Details of tobacco smuggling in India has global implications

Details of tobacco smuggling in India has global implications
SANCHITA SHARMA

NEW DELHI, DEC 18: Though cigarette manufacturers have been linked with smuggling for the first time in India, they are already facing smuggling and racketeering charges in many countries. While the European Union and Canada have pressed smuggling charges against US tobacco companies in US courts, UK's Department of Trade and Industry has initiated investigations into smuggling charges against the UK-based British American Tobacco (BAT), which has a stake in ITC.

Most of these cases were filed after internal company documents showed that tobacco multinationals and their subsidiaries have been controlling and exploiting smuggling routes as part of a worldwide marketing strategy. These documents came into the public domain as a result of a settlement of litigation in Minnesota, USA. BAT's document depository is in Guildford, UK, where many references can be found to smuggling in India (see box).

Far from being the work of organised crime or rogue employees as claimed by the industry, BAT documents show that top ranking executives of the company and its subsidiaries actively exploited smuggling routes as part of their overall strategy to increase market share and revenue. In the US and Hong Kong, senior R.J. Reynolds and BAT employees have either pleaded guilty to or been convicted of charges related to tobacco smuggling.

While the international community is pressing for action, smuggling has become a key component in WHO's Framework Convention on Tobacco Control, an international treaty currently being negotiated by 191 countries. ``Because smuggling defrauds the government of excise taxes and makes these deadly products cheaper, besides creating a market for brands that cannot legally enter the country, smuggling is not just a law and order problem but an issue for public health as well,'' said Dr Derek Yach, Executive Director of the Noncommunicable Diseases and Mental Health cluster, WHO, Geneva. ``Investigating tobacco smuggling in India would give added impetus to action against the illegal practices of tobacco industry at the global level,'' he added.

Suspicions about industry involvement in cigarette smuggling first grew when researchers compared annual global exports with imports and concluded that about one-third of all cigarettes entering international trade each year could not be accounted for. Most smuggling involves the cigarettes moving out of the untaxed ``in-transit'' chain and entering the final market illegally, often through a third country. Trade analysts put the number of smuggled cigarettes at 355 billion in 1996 alone.

Writing On The Wall
Always careful, BAT employees rarely used the words ``smuggled'' or ``contraband'' in their internal documents and memos. Instead, euphemisms like DNP (Duty Not Paid), ``Transit'', or ``GT'' (General Trade), ``Parallel Market'', ``Second Channel'', and ``Border Trade'' were used to hide their activities.

Samples from Guildford Depository Report
* File No BB0310: Dated Feb 13, 1992, this is an internal note from AWH Suszynski, BAT, to Norman Davis, BAT territorial director recording how duty-free outlets were used a front for illegal sales in the domestic market:

``I attach herewith some data on shipments of SE 555 into India. Of the 70 millions shipped into India last year, I am informed that around 10-20 per cent is sold in the duty-free outlets to travellers while the remainder is sold in the local market.''

File No. FJ0962: A series of correspondence beginning mid-May 1991 show BAT's early interest in smuggling 555 to India via GT route despite obstacles. This is a BAT memo dated May 17, 1991, from Bruce Davidson to Fred Combe:

``In answer to your question on India: (1) There is clearly potential of 555 and B&H and also existing demand. Whilst there is some GT from neighbouring countries, it is very small relative to the size of the market...we continue to explore routes...''.

* Combe's reply, dated June 4, 1991:

``Following a meeting with Grants Distillers, I was given a name of an agent they use for the Indian market, who is based in Singapore... (as) a means of gaining entry for GT cigarettes, he could be a useful source of information.''

* File no BB0310 (dated December 2, 1992, sets out share of `Transit', brand by brand, showing total BAT sales declining from 77 per cent in 81/82 to 45 per cent in 91/92. It notes: ``SE 555 has declined as a share of the transit trade due to inadequate marketinW in 81/82 to 45 per cent in 91/92.