Fighting Illegal Tobacco Trade

Harmonised customs infringement definitions, tougher sanctions and the implementation of the WHO Framework Convention on Tobacco Control (FCTC) Protocol are some of the key initiatives put forward by the Commission to tackle the illegal tobacco trade.

The Commission also wants to fight this trade - which costs the EU over €10 billion a year - by tightening the definition of excisable tobacco and encouraging greater sharing of risk information and supply chain data.

These are some of the key points in a new Strategy launched by the Commission, which says that the illicit tobacco trade deprives Member States and the EU of over €10 billion revenue every year in terms of unpaid taxes and duties.

The Commission says that his not only hits government spending; it also fuels the shadow economy and organised criminal groups operating across borders.

Action has already been taken action to curb the illegal tobacco trade; in 2011 for example, the Commission presented an Action Plan to tackle smuggling at the EU's Eastern land border. Despite such efforts, the overall illicit trade continues to grow.

For these reasons, says the Commission, a comprehensive strategy is needed that clearly sets out a number of coordinated measures at national, EU and international level would be the best means of effectively tackling this problem.

The Role of the Commission

The Commission plays a role in combatting cigarette smuggling through the action of the 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 EU 
• 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
• Work together with international organisations like EUROPOL, EUROJUST, INTERPOL and WCO 

The Strategy

The Commission strategy, contained in a Communication entitled "Stepping up the fight against cigarette smuggling and other forms of illicit trade in tobacco products", proposes measures around four problematic areas.

These measures seek to:
• Decrease incentives for smuggling activities
• Improve the security of the supply chain 
• Strengthen enforcement of tax, customs, police and border authorities
• Strengthen sanctions for smuggling activities

The Commission says that most of the measures contained in the strategy will be launched and implemented in the short and medium term, while 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, it says.

The strategy also analyses existing legislation and policies, with the aim of identifying weaknesses and gaps. It also examines ways of better coordinating existing tools in the fight against illicit trade is a cross-cutting issue, as well as improving cooperation between the EU, the national and the international level.

Decreasing Incentives

The Commission believes that measures can be taken in the immediate and short term to reduce incentives and loopholes. For example, the definition of excisable tobacco, which retains a high degree of complexity, could benefit from simplification by aligning it with customs definitions.

The Commission also wants to explore limiting tax avoidance by introducing basic common rules on anti-forestalling. As far as the grey area between smuggling and rightful importation by travellers is concerned, the Commission is also considering elaborating technical guidance to support Member States in using objective criteria when applying thresholds for travellers.

The Commission would also like to expand already existing targeted actions in cooperation with Member States in order to raise public awareness about the damage caused by and the specific risks associated with the consumption of illicit tobacco products.

Improving Supply Chain Security

First and foremost, the Commission wants to better secure tobacco supply chains in the EU and Member States through the signing, ratification and effective implementation of the WHO Framework Convention on Tobacco Control (FCTC) Protocol, including measures regarding licencing of manufacturing equipment, due diligence, and provisions on the free zones inside the EU.

The Protocol obliges parties to establish a tracking and tracing system for all tobacco products that are manufactured in or imported onto their territory.

The Action Plan also urges the European Parliament and Council to adopt the recent Commission proposal for a new Tobacco Products Directive as soon as possible, including the proposed measures on tracking and tracing.

Strengthening Enforcement

In addition to specific actions to improve sharing of risk information and supply chain data through the development of common risk management tools at the EU level, the Commission believes that the planned reform of OLAF should pave the way for enhanced cooperation between international bodies such as EUROPOL, EUROJUST and FRONTEX.

The Commission also plans to organise further targeted actions both within the EU and/or with third countries, address weaknesses identified in Joint Customs Operations and continue its work on scientific research and analytical methods in the fight against illicit tobacco trade.

The Action Plan also pledges to provide increased feedback to Member States regarding analysis of seizures, and proposes new measures to gather information obtained through automated licence plate and container code recognition, and make this available to all Member States.

The Commission also directly addresses the specific problems that Greece is facing with regards to cigarette smuggling over its borders, and pledges more support. The Action Plan contains an initiative to develop a specialised training module for law enforcement authorities.

The Commission will also intensify its work with China, European Neighbourhood countries, Russia, Western Balkans and Turkey in the areas of customs cooperation and the fight against cigarette smuggling and examine the usefulness of posting additional EU liaison officers to important source and transit countries. Relevant anti-fraud provisions should be systematically included in negotiating mandates for relevant international agreements.

Finally, in order to strengthen enforcement, the Commission wants to see European Parliament and Council adopting the pending review of the OLAF Regulation and the Commission's proposal for a reform of EUROPOL as soon as possible.

Toughening Sanctions

Effective and dissuasive sanctions, including criminal sanctions, are needed across the EU to successfully curb the illicit tobacco trade, says the Commission. The Commission plans to carry out an external study on existing penalties in Member States, with a view to toughening them up. The Action Plan also contains a pledge to table a proposal on harmonising definitions of customs infringements and non-criminal sanctions.

Next Steps

The European Parliament and Council will now discuss the measures proposed in the Action Plan. The Commission will monitor the implementation of the Action Plan, which should be concluded by the end of 2015, and will prepare a report in three years’ time.