Blog - Tobacco Reporter

Vapes Evading U.S. Import Duties

E-cigarette companies have imported hundreds of millions of dollars of disposable products from China into the United States without paying taxes and import duties, according to an AP report.

Last week, U.S. authorities confiscated 1.4 million units of unauthorized single-use e-cigarette products at Los Angeles international airport, with an estimated retail value of more than $18 million. The products were mislabeled as toys, shoes and other items.

Records show that the makers of disposable vapes routinely mislabel their shipments as battery chargers, flashlights and other items. Critics blame ineffective regulation. “The steps toward regulating disposables have been very weak, and that has enabled this problem to get bigger and bigger,” said Eric Lindblom, a former Food and Drug Administration official.

Heaven’s Gifts, the parent company of Shenzhen iMiracle, which manufactures the popular Elf Bar and EB brands, previously described how it could help customers evade import fees and taxes, according to the AP report.

The firm’s website reportedly advertised “discreet” shipping methods, such as mislabeling the content of e-cigarette shipments and declaring a low product value.

Another strategy appears to be shipping e-cigarettes by air rather than sea. Air carriers are not required to disclose the same level of detail about their cargo as ocean vessels.

U.S. tobacco companies have complained that their vaping products cannot compete with such lower priced disposables. Altria Group and Reynolds recently filed cases in California and with the International Trade Commission, respectively, against importers of disposable vapes.

Flavored disposables began pouring into the U.S. shortly before China banned vaping flavors last year. China’s vaping manufacturing sector, which produces the lion’s share of e-cigarettes worldwide, is worth an estimated $28 billion, and the U.S. accounts for nearly 60 percent of the country’s vape exports, according to the China Electronics Chamber of Commerce.

Authorities have encouraged those exports while at the same time curtailing the country’s domestic vaping business.

December 20, 2023

Juul Files PMTA for Age-Restricted Products

Juul Labs has submitted a premarket tobacco product application (PMTA) to the U.S. Food and Drug Administration for its next-generation platform (NGP) device and menthol-flavored pods requiring user age verification.

According to a company announcement, the submission includes comprehensive science and evidence for new menthol-flavored pods at 18 mg per milliliter nicotine concentration to be used with Juul Labs’ next-generation device, for which the company submitted a PMTA to the FDA in July 2023 along with tobacco-flavored pods.

“Our next-generation ENDS [electronic nicotine-delivery system] platform, launched initially in the U.K. in 2021 as ‘Juul2,’ delivers an improved vapor experience for adult smokers, utilizes unique Pod ID authentication to address illicit products and incorporates age verification technology capabilities,” Juul wrote on its website. “This latest submission advances our commitment to addressing two public health problems: improving adult smoker switching from combustible cigarettes and restricting underage access to vapor products.”

Each NGP-compatible menthol pod contains a secure microchip that communicates to the NGP device a requirement for age verification prior to use. The NGP device itself can further be locked by the user at any time to prevent unauthorized use. In addition to limiting the number of devices that can be purchased, Juul Labs will also limit the number of new devices that each unique age-verified user can activate and use with menthol-flavored pods to further mitigate the risks of social sourcing.

“The technological advancements that enable device-level age verification complement the programmatic efforts Juul Labs has taken since the company’s 2019 reset to address underage use of its products,” Juul wrote.

The next-generation platform can be used with a mobile or web-based app that enables age verification technology, including device-locking and real-time product information and insights for age-verified consumers.

As the apps are already available in other markets, Juul Labs said it adheres to industry-leading data-privacy protections that are compliant with the EU’s General Data Protection Regulation. For example, the NGP-compatible Juul mobile app and web app do not transmit any customer location data to Juul Labs; the location data necessary to provide app features is stored locally on the customer’s smartphone or computer.

Similarly, the company does not have access to a consumer’s device usage (i.e., puff) information.

Device usage information necessary to provide app features is stored either locally on the customer’s smartphone or computer, or in customer opt-in, end-to-end encrypted backups.

In June 2022, the FDA denied marketing authorization for the currently marketed Juul system. Juul Labs challenged the order in court, and its products remain on the U.S. market pending an administrative review.

December 20, 2023

NASCAR Museum Shut Following Lawsuits

An independently owned NASCAR museum in Winston-Salem, North Carolina, USA, has closed following lawsuits from ITG Brands after it bought the Winston name in 2015, according to The Drive.

In 2019, ITG launched a series of lawsuits against Will and Christy Spencer, who owned the Winston Cup Museum. ITG’s lawsuits, according to a court filing from the Spencers, stated that the company felt the “purchase of Winston Cigarettes from R.J. Reynolds Tobacco Co. in 2015 somehow gave it ownership of Winston Cup history” and that ITG felt the museum was “infringing on their ability to market their cigarettes to racing fans.” Because ITG owns the Winston brand, the company argued that it owned the Winston-branded artifacts the museum possessed.

The claims were dismissed twice.

In July, the museum temporarily closed with a plan to rebrand as the Ralph Seagraves Memorial Museum upon reopening. However, the couple decided it was not financially viable.

“After the past couple of years, we just can’t afford to keep it open and we’ve got to reinvent ourselves,” Christy Spencer said. “We’ve spent the past couple of years dealing with this litigation and so now the time has come to move forward. It’s just not feasible for us to continue to operate the museum.

“The museum has never been a money generator. It was never designed to be a revenue generator; [it] was really a way to fuel Will’s passion for the motorsports industry and give hardcore race fans a place to come and see some unique pieces of history.”

A large part of the collection will go to Mecum Auctions in Kissimmee, Florida, in early January.

December 20, 2023

BAT May Decrease ITC Stake

BAT is considering decreasing its 29.02 percent stake in ITC, according to Money Control.

The move would not have a major impact on ITC, according to analysts.

“We don’t need to have more than 25 percent shareholding in ITC to have a strategic influence, including veto rights. Today, we have more than that,” said Tadeu Marroco, BAT CEO.

BAT currently holds ITC shares amounting to INR1.63 trillion ($19.64 billion).

December 19, 2023

Layoffs at Mastermind Tobacco

Mastermind Tobacco has terminated the contracts of approximately 1,000 employees after being placed under administration due to undisclosed debt, reports Pulse.

The company, owned by the late Wilfred Murungi’s estate, ceased cigarette production six months ago

Mastermind Tobacco, which imported over half of its raw materials from Uganda and the Democratic Republic of the Congo into Kenya, has been involved in legal battles with employees and local tax authorities.

In 2019, Mastermind and the Kenya Revenue Authority (KRA) agreed to sell the company’s prime assets to settle a KES2.9 billion ($18.83 billion) tax arrear. Earlier this year, the company lost a KES517 million lawsuit against the KRA, with the High Court denying it the opportunity to introduce new evidence.

December 19, 2023

AOI Recognized in Tanzania

Alliance One International (AOI) was recognized in the “large tobacco processing industries” category of Tanzania’s Manufacturer of the Year Awards competition, reports The Citizen.

During a ceremony on Dec. 17, AOI Managing Director Ephraim Mapoore thanked the organizers and attributed the company’s success to its adherence to best farming practices and business practices, as well as its commitment to look after its farmer base.

Mapoore noted that AOI has paid its 12,000 contract growers in Tanzania $71.9 million this season, in line with a government requirement to pay growers in U.S. dollars.

In addition, the company paid $1.81 million in fees to the agricultural marketing cooperative society, and $780,000 to cooperative tobacco unions.

Meanwhile, district authorities received $1.72 million in crop cess revenue from AOI.

Mapoore thanked the government for providing its Morogoro factory with reliable electricity. For many years, the company relied on diesel-powered generators in most of the production time.

December 19, 2023

Gilchrist to Lead PMI Global Communications

Philip Morris International has promoted Moira Gilchrist to chief communications officer, effective Jan. 1, 2024. In her new position, she will report to CEO Jacek Olczak.

Also effective Jan. 1, 2024, Marian Salzman, currently senior vice president, global communications, will assume the position of senior vice president and chief corporate citizenship officer. After more than five years spent building the global communications function, Salzman will return to the U.S. to serve as a driving force in developing PMI’s business in the U.S. market.

“Moira has been an essential part of my team for more than five years, and I am delighted that she will take over the reins of the global communication function as I shift my focus to the U.S. market,” said Salzman in a statement. “She has been instrumental in shaping the strategy of PMI’s global communications function as we evolve the business and advance our smoke-free mission. I’m excited to see all she will accomplish as she steps up to lead the function.”

“Over the past 17 years, Moira has demonstrated an outstanding ability to build focused and high-performing teams, always seeking fresh perspectives and insights to drive a culture of curiosity and continuous improvement,” said Olczak. “Coupled with her superb communication skills, these attributes will serve the company well as we pursue our ambitious goal of being a substantially smoke-free company by 2030, with the aim of more than two-thirds of our total net revenues coming from smoke-free products.”

“It is a privilege to have been selected to take the baton from Marian and lead our communications function globally,” said Gilchrist. “Marian has changed everything about how we communicate as a company, and she has had a tremendous influence on me and the extended team. We are a far stronger and more dynamic function today, and I am excited to build on her achievements to continue to move us forward.”

Since joining PMI in 2006, Gilchrist has held several positions, including leading the reduced-risk products corporate affairs team, serving as director of scientific engagement within the R&D function, and working in both product development and commercialization.

Prior to joining PMI, Gilchrist worked in the pharmaceutical sector for more than a decade. She was a principal consultant within PwC’s and IBM’s pharmaceutical industry consulting groups and held positions within both industry and nonprofit organizations as a developer of drug formulations. Gilchrist holds a degree in pharmacy and a doctorate in pharmaceutical sciences, both from the University of Strathclyde in Glasgow, Scotland.

December 19, 2023

Universal Releases Sustainability Report

Universal Corp. released its 2023 Sustainability Report.

“Universal is proud of the efforts taken in the last year to promote the sustainability of our operations and contribute to global sustainability goals,” said George C. Freeman III, Universal’s chairman, president and CEO, in a statement.

“We are taking important steps to advance our sustainability agenda as we continue to monitor and address the environmental and social impacts of our business. We are excited to share details of our work in this year’s sustainability report.”

Universal’s 2023 Sustainability Report focuses on the company’s primary sustainability topics as well as its environmental, social and supply chain goals. This report has been prepared with reference to GRI Standards and SASB Agriculture Products Standard, and data disclosed in this report reflects activities from April 1, 2022, to March 31, 2023.

December 19, 2023

BAT Fined for Tax Avoidance

A Netherlands court ordered BAT to pay a fine of €107 million ($117 million), reports Reuters. The court said BAT under-declared profit by €1.8 billion during the period of 2013 to 2016 and will owe taxes from that period.

“By far the largest part of the fines were imposed for an intentionally untrue tax claim for the transfer of company activities to the United Kingdom,” the Dutch North Holland District Court said in a summary of its judgment.

BAT called the decision “disappointing” and said it was considering appeal.

“BAT complies with all applicable tax legislation across all of our operating markets,” BAT said.

In April, BAT agreed to pay $635 million to U.S. authorities. A subsidiary pled guilty to charges that it conspired to violate U.S. sanctions by selling tobacco products to North Korea and commit bank fraud in 2013–2017.

December 18, 2023

New Zealand Smoking at All-Time Low

The smoking rate among New Zealand adults has dropped to an all-time low, reports the New Zealand Herald, citing data from a new Ministry of Health survey. The poll also revealed that one in 10 Kiwi adults vape daily, with rates highest among young people and Maori.

The annual New Zealand Health Survey recorded 6.8 percent of adults as being daily smokers, down from 8.6 percent last year.

Daily smoking also declined sharply among ethnic groups, with Maori’ rates dropping from 37.7 percent to 17.1 percent and Pacific peoples’ rates dropping from 22.6 percent to 6.4 percent.

Daily vaping among New Zealanders increased from 2.6 percent in 2017-2019 to 9.7 percent this year. Young people were most likely to vape daily (25.2) percent and young Maori had the highest rates (23.5 percent) among different ethnic groups.

Letitia Harding, chief executive of the Asthma and Respiratory Foundation NZ, described the doubling of daily vaping among teenagers as a public health crisis. “What we are witnessing is an epidemic that needs immediate attention to address such alarming statistics,” she was quoted as saying.

The Coalition of Asia Pacific Tobacco Harm Reduction Advocates (CAPHRA), by contrast, credited vaping for helping drive down New Zealand’s smoking rates.

“New Zealand’s ambitious goal of becoming smoke-free by 2025 is well underway, with comprehensive tobacco control legislation, targeted interventions, and a focus on tobacco harm reduction products playing a crucial role”, said CAPHRA Executive Coordinator Nancy Loucas.

“This shift toward less harmful nicotine products is a key part of New Zealand’s world-leading approach to tobacco harm reduction”, said Loucas.

December 18, 2023