These are companies that are willing to spend as much as $940 000 per hour18 marketing and promoting their products in the US alone. Imagine what they’d be willing to spend on lawyers?
In truth, governments around the world have consistently failed to stem the tide of illicit cigarettes, despite the earlier introduction of some positively draconian measures. As cigarette smuggling grew in the 1700s, so did efforts to curtail it. As many as 60 000 men were sent to the galleys for tobacco smuggling; infamous French cigarette smuggler Louis Mandrin was sentenced to be broken alive on the wheel; and a French official was hanged for admitting foreign tobacco into the country. Things aren’t getting better – they’re arguably getting worse.
You press down in one place, it simply pops up somewhere else. You send in criminal investigators, they literally dig entire villages into mountainsides and mask the smell of tobacco with pig sties.
And, to this day, tubes of toothpaste, or punnets of tomatoes, which both most likely pose less of a health risk than cigarettes do and are less susceptible to tax evasion and criminality than cigarettes are, are better controlled and tracked as they travel through the supply chain, than a pack of cigarettes is.
Want to reduce illicit trade in tobacco? Secure the supply chain. Are we doing that? No, we’re not.
8. Toothpaste, fish and fig leaves
Investigations, allegations and revelations like those in this book are typically met with a standard industry response: The industry generally denies all allegations of smuggling or criminality and pins them on rogue employees or their downstream supply chain partners (indeed, the industry has an astonishing proclivity for hiring ‘rogue employees’. I’d fire my entire HR department if they landed me with so many ‘rogue employees’.)
It is a tall ask of the tobacco industry to expect us to ignore the body of evidence as a whole. It is a tall ask of the industry to expect us to trust them to regulate themselves. It is a tall ask of the industry to expect us to trust them given their abysmal track record to develop internal systems that safeguard their supply chains sufficiently, so that cigarettes end up where they are meant to be. Because, I believe, they have proven themselves incapable of putting forth a serious and credible effort to implement the controls and checks needed to safeguard their supply chains. The very economics of doing so works against their overarching objective to sell as many cigarettes as they can to their addicted customer base. The industry is driven by pure profit at any cost.
Many governments and international bodies have become far more sophisticated in terms of how they regulate the industry from a health perspective. While these regulations are beginning to have an impact, relatively little has been done in terms of effectively managing the supply chains along which cigarettes travel.
The concept of trying to regulate the tobacco supply chain is nothing new. As far back as 1606 Spain’s King Philip III decreed that tobacco may only be grown in Cuba, Santo Domingo, Venezuela and Puerto Rico, and – taking securing the supply chain to its logical if somewhat grisly conclusion – made the sale of tobacco to foreigners punishable by death.
But while everyone seems to agree that better securing the tobacco supply chain is critical, very little is actually being done about it. In fact, in many respects we haven’t moved on much since governments first started looking at better regulating the tobacco supply chain in Maryland USA, as far back as 1666.
Maryland banned the production of all tobacco for a year in 1666, facing an oversupply; and in 1730 outlawed the bulk export of tobacco. Facing challenges with tobacco being adulterated with fillers (like dust and wood shavings) and with poor quality tobacco being exported, it also introduced rules to inspect tobacco before it was shipped. The Inspection Acts revolutionised tobacco regulation: Inspectors were empowered to break open every barrel of tobacco, remove and burn any trash inside it, and issue a certificate specifying the weight and kind of tobacco inside, making it both more difficult to ship adulterated tobacco, and easier to collect taxes. That’s 400 years ago.1
Since then? Many countries are arguably doing less now than Maryland was doing centuries ago.
Why is this important? Because, as industry expert Luk Joossens has been arguing for more than a decade now, ‘the evidence strongly suggests that the key to controlling smuggling is controlling the supply chain, and the supply chain is controlled to a great extent by the tobacco industry’.2
Instruments like the global Illicit Trade Protocol begin to set the scene for better regulating the industry’s supply chain, but very little substantive progress has been made in terms of implementing the recommendations; there are virtually no consequences for countries who fail to implement them; and many countries have no obligations as yet under any regulatory regime.
It is common practice for tobacco companies to sell huge quantities to traders and dealers who are little more than pipelines to smugglers, and who are simply used to blur the line between the tobacco companies and smugglers – something many dealers acknowledge.3
Sales are often so indiscriminate that many dealers openly admit that both they and the tobacco companies know the cigarettes are headed for the black market.
Little wonder then that the UK’s Parliamentary Committee hearing on tobacco smuggling called them out on sales that nowhere near matched the legitimate demand in the countries they pretended to export to: ‘You wanted 5% of 5 million. That, to my mind, makes something like 250 000 people approximately, is that correct? We agree roughly a quarter of a million people. Yet, you imported 338 million cigarettes for 250 000 people. It does not make sense, does it?’4
Technically, in law, of course they are perhaps correct (in many countries). There often technically is no obligation on tobacco companies to secure their supply chains, to ensure that they only sell their products into legal supply chains, to legitimate customers who have a legitimate demand in a legitimate market. Technically there is often no legal liability on them once they have sold bulk consignments to middle-men who on-sell to smugglers. In most countries, technically there is no prohibition on ex-factory sales. In most countries, technically there are no ‘know your customer’ requirements.
For purposes of this conversation it almost does not matter whether the tobacco companies knowingly sell to traders who on-sell to smugglers, or even directly to smugglers themselves (although often they seem to know very well as we’ve seen in for instance Colombia where government charged that ‘since at least 1991, PMI were selling cigarettes to individuals whom they knew were reputed drug smugglers’.5) What matters is that the way the tobacco supply chain is regulated now, in most countries, is inefficient and vulnerable.
It’s a weakness that is exploited. And it’s a weakness that very much sits behind perhaps most of the cases we know of where big tobacco’s impunity leads to criminality.
It’s also a weakness that at least some players in the industry are beginning to acknowledge: Philip Morris will tell you that they have the ability to track 100% of master cases throughout the supply chain.6 But that doesn’t help all that much, because in another publication they themselves note how tracking at a master case level isn’t really enough because in, for instance, Algeria ‘evidence show[s] that there was high level smuggling of cartons. The situation called for more granular controls.’ And in Senegal investigations ‘showed that smugglers were diverting the products in cartons and not in master cases’.7
Philip Morris will also tell you how in 2017, ‘The outflow of PMI products from Algeria remains a top priority for PMI. Products tend to be diverted to France, Morocco and Tunisia’ and how in 2014, ‘we discovered that over 50% of the available supply of Marlboro in Australia was actually intended for the South Korean market’. They note that in 2015 ‘the UK tax authority HMRC