possible so that invoices could be sent in 2025. These submissions came from the general public, public health NGOs and regional health authorities. The tobacco industry felt strongly that the regulations should specify that the coming into force would be no earlier than the 2025–26 fiscal year and that the first invoices would be sent in 2026.

Health Canada response

Although Health Canada’s goal is to implement the framework as soon as possible, in order to ensure accountability, predictability and fairness, operational assessments are required and processes, tools, and other measures must be put in place to facilitate and simplify the existing collection and tracking of cost-related data for eligible activities for cost recovery purposes. For transparency, the Regulations specify that they will come into force on May 1, 2025, meaning that the first statement of sales and revenue for the 2025–26 fiscal year is due on or before April 30, 2026, to calculate the annual charge based on the costs for the same fiscal year 2025–26. The first payments from the industry will be due by November 30, 2026.

Scope of coverage

Public health NGOs, regional health authorities, and provinces were concerned with the scope of coverage of the proposed tobacco cost recovery framework. Many respondents felt that the framework should be expanded to recover all federal government costs related to the implementation of CTS and beyond, including contraband tobacco, taxation compliance and monitoring activities. The tobacco industry believed that certain activities, such as smoking cessation programs, should remain funded by general tax revenues. Furthermore, certain public health NGOs recommended that the TVPA should be expanded to, for example, include novel nicotine products.

Health Canada response

FES 2023 amended the TVPA to include provisions that enable the Minister to make regulations respecting fees or charges to be paid by tobacco and vaping product manufacturers for the purpose of recovering the costs incurred by the Government of Canada in relation to the carrying out of the purpose of the TVPA. Under that authority, the Regulations were developed to recover the costs of a range of tobacco-related activities undertaken by Health Canada, the Public Health Agency of Canada, and Indigenous Services Canada in relation to the carrying out of the purpose of the TVPA. These activities would represent the vast majority of tobacco-related activities undertaken by the Government of Canada.

Fee payer and product scope

Academia and public health NGOs recommended the inclusion of distributors in the definition of a designated manufacturer to prevent manufacturers from discounting their revenues through business arrangements. Additionally, public health NGOs recommended including a minimum fee for those whose revenues are less than 0.001% of the aggregate of the total net sales revenue of all manufacturers. With respect to product scope, public health NGOs and regional health authorities recommended the framework include novel nicotine products in the annual charge calculation. The tobacco industry on the other hand, recommended differentiating between tobacco product categories claiming the potential for different regulatory needs and public health impacts. Specifically, exclusions for certain tobacco product categories were suggested, such as cigars and pipe tobacco.

Health Canada response

It is important for the government to ensure that any framework that would be implemented would continue to provide the best value for Canadians in the future. The minimum exception of 0.001% is recommended as it aligns proportionally with the US Food and Drug Administration’s tobacco user fees exception. With respect to the addition of entities that only distribute tobacco products, this will not be included at this time to avoid the potential possibility of double charging the industry for the same tobacco products. However, the definition of net sales revenue has been adjusted to include the value of all consideration that the manufacturer received from other entities in their retail supply chain, such as distributors, for sales of tobacco products.

The TVPA does not distinguish between tobacco products on the basis of their type. All tobacco products pose health hazards and are subject to the same requirements in the Act, therefore no additional exclusions have been made in the Regulations. Tobacco and vaping products are within the scope of the TVPA, while certain nicotine products fall under the purview of the Food and Drugs Act. Nicotine Replacement Therapies (NRTs), for example, are regulated as natural health products under the Natural Health Products Regulations or as prescription drugs under the Food and Drugs Regulations, depending on certain criteria. Health Canada already charges fees in relation to drugs for human use and has also put forward a proposal to recover the costs related to natural health products. As such, the costs of activities related to these products could not be recovered under the new Regulations.

Illicit market

The tobacco industry raised concerns regarding the illicit market in their submissions. The tobacco industry recommended the Government of Canada develop a comprehensive strategy for addressing the illicit market and ensuring unregulated manufacturers participate in the tobacco cost recovery framework. The tobacco industry and some members of the general public expressed concerns with the proposed charges potentially increasing tobacco prices and driving consumers to the illicit market.

Health Canada response

Law enforcement activities to address the contraband market are conducted by the Royal Canadian Mounted Police (RCMP), the Canada Border Services Agency (CBSA), Public Safety Canada, and local enforcement. These entities work closely together to detect, disrupt and prevent the contraband tobacco market. Health Canada is not proposing to recover the costs for activities that are undertaken by the CBSA, RCMP, and Public Safety Canada in relation to their law enforcement activities. As such, tobacco manufacturers would not be paying for these activities. Any price increase resulting directly from tobacco cost recovery is expected to be minimal and significantly less than the price increases the tobacco industry has passed on to consumers in recent years.

Accountability and transparency

The majority of respondents raised the principle of accountability and transparency in their submissions.

Health Canada response

Health Canada’s approach to cost recovery is guided by the following guiding principles:

• Accountability and transparency
• Predictability and sustainability
• Stewardship and fairness

This approach includes elements such as transparent fee or charge setting and costing methodologies, meaningful and inclusive stakeholder engagements, and established processes for regularly reviewing and updating fees and charges.

There are also a number of legislative and government policy requirements to ensure proper accountability and transparency when fees and charges are introduced through ministerial regulations.

The Deputy Minister of Health Canada, as the Accounting Officer under the Financial Administration Act, is accountable before the appropriate Parliamentary committees for duties assigned to them by the Minister, including those under regulations related to fees or charges. The Treasury Board Directive on Charging and Special Financial Authorities details the responsibilities of the Chief Financial Officer and senior departmental managers. For example, the Department would report annually on costs for the tobacco program and revenues from the tobacco cost recovery framework via the Departmental fees report.

All cost-recovered programs are subject to departmental evaluation as well as internal and external audits to ensure fees and charges are consistent with Government of Canada legal obligations and policies. To ensure cost recovery frameworks remain up-to-date, reviews are conducted every five years. If Parliament decided to increase funding for federal tobacco activities, Health Canada could look to appropriately increase the amount to be recovered and work to advise annual charge payers in advance of any changes occurring.

Consultation and engagement with Indigenous partners

Technical consultations took place with the Métis National Council in December 2023 and the Assembly of First Nations in February 2024. Health Canada also offered a briefing to Inuit Tapiriit Kanatami and proactively provided information about the legislative amendments.

On August 1, 2024, a notice of the public consultation was published in the First Nations Gazette. The notice recognized the sacred and ceremonial role that traditional tobacco has for many First Nations and Métis Peoples, as well as the economic role that the manufacture and sale of commercial tobacco plays in certain First Nations communities and encouraged views of Indigenous Peoples on the proposed framework through written submission or meetings. In addition, one-pagers detailing the proposal, inviting feedback, and seeking engagement were sent to National Indigenous Organizations (NIOs), Quebec and Ontario-based Regional Indigenous Organizations (RIOs), and First Nations Chiefs representing communities with tobacco manufacturers.

From August to September 2024, during existing bilateral meetings with NIOs, Health Canada’s Indigenous Relations Unit communicated the Department’s interest in including Indigenous perspectives into the proposal. It emphasized the importance of listening to Indigenous partners and offered to facilitate further discussions. While NIOs expressed appreciation for the updates, no comments, recommendations, or requests for additional engagement were received. Follow-ups were sent to NIOs, RIOs, and First Nations Chiefs with tobacco manufacturers in their communities in October 2024. Health Canada reiterated the Department’s openness to receiving feedback and discussions beyond the October 10 public consultation deadline. To date, no feedback or requests for further discussions have been received from NIOs, RIOs, or specific First Nations communities regarding the tobacco cost recovery proposal.

Modern treaty obligations and Indigenous engagement and consultation

As required by the Cabinet Directive on the Federal Approach to Modern Treaty Implementation, an assessment of modern treaty implications was conducted on the proposal. The assessment did not identify any modern treaty implications or obligations.

Instrument choice

Do not recover costs (baseline scenario)

The Government of Canada does not currently have a cost recovery framework to invoice fees or charges to tobacco manufacturers in relation to tobacco products. Under this option, additional costs are not imposed on the tobacco industry and the government’s costs related to its tobacco-related activities would continue to be funded in whole by taxpayers.

This option was not chosen because it is inconsistent with similar regulatory programs that Health Canada administers and with the Government of Canada’s cost recovery objectives.

Cost recovery

Cost recovery is the preferred option as it establishes a more appropriate cost-sharing balance between taxpayers and the tobacco industry. The public should not bear the costs of government activities in cases where private parties derive the primary benefit, or, for which they cause the need. As noted in the Background section, in the Minister of Mental Health and Addictions and Associate Minister of Health’s 2021 Mandate Letter, the Minister was asked to require tobacco manufacturers to pay for the cost of federal public health investments in tobacco control. The amendments brought by FES 2023 to the TVPA provide the authority to do so.

Selection of cost recovery methodology

Various methods for calculating the annual charge to recover the annual cost base were considered. All options shared the same basic structure, that used each tobacco manufacturer’s domestic market share, by using sales revenue, unit sales, and/or excise duty portion of the total aggregate market.

Allocation of the annual charge to recover the annual cost base by tobacco product sales revenue market share was selected. This method of calculation was chosen as each manufacturer’s annual charge will be representative of their share of tobacco product net sales revenue in Canada, which reflects their contribution to the tobacco product market in Canada. This method is the simplest method because the annual charge can be determined based on revenue alone and excise duty does not impact the charge. Measurement of revenue in Canadian dollars means that the same unit is applied to all tobacco product categories.

The annual charge calculation formula will be monitored on an ongoing basis. Should there be changes to the calculation formula in the future, the Department would consult on a revised proposal.

Regulatory analysis

Benefits and costs

Summary of cost-benefit analysis

The Regulations require manufacturers to pay an annual charge to recover the Government of Canada’s general tobacco-related program costs. Canadians will benefit from manufacturers paying for the cost of tobacco-related activities undertaken by the Government of Canada in relation to the carrying out of the purpose of the TVPA, which will in turn reduce the burden on taxpayers.

While the Regulation will result in benefits, it will also lead to increased costs for affected stakeholders. The Regulation will impose incremental administrative and compliance costs on manufacturers, including those related to the payment of annual charges, time spent submitting and maintaining sales and revenue information, and time spent reviewing the Regulation. The total costs to the industry are estimated to be $298.8 million in present value (PV) over 10 periods of 12 months, or $42.54 million in annualized value. Since this amount is dependent on the annual cost base, which represents the costs of included tobacco-related activities undertaken by the Government of Canada each fiscal year, the amount is expected to vary slightly based on federal government priorities and expenditures each year on these activities.

Health Canada will also incur costs to implement the Regulations such as for compliance promotion and enforcement activities. The incremental cost to the Government of Canada is estimated to be $9.4 million PV over 10 periods or $1.3 million in annualized value. In addition to the monetized costs, the Regulations will result in unquantifiable costs. If manufacturers pass the burden of annual charges to consumers, consumers will face slightly increased prices for tobacco products.

Analytical approach

The Cabinet Directive on Regulation requires departments to analyze the costs and benefits of federal regulations. To measure these impacts, the benefits and costs are estimated by comparing the incremental change from the current regulatory framework (i.e., the “baseline scenario”) to what is anticipated to occur under the new regulatory approach (i.e., the “regulatory scenario”).

To evaluate the impacts of the Regulations, a cost-benefit analysis (CBA) was undertaken that identified, and, to the extent possible, quantified and monetized the incremental impacts. The incremental impacts were evaluated in qualitative terms where quantified and monetized analyses were not possible.

All benefits and costs are estimated over 10 periods of 12 months commencing at the time of publication of the Regulations in the Canada Gazette, Part II. All monetized estimates are expressed in constant 2023 Canadian dollars and are discounted to period one using a 7% discount rate.

Benefits

The tobacco cost recovery framework highlights the connection between manufacturers and the cost of implementing the Government of Canada’s legislative and regulatory framework addressing tobacco use. The Regulations establish an annual charge to be paid by manufacturers whose activities cause the need for the regulation of tobacco products, and who continue to derive benefit from that regulation in that they have the ability to sell their tobacco products on the market.

This annual charge will recover the government’s costs associated with a range of tobacco-related activities conducted by Health Canada, Public Health Agency and Indigenous Services Canada in relation to the carrying out of the purpose of the TVPA. Canadians will benefit because when these costs are borne by industry, the taxes currently paid by taxpayers to fund these activities will be used for other public services.

Costs

Costs will be incurred by manufacturers, consumers and the Government of Canada.

Manufacturers

The Regulations will result in compliance and administrative costs to manufacturers. They will be required to pay annual charges based on their domestic market share, allocate time to familiarize themselves with the Regulations, and incur additional costs for preparing, submitting, and record keeping of the tobacco sales and revenue information.

Profile of the industry

Reports from manufacturers, submitted pursuant to the Tobacco Reporting Regulations along with other data obtained by the Minister, place an upper estimate on the number of manufacturers at 50 companies that will be affected by the Regulations. Available industry data shows that the number of manufacturers has remained relatively stable over the past 20 years and has not undergone significant changes due to new legislation and/or regulations. Therefore, it is expected that the total number of manufacturers will remain relatively stable over the next 10 years.

The wholesale value of all tobacco products in Canada, excluding federal excise duties imposed under the Excise Act, 2001, was estimated at $4.2 billion in 2023. This value is driven primarily by sales of cigarettes, which accounted for approximately 95.3% of the total value. The remainder of the wholesale market is made up of cigars at 2.1%, smokeless tobacco at 1.3%, cigarette tobacco at 1.2%, and pipe tobacco at 0.1%.

Payment of the annual charge

With the cost recovery framework, the costs of the tobacco-related activities undertaken by the Government of Canada in relation to the carrying out of the purpose of the TVPA (see Description section for details) will be recovered from the tobacco industry in the form of an annual charge. Each company will pay an annual charge based on its domestic tobacco market share. The total cost to the tobacco industry is currently estimated to be approximately $298.7 million in PV over 10 periods of 12 months, or $42.53 million in annualized value. As the annual cost base will be calculated annually based on actual federal government costs for included tobacco-related expenses in the previous fiscal year, this amount may vary from year to year to reflect actual costs.

Costs for familiarization with the Regulations

All manufacturers will need to review the Regulations to familiarize themselves with requirements and to ensure compliance. It is estimated that each affected employee will spend 1.5 minutes reviewing each page of the seven-page Regulations. Assuming an average of five people per company conduct this review and the average hourly wage is $76.7, the total cost for all manufacturers to familiarize themselves with the Regulations is estimated to be $3,100 in PV over 10 periods, or $450 in annualized value.

Costs for submission and maintenance of sales and revenue information

All manufacturers are required to submit an annual statement of tobacco sales and revenue for the previous fiscal year to Health Canada. It is assumed that responsible employees at each company spend a total of two hours per year preparing, submitting and record keeping of this information. At an average hourly wage of $68.3 for the responsible employees, the total incremental cost to the industry for this task is estimated at $47,900 in PV over 10 periods, or $6,800 in annualized value.

Consumers

The impact of the Regulations on consumers largely depends on how the industry adjusts its pricing strategy to accommodate the annual charges. Given that the annual charge represents a small fraction of a company’s revenue, it is unlikely that it will significantly affect retail prices of tobacco products. Even if companies choose to pass on the cost of annual charges to consumers through higher prices for tobacco products, the effect on prices is expected to be minimal.

For context, according to data derived from industry reported information, the average wholesale price of a pack of 20 cigarettes, including all taxes and fees, has steadily increased from $4.68 in 2016 to $8.09 in 2023, reflecting an average annual increase of $0.49. If the industry were to fully pass the regulatory burden on to consumers, the price increase would only amount to $0.048, or approximately 10% of the average annual price increase over the past several years. Moreover, the upward trend in tobacco prices over the past two decades has not shown a strong correlation with regulatory changes. This suggests that pricing adjustments are largely driven by factors other than regulation.

Given these factors, the likelihood of a substantial price increase of tobacco products resulting from the Regulations is low. Any potential increase in prices due to the Regulations would be marginal, implying that the overall impact on consumers would be minimal.

Government of Canada

The implementation of the Regulations will require an ongoing investment of public sector resources. Specifically, Health Canada will incur incremental costs for the administration and enforcement of the Regulations. These activities include the development of compliance promotion plans and materials, development and update of guidance material for the industry and internal processes and procedures, calculation of the annual cost base, calculation of the annual charges (including corrections), review of statements of sales and revenue for completeness and accuracy, public disclosure of information, compliance monitoring and verification, invoicing and accounts receivable activities, and compliance and enforcement activities that could include the issue of warning letters and orders to prohibit the sale of tobacco products.

The total government costs are estimated at $9.4 million in PV over 10 periods (or about $1.3 million in annualized value) for the administration and enforcement of the Regulations. These costs will be absorbed through existing budget allocations and recovered through the tobacco cost recovery framework.

Cost-benefit statement

• Number of years: 10 periods of 12 months (2025–2026 to 2034–2035)
• Price year: 2023
• Present value base year: Period 1 (2025)
• Discount rate: 7%

Table 1: Monetized costs
	Period 1	Period 2	Period 10	Total (non-discounted)	PV	Annualized value
Industry
Annual charge	$42,532,794	$42,532,794	$42,532,794	$425,327,940	$298,732,547	$42,532,794
Submitting revenue information	$6,826	$6,826	$6,826	$68,263	$47,945	$6,826
Reviewing the regulations	$3,355	-	-	$3,355	$3,136	$446
Total to industry	$42,542,975	$42,539,620	$42,539,620	$425,399,558	$298,783,627	$42,540,067
Health Canada
Oversight and leading implementation and operation of cost recovery framework	$170,762	$204,996	$204,996	$2,015,723	$1,407,810	$200,440
Strategic and operational policy, including compliance and enforcement policy	$430,068	$232,503	$232,503	$2,522,596	$1,817,645	$258,792
Development and updating of guidelines, procedures, tools, and trainings related to the policies and procedures	$301,010	$30,518	$30,518	$575,670	$467,141	$66,510
Compliance promotion	$140,201	$140,201	$88,701	$990,012	$585,084	$83,303
Implementation (including calculation of annual cost base and the annual charges, reviewing of statements of sales and revenue, and public disclosure of information)	-	$748,846	$787,164	$7,014,230	$4,733,511	$673,946
Compliance and enforcement from non-compliance	-	$10,387	$3,729	$40,219	$28,522	$4,061
Invoicing annual charges	-	$60,818	$60,818	$547,363	$370,321	$52,725
Total to Health Canada	$1,042,041	$1,428,270	$1,408,429	$13,705,813	$9,410,033	$1,339,777

Small business lens

Analysis under the small business lens concluded that the Regulations will impact small businesses as 75% of the estimated manufacturers are small businesses.

These companies need to review the Regulations, submit and maintain tobacco sales and revenue records and pay the annual charge. The total costs to small businesses for meeting the regulatory requirements are estimated to be $3.0 million in PV over the next 10 periods of 12 months or $430,700 in annualized value. Cost per small business is estimated at $81,800 in PV over 10 years or $11,600 in annualized value.

Annual charges account for nearly 99% of all costs imposed by the Regulations on small businesses. Since annual charges are calculated based on a company’s market share, and small businesses have a market share of less than 1%, a major part of the totality of the annual cost base will be borne by large companies. These small businesses will not be disproportionately affected.

Manufacturers with a domestic tobacco total net sales revenue market share less than 0.001% for the previous fiscal year will not be required to pay an annual charge, reducing the financial impact of the charge on their operations.

Small business lens summary

• Number of small businesses impacted: 37
• Number of years: 10 periods of 12 months (e.g. 2025–2026 to 2034–2035)
• Price year for costing: 2023
• Present value base year: period 1 (2025)
• Discount rate: 7%

Table 2: Compliance and administrative costs
Administrative or compliance	Description of cost	Present value	Annualized value
Administrative	Submitting and record keeping of sales and revenue information	$35,479	$5,051
	Reviewing the regulations	$2,320	$330
Compliance	Annual charge	$2,987,325	$425,328
Total	Total costs	$3,025,125	$430,710

 

Table 3: Net costs
Amount	Present value	Annualized value
Net impact on all impacted small businesses	$3,025,125	$430,710
Average net impact on each impacted small business	$81,760	$11,641

One-for-one rule

The Regulations will result in an incremental administrative burden to businesses. The one-for-one rule applies, and the Regulations are considered an “IN” under the rule.

All the manufacturers will incur administrative burden costs associated with time spent reviewing the Regulations, submitting statements of sales and revenue to Health Canada and record keeping.

As per the requirements of the Red Tape Reduction Act and the Red Tape Reduction Regulations, the administrative burden costs are estimated over a 10-year period and discounted to 2012 using a 7% discount rate.

Each manufacturer will spend

• 0.9 hours to review the Regulations (first year);
• 2 hours every year to submit sales and revenue information to Health Canada and record keeping (ongoing).

The time spent on reviewing the Regulations and submitting and record keeping the sales and revenue information by the relevant employees is valued using the hourly wage rate of $52.9 and $59.4 (adjusted for overhead and in 2012 dollars), respectively.

The total incremental administrative burden to all affected businesses is estimated to be $16,420 in PV over 10 years or $2,338 in annualized value. The annualized incremental cost to each affected business is estimated to be about $46.8.

Regulatory cooperation and alignment

Provinces and territories

No province or territory currently has a tobacco cost recovery framework that would require the tobacco industry to pay an annual charge or fee in relation to tobacco products.

International

Cost recovery models for tobacco exist internationally, including in the US. The US is the most comparable regulator with their user fees based, in part, on domestic market share.

The US Food and Drug Administration’s (FDA) charges a fee to recover costs for their tobacco control activities through industry-paid user fees based on domestic market share. This aligns with the Health Canada tobacco cost recovery framework, with the exception that Congress sets the amount of the US FDA’s legislated cost base. The program is entirely funded through and dependent on industry-paid user fees which are used to fund regulatory activities, such as educating the public about risks associated with tobacco. User fees are the sole allowable source for FDA program spending, and the FDA cannot use the funds collected through its tobacco user fees for any purpose besides its tobacco program. Since 2019, the FDA has sought to collect $712 million USD annually from user fees. In the US, small manufacturers or importers with less than 0.0001% market share within an individual tobacco product class are not required to pay any user fees.

Many other international regulators charge a levy to the industry or allocate a portion of tobacco taxes to fund anti-tobacco initiatives and/or tobacco control activities. This includes Botswana, France, Iceland, Ireland, Panama, South Korea, Thailand, and Vietnam.

Effects on the environment

In accordance with the Cabinet Directive on Strategic Environmental and Economic Assessment (SEEA Directive), a Climate, Nature and Economy Lens analysis was conducted and concluded that there will be no impact on the environment, either positive or negative. Therefore, a detailed environmental assessment is not required, and an economic assessment is not required as the proposal is subject to the Cabinet Directive on Regulation.

Gender-based analysis plus

The Regulations are not expected to negatively impact any particular groups of Canadians based on gender, race, or ethnicity. However, it is likely that some population groups could be differentially impacted as a result of imposing an annual charge on tobacco manufacturers. Tobacco use has a disproportionate impact on certain sub-populations (e.g. Indigenous peoples, construction workers, those suffering with mood and anxiety disorders, people living in poverty) and research has shown that there is a gender gap in tobacco use between men and women. According to the Canadian Community Health Survey 2022, smoking rates were higher among men at 14%, compared to women at 10%.⁴ In an effort to reduce these gaps, CTS recognizes the importance of reaching adult males and impacted sub-populations as part of targeted outreach efforts and public awareness strategies. People who smoke may indirectly perceive the charges as stigmatizing or fear potential price increases for tobacco products.

Rationale

The Tobacco Charges Regulations are consistent with other regulatory programs that Health Canada administers and with the Government of Canada’s cost recovery objectives and requirements.

It is expected that the Regulations will recover a proportion of costs incurred by the government in relation to its tobacco-related activities from tobacco manufacturers, which represents a transfer in costs from taxpayers to industry. Additionally, they are expected to result in increased monetary costs for industry as well as increased administrative burden. While it is possible that some of these costs will be passed on to consumers in the form of higher tobacco product prices, the analysis suggests that this impact will be minimal.

The Regulations highlight the connection between tobacco manufacturers and the cost of implementing the Government of Canada’s comprehensive legislative and regulatory framework addressing tobacco use, where the industry is benefiting from and causing the need for the regulation of tobacco products.

Implementation, compliance and enforcement, and service standards

Implementation

The Regulations are made pursuant to the powers of the TVPA. They come into force on May 1, 2025. Manufacturers must submit their first statements for the fiscal year 2025–26 on or before April 30, 2026, and pay the annual charge on or before November 30, 2026. Thereafter, statements are required on an annual basis on or before April 30, and the annual charge must be paid on or before November 30.

Compliance and enforcement

Compliance promotion and outreach activities (including guidance) aimed at informing manufacturers about the cost recovery requirements will take place to increase awareness of the measures set out in the Regulations and to assist regulated parties in achieving compliance.

The Government of Canada will actively monitor compliance of Canadian tobacco manufacturers with the Regulations. Annual statements submitted by manufacturers will be reviewed for completeness and accuracy and payments of annual charges will be collected and monitored each year.

Compliance and enforcement strategies will be consistent with the overall approach regarding the TVPA and its regulations. Compliance monitoring and promotion activities will be conducted in a progressive enforcement approach. If Health Canada has reasonable grounds to believe the Regulations have been contravened, appropriate measures will be taken. These may include but are not limited to warning letters, prohibiting the sale of tobacco products by order, seizing products, and making recommendations for prosecution.

Failure by a manufacturer to submit the information required by the Regulations, such as the statement, or to pay the annual charge that is invoiced could result in an order by the Minister to prohibit the sale of one or more tobacco products by a manufacturer. The penalties for not complying with the Regulations are set out under Part VI of the TVPA. Every manufacturer who contravenes an order made under subsection 42.16(1) of the TVPA is guilty of an offence and liable on summary conviction to a fine not exceeding $50,000. As well, every manufacturer that contravenes the document retention requirements at subsection 42.12(1) or (2) of the TVPA is liable on summary conviction to a fine not exceeding $50,000.

Additionally, interest charges would begin to accrue if payment in full is not received for invoiced annual charges by the due date, as per the Interest and Administrative Charges Regulations.

As outlined previously, the Minister will each year make certain information relating to the compliance measures taken in respect of each manufacturer that has failed either to submit a statement or provided incorrect or incomplete information in the statement, or pay their annual charge or the amount resulting from its correction available to the public.

Service standards

These Regulations do not relate to the provision of service to the public or to industry, therefore, there are no service standards associated with them.

Transparency and international obligations

Canada is a Party to the WHO Framework Convention on Tobacco Control (FCTC). Article 5.3 of the Convention obliges Parties, in setting and implementing their public health policies with respect to tobacco control, to protect these policies from commercial and other vested interests of the tobacco industry in accordance with national law. During the targeted consultations prior to publication of the Regulations, Health Canada asked interested parties to declare any perceived or actual conflicts of interest with the tobacco industry when providing input. Individuals who are part of the tobacco industry or an affiliated organization, or an individual acting on their behalf, were also asked to clearly state so in their submission.

Finally, for transparency purposes, Health Canada has posted on its website a summary of each meeting held with representatives of the tobacco and vaping industry.

Contact

Cecilia Van Egmond
Director
Office of Compliance and Regulatory Affairs
Tobacco Control Directorate
Controlled Substances and Cannabis Branch
Health Canada
Address locator: 0302A
150 Tunney’s Pasture Driveway
Ottawa, Ontario
K1A 0K9
Email: pregs@hc-sc.gc.ca

Footnotes

Footnote a

S.C. 2024, c. 15, s. 217

Footnote b

S.C. 1997, c. 13; S.C. 2018, c. 9, s. 2

Footnote 1

Canadian Substance Use Costs and Harms. 2023. Can be accessed here: https://csuch.ca/documents/reports/english/Canadian-Substance-Use-Costs-and-Harms-Report-2023-en.pdf?_cldee=8uPMv0K93rNcHishHRhr7tA7XfJvF_ZHNkCjPFI70b8BPLtPpKaKGXNcadCt2D-p&recipientid=contact-66dfe5925e63e8118145480fcff4b5b1-2b1aa57329714146a59ce192d976ddac&esid=1d1b0e51-8ecd-ed11-a7c6-000d3a09c3d2

Footnote 2

Canadian Substance Use Costs and Harms Scientific Working Group. Canadian substance use costs and harms 2007–2020. (Prepared by the Canadian Institute for Substance Use Research and the Canadian Centre on Substance Use and Addiction.). 2023. Ottawa, Ont.: Canadian Centre on Substance Use and Addiction.

Footnote 3

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

Footnote 4

Canadian Community Health Survey. 2022. Can be accessed here: https://www150.statcan.gc.ca/t1/tbl1/en/cv.action?pid=1310009601