ISSUE 101 THURSDAY, 18 MARCH 2010 GENEVA BULLETIN

INSIDE THIS ISSUE TIME TO LOOK FOR West African situation 2 BAT’s complicity in smuggling 3 COMMON GROUND

Tracking & tracing works in Kenya 4 Yesterday saw some welcome progress on s #LARIFY WHICH 0ARTIES ACTUALLY DISAGREE Les douanes doivent être davantage Part IV of the protocol - fruitful discussions with the core measures of the protocol, or impliquées en Afrique 5 that built upon and improved the work of fundamentally do not believe in a multilateral intersessional drafting group 2. It is highly approach to this issue. There may be a Il est temps d’interdire à l’échelle encouraging to see Parties reaching small minority that cannot be mondiale la vente de tabac par consensus on potentially delicate matters of accommodated, at least for now, and internet/à distance 6 search and seizure or proceeds of crime. Parties should neither tie themselves in knots to appease them nor waste their The big question is whether Parties can breath arguing with them keep this co-operative spirit going when we head back into the thornier issues of s &OCUS ON CORE PRINCIPLES Articles 5-7 - probably tomorrow in plenary, s #ONSIDER WHICH BITS OF TEXT 0ARTIES COULD likely today in corridor conversations. To cut without crippling a useful and realistic state the obvious, real progress on supply- international system of controls chain provisions will require a willingness to listen and to seek consensus on concepts s !DJUST EXPECTATIONS TO REALITIES NO before haggling about wording - as well as protocol can single-handedly solve all exceptionally hard work as we race to beat problems of illicit trade or substitute for the Sunday deadline of the end of INB-4. national efforts to control smuggling We should not kid ourselves: the clock s 2EMEMBER THAT THE PROTOCOL AND THE really is ticking down, and failure to reach international system it will set up, is merely a agreement this week could soon mean no starting point in global efforts to control illicit Illicit Trade Protocol. trade. At least as important as the system initially set up will be the flexibility to develop That would be a major setback for the with changing technology and needs. FCA FCTC, which to date has been an has suggested a technical committee of the extraordinary success, helping bring Meeting of Parties as a possible mechanism SINCE THE OPENING OF THE smoke-free spaces, advertising bans, to achieve this FIRST WORKING GROUP FOR graphic health warnings and other evidence-based control policies to s ,ISTEN TO OTHER 0ARTIES (ONEST ATTEMPTS THE FRAMEWORK CONVENTION countries around the world. to understand their practical and political ON ON constraints do not mean compromising It would be particularly sad to waste this your own principles. 29 OCTOBER 1999 opportunity when the vast majority of Parties seem to honestly want a concerted Some Parties may note a small irony here: 47,381,437 international effort to deal with the health as civil society organisations, we are free to and financial damage caused by illicit trade. give negotiating advice without having to PEOPLE HAVE DIED FROM For the most part, the arguments are about negotiate ourselves or put our government’s TOBACCO-RELATED DISEASES the “how” of implementing supply-chain name on a legally binding document. To controls and co-ordinating systems which we can only respond that controlling (AS OF 09:00 ON 18 MARCH between countries rather than about the illicit trade in tobacco products is a critical 2010) fundamental desirability of tracking-and- part of tobacco control and public health. tracing, licensing or due diligence regimes. We understand that you do the hardest part of the work; we will do what we can to help So what should we do to reach agreement? you do it well. Some humble suggestions from the FCA:

1 ISSUE 101 THURSDAY, 18 MARCH 2010 GENEVA

WEST AFRICAN SITUATION

4ELLING GRAPHICS FROM THE 5. /FFICE ON $RUGS AND #RIME REPORT ENTITLED 4RANSNATIONAL 4RAFFICKING AND THE 2ULE OF ,AW IN 7EST Africa: A Threat Assessment, published in July 2009. (http://www.unodc.org/documents/data-and-analysis/Studies/West_ !FRICA?2EPORT?PDF

WEST AFRICA’S ILLICIT MARKET (IN VALUE AT RETAIL PRICES)

3OURCE 7(/ 5. 0OPULATION $IVISION 5./$# AND OTHERS FROM THE WORLD TO AFRICA

Route Traffickers Source: Far East (China, Vietnam); Europe (Bulgaria, Groups involved: Cigarette manufacturers, local distributors Luxembourg, Greece) 2ESIDENCE OF TRAFFICKERS: West Africa Vector to West Africa: Via worldwide free trade zones, PARTICULARLY *EBEL !LI $UBAI AND THROUGH TAX HAVENS Threat Vector within West Africa: Landfall at a) Ghana-Benin-Togo, b) Estimated trend: Increasing Guinea (Conakry) and c) Mauritania, Trans-Saharan routes to Potential effects in region: Corruption, possible insurgent North African markets funding, loss of tax revenues $ESTINATION: West Africa (1/3), North Africa (2/3) Potential effects outside the region: Corruption, possible Value insurgent funding, loss of tax revenues Volume: 11 billion illicit cigarettes for West African consumer markets, 21 billion for North Africa Value 53 MILLION

2 ISSUE 101 THURSDAY, 18 MARCH 2010 GENEVA

BAT’S COMPLICITY IN CIGARETTE SMUGGLING IN AFRICA

Internal corporate documents from major tobacco from the North. I will countersign this document which will enable MANUFACTURES MADE PUBLIC THROUGH TWO 53 LITIGATION BAT to pay them – via Sorepex…[translated from original French] settlements in 1998, provided evidence of tobacco companies’ Similarly, to avoid detection between Niger and Nigeria, complicity in cigarette smuggling throughout Asia, Europe, the Sorepex reported that “;$=IRECT IMPORTS TO .IGERIA ;WOULD BE= Middle East, North America, and Latin America. /NLY ONE YEAR through Mr Adji…[who] would disguise the cigarette after British American Tobacco (BAT) opened its litigation importations by calling the shipment something else, e.g. document depository to the public, BAT’s public relations firm matches….” reported to the company that its depository located in 'UILDFORD 5+ WAS A hSKELETONv IN THE COMPANYS CLOSET IN Smuggled cigarettes were also essential to BAT’s management part due to the public airing of BAT’s internal documents of its cigarette brands in Africa. A 1991 internal BAT memo relating to cigarette smuggling. While the has regarding the launch of a new brand in West Africa states: long asserted that price differentials were (and continue to be) The reasons why we were so enthusiastic about Lambert & responsible for increases in transborder cigarette smuggling, Butler[L&B] were ... the possibility of GT [General Trade, a term used analyses of internal tobacco company documents have shown to refer to smuggled cigarettes] exploitation were considered to be that “transit” or “duty not paid” cigarettes (terms used internally good (Ghana, Cameroon) ... I accept that in retrospect we may have by the tobacco industry to refer to smuggled cigarettes) were been over optimistic about its [L&B] potential in Togo, Benin, Niger, incorporated into industry business plans and played an but the main reason for its launch in those markets was not to essential role in increasing market share, particularly in exploit domestic markets but for GT opportunities. emerging markets in low- to middle-income countries. Similarly, a 1990 internal BAT memo states, Publicly available internal BAT records, dating from the 1980s and 1990s, also suggest cigarette smuggling has played an Kool is considered to be the best B&W [Brown & Williamson, then important role in BAT’s market penetration across Africa. "!4S 53 SUBSIDIARY= product offering for the Nigerian market.... $OCUMENTS DESCRIBE HOW "!4 KNOWINGLY WORKED THROUGH KEY Both legal and transit importing would be required to properly – and distributors in Africa which, acting as middlemen, purchased profitably– develop the brand… cigarettes from BAT only to then supply them to “transiteers”; a BAT’s documents show that it also used legal cigarette sales term used to refer to those parties who physically transport “to provide cover for advertising and GT business.” In a 1991 CONTRABAND ACROSS BORDERS $ISTRIBUTORS ALSO INSULATED "!4 memo, BAT marketing executive Joe Green considered the from direct contact with transiteers, thus reducing the risk of distribution strategies for Cameroon in terms of two scenarios exposure for BAT. According to one BAT document stamped where legal imports were permitted and where legal imports “Secret”, one distributor, Soropex, “provide[d] ‘cover’, albeit were prohibited. Even if legal imports were allowed, Green increasingly flimsy, for BAT in some fairly shady business.” A stated, BAT memo regarding Cameroon stated: “GT shipments will remain the mainstay of our activity....The Malabo “It was agreed that Michel Chevaly [of Sorepex] was in an exposed distribution channel will have to be maintained…Maintain a minimum POSITION AND IN ;THE= FUTURE *-4 ;*OHN 4ICEHURST "!45+% "!4 = COVER LEVEL OF "(3& ;"ENSON AND (EDGES BRAND= via legal imports.” SHOULD NOT TRAVEL WITH HIM IN #AMEROON /NE OF THE MAIN FUNCTIONS OF 3/2%0%8 WAS TO ALLOW "!4 TO KEEP AT ARMS LENGTH FROM TRANSIT The findings from BAT’s internal documents suggest that the customers — particularly in Cameroon.” company’s complicity in contraband trade extended across the African continent. Any contribution by the tobacco industry to Additionally, distributors offered BAT detailed knowledge of address the problem of illicit tobacco trade should be viewed major entry points to the African continent, including Port Said, within this context. %GYPT FOR .ORTH !FRICA $JIBOUTI FOR %AST !FRICA AND -ALABO Equatorial Guinea for West Africa. Further, plans to conceal Monique E. Muggli cigarettes among other merchandise and falsify documents on Campaign for Tobacco-Free Kids the origin of the shipment were made known to BAT by Sources: Sorepex: ,E'RESLEY %, -UGGLI -% #OLLIN * 0ATEL 0 ,EE + (URT 2$ British Sales departing from Malabo to North Cameroun and Chad. Via American tobacco and the “insidious impact of illicit trade” in cigarettes three transporters: Sodisa, Mouchili and Bogno… across Africa. Tobacco Control 17;339-345, 2008.

1. For the first time, Bogno will buy 300 cartons: this is the capacity (URT 2$ %BBERT */ -UGGLI -- ,OCKHART .* 2OBERTSON #2 /PEN of his truck, taking into account the other merchandise which will $OORWAY TO 4RUTH ,EGACY OF THE -INNESOTA 4OBACCO 4RIAL. Mayo Clinic ‘hide’ the cigarettes Proceedings 84(5), 2009. 2. Each time, I will ask M & B [Mouchili and Bogno] to sign a document testifying that the cigarettes have really been exported

3 ISSUE 101 THURSDAY, 18 MARCH 2010 GENEVA TRACKING AND TRACING TECHNOLOGY ALREADY IN PLACE IN KENYA

Kenya is the centre of the tobacco trade in 70 per cent of the tax loss or concealment The cargo tracking system works as East Africa, producing tobacco products of products in the market. follows: for its domestic market and 17 other 2. The balance of 30 per cent lost tax Vehicles carrying cargo for export must be countries in Africa and beyond. results from under-declared production licensed and have the tracking mechanism Government statistics indicate 4.7 billion, and/or misclassified tobacco products and/or illicit manufacturing, adding up installed by the transporter. The cigarettes 5.4 billion and 7.3 billion cigarette sticks AROUND 53 MILLION PER YEAR are loaded onto the vehicle under were produced in 2003, 2004 and 2005. supervision of an authorised officer from BAT Kenya reported that it exported 56 The Kenyan government’s response has THE +ENYA 2EVENUE !UTHORITY WHO SEALS per cent of its local production in 2005 been to establish a track and trace system the container using an electronic seal and the proportion of exports has grown composed of two elements: which is subsequently armed. since then. BAT - the leading tobacco 1. Special markings on cigarette packets in company in Africa - has more than the form of tax stamps Movement of the truck and the status of the seal are monitored on a real-time basis doubled its cigarette production in the 2. A tracking system to monitor cargo in country. transit or export cargo destined for that gives the location of the vehicle and neighbouring countries the status of the seals. Any deviation from (ISTORICALLY THERE IS EVIDENCE THAT "!4 the designated export/transit route or any facilitated the worldwide illicit trade in THE TAX STAMP SYSTEM attempts to tamper with the seal send an tobacco. Evidence presented to the British Tax stamps are used for tobacco products ALERT WHICH IS TRANSMITTED TO 2APID (OUSE OF #OMMONS (EALTH 3ELECT intended for the domestic market. The 2ESPONSE 5NITS STATIONED ALONG THE Committee in 2000, for instance, showed details of the stamps are kept in a DESIGNATED ROUTES 4HE 2APID 2ESPONSE that in the 1990s BAT undertook a DATABASE BY THE +ENYA 2EVENUE !UTHORITY 5NITS THEN ARREST THE OFFENDING VEHICLE /N comprehensive, planned project to The tobacco industry is required to keep reaching the port of exit from Kenya, or promote smuggling of its tobacco records of the usage of the stamps and upon receipt by tax authorities in the products worldwide. The evidence was provide details about production. Local destination country, the electronic seal is based on BAT documents published as a cigarette consumption is monitored on the disarmed by Kenyan tax authorities. result of litigation which showed high basis of tracking of the tax stamps in the official awareness of and involvement in For container-level tracking (and tracing) market. A detailed monitoring framework the smuggling operations, with THE 2&)$ SYSTEM IS HIGHLY COST EFFECTIVE involving the tax authority and police has contraband cigarettes referred to by a This system has already demonstrated its been developed for surveillance to ensure RANGE OF EUPHEMISMS INCLUDING $.0 effectiveness in curbing diversion, in that all cigarettes bear excise stamps and (duty not paid) and GT (general trade). facilitating trade between Kenya and its indicate payment of taxes, and their neighbours and shortenening turn-around Kenneth Clarke, BAT’s deputy chairman, legitimacy. Products which do not bear time of transit trucks. It shows that even said publicly after the company’s stamps are periodically seized, the tracking and tracing is feasible in low- as activities were exposed: “We act, offenders arrested and prosecuted. The well as high-income countries. completely within the law, on the basis penalty includes a prison term not that our brands will be available alongside exceeding three years. Penalties are levied OFFENCES AND PENALTIES those of our competitors in the smuggled against manufacturers as well as persons Kenya has resorted to charging offenders AS WELL AS THE LEGITIMATE MARKETv 5NDER handling illicit products. Products seized under the Economic Crimes Act which pressure to clean up its act, BAT now says are destroyed by burning. provides a maximum penalty of 10 years that it wants to help tackle the illicit trade THE CARGO TRACKING SYSTEM and a fine equivalent to double the taxes. and supports the idea of an illicit trade This is considered to be more punitive protocol. Proper monitoring of the The cargo tracking system used in Kenya than tax legislation. activities of the tobacco industry is vital to was designed following interviews with ensure that these words are backed up by customs officials, port operators, customs +ENYA ALSO HOSTS THE 2EGIONAL )NTELLIGENCE action. brokers and transporters. The interviews ,IAISON /FFICE 2),/ /FFICE FOR %AST AND Southern Africa. Through this office and This is already underway in Kenya. identified the diversion methods being its systems, Kenya is able to share $IVERSION OF TRANSIT GOODS HAD BEEN A used, the level of risk of diversion, the information on trends, modus operandi, growing problem for the country. Goods weakness exploited and the impact of routes and significant cases of illicit trade falsely declared as in transit to other violations. The major problem identified in East and Southern Africa. jurisdictions evade local taxes and duties was a weak security feature inherent in to then be dumped on the Kenyan market, manual container seals. This information with the government losing out heavily. It is was then used to design a system based 2ACHEL +ITONYO Institute for Legislative Affairs, Kenya estimated that the Kenyan government ON RADIO FREQUENCY IDENTIFICATION 2&)$ TO LOSES 53 MILLION PER YEAR DUE TO ILLICIT replace the manual seals for tracking the More information: containers. This is a technology similar in trade. The challenges Kenya faces on illicit Siror, J.K. et al, !PPLICATION OF 2&)$ theory to bar code identification but uses trade include: 4ECHNOLOGY TO #URB $IVERSION OF 4RANSIT an electronic tag for the purpose of Goods in Kenya, ncm, pp.1532-1539, 2009  $IVERSION OF EXPORT AND TRANSIT CARGOES identification and tracking using radio Fifth International Joint Conference on INC, including backflow of exports and inward )-3 AND )$#  smuggling. This accounts for approximately waves.

4 ISSUE 101 THURSDAY, 18 MARCH 2010 GENEVA

LES DOUANES DOIVENT ÊTRE DAVANTAGE IMPLIQUÉES EN AFRIQUE

Un protocole relevant notamment de pour cette année là 2,3 milliards permettant aux gouvernements de la compétence des Douanes d’unités”. disposer de moyens pour lutter efficacement contre cette épidémie. L’administration des douanes a L’Afrique est très touchée mais les L’ampleur des dégâts attribuables à longtemps été assimilée à un “gendarme données manquent cruellement l’existence de ce commerce illicite a ainsi aux frontières” reposant sur une En Afrique, le rapport manque conduit les Parties à la Convention Cadre organisation presque militaire, elle était cruellement de données. DE ,UTTE !NTI TABAC DE L/-3 Ì NÏGOCIER avant tout le symbole de la puissance rapidement l’actuel projet de Protocole. publique chargé de protéger l’espace Ainsi en Afrique du Nord et en Afrique national contre l’afflux de marchandises Centrale aucune saisie de cigarettes n’a Le Protocole doit permettre d’aider à un étrangères susceptibles de déséquilibrer été signalée dans la base de données meilleur contrôle de la chaîne le marché intérieur. durant la période 2007-2008 alors même d’approvisionnement mais il suppose qu’il a été avéré que le Sahara, en raison que les pays africains soient en mesure Si la douane est une administration très de ses frontières poreuses, constituait d’appliquer un tel instrument ancienne, elle est à la fois l’une des plus une plaque tournante de la contrebande international. modernes, et des plus réactives dans un de cigarettes. contexte en évolution rapide. Ceci suppose notamment que les En ce qui concerne l’Afrique occidentale, responsables concernés dans les pays Ses compétences élargies la chargent seule une saisie au Burkina Faso a été d’Afrique, à savoir les services des de mettre en œuvre et de faire respecter recensée en 2008. Cette saisie, faite $OUANES SOIENT ACTIVEMENT ASSOCIÏS Ì les dispositions législatives et dans une voiture, a été réalisée dans la l’élaboration et la mise en œuvre de ce réglementaires relatives à tout CAPITALE /UAGADOUGOU ET ELLE CONCERNAIT 0ROTOCOLE ,A PRÏSENCE DE L/RGANISATION mouvement de personnes -ONDIALE DES $OUANES EN ou de marchandises au TANT QU/RGANISATION niveau des frontières. L’AFRIQUE EST TRÈS TOUCHÉE MAIS LES DONNÉES MANQUENT CRUELLEMENT Internationale, dans le cadre $ANS CE CADRE LA des négociations constitue question de la sécurité et de la une illustration de protection de la santé publique l’implication indispensable est devenue une de leurs prérogatives. une cargaison de 662 500 cigarettes de de ces administrations dans le la marque Peter Stuyvesant en processus. Une évolution préoccupante du provenance du Togo. L’année commerce illicite des produits du La région africaine, particulièrement précédente, le Mali avait fait état de six tabac ciblée par les fabricants de tabac qui saisies portant sur plus de 2 millions de veulent développer leurs marchés sur le Le commerce illicite a connu un cigarettes (2 135 000 cigarettes) mais continent et sont prêts à inonder les pays développement et celui portant sur les aucune saisie n’est référencée en 2008 de leurs produits par le biais de la produits du tabac s’est tout dans ce pays. contrebande, a une responsabilité particulièrement aggravé au cours de Cette absence de données met en particulière vis-à-vis des autres régions ces dernières décennies. Cette évolution exergue la gravité de la carence de pour que le Protocole adopté soit fort et résulte notamment de l’implantation de contrôles dans la circulation des produits efficace pour endiguer ce problème du réseaux organisés par des du tabac au niveau du continent africain. commerce illicite. Ceci nécessite professionnels disposant de moyens de cependant qu’à son niveau, les Etats- transport et de communication de haute Cette carence de contrôle explique le Parties s’impliquent pleinement, technologie. Ces réseaux gèrent leurs développement du commerce illicite des notamment les services les plus activités en coordination avec d’autres produits du tabac. concernés. réseaux extérieurs, voire sont liés à des Pourtant il est désormais acquis que ce Saouna Inoussa groupes terroristes. commerce illicite entraîne non seulement 0RÏSIDENT 3/3 4ABAGISME .IGER Le rapport $OUANES ET TABAC  des pertes économiques au travers de la illustre cette situation et cette évolution perte de recettes fiscales pour les Etats préoccupante du commerce illicite. Selon mais présente des conséquences ce rapport, “1 416 saisies ont été sanitaires majeures. Le commerce illicite effectuées dans soixante-quatre pays des produits du tabac sape littéralement MEMBRES DE L/RGANISATION -ONDIALE les politiques fiscales actives permettant $OUANES EN  ET CE NOMBRE EST de réduire sensiblement la passé à 1 654 en 2008, représentant consommation de tabac tout en

5 ISSUE 101 THURSDAY, 18 MARCH 2010 GENEVA

IL EST TEMPS D I RT Y D’INTERDIRE À AWARD L’ É C H E L L E M O N D IALE No ashtray today - we want to encourage a positive attitude...... but LA VENTE DE TABAC PAR you know who you are. INTERNET/À DISTANCE ORCHID La vente de produits du tabac à entrées en vigueur à Trinidad et Tobago, AWARD distance, y compris par Internet, est par aux Seychelles et aux îles Caïmans. La définition un problème international, qui vente de tabac par Internet est Canada* and Sri Lanka for nécessite une solution internationale. Ce également interdite au Canada dans la leadership in negotiations on Articles commerce a le plus souvent pour objet province de Québec, en Iran, en Afrique 13-16 d’éviter les taxes, les produits étant du Sud ainsi que dans les états *this doesn’t mean we agree with all expédiés entre les territoires où les taxes américains de New York, de l’Alaska et sont moins élevées à ceux qui ont des du Connecticut. your positions taxes plus élevées, directement aux Pour sa part, la vente de produits du CONSOMMATEURS $E PAR LA NATURE MÐME tabac par commande postale est de la transaction, habituellement entre interdite notamment au Brésil, au pays/territoires différents, il devient alors Canada, aux îles Caïmans, au Kenya, extrêmement difficile de garantir que les aux Seychelles, en Afrique du Sud de taxes sur le tabac sont payées. même qu’à Trinidad et Tobago. La L’autre aspect problématique de la vente législation canadienne interdit par Internet concerne les mises en garde l’expédition de produits du tabac aux obligatoires, souvent absentes des consommateurs d’une province à l’autre. emballages, de même que des Il est important de noter que le terme « contraventions aux normes nationales vente à distance » est plus adéquat que applicables aux produits. Ce commerce « vente par Internet ». La « vente à The Framework Convention virtuel vient également compliquer distance » est plus générale et couvre l’application des lois interdisant la vente Alliance (FCA) is a global non seulement les transactions de tabac aux mineurs. alliance of NGOs working to effectuées par Internet, mais aussi les achieve the strongest Il est temps d’agir à l’échelle mondiale. commandes postales et les commandes possible Framework Le protocole devrait inclure l’interdiction passées par téléphone, télécopieur et Convention on Tobacco de la vente à distance au détail des messagerie texte, entre autres. Control. Views expressed in produits du tabac aux consommateurs. Il Bref, il importe de toute urgence que est encourageant de constater qu’à the Alliance Bulletin are toutes les Parties en cause appuient LOCCASION DE L/).  UN TRÒS GRAND those of the writers and do l’interdiction de la vente à distance dans nombre de régions/Parties ont réclamé not necessarily represent le cadre du protocole. l’interdiction de la vente par Internet/à those of the sponsors. distance. Framework Convention 2OB #UNNINGHAM $EPUIS L/).  DE NOUVELLES LOIS Société Canadienne du Cancer Alliance interdisant la vente par Internet sont Rue Henri-Christiné 5 Case Postale 567 CH-1211 Geneva, Switzerland

Representative Office: SWISS CHEESE UPDATE FCA c/o ASH International 701 4th Street NW. 3rd Floor Yesterday’s Bulletin ARTICLE h(OLES LIKE 3WISS CHEESEv REPORTED ON THE Washington, DC 20001 disappointing verdict that emerged from the largest legal case concerning USA organised crime ever to be heard by a Swiss court. Bulletin wishes to report that both the Swiss prosecutor and the seven acquitted defendants have Phone: +1 202 289 7155 recently appealed against the court’s decision in the smuggling case dubbed Fax: +1 202 289 7166 “Ticinogate”. Swiss justice thus has a further opportunity to make its mark Email: [email protected] against cigarette smuggling. www.fctc.org

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