Plain Packaging in Canada Update - Also, delisted cigars

[Fezztone]

Could HSA create a nicely designed PP Jar for REs? Or any other cigar for that matter,  and meet the Canadian requirements? 

[Bijan]

8 minutes ago, Fezztone said:

Could HSA create a nicely designed PP Jar for REs? Or any other cigar for that matter,  and meet the Canadian requirements? 

If it's brown and cardboard and no pictures and no font or font size except the approved ones I don't see why not ?

Edit: I just read the rules, no restrictions on shape or materials, just the inside and outside have to be drab brown:

https://www.canada.ca/en/health-canada/services/health-concerns/tobacco/legislation/federal-regulations/products-regulations-plain-standardized-appearance/facts.html

"

There are no requirements for the shape and materials of a primary package that contains cigars. However, among the measures that apply to primary packages, there is a requirement in section 10 of the TPR (PSA) prescribing the colour of primary packages, which applies to all packages, including those that contain cigars.

• Standardized colour
  10(1) Except as otherwise provided by these Regulations, every interior and exterior surface of a primary package and of a secondary package must be drab brown."

[Bijan]

I do wonder if they could mail you or sell you the jar separately. I don't think they're going to ban jars without cigars in them.

[Shrimpchips]

3 hours ago, Bijan said:

Time will tell. It'll be weird if they ever make a plain packaged RE. But if they sell...

 

2 hours ago, LLC said:

It will certainly be the last proper package and quite possibly the last ever.

Sounds like at the very least it’s the last Canadian RE that will actually say that it’s a RE Canada.  Makes me kind of want to grab a box. ..

[NSXCIGAR]

Canada is a very small market. HSA isn't going to do a thing. They could sell all cigars that go to Canada elsewhere. And my guess is that Havana House has no interest in any of this. Business as usual. Send the retailers the original boxes and let them figure it out. The regulations are for retailers, not wholesalers.

I will say I doubt Havana House will be too interested in fronting the money for a 60,000 stick ER run going forward. The Dip Nortenos may be the last ER Canada sees for the foreseeable future.

[Bijan]

6 hours ago, NSXCIGAR said:

And my guess is that Havana House has no interest in any of this. Business as usual. Send the retailers the original boxes and let them figure it out. The regulations are for retailers, not wholesalers.

From my understanding not how it's implemented in Canada. Boxes will come into Canada as plain packaging straight from Habanos S.A. Practically anything Tubos or 50-cab is deleted since as you say Canada is a small market and it's not worth doing custom tubes, etc.

 

Supply of Cuban cigars being in bad shape now in Canada because of Covid preventing cigar bigwigs from flying to Cuba to arrange details of plain packaging.

[NSXCIGAR]

5 minutes ago, Bijan said:

From my understanding not how it's implemented in Canada. Boxes will come into Canada as plain packaging straight from Habanos S.A. Practically anything Tubos or 50-cab is deleted since as you say Canada is a small market and it's not worth doing custom tubes, etc.

So nothing but plain packaging is even allowed to cross the Canadian border? 

And HSA is going to modify their factory packaging for all cigars destined for Canada? That seems like a logistical nightmare. Unfortunately, if I were HSA, I'd tell them to fly a kite. 

And if they're going to do it, you'd better believe they're going to make HH pay. Expect CC prices in Canada to go up significantly, and they're already very high.

[Bijan]

1 minute ago, NSXCIGAR said:

So nothing but plain packaging is even allowed to cross the Canadian border? 

And HSA is going to modify their factory packaging for all cigars destined for Canada? That seems like a logistical nightmare. Unfortunately, if I were HSA, I'd tell them to fly a kite. 

Unsure who of Havana House or HSA is going to foot the bill. Since the consumers will pay in the end they probably don't care. But basically Havana House as the importer can import whatever they want they can't release anything to the market without it being plain packaged though. From what I understand since November 9th all cigars have to be plain packaged going to the stores, and stores have until May of this year to get rid of old stock or I guess plain package it (old stock I believe is where they need to comply). But the laws make it clear that they apply to all packages of tobacco product "intended for retail sale in Canada".

Basically the note is as follows:

https://www.canada.ca/en/health-canada/services/health-concerns/tobacco/legislation/federal-regulations/products-regulations-plain-standardized-appearance/facts.html

13. Importation of premium cigars with branded packaging

As of November 9, 2020, all cigars need to comply with the requirements of the TPR (PSA) before they are released into the Canadian market.

The Excise Act, 2001 requires all imported tobacco products for the Canadian market be stamped prior to importation or before release under the Customs Act for entry into the duty-paid market. For questions about the excise stamp, please email the Canada Revenue Agency at [email protected]

[Bijan]

As in the case of Australia I don't think this will apply to private import via mail for non-commercial purposes since it is not intended for retail sale in Canada.

Also since unfortunately this is the way the wind is blowing, HSA telling them to fly a kite is basically the equivalent of them deciding they would like to diversify into other agricultural products.

[NSXCIGAR]

1 minute ago, Bijan said:

Unsure who of Havana House or HSA is going to foot the bill. Since the consumers will pay in the end they probably don't care. But basically Havana House as the importer can import whatever they want they can't release anything to the market without it being plain packaged though.

HSA certainly wouldn't pay. And I'm not sure why they would have HSA repackage if they are allowed to import with original packaging. I can't imagine it would be cheaper to have HSA do it. And I would think HH would have to front the money for all cigars or packaging used as opposed to doing it as they arrive at their warehouses in Canada.

For such a small and virtually insignificant market like Canada I'm shocked HSA is even entertaining this notion. They certainly would do anything for the right price, but then they're going to gouge them and it would certainly be cheaper just to repackage at the HH warehouses. 

If they can still import from Cuba with original packaging now why can't they just repackage themselves until they presumably work out the repackaging in Cuba? Are they so opposed to repackaging in Canada they are selling zero cigars in the meantime? 

How do the regulators know if the cigars are in plain packaging from HH to the retailers? Doesn't this apply only to retailers? Why can't the retailers do their own plain packaging? 

I must be missing something...

[Bijan]

That restatement of the regulations is quite vague. I said they could import it, but it is unclear whether customs will release the boxes without them having plain packaging, so my statement may have been incorrect. If that is indeed the case I think it's quite the logistics to repackage items that haven't cleared customs and can't leave the warehouse.

Edit: Again the relevant text is:

13. Importation of premium cigars with branded packaging

As of November 9, 2020, all cigars need to comply with the requirements of the TPR (PSA) before they are released into the Canadian market.

The Excise Act, 2001 requires all imported tobacco products for the Canadian market be stamped prior to importation or before release under the Customs Act for entry into the duty-paid market. For questions about the excise stamp, please email the Canada Revenue Agency at [email protected]

They use release twice. Does the first paragraph also use release in the sense of customs release, as in the second paragraph? Or do they use it in the regular sense of release as in Havana House releasing it to the market? I am beginning to think it is customs release (which would explain things), but I could see it being the other way.

[Fugu]

7 hours ago, Bijan said:

That restatement of the regulations is quite vague. I said they could import it, but it is unclear whether customs will release the boxes without them having plain packaging, so my statement may have been incorrect. If that is indeed the case I think it's quite the logistics to repackage items that haven't cleared customs and can't leave the warehouse.

Importer’s warehouses are usually bonded warehouses. As long as stock is kept in bond it technically isn‘t imported. So they have all the time they need, to do what’s needed.

[Puros Y Vino]

AFIAK, Havana House has to apply the plain packaging to anything heading to B&M's.  Duty Free sellers can continue to sell as is.

[Bijan]

7 hours ago, Fugu said:

Importer’s warehouses are usually bonded warehouses. As long as stock is kept in bond it technically isn‘t imported. So they have all the time they need, to do what’s needed.

Right, but can the boxes leave the warehouse before being released/imported or do they have to do the repackaging there in the warehouse? If they can't leave I can see them preferring to do it at the factory in Cuba rather than in the customs warehouse in Canada.

 

6 hours ago, bundwallah said:

AFIAK, Havana House has to apply the plain packaging to anything heading to B&M's.  Duty Free sellers can continue to sell as is.

Again the website is kind of vague, but section 3 makes it sound like it does apply to duty free:

https://www.canada.ca/en/health-canada/services/health-concerns/tobacco/legislation/federal-regulations/products-regulations-plain-standardized-appearance/facts.html

Also makes it sound like they can't give (but maybe sell?) packaging for cigars separately from the cigars themselves:

3. Application of Tobacco Products Regulations (Plain and Standardized Appearance) to tobacco products “intended for retail sale in Canada” including, duty-free shops, trans-border stores, ships’ stores, and to Canadian tobacco products sold in duty-free stores

The TPR (PSA) apply to every package that contains a tobacco product and to every tobacco product that is intended for retail sale in Canada.

Please refer to subsections 2(1) and (2) of the TPR (PSA), copied here, for information on packaging requirements:

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

(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 so 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.

Further, please note that the term “retailer” is defined in section 2 of the TVPA, as follows:

retailer means a person who is engaged in a business that includes the sale of tobacco products or vaping products to consumers.

Edit: Also to note that for a while now duty free stores have had to have tobacco products with duty paid stickers. Technically when bringing tobacco into Canada using your personal duty free allowance you have to pay a special duty unless the products say Duty Paid Canada (I don't think this is generally enforced), also again technically you can't bring in more than 5 units of tobacco even if paying duties if they don't have the sicker, which would be 250 cigars:

https://travel.gc.ca/returning/customs/what-you-can-bring-home-to-canada#tobacco

[Fugu]

2 hours ago, Bijan said:

Right, but can the boxes leave the warehouse before being released/imported or do they have to do the repackaging there in the warehouse? If they can't leave I can see them preferring to do it at the factory in Cuba rather than in the customs warehouse in Canada.

I think you misunderstood. The bonded warehouse is a warehouse operated by the importer (not by customs; but customs officials may request entry any time for inspection). There, they have all the time in this world to „work“ on the packaging while still within their own premises (in this case Havana House’s). Until goods are being cleared and released to the retail market (which is also why I don’t get the actual reason for those Canadian delistings, perhaps they’ll want to carefully check demand first under the new regulations).

E.g. just look what Rob’s doing. Would he need to “import” the cigars he is selling first, then his biz model wouldn’t work out.... He’s shipping international from bond.

This is how it is generally being done also in other parts of the world. Be it labelling with excise and tax stamps, attachment of health warning stickers, be it extended storage keeping for local “vintage” programs, redistribution to duty-free, or, lastly, plain packaging. All done under bond.

In theory, and from my understanding, Havana House could always toss the shiny box of a BHK and pitch the ten cigars in a beautiful Pantone 448c mud-green plastic bag instead ... whether it would still sell at original pricing that’s another story.

[Bijan]

3 minutes ago, Fugu said:

E.g. just consider what Rob’s doing. Would he need to “import” the cigars he is selling first, then his biz model wouldn’t work out.... He’s shipping from bond.

This is generally not a viable business model in Canada for that very reason (that the only way to get cigars is to get the ones Havana house imports).

 

6 minutes ago, Fugu said:

I think you misunderstood. The bonded warehouse is a warehouse operated by the importer (not by customs; but customs officials may request entry any time for inspection).

Makes sense. Still means no one except Havana house can do the work as I believe they are the sole importer. (The retail stores can't do the plain packaging).

[Fugu]

13 minutes ago, Bijan said:

This is generally not a viable business model in Canada for that very reason (that the only way to get cigars is to get the ones Havana house imports).

Basically the same applies. For goods he is exporting he isn‘t subject to domestic market (i.e. AUS) legislation. For cigars he sells domestic, he is ..... well, just have a look at the pricing differences beteen USD and AUD... ???

13 minutes ago, Bijan said:

Still means no one except Havana house can do the work as I believe they are the sole importer. (The retail stores can't do the plain packaging).

Yes, you should think so.

[Bijan]

5 minutes ago, Fugu said:

Basically the same applies. For goods he is exporting he isn‘t subject to domestic market (i.e. AUS) legislation. For cigars he sells domestic, he is ..... well, just have a look at the pricing differences beteen USD and AUD... ???

Yes of course. What I am saying is that in Canada there is no way to do what Rob is doing with respect to export abroad. There is no way to export cigars before Canadian duties have been paid or to recover the duties afterwards. It is possible to export cigars without provincial taxes I believe (about 2x vs 3x real prices for Canadian duties vs Canadian duties + Provincial taxes).

[havanaclub]

HSA certainly wouldn't pay. And I'm not sure why they would have HSA repackage if they are allowed to import with original packaging. I can't imagine it would be cheaper to have HSA do it. And I would think HH would have to front the money for all cigars or packaging used as opposed to doing it as they arrive at their warehouses in Canada.
For such a small and virtually insignificant market like Canada I'm shocked HSA is even entertaining this notion. They certainly would do anything for the right price, but then they're going to gouge them and it would certainly be cheaper just to repackage at the HH warehouses. 
If they can still import from Cuba with original packaging now why can't they just repackage themselves until they presumably work out the repackaging in Cuba? Are they so opposed to repackaging in Canada they are selling zero cigars in the meantime? 
How do the regulators know if the cigars are in plain packaging from HH to the retailers? Doesn't this apply only to retailers? Why can't the retailers do their own plain packaging? 
I must be missing something...

Do you know the number of sales across every single country to say that “Canada is a small and virtually insignificant market”?

What I do know is Canada and Cuba have a very good relationship. I also know that Cubans love Canadians


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[Puros Y Vino]

1 hour ago, havanaclub said:

Do you know the number of sales across every single country to say that “Canada is a small and virtually insignificant market”?

What I do know is Canada and Cuba have a very good relationship. I also know that Cubans love Canadians
 

This is true. What's not to love?  Rob has mentioned that Canada is a very small market for HSA and since we're actually under PCC's umbrella he'd probably have access to some numbers.  A friend of mine worked for the LDCH here also mentioned while "small" it is quite loyal but fragmented. There are many who buy from B&M vs online.  Our ever oppressive tax regime makes it more difficult for people to enjoy their purchases.  He also confirmed for me that Havana House does the plain packaging in Havana.  HSA has or wants no part of that task.

[Fugu]

4 hours ago, Bijan said:

Yes of course. What I am saying is that in Canada there is no way to do what Rob is doing with respect to export abroad. There is no way to export cigars before Canadian duties have been paid or to recover the duties afterwards.

The example was just meant to illustrate that incoming cigars (or other goods for that matter) which - physically - crossed a border, do not immediately and automatically bear an ‘imported’ status. As long as held in a free zone (bonded storage warehouse, freeport, free-trade zone etc.) they are technically not yet imported and can reside there duty-unpaid for extended periods of time. So the repackaging issue should not pose a serious technical problem.

[NSXCIGAR]

4 hours ago, havanaclub said:

Do you know the number of sales across every single country to say that “Canada is a small and virtually insignificant market”?

Difficult to find exact cigar import data, but the population of Canada is 37 million. The worldwide market for CCs is about 2.5 billion people. Prices in Canada are extremely high. Smoking restrictions are common. B & Ms have been declining for years. Not a big cigar culture--at least not anymore. You've got high prices, significant obstacles to smoking and only 2% of the people in the global market. That means a very small market.

I'm still looking to find some exact figures.

[Bijan]

Population of Spain is 47 million and I believe they are the number 1 Cuban cigar market. China is 1393 million number 2. France  67 million number 3. India 1353 million likely not in the top ten definitely not in the top 5 since I believe Germany and Cuba are the next 2 highest.

At least I believe these were the rankings with regard to Cuban cigars until recently.

Anyways only China is in the top ten countries by population.

Germany 19th, France 22nd, Spain 30th, Canada 39th.

Your other points stand most likely though.

[Fugu]

56 minutes ago, NSXCIGAR said:

Difficult to find exact cigar import data, but the population of Canada is 37 million. The worldwide market for CCs is about 2.5 billion people.

Well, Spain has about 45 m population and has for very long, and just until very recently been the No. 1 CC market. So population alone isn’t telling much. Canada certainly isn‘t a big market, but is or has long been one of the many solid and dependable markets (coming in with others behind the big 5-6 markets in the 90s). I think HSA wouldn’t let that go carelessly.

Also, if I am not completely mistaken (someone may correct me), HSA even holds a share in Havana House Cigars and Tobacco Merchants Ltd.

So it wouldn’t be too surprising if they keep closely cooperating. Even in this times of hardship for the Canadian cigar market.

[Bijan]

Yeah looking at countries by population Canada could likely still be in the top ten Cuban cigar markets or close to it.