Illicit Trade - Tobacco Reporter

Price Hikes Fuel Smuggling

Recent tobacco price hikes in the Netherlands have prompted smokers to source their tobacco abroad, reports Turkiye Today.

On April 1, the Dutch government increased a special consumption tax, causing the price of a 20-stick pack of cigarettes to rise by €1 ($1.11) to more than €11. By comparison, a similar pack sells for €8.93 in Germany and €6.50 in Belgium. In Luxembourg, which is among the cheapest countries for smokers in western Europe, a pack of 20 cigarettes sells for €5.07.

Many Dutch smokers have also started sourcing their cigarettes in Turkiye, where tobacco products are frequently offered for less than half of the price in the Netherlands.

The Netherlands permits travelers to import a maximum of 800 cigarettes from EU countries. For cigarettes obtained outside of non-EU countries such as Turkiye, the duty-free limit is 200 cigarettes.

Earlier this month, Dutch lawmakers expressed concern about dwindling tax receipts as legal tobacco consumption plummets in the wake of the higher tobacco duties.

September 13, 2024

Brand Protection Market to Double

The global authentication and brand protection market will reach $6.68 billion by 2030 from $3.34 billion in 2022, reflecting a compound annual growth rate (CAGR) of 9 percent, according to a new report from The Insight Partners.

The anticipated growth is driven by the emergence of new counterfeit and product-forging mechanisms, which has increased demand for stronger brand security measures.

In addition, the rise of omnichannel retailing systems benefits the authentication and brand protection market. These retailing systems feature efficient product allocation, better inventory management and real-time inventory visibility.

North America dominated the authentication and brand protection market in 2022 and is anticipated to have significant growth in the forecasted period. The report’s authors expect the Asia-Pacific market to grow at the fastest CAGR during the projected period.

The authentication and brand protection market is segmented into overt, covert, forensics and digital. In 2022, the covert segment held a larger share of the global authentication and brand protection market. Covert authentication and brand protection is a safety marker that is invisible to the naked eye, often printed on primary and secondary packaging with security inks. Additional forensic safety layers are also embedded in the materials and can be confirmed by more extensive lab analysis. This extra security layer proves to be very difficult for the counterfeiter but is easily verified by field inspectors.

Based on technology, the market is segmented into security printing and tamper-proof labels, security inks and coatings, OVDs and holograms, unique codes, bar codes, RFID, authentication ICs, and others. The bar codes segment held the largest share in the authentication and brand protection market in 2022. In addition, the authentication ICs segment is expected to register the highest CAGR during 2022–2030. Authentication ICs are typically mounted on a printed circuit board. They don’t have any contactless capabilities yet, but they are developing. Inclusion of contactless will add to the growth potential of this market as it will allow the use of authentication ICs in more (nonelectronic) applications and products and form factors such as tags and stickers.

September 12, 2024

Illicit Market Remains a Concern: KPMG

European smokers bought more than 35 billion illicit cigarettes in 2023, accounting for 8.3 percent of total EU cigarette consumption, according to a KPMG study commissioned by Philip Morris Products.

Counterfeit cigarettes remain one of the main sources of illicit tobacco consumption in the region, with 12.7 billion (36 percent) cigarettes consumed, as criminal networks increasingly target higher-taxed and higher-priced markets. Overall, governments in the EU lost an estimated €11.6 billion (12.82 billion) in tax revenue, up from €11.3 billion in 2022. France is still leading the ranking as the country with the largest illicit consumption in all of Europe, with 16.8 billion illicit cigarettes and an estimated €7.3 billion in tax revenues lost.

“We are witnessing an evolution of organized crime groups in Europe, as they are increasingly locating production facilities nearer Western European countries,” said PMI Senior Vice President of External Affairs Christos Harpantidis in a statement.

“We consider this phenomenon to be a direct consequence of failed policy approaches that have not done enough to curb illicit trade and reduce smoking prevalence, and it is putting consumers, governments, legitimate businesses, and society alike at risk.”

We consider this phenomenon to be a direct consequence of failed policy approaches that have not done enough to curb illicit trade and reduce smoking prevalence, and it is putting consumers, governments, legitimate businesses, and society alike at risk.

Christos Harpantidis, senior vice president, external affairs, PMI

Interviews with law enforcement agencies included in the KPMG report shed light onto transnational organized crime’s professionalization of their role in the supply chain of illicit cigarettes. According to information from law enforcement agencies, publicly available media articles, and PMI estimates, criminals have expanded the setup of illegal cigarette factories; in 2023 alone, law enforcement data shows that at least 113 clandestine cigarette manufacturing sites in 22 European countries were disrupted by regional and local authorities.

The steady increase of counterfeit cigarette consumption for the fourth consecutive year across Europe—mainly driven by the U.K. and Ukraine—is now coupled with the rise of all other illicit trade categories, including illicit whites and contraband. Combined with the continued recovery of cross-border legal volumes, after Covid-related travel restrictions ended in 2022, total non-domestic consumption across the 38 European countries in the study has also reached its highest level ever (15.5 percent), equal to more than one cigarette out of six.

Despite this scenario, KPMG revealed that in 26 European countries illicit consumption share was less than 10 percent of total consumption. Of these, 16 markets had an illicit consumption share of less than 5 percent. And in 25 of the 38 European countries included in the study, the share of illicit cigarette consumption was either stable or declining, compared to 2022.

We need to continue working together with law enforcement agencies and governments to ensure that illicit trade does not become an even larger problem across the EU.

Massimo Andolina, president, Europe region, PMI

“It’s truly encouraging to see a decrease in illicit consumption in countries like Italy, Poland, Romania, and Spain. We need to continue working together with law enforcement agencies and governments to ensure that illicit trade does not become an even larger problem across the EU,” stated Massimo Andolina, president, Europe region, PMI.

For the first time since its publication in 2006, the KPMG annual research study has broadened its scope and incorporated all Balkan countries. Now, the research covers 38 countries: the 27 EU member states, as well as Albania, Bosnia and Herzegovina, Kosovo, Moldova, Montenegro, North Macedonia, Norway, Serbia, Switzerland, Ukraine, and the U.K.

The Balkan region has shown lower presence of illicit cigarettes compared to some of the Western European countries, such as France or the U.K. Ukraine, on the other hand, remains the country with the second highest volume of illicit cigarettes consumed, at 8.4 billion.

September 9, 2024

IPM Reiterates Commitment to Tackling Illicit Trade

To mark India’s 1947 independence from British rule on Aug. 15, IPM India, an affiliate of Philip Morris International, reiterated its commitment toward preventing the illicit trade in tobacco products, which the company says threatens India’s economic interest and consumers.

In a 2022 study, FICCI Cascade valued India’s illegal cigarette market at INR229.3 billion ($2.73 billion), causing the government to miss out on INR133.31 billion in revenue, up 46 percent from the 2012 figure. According to the Tobacco Institute of India, the illegal cigarette trade accounts for as much as one-fourth of the cigarette industry in India.

“Eliminating illicit trade has been a longstanding priority for us and continues to be an integral part of our efforts to drive operational excellence and build a sustainable future,” said IPM India Managing Director Navaneel Kar in a statement.

“In India, we are invested in the cause, working with law enforcement agencies to educate and raise awareness about illicit tobacco trade. Public-private partnerships based on an inclusive approach by governments, the private sector and civil society are vital to helping combat the trade.

“Interconnected systems and advanced technologies, such as digitally verified track-and-trace systems, holograms, QR codes and RFID tags, are essential for monitoring and detecting counterfeit products. As India progresses on its path to become a global economic powerhouse, it is critical to take stricter measures to eradicate illicit and build a safer tomorrow.”

August 19, 2024

‘Excessive Tax Hike Could Spur Illicit Trade’

Indonesia’s above-inflation tax hike could fuel illicit trade and depress government revenue collections, according to Apindo, a leading employers association, reports Tempo.

To discourage smoking, the government last year approved a 10 percent increase in excise taxes on cigarettes for 2023–2024.

Despite the tax hike, the number of cigarette factories has increased significantly in Indonesia. Data from the Directorate General of Customs and Excise revealed a surge from 1,214 factories in early 2022 to 1,723 factories in June 2024.

Meanwhile, Statistics Indonesia (BPS) reported a 28.62 percent smoking rate among Indonesians aged 15 and above in 2023. The largest number of smokers was reportedly in the 35–39 age group at 35.21 percent while the youth group (15–19 years) had a rate of 9.62 percent. The Health Ministry’s 2023 Indonesian Health Survey found 70 million active smokers, including 7.4 percent aged 10–18 years.

August 12, 2024

Jordan Joins Protocol to Eliminate Illicit Trade

Jordan has joined the Protocol to Eliminate Illicit Trade of Tobacco Products, reports The Jordan Times.

Health Minister Firas Hawari described the step as an important milestone for the success of the National Action Plan 2024-2026, which is part of the broader National Tobacco Control Strategy 2024-2030.

The Protocol is based on Article 15 of the Framework Convention on Tobacco Control, to which Jordan was one of the first countries to accede.

This article addresses the threats posed by illicit trade and the measures that countries must take to prevent it. The protocol aims to strengthen cooperation between countries, facilitate the exchange of information, and enforce effective measures.

August 1, 2024

PMI Urges Collaboration Against Illicit Trade

International collaboration, stringent regulation and enforcement are the cornerstones in the fight against illicit trade, according to Rodney van Dooren, head of illicit trade prevention at Philip Morris International.

Speaking at a trademark and brand protection conference, held in Delhi, July 23-24, van Dooren pointed out how prohibition has not been a viable option, while regulation and enforcement would be the solution to curb illicit trade.

“Approximately 12 percent of the global cigarettes consumed are illicit, which impacts governments across the globe to the tune of $40.5 billion in tax losses, van Dooren said.

“According to the Euromonitor report, one in four cigarettes consumed in India is illicit which translates to close to $2 billion in tax losses. There are various smuggling routes around the world for both counterfeit and contraband products, making this challenge not a domestic but a transnational issue that requires transnational solution.”

Van Dooren urged authorities to better leverage the existing free trade agreements and provisions within the World Trade Organization to raise awareness with transit and source countries.

“The next recommendation is to promote harmonization of existing gold standard regulations around ASEAN, supported by implementing rules, including the law enforcement agency that has jurisdiction and the related penalties,” he noted.

“The adoption of the regulation requires manufacturers and exporters to ensure that the goods being exported comply with the destination market regulation. Additionally, in transshipment, adopt regulation that allows for inspection of suspicious shipments and exercise jurisdiction by Customs or any appropriate law enforcement agency on IP-infringing violations. Lastly, strengthen domestic enforcement effectiveness by enhanced cooperation with the legal industry and inter-law enforcement agency cooperation.”

August 1, 2024

Altria Worried About Illicit Pouches

Altria Group is worried about growing illicit sales of modern oral products in the United States, reports Reuters. The company has shared data on illegal nicotine pouches with the U.S. Food and Drug Administration.

“This illicit market echoes the beginning of the illicit e-vapor market several years ago,” Altria CEO William Gifford told analysts during a financial update. “We believe it is critical that the FDA acts decisively to regain control of the oral nicotine pouch category to prevent another widespread illicit market from taking hold,” he added.

Altria said it had identified more than 350 unique illegal nicotine pouches on sale, with new brands launching every month.

Gifford said Altria had also observed an increase in illicit cigarettes, one survey of discarded packs in California finding that some 25 percent were non-U.S. brands, mostly originating from duty-free channels or China.

Last month, Philip Morris International said it had observed sales of its nicotine pouches intended for the Scandinavian market on sale in the United States.

Recently, British American Tobacco’s CEO expressed concern about the continued lack of enforcement against unauthorized single-use vapes in the U.S., which makes it difficult for authorized brands to compete in that market.

August 1, 2024

Tracking Legislation Advances in Philippines

The Philippines’ House ways and means committee on July 23 approved legislation to enhance the tracking of tobacco products through the supply chain, reports Business World.

Under the measure, tobacco companies will be required to implement a digital tracking system on cigarette products to help prevent illicit trade.

Tobacco duty avoidance has caused the government to “lose” around PHP220 billion in revenue over the past four years, according to Representative Jose Ma. Clemente S. Salceda, who heads the House ways and means committee.

The legislation would require manufacturers to fix stamps to cigarette packs, vapes and related products, allowing authorities to determine where and when the product was manufactured.

“We would see where [the cigarette] came from because the tracking system allows us to trace it,” Salceda was quoted as saying. “We will see who brought it here and who sold it, all because of the tracking system.”

The approved legislation also requires tobacco manufacturers and importers to register their products and equipment.

July 24, 2024

EU Seized 616 Million Illicit Cigarettes in 2023

The EU anti-fraud office’s (OLAF) and member state authorities seize 616 million illicit cigarettes, 140 tons of raw tobacco and 6 tons of water pipe tobacco in 2023, preventing the loss of over €151 million to EU and national budgets.

It its 2023 report, OLAF details its operations against fraud in multiple areas, including the tobacco trade.

Of the 616 million seized illicit cigarettes, 140.6 million comprised illicit production within the EU. And additional 110.1 million cigarettes were seized in Serbia and 34.25 million were seized in Israel.

Of the cigarettes seized at EU borders, the largest number (84.62 million) came from Turkey. Other prominent origins included the United Arab Emirates (76.18 million cigarettes), Montenegro (62.23 million) and Indonesia (52.5 million).

July 17, 2024

Category: Illicit Trade