Category: Illicit Trade

  • Court Approves Warehouse Monitoring

    Court Approves Warehouse Monitoring

    Image: Alexey Novikov

    The South African Revenue Service (SARS) will move forward with installing closed-circuit television cameras at tobacco warehouses, after defeating a legal challenge in the Guateng High Court, reports Daily Maverick.

    The surveillance plan was drafted to help plug fiscal gaps due to illicit tobacco trade. The South African government misses out on an estimated ZAR8 billion ($431.06 million) in revenue annually due to tobacco tax evasion.

    The Fair Trade Independent Tobacco Association (FITA), representing 80 percent of licensed cigarette manufacturers in Southern Africa took SARS to court in an attempt to stop the installation of the cameras. In two separate applications, 11 tobacco companies sought to prevent SARS from implementing the rule promulgated under the Customs and Excise Act.

    The tobacco companies argued that the new rule is unconstitutional and that it was an unjustified violation of the right to privacy, dignity and property.

    Acting judge Jacques Minnaar on Dec. 29 rejected their case, arguing, among other things, that companies applied for warehouse licenses in the knowledge that these are conditional on SARS officials having unrestricted access to install cameras.

    The companies were all aware of the installation of CCTV cameras at British American Tobacco and Gold Leaf in February 2023, the court added.

  • Pakistan Unlikely to Meet Tracing Deadline

    Pakistan Unlikely to Meet Tracing Deadline

    Image courtesy of Syed Rashid Ali

    Pakistan is unlikely to meet the December deadline for full implementation of a new track-and-trace system for tobacco products, reports The News International.  

    While leading manufacturers, such as Pakistan Tobacco Co. (PTC), Philip Morris International and Khyber Tobacco Co. have incorporated the system into their production facilities, other manufacturers, including Civil Tobacco, Frontier Leaf Tobacco, Falcon Cigarettes Industry, Indus Tobacco Co. and Maneri Tobacco International, have done so only partially. Yet other companies have either refused to comply or dragged their feet, citing technical and financial difficulties.

     The partial implementation raises concerns about the effectiveness of the track-and-trace system, which relies on barcodes, unique identification numbers and a central monitoring system to track the movement of tobacco products from production to sale.

     “The track and trace system must be implemented across the industry for it to be successful and yield the desired results,” an industry official was quoted as saying. “Secondly, comprehensive and effective enforcement needs to be carried out to ensure that no pack of cigarettes is sold without a stamp.”

     The system has been successful in other countries, such as Turkey, Brazil and Kenya, where it has helped reduce tax evasion and illicit trade in the tobacco industry. Industry officials urged Pakistan’s Federal Board of Revenue to take strict action against the non-compliant manufacturers and enforce the system across the industry.

  • Illicits Top Quarter Of Ukrainian Market

    Illicits Top Quarter Of Ukrainian Market

    Image: IvanSemenovych

    The share of illegal tobacco products reached 25.7 percent of the Ukrainian market in October, up from 19.5 percent in June and 20.2 percent in February, reports Interfax-Ukraine, citing data from the most recent Kantar Ukraine study.

    The figure represents the highest share since Kantar began collecting information on the Ukrainian tobacco market.  

    The share of counterfeit products increased to 11.3 percent, and the share of products labeled for duty-free sales or export but sold illegally in Ukraine grew to 12.9 percent.

    Measured over the entire year, illegal cigarettes accounted for 21.8 percent of the Ukrainian tobacco market.

    The Ukrainian government missed out on an estimated UAH23.5 billion ($625.67 million) in tobacco tax revenues in 2023 due to illicit cigarette trade, according to calculations by Kantar.

  • Vapes Evading U.S. Import Duties

    Vapes Evading U.S. Import Duties

    Image: Gudellaphoto

    E-cigarette companies have imported hundreds of millions of dollars of disposable products from China into the United States without paying taxes and import duties, according to an AP report.

    Last week, U.S. authorities confiscated 1.4 million units of unauthorized single-use e-cigarette products at Los Angeles international airport, with an estimated retail value of more than $18 million. The products were mislabeled as toys, shoes and other items.

    Records show that the makers of disposable vapes routinely mislabel their shipments as battery chargers, flashlights and other items. Critics blame ineffective regulation. “The steps toward regulating disposables have been very weak, and that has enabled this problem to get bigger and bigger,” said Eric Lindblom, a former Food and Drug Administration official.

    Heaven’s Gifts, the parent company of Shenzhen iMiracle, which manufactures the popular Elf Bar and EB brands, previously described how it could help customers evade import fees and taxes, according to the AP report.

    The firm’s website reportedly advertised “discreet” shipping methods, such as mislabeling the content of e-cigarette shipments and declaring a low product value. 

    Another strategy appears to be shipping e-cigarettes by air rather than sea. Air carriers are not required to disclose the same level of detail about their cargo as ocean vessels.

    U.S. tobacco companies have complained that their vaping products cannot compete with such lower priced disposables. Altria Group and Reynolds recently filed cases in California and with the International Trade Commission, respectively, against importers of disposable vapes.

    Flavored disposables began pouring into the U.S. shortly before China banned vaping flavors last year. China’s vaping manufacturing sector, which produces the lion’s share of e-cigarettes worldwide, is worth an estimated $28 billion, and the U.S. accounts for nearly 60 percent of the country’s vape exports, according to the China Electronics Chamber of Commerce.

    Authorities have encouraged those exports while at the same time curtailing the country’s domestic vaping business.

  • U.S. Authorities Seize 1.4 Million Vapes

    U.S. Authorities Seize 1.4 Million Vapes

    Image: somchai20162516

    The U.S. Food and Drug Administration in collaboration with U.S. Customs and Border Protection (CBP) seized approximately 1.4 million units of unauthorized e-cigarette products with an estimated retail value of more than $18 million.

    The seizures were part of a three-day joint operation that resulted in seizure of 41 shipments containing illegal e-cigarettes.

    “The FDA is committed to continuing to stem the flow of illegal e-cigarettes into the United States,” said Robert Califf, FDA commissioner, in a statement. “Unscrupulous companies try everything they can to bring unauthorized, youth-appealing tobacco products into the country. The FDA will remain vigilant, and together with our federal partners, stop these imports before they make it into the hands of our nation’s youth.”

    “This enforcement action is a prime example of CBP’s commitment to keeping our communities safe by disrupting the importation of illegal goods into our country,” said Troy A. Miller, senior official performing the duties of the commissioner for CBP. “The rise in illicit e-commerce demands that our agencies remain vigilant in intercepting shipments that could pose serious health risks to the public, including youth, while disrupting the supply chains that bring them to our borders.”

    Among the seized products were Elf Bar, EB Create, Lost Mary, Funky Republic, Relx Pod and Iplay Max, among other brands. The seized shipments all originated in China. Many of the products were misdeclared as toys or shoes.

    “Those shamelessly attempting to smuggle illegal e-cigarettes, particularly those that appeal to youth, into this country should take heed of today’s announcement,” said Brian King, director of the FDA’s Center for Tobacco Products. “Federal agencies are on to their antics and will not hesitate to take action. The significant value of these seized products is also a sobering reminder to these bad actors that their time and money would be better spend complying with the law.”

    According to Reuters, the announcement of the seizure follows reports of Chinese vaping firm Heaven Gifts disregarding U.S. regulations and flooding the market with illicit flavored disposable vapor products, including Elf Bar and Lost Mary. Elf Bar has been identified as one of the most common brands used by youth, according to the National Youth Tobacco Survey.

    Anti-tobacco advocates have praised the efforts of the FDA and CBP. “This is the strongest enforcement action the government has taken to clear the market of illegal flavored e-cigarette products that are addicting our kids and endangering their health,” a Campaign for Tobacco-Free Kids press statement said. “It represents the coordination needed across government agencies to prevent the importation of illegal e-cigarette products into the U.S. and stop bad actors from continually finding new ways to prey on our kids. We urge the FDA, CBP, the Department of Justice and other relevant agencies to continue to use every enforcement tool at their disposal to take these illegal products off the market.”

    The seizure took place at the Los Angeles International Airport in California.

  • Brazil: Over 500 Packs of Cigarettes Seized

    Brazil: Over 500 Packs of Cigarettes Seized

    Image: AlfRibeiro

    Brazilian military police seized a shipment of over 500 packs of cigarettes in the municipality of Novo Santo Antonio, reports Diario de Cuiaba. Over BRL2,300 ($466.09) in cash, checks, lighters and electronic cigarettes was collected. Two were arrested.

    During a roadblock, the suspect fled at high speed and was subsequently detained. The driver then admitted to carrying a shipment of cigarettes and other devices without a receipt. He also admitted to carrying packs of cigarettes from Paraguay and checks worth BRL6,700.

    The illicit products were found under the passenger floor mat.

  • Russia to Criminalize E-liquid Trafficking

    Russia to Criminalize E-liquid Trafficking

    Photo: diy7

    Traffickers of illegal vape liquids could face up to seven years in prison in Russia if a proposal by the Committee of the Federation Council on Economic Policy becomes law, reports AIF.

    Lawmakers are concerned about the ingredients in illegal vapes, which evade regulatory scrutiny.

    Anatoly Vyborny, Deputy Chairman of the Committee on Security and Anti-Corruption, supported the provision, saying that the measure would help protect the health of young Russians.

    Currently, in Russia, there is no criminal liability for the illegal import of vaporizers and e-liquids.

  • Economist Conference Explores Illicit Trade

    Economist Conference Explores Illicit Trade

    Photo: Tobacco Reporter archive

    Economist Impact will host the eighth Global Anti-Illicit Trade Summit, supported by Japan Tobacco International, on Nov. 30 the Westin Ottawa.

    When it comes to cross-border movement of illegal goods, North America’s expansiveness exacerbates the problem. The United States shares the world’s longest (8,890 km) land border with Canada and the busiest land-border crossing with Mexico. This makes preventing smuggling and illegal migration especially challenging for border security and customs agencies. With just over 12,000 km in land borders and approximately 230,000 km of coastline, North America offers plenty of opportunities for criminal networks to traffic people and illegal goods and improve their position in the illicit market.

    The International Chamber of Commerce estimates the financial cost of illicit trade to be $4.2 trillion annually.

    Speakers at the Economist Impact forum include General John Kelly, former commander, United States Southern Command; David Luna, executive director, International Coalition Against Illicit Economies; Christopher Taylor, Canada country attaché, Bureau of Alcohol, Tobacco Firearms and Explosives; Laura Dawson, executive director, Future Borders Coalition; Anne Kothawala, chief executive, Convenience Industry Council of Canada; Marissa Molé Bostick, deputy director, Counterfeit Crimes Unit, Amazon; Sergio Miranda, sergent spécialiste en économie souterraine, Sûreté du Québec; Gaston Schulmeister, director of the Department against Transnational Organized Crime (DTOC), Organization of American States; José Antonio Abugaber Andonie, President, Concamin; and Abram Benedict, Grand Chief, Mohawk Council of Akwesasne

    For further details about the summit, please visit anti-illicit-trade.economist.com.

  • Brazil Busts Fake Cigarette Network

    Brazil Busts Fake Cigarette Network

    Photo: Policia Federal

    Brazil’s Federal Police cracked down on a criminal network trafficking fake Paraguayan cigarette brands in Minas Gerais state, according to the Organized Crime and Corruption Reporting Project (OCCRP). Law enforcement agents reportedly issued multiple arrest warrants and froze more than $4 million in assets.

    The suspects face charges of smuggling, counterfeiting, human trafficking, slave labor, forgery, misuse of machinery, crime against consumer relations, crime against trademark registrations and money laundering.

    Led by a businessman from Sao Paulo, the organization forced Paraguayan nationals to make the cigarettes in hidden factories. The group reportedly picked up workers in Paraguay, blindfolded them, and drove them east across the border into Brazil, where they were  held under surveillance inside the factories for several months. Their telephones were confiscated and they had no contact with the outside world.

    The workers produced counterfeit versions of Paraguayan brands, such as the Tabesa’s TE, Eight and Palermo. Once finished, the cigarettes were transported in trucks, hidden behind shoes.

    Paraguay is a major contraband hub in South America. More than 97 percent of cigarettes produced in Paraguay end up in countries such as Brazil. The business is also entangled with money laundering, political corruption and criminal gang activities.

    In March of this year, the OCCRP reported on the rescue of 19 Paraguayans trapped in an illegal cigarette factory in Rio de Janeiro. Brazil rescued 918 people working as slaves in the first three months of this year.

  • Track-and-Trace Honored in the Breach

    Track-and-Trace Honored in the Breach

    Image: alien185

    Only two out of the more than 40 cigarette manufacturers in Pakistan have properly implemented the country’s track-and-trace system, according to British American Tobacco, reports The Nation.

    Speaking during a media briefing organized by the Pakistan Tobacco Company (PTC) in Islamabad, BAT’s area head of legal and external affairs for the Asia Pacific, Middle East and Africa regions, Mona Iskandarani, stressed the importance of timely implementation and enforcement of the track-and-trace system.

    “We acknowledge the recent enforcement initiatives undertaken by the Federal Board of Revenue in Pakistan but we need sustained enforcement efforts across the supply chain to curb the menace of illicit cigarette trade in Pakistan,” said Iskandarani.

    PTC’s legal and external affairs director, Asad Shah, pointed out that while track-and-trace systems have been implemented in various countries, the system does not offer a silver bullet. Rather, it serves as a tool to facilitate law enforcement agencies to carry out raids and seizures of tax evaded products, he said.

    Despite a lapse of 15 months since the implementation deadline, only two out of over 40 cigarette manufacturers have implemented the track-and-trace in true letter and spirit, Shah lamented. Instead of declining, tax evasion has grown in the tobacco sector since the system became mandatory, he said.

    The share of illicit cigarette sales is projected to grow from 37 percent of the market in fiscal 2021-2022 to approximately 63 percent by the end of fiscal 2023-2024, potentially causing the government lose PKR310 billion ($1.08 billion) in tax revenues in fiscal 2023-2024.