Illegal Cigarettes
“A leading international tobacco company sold large quantities of duty-not-paid cigarettes,
worth billions and billions of dollars, with the knowledge that those cigarettes would be
smuggled into China and other parts of the world. . . . In my view, the tobacco companies
were clearly putting their commercial interests above whatever moral duty they may
have towards our society and to some extent such irresponsible behavior amounted
to assisting criminals in transnational crime.”
ESTONIA
LITHUANIA
RUSSIAN FED.
NETHERLANDS
IRELAND
BELGIUM
CANADA
C
FRANCE
GERMANY
SLOVENIA
CROATIA
Bosnia and
Herzegovina
SERBIA
MONTENEGRO
48%
SPAIN
FYR MACEDONIA
GREECE
TURKEY
MALTA
TUNISIA
MOROCCO
54
31%
2004–05
UZBEKISTAN
ARMENIA
REP.
KOREA
SYRIAN
CYPRUS
ARAB
REP.
IRAQ
LEBANON
ISRAEL JORDAN
CHINA
ISL. REP.
OF IRAN
PAKISTAN
Mexico
SAUDI
ARABIA
UAE
INDIA
THAILAND
YEMEN
SUDAN
HONG KONG
LAO
PDR
MYANMAR
VIETNAM
PHILIPPINES
Nicaragua
Costa Rica
NIGERIA
Venezuela
Panama
CÔTE
D’IVOIRE
GHANA
Colombia
SRI LANKA
CAMEROON
MALAYSIA
SINGAPORE
Ecuador
Peru
!
In 2008, Canada’s
two largest
tobacco companies
paid US$1.12
billion in fines
and penalties
for smuggling
cigarettes, the
largest fines ever
levied in Canada.
13%
31%
70%
17%
INDONESIA
Brazil
ZAMBIA
Bolivia
Chile
AUSTRALIA
S. AFRICA
NEW ZEALAND
Uruguay
Argentina
Recommendations to control
cigarette smuggling, Framework
Convention Alliance, 2007
Track and trace tobacco products to identify
points of diversion to illicit markets
Require that cigarette manufacturers control
their distribution chain, with serious penalties
and tax liabilities for failure to do so
License and monitor tobacco product supply
and distribution chain personnel
18%
2005–06
KAZAKHSTAN
ALGERIA
Other (including non-UK brands)
51%
BULGARIA
ALBANIA
UNITED STATES OF AMERICA
Seizures of cigarettes in the
United Kingdom by type, 2002–2007
20%
RUSSIAN
FEDERATION
GEORGIA
Guatemala
El Salvador
2006–07
No data
UKRAINE
ROMANIA
Evading duty
Illicit cigarette trade, market share and
number of cigarettes, 2005
Europe
Genuine UK Brands
Below 10%
HUNGARY
North America
Counterfeit
25–49.9%
AUSTRIA
ITALY
PORTUGAL
10–24.9%
POLAND
SLOVAKIA
SWITZ.
50% and above
LATVIA
DENMARK
UNITED
KINGDOM
CZECH REP.
—Justice Wally Yeung Chun-kuen, Hong Kong
Court of Appeal of the High Court, 1998
igarettes are the world’s most widely smuggled legal
consumer product. In 2006, contraband cigarettes
accounted for 11 percent of global cigarette sales, or
about 600 billion cigarettes. For years, the tobacco industry
claimed that high cigarette taxes encouraged smuggling from
low tax jurisdictions. However, documents uncovered during
recent lawsuits confirm that the tobacco industry itself is
responsible or involved in many large-scale cigarette smuggling
operations worldwide.
Cigarette smuggling undermines public health efforts to
reduce tobacco use by making international brands more affordable to low-income consumers and to youth, thus stimulating
consumption. In addition, illicit products often fail to comply
with health warning requirements and often violate youth access
laws due to informal and underground distribution networks.
Illicit trade also deprives governments of billions of dollars
in annual tax revenue needed for tobacco control and to treat
tobacco-related diseases. Illicit trade deprives governments of
US$40–50 billion in tax revenue each year. This revenue is
siphoned by organized crime networks and the tobacco companies themselves, assisting in greater sales volume and higher
profit margins. Tobacco companies also smuggle cigarettes to
launch new brands, enter new markets, and fight price wars
with competitors.
Article 15 of the WHO Framework Convention on Tobacco
Control addresses the illicit trade problem and is the basis for
a new international protocol to control cigarette smuggling
formulated by the parties to the Convention.
FINLAND
SWEDEN
NORWAY
Enhance law enforcement and international
cooperation to investigate and prosecute
illicit trade
Asia
Africa and
Middle East
Latin America
5%
700
21 billion cigarettes
9%
78 billion cigarettes
600
9%
62 billion cigarettes
20%
59 billion cigarettes
500
400
Total ILLICIT TRADE
20%
100 billion cigarettes
595 billion cigarettes
(This is 11% of total world trade)
Total
1,361
300
200
100
Commonwealth of
Independent States
By region, 2006
523
275 billion cigarettes
15%
Seizures of illicit shipments
exceeding 100,000 cigarettes
607
0
103
45
29
15
14
13
12
Ce E
nt ast
ra er
l n
W Eur an
es
op d
te
rn e
Eu
As
ro
pe
ia
an
Co
d
Pa
In mm
ci
de o
fic
pe nw
nd ea
en lth
So E t St of
ut as ate
he te
s
rn rn
W Af and
es ric
a
te
rn
Af
ric
a
M
id
dl
e
Ea
N
or
st
th
Am
er
So
ic
ut
a
h
Am
er
ic
a
16
SMUGGLED CIGARETTES
Estimated contraband cigarette market share,
2006 or latest available year
Number of shipments
CHAPTER
55