Factors encouraging smuggling

1
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 ?

2
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 ?

3
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
  C1.2 Bn tax fraud from smuggling 1991-96
  ?

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Hanoi, Vietnam 2003
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Hanoi, Vietnam 2003
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(No Transcript)
7
Vietnam, 2003
8
Some notes from BAT
From a BAT internal document (12 May 1995)

• 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 BATs
  opposition to a licence is simply to protect the
  smuggling trade.3

Comment by Fred Combe, general manager of BAT,
Vietnam, 1998
In Vietnam, smoking State Express 555 means that
youve made it.
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Vietnam, 2003