Leopards never change their spots: tobacco industry implicated in major smuggling operation

Thursday 03 November 2011

A report by the Organized Crime and Corruption Reporting Project (OCCRP) has uncovered a major smuggling operation in the Middle East initiated by Japan Tobacco International (JTI) to introduce its own brands into new markets. [1]

This is despite a binding legal Agreement with the European Union to stamp out the illicit trade in its own tobacco products. JTI has been found to be aiding and abetting smuggling of its brands into Syria and Iraq. JTI, which has a 40% share of the UK cigarette market, took over Gallaher in 2006. Its major brands include Benson & Hedges, Silk Cut, Mayfair and Sterling.

The OCCRP report shows that the EU Agreement on smuggling [2] has not stopped tobacco industry complicity in the illicit trade of cigarettes and that JTI simply cannot be trusted. The company’s actions are in stark contrast to its claims that it is co-operating with law enforcement agencies to stop tobacco smuggling. [3] The cigarette manufacturer also blames high taxes and even plain packaging as a cause of tobacco smuggling.

ASH understands that SOCA (Serious Organised Crime Agency) and the US Justice and State Department are now investigating the claims included in this report.

Given the competitive nature of the industry, it also begs the question that if JTI is so heavily involved in smuggling, what are the other major companies up to? The manufacturers repeatedly blame high taxes for smuggling activity but the OCCRP report shows that it is the company’s own actions rather than taxes that determine the level of illicit trade.

ASH will be writing to Chloe Smith, Economic Secretary to the Treasury, pointing out that the OCCRP report proves that the tobacco industry cannot be trusted. In the recently published anti-smuggling strategy [4] the Government committed to collaborating with the tobacco industry to tackle illicit trade but this latest revelation shows that the industry cannot be relied on to act responsibly.

Deborah Arnott, Chief Executive of the health campaigning charity ASH, said:

“This blows out of the water tobacco industry claims to have cleaned up its act. All the big tobacco manufacturers, JTI, Philip Morris International, BAT and Imperial, have signed legally binding agreements with the EU committing to preventing smuggling of their products anywhere in the world. If subsequently JTI has carried on aiding and abetting smuggling, then it’s clear that a regional agreement like that negotiated by the EU is insufficient. The global treaty currently being negotiated is the essential next step.”

She went on to say:

“The black market in tobacco undermines tax revenues and helps finance terrorism and organised crime. Half all regular smokers die from smoking-related diseases and the black market in cheap cigarettes makes it harder for smokers to quit and gives children unregulated access to tobacco. That’s why the WHO is negotiating a treaty to tackle tobacco smuggling due for completion in 2012. The behaviour of JTI shows yet again that governments will need to safeguard against tobacco industry interference in the treaty if it is to be effective. The activities of all the tobacco companies need further detailed investigation. This could just be the tip of the iceberg.”


Notes and links:
[1] Full OCCRP report: Big trouble at Big Tobacco is available at: http://www.reportingproject.net/
[2] Details of the EU Anti smuggling agreement

[3] See for example JTI’s annual report 2010 which states that:
“The JT Group is protecting both its consumers and its business interests and fighting
ever harder against the growing problem of illicit trade through close cooperation with
law enforcement authorities around the world.”

“JT Group is constantly developing new security features to better protect its brands from illicit trade and supports investigations and seizures of counterfeit tobacco products.”
The 2011 annual report repeats the company’s commitment to tackling smuggling:

JT is resolved not to have any relations with, and to fight against, anti-social groups and organizations that pose a threat to the order and safety of civil society, and organizations involved in tobacco smuggling or counterfeiting.

The company will also never engage in practices that would promote the activities of antisocial elements. If it faces a problem involving such elements, JT will devote company-wide efforts to dealing with it. (p45)

JTI also spelled out its commitment to tackling smuggling in its response to the Government’s
Consultation on the Future of Tobacco Control (2008): see p49
www.jti.com/download_file/715/585/ (pdf)

The tobacco industry continues to argue that high taxes fuel tobacco smuggling. See for example:
Government Hands Revenue to Criminals With Above Inflation Increase in Tobacco Duty:

Rather than face up to its own responsibilities, JTI blames other policies such as mandatory plain packaging as a ‘likely’ cause of illicit trade. For example in its response to the Government Consultation on the Future of Tobacco Control (p16) the company states:

“Mandatory plain packaging for tobacco products would lead to a series of negative and undesirable consequences, including: […]
c)  undermining the progress being made in tackling the illicit trade in tobacco products;”
www.jti.com/download_file/715/585/ (pdf) – see p16

[4] HMRC & UK Border Agency. Tackling Tobacco smuggling – building on our success. A renewed strategy for HM Revenue & Customs and the UK Border Agency. London, 2011