Illicit Trade - Tobacco Reporter

Thailand ‘Flooded’ by Untaxed Cigarettes

Thailand’s tobacco trade has seen an increase in internet sales of illegal cigarettes, flooding the market with illegal, untaxed cigarettes, according to The Nation Thailand.

Illegal tobacco products have gone viral online thanks to low operation costs and the ability to avoid police or customs inspections, according to Thanyasarun Sangthong, director of the Thai Tobacco Trade Association (TTTA).

“Meanwhile, illegal tobacco sellers can access as many different groups of customers [online] as they want,” she said.

A TTTA survey showed that online trade of illicit tobacco products increased 97 percent from July to September of last year. Twitter saw the bulk of illegal trades at 91 percent, followed by Facebook at 9 percent.

“There are three reasons why illegal tobacco is popular among netizens: the cheap price compared to legal products, the taste and convenient trade channels,” Sangthong said.

February 17, 2023

Illegal Vapes and Tobacco Seized

Police in Queensland, Australia, seized illegal vapes and tobacco worth AUD500,000 ($342.4321), reports The Daily Mail.

Law enforcement officers allegedly seized 100 kg of illicit tobacco, thousands of vapes and $80,000 cash while executing a search warrant. Two people have been charged and went to court. They will reappear in Mackay Magistrates Court on March 13.

The warrant and arrests were part of Operation Kitimat, an investigation into reports of vapes and tobacco products being sold to minors.

“Operation Kitimat identified that the peak trading times were prior to 9 a.m. and after 3 p.m., which corroborates significant information we received from members of the public,” Mackay Whitsunday District Detective Inspector Emma Novosel said.

“The operation was aimed to disrupt this criminal enterprise and send a clear message that such activity, including the sale of tobacco and smoking products to children, will not be tolerated in Mackay Whitsunday District.

February 17, 2023

Manila Urged to Deprioritize Tobacco in Smuggling Fight

A consumer group is urging the government of the Philippines to focus on food rather than tobacco in its anti-smuggling efforts, reports the Inquirer.

“Given the rising prices of pantry basics like onions, the government is correct in taking steps to curb agriculture smuggling, but for some reason, some of our legislators would rather waste time picking on the tobacco industry,” said Simoun Salinas, spokesperson of Malayang Konsumer.

“The issue here is food security. Food for the Filipinos should be the priority.”

Senate Bill 1812 aims to amend Republic Act 10845—the Anti-Agricultural Smuggling Act of 2016—to include unprocessed and processed tobacco products in the same category as rice, sugar, vegetables, meat and other essential food products entitled to protection against smuggling. Under the act, large-scale smuggling of these products is considered “economic sabotage.”

“Why give special treatment to tobacco products and why now?” asked Salinas. “Why prioritize tobacco and cigarettes when in fact they are vices that are harmful to our health especially to our children.”

An explanatory note of the proposed bill stated that the “ultimate goal is safeguarding our farmers, consumers and the agricultural sector and attaining the goal of food security for the country.”

Under the act, the penalty for economic sabotage and large-scale agricultural smuggling is a maximum of 20 years’ imprisonment and a fine that is twice the fair value of the smuggled product.

February 17, 2023

Smugglers Create Diplomatic Dispute

Tobacco smugglers fleeing customs agents have caused a minor diplomatic incident between Gibraltar and Spain, reports Reuters.

Gibraltar accused Spain of a “gross violation of British sovereignty” after two customs officials entered the territory during an anti-smuggling operation. Spanish media reported that the Spanish customs agents’ boat lost power while chasing the tobacco smugglers.

Gibraltar’s chief minister, Fabian Picardo, said the facts of the incident need to be investigated before diplomatic action is taken; rocks were reportedly thrown at the customs agents, and a video of the incident shows potential shots fired, but it is unclear who fired them.

Spain’s foreign ministry condemned the attack on the customs agents, who suffered “serious injuries” and said it “categorically rejects the terms” of the statement issued by Gibraltar “as well as the claims of alleged British sovereignty over the territory and waters of Gibraltar contained within it.”

Britain and Gibraltar are in the process of negotiating a treaty to settle Gibraltar’s post-Brexit status and decide how to police the border with Spain.

February 7, 2023

Group Predicts Growth for Holograms in 2023

Commercial holograms will maintain robust growth in 2023 despite the global challenges, according to the International Hologram Manufacturers Association (IHMA), which marks its 30th anniversary this year.

Authentication and track-and-trace systems featuring holograms will continue to help to underpin international efforts by government and law enforcement agencies to bolster overt and covert protection strategies in the next 12 months, said IHMA chair Paul Dunn.

“Counterfeiting is and will remain a massive global threat, continually placing governments, brands and the public at risk—and will continue to be tackled effectively to minimize the impact on society. Despite the economic, social and global supply chain challenges, we expect to see [growth] in 2023 with countries enhancing and bringing forward their anti-counterfeiting plans, which feature holograms,” he said.

“These holograms will become even more integrated with other technologies to create intuitive brand engagement programs while, simultaneously, authentication through scanning a QR code on the label acts as a secondary product verification method. This provides a simple unified platform for brands to interact and engage with their customers.”

Dunn also sees the hologram on labeling continuing to become part of a wider function to track a product throughout its lifecycle and post-life cycle in 2023. This combination of authentication and tracking, he says, will give brand owners complete visibility and control from sourcing raw materials through to recycling.

This year will also see continued growth in high security print applications as, increasingly, holography origination capabilities are brought in-house. This cuts the innovation cycle and enables printers to get their technologies specified for new banknote work.

Sustainability will also be one of the key themes of the next 12 months with manufacturers developing strategies to cut their carbon footprints as part of their corporate responsibility strategies. “The IHMA will be leading efforts through its Sustainability Working Group to encourage best practice by sharing information and showcasing companywide initiatives,” Dunn said.

January 27, 2023

Calls for Crackdown on Illicit Vapes

The Philippine Tobacco Industry (PTI) has called on the Philippines’ Bureau of Internal Revenue (BIR) to crack down on illicit vapor products, reports The Manilla Times.

In a letter sent recently to BIR Commissioner Romeo Lumagui Jr., the group emphasized that the full implementation of the Vaporized Nicotine and Non-Nicotine Products Regulation Act “will ensure that the public is protected against the dangers of using illicit products as well as the collection of appropriate taxes aimed at helping our economy.”

The act, which became law in July 2022, regulates the importation, manufacture, sale, packaging, distribution, use and communication of vaping products such as e-cigarettes and heated-tobacco products.

Under the laws implementing rules and regulations (IRR), e-commerce platforms, e-marketplaces and other similar online platforms are mandated to allow only Department of Trade and Industry and BIR-registered distributors, merchants or retailers of vape products, devices and novel tobacco products to sell on their website or platform.

To ensure vape products are made inaccessible to minors, the IRR also requires vapor product refill receptacles to be tamper-resistant and child-resistant. Products packaged or labeled with flavor descriptors appealing to minors are prohibited.

“We are also hoping that the BIR will closely work with enforcement agencies such as the Philippine National Police, the Armed Forces of the Philippines as well as relevant anti-illicit trade groups from the Bureau of Customs to make sure the law and its IRR are effectively implemented,” the PTI said.

The PTI members include Japan Tobacco International Philippines, Associated Anglo-American Tobacco Corp. and Philip Morris Fortune Tobacco Co.

January 20, 2023

Hong Kong Confiscates $24 Million in Illicit Cigarettes

Hong Kong customs officers confiscated HKD190 million ($24.25 million) worth of black market cigarettes in the second-largest smuggling bust in two decades, reports the South China Morning Post.

Hidden in seven cargo containers, the shipment of 69 million cigarettes was destined for Britain and Japan, according to Leung Chun-man, acting assistant superintendent of the customs’ revenue crimes investigation bureau.

One of the containers was packed with L&B and Benson & Hedges cigarettes with U.K. health warnings while another container was filled with Japan Tobacco’s Seven Stars brand cigarettes.

“It is the second-biggest seizure of illegal tobacco products discovered since our records began in 2002,” Leung said. The largest seizure took place in July 2022, when authorities confiscated HKD222 million worth of contraband.

If the contraband had been legally imported, Leung said, it would have generated HKD130 million in tax revenue.

Figures from the Customs and Excise Department show the agency confiscated 732 million black market cigarettes worth HKD1.23 billion last year—the biggest annual haul since records began two decades ago.

As Hong Kong eased its coronavirus restrictions last month, illegal tobacco dealers increased their activities.

In Hong Kong, a pack of 20 cigarettes sells for HKD50 to HKD60 whereas illegal ones can go for HKD15.

January 20, 2023

Counterfeit Tobacco Seized in France

French authorities seized more than 100 tons of illegal tobacco-related products worth €17 million ($18.43 million) during a raid on Jan. 12.

According to Europol, the confiscated materials included 19.4 million cigarettes and 15 tons of cut tobacco along with 50 tons of packaging materials, such as paper, filters and labels, as well as 18 tons of waste from the cigarette production process.

Officers also seized vehicles, factory machinery and electronic equipment. The seized tobacco and counterfeit products were destroyed.

During the raid, which involved more than 60 officers from the French National Gendarmerie, police arrested nine suspects, most of them Moldovan nationals. The gendarmes discovered a quasi-industrial setup for the production of counterfeit cigarettes in large quantities. They discovered three separate zones in the targeted factory.

One of the zones was dedicated to the processing of raw tobacco to produce boxes of cigarettes labeled as well-known brands sold on the legal market. Another zone was dedicated to the storage of large boxes of counterfeit cigarettes. The third zone was used as a living area for the workers with some 15 beds, a kitchen and a living room. This allowed the workers to live at the factory, completely cut off from the outside world.

Europol facilitated the information exchange and provided specialized analytical support. On the action day, Europol supported the French authorities by cross-checking operational information against Europol’s databases in real-time and providing leads to investigators in the field.

In 2020, Europol created the European Financial and Economic Crime Centre to increase synergies between economic and financial investigations and to strengthen its ability to support law enforcement authorities in effectively combating major criminal threats.

January 17, 2023

BAT South Africa to Restructure Operations

BAT is looking to restructure its South African business following a drop in legal cigarette sales. The process may affect 200 jobs.

The cigarette maker attributed its predicament in part to the five-month cigarette sales ban that South Africa implemented in 2020. Intended to help prevent the spread of Covid-19, the measure was later declared unconstitutional by country’s Supreme Court.

By then, however, the damage had been done, according to BAT.

“The 2020 tobacco sales ban resulted in an explosion of growth for the illicit market. This has continued even after the ban on tobacco sales was lifted,” the company said in a statement.

In 2019, BAT South Africa permanently employed around 1,800 staff across its South African operations. Since 2020, it has been forced to retrench more than 30 percent of its workforce, the company said.

Over the same period, the company’s cigarette sales dropped by around 40 percent as the illicit market accelerated, it said.

Based on independent studies, BAT South Africa estimates that the illicit cigarette trade accounts for up to 70 percent of South Africa’s total cigarette market. This illegal trade has severely impacted the sustainability of the legal tobacco industry and is a source of funds for criminal organizations in South Africa,” BAT wrote.

The company urged for stronger enforcement and new policies to combat the illicit trade.

“While BAT South Africa applauds recent efforts by the South African Revenue Service (SARS) and law enforcement agencies to clamp down on the illicit cigarette market, it also calls for even stronger action, given that the current approach has not stopped the growth of illicit cigarettes.

“SARS has issued important new policies, but now it is time to audit manufacturer policy compliance. To support law enforcement agencies and increase their effectiveness, as well as help consumers differentiate between illicit and legal market offers, a minimum retail price policy is required.

“The illicit trade robs South Africa of billions of rands in much-needed tax revenue, and the impact of this is now clearly being seen on legitimate businesses, their operations, and, unfortunately, the livelihoods of those in their value chains. Legitimate businesses cannot operate competitively if the country’s laws are not enforced.”

BAT did not give details of how it would restructure its business or which jobs might be cut.

January 16, 2023

Menthol Ban Failed to Boost Illegal Sales

Banning menthol cigarettes does not lead more smokers to purchase menthols from illicit sources, according to a new research study published in Tobacco Control.

Researchers at the International Tobacco Control (ITC) Policy Evaluation Project at the University of Waterloo evaluated the impact of federal and provincial menthol cigarette bans in Canada by surveying smokers of menthol and nonmenthol cigarettes before and after Canada’s menthol ban.

Smokers were asked whether their usual cigarette brand was menthol-flavored and to report their last brand purchased. Those who were still smoking after the menthol ban were also asked where they last purchased their cigarettes.

Results showed that after the ban, there was no significant change in the purchase of cigarettes from First Nations reserves, the main source of illicit cigarettes in Canada.

“The tobacco industry has a long history of claiming that policies to reduce smoking will lead to substantial increases in illicit trade,” said Janet Chung-Hall, a research scientist for ITC and lead author of the new study, in a statement. “We can add the Canadian menthol ban to the long list of effective policies, such as graphic warnings and plain packaging, whose evaluation disproved the scare tactics by industry—showing that illicit trade did not, in fact, increase.”

A 2022 study that combined the ITC project data with data from a comparable Ontario evaluation study showed that the Canadian menthol ban led to an increase of 7.3 percent in quitting among menthol smokers above that of nonmenthol smokers. Projecting this effect to the U.S., whose Food and Drug Administration has proposed its own menthol ban, the ITC researchers estimate that a U.S. menthol ban would lead 1.33 million smokers to quit.

“Our previous research from Canada and the Netherlands showed that a menthol cigarette ban leads to significant reductions in smoking,” said Geoffrey Fong, principal investigator of the ITC project and professor of psychology and public health sciences at Waterloo. “These findings combine to provide powerful evidence in support of FDA’s proposed menthol ban.”

January 12, 2023

Category: Illicit Trade