Interagency Committee on Smoking and Health
Meeting Summary: October 26, 2000
Framework Convention on Tobacco Control
Smuggling Issues
Tamara J. Light, Project Officer, Department of Treasury
Ms. Tamara Light described the ATF as a regulatory and criminal enforcement agency
responsible for collecting excise taxes imposed on tobacco products manufactured or imported
into the United States. They are also responsible for monitoring contraband cigarette
trafficking. Under the Contraband Cigarette Trafficking Act, ATF is charged with assisting
states in their efforts to collect revenues imposed on cigarette products. In her
experience, tobacco trafficking occurs when foreign or state governments impose a higher
excise tax on tobacco products than those tax rates in surrounding jurisdictions. She said
that ATF is involved in efforts to curtail smuggling and trafficking, because such diversion
ultimately defrauds the United States government, states, and other governments of their
revenues and also because there have been increased criminal networks over the past 10
years.
The ATF also recognizes that tobacco smuggling is a public health concern. Smuggled
cigarettes frequently are sold at low market prices, which undermines increasing prices as a
means of curtailing consumption. It also denies governments tax revenues that can be used to
support public health efforts. Smuggled cigarettes often do not comply with the various
health regulations, including labeling requirements.
Ms. Light then shared with the group examples of smuggling experiences the ATF has recently
faced. This year, ATF staff arrested 18 people involved in a cigarette trafficking and money
laundering ring that bought products in North Carolina and sold them in Michigan, in part to
support militant terrorism in the Middle East. Another case involved a networking scheme
between New York and Michigan. The network involved a major U.S. wholesaler, Native American
smoke shops, Michigan traffickers, and retail stores. They moved over $70 million worth of
cigarettes. Another example involved smuggling cigarettes and alcohol from the United States
to Canada. When caught, a subsidiary of RJR Northern Brands International admitted selling
over eight billion cigarettes to U.S. companies smuggling cigarettes into Canada. This was
the first time a tobacco company was implicated in smuggling. The ATF is also seeing a rise
in cigarette hijackings and armed robberies. Eventually, the cigarettes land in the black
market in the United States. Ms. Light also spoke about violent crimes related to cigarette
smuggling abroad.
Examples like those above have led the United States, and ATF in particular, to commit to
support the development of a protocol in the Framework Convention with strong measures to
curb smuggling. Proposals to curtail smuggling should include a uniform distribution system
regulating interstate commerce of tobacco. This would include a licensing system for tobacco
products similar to the one the federal government has effectively used for the past 60
years to regulate alcoholic beverages. A license would be issued based on certain clearly
specified criteria, and it could be revoked or suspended for specified violations. ATF also
recommends effective marking, branding, and identification of tobacco packages intended for
domestic distribution or for export to prevent diversion or smuggling and circumvention of
the legitimate channels of distribution. Currently, people are involved in cigarette
smuggling partly because the sentencing guidelines and the penalties for it are much less
than those for drug trafficking.
Ms. Light mentioned that, during the opening statements at the Framework Convention, many
countries mentioned that smuggling is a major problem for them. She had an opportunity to
meet with counterparts from several countries to discuss some of the unique challenges the
various governments face in detecting and prosecuting cigarette smuggling violations.
Speaking on behalf of her Canadian counterpart who could not attend the ICSH meeting, Ms.
Light told the group that for Canada to tackle smuggling problems in the early 1990s, they
devised a national action plan. It was a comprehensive plan with health, tobacco tax and
enforcement initiatives. Their anti-smuggling initiative increased their enforcement
resources, while the health component saw the introduction of a major anti-smoking campaign.
Canada has seen success since increasing penalties, instituting export taxes, improving
stamping and marking, improving security features on tobacco markings, increasing
enforcement and auditing, increasing use of electronic surveillance, and increasing
cooperation between domestic and foreign agencies.
Despite developments in the United States’ efforts to combat smuggling, Ms. Light indicated
there are still serious concerns. Research conducted by the USDA leads to the conclusion
that up to a third of world tobacco exports are diverted to the black market. In a recent
meeting, ATF learned that cigarette smuggling is intensifying globally and organized crime
is increasingly involved. Cigarette smuggling is linked to secondary criminal activity and
increased disrespect for the rule of law. Counterfeit cigarette seizures are on the rise,
and cigarette smuggling is highly profitable. Obstacles identified in the fight against
organized cigarette smuggling include the inability to trace confiscated cigarette
shipments, the lack of cooperation and information sharing between member states, and the
inability to effect controlled deliveries in some countries. She concluded her presentation
by indicating that each country cannot effectively tackle organized cigarette smuggling in
isolation. A successfully negotiated Framework Convention on tobacco control with a
comprehensive anti-smuggling component will assist countries in meeting their domestic
tobacco control policies and goals by reducing the threat of international tobacco
smuggling.
To a question on the current penalty for tobacco smuggling in this country, Ms. Light
indicated it is 5 to 10 years in prison and a quarter of a million dollars fine. In Europe,
however, most smuggling offenses carry only a 2 to 3 year penalty, with time served hovering
somewhere around 1 year. Discussions are under way to harmonize the money laundering laws in
an effort to raise the sentencing guidelines, particularly in Europe where smuggling is very
profitable. To a question on ATF resources devoted to finding and prosecuting tobacco
smugglers, Ms. Light admitted that resources are scarce; ATF seeks partnerships with Customs
and others to be more effective in this regard. Dr. Novotny stressed that smuggling is very
much a health issue because it depresses cigarette prices and leads to increased access for
children and others. If prices remain high as a result of taxation, consumption will
decrease.
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