Illicit trade in cigarettes is often just one element of the various illegal enterprises that transnational criminal syndicates engage in around the world, and it negatively impacts consumers, taxpayers and public health.
Kristin Reif, director of external affairs for Philip Morris International, the world’s leading tobacco company, told an Arizona Chamber of Commerce & Industry breakfast audience on Wednesday that cigarette smuggling rings are often also illegally trading in consumer goods, trafficking drugs and people and can even contribute to the financing of international terrorism.
“People often think of us in many corners of the world as the cigarette company,” Reif said. But, she says, “it is our background in tobacco that has given us a core competency in combatting illegal trade.”
Cigarette smugglers rarely stick to one crime, she said.
“These criminals don’t simply do one business, they do them all,” Reif said. “(Illegal trade) cuts across all industries, products, commodities and even human beings.”
Reif said that Arizona has the country’s 4th highest cigarette smuggling rate, accounting for $175 million in lost state tax revenue and contributing to the $6.9 billion in lost tax revenue across the nation. Reif said that reported figure is likely even larger.
“I’m guaranteeing you that it’s more than $6.9 billion [in tax revenue] lost,” she said. “Criminals don’t file earnings reports.”
It is estimated globally that as much as $2.2 trillion in illicit goods, including arms, tobacco, and pharmaceuticals, are trafficked around the world and that up to 3.3% of world trade is counterfeit and pirated products.
Operation Stolen Promise, a Department of Homeland Security operation to interdict illegally trafficked goods that launched in April 2020, resulted in more than 3,000 Covid-19-related seizures of items like masks, hand sanitizer, and other PPE and led to 362 arrests.
Illegal cigarettes, whether smuggled out of the regular supply chain or counterfeit, also expose consumers to an unregulated product and make it more likely that children will be able to access tobacco, which undermines public health efforts.
“Illegal trade gives access to minors,” Reif said. “My company is not going to sell to a single retailer who’s going to sell to anyone below the age of 21. I don’t think any criminals are going to say, ‘Well, I’ll only smuggle, but I’m not going to sell to a kid.’ They’re going to sell to anyone who will buy their product.”
Phillip Morris has established USA-IT, United to Safeguard America from Illegal Trade, a coalition of industry leaders and law enforcement agencies focused on drawing attention to the issue of black-market goods.
“This problem is too big for one industry to address on its own,” Reif said, arguing that combatting illegal trade across the board is a collaborative effort.
USA-IT members include the U.S. Chamber of Commerce, the National Association of Manufacturers and several makers of pharmaceuticals, apparel and consumer goods.