The World of Contraband Tobacco

John W. Colledge III
Customs and Trade
Anti-Money Laundering
Supervisory Special Agent (Retired)
U.S. Customs Service and
Department of Homeland Security
The Framework Convention for
Tobacco Control – Smuggling
John W. Colledge III
Customs and Trade
Anti-Money Laundering
Supervisory Special Agent
U.S. Customs Service and
Department of Homeland Security
A Taxing Issue
Buffalo, New York
February 4, 2008
International Tobacco Smuggling
 United States
 Canada
 United Kingdom
 Kaliningrad
 Former Yugoslavia
 Panama
South Africa
North Korea
 Brazil
 Paraguay
 Argentina
Framework Convention for
Tobacco Control
 Price and tax measures to reduce
the demand for tobacco.
 Non-price measures to reduce the
demand for tobacco.
 Core supply reduction.
-WHO Framework Convention on Tobacco Control (WHO FCTC)-
Protocol on Illicit Trade in
Tobacco Products
 Organized Crime.
 Corruption.
 Counterfeit
 Terrorism.
 Manufacturing
 Proceeds of Crimes.
 Duty Free System.
 International
 Seizure Payments.
 Tracking & Tracing.
Existing United Nations Treaties and
 Three Drug related treaties.
 Convention against Corruption.
 Global Program against Money-Laundering.
 The United Nations United Nations
Convention against Transnational Organized
Crime and its Protocols.
 United Nations Global Counter-Terrorism
United Nations Convention on
Transnational Organized Crime
Article 1. Statement of purpose
The purpose of this Convention is to promote cooperation
to prevent and combat transnational organized crime
more effectively.
Article 2. Use of terms
For the purposes of this Convention:
“Organized criminal group” shall mean a structured
group of three or more persons, existing for a period of
time and acting in concert with the aim of committing
one or more serious crimes or offences established in
Accordance with this Convention, in order to obtain,
directly or indirectly, a financial or other material benefit;
(b) “Serious crime” shall mean conduct constituting an
offence punishable by a maximum deprivation of liberty
of at least four years or a more serious penalty;
United Nations Convention
against Corruption
Chapter I
General provisions
Article 1. Statement of purpose
The purposes of this Convention are:
(a)To promote and strengthen measures to prevent and
combat corruption more efficiently and effectively;
(b) To promote, facilitate and support international
cooperation and technical assistance in the
prevention of and fight against corruption, including in
asset recovery;
(c) To promote integrity, accountability and proper
management of public affairs and public property.
Counterfeit Merchandise
 Agreement on Trade-Related Aspects
of Intellectual Property Rights (TRIPS).
Geographic indications.
Trade secrets.
 1986-94 Uruguay Round.
 Introduced intellectual property rules
into the multilateral trading system for
the first time.
What is a Trademark?
 A trademark is a word, phrase, symbol or
design, or a combination of words, phrases,
symbols or designs, that identifies and
distinguishes the source of the goods of one
party from those of others. (USPTO)
 Trade-mark
– A word, symbol or design (or combination
of these), used to distinguish the wares or
services of one person or organization from
those of others in the marketplace. (CIPO)
Illegal Manufacturing
 Intent to control illegal manufacturing.
 Controls on sales, resale and disposal
of seized manufacturing equipment.
 Canada proposed national legislation.
Counterfeit Cigarettes?
 This term is incorrect.
 Manufacturing cigarettes with counterfeit
trade marks is a form of illegal
 Smuggled cigarettes counterfeit trademarks
began to appear in the USA, Europe and
Australia in large volumes in and around
 Governments, trademark holders and
consumers are victims.
Duty Free System
Renewed concern on the
international duty free system.
Free or Foreign Trade Zones.
In-transit or in-bond
transportation of tobacco
Seizure Payments
 Basis found in the agreement between PMI
and the European Commission.
 Contraband PMI products found inside the
European Union can result in a 100% penalty
for customs duties and excise taxes.
 Similar penalties already exist in Canadian
and US Customs laws.
Tracking and Tracing
 Industry Controlled – European Union.
 PMI system.
 Currently limited to master cases.
 Not Secure.
 Outlined in the PMI/EC Agreement.
 Data base, including access controlled by PMI.
 JTI system.
 Similar to PMI agreement.
 Government controlled systems.
 Turkey.
 Brazil.
 Canada.
 California.
The Reason for the Contraband
Tobacco Trade
John W. Colledge III
Customs and Trade
Anti-Money Laundering
(775) 224-0133
[email protected]

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