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Cigarette Smuggling

Smugglers Prosper in Spain’s ‘Perfect Storm’ for Tobacco Firms

February 07, 2012, 6:23 PM EST

By Manuel Baigorri

Feb. 8 (Bloomberg) — Spanish smokers, squeezed by higher taxes and a deepening recession, are increasingly relying on smugglers to feed their habit.

Illegal imports now account for 7 percent to 8 percent of Spanish cigarette sales, compared with almost nothing a year ago, according to the country’s tobacconists association. In southern provinces such as Cadiz, Seville and Malaga, the proportion is 20 percent.

“Smuggling and fake tobacco, which had been eradicated since 1993, came back strongly last year,” said Jaime Gil- Robles, corporate affairs director at Altadis, the Spanish unit of Imperial Tobacco Group Plc.

Smuggling, encouraged by a December 2010 increase in tobacco taxes and a ban on smoking in public places, has eroded both government coffers and company revenues. Spain, which has the European Union’s highest jobless rate, collected 14 percent less tobacco taxes in 2011 than a forecast of 9.05 billion euros ($12 billion), excluding value-added tax, according to Altadis.

“The fiscal policy was disastrous as it forced an average increase of 50 euro cents per packet,” Gil-Robles said. “Add the crisis and skyrocketing unemployment to that and you have the best scenario for smuggling and illicit tobacco.”

In a single week last month, Spanish tax authorities seized more than a million illegal packets of cigarettes worth about 4 million euros. In December, officials said they confiscated 561,500 packets of fake Marlboro brand cigarettes which were imported from China and entered the country through the port of Valencia in a container marked “synthetic fiber.”

‘Tremendously Worrisome’

The increase in smuggling is “tremendously worrisome for the whole industry,” said Mario Espejo, chairman of the Spanish tobacco association, which represents more than two-thirds of the country’s 14,000 tobacconists.

British American Tobacco Plc, Europe’s biggest cigarette maker, estimates that 6 percent to 12 percent of the 5.5 trillion cigarettes consumed worldwide each year are obtained through illicit means such as smuggling, its website shows.

In Spain, the number of packets sold last year declined 17 percent to 3.02 billion from 3.62 billion in 2010, according to the Tobacco Market Commission. Altadis this month requested a two-year freeze on tobacco tax to help the market recover. (CTA : this shows conclusively that increased tobacco tax and enforcement of non smoking restaurants and pubs WORKS !)

In May, Altadis cut the price of Fortuna, Nobel and Ducados in Spain to maintain competitiveness after it sold 16 percent fewer cigarettes there in the first half of the fiscal year.

“Last year, there were three big shocks in Spain for the consumer: the tough economic environment, excise increases and the smoking in public spaces ban,” Alison Cooper, chief executive officer of Bristol, England-based Imperial Tobacco, said in an interview in Madrid. “That caused the perfect storm in terms of the Spanish market.”

Bleak 2012 Outlook

This year will again be “tough,” though declines may not be as steep, Cooper said.

Altadis has the biggest share of Spain’s cigarette market at 33.3 percent, according to the tobacco market commission. That compares with 30.7 percent for Philip Morris International Inc., 21 percent for Japan Tobacco Inc. and BAT’s 11.8 percent.

Philip Morris, the world’s largest publicly traded tobacco company, isn’t anticipating much improvement in Spain this year.

“The dynamics observed in the Spanish market in 2011, mainly the adverse economic circumstances and the high unemployment rate, are likely to continue in 2012,” the maker of Marlboro said in a statement to Bloomberg News.

The ban on smoking in public places, introduced at the beginning of last year, is another reason for the decline in tobacco sales, according to Alfredo Arahuetes, dean of the Economic Sciences and Business Administration School at Madrid’s Comillas Pontifical University.

Restaurant Sales Decline

“Lots of bars have seen their business damaged,” Arahuetes said by phone. “Prices here are also a bit lower than in other European countries so tourists come not only for the sun, beaches and parties, but also to take as much tobacco as they can.”

Tobacco prices in Spain should be matched with other European countries, while being removed from the list of products measured to calculate the consumer price index, said Antonino Joya, a director at consumer rights group OCU.

The northwest region of Galicia, along with Gibraltar in the south and Andorra in the north, are the main locations for smuggling, the tobacco association’s Espejo said, adding that the Canary Islands, which benefit from lower taxes, have become another hot spot. A 4.25-euro packet of Marlboro cigarettes can be bought for about 2.25 euros on the black market, he said.

Alvaro Alonso, a manager at Los Angeles restaurant in Madrid, said revenue has dropped 15 percent to 20 percent since the smoking ban was introduced.

“The economic crisis and the smoking ban are a having huge negative impact on this type of business,” 33-year-old Alonso said. “We are just trying to survive.”

For the government, the need to tackle smuggling is just as pressing as it seeks to tackle the euro area’s third-largest budget deficit, said the tobacco association’s Espejo. About 80 percent of the cost of a packet of cigarettes is taxes, he said.

“As a country, we can’t afford the luxury of losing so much money in taxes as we fight to cut the budget deficit.”

–Editors: Paul Jarvis, Sara Marley.

To contact the reporter on this story: Manuel Baigorri in Madrid at mbaigorri@bloomberg.net

To contact the editor responsible for this story: Kenneth Wong at kwong11@bloomberg.net

PIA crew detained in US for several hours

http://www.hindustantimes.com/world-news/Pakistan/PIA-crew-detained-in-US-for-several-hours/Article1-805660.aspx

Press Trust Of India
Lahore, February 02, 2012

First Published: 16:09 IST(2/2/2012)
Last Updated: 16:11 IST(2/2/2012)

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The cabin crew of a Pakistan International Airlines flight was detained for several hours at John F Kennedy Airport in New York for allegedly smuggling hundreds of cartons of cigarettes and dozens of mobile phone sets, officials said on Thursday.
Authorities at the US airport held eight members of the crew of PIA flight PK-721 on Wednesday after over 500 cigarette cartons and a large number of mobile sets, mostly BlackBerrys and iPhones, were found in their baggage.

The items were in excess of the permissible limits, officials said.

The authorities interrogated the crew members for five hours and released them after imposing a heavy fine on PIA, officials said.

PIA spokesman Sultan Hasan described the incident as unfortunate and said an inquiry had been initiated against the crew members.

“Strict action will be taken against them if the charges against them are proved,” he said.

Incidentally, earlier this week, another PIA crew member had been jailed for 32 months for trying to smuggle dozens of counterfeit passports and fake passport materials into the UK.

Felixstowe: Four arrested in alleged tobacco-smuggling plot

http://www.eadt.co.uk/news/felixstowe_four_arrested_in_alleged_tobacco_smuggling_plot_1_1192924

By COLIN ADWENT, crime correspondent Tuesday, January 31, 2012
12:00 PM

FELIXSTOWE: Four suspected smugglers are on bail today after large quantities of hand-rolling tobacco were seized at Felixstowe and Southampton ports.

They include a 40-year-old woman who was arrested earlier this month on suspicion of evading more than £1million in excise duty, following the discovery of hauls totalling 6.5 tonnes.

UK Border Agency officers uncovered the three separate cargo loads of tobacco, which were recorded on import documents as ‘Chinese Herbs’, last April.

Three tonnes were
seized at Felixstowe, while around three-and-a-half tonnes were found at Southampton.

Each illegal consignment was referred to criminal investigators of HM Revenue and Customs for investigation.

It is estimated the total haul could have made over 12 million cigarettes.

The woman was arrested in Croydon, Greater London.

Meanwhile three men, aged 25, 29, and 36, were also detained in North Kensington, London, in relation to 1.65 tonnes of tobacco seized at Southampton Container Port in December 2011.

All the suspects are Chinese nationals. At least one of the men is believed to be in the county illegally.

A home in Croydon, three in London, and a commercial address in North Kensington, London, have been searched by customs officers, as the investigation continues.

The inquiry has already spanned a nine-month period as the Felixstowe seizure was made in April last year.

The female suspect has been released on bail until April 24, while the men are on bail until April 19.

All four were arrested for being knowingly concerned in the fraudulent evasion of excise duty chargeable on tobacco.

HM Revenue & Customs spokesman Bob Gaiger said: “Smuggling cigarettes and tobacco into the UK can have a devastating impact on legitimate traders and deprives the nation of around £2billion a year in lost revenue which is needed for vital public services.

“We urge people to work more closely with us in the fight against crime and encourage anyone who is aware of illicit cigarettes or tobacco being smuggled into or sold in the UK to contact the Customs hotline 0800 59 5000 or e-mail customs.hotline@hmrc.gsi.gov.uk.”

Shop loses licence over illegal tobacco

http://www.swindonadvertiser.co.uk/news/9498746.Shop_loses_licence_over_illegal_tobacco/

10:00am Saturday 28th January 2012 in News By David Wiles

Description: Tatras newsagents

AN OFF-LICENCE and newsagent which sold UK duty-free and counterfeit tobacco had its licence revoked by Swindon Council’s licensing committee yesterday.

Tatras, in Victoria Road, Town Centre, was found to have the cigarettes and loose tobacco hidden in a cupboard and below confectionery on shelving.

Trading Standards officers also seized £1,500 in cash in a paper bag under the counter, which they claim was linked to the sale of illegal products.

Yesterday the licensing committee followed a recommendation to revoke the shop’s licence, meaning it will no longer be able to sell alcohol.

The decision will take effect in 21 days, providing the premises licence holder, Shorish Hamid Mustafa, does not first appeal to magistrates, in which case there will be no change until the outcome of the case.

Russell Sharland, of Trading Standards, said: “The licensing objective of preventing crime and disorder has been deliberately breached over an extended period.

“This is aggravated by the sale of counterfeit product, rather than simply smuggled product, where there can be serious public health consequences.

“Mr Mustafa ignored previous advice and guidance and chose to lie to officers both at the time of the inspection and during the interview under caution.”

Mr Sharland said Trading Standards obtained evidence on September 11, September 18, September 25 and October 2 that Tatras had sold foreign-labelled, non-UK duty paid cigarettes.

In an interview, Mr Mustafa said acquaintances had tried to persuade him for some time to sell illegal tobacco, but he had only decided to do so in the week before the inspection.

He estimated that, overall, he had sold about £40 to £60 worth of illegal tobacco a day, charging as an example, £4 to £4.50 for 20 Marlboro cigarettes, instead of the genuine price of £7.19.

He said the bag of cash was from normal shop takings and would be spent at the cash and carry.

Mr Mustafa said: “I did a big mistake and I’m sorry.”

Mr Mustafa said all his accounts were legitimate, adding that although he paid his staff cash, his accountant sorted out the appropriate tax and VAT.

Coun Vera Tomlinson, chairman of the licensing panel, said the panel agreed there was evidence of the illegal sale of tobacco and poor management practices.

HK helps smash illicit mainland tobacco trade

South China Morning Post – 22 Jan 2012

City authorities praised by British counterparts for helping stem flow of smuggled cigarettes

International co-operation involving Hong Kong is helping to smash illegal tobacco-growing operations on the mainland.

British authorities working to stem the flow of illicit cigarettes from China to Europe have heaped praise on their counterparts in Hong Kong and mainland China for their achievements, which include the seizure of 10 tonnes of tobacco and 713 cigarette manufacturing machines.

“These Chinese efforts really have had a market impact in the UK and other European states because they have driven down production,” said Euan Stewart, deputy director of criminal investigations at Britain’s HM Revenue and Customs. “It has been so successful that from seven provinces where illicit tobacco was manufactured and smuggled out of China to the European market, this has now been driven down to two provinces.”

Hong Kong customs and excise commissioner Clement Cheung Wan-ching said the recent seizure of 10 tonnes of hand-rolling tobacco bound for Britain was an example of the success of the partnership.

“We’ve been working very closely with our UK and mainland colleagues,” Cheung said. “Their revenue officers have been in communication with our officers and the latest incident when we uncovered the largest single police case involving the smuggling of tobacco into the UK is a testament to the co-operation that has been going on.”

Stewart said he had seen a growing willingness to share information from Beijing’s Anti-smuggling Bureau and the State Tobacco Monopoly Administration.

“You need good dialogue and trust to work with any Chinese official, either in Hong Kong or the mainland, and I believe we have achieved that,” Stewart said. “We’ve created an environment of trust where both parties benefit and operate effectively.

“There’s a definite willingness to share, sometimes quite sensitive intelligence, and we’re very grateful for that. We see it making a difference. There’s a whole lot less product reaching our frontiers.”

Anil Gogna, a fiscal and drugs liaison officer at the British consulate in Hong Kong, said Hong Kong was a key anti-smuggling partner in Asia.

“In China, counterfeit cigarettes have been seized and illicit tobacco factories have been found and shut. It has all had a knock-on effect on smuggling into the UK and Europe,” he said.

Cheung said Hong Kong customs had two main areas of co-operation with the mainland.

The first is when tobacco is seized and its mainland source is identified. Information is shared with mainland authorities to see if enforcement action can be taken. The second comes when mainland internet portals are used to sell tobacco to Hongkongers.

“Hong Kong is a free port, anyone can carry a reasonable amount of commodities across the border. But seeing as those commodities may be taxable on the mainland, we have a lot of co-operation. It’s very much a two-way street,” Cheung said.

john.carney@scmp.com

Hong Kong Customs spares no effort in fight against illegal activities

http://7thspace.com/headlines/404074/hong_kong_customs_spares_no_effort_in_f
ight_against_illegal_activities.html

On law enforcement, Hong Kong Customs detected 9,106 illicit cigarette cases
in connection with smuggling, storage, distribution, peddling and excessive
duty-free cigarettes brought in by incoming passengers, with a total of 106
million sticks of cigarettes seized, representing an increase of 44 per cent
and 39 per cent respectively compared with the figures for 2010.About 35
million cigarette sticks were seized in export/transshipment cases while the
remaining sticks were seized in local illicit cigarette activities.

Mr Cheung noted that illicit cigarette activities had become relatively
active after the increase in the duty rate for tobacco to 41.5per cent in
February.The whole situation, however, was gradually put under control
following Customs’ vigorous enforcement action against these
activities.Street peddling activities at blackspots almost
vanished.Moreover, 773 persons were arrested in the selling and buying of
illicit cigarette activities.Among them, 268 were buyers, representing a
drop of 27 per cent against 2010.Increased public awareness of the criminal
consequences of buying illicit cigarettes was believed to have induced the
drop.

HK$29m of illicit tobacco seized in Christmas post

South China Morning Post – 10 Jan 2012

Customs officials will work with mainland and British authorities to stub out lucrative trade

More than 10 tonnes of illicit tobacco destined for Britain has been confiscated in Hong Kong in the past five weeks, prompting customs officials to step up co-operation with British and mainland authorities to stop the illegal trade.

The seizure of the tobacco – meant to be used in hand-rolled cigarettes – was about 10 times more than all the rolling tobacco seized in the first 11 months of last year, according to Hong Kong customs.

A senior customs officer said the tobacco was made on the mainland and could be sold for up to 22 times more than its original price, a high profit margin that was driving the illegal trade.

It would be worth an estimated HK$29 million on the Hong Kong market, according to Mark Lee Yuen-man, head of customs’ cigarette investigation division.

“The seized tobacco is worth from HK$50 to HK$100 per kg, but can be sold for HK$1,100 per kg in Britain,” he said. “The selling price is 50 per cent less than the genuine product costs in Britain.”

Investigators have learned that the illicit tobacco, packaged in bags bearing the Golden Virginia brand name, was smuggled into Hong Kong from the mainland then mailed to Britain by speed post, Lee said.

Over the past five weeks, customs officers at the airport’s airmail centre have intercepted more than 600 Britain-bound parcels containing 6.7 tonnes of the tobacco.

Kong Shui-wing, deputy head of customs’ revenue and general investigation bureau, said nearly 170 tobacco parcels, each weighing about 10kg, were intercepted at the airport on a single day last month.

Comparing the crackdown at the airport’s airmail centre to a soccer game, Kong said: “Our officers were just like goalkeepers trying to stop each goal as they kept shooting.”

The parcels were apparently mailed from different post offices, he said. “We believe that a vehicle was used to go to different post offices and they [the counterfeiters] mailed several parcels at each post office,” Kong said.

To avoid detection, the parcels were declared as gifts for the Christmas and New Year’s holiday. They were addressed to people in various parts of Britain, he said. “We believe the illicit tobacco was mailed during the busy festive period in an attempt to avoid being picked up by our officers for examination.”

Kong compared the battle to stop tobacco smuggling to a “game” of capability and intelligence between smugglers and officers

Inside each bag of tobacco was a price tag in euros. “We believe this is a tactic counterfeiters use to make consumers think the tobacco is a parallel product from other European countries,” Kong said.

According to Hong Kong customs, another 3.5 tonnes of the tobacco was seized in two warehouses, in Kwai Chung and Tai Kok Tsui, in two raids mounted yesterday and on December 14.

Four men, including one from the mainland, were arrested during the two raids.

clifford.lo@scmp.com

Four arrested in HK$27m tobacco seizure

09-01-2012 – RTHK
Customs officers have arrested four people after seizing around 9,500 kilogrammes of tobacco worth about HK$27-million. Much of it was found in packets at the Airmail Centre, waiting to be posted to Britain. The authorities say they’ve smashed two tobacco smuggling syndicates during a month-long operation.

EU-China cigarette conference in Beijing 14-16 December OLAF and Chinese authorities join forces to fight cigarette smuggling from Asia

http://www.iewy.com/38274-eu-china-cigarette-conference-in-beijing-14-16-december-olaf-and-chinese-authorities-join-forces-to-fight-cigarette-smuggling-from-asia.html/print/

Operational cooperation was the focus of the cigarette smuggling conference which ended today in Beijing. It was hosted by the European Anti-Fraud Office (OLAF) and attended by the Chinese authorities involved in controls and investigations into the manufacturing and smuggling of cigarettes. The conference resulted in the establishment of direct contacts between OLAF and regional Chinese authorities in key trade regions and discussions about EU-Chinese cooperation in large-scale international cigarette smuggling cases.

“The considerable increase in counterfeit cigarettes entering the EU black market from China and other Asian countries in recent years requires closer international cooperation. From China alone, we have seized one billion cigarettes in the last 18 months. The Chinese customs Anti-smuggling Bureau has proven to be an important partner by providing information that has led to significant seizures in the EU. We intend to further develop our good cooperation,” said OLAF Director-General Giovanni Kessler.

The conference in Beijing is part of a wider effort to enhance cooperation between OLAF and the Chinese authorities. Earlier this month, Mr Kessler met with Professor Cao Jianming, the Prosecutor-General of the Supreme People’s Procuratorate.

The Chinese authorities attending the conference were the police (Ministry of Public Security), customs, State Tobacco Monopoly Administration and Ministry of Justice. These authorities all have competence in the area of controls and investigations into the manufacturing and smuggling of counterfeit cigarettes.

The illicit tobacco trade costs EU taxpayers an estimated €10 billion each year. Therefore, the European Commission and OLAF have decided to step up their efforts against smuggling. In June this year, the Commission introduced an action plan to be implemented together with Member States and Eastern neighbours to tackle cigarette and alcohol smuggling along the EU’s Eastern border. It proposes targeted actions, including the strengthening of capacities on both sides of the border, and the setting up of trained mobile units and new equipment alongside the border such as automated recognition tools, scanners and night vision. There is also the need to review the way customs penalties currently apply throughout the EU, and to enhance international cooperation, in particular with EU Eastern neighbours.

OLAF
The mission of the European Anti-Fraud Office (OLAF) is threefold: it protects the financial interests of the European Union by combating fraud, corruption and any other illegal activities; it protects the reputation of the European Institutions by investigating serious misconduct by their staff that could result in disciplinary proceedings; and it supports the European Commission in the development and implementation of fraud prevention and detection policies.

For further details:
Pavel BO?KOVEC Head of Unit Spokesman,
Communication, Public Relations
European Anti-Fraud Office (OLAF)
Phone: +32 2 296 72 00
E-mail: olaf-media@ec.europa.eu

http://ec.europa.eu/anti_fraud/index_en.html

Revenue seize nine million cigarettes described as ‘sports socks’

http://www.thejournal.ie/revenue-seize-nine-million-cigarettes-described-as-sports-socks-308273-Dec2011/

The cigarette seizure in Co Monaghan

The cigarette seizure in Co Monaghan

Image: Revenue Customs Service

OFFICERS FROM Revenue Customs Service have seized nine million cigarettes which arrived in Ireland described as ‘sports socks’.

The seizure – in conjunction with the gardaí – was made at a premises in Co Monaghan on Saturday with the ‘President’ brand cigarettes carrying an estimated street value of €3.8 million and a potential loss to the Exchequer of €3.2 million.

The cigarettes had arrived at Dublin Port in a 40-foot maritime container from Malaysia, via Rotterdam and were described as ‘sports socks’ on the manifest.

The seizure was made as part of an ongoing strategy between Revenue and the gardaí to combat cigarette and tobacco smuggling into Ireland.

The Revenue has reminded anyone who is tempted to buy cheap cigarettes from an irregular source that there is a “high possibility” they are counterfeit and provide an unknown set of health risks.

“It also takes much needed funds from the exchequer; hurts legitimate trade and is funding criminal activity,” a statement says.

Anyone any information regarding the smuggling or sale of illegal cigarettes can contact Revenue on 1800 295 295.