Opening Statement of Director Bradley A. Buckles to the International Conference on Illicit Tobacco Trade (ICITT),
United Nations - July 30, 2002

Good morning and thank you for your kind introduction. It is a true privilege and my great honor to be at the United Nations to address this gathering of experts as you launch the important work of the International Conference on Illicit Tobacco Trade.

This conference presents an opportunity for us to learn from each other and work together to strike a blow against the illicit trade in tobacco products. This work is important for several reasons. This illegal activity results in a loss of revenue vital to the operations of Governments, it provides financial fuel to organized crime and terrorist activities and it can undercut health policies.

This conference that brings together experts from around the globe offers a special opportunity to achieve a lasting impact that none of us standing alone could accomplish. The unique experiences that each of us bring to the table will serve to strengthen all and enable us to face down this growing problem that crosses oceans and borders.

I represent an agency that has been in the tobacco business for centuries. As a part of the U.S. Treasury Department, ATF is responsible for regulatory oversight, tax collection, and law enforcement with respect to the most controversial legal products in American society. We approach these multi-faceted duties with an array of employees that range from armed criminal investigators, to inspectors with rights to enter businesses and examine inventories, books, and records, to a host of expert auditors, chemists, lawyers, and other professionals.

Tobacco tax in the United States is big business. ATF collects over $7 billion annually in tobacco taxes. In addition, each State and some local governments impose additional taxes on tobacco products. These taxes on cigarettes range from a low of 2 ½ cents per pack in Virginia where I live, to a high of $3.00 per pack here in New York City.

Tobacco holds an important place in American history. When Christopher Columbus first reached the beaches of San Salvador, his journal tells how the native inhabitants greeted him with fruits and what he described as "certain dried leaves" which gave off a distinct fragrance. And so the history of America and the history of tobacco began. By the 16th century, tobacco was being exported to Europe, and by the 17th century, the strong demand for tobacco in England had turned it into an important source of revenue to the Crown. By the outbreak of the American Revolutionary War, tobacco taxes provided a leading source of revenue to the British Government.

Tobacco was important to the Americans as well. In 1776, during some of the darkest times for the American revolutionaries, George Washington appealed to his countrymen for aid to the army: "If you can't send money, send tobacco." During the war, it was tobacco exports that the fledgling government used to build up credits abroad. And, when the war was over, Americans turned to tobacco taxes to help repay the revolutionary war debt.

And so, tax on tobacco in the United States traces back to our beginnings as a nation. Taxes on alcohol and tobacco remained the primary source of revenue for our Government until the First World War. Alcohol and tobacco were the first commodities taxed because they were not considered essentials of life. In those early times, tobacco was considered a pleasurable but harmless diversion. But whatever the reason for focusing on these commodities, the only purpose for the tax was to supply revenue to operate the government.

Today, here in the United States and elsewhere, taxes on tobacco have taken on a new purpose that extends beyond just a convenient source of revenue. We have learned that tobacco is far from harmless. In the United States and around the world, new high taxes are aimed at reducing consumption for health reasons. This is why we are here, and that is what has brought ATF and the World Health Organization together to host this conference.

Taxes in the U.S. and elsewhere now represent a direct and undisguised attempt to discourage consumption. Making a pack of cigarettes prohibitively expensive will discourage some, particularly our youth, from buying cigarettes to begin with. There is also an element of tax equity reflected in high tobacco taxes. Proponents of the higher taxes argue that smokers as a whole present a greater burden on public health systems, and therefore smokers should bear a greater burden of the tax.

The momentum for health-motivated higher taxes, however, has created a new menace: elicit trade in tobacco products. In the U.S., where on average 40% of the cost of a pack of cigarettes is a function of taxes, it hasn't taken long for some to figure out that if they can avoid some or all of those taxes, huge profits can be made. Narco-traffickers, organized crime, and even those seeking to fund terrorist activities are finding the lure to be irresistible. This illegal activity in turn, pushes cigarettes into black or grey markets where concerns about health and responsible marketing practices are nowhere to be found.

In the United States, as State and Federal taxes continue to rise, trafficking and diversion of cigarettes continues to grow. Recent analysis estimates that $1.4 billion in Federal and State revenues are lost each year to this illegal activity and over $16 billion U.S. dollars are lost worldwide.

As new and more sophisticated players join in this criminal enterprise, we are seeing a wider scope in diversion and trafficking activities. The U.S. tobacco industry as a whole has been responsive and aggressive in efforts to prevent illegal diversion of their products. But when individuals have used their connections in the legal business to actively facilitate illegal trade, they have been prosecuted. In one such case, a subsidiary of a major U.S. tobacco company was found to have been assisting individuals in smuggling cigarettes into Canada. The company and 21 individual defendants were convicted of making false statements to Customs; wire fraud; money laundering and other related charges. They also paid fines and forfeitures totaling $15 million dollars.

The most disturbing development is represented in a recent prosecution for cigarette trafficking between states here in the U.S. In this case, a defendant was convicted in connection with a scheme to provide money and supplies in support of the Hezbollah.

It is important to protect our revenue; it is important to target those who would use profits against us, but the public health issues provide an additional and powerful motivation for effectively addressing the problem. The health consequences in terms of the lost human potential, and in terms of the enormous and avoidable drain on precious public health services demand that the problem of illicit tobacco trade receive our special attention.

I am not an anti-smoking zealot. Adults make choices everyday that affect their health. And to the extent that they don't impose their choice on me, I pass no moral judgment on their decision. But, these issues are real with me. I have seen the devastation of cigarettes as I watched my father die a slow and suffocating death from emphysema. He was a strong man, he knew for years what smoking was doing to him, and he could have quit. He chose not to. Only good health care insurance kept the disease from bankrupting his retirement. But even with insurance, someone paid those costs - it's a bet it was mostly non-smokers.

These issues are real to me because I have children, ages 13 and 15, who will soon confront decisions about smoking. When I drive them to school in the morning, we pass a corner in the back of the high school where smokers congregate to get in one last cigarette before school starts. So far my children speak in derisive terms about cigarettes, and I find that a comfort. I also find comfort in seeing a store clerk turn away an underage customer trying to buy cigarettes. I find comfort in the fact that my children cannot afford cigarettes yet. By all accounts, here in the United States, fewer kids smoke today than did when I was young. But as long as there is a swarm of kids in the back of the high school smoking, there is still room for improvement.

We know that if we can move kids through this critical period without smoking, the chances that they will pick up the habit when they are mature adults is considerably diminished.

Thus we can see that while the problems surrounding our efforts to effectively control tobacco sales are daunting, the stakes are enormous. Let our efforts this week be the beginning of increasingly effective ways to combat the illicit trade in tobacco. By sharing best practices we also create a shared vision to deny criminals easy profits from illicit trade in tobacco products, and in so doing provide a benefit to public health.

These conferences provide the framework for mutually agreeable and beneficial actions we can take. I applaud all of you here today who continue to seek solutions. Despite the frustrations we may face, we are more likely to succeed if we move forward together.

On behalf of the United States, I appreciate your attendance and participation, and I offer our best wishes for a successful conference. Thank you.