JTI calls for collaboration to stem illegal trade

Japan Tobacco International called for greater international and national collaboration between governments, law enforcement agencies and the industry across Asia to stem the tide of illegal tobacco caused by excessive increases in duty.

Appearing at a major regional trade summit, JTI also called on policy-makers to do more to encourage responsible behavior by adopting long-term and balanced tax policies, including moderate and predictable tax increases, which best meet governments’ objectives to raise stable tax revenues and prevent market disruptions.

“There needs to be greater international and national collaboration. Countries must see the threats and clamp down on them, even if these illicit products are not destined for their country. Criminals don’t respect borders and that’s why governments, law enforcement, and the industry must work together to stem the tide of illicit goods.” Mark Hosty, director for anti-illicit trade office for Asia Pacific/Middle East-North East and Turkey at JTI, said during The Economist Asia Trade Week summit.

The counterfeit goods market in the Association of Southeast Asian Nations is worth over $35.9 billion, with $3.3 billion in tax revenue lost annually from smuggled cigarettes.

Hosty said most smuggling operations were multi-jurisdictional as he expressed hopes that countries in the ASEAN region could work together in harmonizing respective legislations so that all parties could work together in the same way.

Echoing JTI’s call, Customs Commissioner Rey Leonardo Guerrero who also participated in the virtual conference, highlighted the importance of international cooperation, particularly industry cooperation.

Guerrero said that “apart from sharing of intelligence with regards international customs administration, what is important is addressing illicit trade from the source. Most countries have many mechanisms to address illicit trade as far as their borders are concerned, but what is important is that illicit goods are addressed at the source so the approach is wholistic both from the origin and destination.”

Illegal cigarettes from Vietnam, Cambodia and other countries reach the Philippines borders with ever-increasing frequency. The biggest cache of fake cigarettes on record was apprehended by Manila Customs in July 2020—P187 million worth of smuggled cigarettes from China. Criminals increasingly use the free ports of the Philippines in their illegal operations.

JTI’s recent report “The Gathering Storm” showed that organized criminal groups were poised to further exploit public demand for cheap goods and capitalize on dwindling buying power in the impending global recession.

The Asian Development Bank revised ASEAN’s growth forecast from 4.7 percent to -3.8 percent in 2020, with seven out of 10 member states forecasted to enter deep recessions.

Both domestic fake and smuggled non-duty paid products are increasingly common in the market, with a total of 357.2 million sticks of seized cigarettes destroyed in the Philippines last year.

Organized criminal groups quickly adapted to border and lockdown restrictions and moved some of their operations online, conducting sales via WhatsApp and Facebook instead. The International Chamber of Commerce predicts that global counterfeit trade will reach $4 trillion by 2022, primarily fueled by e-commerce.

The illegal tobacco trade provides an ideal funding source for criminals, people traffickers and even terrorist groups.

According to the Center for the Analysis of Terrorism, for the past 10 years the counterfeiting or smuggling of tobacco products have been the fastest growing source of revenue for terrorist groups.