Category: Illicit Trade

  • Singular offence

    Singular offence

    A Kenyan man has been told he must pay a Sh15,000 fine or serve five months in prison for selling single cigarettes, according to a story in The Nairobi News.

    The punishment was handed down by a Nyeri Court on Tuesday.

    The man, Simon Gichuki Maina, appeared before resident magistrate Ruth Kefa where he pleaded guilty to selling single cigarettes.

    The law states that cigarettes may be sold only in packs.

    The Court heard that Maina was arrested by Nyeri police at the Kasuku bar on February 11.

    Maina asked the court for leniency on the grounds that he did not know that selling single cigarettes was a crime.

  • Standard debate

    Standard debate

    The Malaysian Health Ministry is considering introducing standard packaging for cigarettes, according to a story by Robin Augustin for Free Malaysia Today.

    Deputy Health Minister Dr. Lee Boon Chye was said to have told Today that standardized tobacco packaging was part of the World Health Organization’s Framework Convention on Tobacco Control, which Malaysia had become a party to in 2005.

    “This has been done in countries like Australia, and the results can be seen,” he said.

    Lee acknowledged that there would be opposition to the move from industry players and traders.

    “They will cite reasons like the cost of the exercise and how it will affect their business or the intellectual property rights of tobacco companies,” he said.

    “We are considering it. There is no timeline set. We have to study the matter and hold talks with stakeholders.”

    The Galen Center for Health and Social Policy was said to have told Today it would support a move to introduce standardized tobacco packaging but noted several matters that should be considered firstly.

    The think tank’s CEO Azrul Mohd Khalib said these matters included the need for new and specific legislation to ensure the parameters of standardized tobacco packaging were clear on intellectual property rights.

    “There are legitimate concerns from businesses regarding how their trademarks would be affected by this move,” he said.

    “Their worries and issues need to be fairly heard and addressed.”

    Azrul warned that the imposition of standardized tobacco packaging could result in smokers choosing cheaper tobacco products, which could lead to an increase in smoking rates.

    “It could increase the preference for illicit tobacco products which would likely be the cheapest on the shelf,” he said, adding that the government must be prepared to implement more enforcement regarding the illicit cigarette market.

  • What’s tracking and tracing?

    What’s tracking and tracing?

    The supply of tobacco products to UK retailers could be put in jeopardy unless HM Revenue and Customs (HMRC) publishes details of the application process for track and trace (T&T) codes without delay, according to a story in the on-line version of Convenience Store magazine.

    With a little more than three months to go before the new T&T regulations are enforced, concerns of a possible backlog of applications from retailers are said to be growing.

    From May 20, retailers will need two unique codes in order to purchase tobacco legally, an economic operator identifier code for their business and a facility identifier code for each of their stores.

    HRMC was said to have told Convenience Store that an announcement on its chosen supplier to act as the UK’s ID issuer would be made by February 1, but by the time the magazine’s story had appeared on February 4 no details had been forthcoming.

  • World Bank report

    World Bank report

    Contrary to tobacco industry arguments, taxes and prices have only a limited impact on the illegal cigarette market share at country level, according to a World Bank report, Confronting illicit tobacco trade: A global review of country experiences.

    The report, running to about 650 pages, says that evidence indicates that the illegal cigarette market is relatively larger in countries with low taxes and prices while relatively smaller in countries with higher cigarette taxes and prices. Non-price factors such as governance status, weak regulatory framework, social acceptance of illicit trade, and the availability of informal distribution networks are said to ‘appear to be far more important determinants of the size of the illicit tobacco market’.

    Part of the Bank’s advice for tackling the illegal trade is for authorities to avoid reliance on the tobacco industry, whose role is said to pose a challenge to countries seeking to address the illegal trade, ‘since the tobacco industry is often linked to illicit trade in tobacco products, either directly or indirectly’.

    ‘The UK and Ireland case studies emphasize the need to fulfill obligations under Article 5.3 of the FCTC [World Health Organization’s Framework Convention on Tobacco Control] to prevent the tobacco industry from influencing public policy,’ the report says. ‘The case studies, including Colombia, Australia, Georgia, and Malaysia, also confirm prior findings that the tobacco industry regularly overstates levels and changes in tobacco illicit trade to oppose tobacco tax reforms. The Georgia and Uruguay case studies show that when the government responds to industry pressure and reduces taxes due to fears regarding tobacco illicit trade, the result is a decline in revenues and an increase in consumption, while the true drivers of illicit trade in tobacco products remain unaddressed.’

    The Bank concludes, in part, that the following actions need to be undertaken to confront the illegal trade in tobacco products.

    • ‘Require licensing for the full tobacco supply chain, as required by Article 6 of the [FCTC] Protocol.
    • ‘Require use of secure excise tax stamps and other product markings to facilitate enforcement and tax collection, as required by Article 8 of Protocol.
    • ‘Establish effective track-and-trace systems to follow tobacco products through the supply chain from production or import to sale to consumers (Article 8 of the Protocol).
    • ‘Establish effective enforcement teams equipped with automated reporting devices, to reduce human discretion in tobacco tax administration (Articles 8 and 19 of the Protocol).
    • ‘Obtain detection equipment and use it effectively at customs posts (Articles 14 and 19 of the Protocol).
    • ‘Develop a risk profile to target inspections (Articles 10, 14 and 19 of the Protocol).
    • ‘Set relatively low duty-free allowances (Article 13 of the Protocol and Article 6.2 of the FCTC) for tobacco product purchases, both in terms of amounts and frequency.
    • ‘Regulate or ban trade in tobacco products in free trade and other special economic zones (Article 12 of the Protocol).
    • ‘Set and enforce significant financial penalties and penal provisions for illicit trade in tobacco products (Articles 15, 16 and 17 of the Protocol).
    • ‘Provide for secure and environmentally friendly destruction of seized cigarettes, carried out by the regulatory authorities and not by the tobacco industry (Article 18 of the Protocol).
    • ‘Educate the public on the impact of tobacco illicit trade.
  • Vaping legal but difficult

    Vaping legal but difficult

    Increasing numbers of Saudis are ditching their cigarettes and switching to vaping devices, according to a story in Arab News.

    And they are free to do so because there are no laws banning vaping in Saudi Arabia. Indeed, vapers are free to indulge their habit in public.

    But there is a catch. There are apparently no legal ways to obtain a vaping device or e-liquid.

    The Ministry of Commerce and Investment banned the sale of vaping products in September 2015.

    And Saudi law forbids the sale of such items and considers anyone bringing them in from abroad to be smuggling and, therefore, liable to be fined and have the items confiscated.

    These bans, the News said, were forcing vapers in the Kingdom to seek ‘alternative’ methods of buying supplies – alternative methods whose legality was doubtful, which was leaving vapers unsure if they were breaking the law.

    One problem for the authorities is that while neighboring countries such as the UAE have adopted similar stances towards vaping – selling the equipment is illegal but using it is fine – others, such as Bahrain, are more relaxed about vaping. So Bahrain is a prime location for smugglers sourcing vaping products.

    Many people seem to take a pragmatic view of the situation. Those who spoke to the News called for vaping products to be regulated. “They [vapers] will probably do it anyway,” said a local vaper. “And with Saudi Arabia’s smoking rate being as high as it is, this could be a lucrative area of investment.

    “Tax it. Double the price. Do whatever you have to do. Make it safer for everyone.”

    Saudi Arabia is said to have a high smoking rate, even though the practice is considered taboo. The Saudi Diabetes and Endocrine Association estimates the number of smokers is almost six million. And this figure is expected to rise to 10 million by 2020, or roughly 30 percent of the population.

  • Threat to SA’s growers

    Threat to SA’s growers

    South Africa is at risk of losing its tobacco-growing industry if British American Tobacco Southern Africa (Batsa) switches to buying tobacco from overseas, according to a story in the Business Day.

    Batsa recently notified the country’s only tobacco processor, Rustenburg-based Limpopo Tobacco Processors (LTP), that it might have to consider buying foreign tobacco should the illicit tobacco industry gain further traction.

    Christo van Staden, the MD of LTP, was quoted as saying that the move would put the existence of his company in doubt.

    “With an estimated global over-production of tobacco leaf expected this year and declining markets, it will be impossible for LTP to find alternative markets for these huge volumes of tobacco,” Van Staden said.

    According to the story, Batsa said it was considering the switch because of the deteriorating market conditions for the tax-paying portion of the industry.

    In December 2018, research firm Ipsos said cigarettes selling for less than the tax of R17.85 per pack owed to the SA Revenue Service had grown market share by more than 25 percent, from 33 percent to 42 percent in three months.

    It was not spelt out why Batsa would find it necessary to switch to buying tobacco from overseas if illicit tobacco products increased their share of the domestic market, but presumably it believes that it can buy tobacco cheaper from elsewhere.

    Van Staden said his short-term request to the Government was not to impose any further increases in excise taxes on cigarettes in 2019, because that would simply make the non-tax-paying products even cheaper by comparison with legal products.

    LTP buys and processes most of SA’s tobacco crop from about 100 commercial farmers and about 150 emerging farmers. The industry is said to employ 10,000 farm workers with 35,000 dependents.

  • Tobacco firms accused

    Tobacco firms accused

    Sri Lanka’s Health Minister Dr. Rajitha Senaratne yesterday accused some locally-based tobacco companies of being involved in a ‘racket to mislead the public on the use of cigarettes in the country,’ according to a story in The Colombo Gazette.

    Senaratne said that some companies were importing illicit cigarettes and distributing them in the market to give the impression that there was a high number of people smoking cigarettes in the country.

    He said that Sri Lanka had implemented nine out of the 10 recommendations of the World Health Organization (WHO) on limiting the use of cigarette use in the country.

    The Minister said also that taxes on cigarettes had been increased to discourage their use.

    It wasn’t clear from the story whether the minister believed that tobacco companies were using the illegal trade to promote, say, the normalization of smoking within society; or whether such promotion was a side-line of the money-making scheme that is the illegal trade.

  • EU and WHO at loggerheads

    EU and WHO at loggerheads

    A French member of the EU Parliament has said that the Commission’s tobacco-products tracking-and-tracing acts do 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 posed to the Commission, 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?’
  • EU response co-ordinated

    EU response co-ordinated

    The European Anti-Fraud Office (OLAF) makes every effort to co-ordinate the EU’s fight against tobacco-products smuggling, the EU Commission said yesterday.

    The Commission was replying to a question from a Czech member of the EU Parliament who had questioned whether the high number of illicit cigarettes entering France should be principally a matter for the French authorities as the Commission had previously suggested.

    In a preamble to his question, Tomáš Zdechovský said that, in its response to parliamentary question E-003300-18 [see TR’s story of September 21, 2018: Going it alone], the Commission had confirmed that, ‘OLAF can bring significant added value by helping co-ordinate anti-smuggling operations’.

    However, in relation to the cigarettes smuggled from Algeria to France, it had stated ‘France has so far not requested OLAF’s assistance in this regard’.

    ‘It is estimated that the annual revenue losses to the EU due to cigarette smuggling amount to as much as €10 billion every year; France has the highest volume of illegal cigarettes in the EU, and OLAF has the unique investigative mandate to fight tobacco smuggling into the EU,’ Zdechovský said, before asking:

    ‘Given that the issue in France is precisely that of tobacco smuggling into the EU, should OLAF not be more proactive?’

    In reply, the Commission said that OLAF was proactive and made every effort to co-ordinate member states’ actions to fight the smuggling of tobacco products into the EU.

    ‘A new European Commission Action Plan on fighting illegal tobacco trade, published on 7 December 2018, addresses the increasing global dimension of tobacco smuggling by proposing a combination of targeted policy and enforcement initiatives, including actions by OLAF,’ the Commission said.

    ‘As regards cigarette smuggling from Algeria into France specifically, OLAF has informed the European Commission that it is in contact with the French customs authorities with a view to assessing the issue and contributing to their actions to counteract this illegal business.’

  • Don’t mention taxes

    Don’t mention taxes

    Organized criminals are targeting Wales with illicit cigarettes because of a lack of investment in enforcement, according to a BBC Online story quoting a senior investigator.

    Clive Jones of Powys Council Trading Standards said tobacco control strategies would be undermined unless central enforcement were introduced.

    New figures were said to show that about 150,000 illicit tobacco products had been seized in Wales since 2013.

    Jones said the threat was that Wales would become a dumping ground for criminals involved in the illegal trade in cigarettes – that criminals would see Wales as an open door.

    And this presented a challenge to the Welsh Government.

    “It’s great having tobacco control strategies but the enforcement arm of that needs to be in place, and if it’s not it completely undermines the wider strategy,” said Jones.

    Meanwhile, Suzanne Cass, chief executive of Ash Wales, said the Welsh Government should back the antismoking charity’s plan to tackle the illegal trade via a central communication and enforcement program.

    And Steve Wilkins, a former Dyfed-Powys police detective chief superintendent who is now anti-illegal trade operations director at Japan Tobacco International was quoted as saying that there were “vast amounts” to be made from illicit tobacco.

    “It is the commodity of choice for organised crime because the profits are high, the chances of getting caught are low and the actual sanctions are very, very low,” he said.