Canada Gazette, Part I, Volume 152, Number 25: Tobacco Products Regulations (Plain and Standardized Appearance)

June 23, 2018

Statutory authority
Tobacco and Vaping Products Act

Sponsoring department
Department of Health

REGULATORY IMPACT ANALYSIS STATEMENT

(This statement is not part of the regulations.)

Executive summary

Background

Tobacco use is the leading preventable cause of premature death in Canada,^footnote1 having a role in causing over 40 diseases and other serious negative health outcomes.^footnote2 In 2012, there were over 45 000 Canadian deaths attributable to smoking, and the Canadian economy incurred $6.5 billion in direct health care costs and $16.2 billion in combined health and economic costs.^footnote3

In response to the substantial and pressing concern of tobacco-related death and disease, Parliament adopted the Tobacco and Vaping Products Act (TVPA), which replaced the Tobacco Act (TA), to regulate the manufacture, sale, labelling and promotion of tobacco products and vaping products. This legislation was enacted in part to protect all Canadians, with a particular emphasis on youth, from the inducements of tobacco use, the consequent dependence on them and the health hazards of using tobacco products.

The Government of Canada addresses the public health problem of tobacco use through its Federal Tobacco Control Strategy (FTCS), which was introduced in 2001 and renewed in 2018. The new tobacco strategy focuses on helping Canadians quit using tobacco, protecting youth and non-tobacco users from nicotine addiction, strengthening the foundations in science, surveillance and partnerships and working with national and regional Indigenous organizations. It is estimated that changes in cigarette initiation and cessation rates from 1999–2015 reduced the excess deaths attributable to cigarette smoking by an estimated 31 700 deaths, which totals approximately $330 billion^footnote* (present value [PV]) in total health benefits.^footnote4 This is the result of comprehensive, ongoing and collaborative efforts under the FTCS, along with tobacco control strategies from other federal, provincial and municipal partners.

According to the World Health Organization (WHO), Canada has already implemented most of the internationally recognized practices in tobacco control.^footnote5 Some of Canada's key accomplishments under the FTCS include the following:

• In 2009, Parliament amended the TA to ban appealing additives, including flavours in cigarettes and little cigars to further protect youth from marketing tactics aimed at them.
• In 2011, the Promotion of Tobacco Products and Accessories Regulations (Prohibited Terms) came into effect, prohibiting the use of the terms "light" and "mild" in the promotion of tobacco products, including on the packaging.
• In 2012, the Tobacco Products Labelling Regulations (Cigarettes and Little Cigars) [TPLR] came into effect, increasing the size of health warnings (HWs) to 75% of the front and back of cigarette and little cigar packages, along with including a toll-free quit line number and web address in the warnings.

Although these measures have helped reduce tobacco use in Canada, there are still 4.6 million tobacco users in Canada. In 2015 alone, approximately 115 000 Canadians became daily smokers.^footnote6 Most tobacco use begins during adolescence. Eighty-two percent of adult daily smokers in Canada (age 25 and older) began by the age of 18.^footnote7 In 2016–2017, students in grades 7 to 12 (secondary 1 to secondary 5 in Quebec) reported the average age for smoking a cigarette for the first time was 13.6 years.^footnote8 Young persons are particularly sensitive to the dependence-causing effects of nicotine in tobacco and report symptoms of dependence even at low levels of cigarette consumption.^footnote9 Furthermore, they are disproportionately at risk of taking up and developing long-term dependence on tobacco. It is worrisome that no statistically significant changes between 2013 and 2015 have been observed in smoking rates for youth (10%) and young adults (18%).^footnote10 Despite the decline in overall tobacco use, rates for youth and young adults remain unchanged, suggesting that more needs to be done to protect youth and young adults from inducement to use tobacco, the dependence that can result and from the health hazards of using tobacco products.

The appearance of tobacco packages and products are an inducement to tobacco use among youth and young adults. Among others, the 2012 report by the U.S. Surgeon General concluded that "tobacco companies have changed the packaging and design of their products to increase their appeal to adolescents and young adults."^footnote11 The promotion of tobacco through their packages and products is particularly effective on impressionable adolescents and young adults, as this is when brand loyalty and smoking behaviour are beginning to be established.^footnote12 Given the strength of tobacco addiction and the severe health consequences that can result from tobacco use, it is imperative that additional measures be taken to prevent tobacco initiation and use, particularly among young persons.

Within this context, the Government of Canada undertook new initiatives to further reduce tobacco use and tobacco-related death and disease. This included a ban on most menthol flavoured tobacco products and the passing of the TVPA, which replaced the TA, to regulate vaping products and to support the implementation of measures to standardize the appearance of tobacco product packaging and certain tobacco products.

Branding, packaging and product design as a promotional tool

Under the former TA, promotion by means of tobacco product packaging has only been subject to specific exceptions (e.g. false, misleading or deceptive promotion and promotion of prohibited additives on packaging). Therefore, packaging is one of the few remaining channels available for the promotion of tobacco products in Canada and the only remaining outlet to youth.

Some provisions of the new TVPA, which are expected to come into force by order at the same time as the proposed Regulations, will prohibit promotion. Once the provisions are in place, the promotion of tobacco products by means of packaging and markings on tobacco products will be prohibited except to the extent that they are expressly permitted by law or by regulation. The proposed Regulations would limit promotion by means of packaging and markings on the tobacco products themselves in order to better protect Canadians and especially young people from inducements to tobacco use.

Branding

The American Marketing Association defines a brand as the "name, term, design, symbol, or any other feature that identifies one seller's goods or service as distinct from those of other sellers." Product branding is an important aspect of marketing, as characteristics associated with a brand can trigger an emotional connection with the consumer, which can dictate which brand of product they choose and whether or not they remain loyal to that particular brand.^footnote13 Distinct product brand personalities can distinguish products from each other and also target specific consumers who share those traits or wish to share those traits.^footnote14 Tobacco products are often referred to as "badge products," in that they have a high degree of social visibility when being used and the users endorse the product while making a statement about themselves.^footnote15

Tobacco companies are aware of this,^footnote16,^footnote17 with one company stating that "to serve as a badge, a product/brand must be something of which the consumer feels they want to utilize as a statement about themselves."^footnote18 The brand imagery has two roles: (1) it provides the user with a sense of self; and (2) it provides an identity when seen by others (image). The second function is particularly important among youth and young adults.^footnote19

Numerous studies, including those conducted by the tobacco industry, demonstrate that tobacco packaging and the products they contain are extensively used to promote tobacco products and the brand image. Some tobacco industry members have thought that packaging alone could be enough to power brand imagery.^footnote20

Research has found that tobacco companies continue to use aspects of the package, such as specific branding elements, colour, typography and packaging format to promote tobacco products in a manner that renders them particularly attractive to youth.^footnote21,^footnote22,^footnote23,^footnote24 Young adult smokers associate cigarette branding with positive personal characteristics, social identity and status.^footnote25

Package

Tobacco packages are a unique marketing tool in that they have a high degree of social visibility because they are frequently on display (e.g. each time a cigarette is taken out of the package or each time the package is shared with others). They are carried around by the user until all the cigarettes are consumed^footnote26 and have been referred to as the "silent salesman"^footnote27 because of their inherent and portable promotional power.

Tobacco companies have conducted considerable market research on all aspects of packaging (e.g. colour, size, shape and opening) to ensure its appeal to various target groups, such as women (young women in particular), youth and young adults. It has been shown that tobacco companies are using novel packaging to make their products more appealing to youth^footnote28 and influence perceptions of risk that tobacco use presents among consumers.^footnote29,^footnote30 For example, to target young women, slim and thin cigarette packages, often referred to as "purse packs," were designed to be easier to carry in one's purse. These slimmer packages have been found to increase the attractiveness of packages and the cigarettes they contain are more likely to be perceived as milder and less harmful. Female branded packs were also associated with a greater number of positive attributes including glamour, slimness and attractiveness, compared to brands without descriptors and "plain" packs.^footnote31,^footnote32 Packages with novel openings and shapes are often perceived as being more contemporary and modern and packages with rounded or "beveled" edges, or with octagonal shapes, convey stylishness, elegance and class.^footnote33

Tobacco product packages can also be designed in such a way as to distract attention from HWs and have an impact on HW salience. Studies indicate that brand imagery displayed on branded tobacco packages has the ability to diffuse the impact of the HWs.^footnote34,^footnote35,^footnote36,^footnote37,^footnote38 For example, novel package shapes have been used to reduce the visibility of HWs or packages have been designed with removable stand-alone inner packaging that allow for the outer packaging containing the HW to be discarded.^footnote39 Distractions can also be accomplished by incorporating the colours of the HWs into the package design, causing the message to blend with the package and reduce its saliency.^footnote40 It was also noted that super slim packages were found to weaken the effectiveness of the HWs displayed on the package.^footnote41 Studies show that package design,^footnote42,^footnote43 brand imagery and colours can also impact consumer perception of the risks of the use of tobacco products and their features, such as product strength. Features such as pack shape and opening style affect smokers' perception of the product^footnote44 and novel pack shapes (e.g. octagonal) and openings are associated with positive brand imagery and are particularly appealing to youth and young adults.^footnote45 Furthermore, smokers associate smaller shaped packs with reduced health risk.^footnote46,^footnote47

Research demonstrates that standardizing tobacco products to a single pack shape, size and opening could minimize the ability for cigarette packs to be used as a promotional tool.^footnote48,^footnote49,^footnote50,^footnote51 In this regard, in Australia, young adults found wider 2 × 10 packs (the size most similar to the Canadian slide and shell design) as less appealing than the traditional flip-top pack.^footnote52 In addition, pack appeal and attractiveness are directly correlated to the ability of the pack design to distract from the HWs,^footnote53,^footnote54 ultimately impacting product purchase and trial.^footnote55

Research shows that tobacco products that are in packages that have lighter shades of colour and more white space are perceived as having a lower strength and causing less harm.^footnote56,^footnote57,^footnote58,^footnote59 A number of qualitative and quantitative studies commissioned by the Australian government prior to the implementation of plain packaging in that country came to the same conclusions regarding light package colours. They also found that packages with darker colours were perceived to be more "harmful to health" and their products "harder to quit," while packages with lighter colours were seen to be less "harmful to health" and their products "easier to quit."^footnote60 Similarly, a study in France also observed that package colour has a significant impact on beliefs about the health risks of tobacco products and their content. The study also concludes that plain packages were associated with fewer false beliefs.^footnote61

Tobacco packages currently available on the market are designed to be appealing and are used to target certain Canadian market segments. For instance, pink and pastel colours for tobacco packages have been used to target young women.^footnote62 Studies show that these colours evoke positive qualities, such as freshness, cleanliness, purity, health and intelligence.^footnote63 Such studies also show that the tobacco product package can be used to evoke positive characteristics, such as glamour, beauty, femininity, masculinity and fun, with the tobacco product it contains.^footnote64 Advances in printing technologies have also allowed for branding elements on the outer film and tear tape of the package, along with the use of holograms on the tobacco package,^footnote65 both of which can make the product more appealing. As well, tobacco industry documents indicate that the tobacco package can also be used to comfort smokers and ease or alleviate the feelings of guilt and social rejection in connection with their tobacco use.^footnote66

Product

Like the package, tobacco products can also be designed in a format that is more appealing to their target demographic. For instance, the appearance of the cigarette is used to communicate brand attributes and imagery that appeal to the smoker^footnote67,^footnote68,^footnote69,^footnote70 and functions as a badge product in that it has a high degree of social visibility and is carried around until it is consumed.^footnote71 A cigarette's appearance has the potential to influence smokers and non-smokers as well as generate significant interest about the product, particularly among youth and young adults.^footnote72,^footnote73 The appearance of a cigarette has also been shown to strongly influence smoking initiation.^footnote74 Designer tipping and slimmer, elongated cigarettes have been used to target young women by giving the tobacco product an image of glamour and femininity.^footnote75,^footnote76,^footnote77 The documents from the tobacco industry suggest that the appearance of cigarettes has been modified to appeal to specific segments of the population, including young adults and women,^footnote78 ultimately increasing sales and market share.^footnote79,^footnote80 An example of such a modification to the appearance of cigarettes is the use of floral and satin tipping paper to target females.^footnote81

Variations in the tobacco product dimensions also contribute to conveying misconceptions about the product's health effects and characteristics (such as strength). For example, studies show that slim diameter cigarettes often convey a weaker or milder taste and the false belief that they are less harmful.^footnote82,^footnote83,^footnote84

What is meant by plain and standardized packages

The expression "plain and standardized packages" refers to packages without any distinctive or attractive features, that are similar in appearance and of the same ordinary colour. Plain packaging is supported by the WHO Framework Convention on Tobacco Control (FCTC), which Canada has ratified and which came into force in 2005. Guidelines adopted in 2010 for the implementation of articles 11 and 13 of the Convention recommend that Parties consider introducing plain packaging measures, with a recommended best practice to apply such measures to all tobacco products. To date, Australia (2012), the United Kingdom (2017) and France (2017) have implemented plain packaging measures and over 15 other countries have announced their intention to introduce plain packaging measures.

Studies show that plain packaging measures reduce the promotional effect of packages and tobacco products themselves. Removing the brand image from tobacco packages would make the package less appealing.^footnote85 Independent studies, spanning at least two decades and multiple countries, have unequivocally demonstrated that plain packaging is perceived as less attractive and less appealing, particularly among youth and young adults. For example, studies examining perceptions of the attractiveness of plain packages show that young adults and youth generally found them less attractive than branded equivalent packages.^footnote86,^footnote87

In preparation for plain packaging regulations in Australia, a qualitative study was conducted to test a number of different colours to determine their level of appeal. The dark brown colour package was considered to be the least appealing package overall and the least likely to induce tobacco use; the package more likely to contain lower quality cigarettes; the package posing the highest harm to health; the package containing harder to quit products; and the package containing cigarettes that users would be less likely to consider smoking.^footnote88 To date, this colour (Pantone 448C) is the package colour selected by all countries that have implemented plain packaging measures for tobacco products. Health Canada also commissioned a public opinion research (2016–17) that confirmed that the Canadian population findings were consistent with those for Australia whereby Pantone 448C, a dark, drab brown, was considered to be an unappealing colour.^footnote89

Studies have also shown that plain packaging measures contribute to the public's awareness of the health risks of tobacco use by increasing the salience of graphic HWs that are required on packaging. Some studies indicate that HWs were more noticeable and effective when displayed on plain packages when compared to branded packages.^footnote90,^footnote91,^footnote92,^footnote93

Standardizing the appearance of tobacco products by mandating the colour of the paper and of the permitted inscriptions on them helps reduce the appeal of the tobacco product as well as minimize the opportunity for the product appearance to mislead consumers about the harms of tobacco use.^footnote94,^footnote95 Results from the public opinion research (2016–17), commissioned by Health Canada, varied in terms of preference; there was a strong indication that any new colour on a tobacco product would be seen as novel and generated curiosity (e.g. a yellow cigarette).^footnote96 One clear finding was that removing branding from the cigarette stick would decrease the appeal of cigarettes.^footnote97,^footnote†

International movement

In 2012, Australia became the first country in the world to introduce plain packaging, followed by the United Kingdom (2017) and France (2017). Ireland, Norway and New Zealand have announced implementation dates regarding similar measures for 2018, while Hungary, Slovenia and Georgia have announced implementation dates for 2019, 2020 and 2022, respectively. Over 15 other countries have announced their intention to introduce plain packaging measures, including Botswana, Chile, Belgium, Finland, The Gambia, Kenya, Malaysia, Mauritius, Nepal, Romania, Singapore, South Africa, Sri Lanka, Taiwan, Thailand, Turkey and Uruguay.

Issues

Tobacco use is the leading preventable cause of illness and premature death in Canada. Inducements to tobacco use remain a major public health concern. Preventing initiation of tobacco use by young persons and others is one of the most effective means of reducing tobacco use and its associated health risks.

Despite the decline in overall tobacco use in recent years, rates for youth and young adults remain unchanged. Meanwhile, numerous studies, including those conducted by the tobacco industry, demonstrate that tobacco packaging and the products they contain are designed to make them attractive to particular segments of the population, such as youth and young women. More needs to be done to lower smoking rates, especially for the youth and young adult segment of the population.

Objectives

Reducing inducements to tobacco use, by limiting the appeal of tobacco packages and the products they contain, aims to prevent youth and others from tobacco initiation, from developing an addiction to nicotine and from becoming lifelong tobacco users.

The proposed Tobacco Products Regulations (Plain and Standardized Appearance) [hereafter referred to as the "proposed Regulations"] would directly support two of the five objectives of the TVPA:

(1) To protect young persons and others from inducements to use tobacco products and the consequent dependence on them; and

(2) To prevent the public from being deceived or misled with respect to the health hazards of using tobacco products.

The proposed Regulations, in association with other tobacco control measures under the new tobacco strategy, are expected to meet these objectives.

Description

The proposal includes (1) the creation of the Tobacco Products Regulations (Plain and Standardized Appearance); (2) an order to amend Schedule 1 to the TVPA with respect to colouring agents; and (3) consequential amendments to the Tobacco Products Information Regulations (TPIR) and the Tobacco Products Labelling Regulations (Cigarettes and Little Cigars) [TPLR].

The proposed Regulations would standardize the appearance of all tobacco products and their packaging through general requirements, applicable to all tobacco products, as well as through specific requirements applicable to certain individual tobacco product types (e.g. tobacco that is rolled in paper or in a wrapper composed of reconstituted tobacco). For instance, all tobacco product packages would be of the same colour, bearing only the permitted text, displayed in a standard location, font style, colour and size. The size and shape of cigarette packages would also be standardized. Certain tobacco products would also be plain in their appearance, bearing only the permitted text in the prescribed location, font style, colour and size. The colour of certain tobacco products would be prescribed (e.g. cigarettes, little cigars and bidis). The size of cigarettes and little cigars would also be standardized.

The proposed Regulations would apply to the packaging of all "tobacco products" as defined in the TVPA, including the packaging of devices necessary for the use of a product made in whole or in part of tobacco, such as heated tobacco products (HTPs). The proposed Regulations also standardize the appearance of certain tobacco products.

Tobacco Products Regulations (Plain and Standardized Appearance)

The proposed measures for tobacco packages include the following:

• Standardize tobacco product packages' overall appearance (e.g. no "beveled" edge, embossing, raised lettering, foil stamping and other distinct visual or tactile features on the exterior or interior surfaces of tobacco product packages);
• Standardize the shape and specify the dimensions for cigarette packages (to only slide and shell format);
• Require a single ordinary colour (Pantone 448C — a matte, dark, drab brown) on all interior and exterior surfaces of tobacco product packages;
• Authorize the display of a brand name on the package, in a standard font style (Lucida Sans Serif), size, colour (Pantone Cool Gray 2C) and location;
• Prohibit the use of colour or filter technology in the brand name;
• Require a standard font style (Lucida Sans Serif), size and colour (Pantone Cool Gray 2C) for permitted information displayed on packages (e.g. name and address of the manufacturer, net quantity and common name of the product);
• Specify requirements for little cigar and cigar packages; and
• Require plain and standardized packaging for cigarette cases/bags furnished by a tobacco manufacturer.

The proposed measures for the appearance of tobacco products include the following:

• Standardize the appearance by only allowing the use of standard colours (e.g. white or Pantone 448C with a matte finish) for cigarettes and other products that can be coloured (including cigarettes, tubes and a tobacco product that is intended for use with a device);
• Allow the display of an alphanumeric code on the tobacco product (e.g. cigarettes, little cigars, cigars and tobacco products made in whole or in part of tobacco, wrapped in paper and intended for use with a device) and standardize its colour, font style, size, letter combination and placement;
• Authorize the display of a standardized brand name on cigar bands in consideration of the fact that these tobacco products are sold or designed to be carried around unpackaged;
• Require standard colour and prohibit apparent designs (e.g. grooves, holes or recesses) on visible parts of cigarette filters;
• Require cigarettes to be one of two standard lengths, reflecting regular and king size cigarettes; and
• Require a standard diameter for cigarettes and little cigars.

As a result of these requirements, the proposed Regulations would reduce the inducing effect that a branded package and product may have on the consumer and also prevent current promotional practices known to increase the appeal of tobacco products, such as

• Packages with rounded or "beveled" edges, or with octagonal shapes;
• Packages with novel openings and shapes;
• Slim and thin cigarette packages;
• Slim diameter cigarettes; and
• Use of colours on packages and products that increase the product's appeal or that may create an erroneous impression with respect to the product's health effects or hazards.

Order Amending Schedule 1 to the Tobacco and Vaping Products Act (Colouring Agents)

Similar to cigarettes, little cigars and blunt wraps, the use of colouring agents on cigarette tubes and tobacco products that are made in part or in whole of tobacco wrapped in paper and that are intended for use with a device would be prohibited, with the exception of those used to whiten the paper and to imitate a cork pattern on tipping paper.

Item 4 of Schedule 1 to the TVPA, which allows the use of whitening agents to whiten the paper or filter or colouring agents to imitate a cork pattern on the tipping paper of cigarettes, would be amended to include a new list of tobacco products. In addition to cigarettes, the list would now include tubes and tobacco products rolled in paper for use with a device.

Item 4.1 of Schedule 1 to the TVPA, which prohibits the use of any colouring agents in blunt wraps, would be amended to also apply to leaf tobacco.

Items 4.2, 4.3 and 4.4 of Schedule 1 to the TVPA, which allow the use of whitening agents and the use of white and brown or bronze as colouring agents in certain cigars and little cigars, would be amended to replace brown or bronze with Pantone 448C.

Item 4.5 would be new and added to Schedule 1 to the Act and would allow the use of Pantone 448C as a colouring agent to colour tobacco products that are made in whole or in part of tobacco and that are intended for use with a device, but that are not rolled in paper.

Item 4.6 would be new and added to Schedule 1 to the TVPA and would prohibit the use of colouring agents in filters and papers intended for use with a tobacco product, except for whitening agents.

Item 4.7 would be new and added to Schedule 1 to the TVPA and would prohibit the use of colouring agents in bidis, except for those used to render the thread around a bidi black.

Consequential amendments

The proposal also includes consequential amendments to the TPIR and the TPLR. These amendments are meant to repeal provisions that are no longer applicable as a consequence of the proposed Regulations, such as removing regulatory requirements for package options that would no longer be permitted (e.g. soft packages for cigarettes and cigars).

Coming into force

The proposed Regulations and the Order Amending Schedule 1 to the Tobacco and Vaping Products Act (Colouring Agents) would come into force on the 180th day after the day on which they are published in the Canada Gazette, Part II. The consequential amendments to the TPIR and to the TPLR would also come into force at the same time. Manufacturers of tobacco products would have a transition period of six months from the publication date for implementation, and retailers would have an additional three-month transition period to comply.

Certain provisions of the TVPA relating to promotion by means of the packaging and the markings on the tobacco products would come into force on a date to be fixed by order, which is expected to be coordinated with the coming into force of the proposed Regulations.

Regulatory and non-regulatory options considered

Status quo

This option would maintain the existing legislative regime with respect to promotion restrictions, including the limited restrictions on tobacco product promotion by means of the packaging and of the product's appearance. Tobacco packages and the products they contain would remain a powerful promotional vehicle for the tobacco industry. Research has found that the tobacco industry uses brand elements on their packaging to promote characteristics preferred by youth.^footnote98,^footnote99,^footnote100,^footnote101,^footnote102,^footnote103 Maintaining the status quo would mean that tobacco products could continue to be offered in stylish and colourful branded packages. Ultimately, this would not address the fact that rates for youth and young adults remain unchanged, despite the recent overall decline in tobacco use.

Therefore, the status quo is not considered to be an appropriate option.

Regulatory options

(a) Plain and standardized packaging for cigarettes and little cigars and plain branded cigarettes

This option would consist of new regulations to standardize the appearance (i.e. colour, permitted text) and shape of cigarette and little cigar packages only, which account for 93% of the Canadian tobacco market. Under this option the regulations would also standardize the size of cigarette packages and appearance of cigarettes (e.g. prescribed font style, size and colour for brand names; prescribed colour for the paper). These measures would be comparable to those of the United Kingdom in that the measures would only apply to a subset of tobacco products.

All other tobacco products would continue to be offered in stylish and colourful branded packages, features that are known to be appealing to youth and others. The plain branded cigarettes would continue to be offered in various sizes, such as slim cigarettes, which have been shown to be appealing to females and are often misconceived as being less hazardous for health.

History has shown that when exemptions from regulations are made for some tobacco products, marketing strategies are adapted to continue to market products to youth. For example, in 2009, when the flavour ban on little cigars was introduced, the weight of many brands of little cigars was increased slightly so that the product would no longer fall within the statutory definition of "little cigar" and could continue to be marketed with flavours and packaging appealing to youth.

Considering that all tobacco products are addictive and harmful, this option would not achieve the objectives of preventing inducements to use tobacco products and the consequent dependence on them.

(b) Plain and standardized packaging for all tobacco products and plain unbranded cigarettes

This option would consist of new regulations to standardize the appearance and shape of cigarette and little cigar packages and regulate the appearance of all other tobacco product packages. This option would also regulate the size of cigarette packages and appearance of cigarettes (e.g. no brand elements; prescribed font style, size and colour for alphanumeric code; prescribed colour for the paper), except for cigarette size/dimensions, similar to what is done in Australia.

Under this option, regulations would not standardize the size of cigarettes. This option is not considered to be optimal as it continues to allow for variations in cigarette sizes (e.g. slim and super slim cigarettes), which are known to be an effective marketing tactic to entice youth, women and others and are often misconceived as being less hazardous for health.

(c) Plain and standardized packaging for all tobacco products and plain unbranded cigarettes of a standardized size (recommended option)

This option would consist of new regulations to standardize all tobacco packages (e.g. Pantone 448C, no "beveled" edges) and the appearance of certain tobacco products (e.g. prescribed font style, size and colour for alphanumeric code; prescribed colour for the paper), including specific requirements to standardize the cigarette package type to slide and shell only as well as the size, shape and dimensions of cigarettes and the size of little cigars.

This option is recommended as it is more likely to meet the objectives of the TVPA. This option integrates the Australian approach to plain packaging, with adaptations to take into account the findings of more recent studies, including Canadian studies, as well as feedback from Canadian public consultations and from international experience with plain packaging.

Since the introduction of plain packaging internationally, some companies have found ways to circumvent the plain packaging measures and to continue to market their products with distinctive branding and features. For example, following the introduction of plain packaging in Australia, package fillers were introduced to allow for slim and super slim size cigarettes to continue to be sold in the new standard package size. The proposed Regulations standardize the products themselves, thereby preventing the manufacture of slim and super slim cigarettes, or other novel marketing sizes.

In addition, the proposed Regulations would limit the package type for cigarettes to slide and shell only. Slide and shell packages are larger than flip-top packs, and research indicates that larger packs are less appealing.^{footnote 104} It has also been noted that larger HWs are more likely to be rated as effective on larger packages.^{footnote 105}, ^{footnote 106} Health information messages (HIMs) are also printed permanently on the inner shell of slide and shell packs, which has been shown to improve their chances of being read, increasing the potential of the reader to attempt quitting.^{footnote 107} In short, mandating only one pack type has the potential to reduce the promotional power of the pack ^{footnote 108}, ^{footnote 109} and prevent deceptive messaging about the risk of smoking based on pack size. ^{footnote 110}, ^{footnote 111}

The industry estimates that this will increase its total cost by $36 million and require an additional 12 months to comply. Despite these increased estimations, restricting pack type to slide and shell will contribute to both plain and standardized appearance (PSA) objectives to reduce inducements to use tobacco products, and to prevent the public from being deceived or misled with respect to the health hazards of using tobacco products.

Other areas not covered in the Australian plain packaging regulations have allowed industry to innovate and adapt marketing strategies to continue to promote brand imagery, variant names and filter technology modifications through the brand names themselves. For example, in Australia, "Dunhill Infinite" is now "Dunhill Infinite White + Taste Flow Filter." The proposed Regulations include measures to prevent this type of practice.

Benefits and costs

Overview of the tobacco industry in Canada

In 2015, manufacturers and importers of the tobacco industry reported sales of tobacco products in Canada — including federal excise duties imposed under the Excise Act, 2001 — totalling $6.91 billion. This wholesale value is driven primarily by sales of cigarettes, which in 2015 accounted for approximately 93.2% of the total value. Of these cigarette sales, approximately 42% were imported cigarettes. The remainder of the wholesale market is made up of cigars at 2.9%, cigarette tobacco at 2.3%, smokeless tobacco at 1.5%, pipe tobacco at 0.1% and kreteks at 0.02%.

The market for cigars is distinct from the market for cigarettes and other tobacco products. The market for cigars is characterized by a high degree of brand differentiation; 27 companies currently sell more than 2 800 distinct brands (3 450 stock keeping units [SKUs]).

Heated tobacco products only recently started to appear on the market and had yet to be introduced on the Canadian market when Health Canada held consultations on plain and standardized packaging in 2016. For that reason, the impacts of the proposed Regulations on heated tobacco products were not included in the cost-benefit analysis. Currently, only the three major tobacco companies involved in the Canadian market have heated tobacco products. As cigarette sales account for over 95% of their wholesale revenue, heated tobacco products would fall within the remainder. Therefore, within their overall adjustment costs, heated tobacco product costs would be relatively small compared to those of cigarettes. These costs would need to be substantial in order to alter the break-even point in the cost-benefit analysis.

Health Canada commissioned a cost-benefit analysis (CBA) to assess the impacts of the proposed Regulations. The analysis incorporates information from a variety of sources (i.e. direct outreach to tobacco product manufacturers and importers, suppliers, trade associations, advocacy groups, information provided by the Australian and British regulatory authorities, published literature and the Tobacco Reporting Regulations). A copy of the complete CBA is available upon request.

Cost-benefit analysis — Costs

The proposed Regulations would result in costs to industry and Government and may have some impact on consumers. The analysis examines the costs of these measures over a period of 30 years. The projection of compliance costs over this period takes into account the timing of incremental capital expenditures and anticipated equipment replacement cycles as well as changes in annual operating costs. In accordance with guidelines published by the Treasury Board of Canada Secretariat, the analysis calculates the present value of future costs employing a real annual discount rate of 8%. Consistent with the present value calculation, compliance costs were also annualized at a discount rate of 8%. All cost estimates obtained from the literature have been adjusted for inflation and are expressed in 2015 Canadian dollars (CAD).

Industry compliance costs

The analysis of compliance costs incorporates information from a variety of sources. For this analysis, information was gathered in the course of direct outreach to tobacco product manufacturers and importers, their suppliers and various trade associations or advocacy groups. Information was also provided by Australian and UK regulatory authorities that have implemented similar plain packaging measures.

Representatives from a total of 14 organizations were interviewed, including representatives from the 3 largest tobacco manufacturers that supply Canada, which represent 93% of cigarettes sold in Canada.

The cost to industry analysis includes costs that would be carried by manufacturers and importers, their suppliers and distributors or retailers of tobacco products. Based on the experience of other countries that have implemented plain packaging, there is a possibility that some products could be eliminated if the annual compliance cost exceeds annual revenues. The compliance cost for industry analysis assumes that there would be approximately 10% consolidation of brands for cigarettes and little cigars, 80% consolidation of brands for pipe tobacco and 45%–50% consolidation of brands for smokeless and cigarette tobacco.

Artwork changes and associated retooling costs

The analysis indicates that the implementation of PSA measures would require replacing the rotogravure cylinders currently used to print brand labels. This would represent a substantial initial investment. In the long run, these initial costs may be offset, at least in part, by factors that reduce printing costs. To estimate the net cost to the industry, the analysis compared a 30-year projection of printing costs in the absence of new regulations to a projection of the printing costs the industry would carry should PSA measures be required. This analysis of artwork changes took a number of factors into consideration, such as the number of cylinders per SKU; the potential consolidation of SKUs; the useful life of print cylinders; and administrative costs.

Artwork and retooling costs of cigarettes, pipe tobacco, smokeless, cigarette tobacco, kreteks and little cigars are included in this calculation. Due to standardization and creation of plain packages, there would be long-term savings for manufacturers. Canadian manufacturers would no longer require spending on the design and redesign of packages or the associated focus group testing and marketing. Long-term savings in printing costs would significantly mitigate and, in some cases, exceed the initial costs associated with the implementation of PSA measures. The estimate across all products ranges from a net cost of $2.6 million to a net saving of $11.2 million over 30 years. On an annualized basis, the estimate of net impacts ranges from costs of approximately $120,000 to savings of approximately $1.2 million.

Caveats and limitations: The analysis of savings relative to baseline costs assumes that consolidation of the SKUs available on the Canadian market would translate to an equivalent reduction in the number of SKUs that manufacturers produce for sale worldwide. The estimates of long-term savings in printing costs do not take into account the elimination of other premium packaging features that would be prohibited following the implementation of PSA measures. These features include embossing; raised lettering; foil stamping; and other distinct visual or tactile features on the exterior or interior of tobacco product packages. Similarly, the analysis does not account for the elimination of costs associated with periodic changes in package design, which manufacturers currently carry whenever they update brand imagery or package artwork. These factors may lead to understated long-term savings and overstated net compliance costs.

Format and product — Tobacco manufacturing

In addition to standardizing the artwork on the package exterior and interior, PSA measures would allow for only regular and king size cigarettes and would standardize the colour of cigarette paper and filters, as well as filter design. They would also standardize the size, shape, format and related features of the packages in which cigarettes are sold. Compliance with these standardization requirements would be expected to require investments in new equipment and other changes in manufacturing operations. None of those consulted provided an estimate of the costs associated with standardizing the appearance of cigarette papers or filters, nor did they suggest that such costs would be substantial. However, they did express some concern with their ability to acquire papers or filters that are compliant with PSA measures while also satisfying product performance standards or other regulatory specifications.

Cigarette manufacturer expenditures: Information from the three largest cigarette manufacturers, which supply the Canadian market, suggests that standardizing the appearance and packaging of cigarettes would require investments in new equipment and other changes in their manufacturing operations.

Manufacturers indicate that complying with standardizing the appearance and packaging of cigarettes would require substantial changes in their operations. In particular, most of the expenditures would relate to modifying packer equipment (i.e. the machines that assemble loose cigarettes into packages). Modifications to packers, purchased in the form of conversion kits, would be required by the change to standard cuboid packages. One firm also anticipates the purchase of new packing machines and wrapper conversion kits, as well as costs associated with reconfiguring its plant floor.

All three firms indicate that they would need to purchase slide and shell packaging equipment and are concerned about purchasing it in a timely fashion. It is estimated that the capital expenditure for all cigarette manufacturers would be $68.8 million (present value) over 30 years. This figure is equivalent to an annualized cost of $7.4 million. This estimate provided by these three tobacco manufacturers was scaled upward to account for the costs that other cigarette manufacturers may carry.

Industry representatives also noted that retooling to comply with standardizing the appearance and packaging of cigarettes would require a substantial amount of time. They estimated that acquisition time for cigarette manufacturing equipment would range from 24 to 30 months, and that multiple orders to equipment manufacturers could add delays. It was also noted that time would be needed to install, test, and calibrate equipment sequentially, which would extend the time needed to come into compliance.

Format and product — Packaging suppliers

Packaging expenditures: Standardization of cigarette packaging would also require the companies, which provide the packaging, to retool machinery. To produce blank packages (prior to printing), cutting and creasing tools are used to crease, shape, fold, perforate and emboss the paperboard. The machinery used for this process is tailored to the dimensions and features of the final packaging.

It is estimated that one company supplies over 95% of the packaging for cigarettes sold in Canada and presently, there is considerable variety in the range of packaging on the Canadian market. The PSA measures being considered would narrow this range to one package type: cuboid slide and shell packages for regular and king size cigarettes. Based on the company's market share and its analysis of the investment that it would need to make, it is estimated that packaging firms would carry retooling costs of approximately $30.3 million to $45.4 million (present value) over 30 years. These figures are equivalent to annualized costs of $2.9 million to $4.3 million.

Bottlenecks could also develop in the supply of packaging materials. The company that supplies the Canadian market with packages indicates that it would require sufficient lead time to convert its systems to produce compliant packages and meet the demand of cigarette manufacturers that serve the Canadian market.

Caveats and limitations: The analysis of the cost of standardizing the appearance of cigarettes and cigarette packages is subject to a number of limitations. Most importantly, the analysis is based on compliance cost estimates provided by representatives of the tobacco industry, which were taken as given. While these estimates were reviewed to ensure they are consistent with information on product features and sales reported under the Tobacco Reporting Regulations (TRR), the accuracy of future projections and limitations cannot be verified.

Repackaging of cigars

Most cigars currently sold in Canada are imported; sales of cigars produced domestically account for less than 12% of the market. Nonetheless, for many foreign manufacturers, Canada is a relatively small market and sales in Canada are unlikely to be high enough to justify a substantial investment in redesigning their packaging. The industry representatives consulted anticipate that the introduction of PSA measures would lead to a substantial consolidation in the variety of cigars available on the Canadian market.

It is estimated that the introduction of PSA measures would lead to a 50% reduction in the number of cigar SKUs available on the Canadian market. The analysis assumes that all cigars that remain on the market would be repackaged by Canadian manufacturers or importers to comply with the proposed PSA measures. The tobacco manufacturers consulted estimated that implementing a repackaging system would cost between $3,300 and $15,000 per SKU. They envisioned this as a one-time cost associated with designing and producing compliant packaging, coupled with establishing a facility capable of receiving imported cigars and transferring them to this packaging. The estimated costs range from $5.75 million to $25.9 million (present value) over 30 years, equating to annualized costs from $473,000 to $2.1 million.

Retailers

Under the proposed Regulations, retailers may carry costs to retrain their employees, reconfigure their inventory and reorganize their stockrooms. They may also carry costs associated with an increase in retail transaction time. The analysis estimates the cost to the retail sector to be approximately $28 million over 30 years, equating to annualized costs of $2.3 million.

The Canadian Convenience Stores Association (CCSA) volunteered to survey its members on the potential impacts of PSA measures and provided a summary of the results, which represented over 2 300 of its members.

Training costs: Based on the survey of CCSA members and Australia's post-implementation study of plain packaging, the analysis assumed that 30% of tobacco product retailers in Canada would carry training costs. On average, eight employees per store would require training; the time required for training would average two hours per employee. The analysis values this time at a wage rate of $15.14 per hour and treats these additional training costs as a one-time cost carried upon implementation of PSA measures. The estimated present value of the cost for training is approximately $2.2 million.

Inventory and stockroom reconfiguration costs: In addition to training costs, responses to the CCSA survey suggest that approximately 88% of convenience stores would carry costs to reconfigure inventory and facilitate the identification of different products.

It was estimated that staff would require an additional two hours per day to order, receive and stock tobacco products following the implementation of PSA measures. As with training costs, this additional time is valued at $15.14 per hour. The analysis assumes that these costs would be carried at 88% of all retail establishments selling tobacco products and would persist for 30 days following the implementation of PSA measures. The estimated present value of the cost is approximately $24.7 million.

Transaction costs: International evidence regarding the effect of plain packaging on retail transaction times is mixed and highly uncertain. Some studies have found a slight increase associated with more difficulty differentiating between products, as well as an increase in service errors (e.g. customers receiving the incorrect product). It is estimated that there will be an average increase of 2.59 seconds per transaction in the month following implementation of PSA, with no discernable effect thereafter. This is considered the best available estimate and was used to determine the increased cost to retailers, valuing the added time at the average retail worker wage rate of $15.14 per hour. The analysis assumes that transaction delays would be experienced at all retail stores. The estimated present value of the transaction costs are approximately $965,000.

Stranded inventory costs: Non-compliant inventory at the end of the implementation period is not expected to be a cost for retailers. Retailers will have an additional three months from manufacturers for implementation of the proposed Regulations. Unsold tobacco products remaining at retail at the end of this period, if any, are likely to be returned to the manufacturer/importer.

Caveats and limitations: The analysis is directly based on information that CCSA provided in a summary of its members' responses to a survey. The survey's findings are reported as provided, and the ability to evaluate the accuracy of this information is limited. As well, the impact of PSA measures on retail transaction times is highly uncertain, as is the duration of the effect on transaction times and inventory/stockroom reconfiguration.

Costs to Government

The introduction of PSA measures for tobacco products would require an investment of public sector resources to administer and verify compliance with the proposed Regulations. Health Canada estimates initial implementation costs of approximately $496,000, coupled with annual outreach, and compliance and enforcement costs, of approximately $499,000. The present value of these costs is approximately $6.6 million. This is equivalent to an annualized cost of approximately $540,000.

Potential economic impacts

In addition to imposing direct costs on industry and Government, PSA measures could also affect the supply and demand in the market for tobacco products.

Impacts on manufacturers

The implementation of PSA measures could have a variety of market impacts that would affect the sales, profitability and operations of tobacco product manufacturers and their suppliers.

Impacts on tobacco product prices and sales: The cost of complying with PSA measures could influence the price of tobacco products, which would in turn impact the demand for tobacco products and thus affect sales. The analysis estimates that manufacturers could incur profit losses ranging from about $2.8 million to $5.5 million over 30 years. This equates to annualized costs of $228,000 to $454,000.

Employment: Any reduction in the sale of tobacco products stemming from the introduction of PSA measures could have an adverse effect on employment in the tobacco product manufacturing sector. To provide a rough estimate of the potential employment impact, the analysis assumes that such an impact would be proportional to projected changes in unit sales of tobacco products. A proportional reduction in the number of individuals employed in Canada's tobacco product manufacturing sector suggests, in the upper-bound case, the loss of approximately one job.

Impacts on retailers

Loss of profits: PSA measures could also affect the profits of tobacco product retailers. The effect of higher prices passed along to the consumer due to manufacturers' increased compliance costs could erode profits by $6,331,733 to $11,993,335 over 30 years. These figures are equivalent to annualized costs of $520,770 to $981,982.

Impacts on consumers

Price increases: To the extent that manufacturers and retailers of tobacco products pass their compliance costs to consumers in the form of higher prices, those who continue to purchase the products would realize a loss in consumer surplus. The potential impact of PSA measures on the price of most tobacco products is relatively modest. As a result, the loss in consumer surplus associated with any increase in prices would also be modest (e.g. less than $3.50 per year for a pack-a-day smoker). Price increases were not included in the overall cost calculation in order to avoid double-counting, given that it is already captured within the loss of profits.

Transaction delays: According to retailers, an increase in retail transaction time would also have an adverse effect on consumers. To estimate this cost, the same assumptions were employed in evaluating impacts on retailers (i.e. a delay of 2.59 seconds per transaction and an effect enduring for 30 days) and valued consumers' time based on an average post-tax wage rate of $19.22 per hour. This approach yields an estimated reduction in consumer surplus of approximately $1.2 million. To place this figure in context, the estimated impact on a consumer who engaged in 20 transactions during the month following the introduction of PSA measures would be a loss in consumer surplus of approximately $0.28.

Impacts on federal and provincial governments

Any change in tax revenues would represent an impact on transfer payments between the Government and the public rather than a social cost. The net impact of such a transfer on society is zero. Therefore, foregone tax revenues were omitted from the calculation of costs and benefits.

Other impacts considered

Potential costs of illicit tobacco control

The Government of Canada recognizes that contraband tobacco has been an issue in Canada and that contraband tobacco undermines key tobacco use reduction interventions. Because of this, contraband is an ongoing concern for the Government of Canada, and enforcement has been a key component of the FTCS and will remain a priority moving forward in the new tobacco strategy.

Public Safety Canada and portfolio agencies including the Royal Canadian Mounted Police, the Canada Revenue Agency and the Canada Border Services Agency are working in close collaboration with Health Canada, the Department of Justice and key stakeholders to tackle illicit tobacco issues. Should there be a rise in counterfeiting, enforcement authorities would likely need to increase the frequency of retail and supply chain audits following implementation of PSA measures. It is difficult to predict the impact, if any, PSA measures will have on counterfeiting; therefore, the incremental cost of these enforcement activities remains uncertain.

The Canadian tobacco industry has claimed that contraband levels will increase as a result of PSA measures. Such claims were also made in 2009, when Canada first introduced a schedule to restrict flavours in cigarettes, little cigars and blunt wraps, and again in 2011, when Canada increased the size of its HWs on cigarettes and little cigars to 75 % of the package. In both these cases, contraband tobacco levels did not increase after the new requirements came into force. Academic research on Canada's contraband market suggests that contraband tobacco levels have decreased in recent years.^{footnote 112} Additionally, between 2010 and 2016, sales of legal cigarettes have been declining at a very slow rate, along with the decline in smoking prevalence. This does not suggest that contraband tobacco is increasing its share of total cigarette consumption.

The Australian government published a post-implementation review of plain packaging in 2016. This review reveals that there has been no change in use of unbranded illicit tobacco. In addition, there was no evidence of increases in use of contraband cigarettes or an increase in purchases of tobacco from informal sellers after plain packaging measures were introduced in Australia in 2012.^{footnote 113} As well, prior to the implementation of plain packaging regulations, the U.K. Department of Health conducted a prospective impact analysis and concluded that plain packaging is not likely to substantially increase the size of the counterfeit market, or the illicit market overall.

Down-trading

Down-trading occurs when tobacco consumers switch from premium brands to value brands (i.e. lower-priced alternative brands). The cigarette market in Canada has exhibited down-trading since 2002, primarily as a result of aggressive pricing strategies by one main company, followed by the others, that evolved into distinct pricing segments. Price segmentation has more or less become a permanent feature of the Canadian cigarette market. Companies have a discount cigarette strategy in place with the objective of attracting young smokers, low-income smokers and smokers who might be thinking of quitting smoking for financial reasons.^{footnote 114}, ^{footnote 115} For tobacco products other than cigarettes, down-trading is expected to have a relatively small impact on the manufacturer's profits.

For the Canadian market, despite down-trading, the average revenue per cigarette for companies has continued to rise. In 2016, tobacco companies' revenues for cigarettes reported to Health Canada under the TRR reached their highest recorded level, up 32% from 2014 revenues.

Evidence from Australia shows that after plain packaging was implemented, the inflation-adjusted recommended retail prices of all cigarette products from the three largest cigarette companies increased by 3.4% on average from 2012 to 2013, with increases greater for premium and mainstream brands. ^{footnote 116}

The potential for down-trading to rise and lower profits for manufacturers and retailers following the implementation of PSA measures was taken into consideration. However, the presence of price segmentation and down-trading, at least in the Canadian experience, is not an indication that average cigarette prices and industry revenues will decline. In Canada, the opposite has been true; therefore, down-trading was not included in the analysis.

Benefits

Literature review

There is a substantial body of literature regarding the effect of tobacco product packaging on the appeal of tobacco products, consumer perceptions of the health risks of tobacco use and consumers' attitudes toward tobacco use. Research across a variety of disciplines explored the factors surrounding the effectiveness of plain packaging measures of tobacco in helping to reduce the public health burden of tobacco use. Studies indicate that plain packaging can

• limit the promotional effect of tobacco product packaging;
• reduce the appeal of tobacco packages, products and brands;
• increase the salience of HWs on the packages of tobacco products;
• reduce misconceptions about product harm and strength, thereby undermining the potential for the packaging to be misleading; and
• help to change attitudes and beliefs toward tobacco use that foster changes in behaviour, both by discouraging young people from becoming tobacco users and by encouraging current users to quit.

The proposed Regulations will support the new tobacco strategy and work in tandem with other factors in the environment to reduce inducements to tobacco use. The proposed Regulations are expected to primarily benefit youth and young adults by supporting the prevention of tobacco initiation and the dependence on tobacco products that could result and continue over a lifetime. PSA measures will also benefit youth, young adults and others by increasing the salience of HWs and reducing the ability of tobacco product packages to mislead consumers. The proposed Regulations are expected to have a significant long-term impact on the decline in disease incidence, mortality and disability caused by tobacco use. Long-term economic benefits would be realized in terms of avoided tobacco-related mortality and morbidity and exposure to second-hand smoke.

Sex- and gender-based analysis

Key findings indicate that while tobacco use has declined over the past 15 years, a gender gap still exists. For instance, in 2001, 24% of males and 20% of females reported current cigarette smoking; by 2015, the rate of current cigarette smoking had decreased to 16% among males and 10% among females.

The proposed Regulations are expected to have a similar positive impact on both genders. PSA measures restricting slim cigarettes, which represent 2.3% of the current cigarette market, are expected to primarily benefit women. Research has indicated that slim and thin cigarette packages increase the attractiveness of packages, particularly among young women, and that slim and super slim cigarettes are more likely to be perceived as milder and less harmful.

Public opinion research in support of the regulatory development of this proposal was inclusive of both genders, and preliminary tobacco package colours tested demonstrated that the drab dark brown packaging was unattractive to both genders. Similarly, unbranded cigarettes were also found to be unappealing by both genders.

International findings

The evidence from Australia suggests that plain packaging does have an impact on the prevalence of tobacco use and the associated public health burden. It is estimated that the Australian measures implemented in 2012 account for a 0.55 percentage point reduction in smoking prevalence between December 2012 and September 2015. This represents approximately 25% of the overall 2.2% decline in smoking prevalence observed over this time. However, it is difficult to isolate reliable estimates of the impact of plain packaging based on the prevalence of tobacco use in Australia post-implementation, given that plain packaging requirements for tobacco were introduced simultaneously with other measures, including requiring new, larger graphic warning labels, imposing a 25% tobacco excise tax increase and restricting Internet advertising of tobacco products. The simultaneous implementation of these measures restricts assessment of their independent impacts. Due to this, the 0.55 percentage point reduction in smoking prevalence seen in Australia was not used to calculate the estimated benefits of the proposed Regulations.

In 2017, the Australian government posted results from the National Drug Strategy Household Survey (NDSHS) for 2016, which showed there was no significant decrease in smoking rates in Australia between 2013 and 2016. However, there was an increase in the age at which young people began to smoke, up from 15.9 to 16.3 years, as well as an increase in the proportion of teenagers who had never smoked, from 95% to 98%. ^{footnote 117} These findings indicate that plain packaging, as part of other tobacco control measures recently implemented in Australia, may have had a positive impact with respect to youth smoking in that time period.

Quantitative analysis — Break-even analysis for PSA

The past success of the FTCS is a result of a multifaceted and coordinated approach involving many partners, including provinces and territories, municipalities, non-governmental organizations, community agencies and the private sector. Given the variety and number of tobacco control interventions working in tandem under the new tobacco strategy, it is challenging to quantify the benefits of an individual tobacco control measure. For this reason, an estimate of the benefits associated with PSA measures was not developed. Instead, a break-even analysis was performed to calculate the effect that the proposed Regulations would need to have on initiation and cessation rates, in order for PSA measures to provide public health benefits that equal or exceed the estimated costs.

Model description

In order to conduct the break-even analysis, a model was developed to quantify and value the benefits of changes in the prevalence of cigarette use in Canada. Three benefits resulting from changes in the initiation and cessation rates were considered: (1) benefits of reduced tobacco-related mortality, (2) benefits of reduced tobacco-related morbidity and (3) benefits of reduced second-hand smoke.

Benefits of reduced tobacco-related mortality

A benefit of the proposed Regulations as part of the new tobacco strategy is the likely reduction in deaths attributable to smoking as a result of a decline in smoking prevalence. To estimate and value the impacts of changes in cigarette use on tobacco-related mortality, estimates of the relative mortality risk of current and former smokers were drawn from a study by Taylor et al. ^{footnote 118} As the duration of time since quitting increases, the mortality risk faced by a former smoker declines. The estimates of annual mortality risk by age, sex and smoking status are adjusted to match the aggregate age- and sex-specific mortality rates reported by the Statistics Canada CANSIM database.^{footnote 119}

The model estimates the social value of averting premature deaths based on a value of $7.4 million per statistical life (2015 dollars), based on the recommendations of Chestnut and DeCivita. ^{footnote 120} The value of a statistical life (VSL) is an aggregated estimate of the value of small annual mortality risk changes in a population and is based on estimates of individual willingness-to-pay (WTP) to reduce one's own mortality risk by a small amount. These WTP estimates are derived primarily from wage-risk studies of workers across jobs of varying risk levels. The VSL represents the value of one "statistical life," not the value of saving a particular individual's life.

Benefits of reduced tobacco-related morbidity

An additional benefit of the proposed Regulations is the likely reduction in illnesses attributable to smoking as a result of a decline in youth uptake. The analysis used cost-of-illness data on tobacco use from The Costs of Substance Abuse in Canada 2002 by Rehm et al. ^{footnote 121} Cost-of-illness studies measure direct (e.g. medical expenses such as hospital visits and medication) and indirect (e.g. lost wages) costs incurred by affected individuals. It is recognized that tobacco-related illnesses generally take several years to manifest themselves; therefore, a latency period of 10 years between smoking initiation and the onset of non-fatal health effects was assumed. It was estimated that the annual morbidity costs are about $1,400 per smoker (2015 dollars).^{footnote &} This estimate was applied to the number of smokers aged 27 and older to estimate the total annual costs of tobacco-related illness each year.

Benefits of reduced second-hand smoke

The model also estimates non-smoker deaths attributable to exposure to second-hand smoke (SHS). The analysis relies on a study by Max et al.^{footnote 122} that estimates the number of deaths attributable to SHS exposure in the United States based on exposure and cause-of-death data collected in 2006. Calculations yield annual rates of 0.66 adult SHS-attributable deaths per 1 000 smokers and 0.03 infant SHS-attributable deaths per 1 000 female smokers. The model then adjusts these parameters dynamically in response to changes in total population, since — all else equal — an increase in total population is likely to increase the number of non-smokers exposed to SHS.

Prospective baseline scenario

A prospective baseline scenario was then developed to estimate the prevalence of cigarette use over the next 30 years. This scenario assumes that future cigarette initiation and cessation rates will hold constant at levels equal to the annual average of the rates derived from the 2009–2013 results of the Canadian Student Tobacco, Alcohol and Drugs Survey (CSTADS) and Canadian Tobacco Use Monitoring Survey (CTUMS).

Break-even analysis — Results: The break-even analysis illustrates the effect that PSA measures would need to have on cigarette initiation and cessation rates, relative to the prospective baseline scenario, over the next 30 years, in order for the PSA measures to provide public health benefits that equal or exceed the estimate of the costs of those measures. Two break-even scenarios were considered.

The first break-even scenario (break-even low) estimates the change in initiation and cessation rates necessary over the next 30 years (2017 through 2046) to generate public health benefits with a present value of at least $138.4 million (2015 CAD), the lower-bound cost estimate of the proposed PSA measures.

The second break-even scenario (break-even high) estimates the change in initiation and cessation rates necessary over the next 30 years (2017 through 2046) to generate public health benefits with a present value of at least $195.9 million (2015 CAD), the upper-bound cost estimate of the proposed PSA measures.

The analysis suggests that both of these break-even points would be achieved if PSA measures proved to have even a minor effect on cigarette initiation and cessation. Specifically,

• a 0.03% increase in the annual rate of smoking cessation and a 0.03% reduction in the annual rate of smoking initiation, relative to the prospective baseline scenario, would yield public health benefits of approximately $198 million (present value), sufficient to exceed the break-even point for the break-even high scenario and break-even low scenario.

In order to put the analysis of public health benefits for the two break-even scenarios into perspective, Table 1 provides additional information. The numbers in this table are not a prediction of what PSA measures would accomplish. Rather, they illustrate the public health benefits that would be accrued in the event of a 0.03% increase in cessation and 0.03% decline in initiation rates for the high- and low-cost scenarios. Since the costs for the proposal have been calculated, the benefits for the break-even scenario must equal or exceed the costs. Using the model created for this analysis, it can then be determined how much prevalence would need to change from the prospective baseline scenario in order to achieve the benefits that would equal or exceed the costs. From this the number of statistical lives that would have to be saved over the next 30 years to achieve these benefits can be calculated. For this break-even analysis, the reduction in the number of excess deaths attributable to cigarette use is 101 fewer deaths over 30 years.

Table 1: Public health benefits of changes in annual smoking initiation and cessation rates: 2017–2046 (2015 CAD, 8% discount rate^{note **})

Benefit Category	0.03% increase in cessation and 0.03% decline in initiation rates
PV of benefits from reduced morbidity ($millions)	$5
PV of benefits from reduced smoking mortality ($millions)	$145
PV of benefits from reduced SHS mortality ($millions)	$48
Total present value of health benefits ($millions)	$198
Reduction in excess deaths due to smoking	77
Reduction in excess deaths due to exposure to SHS	24
Total reduction in excess deaths attributable to cigarette smoking	101

It is important to note that the break-even analysis is based on estimates of the costs of complying with PSA measures, government administration costs, consumer transaction costs and lost profits due to reduced sales. It does not take into account other potential costs, such as the costs of counteracting the potential rise of counterfeiting operations or down-trading. The impact of these costs, however, would need to be substantial in order to alter the fundamental conclusion that small effects on initiation and cessation of tobacco use would be sufficient to produce public health benefits equal to or greater than the costs associated with implementation of PSA measures.

Accounting statement

Table 2: Summary of costs and break-even information

	Costs Present Value (CAD, 2015)		Costs Annualized (30 years, 8%)
	Lower (millions)	Upper (millions)	Lower	Upper
Direct compliance costs
Artwork retooling costs	-$11.2	$2.6	-$1,227,000	$116,000
Cigar repackaging cost	$5.8	$25.9	$473,000	$2,128,000
Format and production — Tobacco manufacturing	$68.8	$68.8	$7,439,000	$7,439,000
Format and product — Packaging suppliers	$30.3	$45.4	$2,856,000	$4,284,000
Retailers	$28.0	$28.0	$2,299,000	$2,299,000
Government administrative	$6.6	$6.6	$540,000	$540,000
Potential economic impacts
Loss of profit due to loss of sales — manufacturer	$2.8	$5.5	$228,322	$454,088
Loss of profit due to loss of sales — retailer	$6.3	$12.0	$520,770	$981,982
Transaction delays for consumer	$1.2	$1.2	$100,766	$100,766
TOTAL COSTS	$138.4	$195.9	$12,293,717	$17,401,294
Break-even Analysis
		Lower and Upper End
Benefits needed to break-even (millions $)		$198
Benefit of reduced morbidity (millions $)		$5
Benefit of reduced mortality (millions $)		$145
Benefit of reduced exposure to SHS (millions $)		$48
Reduction in excess deaths due to tobacco smoking for break-even		101
% increase in cessation		0.03%
% decline in initiation rates		0.03%
Qualitative impacts
Positive impacts	Reduced morbidity and mortality related to tobacco use. Reduced mortality related to exposure to second-hand smoke.
Negative impacts	Reduction in product availability or variety of tobacco products, which will reduce consumer's options.

"One-for-one" Rule

There is no administrative burden expected for businesses due to the proposed Regulations, as there will not be additional reporting requirements. Therefore, the "One-for-One" Rule does not apply.

Small business lens

In developing the proposed Regulations, approaches that would balance minimizing regulatory burden to business with protecting young persons and others from inducements to use tobacco products were considered.

The proposed Regulations would allow manufacturers/importers of tobacco products a transition period of six months from the publication date to allow the majority of these businesses, if not all, to realign their operations and to deplete or modify any remaining stock that does not comply with the proposed Regulations. A six-month transition period would also allow Canada to meet its obligations under the World Trade Organization (WTO) Technical Barriers to Trade Agreement.

Retailers would have an additional three-month transition period for implementation from the date of coming into force during which they would be able to sell through inventory of branded non-standardized tobacco products.

Flexible option

In 2015, there were 27 small manufacturers that would be affected by the proposed Regulations. Small manufacturers make up less than 1% (0.15%) of the market share (based on wholesale values) of all tobacco manufacturers (including importers).

The proposed Regulations would allow manufacturers/importers of tobacco products a transition period of 6 months from the publication date. A flexible option, which would provide a 12-month implementation delay, was also considered. However, providing an implementation period of more than 6 months for small businesses to alleviate compliance costs was deemed to be counter-effective to the protection of Canadians.

Table 3 demonstrates the savings for the tobacco manufacturing industry by delaying implementation by an additional six months. The savings for manufacturers that are small businesses are approximately $1,900. Delaying implementation by more than six months from the publication date is therefore not considered to be part of an effective approach. Allowing branded packages and products from small businesses to remain on the Canadian market any longer than the six-month period would undermine the purpose of this proposal, without greatly reducing small business costs.

Table 3: Small business flexibility analysis (2015 CAD, 8% discount rate)

Short description	Initial Option 6-Month delay for implementation		Flexible Option 12-Month delay for implementation
Number of small businesses impacted	27		27
Total costs (all small businesses)	$2,273	$25,593	$2,104	$23,685
Average cost per small business	$84	$948	$78	$877
Consideration	Small business costs have been estimated to be $1,900 (2015) greater under a 6-month delay compared with 12 months.		The extension of the delay in implementation from 6 to 12 months would increase the risk of youth in Canada becoming life-long smokers. This would compromise the health of Canadians.

The initial option value combines foregone profits and one-time compliance costs associated with unsold inventory. The reason for including the one-time cost in the initial option, but not in the flexible option, is that businesses may not have enough time to sell through their inventories in 6 months, but would likely manage to sell them within one year. Foregone profit includes reduced sales due to price increases for cigarettes. Foregone profits were included in the calculation of both options because of the lower level of sales, the only difference being that in the 12-month option, businesses would carry half the amount of the first year foregone profits, as they would have 6 more months to clear existing stock.

The small business flexibility analysis does not take into account the impacts that a delay in the implementation of PSA measures could have on small retailers. This is because the majority of impacts on retailers, such as longer retrieval times at the point of sale, challenges in inventory control and additional training costs, would be carried no matter the transition period.

Although the flexible option is the lower-cost option for small business in terms of compliance costs, it is not the lower-cost option for Canadians. The flexible option would increase the risk of youth becoming lifelong smokers, which would compromise the health of Canadians.

Consultation

Consultations with partners

Under the FTCS, Health Canada collaborates with the Canada Revenue Agency, the Canada Border Services Agency, the Royal Canadian Mounted Police, the Public Health Agency of Canada, Indigenous Services Canada and Public Safety Canada on tobacco control measures. Health Canada consulted with its partners early in the regulatory development process. No major concerns were raised during these consultations.

Consultation document

On May 31, 2016, Health Canada launched a public consultation on plain and standardized packaging to be considered for all tobacco products. A consultation document entitled "Consultation on "Plain and Standardized Packaging" for Tobacco Products" setting out the proposal under consideration was published on Health Canada's website and was distributed to members of the tobacco industry, non-governmental organizations (NGOs), governmental organizations, academics, experts and researchers. The document solicited comments on the possible regulatory measures.

Over 58 000 responses were received from members of the general public, representatives of the tobacco industry, retailers, health organizations, other levels of government, NGOs and academics. Ninety-two percent of respondents were in support of plain and standardized packaging for tobacco products. The majority of these comments were from the general public, but support also came from NGOs, public health organizations, government and academic researchers. Eight percent of respondents opposed plain and standardized packaging. Industry, retailers and business associations, who represented the majority of the stakeholder groups, were opposed to plain and standardized packaging, but opposition also came from some in the general public and academics.

Of those from the general public, NGOs, public health organizations and academics who showed support for plain and standardized packaging, many requested that plain and standardized packaging apply to all tobacco products. They also expressed a desire for plain and standardized packaging to be implemented as soon as possible and suggested limiting cigarette packages to slide and shell format only. They also supported the standardization of both tobacco product packages and cigarette sizes.

Many of the academics and NGOs who responded presented scientific reviews of available studies in support of plain and standardized packaging. In the consultation document, Health Canada solicited input on potential challenges that might arise in Canada with the implementation of plain and standardized packaging. NGOs and academics included studies and information that countered these concerns. Provincial, territorial and municipal governments provided support for plain and standardized packaging and many commented that plain and standardized packaging would complement strategies already in place in their respective jurisdictions.

Less than 7% of the general public who provided feedback on the consultation opposed plain and standardized packaging and nearly all of those who responded from industry, retailers and business associations opposed plain and standardized packaging. Those who were not in support of plain and standardized packaging raised several concerns. They felt the Government had overstepped its boundaries with such restrictive regulations and was creating a "nanny state." Many also felt that plain and standardized packaging would cause an increase in illicit tobacco, which is already a concern for Canadians. They also stated that plain and standardized packaging would not work and stated that there was no scientific evidence to support it. Many felt that plain and standardized packaging would violate domestic and international laws. They stated that plain and standardized packaging violated the Canadian Charter of Rights and Freedoms and the Trade-marks Act and is inconsistent with the World Trade Organization Trade-Related Aspects of Intellectual Property Rights and the Technical Barriers to Trade Agreement.

Industry respondents were also concerned about the implementation costs associated with plain and standardized packaging and claimed that changes made to the packaging format would require manufacturing equipment modifications that would be both costly and complex. Many industry respondents also commented on how plain and standardized packaging would negatively affect the Canadian taxpayer and that it would result in lost tax revenues, potential job losses, an increased need for governmental resources and an increased burden for small business owners.

In addition to the consultation, during the development of the cost-benefit analysis, manufacturers expressed concern with the slide and shell requirement, indicating that they would need to purchase slide and shell packing equipment and expressed concern over their ability to acquire this equipment in a timely fashion, estimating that it could take 24 to 30 months (while it would take 12 to 18 months for both flip-top and slide and shell packs). It was further noted that multiple orders to the one equipment manufacturer in Canada could add delays to their compliance, and that time would also be needed to install, test, and calibrate equipment sequentially.

The majority of retailers and business associations believed that the implementation of plain and standardized packaging lead to a number of operational hurdles, such as longer retrieval times at the point of sale resulting from clerks experiencing difficulties distinguishing between brands of cigarettes. Many also conveyed the belief that plain packages would create challenges in inventory control and that additional training costs would be carried by employers. In association with the projected longer retrieval times, some retailers also raised security concerns. No additional evidence has been provided by stakeholders so far to support this claim. Manufacturers of pipe tobacco, smokeless tobacco, and cigars and some members of the general public stated that pipe tobacco, cigars and smokeless tobacco products should not be included in the scope of the plain and standardized packaging as they are not directed at youth or young adults.

There was an overwhelming response from stakeholders to the consultation document. All comments and concerns were reviewed and taken into consideration while preparing the proposed Regulations.

Face-to-face meetings: In August 2016, Health Canada held face-to-face meetings and teleconferences with approximately seven stakeholders, six NGOs and some tobacco industry representatives. The purpose of these meetings was to provide an overview of the plain and standardized packaging under consideration and to solicit feedback on the proposed measures. Comments and concerns gathered from these meetings, as well as comments received in response to the May 2016 consultation document, were included in the summary report.

A full summary of the comments received can be found on the Health Canada website at http://www.healthycanadians.gc.ca/publications/healthy-living-vie-saine/tobacco-packages-summary-resume-consultation-emballages-tabac/index-eng.php.

Response of Health Canada to key stakeholder concerns

Evidence to support the measures: Numerous studies have suggested that plain packaging measures reduce the appeal of tobacco packages and the products they contain, particularly among young people. Australia was the first country to implement plain packaging of tobacco products in 2012. The evidence from Australia suggests that plain packaging does have an impact on the prevalence of tobacco use and the associated public health burden. It is estimated that the Australian measures, which included both plain packaging and larger graphic warning labels, implemented in 2012 accounted for a 0.55 percentage point reduction in smoking prevalence between December 2012 and September 2015. All tobacco products are addictive and can cause harm to health.

International and domestic law: The Government of Canada has taken the legal concerns raised by those not in support of PSA measures into consideration. There have been no findings, to date, that plain packaging measures are inconsistent with international trade agreements, nor has there been a finding of breach of intellectual property rights in any of the jurisdictions where plain packaging measures have been implemented.

Action on illicit tobacco: The Government takes the issue of counterfeit and contraband seriously and supports the fight against contraband and counterfeit tobacco products. Addressing contraband tobacco products is a priority of the new tobacco strategy. Evidence from Australia shows that the implementation of plain packaging led to a decline in the consumption of illicit tobacco.

Industry costs: The costs identified by stakeholders during the consultation period have been included in the cost-benefit analysis. The analysis of industry cost is subject to a number of limitations and uncertainties. The estimates provided by industry could not be critically assessed. Overall, the analysis indicates that only a very small change in initiation and cessation rates would need to occur for the benefits to outweigh the costs. The transition period for implementation of the PSA measures is consistent with the WTO obligation of a period not less than six months; consideration will be given to evidence regarding a longer transition period pursuant to this consultation.

Public opinion research

Given that the principal objective of PSA measures is to help protect young persons and other Canadians from inducements to use tobacco products, public opinion research with Canadian youth and young adults was used in the development of the proposed Regulations. Qualitative and quantitative consumer research was conducted on how participants, which included non-smokers and smokers, perceive mock-up PSA tobacco products and packages.

The purpose of this research was to explore Canadians' perceptions and beliefs with respect to aspects of cigarettes (e.g. their size, length and circumference and colour and branding elements) and cigarette packages (e.g. colour and branding elements), as well as determine whether certain aspects are associated with perceptions of decreased harm or increased attractiveness. This research provided greater insight and understanding of the elements that have the greatest impact in reducing the appeal of tobacco products and their packaging, particularly among young Canadians.

The research consisted of two qualitative phases (focus groups) and one quantitative phase (survey). The conclusions presented below are based on both phases of the focus groups and the quantitative study.

Results indicate that brighter coloured plain packaging, particularly reds, blues and greens, have an impact on the appeal and the ability to attract the attention of Canadians. This was particularly evident among youth and young adults, who in virtually all combinations of brand element colours and HWs tested, consistently provided higher appeal and noticeability scores for brighter coloured packaging. By contrast, the beige and browns tested all received lower preference scores for noticeability and appeal. The beige and browns tested were also less likely to make Canadians, particularly youth and young adults, curious about what is in the package. These findings were consistent across the three different HWs tested. In essence, the beige and brown colours are less likely to capture the attention of Canadians.

The findings for appeal and noticeability of cigarettes based on size varied. Smokers in the focus groups generally expressed an appeal for a size that resembled their current brand, or expressed an appeal for a size based on specific circumstances (i.e. smaller cigarette size for a work break). Sizes that are more common to a regular cigarette were generally less appealing and less likely to make participants curious about them.

For cigarette colour, the findings suggest that all of the coloured cigarettes (i.e. other than white) tested invited curiosity. While the visual appeal scores for coloured cigarettes were lower in comparison to white cigarettes, their unfamiliarity increased interest. White cigarettes, conversely, were considered familiar and conveyed a negative connotation about tobacco use to Canadians. They were not appealing to non-smokers. This was particularly evident among youth and young adults included in this research.

Finally, results demonstrate that Canadians find cigarettes with branding (i.e. logo, brand name) more noticeable and more appealing than those without branding. This was particularly the case with youth and young adults, who share some broader views on the importance of brands when making purchases.

The full report of the findings can be found on the Health Canada website at http://epe.lac-bac.gc.ca/100/200/301/pwgsc-tpsgc/por-ef/health/2017/041-16-e/report.pdf.

Regulatory cooperation

The proposed Regulations are important to continue Canada's tobacco control efforts. Plain packaging is supported by the World Health Organization Framework Convention on Tobacco Control, to which Canada is a party. Country-specific plain packaging action is starting to emerge around the globe, with regulations implemented in Australia (2012), the United Kingdom (2017) and France (2017). Ireland, Norway and New Zealand have announced implementation dates regarding similar measures for 2018, while Hungary, Slovenia and Georgia have announced implementation dates for 2019, 2020 and 2022, respectively. Over 15 other countries have announced their intention to introduce plain packaging measures.

PSA measures in the proposed Regulations are aligned with the comprehensive measures implemented in Australia. However, the proposed Regulations also include adaptations to account for lessons learned from Australia's experience, the findings of more recent studies, including Canadian studies, as well as feedback from the Canadian public consultations, in order to achieve additional benefits. The proposed Regulations go beyond the Australian measures in that the plain appearance of tobacco product packages would apply to cigarette cases and bags furnished by a tobacco manufacturer; the interior surfaces of tobacco packages would be dark-drab brown; and no colour or filter technology could appear in the brand name. Further, the proposed Regulations would limit cigarette length and diameter and would also place limits on little cigar diameter.

Given that the proposed PSA measures would apply only to tobacco products for retail sale within Canada, it would not have implications on the export of tobacco products.

Rationale

Canada has already implemented most of the internationally recognized practices in tobacco control,^{footnote 123} and few other countries have been as successful as Canada in lowering smoking rates and shifting public attitudes about tobacco. However, despite such efforts to reduce tobacco use, there are still 4.6 million tobacco users in Canada. Most tobacco use begins during adolescence. Young persons are particularly sensitive to the dependence-causing effects of nicotine in tobacco ^{footnote 124} and they also are more at risk of taking up tobacco products and developing long-term dependence on them. Despite the most recent decline in overall tobacco use, rates for youth and young adults remain unchanged, suggesting more needs to be done with respect to tobacco control measures aimed at youth and young adults. Given the strength of tobacco addiction and the severe health consequences that result from tobacco use, it is imperative that tobacco control efforts seek to prevent tobacco initiation and the tobacco use that can result, particularly among young persons. Existing interventions need to be ongoing, renewed and enhanced by bold new measures.

Tobacco companies have conducted considerable market research on all aspects of packaging (e.g. colour, size, shape and opening) to make it appeal to various target groups, such as women, youth and young adults. Research has found that tobacco companies continue to use specific branding elements, colour, typography and packaging format to promote product characteristics in a manner that makes them more appealing to youth. ^{footnote 125}, ^{footnote 126}, ^{footnote 127}, ^{footnote 128} Since 1997, tobacco product promotion has been prohibited in Canada, with limited exceptions. However, tobacco promotion by means of the packaging is subject to certain restrictions (e.g. no false and misleading promotion, promotion of prohibited additives by means of packaging). Therefore, packaging is one of the few remaining channels available for the promotion of tobacco products in Canada to youth and others.

The promotion of tobacco through its packages and products is particularly effective among youth and young adults, as they are considered to be a particularly impressionable and more vulnerable to inducements to use tobacco products, such as advertising. ^{footnote 129} Documents from the tobacco industry show that tobacco package designs have been modified to increase their appeal to adolescents and young adults. In this context, there is a need for additional tobacco control measures to adapt in order to protect youth from commercial practices that make tobacco products more appealing, to youth, and can induce tobacco use.

Independent research across several countries has consistently shown that plain packaging measures reduce the appeal of tobacco products. There is a substantial body of literature on the effect that tobacco product packaging has on the appeal of tobacco products, on consumer perceptions of the health risks of tobacco use and consumers' attitudes toward tobacco use. A review of this literature indicates that plain packaging can reduce the appeal of tobacco packages, products and brands; increase the salience of HWs on tobacco product packages; reduce misconceptions about the product health risks, which can result from the appearance of the packages and products (e.g. size, colour); and help to change attitudes and beliefs toward tobacco use that foster changes in behaviour, both by discouraging people from becoming tobacco users and by encouraging current users to quit. ^{footnote 130}

Evidence from Australia, which implemented plain packaging in 2012, suggests that plain packaging does have an impact on the prevalence of tobacco use and the associated public health burden. It is estimated that the Australian plain packaging measures, which included the introduction of both plain packaging and larger graphic warning labels, accounted for a 0.55 percentage point reduction in smoking prevalence between December 2012 and September 2015.

There is currently international momentum to address the global tobacco epidemic, with over 15 countries already involved in plain packaging as a means to reduce tobacco initiation and use. The adoption of PSA measures as part of the new Canadian tobacco strategy is in line with the international context and trend and should contribute to maintaining the gains made and reducing tobacco use, particularly among youth. This is an opportunity for Canada to have a positive impact, not only nationally, but also internationally, by aligning its efforts to those of other countries and adopting one of the most comprehensive measures on plain packaging to date.

The proposed Regulations would standardize the appearance of tobacco products and tobacco product packaging for retail sale in Canada. They would strengthen the Governments' efforts to protect the health of Canadians from the health hazards of using tobacco products. The proposed Regulations, as part of the new tobacco strategy, would contribute to the reduction of the health, economic, social and public health costs that are associated with tobacco use.

The regulatory option chosen is one of the most comprehensive to date. It integrates the Australian plain packaging measures and additional measures that are based on findings from recent studies, including Canadian studies, as well as feedback from Canadian public consultations and from international experience with plain packaging.

The cost impacts of this proposal have been estimated to range from $138.4 million to $195.9 million (present value) and relate to direct compliance costs, potential economic impacts and government administrative costs. The benefits associated with the proposed Regulations would support the new tobacco strategy and, as a result, reduce morbidity and mortality related to tobacco use. This reduction in morbidity and mortality would be translated into significant savings to governments in terms of health care costs to address tobacco-related health consequences.

Given the challenges with isolating the benefit associated with PSA measures alone, due to the number and variety of tobacco control measures working in tandem, the benefits of the new tobacco strategy as a whole were considered. This is a more relevant measure of the benefit associated with tobacco control measures, including PSA measures. A break-even analysis was conducted in order to estimate the effect PSA measures would need to have on initiation and cessation rates in order for them to provide public health benefits that equal or exceed the estimate of the costs associated with PSA measures.

The break-even analysis suggests that the break-even points for costs and benefits would be achieved if PSA measures proved to have even a minor effect on cigarette initiation and cessation (over the next 30 years, a 0.03% reduction in the annual rate of smoking initiation and a 0.03% increase in the annual rate of smoking cessation).

Implementation, enforcement and service standards

Coming into force

The proposed Regulations and the Order Amending Schedule 1 to the Tobacco and Vaping Products Act (Colouring Agents) would come into force on the 180th day after the day on which they are published in the Canada Gazette, Part II. The consequential amendments to the TPIR and the TPLR would also come into force at the same time.

Certain provisions of the TVPA regarding promotion by means of the packaging and the markings on the tobacco products will come into force on a date to be fixed by order. It is expected that the coming into force of these TVPA provisions would coincide with the coming into force of the proposed Regulations and the Order Amending Schedule 1 to the Tobacco Vaping Products Act (Colouring Agents).

Manufacturers and retailers would have a transition period to adapt to the regulatory requirements and provide for an orderly transition in the marketplace. Manufacturers and importers of tobacco products would have a transition period of six months for implementation from the date the proposed Regulations are published, and retailers would have an additional three-month transition period to comply with the regulatory requirements. Health Canada would conduct compliance promotion activities to support the implementation of the Regulations. This would minimize loss of inventory and help mitigate profit losses in the short term. Enforcement of PSA measures would begin at the end of the transition period.

Communication and outreach activities

Communication activities will be undertaken to make stakeholders aware of the proposed Regulations and ensure that they have an opportunity to comment on them. Stakeholders are also being informed of this proposal through hard copy and electronic mail-outs. International stakeholders have also been notified through the WTO notification process and provided with the same access to documents and opportunities to comment as domestic stakeholders.

Enforcement of the proposed Regulations

The compliance and enforcement approach for the proposed Regulations includes conducting compliance monitoring and enforcement activities by Health Canada. Part VI of the TVPA sets out a number of penalties for non-compliance with the proposed Regulations. Training on PSA measures would be provided to federal inspectors currently enforcing the TVPA. These inspectors would be responsible for monitoring compliance with the PSA measures, along with other TVPA requirements.

The Government of Canada would actively monitor compliance throughout the supply chain, including manufacturers, importers, distributors and retailers. If federal inspectors have reasonable grounds to believe that the proposed Regulations have been contravened, appropriate measures would be taken, which could range from warnings, compliance plans, penalties and seizures.

Performance measurement and evaluation

Given the variety and number of tobacco control interventions working in tandem under the new tobacco strategy, it becomes challenging to evaluate the performance of an individual tobacco control measure. The performance measures and evaluation for PSA measures will be achieved by an overall evaluation of the new tobacco strategy.

The new tobacco strategy will be evaluated in fulfillment of the Financial Administration Act and the Treasury Board of Canada Secretariat's Policy on Results (2016) in order to assess the relevance and performance of the new tobacco strategy. The horizontal evaluation will be conducted by the Health Canada and the Public Health Agency of Canada Office of Audit and Evaluation in accordance with the Five-Year Evaluation Plan and is scheduled for completion in 2022–2023. The evaluation will be comprehensive and will include an analysis of all new tobacco strategy–funded activities delivered by Health Canada and partner departments. An evaluation framework will be developed by the Office of Audit and Evaluation, in coordination with the Tobacco Control Directorate, as the office of primary interest. The evaluation will examine relevance (continued need and alignment with Government priorities), results (achievement of expected outcomes), and cost effectiveness (demonstration of efficiency and economy).

Contact

Saira David
Plain and Standardized Packaging Division
Tobacco Products Regulatory Office
Tobacco Control Directorate
Healthy Environments and Consumer Safety Branch
Health Canada
Address Locator: 0301A
150 Tunney's Pasture Driveway
Ottawa, Ontario
K1A 0K9
Fax: 613-948-8495
Email: hc.pregs.sc@canada.ca

PROPOSED REGULATORY TEXT

Notice is given that the Governor in Council, pursuant to sections 7 ^{footnote a} and 33 ^{footnote b} of the Tobacco and Vaping Products Act ^{footnote c}, proposes to make the annexed Tobacco Products Regulations (Plain and Standardized Appearance).

Interested persons may make representations concerning the proposed Regulations within 75 days after the date of publication of this notice. All such representations must cite the Canada Gazette, Part I, and the date of publication of this notice, and be addressed to the Plain and Standardized Packaging Division, Tobacco Products Regulatory Office, Tobacco Control Directorate, Healthy Environments and Consumer Safety Branch, Health Canada, 150 Tunney's Pasture Driveway, Ottawa, Ontario K1A 0K9 (email: hc.pregs.sc@canada.ca).

Ottawa, June 19, 2018

Jurica Čapkun
Assistant Clerk of the Privy Council

Tobacco Products Regulations (Plain and Standardized Appearance)

General

Interpretation

Definitions

1 (1) The following definitions apply in these Regulations.

Act means the Tobacco and Vaping Products Act. (Loi)

carton means a secondary package that contains two or more primary packages. (cartouche)

health warning, in respect of a tobacco product, has the same meaning as in the Tobacco Products Information Regulations or the Tobacco Products Labelling Regulations (Cigarettes and Little Cigars), as applicable. (mise en garde)

lower slide-flap means, in respect of a slide and shell package, the lower extremity of the slide that can be folded and is concealed by the shell when the package is closed. (rabat inférieur)

primary package means any package — other than an overwrap — that is intended for retail sale in Canada and in which a tobacco product is directly placed. (emballage primaire)

secondary package means any package — other than an overwrap — that is intended for retail sale in Canada and in which a primary package is placed. (emballage secondaire)

slide means the sliding portion of a slide and shell package. (tiroir)

upper slide-flap means, in respect of a slide and shell package, the upper extremity of the slide that can be folded and is concealed by the shell when the package is closed and that is visible when the package is used in the customary manner to gain access to the tobacco product. (rabat supérieur)

Interpretation — common name

(2) In these Regulations, a reference to a common name is a reference to the common name that is shown on a label in accordance with subparagraph 10(b)(ii) of the Consumer Packaging and Labelling Act.

Interpretation — declaration of net quantity

(3) In these Regulations, a reference to a declaration of net quantity is a reference to the declaration of net quantity that is contained on a label in accordance with section 4 of the Consumer Packaging and Labelling Act.

Interpretation — exterior surface

(4) In these Regulations, a reference to an exterior surface of a tobacco product package is a reference,

• (a) in the case of a package that has a rectangular cuboid shape when it is closed, to that part of the package that forms, as the case may be, the exterior surface of the front, back, any of the sides or the top or bottom of the package;
• (b) in the case of a cylindrical package,
  • (i) to that part of the package that forms, as the case may be, the exterior surface of the top or bottom of the package when it is closed, and
  • (ii) to that part of the package that forms, as the case may be, the exterior curved surface that makes up the front or back of the package around its circumference; and
• (c) in the case of any other package, to that part of the package that forms, as the case may be, the exterior surface of the front, back, any of the sides or the top or bottom of the package when it is closed.
  

Interpretation — overwrap

(5) In these Regulations, a reference to an interior surface or exterior surface of a tobacco product package does not include a reference to an overwrap.

Application

Tobacco product — retail sale

2 (1) These Regulations apply to every package of tobacco products that is intended for retail sale in Canada, as well as to every tobacco product that is intended for retail sale in Canada.

Package

(2) These Regulations also apply to a package that does not contain a tobacco product, if the package is furnished by a manufacturer of a tobacco product with the intention that a tobacco product, primary package or secondary package may be placed in it after the tobacco product, primary package or secondary package is sold at retail in Canada.

Non-application

3 These Regulations do not apply to a package of tobacco products that is intended to be distributed to a manufacturer or retailer.

Interior surfaces

4 (1) For greater certainty, a provision of these Regulations that applies to any interior surface of a primary package of cigarettes applies to each surface of the slide of a slide and shell package — including the upper slide-flap and lower slide-flap — with the exception of any surface that forms the exterior surface of the top or bottom of the package when it is closed.

Carton

(2) For greater certainty, a provision of these Regulations that applies to any interior surface of a secondary package applies to each surface of a carton that forms its flaps and that is visible only when the carton is opened.

Purpose

Plain and standardized packaging

5 (1) For the purposes of section 23 of the Act, these Regulations set out the requirements that manufacturers of tobacco products must meet in respect of the plain and standardized appearance, shape and content of tobacco product packages.

Package — information

(2) For the purposes of section 15.3 of the Act, these Regulations set out the requirements that manufacturers of tobacco products must meet in respect of the manner of displaying information on or in tobacco product packages, including the form and placement of the information.

Product standards and markings

6 For the purposes of sections 5 and 5.3 of the Act, these Regulations also establish standards that manufacturers of tobacco products must meet in respect of the plain and standardized appearance and shape of tobacco products and set out requirements that manufacturers must meet in respect of the markings that may be displayed on tobacco products.

PART 1

Tobacco Product Packaging

General Requirements

Package Contents

Primary package

7 (1) A primary package may contain only a tobacco product, a lining and a leaflet.

Secondary package

(2) A secondary package may contain only a primary package or other secondary package, as well as any overwrap covering those packages.

Standardized Physical Design Features

Package shape

8 Every primary package and secondary package must have a rectangular cuboid shape when it is closed, having six surfaces that meet at right angles and whose edges are rigid and straight and not rounded or beveled.

Brand element, image, colour or information

9 The interior surfaces and exterior surfaces of a primary package and of a secondary package must not display any brand element, image, colour or information unless it is required or authorized by or under the Act or any other Act of Parliament or any Act of the legislature of a province.

Colour

10 (1) Except as otherwise provided by these Regulations, every interior surface and exterior surface of a primary package and of a secondary package must be the colour Pantone 448C.

Exception — required information

(2) Other colours may be used on those surfaces to display a health warning or other information as required by or under the Act or any other Act of Parliament or any Act of the legislature of a province.

Exception — package made of metal

(3) An interior surface of a primary package that is made of metal may be the natural colour of the metal.

Finish

11 Except as otherwise provided by or under the Act or any other Act of Parliament or any Act of the legislature of a province, every interior surface and exterior surface of a primary package and of a secondary package must have a matte finish.

Adhesive substance

12 Any adhesive substance that is used on an interior surface or exterior surface of a primary package or of a secondary package or on any lining or overwrap must be transparent and colourless.

Texture

13 (1) Every interior surface and exterior surface of a primary package and of a secondary package, as well as any overwrap covering the package, must have a smooth texture, without any raised features, embossing, decorative ridges, bulges or other irregularities.

Exception — carton

(2) However, a carton may include a perforated strip for opening which, once torn, may leave serrations on the carton's interior surfaces and exterior surfaces.

Features

14 (1) The interior surfaces and exterior surfaces of a primary package and of a secondary package, as well as any lining, leaflet and overwrap, must not include any feature that is designed to change the appearance (such as heat-activated ink) or to change the surface area (such as a fold-out panel) of the package, lining, leaflet or overwrap.

Means of opening

(2) A primary package must be designed in such a manner that it may be opened by only one means when the package is used in the customary manner to gain access to the tobacco product.

Inner box

(3) A primary package must be designed in such a manner that it does not form an inner box that can be removed without being damaged.

Access by electronic means

15 (1) The interior surfaces and exterior surfaces of a primary package and of a secondary package, as well as any lining, leaflet and overwrap, must not include any feature that is designed to permit access by electronic means to any promotion.

Feature visible through technological means

(2) However, the surfaces, lining, leaflet and overwrap may include a feature that is designed to permit access by electronic means to other types of information if the feature becomes visible only through technological means or meets the requirements of the Act or any other Act of Parliament or any Act of the legislature of a province, or their regulations.

Calibration marks

16 Calibration marks may be displayed on any interior surface and exterior surface of a primary package or of a secondary package if those marks are not visible when the package is used in the customary manner to gain access to the tobacco product.

Bar code

17 (1) A bar code may be displayed only once each on a primary package and a secondary package.

Rectangular cuboid package

(2) In the case of a package that has a rectangular cuboid shape when it is closed, a bar code may be displayed on only the exterior surface of the top, bottom or any one of the sides of the package.

Shape and colour

(3) Every bar code must

• (a) be rectangular in shape and not contain any image or design;
• (b) be no more than 40 mm by 20 mm in size; and
• (c) have a matte finish and be printed in either black and white or in the colours Pantone 448C and white.

Scent and sound

18 The interior surfaces and exterior surfaces of a primary package and of a secondary package, as well as any lining, leaflet and overwrap, must not be capable of emitting a scent or sound.

Cut-out window

19 The interior surfaces and exterior surfaces of a primary package and of a secondary package must not include any cut-out window that permits the contents of the package to be visible without opening it.

Sticker or tab

20 (1) The interior surfaces and exterior surfaces of a primary package and of a secondary package must not include any sticker or tab, such as for resealing the package after opening.

Exception
(2) However, an interior surface or exterior surface of a primary package that is a pouch for cigarette tobacco, pipe tobacco or leaf tobacco may include a rectangular tab for resealing the package after opening if the tab does not conceal or obscure any information required by or under the Act or any other Act of Parliament or any Act of the legislature of a province.

Requirements
(3) Sections 9 to 12, subsections 13(1) and 14(1) and sections 15 and 18 apply to the tab referred to in subsection (2).

Lining
21 (1) Any lining that is placed in a primary package must

• (a) be made of one sheet of silver-coloured foil that is attached to white backing paper and to an interior surface of the package in such a manner that it cannot be removed without damaging the lining;
• (b) have a matte finish and no variations in colour tone;
• (c) not display any brand element, image, colour or information; and
• (d) have a smooth texture, without any raised features, embossing, decorative ridges, bulges or other irregularities aside from embossed dots or squares that are required for the automated manufacturing process and that are uniform in size and equidistant.

Exception — device
(2) However, any lining that is placed in a primary package that contains a device that is necessary for the use of a tobacco product, or a part that may be used with such a device, must

• (a) be made of plastic that is the colour Pantone 448C;
• (b) meet the requirements of paragraphs (1)(b) and (c); and
• (c) have a smooth texture, without any raised features, embossing, decorative ridges, bulges or other irregularities.

Overwrap
22 Any overwrap that covers a primary package or secondary package must meet the following requirements:

• (a) it must mould to the primary package or secondary package that it covers;
• (b) it must be transparent and colourless;
• (c) it must not include any tear tape other than as authorized by section 24;
• (d) it must not display any brand element; and
• (e) it must not display any image or information other than those authorized by section 23.

Overwrap — more than one primary package
23 If an overwrap covers more than one primary package, the following information and images may be displayed on it:

• (a) calibration marks that meet the requirements of section 16;
• (b) a bar code, if it is displayed only once on the overwrap and meets the requirements of subsection 17(3) and is printed directly on the overwrap or on a label that meets the requirements of section 11 and subsections 13(1) and 14(1);
• (c) a solid black rectangle to cover the bar code on each primary package;
• (d) the declaration of net quantity and the common name of the tobacco product, printed in white on a black rectangle, if they are oriented parallel to and in the same direction as any information that is displayed on the surface that the overwrap covers; and
• (e) a health warning and any other information or image that is required or authorized by or under the Act or any other Act of Parliament or any Act of the legislature of a province.

Tear tape
24 An overwrap that covers a primary package or secondary package may include a single tear tape that

• (a) is made of plastic, is transparent and is either colourless or the colour required by or under an Act of the legislature of a province;
• (b) forms a straight line having a uniform width of no more than 3.5 mm around the package;
• (c) is parallel to any straight edge of the package and perpendicular to the opening of the package;
• (d) is designed in such a manner that the entire overwrap is removed once the tear tape is torn; and
• (e) displays only information or images that are required or authorized by or under the Act or any other Act of Parliament or any Act of the legislature of a province.

Text Size, Style and Placement

Information

Text style and colour
25 (1) Except as otherwise provided by or under the Act or any other Act of Parliament or any Act of the legislature of a province, any text that is displayed on a primary package or secondary package, or on any overwrap covering the package, must have a matte finish and be printed in a regular weight and width Lucida Sans Serif font style, without italics, and in the colour Pantone Cool Gray 2C.

Spacing
(2) The space between every word that forms part of an expression must be no more than 4 mm.

Brand Names

Colour and filter technology
26 A brand name that is not prohibited by the Act may be displayed in accordance with these Regulations on a primary package and a secondary package, if the brand name does not evoke a colour or include the name of a filter technology.

Placement
27 (1) In the case of a primary package or secondary package that has a rectangular cuboid shape when it is closed, the brand name may be displayed only once on each exterior surface of the front, back, top, bottom and any of the sides of the package.

Cylindrical package
(2) Subject to subsection (3), the brand name may be displayed only once on each of the following surfaces of a cylindrical primary package or secondary package:

• (a) the exterior surface of the top and bottom of the package; and
• (b) the exterior curved surface of the front and back of the package.

Cigar tube
(3) The brand name may be displayed only once on a cigar tube.

Other package
(4) In the case of any other package, the brand name may be displayed only once on each exterior surface of the package.

Text size and style
28 (1) Any brand name that is displayed on a primary package or secondary package must

• (a) be printed in alphabetic characters of 14 points; and
• (b) form only one line of text.

Capital letter
(2) Only the first letter of each word in the brand name may be a capital letter.

Manner of display
29 (1) If a brand name is displayed on a primary package or secondary package on an exterior surface on which a health warning is also displayed, the brand name must be oriented parallel to and in the same direction as the health warning and must be centred in the remaining area of the surface.

Other cases
(2) If a brand name is displayed on a primary package or secondary package on an exterior surface on which a health warning is not displayed, the brand name must be

• (a) oriented parallel to and in the same direction as any other information that is displayed on the surface, centred in the remaining area of the surface; or
• (b) centred on the surface, if no other information is displayed on that surface.

Exception — cigar tube
(3) Subsections (1) and (2) do not apply to a cigar tube.

Manufacturer Information and Declaration of Net Quantity

Manufacturer identity and principal place of business
30 (1) The manufacturer's identity and principal place of business may be displayed only once on every primary package and secondary package and must be printed in characters of 10 points.

Package surface
(2) In the case of a primary package or secondary package that has a rectangular cuboid shape when it is closed, the manufacturer's identity and principal place of business may be displayed on the exterior surface of only one of the sides of the package.

Manner of display
31 In the case of any package, other than a cylindrical package, the manufacturer's identity and principal place of business must be oriented parallel to and in the same direction as any other information that is displayed on the same exterior surface of the package.

Net quantity and common name
32 (1) The declaration of net quantity and the common name of a tobacco product may be displayed on every primary package and secondary package.

Principal display panel
(2) The declaration of net quantity and the common name of a tobacco product may be displayed only once on each principal display panel, as defined in subsection 2(2) of the Consumer Packaging and Labelling Regulations.

Manner of display
33 (1) If the declaration of net quantity and the common name of a tobacco product are displayed on a primary package or secondary package on an exterior surface on which a health warning is also displayed, the declaration and the common name must be oriented parallel to and in the same direction as the health warning.

Other cases
(2) If the declaration of net quantity and the common name of the tobacco product are displayed on a primary package or secondary package on an exterior surface on which a health warning is not displayed, the declaration and the common name must be oriented parallel to and in the same direction as any other information that is displayed on the surface.

Placement
34 In the case of a package that has a rectangular cuboid shape when it is closed, the declaration of net quantity and the common name of the tobacco product must be displayed in such a manner that the last letter of that information is 5 mm from the bottom and right edges of the package.

Text size and style — net quantity and common name
35 (1) The declaration of net quantity and the common name of the tobacco product must be printed in letters whose height is no more than the minimum height of the numerical quantity in the declaration of net quantity set out in subsection 14(2) of the Consumer Packaging and Labelling Regulations.

Definition of height
(2) For the purposes of this section, height has the meaning assigned by subsection 14(1) of those Regulations.

Leaflets

Standardized appearance
36 (1) Except as otherwise provided by or under the Act or any other Act of Parliament, a leaflet must have a matte finish and the text that is displayed on it must be printed in a regular weight and width Lucida Sans Serif font style, without italics, and in either black on a white background or in the colour Pantone Cool Gray 2C on a background that is the colour Pantone 448C.

Brand name
(2) A brand name that is not prohibited by the Act may be displayed on a leaflet in accordance with this section, if the brand name does not evoke a colour or include the name of a filter technology.

Image
(3) A leaflet must not display any image other than one that warns consumers of the health hazards arising from the use of the tobacco product or that provides instructions for its use.

Risk statement
(4) Any statement respecting a risk arising from the use of the tobacco product may be printed in red.

Specific Requirements — Cigarette Packages

Type of Authorized Package and Standardized Physical Design Features

Authorized package
37 A primary package that contains cigarettes must be a slide and shell package with a vertical opening.

Slide and shell package — requirements
38 A slide and shell package must meet the following requirements:

• (a) the only way to open it is by using the slide; and
• (b) the edges of its upper slide-flap and lower slide-flap must be rigid and straight, without any rounding or beveling, except at the corners that are concealed by the shell when the package is closed.

Dimensions
39 (1) A slide and shell package that contains regular size cigarettes must have the following dimensions when it is closed:

• (a) its height must be no less than 73 mm and no more than 77 mm;
• (b) its width must be no less than 82 mm and no more than 106 mm; and
• (c) its depth must be no less than 16 mm and no more than 18 mm.

King size cigarettes
(2) A slide and shell package that contains king size cigarettes must have the following dimensions when it is closed:

• (a) its height must be no less than 85 mm and no more than 89 mm;
• (b) its width must be no less than 82 mm and no more than 106 mm; and
• (c) its depth must be no less than 16 mm and no more than 18 mm.

Material
40 (1) Every primary package and secondary package that contains cigarettes must be made of rigid cardboard.

Carton
(2) However, a carton may be made of paper.

Overwrap
(3) An overwrap that meets the requirements of sections 22 to 24 may be used, instead of a carton, to cover two or more primary packages of cigarettes.

Text Placement

Declaration of size of cigarettes
41 The declaration of the size of cigarettes as regular size or king size may be displayed on the exterior surface of the front and back of a primary package and of a secondary package and it must be printed in alphabetic characters of 10 points, oriented parallel to and in the same direction as the health warning and positioned in such a manner that the first letter of the declaration is 5 mm from the bottom and left edges of the package.

Specific Requirements — Little Cigar Packages

Material
42 (1) Every primary package that contains little cigars must be made of rigid cardboard or of metal.

Secondary package
(2) Every secondary package must be made of rigid cardboard.

Exception — carton
(3) However, a carton may be made of paper.

Overwrap
(4) An overwrap that meets the requirements of sections 22 to 24 may be used, instead of a carton, to cover two or more primary packages of little cigars.

Metal package
43 Despite section 8, a primary package that contains little cigars and that is made of metal — and any carton that contains such a primary package — may have rounded or beveled corners.

Specific Requirements — Cigar Packages

Overwrap
44 Any overwrap that covers a cigar must mould to the cigar and meet the requirements of paragraphs 22(b) to (e).

Interpretation — primary package
45 Despite these Regulations, a package is considered to be a primary package if it is made of wood, it is intended for retail sale in Canada and cigars that are covered by overwrap are directly placed in it.

Package shape
46 Despite section 8, a primary package that contains a cigar may be a tube that is rigid and cylindrical and that has at least one end tapered or rounded.

Material
47 (1) Every secondary package that contains cigars must be made of rigid cardboard.

Carton
(2) However, a carton may be made of paper.

Overwrap
(3) An overwrap that meets the requirements of sections 22 to 24 may be used, instead of a carton, to cover two or more primary packages of cigars.

Metal or wooden package
48 Despite section 8, a primary package that contains cigars and that is made of metal or of wood — and any carton that contains such a primary package — may have rounded or beveled corners.

Specific Requirements — Other Tobacco Product Packages

Package shape
49 Despite section 8, a primary package need not have a rectangular cuboid shape when it is closed if it contains any tobacco product other than a cigarette, a little cigar, a cigar, a device that is necessary for the use of a tobacco product or a part that may be used with such a device, or a tobacco product that is made in whole or in part of tobacco and intended for use with a device.

Specific Requirements — Packages that Do Not Contain Tobacco Products

Plain and standardized appearance
50 (1) If a manufacturer of a tobacco product furnishes a package so that a tobacco product may be directly placed in it after the product's retail sale in Canada, the package must meet the requirements of these Regulations that apply to a primary package that contains the tobacco product, other than the requirements of subsection 14(3) and sections 21 and 30 to 35.

Bag
(2) Despite subsection (1), if a manufacturer of a tobacco product furnishes a bag — other than a pouch — with the intention that a tobacco product, primary package or secondary package may be placed in it after the tobacco product, primary package or secondary package is sold at retail in Canada, the package must meet the requirements of

• (a) section 9;
• (b) subsections 10(1) and (2);
• (c) sections 11 and 12;
• (d) subsection 13(1);
• (e) subsection 14(1);
• (f) sections 15 and 16;
• (g) subsections 17(1) and (3);
• (h) sections 18 and 19;
• (i) subsection 20(1);
• (j) sections 25 and 26;
• (k) subsection 27(4);
• (l) section 28; and
• (m) subsection 29(2).

PART 2

Appearance and Dimensions of Tobacco Products

General Requirements

Appearance
51 Subject to section 52, every tobacco product that is made of tobacco that is rolled in paper or in a wrapper composed of reconstituted tobacco must have a smooth texture, without any raised features, embossing, decorative ridges, bulges or other irregularities.

Filter
52 A filter may have holes or recesses that are not visible.

Alphanumeric code
53 (1) A tobacco product may display an alphanumeric code if the code

• (a) has a matte finish and is printed in a regular weight and width Lucida Sans Serif font style, without italics, and in black or in the colour Pantone Cool Gray 2C;
• (b) is printed only once on the tobacco product, in characters of no more than 8 points;
• (c) is composed of no more than eight numeric characters and either the abbreviation "CA" that represents Canada or one of the following abbreviations that represents the province or territory where the tobacco product is sold:
  • (i) in the case of Ontario, "ON",
  • (ii) in the case of Quebec, "QC",
  • (iii) in the case of Nova Scotia, "NS",
  • (iv) in the case of New Brunswick, "NB",
  • (v) in the case of Manitoba, "MB",
  • (vi) in the case of British Columbia, "BC",
  • (vii) in the case of Prince Edward Island, "PE",
  • (viii) in the case of Saskatchewan, "SK",
  • (ix) in the case of Alberta, "AB",
  • (x) in the case of Newfoundland and Labrador, "NL",
  • (xi) in the case of Yukon, "YT",
  • (xii) in the case of the Northwest Territories, "NT", and
  • (xiii) in the case of Nunavut, "NU"; and
• (d) in the case of cigarettes, of little cigars, of cigars and of tobacco products that are made in whole or in part of tobacco, wrapped in paper and intended for use with a device, is displayed parallel to and no more than 38 mm from the end of the product that is not designed to be lit or heated.

Exception — cigars
(2) Despite paragraph (1)(b), instead of being printed on a cigar, the alphanumeric code may be printed on a cigar band that meets the requirements of subsection 59(3) if the code is displayed only once on the band and is printed in characters of no more than 10 points.

Information
(3) The alphanumeric code must not convey any information relating to characteristics of the tobacco product, or its emissions, or be designed to permit access by electronic means to any such information or to any promotion.

Brand element
(4) The alphanumeric code must not evoke the tobacco product's brand elements.

Marking visible through technological means
54 A marking that becomes visible only through technological means and is not designed to permit access by electronic means to any promotion may be displayed on a tobacco product.

Specific Requirements — Cigarettes

Size of cigarettes
55 Cigarettes must have a diameter of 8.0 mm and must be

• (a) no less than 71.0 mm and no more than 73.0 mm in length, in the case of regular size cigarettes; and
• (b) no less than 83.0 mm and no more than 85.0 mm in length, in the case of king size cigarettes.

Requirements
56 A cigarette must meet the following requirements:

• (a) that part of its filter, if any, that is visible under normal conditions of use must be white;
• (b) the paper that it is made of must be white and have a matte finish; and
• (c) its tipping paper must have a matte finish and be white or imitate a cork pattern.

Specific Requirements — Little Cigars

Size of little cigars
57 Little cigars must have a diameter of no less than 7.0 mm and no more than 8.5 mm.

Requirements
58 A little cigar must meet the following requirements:

• (a) its mouthpiece or tip must have a matte finish and be white or the colour Pantone 448C;
• (b) that part of its filter, if any, that is visible under normal conditions of use, must be white; and
• (c) its tipping paper must have a matte finish and be white, the colour Pantone 448C or imitate a cork pattern.

Specific Requirements — Cigars

Information on cigar band
59 (1) The brand name, manufacturer's identity and principal place of business and the name of the country in which the cigar was manufactured may be displayed on a cigar if that information is displayed on a band that is fitted around the circumference of the cigar and meets the requirements of this section.

Requirements — information
(2) The information described in subsection (1) may be displayed only once on the band and must

• (a) have a matte finish and be printed in a regular weight and width Lucida Sans Serif font style, in characters of no more than 10 points, without italics, and in the colour Pantone Cool Gray 2C; and
• (b) be displayed horizontally along the length of the band such that the text runs around the circumference of the cigar.

Requirements — cigar band
(3) The band must be the colour Pantone 448C and have a matte finish and smooth texture, without any raised features, embossing, decorative ridges, bulges or other irregularities.

Non-compliant band
60 The band referred to in section 59 may be placed over another band that does not meet the requirements of these Regulations if it completely covers the other band and is attached to it in such a manner that it cannot be removed without damaging the other band.

Specific Requirements — Other Tobacco Products

Tobacco products used with a device
61 (1) The requirements of section 56 apply to a tobacco product that is made in whole or in part of tobacco, wrapped in paper and intended for use with a device.

Tobacco products not wrapped in paper
(2) A tobacco product that is made in whole or in part of tobacco and intended for use with a device but that is not wrapped in paper must have a matte finish and be the colour Pantone 448C.

Devices
62 (1) Except as otherwise provided by or under the Act or any other Act of Parliament or any Act of the legislature of a province, the surfaces of a device that is necessary for the use of a tobacco product and of the parts that may be used with the device need not be the natural colour of the materials that they are made of.

Access by electronic means
(2) The surfaces must not include any feature that is designed to permit access by electronic means to any promotion.

Feature
(3) However, the surfaces may include a feature that is designed to permit access by electronic means to other types of information if the feature meets the requirements of the Act or any other Act of Parliament or any Act of the legislature of a province, or their regulations.

Marking on a device
63 (1) Except as otherwise provided by or under the Act or any other Act of Parliament or any Act of the legislature of a province, a marking that is not a promotion may be displayed on a device that is necessary for the use of a tobacco product and on a part that may be used with the device.

Exception — brand name
(2) However, a brand name that is not prohibited by the Act may be displayed on a device and on a part that may be used with the device.

Filters
64 That part of a filter that is visible when the filter is used with a tobacco product under normal conditions of use must be white.

Tubes
65 The requirements of paragraphs 56(a) to (c) apply to a tube that is intended for use with a tobacco product.

Paper
66 Any paper — other than tipping paper — that is intended for use with a tobacco product must have a matte finish and be white.

Bidis
67 Any thread around the circumference of a bidi must be black.

PART 3

Consequential Amendments, Transitional Provisions and Coming into Force

Consequential Amendments

Tobacco Products Information Regulations

68 Paragraph (c) of the definition type of package in section 1 of the Tobacco Products Information Regulations ^{footnote 131} is amended by adding "and" at the end of subparagraph (ii) and by repealing subparagraph (iii).

69 Subsection 13(2) of the Regulations is repealed.

Tobacco Products Labelling Regulations (Cigarettes and Little Cigars)

70 Paragraphs (a) and (b) of the definition top edge in section 1 of the Tobacco Products Labelling Regulations (Cigarettes and Little Cigars) ^{footnote 132} are replaced by the following:

• (b) in respect of a package, the edge that is in the horizontal plane and that forms the upper limit of the package when the package is used in the customary manner to gain access to the tobacco product; and

71 Section 12 of the Regulations is replaced by the following:

Display areas
12 Health warnings must be displayed in respect of each type of package set out in column 1 of Schedule 1 on the display areas set out in column 2.

72 Subsections 13(2) to (5) of the Regulations are repealed.

73 Section 17 of the Regulations is replaced by the following:

Display areas
17 A toxic emissions statement must be displayed in respect of each type of package set out in column 1 of Schedule 2 on the display areas set out in column 2.

74 Subsections 18(5) to (7) of the Regulations are replaced by the following:

Space occupied
(5) For the purposes of subsections (2) to (4), the toxic emissions statement must completely occupy the portion of the display area.

75 Section 23 of the Regulations is replaced by the following:

Leaflet
23 Subject to section 22, a health information message must be displayed on a leaflet inserted in the package except in the case of cartons.

76 Schedules 1 and 2 of the Regulations are replaced by the Schedules 1 and 2 set out in the schedule to these Regulations.

Transitional Provisions

Definition of transitional period
77 (1) For the purposes of this section, transitional period means the period beginning on the day on which these Regulations come into force and ending on the 90th day after that day.

Tobacco product
(2) During the transitional period, a retailer may sell a package of tobacco products or a tobacco product that does not meet the requirements of these Regulations.

Package or bag
(3) During the transitional period, a retailer may furnish a package or bag referred to in section 50 that does not meet the requirements of these Regulations.

Coming into Force
180 days after publication

78 These Regulations come into force on the 180th day after the day on which they are published in the Canada Gazette, Part II.

SCHEDULE

(Section 76)

SCHEDULE 1

(Section 12 and subsection 14(3))

DISPLAY AREAS FOR HEALTH WARNINGS

Item	Column 1 Type of Package	Column 2 Display Areas
1	Slide and shell package	The two largest sides of the package
2	Slide and shell package with a lateral slide	The two largest sides of the package
3	Box that is not a carton	If the two largest sides, excluding the top and bottom of the package, have a total surface area greater than the surface area of the top, the two largest sides If the two largest sides, excluding the top and bottom of the package, have a total surface area less than or equal to the surface area of the top, the top
4	Carton	The two largest sides of the package are the two primary display areas and the next two largest remaining sides are the two secondary display areas

SCHEDULE 2

(Section 17)

DISPLAY AREAS FOR TOXIC EMISSIONS STATEMENTS

Item	Column 1 Type of Package	Column 2 Display Areas
1	Slide and shell package	A side, other than that on which a health warning is displayed, excluding the top and bottom of the package
2	Slide and shell package with a lateral slide	A side, other than that on which a health warning is displayed, excluding the top and bottom of the package
3	Box that is not a carton	If the health warning is displayed on the top of the package, one of the largest remaining sides, excluding the bottom If the health warning is displayed on the top of the package, one of the largest remaining sides, excluding the bottom
4	Carton	The remaining sides, other than the sides on which the health warnings are displayed