Increased Cigarette Smuggling: Warning or Threat? (fwd)

[Robert Weissman <rob@essential.org>]

>From Ross Hammond:


Increased Cigarette Smuggling: Warning or Threat?
     
27 April 1998
     
Dear Colleagues:
     
     In the last week a number of tobacco industry spokesmen have raised the
specter of increased cigarette smuggling should the price of cigarettes rise
dramatically as a result of a tax increase. This is indeed a serious issue
that needs to be confronted when considering national tobacco legislation.
However what these spokesmen fail to mention is the role that their industry
has played in promoting smuggling. This raises the question: are they
warning or threatening us? Consider the following:
     
-- Every year, around 300 billion cigarettes are illegally smuggled,
representing around a third of all cigarettes destined for export. This
figure has been rising at the same time that the cigarette companies have
been trying to capture new markets in Eastern Europe and Asia. As US Senator
Frank Lautenberg puts it, "What 
other legal industry allows up to one-third of its product to be diverted to
illegal sales?" 
     
 -- Following the Canadian Parliament's passage of a large tax increase on
cigarettes in 1989 (which the subsidiaries of BAT, RJ Reynolds and Philip
Morris lobbied heavily against), Canadian cigarette exports to the United
States tripled, with most of these exports going to Buffalo and other points
on the U.S.-Canada border. Most of these cigarettes ended up smuggled back
into Canada. In 1994 Prime Minister Jean Chretien was forced to reduce the
tax because the government was losing so much revenue to the smugglers. "The
fact is that the Canadian tobacco manufacturers have benefitted directly
from this illegal trade," and had known "perfectly well" what was happening,
Chretien said.
     
-- In 1997 a senior executive with RJ Reynold's Canadian subsidiary who was
in charge of marketing cigarettes to the Akwesane Indian Reservation (which
sits on the US-Canada Border) was charged with conspiring with a smuggling
ring to bring millions of dollars worth of the company's cigarettes into
Canada. According to federal court records, he met often with leaders of the
ring and that his company paid for trips by these smugglers to a fancy
Canadian fishing resort.
     
- Executives with BAT in Hong Kong have been charged with accepting bribes
from a Hong Kong-based smuggling ring. BAT officials allegedly arranged the
sale of millions of dollars worth of cigarettes. The Wall Street Journal
reported in December 1996 that BAT executives held "weekly meetings at which
smuggling activities were discussed, down to specific boats, inlets, and
villages involved" and that "such information was kept from the most senior
BAT officials who visited Asia from London to allow them deniability."
     
- In his April 20th remarks to the US Senate Democratic Caucus, former
Surgeon General C. Everett Koop accused BAT and Philip Morris of setting up
"potential black market mechanisms in Mexico by buying out Mexican tobacco 
companies." He was referring to last July's purchase of Mexico's two
cigarette companies by Philip Morris and BAT for a combined $2.1 billion.
     
As part of a package of international tobacco control provisions, Senator
Frank Lautenberg's office has developed a proposal to address cigarette
smuggling by giving the Bureau of Alcohol, Tobacco and Firearms (BATF) broad
authority to: 
     
-- require that all cigarette exporters, manufacturers, and distributers
have a license and keep detailed records; 
     
-- make cigarette exporters post a bond that will only be returned when it
is proven that the cigarettes have reached their final destination; and
     
-- require that unique markings be placed on cigarette packages so that
smuggled cigarettes can be traced back to their source.
     
These proposals deserve publicity and support. Contact your Senators and
Representatives and ask them to sign on to the international tobacco control
initiatives co-sponsored by Sens. Durbin, Lautenberg, Wellstone, and Wyden
and Reps. Doggett and Pallone and currently contained in the McCain bill
reported out of the Commerce Committee. 
    


Ross Hammond
88 Norwich Street
San Francisco, CA 94110
tel/fax: 415-695-7492
e-mail: margross@igc.org


Sources: Sens. Richard Durbin and Ron Wyden, "Big Tobacco Must Stop
Targeting Kids Worldwide," Roll Call, 23 March 1998; Raymond Bonner and
Christopher Drew, "Cigarette Makers Are Seen as Aiding Rise in Smuggling," 
New York Times, 25 August 1997; "Convicted smuggler points to Canadian
tobacco executive," Canadian Press, 20 January 1998; Wall Street Journal, 18
December 1996 quoted in David Holzman, "Tobacco Abroad: Infiltrating Foreign
Markets," Environmental Health Perspectives, Vol. 105, No. 2, February 1997;
C. Everett Koop, "Remarks Concerning the McCain-Hollings Bill," Presented at
the Request of the Democratic Caucus of the Senate, 20 April 1998.