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EU strategy to fight cigarette smuggling

06 June 2013
by eub2 -- last modified 06 June 2013

The European Commission has adopted a comprehensive package to step up its fight against illicit tobacco trade, especially cigarette smuggling. The illicit tobacco trade is a global threat depriving Member States and the EU of over EUR 10 billion revenue every year in terms of unpaid taxes and duties. Not only does this hit national revenues hard, illicit trade also fuels the shadow economy since it is almost exclusively the domain of organised criminal groups operating across borders. Furthermore, it also undermines health policy initiatives aimed at discouraging the consumption of tobacco products and legitimate business as most illicit products are not made in line with EU rules on tobacco products. To effectively tackle the problem of illicit tobacco trade, the Commission's strategy sets out a number of coordinated measures at national, EU and international level.


Why is there a need for an EU Strategy to fight against cigarette smuggling and other forms of illicit trade in tobacco products?

The illicit trade in tobacco products is an increasingly complex and global phenomenon. It causes losses to the budgets of the EU and the Member States. It fuels the shadow economy, triggers organised cross-border crime and undermines health policy initiatives aimed at reducing the consumption of tobacco products. Reducing the availability of illicit products by protecting the legal supply chain is in the interest of the internal market and of public health, as well as in that of legitimate business. It is therefore crucial that this issue is addressed in a broad and consistent EU Strategy.

What are the specific measures proposed by the Strategy?

The Strategy proposes measures around four problematic areas. These measures seek to:

1) decrease incentives (for example examining the application of excise rules and introducing basic common rules on anti-forestalling)

2) secure the supply chain (for example the signature, ratification and implementation of the World Health Organisation Framework Convention on Tobacco Control Protocol to eliminate illicit trade in tobacco products at EU level)

3) strengthen enforcement (for example further operational actions, joint customs operations, providing technical and financial assistance to Member States and countries concerned to strengthen their capacities, enhance the exchange of information at EU and international level between the actors concerned especially the cooperation with major source and transit countries)

4) strengthen sanctions (for example proposal to harmonise definitions of customs infringements and non-criminal sanctions)

The proposed actions are listed in an Action Plan attached to the Strategy in form of a staff working document. Both the Strategy and the Action Plan will be discussed with the Council and Parliament.

When will the measures proposed by the Strategy enter into force?

Some of the measures proposed are on-going. Most of the measures will be launched and implemented in the short and medium term, some are long term or will be applied on a continuous basis. The implementation of the strategy should be concluded by the end of 2015.

What is the role of the EU/OLAF in tackling the issue of the illicit trade in tobacco products?

The European Commission plays a significant role in combating cigarette smuggling through the action of the European Commission's Anti-Fraud Office (OLAF). OLAF's role is to protect the EU's financial interests. Because of the significant financial losses which result from cigarette smuggling, OLAF contributes to fighting smuggling and counterfeit.

The role of OLAF is to:

• Assist and support law enforcement authorities throughout the European Union (EU) with their operational cases, as well as to coordinate major fiscal and criminal investigations with the Member States and third countries;

• Manage CIGINFO, an EU-wide seizure reporting system;

• Provide intelligence and analysis to the Member States;

• Provide assistance and support for joint international customs operations;

• Organise an Annual Task Group Cigarettes (TGC) Conference for experts from the Member States and key third countries. This event brings together investigators and analysts to discuss new trends in smuggling and to set priorities for the year ahead. The Annual TGC Conference helps to cement operational relationships between the Member States and other countries so that there can be rapid exchanges of information to target smuggling and counterfeiting. The 18th Annual TGC Conference will be held in Bucharest, Romania, in November 2013;

• Work together with international organisations like EUROPOL, EUROJUST, INTERPOL and WCO.

OLAF also manages the HERCULE II Programme, an EU programme which co-finances initiatives aimed at protecting the EU's financial interests. The Programme has a total budget of €98,525,000 for the period 2007–2013. Of this, approximately €6 million a year is spent on anti-contraband and anti-counterfeit measures, including financial support for the purchase of vital technical equipment and for training.

What has the Commission done in the past in order to address the issue of the illicit trade in tobacco products?

- Policy initiatives and international cooperation

In 2011 the Commission prepared an Action Plan to fight cigarette and alcohol smuggling along the EU Eastern Border.The Action Plan contains short, medium and long term actions aiming to tackle large scale smuggling and to reinforce cooperation mechanisms with Eastern partners. The actions cover key areas where the main problems were identified like for example the need to strengthen operational cooperation among competent services in the region, including the sharing of intelligence. The implementation of the Eastern Border Action Plan is on-going. The outstanding actions are incorporated into the Strategy adopted today.

With regard to the relationship between the EU and the main source countries, the initiatives taken by the EU vary according to the existing legal and institutional framework:

• The EU concluded a Customs cooperation and Mutual Administrative Assistance Agreement (CCMAA) with China in 2004 which set up a Joint Customs Cooperation Committee (JCCC) including an Anti-fraud Working Group.

• Mutual administrative assistance in customs matters (MAA) with Malaysia, Singapore and Vietnam is carried out in the framework of the General Scheme of Preferences (GSP).

• Anti-fraud provisions in free trade agreements (FTA) with key source countries are used for enhanced cooperation in customs matters.

• Strategic Frameworks on Customs Cooperation were endorsed with Russia, Moldova and Ukraine. Working groups have been created under each of these Strategic Frameworks, to discuss the illicit tobacco trade on a regular basis. Related issues have regularly been raised at meetings of the competent EU-committees under other existing agreements with these countries – which include Protocols on Mutual Administrative Assistance in customs matters - and have also been discussed during high level visits.

- Engagement with legitimate traders

Engagement with legitimate traders is an important part of the Commission's strategy to combat contraband and counterfeiting. The European Union and the Member States have signed four legally binding and enforceable multi-year Cooperation Agreements with the four largest tobacco manufacturers. These Agreements ensure that the manufacturers carry out certain supply chain control procedures to prevent the diversion of their products into illicit trade channels. These agreements and the resulting cooperation with tobacco manufacturers have been very successful in reducing illicit trade.

- Technical and operational assistance to Member States

Under the HERCULE II Programme, Member States receive co-funding for the purchase of technical equipment, as well as for technical assistance and training for the purpose of fighting against cigarette smuggling. The Customs 2013 and Fiscalis 2013 programmes, administered by the Commission's Directorate-General for Taxation and Customs Union (TAXUD) are used in support of political or operational initiatives in the customs and tax areas. Upon Member States' request, the Commission also provides technical assistance, including expert opinions and logistical assistance in tax administration issues and the fight against fraud.

- Protocol on the Elimination of the Illicit Trade in Tobacco Products

A Protocol on the Elimination of the Illicit Trade in Tobacco Products was adopted by the Conference of the Parties to the World Health Organization Framework Convention on Tobacco Control (FCTC) in November 2012. The Protocol was negotiated by the European Commission, on behalf of the EU and its Member States. The Protocol obliges the Parties to implement effective measures to eliminate the illicit manufacturing and trading of tobacco products. It contains provisions on the control of the supply of tobacco products, notably a tracking and tracing system, and requires all companies and persons engaged in the supply chain of tobacco, tobacco products and manufacturing equipment for making tobacco products to conduct due diligence on their customers, to ensure that sales to these customers are commensurate with legitimate demand. The EU will sign and ratify the Protocol. The Commission is currently preparing for the signature of the Protocol on behalf of the EU.

- The Commission proposal for a revised Tobacco Products Directive

The Commission proposal foresees two measures to ensure that tobacco products circulating on the Internal Market comply with the rules set out in the EU legislation and to reduce illicit products on the EU market: a tracking and tracing system and security features. The proposal is currently discussed by the Council and by the European Parliament.

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