Category: Illicit Trade

  • Illegal-trade crackdown

    Illegal-trade crackdown

    Chinese tobacco authorities were involved in the seizure of 195,000 cartons of smuggled and counterfeit cigarettes during the first half of this year, according to a Xinhua News Agency story quoting the State Tobacco Monopoly Administration.

    Tobacco authorities at all levels were said to have worked closely with the police and customs authorities to intensify a crackdown on smuggling gangs.

    Law enforcement agencies prosecuted 1,601 people for producing and selling counterfeit cigarettes.

    According to Chinese law, people who sell counterfeit products worth more than 50,000 yuan (US$7,353) are liable to punishment, while the worst offenders may be sentenced to life in prison.

  • WHO report published

    WHO report published

    The recently-appointed director general of the World Health Organization, Dr Tedros Adhanom Ghebreyesus, has said that governments around the world “must waste no time in incorporating all the provisions of the WHO Framework Convention on Tobacco Control [FCTC] into their national tobacco control programs and policies”.

    “They must also clamp down on the illicit tobacco trade, which is exacerbating the global tobacco epidemic and its related health and socioeconomic consequences,” he said in a foreword to the latest WHO report on the global tobacco epidemic, which was published yesterday. “Forty Parties are needed for the Protocol to Eliminate Illicit Trade in Tobacco Products, under the WHO FCTC, to come into force. Currently, only a few more Parties are needed for this important step to occur.”

    The protocol, which was promoted by the WHO’s previous director general and which was adopted in November 2012, still has not entered into force. At its heart, it calls for the establishment of a tobacco-products tracking-and-tracing system, but a search for ‘tracking and tracing’ in the 135-page report brought up only one oblique reference, in a passage on tax stamps.

    In a press note issued alongside the report, which is said to have been ‘made possible by funding from Bloomberg Philanthropies’, the WHO said its latest report had found that more countries had implemented tobacco control policies, ranging from graphic pack warnings and advertising bans to no-smoking areas, though it wasn’t clear what was meant by ‘more’. ‘About 4.7 billion people – 63 percent of the world’s population – are covered by at least one comprehensive tobacco control measure, which has quadrupled since 2007 when only one billion people and 15 percent of the world’s population were covered,’ the press note said. ‘Strategies to implement such policies have saved millions of people from early death.

    ‘However, the tobacco industry continues to hamper government efforts to fully implement life- and cost-saving interventions…’.

    The press note went on to say that FCTC strategies to support the implementation of tobacco-demand reduction-measures, such as the “MPOWER” measures, had, during the past decade, saved millions of people from early death and hundreds of billions of dollars. ‘MPOWER,’ the note said, ‘was established in 2008 to promote government action on six tobacco control strategies in-line with the WHO FCTC to:

    • monitor tobacco use and prevention policies;
    • protect people from tobacco smoke;
    • offer help to quit tobacco use;
    • warn people about the dangers of tobacco;
    • enforce bans on tobacco advertising, promotion and sponsorship; [and]
    • raise taxes on tobacco.’

    The WHO press note is at: http://www.who.int/mediacentre/news/releases/2017/tobacco-report/en/.

    The report is at: http://apps.who.int/iris/bitstream/10665/255874/1/9789241512824-eng.pdf.

  • Illegal trade exposed

    Illegal trade exposed

    Philip Morris International has told the US Commission on Security and Co-operation that it has a ‘clear business imperative to combat the problem of the illegal tobacco trade’ and to ensure its products are sold legally in the market for which they are intended.

    According to a note posted on PMI’s website, Marc Firestone, the company’s senior vice president and general counsel yesterday appeared as an invited witness before the commission to offer expert testimony in support of the commission’s objective of addressing the security and economic threats posed by the illegal trade in tobacco.

    The commission is a bipartisan body of the US Congress with representation from the House of Representatives and Senate.

    Firestone is said to have told the commission that the global illegal tobacco trade annually deprived governments of US$40-50 billion in lost tax revenue, a figure greater than that of the illegal trade in oil, wildlife, timber, arts and antiquities, and conflict minerals combined. He added that “criminals are the only promoters of the global illegal tobacco trade”.

    “The revenues that governments and law-abiding manufacturers like PMI lose every year to the illicit trade in tobacco are huge,” Firestone said. “However, the threat posed to safety, security, and the rule of law in Europe, the United States and around the globe is where the interests of our company and the concerns of this commission most pointedly intersect.”

    Firestone was said to have emphasized the critical role co-operation between industry, law enforcement, and government authorities could play in tackling illicit tobacco, and outlined a series of concrete measures that these groups could take to further reduce the flow of illicit tobacco worldwide.

    With Firestone on the expert panel were Dr. Louise Shelley, founder and executive director of the Terrorism, Transnational Crime and Corruption Center at George Mason University, and Professor David Sweanor, an adjunct professor at the University of Ottawa and global tobacco control policy expert.

    Firestone’s testimony is at: https://www.pmi.com/docs/default-source/pmi_media-center/pmi-testimony_final_17-july-2017.pdf.

  • Illegal trade increasing

    Illegal trade increasing

    A recent study conducted by the Foundation for Economic and Industrial Research in Greece, estimates that illicit products could account for 30 percent of cigarette sales this year, according to a Kathimerini story relayed by the TMA.

    In January-June this year, the decrease in the legal cigarette market was twice that of the corresponding period last year.

    The story said that high taxes on tobacco products and a lack of remedial measures were considered as factors for the reported increase in the illegal cigarette trade.

  • Government accused

    Government accused

    The biggest manufacturer of ‘Native cigarettes’ in Canada is suing the federal government for $3 billion for failing to stop the proliferation of contraband tobacco producers, according to a story by Mark Bonokoski for the Toronto Sun.

    The lawsuit, filed in the Ontario Court of Appeal at the end of June by Grand River Enterprises’ (GRE) Jerry Montour and three other principals in the company, accuses the Attorney General of Canada of ‘malfeasance in public office, negligence, breach of fiduciary duty, and breach of aboriginal rights’.

    The foursome, all status Indians, is seeking $1.5 billion in damages for revenues allegedly lost to about 50 unlicensed and therefore illicit cigarette manufacturers in the province competing with their brands, and another $1.5 billion for the government’s failure to close them down.

    The federal authorities have yet to file a statement of defence.

    The lawsuit is based on two theories of liability – the ‘forced incorporation’ of GRE, and the ‘failure’ of the federal government to ‘enforce’ its agreement to come down hard on First Nation cigarette companies manufacturing products without a licence.

    Bonokoski said that a raid by the RCMP on GRE in the mid-1990s resulted in GRE agreeing to pay federal excise taxes to avoid being shut down, while, for their part, the federal authorities promised to ‘intensify enforcement against contraband to level the playing field between GRE and other on-reserve tobacco manufacturers’.

    GRE argues in the court document that the federal government, namely through the Attorney General’s office, has failed to implement or administer what has been cited as the 1994 Anti-Smuggling Initiative and, as a result of not enforcing laws against the production of contraband cigarettes by other First Nation profiteers, has caused Montour and company to incur substantial losses.

    Bonokoski’s piece is at: http://www.torontosun.com/2017/07/15/first-nations-cigarette-maker-suing-the-feds-for-billions.

  • Tracking questions

    Tracking questions

    The Hungarian MEP Norbert Erdős has asked the EU Commission whether tobacco producers may continue to introduce their tobacco-products tracking and tracing systems.

    In a preamble to two questions, which are due to be answered by the Commission in writing, Erdős said that though the new Tobacco Products Directive (TPD) entered into force more than three years ago – on 18 May 2014 – the Directorate-General for Health and Food Safety (DG SANTE) planned to adopt, ‘experimentally and only by the end of this year, the delegated and implementing acts intended to bring into effect Article 15 on traceability and Article 16 on security features’.

    ‘This means that the Commission has spent more than three and a half years drafting the outline of the legislation regulating the introduction to the technical specifications, which leaves only 18 months for member states, the industry and distributors to carry out the work needed for them to comply with the legislation,’ he said.

    ‘The Commission has previously declared that member states need not wait for the delegated and implementing acts and that member states and industry operators may start the work needed for them to comply with the requirements specified in the TPD.’

    Erdős asked:

    1. ‘Does that mean that tobacco producers may continue the introduction of their tracking and tracing systems?’ and
    2. ‘Can the Commission confirm one of the conclusions of the Commission’s communication of 6 June 2013 (COM (2013) 324 final) that “the measures implemented by the four big manufacturers under the co-operation agreements, such as tracking and tracing of tobacco products, due diligence in relation to customers and prevention of money laundering, have clearly led to a significant reduction in the presence of these companies’ products on the illicit market”?’
  • Tobacco under the radar

    Tobacco under the radar

    The European Commission has been asked what it is doing to fight ‘bulk tobacco inflows into the European Union’.

    In a preamble to their question, which the Commission will answer in writing, the Italian MEP, Fulvio Martusciello, and the Slovenian MEP, Patricija Šulin, said the fight against the illegal tobacco trade centered largely on manufactured cigarettes.

    However, according to a study carried out by the Universita’ Cattolica del Sacro Cuore and Transcrime in December 2016, the illegal trade in bulk tobacco, or the sale of unbranded cut tobacco outside legitimate channels, had been increasing.

    More than €870 million per year was lost in eight EU member states alone, a considerable proportion because of inflows from outside the EU, mainly from Bosnia and Herzegovina.

    The illegal tobacco trade was in breach of the competition laws laid down in Article 101 of the Treaty on the Functioning of the European Union, but bulk tobacco had never been cited as a growing problem.

    ‘In the light of the above information, what is the Commission doing to fight bulk tobacco inflows into the European Union?’ they asked.

  • Illegal trade on a high

    Illegal trade on a high

    With the arrival in Sri Lanka of record numbers of illicit cigarettes, smoking is on the rise despite the government’s ‘heavy regulations and high taxes’, according to a story by Nishel Fernando for Ceylon Today.

    In an exclusive interview, Ceylon Tobacco Company’s (CTC) MD and CEO Michael Koset told Ceylon Today that smoking in the country was growing slightly year on year because the government’s tax hike had resulted only in a shift in smoking from licit cigarettes to illicit cigarettes and bidis.

    As a result of the government’s tax hike in October and the introduction of VAT in November, the illegal tobacco trade had increased to record levels, he said.

    The illegal trade was estimated to reach about one billion cigarettes this year, which meant that it would account for 30 percent of overall cigarette consumption.

    Last year, the illegal trade was said to have accounted for one percent of overall consumption.

    Koset said that tax hikes hit both the licit cigarette industry and government revenue.

    During the first quarter, 35.6 million illicit cigarettes were ‘detected’, up from four million during the first quarter of 2016. And since only one in 10 illicit cigarettes was detected, an estimated 320 million illicit cigarettes with a market value of Rs16 billion were thought to have entered the market during first quarter of 2017.

    The estimated loss to government revenue due to illicit cigarettes was Rs13 billion during the first quarter.

    At the same time, the licit cigarette sales volume had fallen 29 percent during the first quarter of this year compared to that of the same period of 2016.

    As a consequence of this, CTC’s contribution to government revenue had declined by 11.1 percent to Rs19.7 billion from Rs22.2 billion.

  • Lower taxes, more revenue

    Lower taxes, more revenue

    Pakistan’s government says that a cigarette federal excise duty (FED) reduction is aimed at convincing smokers currently buying black-market products to switch to duty-paid products.

    It says that currently it is losing millions of rupees in revenue to the widespread availability of smuggled cigarettes.

    But not everyone is convinced. Writing in The News, Syed Anwer Alam said the introduction of a third-tier federal excise duty on cigarettes, which would result in a 50 percent reduction in tax on tobacco products – was likely to increase their consumption in the country.

    Quoting ‘a report’, Anwer Alam said Pakistanis smoked more than 65 billion cigarettes annually, and that more than 100, 000 deaths in the country could be attributed to diseases caused by smoking.

    Pakistan was a signatory to the World Health Organization’s Framework Convention on Tobacco Control (FCTC), which called for ‘price and tax measures to reduce the demand for tobacco’.

    The minimum FED suggested under the convention was 75 percent.

    According to Anwer Alam, a ‘report released by a non-profit organization suggests that the cumulative FED on tobacco products till FY 2016-17 was around 57 percent.’

  • OLAF tackling illegal trade

    OLAF tackling illegal trade

    In the executive summary of its 2016 report, the European Anti-Fraud Office, OLAF, said that it had co-organised or supported 12 successful Joint Customs Operations (JCOs) and had made significant progress in its efforts to fight the illicit trade in tobacco products.

    During the year, it had helped national authorities seize 469 million cigarettes.

    And under a section of the report headed, The changing nature of cigarette smuggling, OLAF said that the prevalence of contraband on the EU tobacco market had decreased significantly during the past decade.

    ‘A Commission Staff Working Paper published in 2016 showed, for example, that contraband in genuine Phillips Morris products on the illicit EU tobacco market dropped by around 85 percent from 2006 to 2014,’ it said.

    ‘This, however, did not lead to an overall reduction of illicit products on the EU market as smugglers turned their attention to traffic with “cheap whites,” which are non-branded cigarettes.’

    Later in the report, OLAF said it had a crucial role in co-ordinating large-scale JCOs involving EU and international operational partners. ‘JCOs are targeted actions of a limited duration that aim to combat fraud and the smuggling of sensitive goods in specific areas at risk and/or identified trade routes,’ it said.

    ‘In 2016, OLAF co-organised or supported 12 such successful operations. Four of the JCOs organised in co-operation with Member States (Estonia, Finland, Greece and the Netherlands) were financed by OLAF.’

    One of these operations, JCO Magnum, was organized at regional level and targeted the smuggling of tobacco products by road into the EU from third countries such as Belarus, Ukraine and Russia. The operation was said to have been co-ordinated by the Estonian Customs Administration and OLAF with the involvement of five member states, and led to the seizure of around 11 million cigarettes.

    Meanwhile, OLAF reported that investigators would now be able to access a new Container Status Messages directory that gathered messages reporting the movements of containers transported on maritime vessels. ‘The messages are directly provided by maritime carriers,’ the report said.

    ‘Similarly, an Import, Export and Transit directory has also been developed, containing data on goods entering, transiting and leaving the EU.

    ‘Data relating to exports which will be gathered is limited to sensitive products, such as tobacco, alcohol and fuels.

    ‘As of next year, customs officials as well as OLAF officials will also be able to cross-check the information from both databases to detect potential fraud patterns.

    ‘These new tools will strengthen the analytical capabilities of national customs authorities and OLAF in detecting fraudulent operations.’