Category: Illicit Trade

  • Fake cigarettes on Facebook

    social media photo
    Photo by Jason A. Howie

    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.”

  • Illegal trade growing

    Illegal trade growing

    Malaysia’s second finance minister Datuk Seri Johari Abdul Ghani said yesterday that the illegal cigarette trade was on the rise following the government’s raising of cigarette prices through higher excise duties, according to a story by Fernando Fong for the New Straits Times.

    Johari said the duties, which have pushed cigarette prices up to RM17 per pack, were meant to discourage people from smoking.

    However, smokers were now turning to contraband tobacco, which was mostly smuggled in from neighbouring countries.

    Black market cigarettes were priced at between RM3 and RM5 per pack, which meant that even students could afford them.

    Johari said that illicit cigarettes were more dangerous than were licit ones because their tar and nicotine contents were unknown, and he added that they might also contain other dangerous chemicals at higher-than-permitted levels.

    He said the government was determined to reduce the supply of low-price, contraband tobacco and aimed to lower the smoking rate in the country.

    “The Customs Department will introduce harsher penalties against those who sell illicit cigarettes, which could be tabled in the next parliamentary session,” he said.

  • Ninety percent tax and rising

    90 photo
    Photo by Steve Bowbrick

    Giles Roca, director general of the UK’s Tobacco Manufacturers’ Association (UKTMA), has expressed disappointment that yesterday’s budget raised tobacco taxes.

    “We are disappointed that the government has once again raised taxation on tobacco when tax on some of the lowest priced cigarettes already accounts for 90 percent of the price,” he said.

    “Taxation on tobacco in the UK is already the highest in the EU meaning that prices in the UK are up to four times higher than in other European countries.’

    The UK pre-budget retail price of a typical pack of 20 cigarettes was given by the UKTMA as £9.91, which compares with the equivalent of £3.93 in Spain and £2.81 in Poland.

    Taxation on tobacco was said to have increased by more than 50 percent during the past five years.

    Yesterday’s increase would simply encourage people to buy from the black market and take business away from the legitimate trade, Roca said.

    Such black-market activity added up to about £2.4 billion in lost taxes in the past year alone.

    The Chancellor, Philip Hammond, yesterday announced the imposition of a minimum excise tax on cigarettes, whereas previously the UK had been one of several EU states that had not applied some form of minimum tax. “Today’s announcement to introduce minimum excise taxation at a rate of £268.63 per 1,000 cigarettes from 20 May 2017 will increase the total amount of taxation paid on lower priced cigarettes,” said Roca. “We will wait and see how this impacts the tobacco market as a whole.”

    The TMA describes itself as the trade association for tobacco companies that operate in the UK: British American Tobacco, Gallaher (a member of the JTI group of companies), and Imperial Tobacco.

  • Tobacco taxes, robberies up

    robbery photo
    Photo by Arenamontanus

    Police in New Zealand need to record the number of robberies in which tobacco is taken, according to a story by Nicholas Jones for the New Zealand Herald quoting the Act Party leader David Seymour.

    The call by Seymour came after a weekend robbery at a dairy in Christchurch that has been robbed eight times in seven months. Cash and cigarettes were taken during the latest robbery.

    In October, police said the black market for tobacco was fuelling dairy robberies.

    Seymour told the Herald he had recently requested from police information on the number of tobacco-related burglaries.

    But the request could not be met because crime statistics do not record whether tobacco products are taken in burglaries or robberies.

    “Tobacco taxes have more than doubled in the past five years and there are, sometimes violent, robberies of the now $300 bricks of cigarettes happening every other day,” Seymour said.

    “It is extraordinary that the police are not recording whether tobacco was a factor in a robbery.”

    The Government last year passed legislation to hike the price of cigarettes to about $30 a pack by 2020, despite being condemned by New Zealand First and Act.

    And the tax on tobacco will rise by 10 percent on January 1 each year for the next three years. Those rises are expected to bring in an extra $425 million in tax over that period.

    Seymour said the government’s policy of taxing tobacco hard had made dairies and service stations into targets for theft, but it had not significantly reduced smoking rates.

  • Factory closure threat

    Closed photo
    Photo by gagilas

    British American Tobacco has said that it might close its South African cigarette plant if plans to ban branded tobacco packaging are implemented, according to a story by Thembisile Dzonzi for Bloomberg News.

    BAT’s Heidelberg factory is situated south of Johannesburg.

    The proposed ban would threaten the financial viability of the Heidelberg operation, Joe Heshu, BAT’s head of external affairs in Southern Africa, said in an e-mailed response to questions from Bloomberg.

    Standardized packaging threatened the closure of the factory and posed a threat to the viability of the legal tobacco industry in South Africa, Heshu said.

    The move would make it harder to distinguish licit cigarettes from black-market cigarettes and “the illegal market will benefit from having a cheaper product,” he added.

    South Africa is cracking down on industries and products viewed as harmful to consumers, including through a planned tax on sugar-sweetened beverages, which Finance Minister Pravin Gordhan said last month would be implemented later this year.

    In his budget speech, Gordhan announced higher taxes on tobacco and alcohol products.

    The full story is at: https://www.bloomberg.com/news/articles/2017-03-01/bat-says-planned-south-african-tobacco-rules-may-close-plant.

  • End-game within reach

    game photoA new report proposes the immediate and accelerated implementation of three actions aimed at ending cigarette use by US adults.

    * Increase excise taxes at the federal level and in many states with four goals: lowering smoking rates, harmonizing taxes across state borders to reduce the illegal trade, covering the costs of smoking-related disease, and encouraging a shift from cigarettes to reduced-risk products and complete cessation.

    * Encourage health and life insurers, employers, and health professionals actively to promote smoking cessation measures supported by the US Preventive Services Task Force and the 2014 US Surgeon General’s Report.

    * Establish a more rational tobacco, nicotine, and alternative products regulatory framework that is based on their relative risks, and that is adaptable to the increased speed of innovation in new technology development.

    The report, Ending cigarette use by adults in a generation is possible, was the work of a team of  tobacco control and health experts whose goal was  to assess the  views of 120 US tobacco control experts about what they saw as some of the key areas and priorities for significantly reducing or eliminating the use of the cigarette.

    According to the report’s executive summary, each year cigarette smoking directly kills 480,000 Americans. ‘It also harms many millions more through secondary effects,’ it says. ‘The economic toll is enormous and costly, with an annual medical bill of over $170 billion. Yet, the public and media’s focus has largely shifted to other health issues. Mainstream tobacco control largely centers on measures to slow youth uptake, which will yield mortality and health gains, but will only reach its full impact 50 years from now.

    ‘There is an urgent need to accelerate progress to end cigarette smoking in adults. That requires fully implementing historically-validated tobacco control measures – especially tobacco taxes – and integrating new science-based reduced-risk products into tobacco control. Simultaneously, we need to pursue a long-term approach to nicotine that is coherent with, and proportionate to, the risks associated with other public health measures required to address psychoactive substances.

    ‘We consulted 120 key tobacco control leaders across the United States… They represent a broad swath of tobacco control experience and expertise, ranging from researchers and academics, to advocates, state and urban tobacco control staff, government officials, and local front-line workers. Their input is integrated into a proposed strategy to achieve the goal of reducing cigarette smoking in adults to less than 10 percent in all communities nationwide by 2024.

    ‘This is not a consensus report. We considered all inputs, and focus here on what represents the needed balance between what has worked to reduce smoking in the US, and additional steps that are now needed. These steps draw upon advances in technology and deeper insights into what drives behavior change.’

  • Help of Belarus sought

    cigarette smuggling photo
    Photo by HM Revenue & Customs

    In an effort to halt the growing illegal tobacco trade between Belarus and countries of the EU, the EU Commission has called on the government in Minsk to raise its excise duty rates to EU levels, according to a story by Sarantis Michalopoulos for EurActiv.com.

    Günther Oettinger, the EU’s Budget Commissioner, was said to have, for the first time, recognized that low excise taxation on cigarettes in Belarus encouraged the illegal trade.

    The main drivers of cigarette smuggling from Belarus to the EU were the “big differences in fiscal charges on tobacco products,” he said on Wednesday.

    “To reduce cigarette smuggling from Belarus, the Commission would encourage Belarus, as well as other neighbouring countries, to approximate its excise duty rates to the levels in the EU,” Oettinger said.

    The EU Parliament recently called on the EU executive to tackle the illegal tobacco trade from Belarus.

    Oettinger responded last week by saying that Belarusian products accounted for about 10 percent of the illegal tobacco market in the EU.

    Project SUN, an annual study commissioned by the four major tobacco manufacturers was the first to estimate the scale of the illegal cigarette market in the EU. It found that extremely low excise taxes in Belarus incentivised tobacco smuggling to the EU.

    The average price of a pack of 20 cigarettes in Belarus is €0.58, while in Poland the average price is €3.13, in Lithuania €2.60, and in Latvia €2.86.

    Oettinger emphasised it was equally important for Minsk to strengthen its operational co-operation with the European Anti-Fraud Office (OLAF) and member states’ customs authorities.

    Nowhere was it mentioned that one of the main drivers of the illegal trade in any one country is simply the difference between the cost of manufacturing and distributing a pack of cigarettes, and the price at which it is offered to consumers after the imposition of tax.

  • Where contraband costs more

    Inflation photoMaximum security prisoners are paying more than A$20 for a single rolled cigarette in a black-market trade that has emerged following the imposition of a tobacco-smoke-free policy in prisons in the Australian state of New South Wales (NSW), according to a story by Dan Proudman for the Newcastle Herald.

    Such a black-market operation was said to have been uncovered at Cessnock jail on Monday when 15 tobacco pouches, 10 packs of rolling papers and other contraband were discovered inside a garbage bin.

    Corrective Services NSW said each of the pouches, the contents of which could be used to make 50-65 rolled cigarettes, could be sold for $300 inside the minimum-security wings of the prison.

    But the Herald was said to understand that the same pouches were being smuggled into the maximum-security sections for up to $800 each.

    The pouches can be bought over the counter at supermarkets for between A$30 and A$70.

    Tobacco has quickly become the contraband of choice within many jails, including Cessnock, since the prisons became smoke free in August 2015.

    In the past year, 223 visitors have been banned from jails for trafficking tobacco.

  • Warnings on illegal trade

    Hong Kong photo
    Photo by Jonathan Kos-Read

    A Hong Kong-based advocacy group has urged the government to step up enforcement against the illegal tobacco trade and warned it not to introduce measures that might jeopardize inroads that have been made into the trade, according to a story by Alex Fok for the Harbour Times.

    Pollster Ipsos Hong Kong released this month a report on a survey into the public perception of the black-market cigarette trade. Commissioned by the organization, Hong Kong United Against Illicit Trade (HKUAIT), the researchers interviewed about a thousand Hong Kong adults in December.

    The results show that 84 percent of the respondents considered illicit cigarettes to be a serious issue in Hong Kong.

    Ipsos director Mick Gordon said that about three out of four respondents attribute the problem to sophisticated criminal networks, insufficient penalties and drastic excessive tax increases on cigarettes.

    According to the latest Asia Illicit Tobacco Indicator 2015 report by Oxford Economics, Hong Kong’s illicit cigarette incidence has fallen by 6.7 percent since 2012, but remains at 29.1 percent, which is said to translate into an estimated HK$2.9 billion tax loss in the fiscal year 2015/16.

    HKUAIT advisor Jeff Herbert warned that the tax loss could, in turn, fund criminal organizations and generate even greater indirect losses in terms of extra enforcement actions and prosecutions.

    Herbert called for increased penalties, greater enforcement, public education and sensible tax rises amid negative factors such as ever rising costs of living and proximity to the mainland counterfeit market from where about 60 percent of these cigarettes were transported through land routes.

    Meanwhile, Patrick Wong, executive director of HKUAIT, expressed concerns over a recent legislative proposal by the government to enlarge the size of health warnings on tobacco products from 50 percent to 85 percent, arguing that such a move would further reduce available space for tobacco manufacturers to print security and authentication features, resulting in a less secure supply chain that could facilitate the illegal trade.

  • Dismounting the high horse

    Dismounting the high horse

    It’s time for critics to recognize the tobacco industry as a partner, rather than an adversary, in the fight against illicit trade.

    By George Gay

    smokers zurichA few years back I was told off for having suggested that the price people pay for cigarettes should be aligned in direct relationship with their incomes; so the more a person earned the more she should pay for her cigarettes. The general drift of the complaint was how dare I suggest that a person who had studied diligently and worked hard so as to land a well-paying job should be penalized for such enterprise.

    I tried to explain that my suggestion was aimed not at penalizing the better-paid person but at helping her by pushing the price of cigarettes to the point where she could no longer afford them, stopped smoking and enjoyed all of the health advantages that quitting offered. I was merely raising the bar of government strategy so that it encompassed too the better off.

    At this point the person who had been telling me off looked at me as if I were mad and changed the subject.

    What does this true story indicate? To me it suggests that there is at least one person who doesn’t buy into the idea that the primary reason why governments raise cigarette taxes is to improve public health. And I get the feeling that he isn’t alone.

    So it’s about the money, about government revenues? In part. For instance, in July, a smoker in the U.S. state of Pennsylvania raised a question that should be asked often and loudly but rarely is: Why should smokers pay a disproportionately high level of taxation? Writing on www.pennlive.com, Nancy Eshelman said that she had smoked for more than 50 years and, during that time, “dropped a lot of money into the state coffer.”

    “I don’t mind paying tax on my cigarettes,” she wrote. “But why should I, and other smokers, provide nearly two-fifths of the new revenue that will balance the state’s new budget?”

    Making choices

    But there’s more to tax increases than money and health. For one thing, they have to do with the fact that, in the minds of some people, there can be no redemption for tobacco sinners. And they have to do with the fact that some people make their choices not on the basis of what they like the most but on what they dislike the most.

    This way of choosing was evidenced by the Brexit vote and by reaction to the U.S. presidential campaigns. And it is evident in the vapor debate—it’s better to stick with smoking than allow tobacco manufacturers to take the moral high ground with their newfangled vapor devices.

    And in respect of the illegal trade in tobacco products, there seems to be a theme running through the narrative suggesting that some in the anti-tobacco field would sooner that this trade carried on if the alternative required working with tobacco manufacturers.

    In September, a brand security consultant said the World Health Organization (WHO) would rather focus on easy targets, such as licit tobacco companies, than on the illegal trade in tobacco products, according to a story by Connor D. Wolf published on InsideSources. Former U.S. federal agent Thomas Lesnak warned that the WHO’s political agendas and secret meetings had resulted in an echo chamber of dangerous policies. “No one really wants to talk about what the facts are, what the real numbers are,” Lesnak said. “It’s easy to say I’m against the big tobacco companies. Politically it’s smart. There’s no downside to it except you’re ignoring what’s really going on out there.”

    Also in September, a report by the Australian Institute for Progress (AIP) said that the November meeting of the Conference of the Parties (COP) to the WHO’s Framework Convention on Tobacco Control (FCTC) would lack the transparency and dialogue that underpin United Nations values. The report was launched by the former Australian government minister Gary Johns.

    The seventh FCTC COP, which was set to be held in Delhi, India, on Nov. 7–12, just after this magazine’s November issue was due to be published, was refusing entry to relevant stakeholders or media to discuss new developments that could save lives around the world, the AIP said in a story issued through PR Newswire. “The WHO FCTC is a closed shop which uses exclusion to silence debate,” Johns was quoted as saying.

    Perhaps this is part of the reason why, according to a Taxpayers Protection Alliance (TPA) report in October, numerous countries have opted not to pay their obligations to the WHO FCTC. “As of July 15th, 142 of the 180 FCTC member countries, nearly 80 percent, had outstanding obligations,” the TPA said. “The FCTC has faced criticism for banning journalists at its meetings, malpractice, stifling debate, lacking transparency and being profligate with public money.”

    And perhaps the criticisms are starting to get through. Also in October, though before the TPA report came out, Vera Luiza da Costa e Silva, head of the Secretariat of the FCTC, wrote in a Huffington Post blog that some sessions of the international tobacco control meeting due to be staged in India would be held in public. But da Costa e Silva said that the parties to the Delhi meeting could not sit at the negotiating table with the people who had caused the global disaster of tobacco use because the tobacco industry had lied.

    Startling inefficiency

    russia-cigarettesSo no redemption for the tobacco sinners, which seems to mean that the future looks bleak because, as is suggested above, the FCTC, working on its own, is stuck inside an echo chamber—and one of startling inefficiency.

    In September, Philip Morris International expressed concern that, four years after its adoption, an international protocol aimed at eliminating the illegal trade in tobacco products had not entered into force. The Protocol to Eliminate Illicit Trade in Tobacco Products, developed under the FCTC, was adopted in November 2012. The protocol, PMI pointed out, must be ratified by 40 FCTC signatories to enter into force, but, after almost four years, only 20 signatories, 19 countries and the EU, had ratified it.

    “PMI has been a supporter of the anti-illicit trade protocol since its adoption in 2012,” said Alvise Giustiniani, head of PMI’s anti-illicit trade department. “The WHO’s protocol paves the way for solutions that have already been proven effective in the EU—such as tracking and tracing, and due diligence procedures—to be implemented as common practice around the world.  We believe the protocol is a significant step forward towards creating a global solution for the problem of the illegal and unregulated tobacco trade. It is concerning that, four years after its adoption, the protocol has not entered into force. As the protocol presents a promising framework to fight the tobacco black market around the world, this is a missed opportunity.”

    But, in fact, even the EU has not covered itself in glory recently in respect of the illegal trade in tobacco products. For a number of years it has had in place anti-illegal trade agreements between the four major multinational tobacco manufacturers, the EU Commission and member states aimed at cracking down on the illegal trade in cigarettes. The agreements have required the four companies to secure their supply chains through marketing and tracking-and-tracing systems, and to make two types of payment to the European Commission and the member states of the EU. These payments consisted of annual fixed sums payable from 2004 up to 2030, ranging from $200 million to $1 billion, and “seizure payments” equivalent to 100 percent of the evaded taxes for seizures of genuine (not counterfeit), diverted products above quantities of 50,000 cigarettes in one haul, rising to 500 percent if total annual seizures exceed 150 million to 450 million cigarettes.

    However, the commission decided in July not to extend the 12-year agreement with PMI, the oldest agreement and the first to come up for renewal, saying that it would instead focus on provisions of its new Tobacco Products Directive and WHO protocols to continue the battle against the illegal tobacco trade. That, I take it, is the WHO protocol that is still reverberating around the echo chamber.

    The commission decision seems to have been irrational. A commission report assessing the agreement with PMI in February concluded that the deal had “effectively met its objective of reducing the prevalence of PMI contraband” but questioned its “continued relevance,” according to a story on www.euobserver.com. During the period of the agreement, the volume of genuine PMI cigarettes seized by EU member states between 2006 and 2014 was said to have declined by about 85 percent. And PMI was said to have used the agreement “on multiple occasions” to give anti-fraud authorities in the EU “information of direct investigative value.”

    But the report said, “It can also be argued that PMI’s incentives in this type of assistance to enforcement might as well be independent from the existence of the PMI agreement.” The report said also that while the deal might have worked well in the past, the “market and legislative framework has changed significantly since the entry into force of the agreement” in 2004, with many of the rules in the agreement now part of EU law and some parts of the deal contradicting international obligations. But the clincher, I imagine, was the report’s acknowledgment of criticism that the agreement allowed a cozy relationship between companies and the EU.

    What strikes you here is that the agreement clearly worked and that it could probably have been made to continue to work, with agreed changes to cover the new market and legislative framework—but anything rather than work with a tobacco company, to stay in a relationship with a tobacco company that could be conceived of as cozy but in reality was probably a working relationship.

    The agreement certainly worked. Margarete Hofmann, policy director of the EU’s anti-fraud office OLAF, sent a briefing paper to political advisers in the European Parliament on March 7 stating that the existing agreements with the four major tobacco companies were the “best instruments” to combat cigarette smuggling at the international level. According to a story by Quentin Aries and James Panichi for www.politico.eu, documents accessed by Politico revealed that Hofmann had warned that a failure to renew the deal with PMI would hurt law enforcement agencies’ short-term anti-smuggling capability.

    But the “cozy” relationship was the issue. An Irish member of the European Parliament, Nessa Childers, in an opinion piece in The Parliament Magazine, said that the “infamous” PMI agreement should be confined to the dustbin of public policy history. “We have empowered the industry to self-police cigarette smuggling without independent verification,” she said. “Therefore, it will come as no surprise that the vast majority of seizures are declared as counterfeit. If they were not, then the industry would owe the exchequer duty on the smuggling of their own wares.”

    What Childers implied, however, was at odds with the commission’s view. The commission had previously said in answer to a parliamentary question that there had been no evidence of incorrect reporting by tobacco manufacturers in relation to the provenance of cigarettes seized within the EU. “It is important to note that there has been no evidence of incorrect reporting by the manufacturers,” the commission said as part of its answer. “One particular member state has verified 123 assessments made by manufacturers and not found any error.”

    In the past, we in the tobacco industry did and said a lot of things that were indefensible, and I still think—and sometimes point out—that there are issues that we still get wrong and don’t act on quickly enough to put right. But in respect of the illegal trade, it is about time that the WHO and the EU came down from their self-righteous high horses and started to recognize that it is the tobacco industry that can be the most effective partner in combatting the illegal trade in tobacco.