international status of the illicit tobacco trade and key ......cocaine europe & n. america* 72...
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InternationalStatusoftheIllicitTobaccoTradeandkeydevelopments
LUKJOOSSENSBeirut8November2018
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Legalcigarette sales:1980-2013(source:TobaccoAtlas)
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LesssmokersexceptinAfroandEmro
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Illegalsales:Lackofreliabledata
ØItisestimatedthatoneinevery10cigarettesgloballyisillicit.
ØGrowingevidencethatindustrysponsoredestimatesaretoohigh.
ØGrowingevidencethatindustrysponsoredestimatesuseuncertainorunknownmethodology
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AcademicversusIndustryestimatesoftheillicitcigarettemarket(%)
Country Year Academic% Industry%
HongKong 2012 12 36
India 2016 3 20
Columbia 2016 3,5 20
Source:BMJTobaccoControlJournal
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Industry dataarealways alarming
Press releasesoftheBelgianTobaccoIndustry:
• 21/11/2012:Cigarettecontraband,an increasingproblem
• 2/2/2015:Theillegalcigarette trade:anincreasing problem.
• 28/5/2015:Apersistentandincreasing problem.
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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.
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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$)
WORLD 11.6% 40.5 billion
High income 9.8% 17.6 billion
Low and middle income
12.1% 22.9 billion
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DollarValueofillicitmarkets
Cocaine Europe & N. America* 72 billionCigarettes** 40,5 billionHeroine Europe* 33 billionCounterfeit products Europe* 8,2 billionMigrant smuggling Latin America*
6,6 billion
Illicit Timber South East Asia* 3,5 billion
Source:UNODC*andJoossens,2009**
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Legalpriceandillicittrade(2007)
World Bank income group
Average legal price per pack (US$)
Illicit market share
Low income 1.13 16.8%
Middle income 1.89 11.8%
High income 4.91 9.8%
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"TheGlobalizationofCrime:ATransnationalOrganizedCrimeThreatAssessment"
ThisreportbytheUnitedNationsOfficeonDrugsandCrimelooksatmajortraffickingofproductssuchasillicitdrugs(cocaineandheroin),firearms,counterfeitproductsandstolennaturalresources.Oneofthemainconclusionsisthatbecausetransnationalorganizedcrimemarketsareglobalinscale,strategiestoaddressthemshouldalsobeglobal.
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ProvenanceofillegalcigarettesintheEUin2010-11(source:OLAF)
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CigarettesmugglingroutestoAfrica
Source:UNODC2009
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Illicitflowsoftobaccoproductsin2016(sourceWCO)
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Themodusoperandi:disappearingcontainersduringinternationaltransport.
Ø Containersoftendisappearin“freezones”.GoodsintroducedinafreezonearegenerallynotsubjecttousualCustomscontrols.Duetothelackofcontrolinsomefreezones,thegoodsmayleavethezonesunnoticedwithacoverload.
Ø Freezonesmayalsohavemanufacturingfacilitiesdestinedfortheillegalcigarettemarket.
Ø Today,over3,000activefreezonesexistin135countries.
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Freezones“Moreeffectiveactionsandco-ordinationatthenationalandinternationallevelsareurgentlyneededtoensurethatfreezonesarenotunderminedbyillicitactivities.”
OECD,WCO,WTO,INTERPOL,EUROPOL,OLAF,UNODC,WHO.2018
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Freezones
”Freezonescanbeusedfortheproductionandsmugglingof“illicitwhites”.FreezonesintheUAE,suchasJebelAliFreeZonebecomewellknownsourcesofillicitwhitestoauthorities.”OECD,2018
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Whataretheidentifiedformsofillicittradein“high–risk”foreignfreezones?N=10
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Interpolreport2014
Althoughcreatedtoimproveandincreaseinternationalcommercialactivities,freetradezonescanbemisusedbycriminalgroupstotrafficingoods,includingalcohol,tobaccoandenergyproducts.
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Mostimportantcigaretteseizurein2016(source:WCO)
ØJordanCustomsreportedtheseizureatAqabaseaportof11containerspackedwith117millioncigarettes(amixofdifferentbrands).
ØTheshipmentwasdeclaredascomingfromGermany,althoughotherinformationsuggestedtheroutingwasJebelAli– Germany– Aqaba.
ØThebillsofladingsuggestedtheconsignmentswerewood.
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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)
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Illicitwhites
Brandsmanufacturedlegitimatelyinonemarket,eithertaxedforlocalconsumptionoruntaxedforexport,andsoldknowinglytotraderswhotransportthemtoanothercountrywheretheproductsaresoldillegallywithoutdomesticdutypaid.(Europeancommission,2011)
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CEOPMICalantzopulos 20/11/2013NewYork
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“Thetobacco industry iscomplicit inillegal trade.Smuggling isone ofits businessstrategies.”
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Thetobaccoindustry
Ø 50yearsofexperienceinorganisingsmuggling.
ØMorethan3billionUSDinpaymentsandfinesinEUandCanadatosettlefivesmugglinglawsuits.
Ø LawsuitagainstRJReynoldsonsmuggling chargesinvolving Colombian and Russiancrimesyndicates.
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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.
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BATinternalDocumentsinAsia
“BATdocumentsdemonstratethestrategicimportanceofsmugglingacrossglobal,regional,national,andlocallevels.ParticularlyimportantinAsia,contrabandenabledaccesstoclosedmarkets,createdpressureformarketopening,andwashighlyprofitable.”
Source:CollinJandal,Tobaccocontrol,2004.
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JTIhasbeenaccussedinNovember2011oforchestratingcigarettesmuggling
“AsubsidiaryofJapaneseTobaccoInc(JTI)hasbeenaccusedofsmugglingcigarettesfromCyprusintoSyria.450 000cartonsofcigaretteswereallegedlysoldtothebrotherofSyrianPresidentBasharal-Assad.”Source:OrganizedCrimeandCorruptionReportingProject(OCCRP)
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TheIllicitTobaccoTradeGlobally
Illicittradeisaglobalproblem,whichneedsaglobalsolutionthroughtheWHOFCTCIllicitTradeProtocol
ØToughersupplychaincontrolsØTougherenforcementØGreaterinternationalcooperation
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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.
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Thestrategy oftheIndustry towardsillicit tobacco trade
UsetheillicittradeargumenttoattackØhightaxesandØtobaccoregulation
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JTI-MacdonaldadinCanada(September2016)
“Plain packaging makescigarettes easier tocounterfeit.”
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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.
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HMCustoms andRevenureport(Aug.2014)
“Theconclusion oftheHMCustoms andRevenuwasthat there wasno evidence tosuggest that theintroduction ofstandardisedpackaging would haveasignificantimpactonthesize oftheillicit market.”
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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.
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Conclusions
• Oneinevery10cigarettesgloballyisillicit.• Don’trelyontobaccoindustryestimates.• Illicittradeisaglobalproblemwhichneedsaglobalsolution.
• TheWHOFCTCIllicittradeprotocolmighthelp.
• Moreinternationalactionisurgentlyneededtoensurethatfreezonesarenotunderminedbyillicitactivities.