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Category: Illicit Trade

  • Russia to Criminalize E-liquid Trafficking

    Russia to Criminalize E-liquid Trafficking

    Photo: diy7

    Traffickers of illegal vape liquids could face up to seven years in prison in Russia if a proposal by the Committee of the Federation Council on Economic Policy becomes law, reports AIF.

    Lawmakers are concerned about the ingredients in illegal vapes, which evade regulatory scrutiny.

    Anatoly Vyborny, Deputy Chairman of the Committee on Security and Anti-Corruption, supported the provision, saying that the measure would help protect the health of young Russians.

    Currently, in Russia, there is no criminal liability for the illegal import of vaporizers and e-liquids.

  • Economist Conference Explores Illicit Trade

    Economist Conference Explores Illicit Trade

    Photo: Tobacco Reporter archive

    Economist Impact will host the eighth Global Anti-Illicit Trade Summit, supported by Japan Tobacco International, on Nov. 30 the Westin Ottawa.

    When it comes to cross-border movement of illegal goods, North America’s expansiveness exacerbates the problem. The United States shares the world’s longest (8,890 km) land border with Canada and the busiest land-border crossing with Mexico. This makes preventing smuggling and illegal migration especially challenging for border security and customs agencies. With just over 12,000 km in land borders and approximately 230,000 km of coastline, North America offers plenty of opportunities for criminal networks to traffic people and illegal goods and improve their position in the illicit market.

    The International Chamber of Commerce estimates the financial cost of illicit trade to be $4.2 trillion annually.

    Speakers at the Economist Impact forum include General John Kelly, former commander, United States Southern Command; David Luna, executive director, International Coalition Against Illicit Economies; Christopher Taylor, Canada country attaché, Bureau of Alcohol, Tobacco Firearms and Explosives; Laura Dawson, executive director, Future Borders Coalition; Anne Kothawala, chief executive, Convenience Industry Council of Canada; Marissa Molé Bostick, deputy director, Counterfeit Crimes Unit, Amazon; Sergio Miranda, sergent spécialiste en économie souterraine, Sûreté du Québec; Gaston Schulmeister, director of the Department against Transnational Organized Crime (DTOC), Organization of American States; José Antonio Abugaber Andonie, President, Concamin; and Abram Benedict, Grand Chief, Mohawk Council of Akwesasne

    For further details about the summit, please visit anti-illicit-trade.economist.com.

  • Brazil Busts Fake Cigarette Network

    Brazil Busts Fake Cigarette Network

    Photo: Policia Federal

    Brazil’s Federal Police cracked down on a criminal network trafficking fake Paraguayan cigarette brands in Minas Gerais state, according to the Organized Crime and Corruption Reporting Project (OCCRP). Law enforcement agents reportedly issued multiple arrest warrants and froze more than $4 million in assets.

    The suspects face charges of smuggling, counterfeiting, human trafficking, slave labor, forgery, misuse of machinery, crime against consumer relations, crime against trademark registrations and money laundering.

    Led by a businessman from Sao Paulo, the organization forced Paraguayan nationals to make the cigarettes in hidden factories. The group reportedly picked up workers in Paraguay, blindfolded them, and drove them east across the border into Brazil, where they were  held under surveillance inside the factories for several months. Their telephones were confiscated and they had no contact with the outside world.

    The workers produced counterfeit versions of Paraguayan brands, such as the Tabesa’s TE, Eight and Palermo. Once finished, the cigarettes were transported in trucks, hidden behind shoes.

    Paraguay is a major contraband hub in South America. More than 97 percent of cigarettes produced in Paraguay end up in countries such as Brazil. The business is also entangled with money laundering, political corruption and criminal gang activities.

    In March of this year, the OCCRP reported on the rescue of 19 Paraguayans trapped in an illegal cigarette factory in Rio de Janeiro. Brazil rescued 918 people working as slaves in the first three months of this year.

  • Track-and-Trace Honored in the Breach

    Track-and-Trace Honored in the Breach

    Image: alien185

    Only two out of the more than 40 cigarette manufacturers in Pakistan have properly implemented the country’s track-and-trace system, according to British American Tobacco, reports The Nation.

    Speaking during a media briefing organized by the Pakistan Tobacco Company (PTC) in Islamabad, BAT’s area head of legal and external affairs for the Asia Pacific, Middle East and Africa regions, Mona Iskandarani, stressed the importance of timely implementation and enforcement of the track-and-trace system.

    “We acknowledge the recent enforcement initiatives undertaken by the Federal Board of Revenue in Pakistan but we need sustained enforcement efforts across the supply chain to curb the menace of illicit cigarette trade in Pakistan,” said Iskandarani.

    PTC’s legal and external affairs director, Asad Shah, pointed out that while track-and-trace systems have been implemented in various countries, the system does not offer a silver bullet. Rather, it serves as a tool to facilitate law enforcement agencies to carry out raids and seizures of tax evaded products, he said.

    Despite a lapse of 15 months since the implementation deadline, only two out of over 40 cigarette manufacturers have implemented the track-and-trace in true letter and spirit, Shah lamented. Instead of declining, tax evasion has grown in the tobacco sector since the system became mandatory, he said.

    The share of illicit cigarette sales is projected to grow from 37 percent of the market in fiscal 2021-2022 to approximately 63 percent by the end of fiscal 2023-2024, potentially causing the government lose PKR310 billion ($1.08 billion) in tax revenues in fiscal 2023-2024.

  • Trinidad And Tobago: ‘Illicits Diverting Tax Dollars’

    Trinidad And Tobago: ‘Illicits Diverting Tax Dollars’

    Image: japhoto

    Trinidad and Tobago loses about $30 million annually in uncollected taxes from illicit cigarettes, according to participants in a forum on anti-illicit trade hosted by the T&T Manufacturers’ Association, reports The Trinidad Guardian.

    Policymakers, law enforcement agencies, regulatory bodies and major brands, such as Puma, Moet Hennessy, Servier and BAT, participated in the forum.

    “The illicit cigarette trade makes up 5 [percent] to 10 percent of the market, and British American Tobacco fears this share can grow as consumers tend to favor these brands because they sell at a lower price,” said Arturo Payro of BAT. “Cigarettes are T&T’s most illegally traded products in quantity and value.”

    Randall Karim, permanent secretary (ag) of the Ministry of Trade and Industry, stated that a strong legal framework will act as a powerful deterrent and send a strong message to smugglers that illegal trade is intolerable.

  • Altria Urges Action Against Illegal Vapes

    Altria Urges Action Against Illegal Vapes

    Photo: Malcolm Griffiths

    A booming illegal disposable flavored vape market is hurting sales of Altria Group’s authorized products, according to Altria Chief Financial Officer Sal Mancuso.

    Speaking during a call with media and financial analyst, Mancuso noted that traditional cigarette sales had dropped even more than usual in the third quarter of 2023. The decline, he said, was caused by inflation and economic issues influencing customers as well as the heightened usage of illegal flavored disposable e-cigarettes.

    Mancuso also observed that there appeared to be more switching between different categories than initially assumed and that e-cigarettes alone were causing a 1.5 percent to 2.5 percent reduction in traditional cigarette industry volumes.

    R.J. Reynolds Vapor Co. leads the U.S. vapor market with a 41.8 percent share, per the latest Nielsen convenience store report released Oct. 7.

    Njoy, which Altria purchased for $2.75 billion in June, has struggled to increase its No. 3 market share.

    “The current state of the (vaping) market is intolerable for both legitimate manufacturers and consumers,” Altria CEO Billy Gifford said during the call. “The regulated market is being overrun by illegal flavored disposable e-vapor products made and distributed by companies violating virtually every rule and guidance FDA has issued since 2016. A lot of these products are imported. They’re imported illegally and then they’re sold illegally.”

    Saying a “strong course correction is needed,” Gifford noted that Altria has filed federal lawsuits in California against 34 organizations that include manufacturers, distributors and online retailers.

  • Cigarette Production Plunges in Pakistan

    Cigarette Production Plunges in Pakistan

    Photo: hassan

    Tobacco companies in Pakistan produced 43.9 billion cigarettes in 2022-2023, down from 64.7 billion in the previous fiscal year, reports The News International, citing figures from the Federal Board of Revenue’s (FBR) track-and-trace system.

    The country’s leading manufacturers, Pakistan Tobacco Co. and Philip Morris International, suffered year-to-year production declines of 32 percent and 39 percent, respectively. The production of Khyber Tobacco, by contrast, jumped 48 percent in the most recent financial year.

    The FBR collected tobacco revenues of PKR62.9 billion ($224.3 million) from July to September this year, compared with revenues of PKR177.7 billion in the comparable 2022 quarter.

    The FBR undertook 1,447 “actions of enforcement and seizure with confiscation” during the most recent financial year, according to FBR Project Director of Track and Trace Zaheer Qureshi

    The government is reportedly exploring strategies to boost revenue as part of an anticipated mini-budget in December.

    During a discussion on tobacco taxes, FBR officials attributed lamented the challenges posed by a limited workforce, logistical hurdles and an undocumented economy.

  • New Proposal to Tackle Illicit Trade

    New Proposal to Tackle Illicit Trade

    Photos: Niroworld

    Joey Salceda, the chairman of the Philippine House of Representatives Ways and Means Committee, has proposed new legislation to tackle the illicit trade in cigarettes, reports the Philippine News Agency.

    Among other things, the measures would address smuggling through the country’s economic zones, leakage of tobacco declared for export or transshipment, and the manufacture of fake cigarettes.

    The illegal tobacco market has flourished in the Philippines recently. The government expects to miss out on PHP60.6 billion ($1.06 billion) in revenue this year if the illicit tobacco trade continues on its current trajectory.

    Salceda noted that 2022 tax collections declined by 7.8 percent to PHP160.4 billion and that the government missed its 2022 target of PHP191.6 billion by PHP31.2 billion.

    Salceda said that illicit cigarettes are “easy to come by” in every trade segment. “There is no challenge to buying these brands,” he was quoted as saying. “And they sell at as low as one-fifth the price of licit cigarettes. The legitimate ones don’t stand a chance. Even fakes of premium brands are becoming easier to come by. From the same online shopping sites, fakes that are half the price and supposedly of the same flavor are sold openly.

    “In the meantime, the revenue base will continue to shrink, and there is a chance that prevalence might actually increase as a result of cheaper illicit alternatives. This is a serious national crisis. For better or for worse, our advocacy of higher taxes played a role in making the illicit sector more attractive. We have a responsibility to help solve this problem,” he said.

  • Illicit Sales Shrivel in Papua New Guinea

    Illicit Sales Shrivel in Papua New Guinea

    Photo: Anton Balazh

    The prevalence of illicit cigarettes in Papua New Guinea has declined remarkably, report the Papua New Guinea Post-Courier and The National, citing a report by the Manufacturers Council of Papua New Guinea (MCPNG).

    According to MCPNG CEO Chey Scovell, the share of tax-avoiding products has declined to 4 percent from 40 percent, allowing tax authorities to collect more revenue. “This is a massive drop, which has resulted in the PNG government taking back millions of kina in revenue from the illicit tobacco importers and sellers, when you consider that government was forgoing almost half a billion kina each year from untaxed illicit tobacco,” Scovell said. 

    He attributed this success to the implementation in 2019 of a new system to encourage manufacturers to produce and sell a smaller portion of their products at a reduced rate.

    “By allowing a 50 percent discount on taxed supplies, a real problem coming from high taxes has been addressed,” said Scovell. Previous high tax rates led to more illicit consumption, he noted. “Consumers in PNG faced prices as PGK1.20 ($0.32) for legal products compared to the PGK0.50 for illicit alternatives.”

    “Although there is still an ongoing battle to lower prices further, market observations reveal approximately 85 percent of consumers are shifting toward legal purchases,” Scovell said.

    “I appeal to the government to continue this so we do not go back to 2018 levels of illicit tobacco flooding our markets and causing the government and legitimate business to lose out,” he said.

  • California Flavor Ban Spawned Illicit Market

    California Flavor Ban Spawned Illicit Market

    Photo: sosiukin

    California’s 2022 ban on menthol cigarettes and flavored vapes has spawned a large, illicit marketplace for such products in the state, according to a study carried out WPSM Group.

    The researchers collected 15,000 empty discarded cigarette packs and 4,529 vapor product packages from May 1 through June 28 in 10 California cities. The study shows that the flavor ban has had limited effect on the access or demand for flavored vapor products or menthol cigarettes throughout the entire state. The results of the study include:

    • Of the vapor packs found, almost all (97.9 percent) were flavored.
    • Menthol (14 percent) and “menthol workaround” (7.1 percent) cigarettes combined made up 21.1 percent of the packs found compared to 24.5 percent of the California marketplace prior to the ban implementation.
    • More than one-quarter (27.6 percent) of products found were nondomestic products, which are not intended for the U.S. market. These products were primarily from U.S. Duty Free, Worldwide Duty Free, China and Mexico.
    • One cigarette brand, Sheriff, the fifth most prevalent brand found, is only intended for use outside the U.S.
    • The study indicated significant loss of state cigarette tax revenue. Among packs where it was possible to determine what tax stamp was applied, only 45 percent bore the California tax stamp.
    • This data suggests illicit cigarette markets are costing California as much as $1.27 billion annually in cigarette excise tax revenues—a funding source that supports important government programs.

    “This study provides further evidence that keeping products legal and regulated is the best path forward for tobacco policy,” said David Fernandez, vice president of government affairs and public policy of Altria Group, in a statement. “This data shows these products shifting in real time to illicit markets, which we know lack proper government oversight and other benefits of a well-regulated system.”

    The ban, which was implemented in December 2022, covers menthol cigarettes, flavored cigars, flavored smokeless tobacco and flavored vapor products.