Tobacco industry seeking to control anti-smuggling measures, say critics

14 June 2018:

UN protocol says mechanisms designed to counter illicit trade should not be delegated to industry, but monitors allege firms are involved

The tobacco industry is working to secure control of a system to track the movement of cigarettes around the world, allegedly because it is complicit in the smuggling of its own products, according to a new research paper.

A detailed study from the Tobacco Control Research Group at the University of Bath, using a range of sources including internal documents and whistleblower testimony, claims the industry is now going to elaborate lengths to control the global “track and trace” system that the United Nations has said must be put in place to counter smuggling.

High taxes have been imposed in many countries on cigarettes and other tobacco products because price rises have been shown to be an effective way to cut smoking. Tobacco companies have in the past been found to be complicit in the smuggling of their brands across national borders to evade these high taxes.

Tobacco companies complain about the smuggling of cheap illegally-made copies of their brands, but two-thirds of the illicit tobacco market is made up of genuine product, says the study in the journal Tobacco Control. “At best, evidence indicates that tobacco companies are failing to control their supply chain, over-producing in some markets (eg Ukraine) and oversupplying others (eg Belgium) in the knowledge their products will end up on the illicit market,” says the paper.

At worst, some companies may be proactive, they say,. “Ex-employees insist JTI remained actively involved, describing ‘rampant smuggling’ throughout the Middle East, Russia, Moldova and the Balkans. Leaked documents suggest that British Tobacco Association staff suspected JTI was facilitating smuggling into the Democratic Republic of Congo but that BAT also clandestinely moved millions of dollars in cash from Uganda to the DRC to buy tobacco leaf which was presumably then illegally exported,” says the paper.

Each of the big tobacco companies has strongly denied any involvement in the illicit trade.

The World Health Organisation’s Framework Convention on Tobacco Control adopted an Illicit Trade Protocol in 2012 to crack down on smuggling. Central to this protocol is a “track and trace” system, which would ensure every pack of cigarettes or other tobacco product would be marked in a way that it can be followed on its journey from manufacturer to smoker around the globe.

Philip Morris International (PMI) devised a track and trace system called Codentify in the mid-2000s which it licensed for free to the other big tobacco companies. But the Illicit Trade Protocol states that the track and trace system cannot be “delegated to the tobacco industry”. So the companies tried to give Codentify the impression of independence “via a complex system of front groups and third parties”, says the paper.

The Digital Coding and Tracking Association was one of these, created in 2011 to promote Codentify to governments, say the authors. Criticised for its connections to the industry, in 2016 it sold Codentify to a new company called Inexto. A PMI spokesman stated Codentify “now complies with … the WHO’s Framework Convention on Tobacco Control.” But, says the paper, “Inexto’s links to PMI are clear”. Top officials were former tobacco company employees.

The paper traces payments by tobacco companies to organisations that could help promote Codentify, including Interpol, which received 15m Euros in 2012 and European and UN anti-corruption educational organisations.

Professor Anna Gilmore, lead author of the paper in the journal Tobacco Control, said: “This has to be one of the tobacco industry’s greatest scams: not only is it still involved in tobacco smuggling, but big tobacco is positioning itself to control the very system governments around the world have designed to stop companies from smuggling. The industry’s elaborate and underhand effort involves front groups, third parties, fake news and payments to the regulatory authorities meant to hold them to account.”

The companies say they want to control smuggling. “Illegal trade hurts our business and that’s why we invest heavily in securing our supply chain and why we support the FCTC’s Anti-Illicit Trade Protocol,” said Alvise Giustiniani, vice president Illicit Trade Prevention at PMI.

“Allegations that the tobacco industry cannot be trusted are absurd, given that we collect more than $32bn in excise tax for governments across the world,” said Brendan Lemoult, Fiscal Affairs and Anti-Illicit Trade vice president of JTI.

“We are totally opposed to illicit trade. Illicit trade benefits no one but the criminals involved and creates a market that is uncontrolled and unaccountable,” said a spokesman for Imperial. Codentify had been transferred to Inexto, he said, because “a specialised technology company is better placed to further develop the technology to ensure it remains state-of-the-art and fit for purpose.”

BAT says smuggling is organised crime and “a well-coordinated and collaborative solution is needed. BAT works with governments, law enforcement agencies, the industry and international organisations, as well as utilising our own robust supply chain security systems to prevent our products from becoming part of this criminal trade,” a spokesman said.

Source: The Guardian