cigarette smuggling in europe: who really benefits?

by:CAI YI JIE     2019-08-22
Nowadays, the phenomenon of smuggling cigarettes is becoming more and more common and organized, posing a serious threat to public health.
The threat comes from two main directions.
First of all, smuggling makes cigarettes cheaper, thus increasing consumption.
The third export of global annual exports to the contraband market has a huge impact on consumption, resulting in an increase in the burden of disease, especially in poor countries.
It also cost tens of millions of dollars in government debt.
Second, the tobacco industry has used smuggling politically to lobby the government to lower taxes, arguing that smuggling is caused by price differences.
This cardboard pallet display shows that there is no correlation between the claimed high prices and the high level of smuggling in Western Europe.
In fact, countries like Norway and Sweden where cigarettes are expensive don\'t have a big smuggling problem, while countries in southern Europe do.
Cigarette smuggling is not caused by market forces.
This is mainly due to fraud caused by illegal evasion of import duties.
The cigarettes involved are not cheap brands from southern European countries because they do not have international markets. It is the well-
Famous international brands such as Marl Road and Winston.
We recommend that the regulation of cigarette trade be strengthened, including international transport conventions and a total ban on transit trade.
The manufacturer sells to dealers and the dealers sell to smugglers.
How big is the problem?
Nearly three of the world\'s cigarette exports have entered the market for illegal contraband.
Estimated by the difference between global exports and imports, almost all \"lost\" cigarettes are smuggled.
The world cigarette production is quite accurate. due to the short storage time of cigarettes, the world cigarette production is very close to the world consumption (
Large quantity not in storage).
Therefore, after allowing legitimate trade that is normally excluded from national statistics, global imports should be close to global exports (
Major import duties-
Free sales to travellers, diplomatic groups and military agencies).
The time difference between three to six months of recording import and export statistics cannot also explain the import and export differences.
2 imports are lower than exports, to the extent that legal tariffs cannot be explainedfree sales.
Although the responsibility of volume
There is no public record of free trade, and tobacco trade estimates about 0. 45 million cigarettes a year.
Of course, legally imported cigarettes may include cigarettes smuggled into third countries, so even such smuggling estimates may be underestimated.
Table 1 shows the global annual import and export situation from 1975 to 1996.
These figures come from the US Department of Agriculture and are accepted as accurate figures by other US government agencies, such as the Department of Health and Human Services.
In 1996, 1070 million cigarettes were exported, but 70 0 thousand cigarettes were imported, a difference of 4000 million.
0. 45 million after deducting legal tariffs
Free sales and about 355 cigarettes-
32% of global exportsmissing.
The European Union component is about 0. 6 million per year, and the European government loses $60 thousand per year in revenue. 5 (
All US dollar prices are US prices unless otherwise stated. )
View this table: View the inline View pop-up table 1 World cigarette Import and Export (
Thousands of pieces)
These figures are extraordinary.
They mean that there is a third, perhaps more illegal and cheap sale of all cigarettes exported.
Considering the relationship between price and consumption, this represents a huge stimulus to consumption, thus giving a hard-pressed, cash-
Lack of medical services.
In addition, the poor countries bear the brunt of cigarette smuggling (see below). Why cigarettes?
The appeal of cigarettes to fraudsters lies in the difference between tariffsfree and duty-
The paid price, even under the relatively low street price required to attract consumers, has a lot of profit margin.
They are also attractive because they are easy to handle.
Oil products, even other high-tax products such as alcohol
Is also the object of fraud-
Competition cannot be made based on the tax value of each weight or the conditions required for transportation.
A \"master bag\" of 10 thousand cigarettes is the common carton size in supermarkets.
The potential tax value of these containers is approximately $200200000 (table 2)
Almost all of this is a potential profit for smugglers.
View this table: view the risk tax revenue for a truck load (in US dollars)Large-
Scale smuggling also requires a willing market and a good local distribution network to supply.
This market and network has been in Italy for many years, where tobacco smuggling has long been established and culturally accepted, and in Spain, smuggling has also been established.
As a result, the recent expansion of cigarette smuggling has taken advantage of these countries as the basis for their penetration into markets in other parts of the EU, although opening up in Central and Eastern Europe has also provided new opportunities for smugglers.
The tobacco industry believes that smuggling is caused by the large difference in cigarette prices in different countries (
The argument we call \"market power)
So the solution is to cut taxes.
Given the high tax rates on cigarettes in many countries and the resulting price differences, this argument sounds attractive and even logical.
However, if this is true, countries with expensive cigarettes will experience a lot of smuggling, while countries with cheap prices will not.
In fact, the opposite is true.
According to data from the European Federation of cigarette retailers 5 and 9 countries from other sources, 67 we classify 15 EU countries
Smuggling countries, the market share of contraband is more than 10% (
Spain 15%, Austria 15%, Italy 11. 5%, Germany 10%),medium-
Smuggling countries, the market share of contraband is between 5% and 10% (
5-10% in the Netherlands, 7% in Belgium, 8% in Greece, and probably Luxembourg and Portugal, but no research), andlow-
Smuggling countries, the market share of contraband is less than 5% (
France 2%, UK 1.
5%, 6 Ireland 4%, Sweden 2%, 7 Norway 2%, 8 there may be Denmark and Finland, but there is no study).
The results of the month can be seen in the table.
View this table: View the price of cigarettes in the inline View pop-up table 3 (in US$)
The extent of smuggling to EU countries. The correlation between the tobacco industry\'s alleged high prices and high levels of smuggling simply does not exist.
In fact, countries such as Norway, Sweden, Denmark and the United Kingdom where cigarettes are expensive do not have a big smuggling problem.
Table 3 shows high levels of cigarette smuggling in southern Europe rather than in the north.
Why is this?
The smuggling of cigarettes is not mainly caused by market forces.
It was caused by fraud.
Illegal evasion of import duties.
The cigarettes involved are not cheap brands from southern European countries.
There is no international market for such brands.
Smuggled cigarettes are expensive international brands made by multinational companies-
For example, marl Road, camel and Winston.
These international brands are imported into warehouses in northern Belgium (see below).
No tariffs were paid to them because they were marked as being exported from the EU (EU)
For example, a third country in North Africa.
In theory, they only transit through the EU.
They were then transported to all parts of Europe, \"disappeared\" on the journey, 9 fell into the hands of smugglers, and then took to the streets.
By evading tariffs, they can be sold for about one dollar per pack, much cheaper than the official statutory price.
Who is the best for smuggling cigarettes?
Multinational manufacturers sell their cigarettes to traders before they sell them again.
The manufacturer said that once they sold them they had no further legal responsibility and had no idea where they had gone.
Then it would be beneficial to consider who would benefit the most from this illegal evasion of responsibility.
Manufacturers make normal profits by selling cigarettes (legally)
To the dealer
The cigarettes then entered the black market and were sold at a significantly lower price, stimulating demand.
This puts pressure on governments not to increase taxes because of loss of income, which can also lead to lower prices and higher consumption, as happened in Canada.
The industry then uses this to urge the government to reduce or not increase taxes.
Finally, contraband cigarettes intercepted by customs must be replaced --
Create more sales.
Thus, the real beneficiaries of smuggling cigarettes are multinational corporations.
Smuggling is equivalent to higher sales for them.
In fact, the benefits are even greater, as recognized in the tobacco trade report.
In a 1996 report, World Tobacco acknowledged that \"although the sale of contraband cigarettes affects the level of income of governments around the world --
Smuggling is widely derived from tobacco sales and also helps to promote the development of some of the world\'s leading brands in markets that have been closed to foreign imports and demand for Western cigarettes continues to grow.
In 1993, Michael Balford wrote in the international tobacco magazine: \"Whose brand sells best in the contraband trade?
The focus of traditional smuggling is
International well-known brands, because the instant identification and confidence of goods is essential for these fast, secret transactions.
Small for smugglers-known brands.
They focus on the products of multinational companies.
\"10 smuggling pushes top international brands to low prices at affordable prices
Revenue and image of consumers
In the developing countries where Western products are considered exquisite and fashionable, conscious young people.
It can be said that smuggling is a strategy to enter the market.
This is highlighted by some examples.
In Argentina in the 1960 s, there was a close time relationship between the rise of smuggling and the entry of transnational tobacco companies into the Latin American market.
In fact, smuggling forces the market to open up and allows multinational companies to enter.
Contraband rose from 2% of total consumption to 12% until multinationals bought state-owned companies, which mysteriously fell in early 1970.
Italy is the oldest smuggling country in Europe.
Cigarette production is controlled by the state monopoly. since 1963, cigarette advertising has been banned, which theoretically makes it difficult for foreign brands to compete.
So far, however, smugled Road is the most smuggled brand in Italy and a market leader, with a market share of 50% in 1996.
The smuggled marl Road is cheaper than the country\'s leading brand MS.
Bulgaria is one of the few countries in Eastern Europe that still have countries --
It is also one of the poorest tobacco industries, with an average income of $90 a month in 1996.
In 1995, the domestic consumption of cigarettes was estimated at 0. 13 million, and the illegal import was estimated at about 50 thousand, accounting for 38% of the total consumption.
Here, like many other countries, American cigarettes are popular among young people, but most people can\'t afford them at official legal prices.
The price of a pack of marl roads is $1997, while a pack of smuggled ones only costs $1.
According to the official price, the market for American cigarettes will be very limited, and it is huge according to the price of smuggling.
China is the largest cigarette market in the world.
This is a very difficult market to penetrate, and there is an advertising ban;
Nevertheless, it is estimated that about 0. 4 million cigarettes are smuggled into China every year.
This market is so huge that it is hard to imagine that any industry would not be willing to stand in this market.
Willingness of multinational cigarette manufacturers to cooperate
The action to crack down on smuggling their brands into China will be a touchstone to test their sincerity and their aversion to illegal acts.
Transportation fraud is at the heart of cigarette smuggling in Europe.
On 1997, a committee of the European Parliament published a detailed report on the European Union transit process.
5 Complex inspection and documentation systems allow temporary suspension of duties, excise and value of goods --
Value-added tax on goods from a third country or shipped to a third country when transported through Europe.
For example, cigarettes imported from the United States are shipped to North Africa through Antwerp.
They went into the transport system, from Antwerp to Spain, and from there to North Africa.
If their exports are confirmed, the EU will not be taxed.
When these duties are fraudulent
Free goods are on the black market.
The Council of the European Parliament has revealed the complexity of the route of smuggling cigarettes into the free circulation of the EU.
Download the roadmap for new tabDownload figureOpen powerpointSmuggling
See text for description.
The Port of Antwerp, Belgium offers unparalleled cigarette storage facilities in other parts of Europe.
In 1996, about a cigarette passed through the port.
0. 62 million imported from the United States (
Mainly from Philip Morris and Reynolds)
And 0. 38 million from Brazil.
Factories owned by Philip Morris and BAT)(
See Tables 4 and 5).
View this table: View cigarette exports from the United States to Belgium (
Thousands of pieces)
View this table: View cigarette exports from Brazil (
Thousands of pieces)
In addition to the relatively small proportion used for duty --
Sold for free, none of these cigarettes are shipped to the EU market, as large US producers supply their legitimate EU market entirely from EU production facilities.
These cigarettes are exported to third countries.
So anyone who wants to buy US tariffs
Free cigarettes on the European black market are likely to buy products from Antwerp\'s warehouse just because the cigarettes are there.
Estimated gross value of millions of taxes-
Free cigarettes in transit are $14 m.
According to a recent article in The New York Times, it is these transit cigarettes that are eventually sold illegally in Europe, very easy and without control.
The main trade routes for smuggling routesTwo include transporting cigarettes to Eastern Europe and the former Soviet Union.
They first moved from Belgium to the free zone in Switzerland by road, when they were not within EU law, and then they left Switzerland under the new transit regulations, destinations for Central and Eastern Europe or one of the former Soviet republics (
Route 1 in figure).
On another route.
Route on map 2)
Cigarettes are taken from Port warehouses to regional airports in Belgium or the Netherlands by air (
Up to five containers per aircraft)
Destinations to Eastern Europe, from where they return to the EU in many ways, particularly Italy and Germany.
In Germany, the process is described as \"Ant\"smuggling” (
In large quantities of small goods transported by private cars and minivans, the secret transport of cigarettes across the eastern border.
The cigarettes are supplied to the Italian market and to other European Union countries.
For Italy, cigarettes are heavily crossed the Adriatic Sea by speedboat from Afghanistan and the Republic of the former Yugoslavia, landing on the long coastline, a traditional, long
Established route.
In our last example
Route on map 3)
To some extent, the traditional route through Gibraltar and andowell was replaced by shipping cigarettes from northern European ports.
Documents were prepared indicating the final destination of North Africa, but maritime routes were close to Spanish territorial waters, where they were unloaded by fast vessels and landed on the Spanish coast.
59 The structure of the transaction is as complex as possible to make the investigation as difficult as possible.
A batch of cigarettes will pass through a series of confusing owners in a short period of time, then reach the final owner, and the connection between successive owners is as vague as possible.
For example, a Swiss subsidiary of an American multinational company sold a batch of American cigarettes to a company owned by a Swiss trader, who sold them to a Panama company, they marked them as Senegal in West Africa.
Spanish police intercepted the shipment near the Spanish coast and they would have landed there by speedboat.
The attitude of multinational companies the route of multinational companies is that they legally sell cigarettes to dealers and their responsibility ends.
Some dealers themselves accuse the industry of lying when they say they don\'t know where the cigarettes are going.
Given the huge scale of smuggling shown by the gap between exports and imports, it would be strange if the industry did not know what was going on.
It was like Lord Nelson, the British admiral at the Battle of Copenhagen in 1801, putting his telescope in the eyes of the blind, declaring that \"I really can\'t see the signal \".
What is the attitude of the industry?
Much of Europe\'s tobacco trade is in Switzerland, and trade with Antwerp can be considered as the center of trade.
The European headquarters of Philip Morris and Reynolds are there.
According to an article in The New York Times, when EU investigators asked officials at Renault, they refused to help on the grounds that the Swiss business secrecy law prevented them.
In the United States, a former Brown and Williamson executive admitted to selling contraband cigarettes.
The cigarettes were delivered from a warehouse in Alabama to a private warehouse in the state of Louis Anna, marked as an offshore vessel, and therefore duty free, and then sold to a Vietnamese organization smuggled into Canada.
Discussing and suggesting the scale of cigarette smuggling poses a huge threat to public health by stimulating consumption, while also depriving the government of tens of millions of dollars in taxes.
It is also increasing, which shows extreme difficulty in controlling it.
The tobacco industry claims that smuggling is caused by high taxes, and the resulting price differences are only occasional at best.
Strong indirect evidence questioned their sincerity in expressing concerns about cigarette smuggling.
They are often the main beneficiaries of it.
We believe that cigarette smuggling can be reduced, but this action must be international, including measures to simplify trade routes, whether or not there is cooperation in the industry. operation.
We offer the following suggestions.
Penalties for tobacco smuggling should be revised. Many penalties for tobacco smuggling are out of date.
These measures should be strengthened as part of the tobacco tax law revision.
The key to this revision is to ensure that penalties for smuggling are combined with the possibility of being captured, making tobacco smuggling economically unattractive.
These penalties should not be directed only to import and export companies and intermediaries;
They should target multinational manufacturers and they should be responsible for the destination of their products (see below).
All tobacco products should highlight tax receipts, showing that applicable taxes have been carried out in different countries in different ways.
The purpose is to clearly distinguish between legal and illegal goods, make it easier for contraband to be found and the law is easier to enforce.
Many European countries have called for \"tax collection \".
A paid stamp attached to a cigarette box under a glass cardboard pallet display package. RECORD-
Retention requirements for revenue purposes should be added-
Retention and reporting requirements for revenue purposes are full of loopholes.
As part of the revision of tobacco tax laws, these laws should be improved.
The current system allows multinational companies to legally sell cigarettes to intermediaries and then evade all responsibility for the occurrence of cigarettes. Record-
Need to maintain and track the system, which makes it the responsibility of the manufacturer to prove that cigarettes arrive legally in the enduser markets.
Cigarette packaging should be clearly labeled for easy tracking from manufacturer to terminal
This measure will complement the first two proposals and should be part of the International Convention on Tobacco transport (see below).
The sale of smuggled cigarettes should be restricted, because in some countries, smuggled cigarettes are almost part of culture and need not only law enforcement, but also change the attitude of smokers towards authority.
Sales should be limited to licensed premises, and fines for selling through unlicensed premises and suppliers are high.
In the Czech Republic, heavy penalties for sales of cigarettes without tax tickets have had a measurable impact (
Personal communication with the president of the National Health Promotion Centre in Prague, Czech Republic, October 28, 1995).
Supply should be controlled, transit trade should end eventually, and the most important thing is probably to reduce supply.
This will require greater cooperation.
Operations between customs officers and other organizations.
Like illegal drugs (
From the point of view of control, nicotine seems to be more and more like)
We believe that it is time for the international convention to control the transportation of cigarettes.
Given the involvement of organized crime, the Convention requires the support of governments and some central organizations around the world.
The World Health Organization is seeking to address these international issues through the international framework for tobacco control.
We welcome this initiative and urge the adoption of an international convention to strictly control the transportation of cigarettes at the international level.
Transit trade in cigarettes should be completely prohibited.
For example, cigarettes may be transported from a warehouse in the United States to a warehouse in Antwerp and sold to Swiss companies by subsidiaries of American companies, which is ridiculous, selling them to Panamanian companies, the Panamanian companies ship them to North Africa, except that they end up in Spain.
No reason-
If this is a legitimate trade and cigarette manufacturers take action in good faith --
Why should manufacturers not ship cigarettes directly to North Africa.
This is what should happen: cigarette manufacturers should not be allowed to sell to intermediaries.
They should have an obligation to export directly to importing countries and produce end products like arms trade
User certificate and proof of purchase, tax payment and import.
The convention should provide that the transportation of cigarettes is permitted only if an agreement is reached on the final destination, and that cigarettes have sufficient countries and regions
Specific health warnings and tax receipts.
Thank you for your financial support.
World Tobacco Association (1996)
World Tobacco Archive 1996(
World Tobacco, London.
Raw M. joossenl (1995)
Tobacco smuggling and cross-border shopping in Europe.
BMJ 310: 1393-1397.
Free full text of the US Department of Agriculture.
Tobacco: World Market and Trade.
\"Foreign Agricultural Services\", a series of notices, August 1997. .
Department of Health and Human Services (1992)
Smoking and Health in the Americas: total report of surgeons working with the Pan American Health Organization 1992. (
Centers for Disease Control, smoking and health office, Atlanta, Georgia). (
Publication Number of DHHS (CDC)92-8419. ). ↵Anon (1997)
Investigation Committee of community transportation system. (
European Parliament in Brussels)(4 volumes). .
Your Majesty\'s vault.
Meeting on Primarolo, Dawn, July 1, 1997. .
Anderson J. pesen LGW (1997)Cigarette-smuggling. (
National Police Academy of Sweden. ↵Lund KE (1990)
Note on changes in tobacco use since 1970. (
National Tobacco and Health Council, Oslo, Norway). (
NCTH file 36/1990. ).
Drew C Bonner R (1997)
Cigarette manufacturers are believed to be accomplices in smuggling.
New York Times, August 25. . ↵Barford MF (1993)
New dimensions promote cigarette smuggling.
3: 16 to 18 hours tobacco company↵Bonner R (1997)
Two cases uncovered cigarette smuggling in Italy.
New York Times, September 2. .
Department of Agriculture.
Informal report on tobacco from Bulgaria (
US Department of Agriculture official data), 1 May 1997. . ↵Yuan HA (1997)
Decline in cigarette production;
Contraband and fakes are rampant.
Tobacco Reporter 4: 32
Former B & W executives were convicted of smuggling cigarettes.
The Associated Press, October 16, 1997. .
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