Tobacco Smuggling and Terrorism.

In discussions on-line about the impending PACT act becoming law, it has become obvious that American snusers feel they are getting a raw deal.

In a sense, American consumers of Swedish snus have been basking in a “duty-free” zone for the past few years, many weening themselves from cigarettes in the process.  Your lungs, God and the Greater Good think this is wonderful.  The US Government does not.  Tobacco is taxed. Period.

Swedish snus consumers in the USA will eventually be forced to pay taxes on their snus purchases.  They will most likely see in the next few years an increase in availability in US ‘bricks & mortar’ shops, and a drastically reduced portfolio.  No more Gotlands Julesnus or Offroad Limited Edition ‘Spam with Egg, Bacon, Sausage and Spam’ Flavor, for sure. But that’s another article.

Many have poo-pooed an underlying reason for the passage of this legislation:  smuggling as a source of funds for terrorist groups.  Many have laughed that this is as ludicrous as the ‘for the children’ banter which has led to a lot of pain for legitimate adult tobacco consumers now unable to procure their favorite flavored smokes.

In the US, tobacco is smuggled from state to state by consumers, mostly.  New York City, with smokes now costing over $10 a pack, has been a recent focus of the press, with several high-profile arrests of organized smugglers bringing master cases in for ‘illicit’ sale. The last ‘haul’ was 77m sticks, caught before the rig even left Virginia.

In Europe, the problem is magnified a thousandfold.  Imagine the UK, where a pack of Marlboro or Benson & Hedges costs $12 retail, and Poland, where the same products cost $2, and Ukraine, where they cost $1.25.  Imagine illicit cigarette factories all over China, with some also in Russia and Poland, producing fake Marlboros and B&H in underground factories, and actually undercutting the Polish and Ukrainian product.  ALL the product is headed west.

When I opened Gallaher Poland, I had the unenviable task of having to constantly identify smuggled shipments of Gallaher, or ‘apparent’ Gallaher product which were routinely seized by Polish customs.  We had Middle-Eastern ‘Sovereign’ cases smuggled via Dubai in cases marked “Computers.”  We had lorries loaded with Russian cigarettes seized at the border and shown on the Polish equivalent of “COPS” which led us to send a high-level delegation to the eastern borders to verify the EU’s investment in new detection technologies. Our lawyer constantly flew to the port of Gdansk to verify the authenticity of the seized products.  More often than not, they were Chinese fakes on the way to the UK.  Poland is a flat country of East-West roads between the ex-Soviet bloc and the West.  Having an office there exposed an underbelly of the business which no company wants to see.

CONTROL

Tobacco companies deplore smuggling.  Like any consumer goods companies, they must respect and protect their country-specific businesses and distributors.  Strict contracts are in place with national distributors to prevent international shipments, but they happen anyway.  It’s simple human nature.  When Poland entered the EU in 2004, many Poles moved to the UK and Ireland to find work.  Many also found that they could stock up on cheap Polish-produced multinational cigarette brands and shuttle them across on buses and planes.  For many, it became a primary source of income.

But they weren’t the problem.  2004 was the first year I saw ‘the list.’  It was the list of distributors with whom we are forbidden to work.  Like all “Big Tobacco” companies, Gallaher hired ex-intelligence agents to run its Security Department.  “The List,” we were told, was one of companies known to be connected to organized crime and terrorism.  They were scattered throughout the Middle-East and places like Cyprus, which is the geographical ‘jumping-off’ point from the EU to the Middle-East.

The meetings were serious.  Gallaher Management told us that ‘cigarette smuggling finances terrorism.’  Names like “Hezbollah” were thrown around, and a greater, more depressing world of tobacco was opened up to my colleagues and me.

Whether it’s Ukrainian Marlboros being shipped to Indiana or cases of fake Chinese B&H in Manchester, UK, the illicit tax-free sale of cigarettes is handled by criminals.  It is indisputable.

In the US, substitute ‘Mafia’ for ‘Terrorism.’  But it’s the same.

While US Swedish snus users are right to feel screwed by this legislation, there is indeed a greater good to be served by PACT.  It will not stop consumers from crossing borders or visiting Indian reservations for tobacco products.  But it could be effective in reducing the illicit trans-continental movement of legitimate and illegitimate tobacco products whose sale benefit criminal organizations.

Keep it in mind.

ANDREW ROMEO
Live from New York on SnusCENTRAL.org