Category: Illicit Trade

Call for Crackdown on Illicit Trade After Ban

Cigarette sales became in South Africa became legal again on Aug. 18
(Photo: Michael Turner | Dreamstime)
British American Tobacco South Africa (BATSA) has called on the government to urgently ratify the World Health Organization’s (WHO) illicit trade protocol. The appeal comes after the company lost a substantial share of the domestic market during the country’s coronavirus lockdown, which included a five-month ban on tobacco sales.
Research by the University of Cape Town’s Research Unit on the Economics of Excisable Products (REEP) found that 93 percent of smokers were able to purchase cigarettes during the lockdown. However, the brands they bought changed significantly.
The market share of BATSA products dropped from 48 percent prior to lockdown to 8.7 percent in June, REEP found. According to BATSA, the small share of people who reported being able to buy BATSA brands during the lockdown almost certainly obtained them out of pre-lockdown shipped retail stock.
Meanwhile, sales of cigarette brands associated with the Fair-Trade Independent Tobacco Association (Fita) increased substantially while BAT was unable to operate normally during the lockdown. Sales of Zimbabwean-owned Gold Leaf Tobacco Corp.’s RG brand, for example, exploded. At 11.6 percent of the market, this brand saw approximately 10 million cigarettes purchased every day at prices that were up to five times higher than prior to lockdown despite no tax being paid, according to BATSA.
“Our company has not shipped a single cigarette to South African retail or wholesale customers since the ban came into effect in March,” said BATSA spokesperson Johnny Moloto. “This is why we, as the previously largest tobacco company in the country are barely a footnote in the REEP reports now.”
Cigarette and tobacco product sales in South Africa became legal again on Tuesday, but South African Revenue Service Commissioner Edward Kieswetter said it would take years to root out the corruption and illegal activities that have taken root in the past four months.
The ratification of the global illicit trade protocol that BATSA demands would oblige South Africa to implement WHO track-and-trace guidelines, among other measures. South Africa signed the agreement seven years ago but never ratified it.
August 20, 2020
Illegal Factory Raided in Phnom Penh

Photo: noah4ever from Pixabay
Cambodian Police raided an illegal cigarette factory in Phnom Penh on Aug. 11 and arrested 20 staff, reports Phnom Penh Post.

Officers confiscated many popular Chinese cigarette brands, including Furong Wang, Nanjing and Shuang Xi.

Based in the capital’s Por Sen Chey district, the factory had been operating illegally for two years and employed more than 100 workers, according to a representative of the Ministry of Interior’s counter counterfeit committee.

“B.P.A Bopea Asia Co. Ltd produces many brands of cigarette for China, but we do not know which fake logos were meant for which markets,” he said.

Staff arrested for questioning included 14 Chinese, three Vietnamese and a Cambodian translator.

Cambodia Movement for Health Executive Director Mom Kong said he supported the effort to shut down the factory. He called on police to search for other illegal ones.

“We want to see law enforcement in inspecting tobacco products to enhance public health in Cambodia,” he said.
August 13, 2020
Malaysians Want Action on Black Market

Photo: Alex Gresbek from Pixabay
Ninety-seven percent of Malaysians would want the government to take immediate action against illicit tobacco sales, reports The New Straits Times, citing a nationwide survey conducted by British American Tobacco (BAT).
The black market for tobacco products causes the government to miss out on more than MYR5 billion ($1.178 billion) in tax collections, according to BAT.
The survey noted that an overwhelming majority (88 percent) of Malaysians believe the tobacco black market was impeding the nation’s Covid-19 economic recovery.
Participants in the survey said the top three factors sustaining the illegal tobacco sales are corruption (38 percent), high excise duties (27 percent) and insufficient resources for enforcement agencies to tackle the issue (19 percent).
BAT Malaysia Managing Director Jonathan Reed said the company welcomed the enthusiastic response to its Stop the Black Market campaign.
Since going live on July 6, 2020, the campaign’s website has had more than 30,000 unique visits.
Tobacco Reporter covered Malaysia’s struggle with illicit trade in its February issue.
August 4, 2020
When Crime Pays

Photo: Ridzani Tshivhase
Cigarette smuggling thrives in southern Africa.
By Thulani Mpofu
On May 15, 2020, South African police in northern Limpopo Province near the border with Zimbabwe impounded four vehicles and cigarettes worth ZAR1.4 million ($83,530).
The drivers, transporting cigarettes smuggled from Zimbabwe, avoided arrest by bolting out of their vehicles and out-sprinting police.
A fortnight later, four South African men and a Zimbabwean woman were arrested in the same province after a high-speed chase while attempting to spirit 10,000 boxes, or 200,000 sticks, of cigarettes into South Africa. In the last two weeks of June, 30 people were arrested resulting in the confiscation of cigarettes worth ZAR4 million.
The consignments had been smuggled through the official border post at Beitbridge, or via some 200 illegal crossing points on the Limpopo River, which forms the border between the two southern African countries.
In Botswana on April 4, police in a northern district close to Zimbabwe arrested a Motswana and a Zimbabwean for smuggling 127 cartons of cigarettes into that country.
On April 16, three men were arrested near South Africa’s border with Mozambique while transporting 20,095 packs of cigarettes worth ZAR900,000. The contraband was coming from Mozambique.
“Cigarette smuggling is a big problem for us,” South Africa Police Service Limpopo Province spokesperson Brigadier Motlafela Mojapelo told Tobacco Reporter.
“We are on alert all the time and make arrests every day, but they are undeterred. I can tell you that since March we have arrested nationals of both countries numbering at least 100. What they tell us during investigations is that the crime pays for those who avoid arrest, but our message to them and would-be smugglers is that ultimately we will catch them.”

Beitbridge Border Post (Photo: Bulawayo24)
Trafficking of cigarettes from Zimbabwe into South Africa, the biggest economy in southern Africa and the most lucrative market for both licit and illicit cigarettes in the region, is rampant. Hundreds are arrested yearly for transporting the illegally imported tobacco into South Africa as well as Namibia and Botswana. Individuals and more organized cartels whose kingpins are rarely arrested are involved.
Apart from being the main destination of trafficked cigarettes from Zimbabwe, South Africa is consistently the biggest African importer of tobacco grown in its northern neighbor. For example, in 2018, South Africa spent $100.8 million importing 32.2 million kg of tobacco from Africa’s top growing nation and the globe’s fourth-biggest producer. In that year and as in other years, South Africa’s spending and volume of imports was second to China, which imported 59.1 million kg of the leaf, worth $449.7 million.

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According to a report by the Atlantic Council of the United States, “The Illicit Tobacco Trade in Zimbabwe and South Africa: Impacts and Solutions,” released in March 2019, high taxes that South Africa, Namibia and Botswana charge on cigarette imports are the major factor discouraging legal importation of the product, encouraging smugglers to try their luck.
Members of the Southern Africa Customs Union (SACU)—South Africa, Namibia, Botswana, Eswatini and Lesotho—charge an average of ZAR16.66 in excise tax on a 20-pack of cigarettes. With a 15 percent value added tax, the total cost of the pack rises to about ZAR20. This suggests, according to an Atlantic Council study, any pack of cigarettes selling for less than the minimum collectable tax of around ZAR20 is likely smuggled or broadly illicit.
An Ipsos study whose findings were released in November 2018 established that Rudland & George cigarettes, manufactured by one of Zimbabwe’s largest tobacco-growing contractors, Gold Leaf Tobacco, had become the biggest-selling brand in South Africa overall, retailing at ZAR10 a pack.
The research estimated that illegal cigarettes accounted for 33 percent of all cigarettes sold in South Africa. The tobacco is especially prominent in the informal trade where they make up about 42 percent of that market. Due to their low prices, illegal cigarettes are an attractive bargain for smokers.
A separate research by the Tobacco Institute of South Africa (TISA) said 38 percent of the illicit sticks were smuggled from Zimbabwe, making that country pivotal for any illicit trade strategy.

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The financial prejudice of smuggled tobacco to the economies of Zimbabwe and South Africa is not accurately known, said a Harare-based tax consultant, Tendai Mavima.
“There are no records for smuggled goods, so we cannot be specific in the economic impact,” he said.
“But it is known cigarettes are being smuggled every day. Both economies suffer because if cigarettes are smuggled, it means losses in income tax, value added tax, excise duty and other taxes applicable to cigarette trade. For Zimbabwe, illegal exports in cigarettes means loss of foreign currency.”
A Japan Tobacco study released in March 2018 suggests that South Africa lost about $1.5 billion in tax revenue to illicit trade between 2010 and 2016. BAT South Africa estimates that the illegal cigarette market cost South Africa “a conservative” ZAR8 billion every year.
In its March 2019 report, the Atlantic Council of the United States said although cigarettes are smuggled from Zimbabwe into Botswana, Namibia and Mozambique, the three countries have smaller and poorer populations, leaving South Africa as the most attractive market for cigarette smugglers keen on large profits.

South Africa police stand guard over Pacific Breeze cigarettes smuggled from Zimbabwe (Photo: OperaNewsHub)
Actors are not only small-time traders who use undesignated exit points along the Limpopo River but also some “untouchables” who are well connected to the ruling elites in Zimbabwe and South Africa. Small traders typically use small vehicles to carry the contraband, but the “untouchables” carry theirs in large trucks that pass through Beitbridge Border Post where some officials are bribed to wave the vehicles across the border.
“A former smuggler claims that one of these cigarette-smuggling cartels involves politicians in the highest levels of government from both Zimbabwe and South Africa but would not divulge names,” the report says.
“This cartel is said to operate a smuggling scheme that runs from Harare to Durban. Huge trucks are used to smuggle the cigarettes from their loading points in Harare through formal border crossing points and onwards to their destination. These trucks are not stopped or searched on the Zimbabwean side of the border. The cigarette brands that are most frequently smuggled are Remington Gold and Pacific Blue, both owned by Savanna Tobacco [now known as Pacific Cigarette Company]. Beitbridge border post is a major point of entry.”
In late March 2020, South Africa banned tobacco and alcohol sales, saying consumption of both increased the risk of spread of Covid-19. The Fair Trade Independent Tobacco Association, an industry lobby group in that country, argued in a statement that the ban only worsened the black market and the smuggling of cigarettes.
Gift Mugano, a researcher at South Africa’s Nelson Mandela University, told Tobacco Reporter that individual smugglers and large companies are taking advantage of porous borders in southern Africa and poor government monitoring of their tobacco value chains. Countries, he said, lose much money in the forms of import and export taxes, excise duty and value added tax.
“Our borders in the region are porous,” he said.
“For example, there is no fence separating Zimbabwe’s border with Mozambique, the same for the border between Zimbabwe and Botswana. People, some of them smugglers, just walk or drive across. Even the formal border posts are porous because officials can be bribed.”
Echoing the Atlantic Council report, a World Bank study, “Confronting Illicit Tobacco Trade: A Global Review of Country Experiences,” which focuses on SACU, expresses concern over criminal enterprises’ close ties to leading political figures in South Africa.
“Recently, a notorious cigarette smuggler’s lavish birthday party is reported to have been attended by high-profile policemen and politicians,” said the report released in January 2019.

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“Similarly, multiple reports allege that a leading cigarette smuggler met with South Africa’s ex-president to secure a votes-for-protection agreement. All future policy and enforcement measures must reckon with the reality that, in this region, the tobacco industry is disproportionately powerful.”
The paper says government agencies in the SACU region have had little impact on illicit tobacco trade because of lack of focus, priority and resources allocated to tobacco regulation and to excise goods in general. Furthermore, they are unable to effectively secure tobacco supply chains at key points especially at production, shipment and on the retail segment. Some law enforcement agencies, the document adds, do not have nonintrusive inspection assets, such as scanners, to detect undeclared goods.
“Tobacco is like gold,” Mugano said.
“Many find it profitable to smuggle both commodities within the region and millions [of dollars] are involved. Like gold, cigarette smuggling is done by syndicates involving big companies. Those money-mongers are connected to figures in high places politically. Because of that, containing smuggling will be difficult.”
In her book Dirty Tobacco: Spies, Lies and Mega-Profits, published in June 2020, Telita Snyckers, a South African author and a tax and customs lawyer, argues that some tobacco companies smuggle their own product to evade tax. Illegally trafficked cigarettes, the book adds, are potentially more profitable than cocaine, heroin, marijuana and guns.
“The industry—even licensed, bigger players—has a long and consistent history of fines, felonies and infringements, spanning decades, across the globe,” the book reads in part.
“There is ample proof that the tobacco industry incorporated smuggling and other tax and duty evasion measures as an explicit part of its business strategy,” writes Snyckers.
August 1, 2020
Bhutan Targets Tobacco Smuggling

Photo: Taco Tuinstra
The Bhutan government met on July 30 to discuss ways to combat tobacco product smuggling on the nation’s borders.
Prime Minister Lotay Tshering noted that tobacco product smuggling has been one of the major illegal activities in the country as more than 30 individuals are arrested each day for this crime.
Bhutan bans the sale of tobacco products but not their import. The government is proposing to introduce a scheme to allow people to purchase their tobacco products at the nation’s duty-free outlets but with the nation’s 100 percent excise tax included in the purchase price.
Currently, an individual who enters Bhutan is permitted to carry 800 sticks of cigarettes or 1,200 sticks of bidis or 150 pieces of cigars or 750 grams of other tobacco or tobacco products in a month after paying the excise tax.
July 31, 2020
Push for Harsher Smuggling Penalties

Photo: Džoko Stach from Pixabay
Senators in the Philippines are pushing for harsher penalties for smuggling tobacco products, including making the offenses nonbailable and worthy of a life sentence in jail.

Currently, there is a PHP50 million ($1 million) minimum fine and eight years to 12 years of possible jail time for illegal trade.

The senators have stated that cigarette smuggling is weakening the campaign to reduce smoking as illicit tobacco products are both cheaper and more dangerous. “There must be a strong crackdown on smuggling and illicit trade of tobacco products,” said Senate President Pro Tempore Ralph Recto.

“Smuggling hurts local industries and costs jobs,” said Senator Sonny Angara. “If it [smuggled value] exceeds PHP50 million, it can even be considered economic sabotage under a previous law.”

The proposed harsher penalties for illicit trade “should be coupled with a strong and consistent enforcement,” according to Senate Minority Leader Franklin Drilon.
July 27, 2020
BAT: Illicit Traders Have Taken Over South Africa

Photo: BAT
British American Tobacco South Africa (BATSA) declared today that the entire domestic cigarette market is now controlled by illicit suppliers. BATSA added that the nation’s lockdown of legal cigarette sales during the Covid-19 pandemic has cost the country ZAR4 billion ($241.7 million) in lost excise tax revenues and 30,000 industry jobs lost.
“With an already overstretched consumer, further increasing the cost of tobacco products will simply mean they default to the illicit market, which is now significantly cash-flush and can now afford to significantly reduce their prices,” said BATSA spokesperson Johnny Moloto.
“This means that tax-compliant manufacturers like ourselves continue to be at a disadvantage while the state is losing around ZAR35 million [$2.1 million] every single day in excise taxes.”
Moloto added, “These illicit supply chains will be so entrenched that it will be difficult for SARS (South African Revenue Service] to be able to reverse this or deal with this within a short period of time.”
July 27, 2020
Vietnam Struggling With Smuggling

Photo: Tobacco Reporter archive
Vietnam loses VND8.5 trillion ($366.4 million) in tax revenue each year to tobacco smuggling, according to a recent article in Vietnam News.
Tobacco use among those in Vietnam is more than 45 percent, with a constant increase in young people taking up smoking. Vietnam is one of 15 countries with the highest rate of smokers, according to the World Health Organization. Tobacco-smuggling brings high profits, according to Nguyen Mahn Hung, chairman of the Vietnam Consumer Protection Association.
“Smuggling can bring profits of up to 400 percent while official imported cigarettes are subject to import tax of between 100 percent and 202.5 percent and value added tax of 10 percent,” he said. Vietnam is third in the region for illegal tobacco trading, with 21 billion sticks of illegal tobacco products.
In related news, Health experts and anti-smoking advocates met at a conference by the Ministry of Information and Communications in Ho Chi Minh City, on July 23 to express their concerns about the rising incidence rates of vapor and heat-not-burn (HNB) tobacco products among youth.
Phan Thi Hai, deputy director of the Vietnam Tobacco Control Fund under the country’s Ministry of Health, noted that while his ministry has worked hard to decrease cigarette consumption in recent years, it has been outflanked by the large rise in vapor and HNB tobacco product users.
Hai said that the makers of these products use “compact, eye-catching designs and various flavors” to entice new users, whether they are smokers or nonsmokers.
Le Thi Thu from HealthBridge Canada urged the Vietnam government to develop a legal framework to control vapor and HNB tobacco products with authorities to make extra efforts to inspect and prevent production, imports, marketing and sales of these products.
July 27, 2020
BAT Asks Malaysians to Tackle Black Market

Photo: BAT
British American Tobacco (BAT) has launched a campaign to draw attention to the problem of illicit cigarette sales in Malaysia, reports The New Straits Times.
The company is inviting Malaysians to participate in a survey and to share their views on a dedicated Facebook page.
Worldwide, Malaysia is now the country most affected by illegal cigarettes, according to Oxford Economics. Nielsen figures suggest that black market accounted for 62 percent of all domestic tobacco sales in 2019.
Illicit cigarette sales cause the government to miss out on an estimated MYR5.3 billion ($1.24 billion) in excise tax revenues each year.
Many Malaysians also believe that youth smoking is linked to cheap illegal cigarettes.
BAT Malaysia managing director Jonathan Reed said the tobacco black market negatively impacts legal businesses and the lives of all Malaysians.
“We applaud the hard work done by law enforcement agencies recently and we hope that these efforts continue to pressure the syndicates operating in this black market,” he said in a statement on July 6.
“However, enforcement alone is not enough to address this issue.”
BAT hopes the surveys will spark a national discussion on how illicit cigarette sales can be stopped.
July 7, 2020
Turkey Bans Sale of Hand-Rolled Cigarettes

Photo: Tobacco Reporter archive
Turkey has banned the sale of hand-rolled cigarettes as part of a crackdown on illegal cigarettes. Violators risk prison terms ranging from three to six years, reports Daily Sabah.
In response to rising cigarette prices, Turkish smokers have been turning to roll-your-own cigarettes, which are considerably less expensive than factory-made smokes.
Authorities suspect at least some of these products to have avoided tax; it is difficult to trace the contents of hand-rolled cigarettes that are sold in packs without official brands.
According to media reports, Turkey is now home to more than 25,000 tobacco shops whose earnings mostly depend on the sale of hand-rolled cigarettes and raw tobacco. Illegal online sales of hand-rolled cigarettes also proliferated in recent years, complicating efforts to track down illegal sales.
Studies show hand-rolled cigarettes illegally sold in tobacco shops contain a high level of cadmium and lead and other materials harmful to the health.
Yuksel Denli, deputy head of the Ministry of Agriculture and Forestry’s department of tobacco and alcohol hopes the new regulations will prevent a yearly tax loss of about TRY9.5 billion ($1.4 billion).
Turkey has taken stricter measures against smoking in recent years. The percentage of smokers in the country is 28 percent, according to official figures.
July 5, 2020