JT International Bhd (JTI Malaysia) has said it will close its plant in Shah Alam, Selangor, by the end of December, a move that end its manufacturing operations in Malaysia, according to a story in The Edge Financial Daily.
The closure will see about 270 people made redundant and production outsourced to other JTI production facilities.
The news comes in the wake of a statement by British American Tobacco (M) Bhd (BAT Malaysia) in March 2016 that it would close its cigarette-making facility in Petaling Jaya, Selangor, by the second half of 2017, ‘affecting’ 230 people.
According to the Daily’s story, JTI Malaysia said in a statement to it that the ‘extremely challenging’ operating environment in Malaysia was one of the main reasons behind the group’s decision to close its plant. It added that the decision was taken after an extensive review of how it supplies its products to its consumers and the operating environment in Malaysia.
“To ensure consistency in the supply of our quality products to our consumers in Malaysia, we will now source products, for the Malaysian and other Asian markets where we operate, from other JTI production facilities,” the company said.
For the past few years, the three major tobacco companies, BAT Malaysia, JTI Malaysia and Philip Morris (M) Sdn Bhd, have been complaining about the steep increases in tobacco excise taxes that have been imposed and the level of illegal tobacco trade in the country.
The consumption of illicit cigarettes in India increased by 90 percent last year, according to a story by Siddharth Tiwari for the Sunday Guardian, citing ‘industry’ figures.
Industry studies backed by seizure figures are said to have revealed that 17 billion cigarettes are smuggled into India each year.
But, presumably because of locally-produced cigarettes on which tax is not paid, the total number of illicit cigarettes on the market is much higher. According to Euromonitor International, the number of illicit cigarettes consumed in India has increased from 11.1 billion in 2004 to 23.9 billion in 2015.
This was said to make India the fourth largest illicit-cigarette market.
Meanwhile, a study by the Federation of Indian Chambers of Commerce and Industry indicated that the number of illicit cigarettes in India had double during the past decade, causing an annual revenue loss to the national exchequer of more than Rs90 billion.
The illegal trade was said also to be undermining the government’s efforts to reduce smoking by making cigarettes increasingly expensive.
But some see the high-tax strategy used by the government as being at least part of the problem.
Tobacco-industry experts were said to have told the Sunday Guardian that high and discriminatory taxes, coupled with extreme regulations such as pictorial warnings, were providing a boost to the illegal cigarette trade in India.
“The illegal cigarette trade is on a growth trajectory due to the high tax arbitrage,” said Syed Mahmood Ahmad, director of the Tobacco Institute of India.
“In addition to this, non-adherence of illegal cigarettes with regulations like pictorial warnings lends an impression that they are safer alternatives to their legal counterpart.”
The destruction of a $9 million tobacco crop in rural Victoria shows illicit growers they cannot hide from the law, according to an Australian Associated Press story quoting the Australian Taxation Office.
The five-hectare crop was found at a property near Cobram on the New South Wales border in Victoria’s north last week.
The five tonnes of tobacco that would have been harvested from the crop was said to have an estimated street value of $9 million.
The ATO, assisted by Victoria Police, seized also three trucks and a tractor when they raided the property.
The tobacco was ploughed into the ground, making it worthless.
“This seizure further demonstrates that those who participate in illegal activity cannot hide,” ATO deputy commissioner Michael Cranston said on Monday.
It was said by AAP to be the fourth operation of its kind this year and the ninth in Australia since July 2016, with almost $48 million worth of tobacco destroyed in that time.
Last week, this website reported on a story by John Ellicott for The Land, which described how there had been six major leaf tobacco growing busts during the past six months.
The tobacco provisions within Ontario’s 2017 budget have been described by Imperial Tobacco Canada as a reversal of previous policy and a boost for those involved in the country’s biggest illegal tobacco market.
The budget imposes an additional $2 in tax on a carton of cigarettes and makes provision for the addition of another $8 in tax during the next two years.
The Finance Minister was said to have reversed the province’s policy on tobacco taxation a year after putting it in place.
In a statement issued through PRNewswire, Imperial said it was committed to working with government on responsible legislation and fiscal policy, but believed the budget measures would push more people toward the illegal market.
“For a province that has the highest contraband rate in Canada and the second highest in all of the Americas, this increase is both irresponsible and irrational,” said Eric Gagnon, head of Corporate and External Affairs. “The Wynne government is caving to the agenda of radical anti-tobacco lobbyists, an agenda that completely ignores public health and the realities of Ontario’s illegal tobacco trade. Now that these groups have had their way, it’s time to take action because these increases will only exacerbate the significant contraband problem in the province.”
Imperial’s statement said that Ontario was the hub of Canada’s contraband tobacco trade and lost an estimated $1 billion in tax revenue each year because of that trade.
The province was home to more than 20 illegal tobacco factories and hundreds of smoke shacks with ample production capacity.
Illegal cigarettes were produced in facilities that were unlicensed, unregulated and uninspected, and because these products were not taxed, they were purchased illegally for a fraction of the price of legal products.
“If health groups are truly concerned with the health of Ontarians, then we invite them to join in the fight against the illicit trade, which provides cheap cigarettes to youth,” said Gagnon. “It’s time to stop turning a blind eye to the growing criminal trade that’s taking place, not only to help curtail tax evasion, but for the fiscal equity and safety of all Ontarians living in the communities where these criminals operate. This reckless, head-in-the-sand approach to tobacco taxation only benefits organized crime.”
“Ontario has poured gasoline on a fire of its own making and has gone back on a commitment it made in its 2016 budget for scheduled, moderate tobacco tax increases over time. The question now is whether or not Ontario will take decisive action to put that fire out? We have seen none so far,” said Gagnon.
Although it is illegal to grow tobacco in Australia, where no commercial production licenses have been issued since 2006, the crop has again become the focus of a multi-million-dollar industry, according to a story by John Ellicott published in The Land.
Criminal syndicates, drawn to the illegal tobacco trade by the soaring prices of cigarettes, are said to have become involved in tobacco farming, and the Australian Taxation Office (ATO) has warned landholders about being approached by individuals wanting to grow tobacco on their farms.
“Whilst we continue to see small farm plots still being used to grow illicit tobacco [primarily in Victoria and New South Wales] we have also seen the emergence of the use of green houses in non-traditional tobacco growing areas,” an ATO spokesperson said.
“There are a number of syndicates involved in the domestic illicit tobacco industry and in some instances [they] have known links to organised crime.”
While smuggling is still the major source for illicit tobacco products entering the domestic retail market, the syndicates are turning more and more to growing their own.
The tobacco is often grown in large paddocks, in fairly open view of the public.
And this is perhaps one of the reasons why there have been six major seizures during the past six months.
On March 22, with the assistance of New South Police, the ATO executed warrants at a property in Cooma, New South Wales, where they destroyed 2,120 kg of leaf tobacco and 26.3 acres of tobacco plants with an estimated excise value of A$11.77 million.
On March 21, with the assistance of Victoria Police, the ATO executed warrants at a property in Macorna, Victoria, where they destroyed 100 kg of leaf tobacco and 15 acres of tobacco plants with an estimated excise value of A$5.8 million.
On January 31, the ATO executed warrants and seized and destroyed 980 kg of tobacco at a property in New South Wales, with an estimated excise value of A$530,000.
On January 17, with the assistance of Victoria Police, the ATO executed warrants at a property near Bacchus Marsh, Victoria, where they seized and destroyed four acres of tobacco plants with a weight of 3,053 kg and an estimated excise value of A$1.52 million.
On December 9, with the assistance of New South Wales Police, the ATO executed warrants at a property in Tahmoor, New South Wales, where they seized and destroyed 114,000 tobacco plants (seedlings) with an estimated excise value of A$8.7 million.
And on November 15, with the assistance of Victoria Police, the ATO executed warrants at a rural property in Eurobin, Victoria, where they seized – from a hot house – and destroyed 123,000 tobacco plants (seedlings) with an estimated excise value of A$10 million.
About 1.1 million deaths could be prevented during the next 40 years in Malaysia if cigarette prices were increased and other measures put in place, according to a story in The Star.
Raising the price of a pack of cigarettes from RM17.00 to RM21.50, coupled with other anti-smoking policies, would deter about 2.1 million Malaysians from picking up the habit, according to a study by the Health Ministry and Universiti Putra Malaysia (UPM).
UPM senior lecturer Dr. Norashidah Mohamed Nor, one of the study’s lead researchers, said the excise tax on cigarettes should be increased from 49 percent to 60 percent, which would increase the price per stick from 40 sen to 64 sen.
But if the government’s target of a 15 percent smoking prevalence in 2025 was to be met, she said, excise increases would have to be backed by 100 percent enforcement of smoke-free policies, a comprehensive marketing ban, including a ban on point-of-sale promotions, and a mass media campaign on the dangers of smoking.
As of 2015, about five million or 22.8 percent of the Malaysian population aged 15 and above were smokers.
Referring to claims that the consumption of illicit cigarettes would rise if licit cigarettes were made more expensive, Norashidah said the study had found this to be inaccurate. She described the demand for contraband as relatively stable. Contraband’s share of the overall market had decreased slightly despite the fact that cigarette excise tax had been increased during the “past years”.
Last month, Deputy Health Minister Datuk Seri Dr. Hilmi Yahaya said raising cigarette prices to RM21.50 a pack was among the measures to be taken to reduce the number of smokers in the country.
But the Health director-general Datuk Dr. Noor Hisham Abdullah said the scourge of illicit cigarettes would have to be addressed first before increasing the price. “We are discussing with the Immigration Department, Finance Ministry and all the concerned parties before implementing the new price.”
British American Tobacco (Malaysia) is concerned by the high level of illegal cigarette trade in the country, which is said to form the main challenge to the licit tobacco industry in the short- and medium-term, according to a story in The New Straits Times.
Sales of illicit cigarettes had surpassed those of licit products, the company’s managing director Erik Stoel was quoted as saying.
Illicit cigarettes, which had accounted for 36.9 percent of total cigarette consumption in 2015, had captured a record 57.1 percent by December 2016.
And the outlook for 2017 was dependent on the outcome of the government’s initiatives to curb the illegal trade,” Stoel told reporters after BAT’s annual general meeting in Petaling Jaya on Tuesday.
But the company is nevertheless confident that it can weather these storms.
“The group has a long-standing legacy and presence within the Malaysian economic landscape,” Stoel said.
“While there are currently big challenges facing the tobacco industry, the group has in place a clear strategy and commitment to invest, to help the group navigate through these challenging times.”
The packaging and product standardization aspects of the Canadian federal government’s proposal to amend certain acts include unlawful and flawed positions, and will be counterproductive in achieving its objectives, Imperial Tobacco Canada said in its submission to the Senate Committee on Social Affairs, Science and Technology.
Bill S-5, which would amend the Tobacco Act and the Non-Smokers’ Health Act and would make consequential amendments to other acts, was introduced in the Senate in November. It combines two public policy initiatives in one piece of legislation: the legislative framework for vaping products, and the further regulation of tobacco products through provisions enabling the introduction of packaging and cigarette standardization.
“While we support the government’s public health objectives related to reducing the harm of cigarette consumption, we believe measures such as packaging and product standardization are counterproductive to the government’s stated objectives,” said Eric Gagnon, head of corporate and external affairs. “These measures represent an unprecedented assault on commercial expression and wholesale expropriation of an industry’s brands and trademarks that cannot be justified.”
In a press note, Imperial said there was no reliable evidence that standardized packaging would work and that such measures had failed to deliver any of the anticipated benefits in Australia, the only country that had fully implemented standardized packaging for any substantial length of time.
‘Instead the policy has led to unintended consequences that are adversely impacting the public, businesses and government,’ the note said.
‘There is no reason to believe that the result would be any different in Canada, especially given the nature and magnitude of its existing illicit tobacco product problems.
‘Through the standardization measures, Health Canada will provide a template for organized crime to flood the Canadian market with counterfeit products – and consumers, retailers and law enforcement will have no ability to distinguish legal from illegal products.’
But Imperial said that with respect to vaping products, it supported the framework introduced by the government in Bill S-5, with some notable exceptions related to discouraging their promotion through reference to harm reduction.
It urged prompt enactment of appropriate regulations governing the manufacture of these products.
“Contrary to packaging and product standardization, there is a wealth of evidence suggesting that using e-cigarettes as an alternative to conventional cigarettes can have an impact on public health,” said Gagnon. “The proposed legislation must allow manufacturers and retailers the ability to communicate to consumers reliable substantiated evidence about those new products and their reduced risk and harm reduction potential.”
Imperial said that if the focus was truly on public health, then the government should make the vaping products’ provisions of Bill S-5 the priority. “If the government is committed to improving public health, it would acknowledge the harm reduction potential of vaping products as an alternative to conventional cigarettes, and prioritize the introduction of clear regulations around these products,” said Gagnon.
Meanwhile, the Canadian Vaping Association (CVA) has come out in support of Bill S-5. Representatives of the CVA were said to have underscored the importance of including electronic-cigarette-specific amendments to the bill during a presentation before the Senate Standing Committee on Social Affairs, Science and Technology.
The CVA quoted Senator Chantal Petitclerc, the sponsor of the bill, as saying that it “strikes a balance between the harms from vaping products if they entice youth to develop a nicotine addiction and the public health benefit if they contribute to reducing tobacco-related death and disease”.
“This is why the government is proposing a flexible regime, one that can be adjusted as the science on vaping products develops,” he said.
The CVA said that it endorsed the government’s science-based approach.
CVA’s sister organization, the Electronic Cigarette Trade Association of Canada, also made a presentation to the Senate committee.
A new campaign spearheaded by British American Tobacco Romania that is seeking further to reduce the black market in tobacco products is a continuation of a collaboration between the company and the Romanian authorities, according to a story by ACTMedia News Agency.
The collaboration saw the reduction of the black market from 36.3 percent at the beginning of 2010 to 16.8 percent in 2016. The next stage aims to get it down to 10 percent.
“The illegal traffic of cigarettes must drop,” said Ileana Dumitru, public relations manager of BAT Romania.
“Each sixth cigarette smoked in Romania comes from illegal traffic which means less income for the state budget.
“We want to support the Romanian authorities to reach its objective to bring the black market to the European average of 10 percent.”
According to the company, Romania has 2,000 km of borders with non-EU countries where the price of tobacco can be six times lower than in Romania.
The state budget was said to lose almost €50 million every month due to the black market and, over the past seven years (2010 – 2016), the losses were put at €4.8 billion.
For every percentage added to the illegal tobacco market, the state budget reportedly loses annually another €40 million.
As part of the campaign, BAT Romania is making public information about where in the country illicit cigarettes are intercepted and where the main negative effects of smuggling are felt.
The company is hoping, too, to involve the public in reporting any suspicious activities possibly related to smuggling.
Counterfeit cigarettes and tobacco are being advertised and sold through Facebook, according to a BBC online story.
Counterfeit products are reportedly being sold by people using fake profiles on buy and sell pages for the south-east of England.
Facebook was quoted as saying that content in breach of its commerce policy was always removed, but ‘cut-price’ tobacco and cigarettes are said to be being sold through the social media site’s Marketplace pages.
Undercover reporters were said to have arranged to meet a seller in Tunbridge Wells, Kent, and purchased items marketed as Mayfair cigarettes and Amber Leaf rolling tobacco.
When analysed, these products were found to contain double the lead content and a third more cadmium than did genuine products. Both of these are toxic metals that can cause damage to the liver, kidneys and brain.
Jon Griffin, analyst at Kent Scientific Services, was quoted as saying that human beings were not good at getting rid of contaminants.
“So the likelihood is you are going to be taking in more of those contaminant metals and they will remain in your system in organs, in the brain, in other organs in the body and you will not get rid of them,” he said.
“Over a period of time there’s a bigger potential health risk.”
British American Tobacco (Malaysia) is concerned by the high level of illegal cigarette trade in the country, which is said to form the main challenge to the licit tobacco industry in the short- and medium-term, according to a story in The New Straits Times.
