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InternationalStatusoftheIllicitTobaccoTradeandkeydevelopments
LUKJOOSSENSBeirut8November2018
Legalcigarette sales:1980-2013(source:TobaccoAtlas)
LesssmokersexceptinAfroandEmro
Illegalsales:Lackofreliabledata
ØItisestimatedthatoneinevery10cigarettesgloballyisillicit.
ØGrowingevidencethatindustrysponsoredestimatesaretoohigh.
ØGrowingevidencethatindustrysponsoredestimatesuseuncertainorunknownmethodology
AcademicversusIndustryestimatesoftheillicitcigarettemarket(%)
Country Year Academic% Industry%
HongKong 2012 12 36
India 2016 3 20
Columbia 2016 3,5 20
Source:BMJTobaccoControlJournal
Industry dataarealways alarming
Press releasesoftheBelgianTobaccoIndustry:
• 21/11/2012:Cigarettecontraband,an increasingproblem
• 2/2/2015:Theillegalcigarette trade:anincreasing problem.
• 28/5/2015:Apersistentandincreasing problem.
Tobaccoindustry datashowadecrease ofillicit tradeinBelgium from 10%in2009to5%in2014.
2009 2010 2011 2012 2013 2014
9,9% 5,9% 5,9% 7,5% 7,6% 5,1%
According totheir owndata,Illicit trade isdecreasing in2014,butisstill described asagrowing problem.
Source: Joossens L, Merriman D, Ross H, Raw M, 2009
Theglobalillicitcigarettetrade
• 11.6%oftheglobalcigarettemarketisillicit
• Theburdenofillicittradefallsmainlyonlowandmiddleincomecountries
World Bank income group
Illicit market share
Revenue lost to government (US$)
WORLD 11.6% 40.5 billion
High income 9.8% 17.6 billion
Low and middle income
12.1% 22.9 billion
DollarValueofillicitmarkets
Cocaine Europe & N. America* 72 billionCigarettes** 40,5 billionHeroine Europe* 33 billionCounterfeit products Europe* 8,2 billionMigrant smuggling Latin America*
6,6 billion
Illicit Timber South East Asia* 3,5 billion
Source:UNODC*andJoossens,2009**
Legalpriceandillicittrade(2007)
World Bank income group
Average legal price per pack (US$)
Illicit market share
Low income 1.13 16.8%
Middle income 1.89 11.8%
High income 4.91 9.8%
"TheGlobalizationofCrime:ATransnationalOrganizedCrimeThreatAssessment"
ThisreportbytheUnitedNationsOfficeonDrugsandCrimelooksatmajortraffickingofproductssuchasillicitdrugs(cocaineandheroin),firearms,counterfeitproductsandstolennaturalresources.Oneofthemainconclusionsisthatbecausetransnationalorganizedcrimemarketsareglobalinscale,strategiestoaddressthemshouldalsobeglobal.
ProvenanceofillegalcigarettesintheEUin2010-11(source:OLAF)
CigarettesmugglingroutestoAfrica
Source:UNODC2009
Illicitflowsoftobaccoproductsin2016(sourceWCO)
Themodusoperandi:disappearingcontainersduringinternationaltransport.
Ø Containersoftendisappearin“freezones”.GoodsintroducedinafreezonearegenerallynotsubjecttousualCustomscontrols.Duetothelackofcontrolinsomefreezones,thegoodsmayleavethezonesunnoticedwithacoverload.
Ø Freezonesmayalsohavemanufacturingfacilitiesdestinedfortheillegalcigarettemarket.
Ø Today,over3,000activefreezonesexistin135countries.
Freezones“Moreeffectiveactionsandco-ordinationatthenationalandinternationallevelsareurgentlyneededtoensurethatfreezonesarenotunderminedbyillicitactivities.”
OECD,WCO,WTO,INTERPOL,EUROPOL,OLAF,UNODC,WHO.2018
Freezones
”Freezonescanbeusedfortheproductionandsmugglingof“illicitwhites”.FreezonesintheUAE,suchasJebelAliFreeZonebecomewellknownsourcesofillicitwhitestoauthorities.”OECD,2018
Whataretheidentifiedformsofillicittradein“high–risk”foreignfreezones?N=10
Interpolreport2014
Althoughcreatedtoimproveandincreaseinternationalcommercialactivities,freetradezonescanbemisusedbycriminalgroupstotrafficingoods,includingalcohol,tobaccoandenergyproducts.
Mostimportantcigaretteseizurein2016(source:WCO)
ØJordanCustomsreportedtheseizureatAqabaseaportof11containerspackedwith117millioncigarettes(amixofdifferentbrands).
ØTheshipmentwasdeclaredascomingfromGermany,althoughotherinformationsuggestedtheroutingwasJebelAli– Germany– Aqaba.
ØThebillsofladingsuggestedtheconsignmentswerewood.
Thethreetypesofillicitcigarettesnow.
ØIllicit trade ofwellknown cigarette brands(still ongoing)
ØIllicit trade ofnewcigarette brands mainlydestined for the illegal market(manufacturedby legal companies)
ØIllicit manufactured cigarette brands (includingcounterfeitcigarettes)(variable according tothe regions)
Illicitwhites
Brandsmanufacturedlegitimatelyinonemarket,eithertaxedforlocalconsumptionoruntaxedforexport,andsoldknowinglytotraderswhotransportthemtoanothercountrywheretheproductsaresoldillegallywithoutdomesticdutypaid.(Europeancommission,2011)
CEOPMICalantzopulos 20/11/2013NewYork
“Thetobacco industry iscomplicit inillegal trade.Smuggling isone ofits businessstrategies.”
Thetobaccoindustry
Ø 50yearsofexperienceinorganisingsmuggling.
ØMorethan3billionUSDinpaymentsandfinesinEUandCanadatosettlefivesmugglinglawsuits.
Ø LawsuitagainstRJReynoldsonsmuggling chargesinvolving Colombian and Russiancrimesyndicates.
TTCInternal Documents inLebanon
“ Evidence ofthe complicity ofTransnationalTobaccoCompanies(TTCs)incigarettesmuggling extends to Lebanonand the MiddleEastwhere this trade hasespecially benefitedfrom weak governance and chronic politicalinstability.”
Source:Nakkash Rand LeeK,Tobaccocontrol,2008.
BATinternalDocumentsinAsia
“BATdocumentsdemonstratethestrategicimportanceofsmugglingacrossglobal,regional,national,andlocallevels.ParticularlyimportantinAsia,contrabandenabledaccesstoclosedmarkets,createdpressureformarketopening,andwashighlyprofitable.”
Source:CollinJandal,Tobaccocontrol,2004.
JTIhasbeenaccussedinNovember2011oforchestratingcigarettesmuggling
“AsubsidiaryofJapaneseTobaccoInc(JTI)hasbeenaccusedofsmugglingcigarettesfromCyprusintoSyria.450 000cartonsofcigaretteswereallegedlysoldtothebrotherofSyrianPresidentBasharal-Assad.”Source:OrganizedCrimeandCorruptionReportingProject(OCCRP)
TheIllicitTobaccoTradeGlobally
Illicittradeisaglobalproblem,whichneedsaglobalsolutionthroughtheWHOFCTCIllicitTradeProtocol
ØToughersupplychaincontrolsØTougherenforcementØGreaterinternationalcooperation
The SWOTanalysıs ofthe Illicit TradeProtocol(ITP)
Strenght:ınternatıonalcollaboratıonıseffectıvetocombatıllıcıt trade.Weakness:lackofexpertıseofhealthoffıcıalsandfearofthe ımplementatıon costs.Opportunıty:cigarette traceabılıty wıllbeoblıgatoryınall ITPParties ın 2023.Threat:thetobacco ındustry ısproposıngtheırowntraceabılıty system which they control.
Thestrategy oftheIndustry towardsillicit tobacco trade
UsetheillicittradeargumenttoattackØhightaxesandØtobaccoregulation
JTI-MacdonaldadinCanada(September2016)
“Plain packaging makescigarettes easier tocounterfeit.”
TheUKindependentReviewundertakenbySirCyrilChantler,April2014.
TheChantler review identified that inAustralia“hardly anycounterfeitstandardised packages havebeenfound todate”.
Furthermore,arepresentative ofone ofthetobaccomanufacturers informed SirCyril’s teamthat hiscompanyhadseen areduction incounterfeitproductfollowing theintroduction ofstandardised packaging inAustralia.
HMCustoms andRevenureport(Aug.2014)
“Theconclusion oftheHMCustoms andRevenuwasthat there wasno evidence tosuggest that theintroduction ofstandardisedpackaging would haveasignificantimpactonthesize oftheillicit market.”
UKHighCourt decision onstandardised packaging (May2016)TheKPMGreportindicates arise oftheillicitmarket inAustralia.However,this reportisfunded by thetobacco companies andKPMGitself hassaid that it isamisinterpretation tosuggest that it supportsthecontention thatplain paperpackaging could lead ofitself toanincrease oftobacco smuggling.
Conclusions
• Oneinevery10cigarettesgloballyisillicit.• Don’trelyontobaccoindustryestimates.• Illicittradeisaglobalproblemwhichneedsaglobalsolution.
• TheWHOFCTCIllicittradeprotocolmighthelp.
• Moreinternationalactionisurgentlyneededtoensurethatfreezonesarenotunderminedbyillicitactivities.