Factors encouraging smuggling

• Criminal organisation

• Sophisticated distribution

• No control over movement

• No duty during transit

• Illegal sales tolerated

• Difficulty telling legal from illegal• Active support of tobacco companies

Factors reducing smuggling

• Prominent tax stamps• Severe penalties• All in chain licensed• Tracking by serial number• Dispatch only to responsible destination• Label with destination• Increased anti-smuggling action• Action against companies

Legal action against tobacco companies for alleged smuggling

• Oct. 2001: UK Dept of Trade investigates BAT

• Jan. ’02 Canada: Rothmans offices searched re smuggling to US, 1989-96

• Late ’01-early ’02: European Commission sues US companies for smuggling

• Feb. ’02(?): European Union accuses US companies of violating Iraq sanctions

• Early-mid ’02: US government sues PM for ‘racketeering’

• Oct. ’02: EU Commission sues Rothmans in USA for money laundering

• Jan. ’03: German boss of Reemtsma (Imperial) held by police

• Jan. ’03: Iraqi sues RJT over loss of (smuggling) earnings!• Mar. ’03: 8 JT (RJR) executives charged with C$1.2 Bn tax fraud from

smuggling 1991-96

Hanoi,Vietnam2003

Hanoi, Vietnam 2003

Vietnam, 2003

Some notes from BAT

“Smuggled sales into Vietnam are currently estimated at approximately 7 bn [billion] p.a. although prior to a crackdown in 1990 (when [it was eliminated for 18 months) it was in the region of 12-17 bn p.a.”

“SE [State Express] 555 is the major smuggled brand and there is no doubt it has a tremendous image and sales potential in the country.”

“BAT has resisted agreeing to manufacture 555 in Vietnam due both to concerns about the ability to sell the brand as a locally manufactured product and to the possible impact of a licence outside Vietnam.

“…Vinataba [the Vietnamese State monopoly] sees a licence of 555 as an attractive opportunity for the JV [joint venture], and believes that BAT’s opposition to a licence is simply to ‘protect the smuggling’ trade.”3

From a BAT internal document (12 May 1995):

“In Vietnam, smoking State Express 555 means that you’ve made it.”

Comment by Fred Combe, general manager of BAT, Vietnam, 1998:

Vietnam, 2003