Tobacco information workshops&

Disposal of seized goodsANTI-ILLICT TRADE CONFERENCE (10 NOVEMBER 2015)

Francois GreylingIndependent Consultant to TISA

TOPICS

• Southern African Customs Union - Enforcement factors• Southern Africa production region & product flow • Enforcement challenges• Workshop dynamics• LEA actions & Prosecutions• Seizures• Destructions

Southern African Customs UnionBotswana Lesotho Namibia Swaziland & South Africa

• One excise system – 5 sovereign states & 5 revenue collection agencies

• Five different versions of Customs & Excise legislation (similar underlying text)

• Different versions of Intellectual Property Protection platforms• Counterfeit Goods Act – South Africa • Merchandise Marks legislation / Industrial

Property Orders

• Different versions and levels of Tobacco Products Control legislation• South Africa• Namibia• Botswana

• Different Law Enforcement Agencies (LEA) with overlapping powers and different levels of enforcement

• Vast land and sea borders to control Source: SAM AIT Intel

ENFORCEMENT FACTORS:

AngolaZambia

Zimbabwe

Manufacturing capability

Special Economic Zone

SOUTHERN AFRICA PRODUCTION REGION & PRODUCT FLOW

Direct supply channelling

Transit supply channelling

ENFORCEMENT CHALLENGES

• More than 60% of the suspect illicit product is locally manufactured and is visually compliant

• There is a perception that visual compliant product cannot be illicit

• Manipulation of the current excise control mechanism (integrity)

• No legal requirement to transport goods with applicable transaction papers

• No track and trace system required by law

• Duplication and falsification of tax invoices

• Sale of products below the applicable tax incidence (minimum tax at risk R14.16)

• Very little control over imports of unmanufactured tobacco

SOUTH AFRICA’S ILLICIT THREAT:

TOBACCO INFORMATION WORKSHOPS

ENFORCEMENT SUPPORT:

• LEA engagement to offer tobacco information workshops – RSA & BLNS

• South African Police Service, South African Revenue Service, South African National Defense Force & other (RSA)

• Customization of material according to country criteria, audiences and time allocations

• Regional/Cluster, Stations/Offices, Ports of Entry

• Product identification & legislative compliance criteria (RSA)• Customs and Excise Act• Tobacco Products Control Act• Counterfeit Goods Act• Agricultural legislation

• National Prosecuting Authority & Asset Forfeiture Unit• Successful prosecution• Money Laundering

INFORMATION SESSIONS FACILITATED:

680

723 368

2274

30121752

Period 2010 - 2015

2010

2011

2012

2013

2014

2015

Period Attendance

2010 680

2011 723

2012 368

2013 2274

2014 3012

2015 1752

TOBACCO INFORMATION SESSIONS

DISCUSSION TOPICS:

• TISA’s identity and goals

• Defining the problem

• Legislative application -Acts and Regulations

• Remedial considerations & actions

• Product differentiation -Unmanufactured and Manufactured

• Documentation

• Methods of smuggling

LEA ACTIONS & PROSECUTIONS

• Better knowledge lead to a higher level of awareness

• Effective LEA initiatives lead to an increase in seizures• Cross border interaction• Multi-agency involvement

• Structured operations allowed for the apprehension of more suspects

• Specialized prosecutions resulted in a higher rate of matters being successfully concluded

• More stringent sentences• Higher deterrent value

SEIZURES

• Increased volumes could not be accommodated by existing storage facilities

• The auctioning off of seized tobacco was no longer a feasible solution• Goods were not stored in ideal conditions

• Contamination and product liability risks

• Threat of negative implications on future taxation compliance

• Risk of legitimate market destabilization

• The historical burning of seized tobacco products was not an option based on environmental considerations

• Cost effective and environmental responsible methods had to be sought • TISA developed such a capacity

• Offered destruction assistance

Destructions Machines• Customized for cigarette

destructions

• Mobile units for easy deployment

• Light delivery vehicles with a 2.5 liter engine capacity can transport it

• Powered by diesel engines -easy to maintain

• Ability to process 50,000 whole display cartons per day

• Team: 1 x machine operator & 8 x labourers

• Realistic destruction rate is 32,500 display cartons per day (logistics)

• TISA has 8 big machines strategically deployed and 1 smaller version

Destructions in progress & destruction residue

Display cartons – destruction residueAgriculture – land rehabilitation – creation of an artificial water table

Display cartons – destruction residueManufacturing – soil mixture – brick manufacture

TOBACCO DESTRUCTION - FIGURES

SOUTH AFRICAN CUSTOMS

Period Disposal category

Cigarettes (sticks)

2010 30,949,776

2011 463,725,330

2012 222,275,068 2013 285,422,091

2014 173,673,707 2015 13,529,520

Total 1,176,045,972

Master case equivalent 117,605

SOUTH AFRICAN CUSTOMS – TOBACCO

Period Disposal category

Tobacco (kg)

2010 -

2011 230,390

2012 464,000

2013 10,080

2014 3,750

2015 -

Total 708,220

Master case equivalent 35,411

SACU CUSTOMS (EXCLUDING RSA)

Period (2010 - 2015)Disposal category

Cigarettes (sticks)

Botswana 144,115,000

Lesotho 4,500,000

Namibia 22,625,200

Total 171,240,200

Master case equivalent 17,124

SOUTH AFRICAN POLICE SERVICE - NORTHWEST

PeriodDisposal category

Cigarettes (sticks)

2014 34,621,830

2015 5,035,000

Total 39,656,830

Master case equivalent 3,966

COMBINED SACU / SARS / SAPS

PeriodDisposal category

Cigarettes (sticks)

2010 – 2015 1,400,472,522

Master case equivalent 140,047

Master case equivalent 175,458

Dr. John C. Maxwell

People working together ultimately succeed or fail, based on their commitment to one another.

Thank you