Category: Illicit Trade

Tracking the rationale
A member of the European Parliament (MEP) has expressed concern that the introduction of a tobacco tracking and tracing system could run ‘counter to all business rationale’.
In a preamble to questions posed to the European Commission and that will be answered by the Commission in writing, the Hungarian MEP Norbert Erdős said the purpose of the tobacco tracking and tracing system envisaged in Directive 2014/40/EU was to combat the illegal tobacco trade, which was not only prejudicial to public health and taxation, but also detrimental to the legitimate interests of compliant business operators and lawful tobacco growers.
‘I am concerned, however, that the EU system will be nothing but an isolated solution, as there are no guarantees as to whether third countries, which are sometimes the origin of illicit tobacco products, will introduce a similar system,’ he said.
‘Even if they do, such schemes may not be interoperable with the EU system.
‘Without such guarantees, there is a significant risk that we will be introducing a mechanism of very little (if any) public health and budgetary benefit which runs counter to all business rationale.’
Erdős asked:
* ‘How can the Commission guarantee that the EU tobacco tracking and tracing system will be globally interoperable?’ and
* ‘What consultations are taking place with the WHO Framework Convention on Tobacco Control (FCTC) Secretariat and what internationally recognised standards are being taken into account for this purpose?’
August 15, 2017
Running out of steam
The number of smokers in Australia has increased for the first time since anti-smoking campaigns were ramped up a generation ago, casting doubt on the effectiveness of cigarette tax increases, according to a story by Adam Creighton for The Australian.
Creighton quoted Dr. Colin Mendelsohn, an expert in public health at the University of New South Wales, as saying that an unexpected standstill in the national smoking rate since 2013 combined with a rapid population growth had pushed up the number of regular smokers by more than 21,000 to 2.4 million.
Mendelsohn said Australia’s “punitive and coercive” policies to curb smoking had “run out of steam”.
“For the first time ever, there has been no statistically significant reduction in the smoking rate, and an increase in the number of smokers in Australia,” he reportedly told The Australian, noting the nation’s smoking rate was now higher than the US’ smoking rate for the first time in a decade. “This is despite plain packaging and the most expensive cigarette prices in the world.”
Mendelsohn said plain packaging and tax increases had worked better for younger smokers than for older smokers, noting regular smoking rates for 12-to-17-year-olds had halved to 1.5 percent during the past three years. “But we’re left with established, older smokers who can’t or won’t quit. The strategy of higher prices isn’t working for them,” he said.
A standard pack of Marlboro cigarettes averages $25.10 in Australia according to price comparison website Numbeo, compared with $14.80 in Britain, $8.50 in the US and $1.90 in Indonesia.
There was a law of diminishing returns associated with price increases, said Mendelsohn, and a lot of smokers were digging their heels in. High prices were fuelling a black market.
Meanwhile, Dr. Alex Wodak, director of the Australian Drug Law Reform Foundation, endorsed Mendelsohn’s analysis and concerns. “Australia is doing everything right in terms of tobacco control, but one key difference with the UK and USA, where smoking rates have dropped, is our hostility to e-cigarettes,” he said.
Creighton’s story is at: http://www.theaustralian.com.au/news/nation/more-smokers-lighting-up-despite-everincreasing-taxes/newsstory/190014e7306548c49fc372dabb5a0555.
August 15, 2017
Customs officers charged
Two members of a cell of allegedly corrupt Customs officers have been charged as part of a series of raids targeting organised crime figures in Australia and Dubai this week, according to a story by Dan Oakes for the Australian Broadcasting Corporation (ABC).
Australian Customs official Craig Richard Eakin and former Customs employee Johayna Merhi were said to have been charged this week with corruption offences over an alleged tobacco smuggling ring.
‘Documents obtained by the ABC suggest Eakin and Merhi are allegedly the latest in a line of Sydney-based Customs officers suspected of passing information to members of the Jomaa family and its associates for years, which police allege allowed the smuggling of cigarettes and drugs into Australia,’ Oakes wrote.
‘The arrests raise questions about how the influence of the family was allegedly allowed to permeate Customs for so many years, despite warnings from law enforcement agencies.’
Oakes’ story is at: http://www.radioaustralia.net.au/international/2017-08-10/customs-officers-suspected-of-passing-information-to-alleged-crime-figures/1692686
August 10, 2017
Leaf self-sufficiency sought
Iran has made plans to increase the land it has under tobacco by 500 percent, according to a story in The Financial Tribune citing the Islamic Republic News Agency and quoting the head of the Tobacco Planning and Supervision Center, Ali Asghar Ramzi.
About 20 percent of Iran’s leaf tobacco requirement is domestically produced, and the country plans to become self-sufficient.
Imported tobacco is said to be 30-40 percent more expensive than is local leaf.
Almost 65 percent of the more-than 5,000 tons of tobacco produced in Iran is grown in the northern province of Golestan, according to Hosseinali Qavanlou, head of Golestan’s Industries, Mines and Trade Organization.
Meanwhile, annual cigarette consumption in Iran stands at 55 billion.
The domestic production of cigarettes reached 45 billion in the most recent Iranian year (March 2016-March 2017), close to 15 billion more than the production of the year before.
Ramzi said plans were underway to increase the local production of cigarettes to 50 billion this year.
He said that 14.8 billion cigarettes were produced in Iran during the first four months of the current Iranian year that started on March 21, up 37 percent on the production of the corresponding period of last year.
About 960,000 cigarettes were imported and 2.6 million were smuggled into the country during the same period, figures that were down 66 percent and 44 percent respectively year-on-year.
August 9, 2017
Criminals given “leg-up”
An Australian Liberal-party backbencher fears his government may be giving a “leg-up” to organized criminals by continuing to bump-up tobacco taxes, according to a story by Roje Adaimy for the Australian Associated Press.
Craig Kelly told parliament on Tuesday the retail price of a pack of cigarettes was headed toward $40 in Australia, yet packs were being ‘sold wholesale in Asia for the equivalent of $1’.
He agrees the extra revenue from the latest tax increase will help repair the budget and that the high cost of smoking could deter people from smoking.
“But my concern that what will happen, is we’ll be basically creating prohibition by price,” Kelly was reported to have said.
“The risk is that we’re going to turbocharge the illicit and underground market, we’re going to turbocharge smuggling, we’re going to turbocharge black market cigarettes and we’ll be giving a leg up to organised crime.”
According to Kelly, about 14 percent of the cigarettes sold in Australia are illicit, and he wants law enforcement agencies to be given more resources to monitor the trade.
While Mr Kelly is happy to see fewer young people smoking and wants rates to drop to zero, he questioned whether higher prices were just diverting them to other drugs.
“There is a real risk because of the price sensitive nature of cigarettes that we may merely be trading one health hazard for another,” he said.
His comments came as the lower house passed a bill to increase the tax on roll-your-own cigarette tobacco, cigars, snuff, and other products to bring them in line with manufactured cigarettes.
The change, announced in the May budget, will be made over four years and is expected to rake in $360 million.
August 9, 2017
NZ to legalize smokeless
The sale of smokeless tobacco products is to be legalized in New Zealand with a view to providing smokers with less-risky alternatives to cigarettes, according to a story by Rachel Thomas for stuff.co.nz.
Associate Health Minister Nicky Wagner said yesterday that some smokeless products available internationally, including heat-not-burn, snus, moist snuff, dissolvables and inhaled nicotine devices, might be significantly safer than were cigarettes.
Additionally, she added, restricting sales of these products might exacerbate supply and demand issues; for example, by encouraging black market sales.
Current laws ban the import, sale and distribution of tobacco products described as suitable for chewing or any other oral use besides smoking.
In her announcement Wagner said the government intended to establish a pre-market approval system for smokeless tobacco and nicotine-delivery products, other than e-cigarettes.
“This is part of new thinking – a forward looking approach, building on some of the innovative new technologies that are available intentionally to try and give smokers safer alternatives to tobacco,” she said.
Under pre-market approval provisions, smokeless products could be sold legally only after manufacturers had demonstrated that the use of these products was significantly less harmful than was tobacco smoking.
Wagner made her announcement in front of health experts and advocates who were presenting the Achieving Smoke-free Aotearoa Project (ASAP) – a road map on how to achieve the country’s smoke-free 2025 goal.
Their plan called for the government to reduce the availability and convenience of tobacco products, to place severe restrictions on retailers and to impose massive cigarette tax increases.
Project leader, University of Otago Wellington Professor Richard Edwards, reportedly was “a bit taken aback” by Wagner’s announcement.
“We put all these recommendations and things in the report and this wasn’t one of them,” he said of Wagner’s announcement.
Edwards said the government should assess the impact of new laws on e-cigarettes, which are set to come into effect next year – before adding other types of tobacco-containing products.
August 3, 2017
Illicit machines found
Five ‘key members’ of a gang have been charged in China with producing and selling illicit tobacco machines, according to a Shanghai Daily story relayed by the TMA and quoting the Jiading District People’s Procuratorate.
It is alleged that between February and June 2016, the gang members sold five machines for 2.2 million yuan (US$327,400) in Yunxiao and Xiamen, Fujian province, and in Taiwan.
Prosecutors said that, without getting approval from the local tobacco authority, the main suspect had rented two warehouses in Jiading as workshops and hired workers to produce the tobacco manufacturing machines.
In China, tobacco production and sales are under state control.
August is clearly a busy month for illicit-machinery busts in China. On August 4 last year, this magazine reported that Shanghai police had busted a seven-member gang that built and sold illicit cigarette-making machines nationwide.
The 2016 report, which was based on a story by Janet Zhang for the Shanghai Daily quoting Shanghai Television, bore some resemblances with that of the 2017 story – certainly in respect of geography and machine prices.
The gang, which apparently operated out of the Jiading District of Shanghai, sold their machines to people in other provinces, including Fujian, Liaoning and Guangdong.
When the police busted the gang on July 12, they seized 19 machines.
According to the police, the gang had been running the business since October 2014.
The gang members were said to have bought machine parts from other places and hired people to assemble them in Jiading.
The machines, which were said to have sold at prices ranging from 250,000 yuan to 400,000 yuan, were apparently capable of producing 2,000 cigarettes a minute.
August 3, 2017
Illegal trade targeted
The trade association representing the UK tobacco industry yesterday launched a campaign targeting the illegal tobacco trade across some of the busiest transport hubs in the UK, key transports routes in and out of the country and online.
‘The campaign which builds on previous TMA [UK] activities seeks to challenge the flows of non-UK duty paid tobacco from known high-risk routes into the UK which is then sold on illegally in a variety of ways,’ said a TMA press note.
‘Research shows that this ranges from simply selling on to friends and family or by more sophisticated means such as through the use of retailers, social media and community websites.
‘The TMA is therefore extending its campaign activities to focus on such online platforms used for the sale of illegal tobacco as well as known transport routes used to bring non-UK duty paid tobacco into the UK.’
The campaign, which will run during the summer, will target, for instance, airports, ports, international coaches, websites and social media platforms.
The TMA said it was advising adult consumers to adhere to the government guidelines and only bring tobacco into the UK for personal use, because the consequences for doing otherwise could be severe.
And it said it was advising smokers not to buy illicit tobacco products from online sources because in doing so they could be aiding organised crime.
“As people travel to and from the continent over the summer holidays, we are taking this opportunity to remind them with this new campaign that it is illegal to bring back tobacco from overseas and then sell it on in the UK,” said Giles Roca, director general of the TMA.
“Reselling tobacco bought overseas is not a victimless crime. This practice affects many hard-working independent shopkeepers who are deprived of legitimate tobacco sales and related footfall.”
August 1, 2017
Taxing smokers
ASEAN governments should try to make their tobacco tax policies more effective, not only for the health of smokers but also for the health of their revenues, according to a story in Vietnam News.
This recommendation was issued recently in a report by the Southeast Asia Tobacco Control Alliance (SEATCA).
SEATCA based its recommendation on a tobacco tax index that was made public during a regional workshop on strengthening tobacco tax administration.
The workshop was held in Siem Reap, Cambodia, and attended by tobacco tax experts from ASEAN countries, including Cambodia, Indonesia, Laos, Myanmar and Vietnam.
The index tracked the ‘progress’ of tobacco tax policies against Article 6 of the World Health Organization’s Framework Convention on Tobacco Control.
It showed that while some countries had made what was called significant progress in formulating and implementing tobacco tax policies, the region had advanced at a slow pace in the past few years, and had been outpaced by economic and income growth.
According to the index, cigarettes are becoming more affordable in ASEAN countries.
Thailand imposes the highest tax burden as a percentage of retail price, 70 percent, Singapore imposes 66.2 percent, Brunei 62 percent, Cambodia 25-31.1 percent, and Laos 16-19.7 percent.
Sophapan Ratanachena, SEATCA’s tobacco tax program manager, said most ASEAN countries had no long-term tobacco tax policies with regularly adjusted fiscal and public health targets.
“The major obstacles in some countries are the ineffective tobacco tax structures, such as Indonesia’s multi-tiered system or those with purely ad valorem tax systems, weak tax administration and tobacco industry interference to weaken tax policy or reduce tax collection efforts,” Ratanachena said.
Based on international guidelines, SEATCA urged ASEAN governments to implement long-term tobacco tax policies that included public health targets, to apply a uniform specific tax system or a mixed system with a minimum specific tax floor, and to tax all tobacco products in a comparable way.
SEATCA recommended that governments should ask tobacco companies to submit periodically detailed financial reports, to establish a tracking and tracing system, including fiscal markings with a unique identifier, to reduce the risk and assist in the investigation of the illegal trade in tobacco products; and to forgo tax-free or duty-free tobacco sales.
It recommended that governments should implement a code of conduct for all government ministries and officials that prohibits unnecessary interaction with the industry.
July 26, 2017
Cigarettes top list of fakes
Cigarettes topped the list of counterfeit products seized at the EU’s external borders last year, according to a Commission press note.
New figures published by the Commission show that customs authorities detained more than 41 million ‘fake and counterfeit’ products at the EU’s external borders in 2016.
‘The goods had a total value of over €670 million,’ the press note said.
‘Everyday products which are potentially dangerous to health and safety – such as food and drink, medicines, toys and household electrical goods – accounted for over a third of all intercepted goods.’
Pierre Moscovici, Commissioner for Economic and Financial Affairs, Taxation and Customs, was quoted as saying that a high level of protection of intellectual property was crucial to support growth and create jobs.
“Fake goods pose a real threat to health and safety of EU consumers and also undermine legal businesses and state revenues.
“Studies show that the EU is particularly exposed to imports of counterfeit products.”
Moscovici paid tribute to the work done by customs authorities in combating fake goods.
“They need support and resources to enable them to protect us all from the dangers that they can pose,” he said.
“Co-operation between law enforcement authorities should be strengthened and risk management systems upgraded to protect the EU from goods infringing on intellectual property rights.”
At 24 percent, cigarettes comprised the top category of counterfeit products seized. Toys (17 percent) were second, foodstuffs (13 percent) were third, and packaging material (12 percent) was fourth.
The number of seized products was up by two percent on that of 2015.
Eighty percent of the counterfeit goods that arrived in the EU came from China, but large numbers of cigarettes originated in Vietnam and Pakistan.
The Commission’s report on customs actions to enforce international property rights has been issued annually since 2000 and is based on data transmitted by member states’ customs administrations to the Commission.
The full report is at: https://ec.europa.eu/taxation_customs/sites/taxation/files/report_on_eu_customs_enforcement_of_ipr_at_the_border_2017.pdf.
July 24, 2017