Illicit cigarettes face crackdown

A meeting to disseminate the inter-ministerial Circular No. 36/2012/TTLT/BCT-BCA-BTP-BYT-VKSNDTC-TANDTC dated December 7, 2012 on handling infringements of smuggled cigarettes and cigarette material trading was recently held in Hanoi by the Steering Committee on Fighting against Smuggling, Counterfeit Goods and Commercial Fraud (Steering Committee 127) and Vietnam Tobacco Association (VTA).

The illicit cigarette trading typically violates health laws, reduces taxes to the state and damages sales of legitimate dealers.  The circular defines more clearly how to deal with criminal infringements and proof of trading of  smuggled cigarettes, and cigarette materials.

In particular, the circular toughens the penalties for those who trade in, transport, and hoard smuggled tobacco.

For example, offenders who smuggle a quantity from 1,500 to fewer than 4,500 packs of cigarettes will be subject to criminal prosecution and shall be imprisoned from six months to three years, from 4,500 to fewer than 13,500 packs, the term will be from three to seven years, and from 13,500 packs or more the term will be seven to 15 years.

“I believe that the introduction of this circular with more serious sanctions as well as strong efforts of relevant state management agencies will successfully fight against smuggling cigarettes, which assures that there will be no tax loss for the Vietnamese government and helps to establish a fair playing field for legal domestic tobacco companies,” said Pham Kien Nghiep, VTA’s general secretary.

 In fact, smuggled cigarettes led to a VND4.32 trillion loss ($207.7 million) of Vietnam’s state budget in 2012. What’s worse, almost all of smugglers trade in cash, which results in foreign currency drain out of the country.

In addition to tax loss, cigarette smuggling cases have seriously affected agricultural sector as it was unable to sell 17,000 – 18,000 tonnes of tobacco leaves, equivalent to 10,000 hectares of tobacco plantation areas, and more than 43,000 farmers lost their job for 4 – 5 months. In addition, 180,000 people working in the tobacco industry have been unemployed.   

According to VTA, among smuggled cigarettes, for example, Jet and Hero brands produced by Indonesia’s Sumatra Tobacco Company  are almost not used by the Indonesians, but they are imported illegally into Vietnam.

Those illegal cigarettes do not comply with  any Vietnam laws and they do not have imported stamps or health warnings. Moreover, their quality is not tested by  Vietnamese authorities in charge. The smuggling of Jet and Hero cigarettes into Vietnam and their illegal consumption have lasted for 15 years.

VTA claimed that the quantity of smuggled cigarettes in Vietnam had been increasing  significantly year by year, which critically threatened the domestic tobacco industry as well as Vietnamese people’s health because of un-guaranteed quality.  

According to VTA, smuggled cigarettes have recently accounted for at least 20 per cent of the market share or about 800 million packs.

In order to fight against cigarette smuggling, since 2007, the Vietnamese government has issued related legal documents to deal with smuggled cigarettes and counterfeit cigarettes, setting up greater punishments and mobilising funds for anti-smuggling cigarettes campaigns.