Korea prepares for price-driven smuggling surge

South Korea’s customs office said Monday that it would crack down on tobacco smuggling ahead of a cigarette price hike that is expected to hit smokers from the start of next year, according to a story in The Korea Herald.

The government is set to raise tobacco prices by WON2,000 (US$1.78) per pack, or about 80 percent in respect of the average per-pack price.

The South Korea Customs Service (KCS) has said that it will strengthen its monitoring of shipments of duty-free cigarettes that could be routed back to the domestic market using fake documentation.

It has said that it will keep a close watch on those believed to be involved in tobacco smuggling and tourists suspected of purchasing more cigarettes than the government-imposed 10-pack ceiling for duty free.

And it said it will co-operate with police and the prosecution service to prevent the sale on the domestic market of duty-free cigarettes supplied to US soldiers stationed in Korea.

The KCS is concerned that the price hike could lead to a repeat of the surge in smuggling that occurred about a decade ago, when the most recent previous price increase came into force.

According to the agency, it intercepted cigarettes worth about WON1.7 billion being smuggled into Korea during 2004, and this figure jumped to WON11.2 billion during 2005.

Even without any price rises, the value of intercepted cigarettes has surged in recent times: to WON43.7 billion last year and to WON66.8 billion during this year to November.

There was no indication of why this surge had occurred: whether it was down to increased smuggling, better detection, increased values being applied to seized products or a combination of all three.