Export Act-Mr. Mackenzie King
liquor control acts. That is true at the present time of seven provinces out of the nine, and when Nova Scotia puts into final effect the law which she is contemplating, that province also will be under liquor control with respect to the sale of liquor within its territory. Prince Edward Island is a prohibition province, and as a consequence the laws there are somewhat different. Therefore to-day, where there is a desire on the part of anyone to procure liquor for consumption, he is obliged in the different provinces to do so through the agency of the liquor control offices. In Ontario, for example, the commission controlling the liquor traffic is the body which alone has the right to purchase from distilleries or breweries any liquor for sale for the purpose of consumption in the province.
Let me deal now with the matter of the sale of liquor for export. I would like to speak first of the law as it relates to export to any foreign country other than the United States. I say "other than the United States," because since the United States has become a prohibition country the situation with regard to that country is a little different from what it is with regard to the others. In the latter, where there is a desire to obtain liquor for export, application therefor is made to the national revenue officers. Inasmuch as the liquor is for export no excise duty is imposed upon it. After the application is received the goods are entered for export, but the department instead of requiring an excise payment, exacts from the parties who wish to export the liquor a bond, for double the amount of the excise. The excise duty [DOT]on liquor sold for domestic consumption is $9 a gallon. That would mean that in the case of liquor for export toforeign countries a bond to the amount of $18 a gallon would be exacted by
the department. After the bond has been secured by the department, the liquor is released on a permit issued by the department to be used in transporting it out of the country, and from the port of shipment to the foreign country to which it is destined. When a certificate of the landing of the liquor in the foreign country to which it is destined has been obtained, it is returned to the department and if on examination it is found to be satisfactory, thus affording to the department a guarantee that the liquor has actually been landed in the country to which it was shipped, the bond is then cancelled. That, I think, is the procedure generally with regard to export.
In the case of the United States for some years past, a different procedure has been
JMr. Mackenzie King.]
followed. Where it is desired to ship liquor into the United States an application to that effect is, as in the case of liquor for consumption in Canada or for export, made to the department in the first instance. The application states that the liquor is to be exported to the United States, and the place in the United States to which it is to be exported is named. In that case the department exacts, before the liquor is released, the payment of excise to an amount similar to that which is required on liquor to be sold for domestic use. In other words, the person applying to have liquor taken from a distillery or bonded warehouse for shipment into the United States has to state in his application that the liquor is to be shipped to the United States. This requirement having been met, the Department of National Revenue demands that when the goods are entered for duty the applicant shall pay $9 per gallon excise on liquor thus destined. When the excise has been paid, a permit is granted to take the goods out of the distillery or bonded warehouse, or wherever they may be, to one of a certain number of named ports in the Dominion itself. The goods are transported there under this permit, which states that they are destined for the United States. When they reach the end of steel nearest the port from which they are to be shipped, they are taken from the transportation agency by which they are brought to the wharf or dock whence they are to be shipped, and are put on board vessels known to be sailing to the United States. After they have been put on board they are inspected by a customs officer, who makes certain that the goods so put on board correspond with the goods named in the permit given by the customs officials. When he is satisfied on that point, the permit is removed and the clearance is then given to the owner or master of the ship permitting him to take those goods to the destination named in the United States.
There is this additional feature with respect to liquor being shipped into the United States; when the Department of National Revenue issues the permit to take the liquor from the distillery to one of those ports for export, the department sends to officials designated by the Ontario Liquor Control Board a copy of that permit. Thus the Ontario Liquor Control Board has full knowledge that the liquor is being shipped from a distillery in Canada to the United States, and when the shipment is made the commission is advised of the fact, as are the officers of the federal government.
There has come up in that regard a question which, I 'believe, is capable of explanation
Export Act-Mr. Mackenzie King
but which is apt to give rise to some confusion. It is perfectly clear that the Ontario Liquor Control Board must regard as liquor for purposes of export, liquor which the Department of National Revenue at Ottawa regards as liquor to be sold for consumption in Canada, because only liquor that is sold for consumption in Canada pays this excise duty. All liquor for export other than liquor that is going to the United States is exported without payment of any excise duty; the bond to double the amount of the duty is all that is required.
May I again pause to say that all I have described relates to a situation which has to do with the collection of revenue and nothing more? Distilling and brewing is a perfectly legal and legitimate business in Canada, and is so regarded. The laws of this country as they stand require that the government shall raise revenue from excise in the case of intoxicating beverages for consumption within the country, and this is the method which the department takes, through its officials, of collecting the revenue and making perfectly sure that it is collected. At every stage the Department of National Revenue, rightly and properly, safeguards the revenue of the country. The purpose of issuing the permits, of requiring the examination of shipments at the dock and elsewhere, is to see to it that the liquor is not shortcircuited and sold for domestic consumption; that it actually will be exported out of the country. The reason that the Ontario government is supplied with copies of those permits is that its officials also may see that in no particular _ is this liquor shortcircuited back into Ontario.
That would all be simple enough and subject to no question from any point of view provided the process related in no particular to imports into a country which, it is known, prohibits the importation of liquor. However, the government of Canada, its ministers, its officials, the members of this house who vote the appropriations to pay the salaries of the officials, know that liquor cannot be imported legally into the United States, that liquor can get into the United States from distributors in Canada only through the agency of rum runners, of bootleggers, of criminal gangs which make their profits out of violating the laws of that neighbouring country. Such being the case, the whole process, which is perfectly legal from the point of view of the collection of the national revenues, becomes, to say the least, a very questionable process when adopted in relation to the exportation of liquor from Canada to the United States, with the laws of that country what they are to-day. In other words,
to state the matter as I believe some so regard it, the officials of the government of Canada themselves become the necessary link between the breweries and distilleries that wish to export liquor into a country into which it cannot legally be imported and the bootleggers and rum runners and criminal gangs that make their profits out of importing the liquor into the coimtry prohibiting its importation. That is a condition which I believe the citizens of this country, once they understand it aright, will not wish to have countenanced or continued for a single day. The fact that it has continued has undoubtedly been due to the circumstance that the aspect which I am now describing has never been fully comprehended, or indeed so much as thought of by many who have given much thought in other particulars to this very vexing problem.
Again may I point out the connection which the officials of the government make between the distillery and the rum runners. The liquor to be exported is for the United States. The application is made to the excise officials to enter liquor for export to the United States. That liquor cannot get out of the distillery or the brewery until it has been entered for payment of excise. The official who has to do with that matter knows in performing his legal duty that he is entering for payment of excise, liquor which is to go" to the United States and which because it is prohibited entry to that country by the laws of the country cannot enter the United States except by violation of the laws of the United States through the agency I have described namely that of bootleggers, smugglers and rum runners.
Similarly, when permits are issued they bear on their face that the liquor is destined to the United States. The officials who make out these permits while performing their legal duty, know that the liquor cannot legally enter the United States, nevertheless they are obliged to sign the permits because as the Canadian law stands at the present time there is nothing in it which makes illegal the shipment of liquor into the United States.
When it comes to the matter of export at the docks, there again the officials in the discharge of their duty legally performed clear vessels knowing that the liquor is going to the-United States. They have the evidence before them in documentary form, they know that the liquor can enter only in violation of the laws of the United States and by the criminal agencies I have described and yet in the discharge of their duty they are not able to do other'than clear in accordance with
Export Act-Mr. Mackenzie King
the law as it is to-day, because at the present time it is not in Canada illegal to ship liquor into a country which prohibits its importation.
The purpose of this bill, Mr. Speaker, is to make that sort of thing impossible in the future. It is to prevent the countenancing by officials of anything in the way of smuggling, or of that which involves smuggling into another country. This bill declares that hereafter excise officials shall not release from any distillery or brewery liquor known to be destined to any country which prohibits its importation or to clear any vessel known to have aboard liquor destined to such a country. In other words, if an application hereafter is made for the export of liquor to the United States, so long as the laws of that country remain what' they are, the applicant will be told that parliament has passed a law which prohibits the export of liquor into a country which prohibits its importation, and that the application cannot be received or entry made for that purpose. If a permit is requested to transport liquor from a brewery or distillery to an export dock, and that permit requires a statement to the effect that
the liquor carried by it is going to the United States, it will not be legal for such a permit to be issued. Similarly, if anyone asks for the clearance to the United States of a vessel which is known to have liquor on board, that clearance will have to be refused. In other words, our excise service, our preventive service generally, will hereafter in no particular countenance the export of liquor into a country into which its importation is known to be prohibited.
I would like, if I may, for the sake of accuracy, to place on Hansard in abbreviated form the procedure with respect to the sale for consumption in Canada to a provincial liquor control board, and the sale to a purchaser for export to a foreign country other than the United States as for example the West Indies or the Argentine, and the sale to a purchaser who purchases in order to export to the United States. I have prepared with the supervision of an officer of the department a statement which in three parallel columns sets out the procedure which I have briefly outlined. If the house will permit me I would like to have it placed on Hansard just in the form in which it is:
Governmental Procedure in Case of Sale of Liquor by Distillery
The primary concern of the Federal Government in the case of sales of liquor, as in the case of sales of tobacco or any other commodity on which an excise duty is levied, is simply to collect that duty. The procedure followed vanes somewhat according to the purchaser and destination.
I. Sale for consumption in Canada, e.g., to a provincial liquor control board II. Sale to a purchaser for export to a foreign country other than the United States, for example the West Indies or Argentine III. Sale to a purchaser who purposes to export to United States1. Board makes bargain with a distiller for purchase of liquor in a bonded warehouse. 2. Purchaser or distiller notifies collector of desire to remove liquor for consumption (which becomes liable to excise duty on removal) and provides by entry for payment of duty, say $9 a gallon. 3. Collector issues a "Permit to remove spirits" (T. 204) after duty is paid. Purchaser makes bargain with a distiller for purchase of liquor in a bonded warehouse. Purchaser or distiller notifies collector of desire to remove liquor for export; he furnished a bond in double duty, S18 per gallon, (D.57), and files entry for export. Collector issues "Permit to remove spirits'' after bond is filed. Purchaser makes bargain with a distiller for purchase of liquor in a bonded warehouse. Purchaser or distiller notifies collector of desire to remove liquor for export (which becomes liable to excise duty on removal) and provides by entry for payment of duty, say $9 a gallon. ' Collector issues "Permit to remove spirits", in duplicate, after duty is paid. In say, Ontario, one copy of permit is sent to Ontario liquor commission.[DOT]r.Mr. Mackenzie King.]MARCH 14, 1930 599 Export Act-Mr. Mackenzie King Governmental Procedure in Case of Sale of Liquor by Distillery-Concluded The primary concern of the Federal Government in the case of sales of liquor, as in the case of sales of tobacco or any other commodity on which an excise duty is levied, is simply to collect that duty. Ihe procedure followed varies somewhat according to the purchaser and destination. I. Sale for consumption in Canada, e.g., to a provincial liquor control board I. Sale to a purchaser for export to ] a foreign country other than the United States, for example the West Indies or Argentine II. Sale to a purchaser who purposes to export to United States4. Dominion officers have no further concern. rhe liquor is transported, still "in bond", under control of federal officers, to the port of exit. The exporter fills out an entry form for export to a specified foreign port. One copy is sent by the collector at the warehouse point to the collector at the port of exit; this is returned immediately after export is completed, with endorsement of evidence as to export. Another copy goes to the agent of the exporter, is endorsed by the master of the vessel on which the liquor is loaded, and is later endorsed by the collector or British Consul in the foreign country and returned. The bond for double duty is can* celled upon its return, provided upon examination by the federal authorities at Ottawa it is found satisfactory. The Dominion officers have now collected their excise duty, and might be supposed to have no further concern till the liquor reaches a port of exit. They do however direct the procedure to be followed in transit. See Memo 689C (issued May 15th, 1929, following conference with Sir Henry Drayton) "for the guidance of licensed distillers and brewers when shipping intoxicating liquor upon which duty has been paid for export to the United States via the St. Clair and Detroit river frontiers". The memo provides: "The original permit when issued to the distiller, or brewer, is to be attached to the bill of lading, and it is important that it accompany the goods to avoid detention and delay during transportation. . The duplicate copy is to be mailed immediately by the officer in charge of the brewery to the provincial official designated by the Chief Commissioner, Liquor Control Board of Ontario, Toronto." It also specifies certain docks at which customs officers will be stationed and from which alone liquor may be exported. The exporter at the border point fijf in export entry form B. 13, statithe quantity and kind destination. The master of the ship (or ro^r* boat) fills out a "Master's Report Outwards", giving quantity, description, consignees, etc. The customs officer takes these two statements, goes on board, checks the cargo, and issues a clearance (C.8) giving the name of the master, number of crew, name of vessel and itemized cargo. [DOT] The original permit, ("after it has served the required purpose, namely, showing that the liquor is legally in transit") is surrendered to the customs officer for cancellation and filing.
Export Act-Mr. Mackenzie King
I should also like to place on Hansard a department, and in that connection I hold in copy of the permit which is issued by the my hand permit T-204, which is the one used.
Excise Act Permit T. 204
General number Local number
Permit the removal in(')
of the undermentioned spirits, equal to(I * * 4 *) gallons of the strength
of proof being the property of(6 * * *)
of(*) and about to be transferred into the possession
the duty having been (*) ,
This permit is valid for(10) days from date and no longer, and
on or before the expiration of the said (") days it is to be delivered
into the hands of the collector or sub-collector of customs and excise for the port of (ls)
1 2 3 4 5Number and marks of barrels, casks, kegs, or puncheons Numbers and gallons in each package Strength Number of gallons of the strength of proof Name of person or corporation in whose custody the spirits will be during removalNo. Gallons No. Gallons No. Gallons No. Gallons
Permit granted at.
This day of 19.... Collector of Customs and Excise
I would draw the attention of the house to
the fact that it requires the owner to state
in full his name and occupation and place
of business, the name and occupation in full
of the person into whose possession it is to
be transferred, his place of business and the
number of days which in the opinion of the
officer granting the permit may be necessary
for the removal; the period named for the removal; the port into which the spirits are removed or in which the removal from one place to another takes place; the mode of conveyance, as via the Canadian National railway or steamer, or whatever it may be; the warehouse, its locality, and the place to
which the spirits are to be removed. In other words, I want to make clear that on the face of it the permit carries with it the mention of the country to which the goods are destined.
I have in my hand a copy of what is known as circular 689C of the Department of National Revenue, issued on May 15, 1929. It may help to illustrate what I am seeking to make apparent as to the different effect the wording of these circulars may create when it is understood that in some cases they may relate to countries to which liquor may be exported, and in other cases to countries to which liquor may not be exported. It is
Export Act-Mr. Mackenzie King
a circular signed by George H. Taylor, the Commissioner of Excise, dated May 15, 1929. It is addressed to the collectors of national revenue and others concerned, and reads:
Departmental Regulations Respecting Exportation of Duty-Paid Intoxicating Liquors
You are advised that the following regulations are issued, effective forthwith, for the guidance of licensed distillers and brewers, when shipping intoxicating liquor, upon which duty has been paid, for exportation to the United States, via the St. Clair and Detroit river frontiers.
Certain docks have been established and operated at which customs-excise officers will be stationed for the acceptance of entry and clearance of such goods for export.
In other words, the chief of the excise department, the Commissioner of Excise, in accordance with what is essential for the collection of revenue and wholly legal under the law as it stands, instructs his officials that certain rules have been laid down for the guidance of distillers and brewers to enable them to export to the United States, though it is known that the liquor cannot legally get into that country, and they are given directions which will facilitate the liquor in reaching the United States in the only way in which it can reach that country, namely through the medium of rum runners and smugglers. Section three of this circular has the following:
(3) Intoxicating liquors may not be exported from any place, dock or premises along this frontier, other than those defined in the preceding section as customs-excise officers will be stationed only at these points for this purpose.
(5) During transportation and upon arrival of the intoxicating liquor at the ports designated above, the provincial officers will exercise such supervision as deemed necessary to ensure that same is discharged in entirety at the docks named in section 2, and in accordance with the marks and numbers on the packages containing such goods, as detailed in the permit.
(6) When entry (form B-13) is presented for the exportation of the goods, the customs-excise officer stationed at the dock will check the cargo to see that it agrees with the export entry and master's report outwards, before issuing a clearance to the vessel.
These export entries are to be sworn to by the exporter, or his duly authorized agent, and when checked, as above, are to be certified by the officer clearing the goods for export, as per instructions previously issued in that regard.
(7) In order to provide for the proper identification of the packages thus shipped, and to enable the provincial officials to maintain requisite control, each case of spirits delivered for exportation from the distillery duty paid shall, in addition to the usual excise numbers shown thereon, be legibly and indelibly marked with a serial number, commencing with No. (1) in each fiscal year, these serial numbers being shown accordingly on the official permit issued under the provisions of section 173 of the Excise Act.
Then as respects beer permits:
(9) Brewers shipping for exportation to the United States are required to legibly and indelibly number each carton of bottled beer, or bag, or wooden package, with a serial number, commencing with No. (1) in each fiscal year. These serial numbers are to be shown accordingly on the beer permits.
(11) The original permit when issued to the distiller, or brewer, is to be attached to the bill of lading, and it is important that it accompany the goods to avoid detention and delay during transportation.
The duplicate copy is to be mailed immediately by the officer in charge of the brewery to the provincial official designated by the chief commissioner, liquor control board of Ontario, Toronto.
(12) After the permit has served the required purpose, viz., showing that the intoxicating liquor is legally in transit, it is to be surrendered to the collector at the port of destination for cancellation, as indicated thereon, and for file.
(15) Officers in charge of the respective breweries are authorized to issue permits on the official form and to sign same for the collector, care being exercised to ensure that they accurately correspond with the requisition.
(16) While the foregoing regulations have special reference to exportation of duty-paid liquor, via the ports mentioned, to the United States, they shall, so far as applicable, be observed as respects all exportations of duty-paid liquor via the frontier ports in the province of Ontario.
May I point out that the designation of certain docks as the only places from which liquor can be shipped into the United States was in accordance with the desire of the national revenue department to ensure more completely the collection of revenue, and also to avoid the short circuiting of these shipments. Incidentally, it was believed that this procedure might also help the United States officials to watch for liquor that was being shipped into their country if the docks from which it could be shipped in accordance with the regulations of the Department of National Revenue were definitely known and restricted in number.
Then I should like to draw attention also to a memorandum, No. 222, of the Department of National Revenue, dated Ottawa, 15th of May, 1929, and which refers to the particular circular which I have just read. It is signed by Mr. R. W. Breadner, commissioner of customs, and is addressed to collectors of national revenue, agents of railway and steamship lines, and others concerned. The memorandum is headed:
Department of National Revenue, Canada, (Customs Division).
Export Act-Mr. Mackenzie King
The paragraphs to which I wish to draw attention are the following:
A system of permits to be issued on release of intoxicating liquors from distilleries and breweries for exportation has been adopted for the purpose of safeguarding such goods and preventing diversion during shipment to the port of exit. In this connection see circular No. 689-0 excise, bearing this date.
The export entry (form B. 13) shall in such case be made at customs at the port of exit from Canada and the customs officer supervising export and receiving the export entry shall
carefully check the goods laden on the outgoing vessel or other conveyance or vehicle to see that the goods laden correspond with the goods described in the entry.
Then, Mr. Speaker, I should also like to place on Hansard form B. 13, which is used in connection with the clearing of vessels, and to draw the attention of the house to the circumstance that the form distinctly provides that the country of final or ultimate destination must be given in filling out the form.
Form B. 13-(Amended 1928.) 1,000,000-1-29
(Place of lading)
Entry and list of articles of domestic production and foreign articles, which are not subject to export,
customs, or excise duties, delivered by.
(Address of owner or agent)
to for exportation to
(Name of railway or vessel, &c.) (Country of final or ultimate destination)
via consigned as below:
(State if shipped via United States port or direct from Canadian port)
N.B.-Goods must be described accurately as "Canadian" or "Foreign," and correct details must be given of quantities, values and ultimate destination of exports.
Address of consignee and marks on packages Number of packages Articles Describe the articles fully as, canned pork, printed cotton cloth, printing presses, apples, oats, wheat, &c. General terms such as meats, dry goods, machinery, prints, &c., will not be accepted Quantity State number of pounds, tons, gallons, yards, &c. Value at time and place of shipment
Domestic products, including imported goods re-manufactured in Canada Foreign or imported products in same condition as imported
Stamp of port of exit
(owner, shipper or consignor), hereby certify that the above is a full and true statement of the kinds, quantities, values and destination of all the articles delivered by me for exportation as aforesaid.
Officer of Customs and Excise
Regulation 7 of the instructions which appears on the back is as follows:
The country of ultimate destination to which the goods are destined for a market is to be stated in the export entry as the country to which exported, and this rule is to be strictly observed.
There is also the form of clearance and the report outwards. Taken together, it will be observed that what is aimed at by the Department of National Revenue-and I cannot make this too clear-is the collection of revenue in the surest and most effective way.
Export Act-Mr. Mackenzie King
That is the business of the Department of National Revenue. But, Mr. Speaker, when we consider the effect of these regulations in their international bearing-and that is why I am introducing this bill in my capacity as Secretary of State for External Affairs as well as Prime Minister-when we consider their effect in relation to the actions of rum runners, smugglers and bootleggers, they come to have an entirely different significance and one which is anything but satisfactory. In a word the system devised for the sake of obtaining revenue becomes a system which affords, in the person of government officials, a series of links between the distillers and breweries which wish to export to countries into which importation is prohibited and the criminal gangs that are required to get the liquor through into the country to which it is destined and into which its entry is prohibited by law. Mr. Speaker, I think I need hardly do more than explain the situation as it actually is for hon. members to see that our country cannot afford to have its position in this matter capable of interpretation in any such light either in our own eyes or in the eyes of any other country in the world. Certainly it was never intended that regulations made for the purpose of collecting revenue for one government should be made to serve the purpose of defeating the laws of another government by facilitating the operation of criminal groups of the most desperate character in their efforts to make gain by illicit traffic in liquor.
The question which naturally will present itself to the minds of all who have listened to what I have just been saying is, I am sure, this-and it is, I am equally sure, what my friend the leader of the opposition (Mr. Ben-net) will direct his attention to when he speaks: How is it, if such is the situation, that this has been permitted to go on for so long? Why was not immediate action taken to prevent the possibility of anything of this kind?