Category: Illicit Trade

  • Impacting the illegal trade

    Impacting the illegal trade

    Philip Morris International said yesterday that 31 projects had been selected for funding in the second round of PMI IMPACT, a global initiative supporting third party programs dedicated to fighting illegal trade and related crimes. The PMI IMPACT Expert Council was said to have selected the projects from more than 157 proposals.

    PMI IMPACT has allocated $49 million for the implementation of more than 60 projects in 41 countries as part of its first and second funding rounds.

    ‘The successful applicants come from 23 countries in Europe, Eastern Europe, Middle East, Asia, North and South America, representing a broad range of sectors including think tanks, academic institutions, universities and law enforcement authorities,’ PMI said in a note posted on its website.

    ‘A total of $21 million has been allocated for the implementation of the selected projects.’

    Paul Makin, a member of the Council, was quoted as saying that the selected projects stood out for their innovative thinking and systematic approach to addressing the complexities of illegal trade and its links to a broader range of criminal activities.

    “We are looking forward to seeing these ideas come to fruition and thereby help advance the global efforts to strengthen security and prevent crime around the world.”

    The selected projects are aimed at addressing multiple aspects of illegal trade – ranging from tobacco, alcohol and pharmaceutical products to the trafficking of rare animal species. Beyond illegal trade, the projects are set to tackle a broad network of related crimes such as drug trafficking, money laundering and modern-day slavery.

    PMI announced the results of the second funding round during a meeting of the OECD [Organisation for Economic Co-operation] Task Force on Countering Illicit Trade.

    “Fighting illicit trade is in PMI’s DNA and I am delighted that PMI IMPACT is enabling organizations around the world to really make a difference against illegal trade, not only in tobacco but across a wide range of sectors,” said Alvise Giustiniani, PMI’s vice president illicit trade prevention.

    “It’s only through concerted efforts and broad public-private collaboration that we’ll be able to implement meaningful and long-term solutions against illegal trade.”

    The projects, which are expected to be completed during the next two years, include:

    • ‘Projects that seek to better understand the links and drivers around organized crime and illegal activities in high risk border areas and provide analysis and recommendations on how to tackle them;
    • ‘Actions to use innovative digital tools and solutions to create databases and platforms to allow for the capture and identification of key trends in illegal trade;
    • ‘Initiatives to raise awareness on the impact of illegal trade and develop dialogue between public and private sector actors in tackling the issue; and
    • ‘Programs to tackle specific areas of concern and the links between different forms of illicit trade as part of global criminal networks.’

    A list of the selected projects is available on the PMI IMPACT website at:

    http://pmi-impact.com/updates/secondfundinground.

  • Make them pay

    Make them pay

    Small retailers in Malaysia are said to have been frightened off selling illicit cigarettes by the prospect of a RM100,000 fine, according to a story by Mark Rao for The Malaysian Reserve.

    Such stores had been havens for smokers who needed to find cheap cigarettes, but because they are not typically big-money businesses, they have had to think twice.

    A Center for Public Policy Studies’ report last year found that well-known illicit brands such as John, Canyon and Luffman were typically hidden by small retailers in opaque boxes and shelves or underneath tables, from where they were sold to customers upon request.

    Illicit cigarettes took 64 percent of the market during the fourth quarter of last year, according to a report cited by British American Tobacco (M).

    With the Government needing higher revenues to plug a huge financial hole, it promised stricter enforcement against illicit cigarettes and liquor.

    The Government is said to be aiming to ‘recover’ about RM1 billion in revenue lost to the black market with its threats of minimum fines of RM100,000 and six months’ in jail for individuals caught dealing with illicit cigarettes and liquor.

    The Royal Malaysian Customs Department and other relevant agencies are said to have increased preventive measures since January.

    But BAT MD Erik Stoel said the government’s intent was there and important regulatory steps had been taken, but enforcement intensity was still not at the level to make a significant impact.

    “It is early days, but we believe it is critical that more focus is put on enforcement and more law enforcement agencies join the party,” he told The Malaysian Reserve.

    He said changing the law dealing with illicit cigarette trade cannot be the sole option and urged a unified front between the relevant authorities to tackle the issue.

    Meanwhile, the Galen Center for Health and Social Policy CEO Azrul Mohd Khalib said the environment for the black market for cigarettes and tobacco products had to be made hostile, intimidating and prohibitive by the authorities.

    “One way to do this is to threaten and enforce severe penalties for small retailers and traders for carrying these products,” he said, citing the termination of business licenses as an effective deterrent.

    Cigarette excise duties in Malaysia rose 110 percent from 2011 to November 2015, while the Sales and Services Tax last year resulted in an increase of up to four percent in retail cigarette prices.

  • Fresh thinking needed

    Fresh thinking needed

    A network of tobacco farmers in Thailand is calling on political parties to help ease the impact of a 40 percent rise in cigarette excise tax that is scheduled for October 1, according to a story in The Nation.

    Songkran Pakdeejit, president of the Burley Tobacco Farmers Association of Phetchabun, met yesterday with representatives of various political parties to discuss the effect the proposed new tax rate would have on tobacco growers.

    Songkran said about 50,000 tobacco-grower households in the North, Northeast, and upper Central regions were already struggling because of annual increases in cigarette tax rates. These increases reduced the state-run Tobacco Monopoly’s cigarette sales and, therefore, its production and the amount of tobacco it bought from local growers.

    Growers were very concerned that they were going to lose their livelihoods.

    The network has reportedly asked the authorities to delay enforcement of the next tax rise, but has not received a response.

    But because an election is due to be held in the next two weeks, Songkran asked the parties to recognize growers’ concerns and bring the issue to the attention of their parties.

    At the meeting, the Thai Tobacco Trade Association released a poll result showing most grocery shops were opposed to the tax increase. Jointly conducted by the association and Nida Poll in February, the poll showed 81 per cent of respondents from 1,056 retailers across the country believed the new tax would increase the sale of illicit cigarettes. Ninety-one per cent of respondents said they would be affected by the new tax rate.

    The Association director Waraporn Namat said that in the past four to five years the government had gradually increased the tobacco tax rate in the hope of reducing the number of smokers. “But the number hasn’t decreased significantly and instead they opt for buying illicit cigarettes or tobacco which are cheaper,” she added.

  • Fake cigarettes seized

    Fake cigarettes seized

    Bulgarian customs agents have seized 5.9 tons of counterfeit cigarettes at a border crossing with Romania, according to a Xinhua News Agency story.

    Officials in Sofia were quoted as saying yesterday that the cigarettes were seized at the Danube Bridge checkpoint near Vidin, Bulgaria.

    The cigarette packs, which were said to have carried the brand logo of a popular [but unnamed] English cigarette brand, were found in a truck traveling to western Europe, the National Customs Agency (NCA) said in a press note. The trademark owner had been notified.

    The shipment was declared only as cardboard, the NCA said.

    Bulgaria is a favorite transit country for those involved in illegal trade.

    Last year, the NCA seized 51.2 million cigarettes and 5.4 tons of tobacco, along with other non-tobacco-related goods.

  • Easy to lose track

    Easy to lose track

    The EU Commission said yesterday that the EU’s traceability system for tobacco products contains multiple safeguards, including independence requirements that ensure the system is controlled by member states and is independent of the tobacco industry.

    The Commission was replying to questions posed by a French member of the EU Parliament who had claimed that the Commission’s tobacco-products tracking-and-tracing acts did not take into account the entry into force of the World Health Organization’s ‘Protocol to Eliminate Illicit Trade in Tobacco Products’.

    In a preamble to two written questions, Michèle Rivasi said that parallel trade in tobacco resulted in increased smoking, particularly among adolescents, who were more sensitive to prices, and an annual tax loss for EU member states estimated at between €15 billion and €20 billion.

    ‘The World Health Organization (WHO) considers that the best way to put an end to this phenomenon is to apply its Protocol “to Eliminate Illicit Trade in Tobacco Products,” which was drawn up in 2012 and entered into force on 25 September 2018,’ she wrote.

    ‘To date, there are 48 parties to this international treaty, including the European Union, which ratified the WHO Protocol on 24 June 2016, following the vote of the European Parliament on 9 June 2016.

    ‘Article 8 of the Protocol requires, in particular, that a tracking and tracing system be set up for tobacco products which is strictly independent of tobacco manufacturers, who are suspected of fuelling parallel trade.

    ‘At the beginning of 2018, the implementing and delegated acts on the traceability of tobacco products adopted by the European Commission entrusted several essential traceability-related tasks to cigarette manufacturers themselves.’

    Rivasi then asked:

    1. ‘Why do the Commission’s acts not take into account the entry into force of the WHO Protocol?
    2. When will the Commission revise them?’

    In reply, the Commission said that the traceability system for tobacco products contained multiple safeguards, including independence requirements that ensured that the system was controlled by the authorities of the member states and that it remained independent from the tobacco industry. ‘To that extent, Article 15 of Directive 2014/40/EU (on tobacco traceability), along with the relevant implementing and delegated legislation, is fully in line with the World Health Organization Framework Convention on Tobacco Control’s Protocol (notably Article 8), it said.

    ‘Article 35(9) of Commission Implementing Regulation (EU) 2018/574 provides that the procedures governing the appointment of service providers and the monitoring of their compliance with the independence criteria set out in the secondary legislation will undergo a periodic review by the Commission. Conclusions of that review will form part of the report on the application of Directive 2014/40/EU provided for under Article 28 of that Directive. Following the publication of the report, the Commission may, if deemed necessary, table a proposal for amending respective legislation.’

  • Tobacco agreements helpful

    Tobacco agreements helpful

    EU member states appear to be keen to let run to their expiry dates the three remaining anti-fraud agreements signed with tobacco manufacturers and aimed at countering tobacco smuggling.

    Toward the end of last year, a Croatian member of the EU Parliament had asked the Commission if it believed it was feasible to terminate by May agreements that it had made with tobacco manufacturers and that were aimed at countering the illegal trade in tobacco products.

    In a preamble to two questions, Biljana Borzan said that, in 2016, Parliament had called on the Commission not to renew such an agreement with Philip Morris International.

    ‘Last April, it expressed the conviction that the agreements with the other tobacco companies should also be terminated and called on the Commission to present the feasibility of doing so by the end of the year,’ she said.

    ‘The Tobacco Products Directive introduced a traceability system for tobacco products, which will be operational on 20 May 2019, following the recent approval of the secondary legislation.

    ‘In addition, the WHO [World Health Organization] Protocol to Eliminate Illicit Trade in Tobacco Products, which was ratified by the EU in 2016, entered into force last September.

    ‘As Parliament made clear in 2016 and 2017, these agreements are becoming irrelevant and send a damaging and counterproductive message to third countries that the EU is engaging in inappropriate dealings with the tobacco industry.’

    Borzan asked:

    ‘Does the Commission believe that it is feasible for the agreements with the tobacco companies to be terminated by 20 May 2019, as Parliament requested in its report?

    ‘When does the Commission expect to have a response ready for Parliament?’

    In reply, the Commission said that the three remaining anti-fraud agreements to counter tobacco smuggling in the EU had been concluded between the EU, the member states as well as the respective tobacco manufacturers.

    ‘As member states are co-parties to the agreements, they would need to agree to shorten the duration of the agreements,’ the Commission said.

    ‘Following the European Parliament’s call on the Commission to study the feasibility of terminating the three agreements ahead of their original deadline, the Commission has launched a consultation procedure with all member states to seek their views. The Commission has now received replies from more than half of the member states. In all the answers received by the Commission, the member states expressed their preference to continue the existing agreements until their expiry date.

    ‘Several member states have underlined in this respect that, as the new traceability rules under the Tobacco Products Directive and the [WHO] Framework Convention on Tobacco Control (FCTC) Protocol will require some time in order to have a tangible impact on smuggling, the anti-fraud agreements in question can still be considered relevant.

    ‘The Commission will inform the European Parliament of the outcome of the consultation process and its conclusions in due course.’

  • Smokers, drinkers hit hard

    Smokers, drinkers hit hard

    South Africa’s Treasury plans to raise an extra R1 billion from increases in excise taxes on tobacco products and alcohol, according to a story in The Business Daily.

    The Daily said that smokers were expected to provide the Treasury with an additional R400 million [presumably in the first year of higher taxes], while drinkers were expected to provide

    an extra R600 million.

    The excise duty on a pack of 20 cigarettes will rise by R1.14 to R16.66, and that on a typical cigar by about 64c to R7.80.

    The Treasury’s plans fly in the face of an appeal made earlier in the week by the recently-launched Black Tobacco Farmers Association (BTFA), which warned that the entire tobacco value chain in South Africa was under threat from illicit traders; a threat that could increase if a proposal to increase excise taxes again were accepted.

    According to a story in The Business Day, it was estimated that close to 50 percent of South Africa’s tobacco-products market was controlled by illicit players, making it one of the world’s biggest markets for illicit tobacco products.

    The illegal trade in tobacco products was said to be costing the fiscus up to R9 billion a year in uncollected tax.

    The BTFA called on the government to keep tobacco excise taxes at their current level to protect jobs on farms.

  • Under threat in South Africa

    Under threat in South Africa

    The entire tobacco value chain in South Africa is under threat from illicit traders; a threat that could increase if a proposal to increase excise taxes again is accepted, according to a story in The Business Day quoting the recently-launched Black Tobacco Farmers Association (BTFA).

    The story said it was estimated that close to 50 percent of South Africa’s tobacco-products market was controlled by illicit players, making it one of the world’s biggest markets for illicit tobacco products.

    The illegal trade in tobacco products was said to be costing the fiscus up to R9 billion a year in uncollected tax.

    The BTFA yesterday called on the government to keep tobacco excise taxes at their current level to protect jobs on farms.

    Last year, the Government increased excise duties by between six percent and 10 percent in a move that was expected to bring in an additional R1.33 billion in revenue in the 2018/19 financial year.

    The BTFA chairperson Ntando Sibisi said that his organization was asking the Finance Minister to ensure that the South Africa Revenue Service tackled the illegal trade in cigarettes more seriously before excise taxes were increased further.

    “At this stage more excise duties will do nothing but cause the illicit economy to grow even more,” said Sibisi. “Under the current economic conditions, an excise increase will force more consumers to go for cheaper, untaxed cigarettes.”

    Sibisi said the illegal trade was partly caused by high excise taxes and was “killing any progress that we have made over the years to create jobs and maintain jobs that have uplifted our communities”.

    “The illicit cigarette trade places more than 10,000 jobs at risk and deprives SA taxpayers of R25 million in lost taxes daily,” he said. “We call on law enforcement agencies to act and actually clamp down on illicit cigarette trade and hope that this will be reflected in the budget.

    “The future of tobacco farming, which provides a sustainable income for thousands of families, rests upon whether our concerns are taken seriously.”

  • Sin products seized

    Sin products seized

    Irish Revenue officers seized 98,000 cigarettes, more than 4 kg of tobacco and 2,950 litres of alcohol in Dublin Port on Friday, according to an Irish Examiner story.

    The alcohol and cigarettes were discovered when officers stopped and searched a foreign-registered bus and van that had disembarked a ferry from Holyhead, Wales.

    The tobacco products were branded Marlboro, Kent, Winston, Winchester, Vogue and Davidoff. They were said to have been concealed within numerous packages being transported in the bus and van.

    The seized alcohol and tobacco products were said to have a ‘combined retail value of €89,600, representing a potential loss to the Exchequer of €62,500’.

  • Fake news from Kenya

    Fake news from Kenya

    About 700 million counterfeit cigarettes were traded in Kenya last year, according to a story in The Star citing market research by British American Tobacco.

    The company was quoted as saying that the illegal trade in Kenya accounted for 14.1 percent of the cigarette market.

    Financial director Sidney Wafula said the trade ‘denies Kenya Revenue Authority (KRA) Sh2.5 billion annually in tax revenue while the industry loses Sh900 million’.

    Meanwhile, MD Beverly Spencer that BAT’s independent third-party research showed that counterfeit cigarettes were either smuggled into the country, having been destined for a lower tax market that was never reached, or they were produced locally with forged tax stamps.

    Spencer said KRA and other relevant bodies needed to find the point of sale of the fake products because it was difficult for consumers to tell the difference between genuine and fake products.