Cigarette Smuggling
British American Tobacco set to spook politicians on blackmarket tobacco
Simon Chapman, Professor of Public Health, University of Sydney 13/10/10
http://www.ashaust.org.au/lv4/BATvidChapman1010.htm
The tobacco industry has much to lose with plain packaging. So far it’s put a match to three consecutive failures to explode. First we had the widely ridiculed effort from a BAT sponsored PWC report in February to convince Canberra than one in eight cigarettes smoked in Australia today were blackmarket, duty-not-paid. Then we had the embarrassing efforts of the IPA to argue that that it would all end in big tears in court when the tobacco industry would successfully sue the government. Most recently, we saw the recent rapidly aborted TV campaign trying to convince us that plain packaging “would not work” (which is why the industry was spending A$5m to tell us that).
The next wave of the tobacco industry’s panicked assault on plain packaging of tobacco products is about to commence with a DVD, now on British American Tobacco’s website about to be mailed to all MPs. The 6m52s high production video dramatises the lines that display bans (now adopted by over 40 nations), plain packs, tax increases and banning additives will all contribute to crime, terrorism and prostitution. It’s got everything from a cheesy script, an eastern European drug dealer stereotype (Middle Eastern might have been too much!), gormless, idealistic, and clueless European Union bureaucrat and shifty English bad guy.
The entire premise is that these control measures will be manna from heaven for organised crime: “Plain packs – easy for us to copy .. no logos to match .. easier to counterfeit .. lots more profit” says a fingernail removing Budapest crime boss from the back of a limo.
Copying branded packs has never been a barrier to tobacco counterfeiters. On the streets of many chaotic low and middle income nations, they are openly sold in shops and through street vendors because of chaotic law enforcement and corruption . I recently edited a research paper from Tehranshowing that 21% of cigarettes are smuggled there.
But that’s not remotely the situation in Australia nor most OECD nations. Forecasts of massive black markets assume that smokers will be able to access these products with the ease that they today are able to buy cigarettes from every second shop. But if your ordinary smoker in the suburbs is able to so easily locate blackmarket tobacco, what would be stopping the police from doing exactly the same if it’s all so easy? All smokers reading this ask yourselves how easy would it be for you to access illegal tobacco products this afternoon. Most would not have a clue because it’s actually quite hard to find.
As I argued in Crikey in February, the obvious answer is that blackmarket tobacco is not flourishing in Australia. The tobacco industry campaign is bluster from start to finish because it knows fully well the this is the biggest Armageddon that will ever rain down on it, consigning tobacco promotion’s last bastion to history. Plain packs passes the scream test with flying colours. When the industry applauds or ignores an initiative, it’s time for a rethink. But when it behaves like it’s about to haemorrhage sales, you’re on target.
Eight million smuggled cigarettes seized in Hong Kong
Last updated: April 13, 2010
Source: Earth Times
Hong Kong – More than 8 million illicit cigarettes worth 2 million US dollars bound for Britain have been seized in Hong Kong, customs officials said Tuesday.
The haul of 852 cartons of branded cigarettes was sent by river from Guangzhou in southern China to Hong Kong and was on a cargo container due to be shipped to Britain.
The shipping container was marked as containing ovens, a customs spokesman said. The cigarettes it contained would be liable to around 1.3 million US dollars in tax.
No one was arrested after the cigarettes were detected by X-ray at Hong Kong’s container terminal Monday and investigations into the case were continuing, the spokesman said.
KOHL BILL TO STOP BLACK MARKET CIGARETTE SMUGGLING SIGNED INTO LAW BY PRESIDENT
Last updated: April 1, 2010
Source: Tradingmarkets
Today U.S. Senator Herb Kohl’s bill, the Prevent All Cigarette Trafficking (PACT) Act, was signed into law by President Barack Obama. The PACT Act cracks down on black market tobacco selling by closing loopholes in current tobacco trafficking laws, enhancing penalties for violations, and providing law enforcement with new tools to combat the innovative methods being used by cigarette traffickers to distribute their products. In 1998, the Bureau of Alcohol, Tobacco, Firearms and Explosives (BATFE) had six active tobacco smuggling investigations. Today there are more than 400 open cases.
“The cost of tobacco smuggling to Americans is not merely financial. Internet tobacco sales have been used by terrorist and organized crime groups to raise millions of dollars to support their illicit activities. This new law will help us ensure that we no longer continue to enable terrorist organizations to exploit the weaknesses in our tobacco laws to their advantage, allow states lose tax revenue, and provide children with easy access to tobacco products sold over the Internet,” Kohl said.
Hezbollah, al Qaeda and Hamas have all generated significant revenue from the sale of counterfeit cigarettes. Hezbollah is estimated to have earned $1.5 million between 1996 and 2000 through tobacco smuggling. That money is often raised right here in the United States, and then funneled back to these international terrorist groups.
Kohl noted that cigarette trafficking, including the illegal sale of tobacco products over the Internet, costs states billions of dollars in lost tax revenue each year. It is estimated $5 billion of tax revenue is lost, at the federal and state level, each year. As lost tobacco tax revenue lines the pockets of criminals and terrorist groups, states are being forced to increase college tuition and restrict access to other programs because of these lost revenues.
The Internet represents a new obstacle to enforcement. Illegal tobacco vendors around the world evade detection by conducting transactions over the Internet, and then shipping their illegal products around the country to consumers. Just a few years ago, there were less than 100 vendors selling cigarettes online. Today, approximately 500 vendors sell illegal tobacco products over the Internet.
The PACT Act will:
* Strengthen the reporting requirements for interstate cigarette sellers.
* Increase the criminal penalty from a misdemeanor to a felony and create a substantial civil penalty for violations, including violations of the reporting requirements and state tobacco tax laws.
* Grant federal and state law enforcement officials more powers to investigate and prosecute violators.
* Prohibit the United States Postal Service from delivering tobacco products
The PACT Act (S. 1147) was passed under unanimous consent by the Senate on March 11, 2010. On March 17, the House of Representatives passed identical legislation (H.R. 1676) by an overwhelming majority, 387 to 25.
Tobacco companies pay out lofty fines
Last updated: April 14, 2010
Source: Montreal Gazette
Two tobacco giants paid fines Tuesday that totalled $225 million for their role in cigarette smuggling in the early 1990s — which the federal government says is the largest criminal levies ever imposed in Canada.
JTI-Macdonald Corp. and R.J. Reynolds also reached a settlement in a lengthy civil suit with the provincial and federal governments.
The companies paid their fines Tuesday morning after pleading guilty in the Ontario Court of Justice, the federal government said in a news release.
“Taken together, this is the largest amount ever levied in Canada,” National Revenue Minister Keith Ashfield told a news conference.
The fines, combined with the civil settlement, will put a total of $550 million in provincial and federal coffers, bringing an end to a decade of litigation involving contraband tobacco shipped between the United States and Canada.
Cigarette smuggling raged through the early 1990s, forcing governments in Canada to eventually reduce tobacco taxes to stem the tide of contraband flowing across the border.
JTI paid $150 million after pleading guilty to “aiding persons to be in possession of tobacco not packaged in accordance with the Excise Act,” the federal government said in a release.
Northern Brands International Inc. — a company affiliated with R.J. Reynolds — pleaded guilty to a Criminal Code conspiracy and paid a $75-million fine ordered by the court.
An anti-smoking group on Tuesday condemned the deal with the governments as a settlement for “chump, saying it amounted to a “sell-out” and a “sweetheart deal” that fell far short of the amount the government originally sought.
“In court papers from 2005, the federal and provincial governments filed claims for nearly $10 billion against JTI-Macdonald Corp. and related companies over contraband,” said Garfield Mahood, executive director of the Non-Smokers’ Rights Association
“The settlements prove that tobacco crime does pay, big Time, as it has for decades. The government settled for “chump change”.”
The civil settlements with the two companies come two years after the federal and provincial governments settled with other cigarette makers — Imperial Tobacco and Rothmans, Benson and Hedges, which paid fines of $200 million and $100 million, respectively, in separate court actions.
The federal government thus labelled Tuesday’s fine as the biggest, when added together, because they considered the cases one file, dealt with by one judge, rather than separate cases.
The money in the latest civil settlement will be shared between the federal government and the provinces, with Ontario, Quebec, British Columbia, and Ottawa receiving the biggest settlements because they were the ones that lost the most.
A spokesman for the Canada Revenue Agency said the fines and settlement amount to more than the governments lost in excise taxes.
(Photograph by Stringer, Reuters)
High taxes don’t result in cigarette smuggling, say experts at Turkish forum
Last updated: April 9, 2010
Source: Hurriyet Daily News
The National Committee on Cigarettes and Health, or SSUK, organizes a conference in Istanbul that brings together academics and experts from Turkey, Hong Kong and India. Using facts and figures, they argue that Turkey’s smoking ban has not led to more cigarette smuggling and call for further cigarette tax hikes in the country
The theory that high taxes on cigarettes increase smuggling was criticized by experts from Turkey, India and Hong Kong who gathered in Istanbul on Wednesday.
The experts met to discuss the effect of smoking bans and raising taxes on cigarette smuggling.
Along with the National Committee on Cigarettes and Health, or SSUK, in Turkey, they presented facts and figures to show that high cigarette prices will deter smoking and will not lead to significantly more cigarette smuggling.
There have been reports in the Turkish media that cigarette smuggling has increased 20 percent because of the smoking ban, which is believed to reduce government tax revenue.
Experts, however, disagree; SSUK President and professor Elif Dağlı said cigarette smuggling is not likely to be individual work but the result of organized crime.
In order to increase smuggling by 20 per cent in Turkey, one would need a staff of approximately 20,000 people to work in distribution and sales, she said.
“Smuggling has nothing to do with cigarette prices, this is a method employed by the industry to scare the government,” said the professor. “If you keep the cigarette prices high, you increase tax income, reduce tobacco consumption and preserve health.”
However, she said she expected the tobacco industry would attempt to reduce the price to lower government tax income in the coming months and lobby the government into loosening the smoking ban.
She further offered statistics on how cigarette smuggling is high in countries with lower taxes and lower in the ones with higher taxes.
“The most important factor in reducing tobacco consumption is having high taxes applied on cigarettes. As doctors, we say high cigarette prices are good for [national] health,” she said.
1 billion to die from smoking by 2100
Dr. Lam Tai-Hing, director of the school of Public Health from the University of Hong Kong, said the most important method for fighting against smuggling is to give resources to customs, as smuggling will go on even without raising taxes.
Dr. Prakash C. Gupta, meanwhile, director of the Healis-Sekhsaria Institute of Public Health in Mumbai also said smuggling happens to countries with low access control and is not a function of price.
To further emphasize the fact that smoking kills, Lam estimated that two-thirds of smokers will be killed by related diseases if they start smoking at a young age, with a quarter dying between the ages of 35 to 69.
He said by 2030, 8 million people could be killed per year, with 80 per cent of them in low-and-middle income countries.
In the last century, smoking killed 100 million people, but is expected to kill 1 billion people in this century. Moreover one-third of adults are also exposed to second hand smoking, which also kills about 600,000 people per year.
Lam said raising tax is the most effective way to reduce tobacco consumption, adding that cigarette taxes should be at least 75 per cent of the price.
“Politicians may become unpopular if they impose high taxes but tobacco is one product that the consumers want to give up,” Gupta said.
Details of the smoking ban in Turkey
Turkey’s smoking ban took effect on July 19, 2009, outlawing smoking in all enclosed public places, such as bars, cafes, restaurants and places where nargile is smoked. Smoking is also not allowed in taxis, trains, outdoor stadiums as well as private and public schools.
Hotels are also required to set up rooms with ventilation systems that meet established standards for guests who smoke. These rooms must be on the same floor or corridor of each other.
Under the legislation, special sections made for smokers cannot exceed 10 percent of the overall space, and must be isolated from other enclosed areas. Similar-sized areas can also be created on the decks of sea-transport vehicles for smokers on intercity and international routes.
People under the age of 18, meanwhile, will not be allowed to enter these sections. Businesses are additionally required to make arrangements that protect nonsmokers from fumes if smoking is allowed in open-air parts of their premises.
Individuals who do not obey the ban are fined 70 Turkish Liras, while those who let people smoke in enclosed areas are fined between 572 and 5,723 liras.
Despite strong industry opposition and the belief by some that the ban is too strict, Turkey’s smoking ban was highly praised by other countries at this year’s Asian-Pacific Organization for Cancer Prevention congress, according to Dr. Nejat Özgül, deputy president for the anti-cancer department at the Health Ministry.
“If we want to win the war against cancer, we have to win the war against tobacco,” he said.
Progress made on global tobacco smuggling pact
Last updated: March 21, 2010
Source: Reuters
Negotiators have made significant progress on a global pact to halt smuggling and counterfeiting of tobacco products in a week of talks, the World Health Organization (WHO) said on Sunday.
But they did not discuss a proposal to ban sales of duty-free cigarettes, which activists say are frequently diverted into illicit trade that costs governments an estimated $40 billion in lost taxes.
Instead, negotiators from 168 countries did agree in closed meetings on the outline of a “tracking-and-tracing” system for tobacco products, the WHO and non-government organizations said.
Senior health officials will attempt to hammer out remaining differences when they meet in Uruguay in November to finalize the treaty, formally a protocol to the 2005 Framework Convention on Tobacco Control (FCTC).
“There has been a great amount of progress. We made breakthroughs in important areas of the protocol, but just need to carry on with this momentum,” Vijay Trivedi, policy adviser to the FCTC secretariat, told Reuters after talks ended on Sunday.
“It needs more time, basically,” he said, confirming agreement on the outline of a tracking and tracing system.
The treaty would require countries to license tobacco manufacturers, set up the tracing regime with a global data base, and carry out due diligence on sellers, distributors, exporters and importers.
All unit packets of cigarettes would have to be marked with unique serial numbers, a provision that tobacco companies say would cost them hundreds of millions of dollars to implement.
The Framework Convention Alliance, which groups more than 350 non-government organizations, said negotiators had “agreed important provisions to control the supply chain for tobacco products, including … a licensing system for manufacturers and others involved in the tobacco trade.”
But Gigi Kellett, tobacco campaign director at the activist group Corporate Accountability International, said the negotiators did not discuss a ban on duty-free tobacco sales.
Airports, airlines and duty-free operators say they would lose $3 billion a year from such a ban, and that there is no evidence that products intended for duty-free sale are diverted.
Philip Morris International, which makes Marlboro cigarettes and is the world’s largest non-state-owned tobacco firm, and British American Tobacco, the second-biggest cigarette maker, say they back effective measures against illicit trade.
Tobacco kills 5.4 million people a year from cardiovascular disease, cancers, diabetes and other illnesses, according to the WHO, which clinched the anti-tobacco treaty in 2005.
The existing treaty obliges governments to protect their populations from exposure to tobacco smoke and reduce demand through price and tax measures, regulating packaging and labeling of products and curbing advertising and sponsorship.
(Editing by Kevin Liffey)
Written by Stephanie Nebehay
Customs crackdown on Malaysian retailers
Last updated: March 24, 2010
Source: Tobacco Reporter
A crackdown in Malaysia on retailers selling smuggled cigarettes saw more than 100 cases brought to court during the first two months of this year, according to a story in The Star quoting the deputy director-general of the Customs Department, Datuk Mohamed Khalid Yusuf.
During the whole of last year, only a few cases went to court.
Retailers face being fined 10 times the value of any smuggled cigarettes seized from them.
(hint – do the same in Hong Kong)
“Currently, in Peninsular Malaysia, one out of three cigarette packs sold in the market is illegal, whereas in Sabah and Sarawak, two out of three cigarette packs sold in the market are illegal,” Khalid said.
Tobacco Smuggling: The Report
Each year approximately 400 billion cigarettes, or one-third of all legally exported cigarettes, end up illegally smuggled across international borders. Cigarettes are the world’s most widely smuggled legal consumer product.
Find out more in the Illegal Pathways to Illegal Profits report here.
(more…)
£6m smugglers jailed 20 years after East End warehouse raid
First published: February 23, 2010
Source: East London Advertiser
TWO men behind an international smuggling racket have been jailed today (Tuesday) for nearly 20 years between them for their part in smuggling 11 million cigarettes, five tonnes of hand-rolling tobacco and thousands of litres of wine into Britain.
The contraband thought to have a ‘cut price’ street value of £6 million was stashed in a warehouse in London’s East End which was raided by police and customs officers.
It had been smuggled in through Tilbury and Ipswich in mattresses, glass jars, toilet rolls and barbeque charcoal.
The smugglers used a warehouse in Cable Street in Shadwell for their dodgy consumables to evade £6m import duty.