Category: Illicit Trade

  • Illicit E-Cigarettes Seized at Dallas Airport

    Illicit E-Cigarettes Seized at Dallas Airport

    Photo: FlyntDreamstime.com

    U.S. Customs and Border Protection (CBP)  officers at the Dallas Fort Worth International Airport working in conjunction with agents from the U.S. Food and Drug Administration (FDA) have seized 33,681 units of e-cigarettes with a manufacturer’s suggested retail price of $719,453.

    In December 2020, CBP seized 42 separate shipments arriving from China destined to various Texas counties. The shipments included individual disposable flavored e-cigarette cartridges resembling the Puff Bar brand, including Puff XXL and Puff Flow.

    As part of an ongoing joint operation with FDA, officers and agents were looking to intercept counterfeit or other violative e-cigarettes, including certain flavored e-cigarettes imported to the U.S. that did not meet the Federal Food, Drug, and Cosmetic Act requirements, as amended by the Family Smoking Prevention and Tobacco Control Act.

    “Many counterfeit, unapproved or unauthorized products are likely produced in unregulated facilities with unverified ingredients posing a serious health concern to consumers. It is especially alarming when these types of counterfeit and unauthorized products find their way into the hands of children as studies indicate,” said CBP Port Director Timothy Lemaux in a statement. “We will continue to take every opportunity to work with our partners at the FDA to intercept and seize products that threaten U.S. consumers.”

    Tobacco products including e-cigarettes imported or offered for import into the U.S. must comply with all applicable U.S. laws.

    “The FDA continues to prioritize enforcement against e-cigarette products, specifically those most appealing and accessible to youth,” said Mitch Zeller, director of the FDA’s Center for Tobacco Products. “We are very concerned about how popular these products are with youth. This seizure makes clear to tobacco product manufacturers, retailers and importers that the FDA is keeping a close watch on the marketplace and will hold accountable those companies that violate tobacco laws and regulations.”

    CBP’s trade enforcement mission places a significant emphasis on intercepting illicit products that could harm American consumers. In fiscal year 2020, CBP seized 93,590 units of e-cigarettes that did not meet U.S. federal regulations.

    In July 2020, the FDA issued a warning letter to Cool Clouds Distribution (doing business as Puff Bar), to remove their flavored disposable e-cigarettes and youth-appealing e-liquid products from the market because they do not have the required premarket authorization.

    “Protecting American consumers from illicit and especially harmful tobacco products, such as counterfeit or flavored e-cigarettes, is of utmost importance to the FDA,” said Judy McMeekin, FDA associate commissioner for regulatory affairs. “We will continue to investigate and remove from the marketplace products that pose a particular danger to the public health.”

    While the Puff Bar website appears to have recently stopped online sales and distribution in the U.S, it does not mean that the firm ceased distributing products to other retailers or selling products at brick and mortar retail stores, according to the FDA. The website’s store locators are still active, indicating that potential consumers can still search for products located for sale at retail stores.

  • Illicit Cigarettes Seized Throughout Europe

    Illicit Cigarettes Seized Throughout Europe

    Photo: Lithuania Customs

    European law enforcement authorities seized 67 million cigarettes and 2.6 tons of tobacco worth €35.82 million ($43.62 million) last month, according to Europol. They arrested 17 suspects.

    The most significant seizures of the illegally traded cigarettes were made in Lithuania (28.75 million), the U.K. (9 million), Poland (6 million), Ireland (3.5 million), Romania (2.2 million), Sweden (500,000), Latvia (740,000) and Croatia (150,000). Eighty-eight percent of the cigarettes seized were produced in Belarus.

    Supported by Europol and the European Anti-Fraud Office, the joint operation took place Nov. 2-13, 2020. Led by the customs departments of Lithuania and the U.K., the operation was facilitated by intelligence analysis of excise duty suspension abuse. The fraud scheme consisted of illegally diverting cigarettes from EU internal and external transit customs procedures to the black market without paying millions in taxes.

  • European Authorities Seize Illegal Cigarettes

    European Authorities Seize Illegal Cigarettes

    Photo: Tobacco Reporter archive

    Law enforcement authorities seized 37 million illegal cigarettes worth €12.9 million ($15.4 million) and 1.8 tons of tobacco in a 10-day operation led by Frontex, the European Border and Coast Guard Agency with the support of Europol.

    The operation, known as JAD Arktos 2 and coordinated from Frontex’s headquarters in Warsaw, was co-led by Latvia and Finland and saw the involvement of border guards, police and customs officers from Poland, Estonia, Finland, Latvia, Lithuania and Slovakia.

    JAD Arktos 2 took place between Nov. 16-25 and targeted excise fraud, particularly tobacco smuggling, document fraud and migrant smuggling at selected border crossing points at EU’s eastern land borders.

    Since this operation focused predominantly on identifying criminal activities related to excise fraud, the Analysis Project Smoke within Europol’s European Financial and Economic Crime Center supported this operation by facilitating the cross-checking of entities against Europol’s databases.

    The operation was coordinated under the umbrella of the European Multidisciplinary Platform against Criminal Threats as part of the EU Policy Cycle, a four-year plan for the fight against serious and organized crime. It brings together police and law enforcement authorities of EU member states, European agencies and international organizations to jointly strengthen Europe’s borders and internal security.

  • Opportunities for Tax Stamps Highlighted

    Opportunities for Tax Stamps Highlighted

    Photo: Reconnaisance International

    New investment in track-and-trace systems, rising excise taxes and wider commercial applications will drive tax stamp growth in the next five years, according to a new report published by Reconnaissance International.

    The third edition of the “Tax Stamps & Traceability: A Market Analysis and Technical Update” identifies cannabis and vapor products as new markets for tax stamps to tap into at a time when the continued trade in illicit tobacco and alcohol sees revenue agencies using the devices as effective weapons in the fight against counterfeiters and criminals.

    The report also points to the fact that by 2023, tobacco products in at least 60 countries will need to have track-and-trace systems in place to comply with the World Health Organization’s (WHO) Framework Convention on Tobacco Control (FCTC) Protocol to Eliminate Illicit Trade in Tobacco Products. This could open up additional tax stamp markets and more commercial opportunity for an established product.

    Nicola Sudan

    “This is an important strategic report, offering insight, analysis and to those with a vested interest in tax stamps, the knowledge needed to progress with their own plans in this burgeoning sector,” said the report’s editor Nicola Sudan of Reconnaissance International. “Tax stamps offer a cost-effective way to secure excise revenue, while the authentication benefits provided cannot be overstated. It is why they will continue to be highly regarded and used by revenue authorities around the world well into the future.

    “So whether your country, state or jurisdiction currently uses a tax stamp scheme, or is considering investing in such a scheme, it would be beneficial to find out what a modern program can deliver and why now is the right time to introduce them or expand your current scheme. This report will aid in making the right decisions and choices.”

  • Trade Body Holds Seminar on Tax Stamps

    Trade Body Holds Seminar on Tax Stamps

    Photo: ITSA

    The International Tax Stamp Association (ITSA) will hold a seminar on Dec. 3 examining the central role tax stamps play in securing revenues as international supply chains continue to be threatened by counterfeiters and smugglers take advantage of the Covid-19 pandemic to trade in illicit tobacco.

    The trade in fake tobacco is worth between $40 billion and $50 billion annually worldwide and churns out more than 600 billion fake cigarettes, according a 2020 World Bank Report.

    Properly implemented tax stamp and traceability programs can help governments protect and recoup much-needed revenues as they battle to get their public finances back on track, says ITSA.

     “The need for tax programs has increased dramatically in the global coronavirus pandemic, which has seen government revenues plummet, deficits rise, and debt levels swell to eye-watering proportions,” said Juan Carlos Yanez, chair of ITSA.

    “Whether your country, state or jurisdiction currently uses a tax stamp scheme or is considering introducing such a scheme, it would be worth finding out what a modern initiative can deliver and why now is the right time to introduce or expand your current scheme.”

    Webinar attendees also have the chance to discuss the importance of effective production monitoring and the need for a global information sharing focal point that facilitates the exchange of important data and best practice between countries.

    More than 150 revenue agencies (national and state governments) globally use tax stamps to collect tax duties and excise payments, involving the worldwide production of some 140 billion stamps annually. As well as providing visible proof of tax payment and revenue collection, tax stamps have also taken on a key role in product authentication, anti-tampering and track and trace applications.

  • New York Top State for Tobacco Smuggling

    New York Top State for Tobacco Smuggling

    Map: Tax Foundation

    Excessive tax rates on cigarettes in some U.S. states induce substantial black and gray market movement of tobacco products into high-tax states from low-tax states or foreign sources, according to a new report by the Tax Foundation.

    New York has the highest inbound smuggling activity, with an estimated 53.2 percent of cigarettes consumed in the state deriving from smuggled sources in 2018. New York is followed by California (47.7 percent of consumption smuggled), Washington (40.1 percent), New Mexico (36 percent), and Minnesota (35.8 percent).

    New Hampshire has the highest level of outbound smuggling at 66.8 percent of consumption, likely due to its relatively low tax rates and proximity to high-tax states in the northeastern United States. Following New Hampshire is Idaho (27.4 percent outbound smuggling), Wyoming (23.1 percent), Virginia (22.8 percent), and North Dakota (20 percent).

    Rhode Island, following a cigarette tax increase from $3.75 to $4.25 in the Summer of 2017, has seen a significant increase in smuggling into the state, moving it from a ranking of 18th to 8th highest inflow of cigarettes in the U.S.

    Cigarette tax rates increased in 39 states and the District of Columbia between 2006 and 2017.

    “Lawmakers interested in taxing and regulating electronic cigarettes should understand the policy trade-offs related to high taxation or bans of nicotine products,” the Tax Foundation wrote in its report. “With distribution networks already well-developed, criminal gangs are poised to expand into vapor products.”

  • Ghana Suspends Track-and-Trace Contract

    Ghana Suspends Track-and-Trace Contract

    Photo: Tobacco Reporter archive

    A contract between the government of Ghana and U.K. security printer De La Rue to combat growing illicit trade in cigarettes has been suspended, according to Devdiscourse.  

    Ghana’s Revenue Authority signed a five-year contract with U.K. security printer De La Rue in September to create a track-and-trace excise tax stamp system as illicit tobacco products reportedly account for about 20 percent to 30 percent of total sales.

    The deal, however, went under suspicion when De La Rue outsourced the track-and-trace system to Atos, which partners with the tobacco industry.

    Another aspect was that the tender was awarded in breach of public procurement regulations regarding transparency. Due to these issues, the contract has now been suspended by Ghana’s Public Procurement Agency.

  • ‘PMI Distorting Data to Hide Smuggling’

    ‘PMI Distorting Data to Hide Smuggling’

    Photo: Taco Tuinstra

    Philip Morris International (PMI) has manipulated widely-used data on flows of contraband cigarettes to conceal its involvement in cigarette smuggling, reports the Organized Crime and Corruption Reporting Project, citing a complaint by MSIntelligence (MSI), a former business partner specializing in brand protection.

    MSI uses a variety of methods to quantify illegal cigarette consumption in more than 100 countries. That survey data has formed the backbone of widely-cited reports on worldwide cigarette contraband, some used by regulators.

    According to MSI, PMI smuggled its cigarettes into Libya despite U.S. sanctions and omitted survey results from a recent KPMG report suggesting that massive quantities of the Swiss company’s cigarettes were being smuggled into France in 2019.

    A Philip Morris spokesperson called the allegations unfounded, suggesting they are related to an ongoing commercial dispute between its Swiss affiliate and MSI.

    In the early 2000s, the European Commission filed a massive lawsuit against PMI over facilitating the widespread smuggling of its cigarettes into the EU, following a similar lawsuit in the U.S.

    PMI settled the European lawsuit for $1.25 billion.

  • Scams Drive Demand for Authentication

    Scams Drive Demand for Authentication

    Photo: Michael Bleyenberg

    New demand for security and authentication devices to tackle the threat of counterfeiting caused by the Covid-10 crisis will strengthen the holography market in 2021, according to a global trade body.

    The International Hologram Manufacturers Association (IHMA) says authentication and track-and-trace systems, which use holographic technologies, will help to underpin international efforts by government and law enforcement agencies to bolster overt and covert protection strategies in the next 12 months.

    While Asia will continue to offer opportunities for holograms in 2021, the IHMA says countries across North America and Europe will also be ramping up investment in technologies to tackle counterfeiting as Covid-19 rages, offering additional opportunities for hologram sales across these regions.

    Recent media reports about the dangers of buying fake products online indicate that the pandemic will contribute towards the push for more security devices.

    The World Health Organisation (WHO) has said that a growing volume of fake medicines are on sale in developing countries, while Interpol has seen an increase in fake medical products.

    This situation is set to continue in the next 12 months, predicts the IHMA, while growth in packaging authentication devices will stay “strong and lucrative” on the back of forecasts that the market for anti-counterfeit pharmaceuticals and cosmetics packaging will reach more than $10 billion by the end of 2026, growing by almost 9 percent in the next five years despite the current situation.

    The overall global market for anti-counterfeit packaging is projected to be worth more than $188 billion by 2025.

    A poll has revealed that almost 50 percent of hologram manufacturers and suppliers are seeing an increase in demand from customers, specifiers and end-users for holographic devices and technologies. This indicates that hologram users will continue to be concerned about the impact of counterfeiting on e-commerce supply chains as the pandemic continues to be felt well into new year.

    The IHMA advises brand owners and product manufacturers to tackle the threats, stepping up plans for investment in authentication and verification technologies to protect brands, profits and reputations.

    Paul Dunn

    “Criminals are infiltrating global supply channels, deploying scams and counterfeits to trick people during these difficult times,” said IHMA Chair Paul Dunn. “Furthermore, items such as falsified medicines and drugs pose a terrible threat and can endanger lives.

    “It’s clear that in the face of the continued impact of Covid, we can legitimately say brand owners, law enforcement, government and other influencers will continue to push demand for authentication and brand protection devices such as holograms.”

    The use of authentication solutions, as advocated by the ISO12931 standard, enables examiners to verify the authenticity of a legitimate product, differentiating it from fake products coming from counterfeiting hot spots in Asia and eastern Europe. Even those that carry a “fake” authentication feature can be distinguished from the genuine item if that item carries a carefully thought-out authentication solution.

     

     

  • China Shuts Down Juul Counterfeiter

    China Shuts Down Juul Counterfeiter

    Chinese federal authorities have shut down a major manufacturer and international distributor of counterfeit Juul devices and pods, Juul Labs announced.

    Following a lengthy investigation last year by Juul Labs’ brand protection team into counterfeit operations in the region, the company identified Shenzhen Kang Erqiang Electronic Technology Co. as a large player in the illicit global trade of counterfeit Juul products.

    Chinese law enforcement subsequently seized 14,600 units of counterfeit Juul products, including counterfeit pods, devices, and packaging. A computer was also seized, which provided authorities with critical information regarding when the illicit operation was launched as well as a rough estimate of counterfeit sales.

    Authorities determined that the counterfeit operation began sometime in 2018, and over a 16-month period, sold roughly $324,000 worth of counterfeit Juul products. The factory operator confessed to his involvement and was sentenced to three years and four months in prison, along with a fine equivalent to $163,487.

    In a statement, Juul said it would continue to fight illegal sales of its products. “These black-market products present additional health and safety risks to adult consumers given that they often are produced in unsanitary conditions without manufacturing and quality controls and lack ingredient testing and product characterization. They also may contain harmful chemicals not present in other, authentic products. Furthermore, sales of counterfeit vapor products undermine underage-prevention measures through ease of access.”