The cases stem from cigarette sales in Canada from 1989 to 1994, when the federal and provincial governments increased taxes to reduce tobacco use. Rising prices fueled a black market in which Canadian-made cigarettes were shipped to the U.S., where taxes were lower, before being smuggled back across the border.
The tobacco companies knew their exports would be sold on the black market, police said when criminal charges were filed in 2003.
The average price of a carton of 200 cigarettes tripled from C$15 in 1981 to C$45 in 1993, according to a study done by Physicians for a Smoke-free Canada. Contraband (illegal, illicit, black market) cigarettes sales rose from zero in 1985 to 14.5 billion, about 72.5 million cartons, in 1993, according to the study. The governments rolled back taxes that year in a bid to reduce smuggling.
Canadian exports rose from 1 billion cigarettes in 1987 to 15.7 billion in 1993, Statistics Canada, a federal agency, said in a report. The RCMP’s (Royal Canadian Mounted Police) investigation took eight years as police reviewed 763,000 documents and conducted 275 interviews, police said.
Imperial Tobacco Canada Ltd. and Rothmans Inc., Canada’s two biggest tobacco companies, agreed in 2008 to pay about C$1.15 billion in fines and penalties to settle charges they helped cigarette smuggling in the 1990s.
Japan Tobacco's JTI-MacDonald unit will pay C$150 million to settle out of court claims brought by federal and provincial governments. Under a separate settlement, R.J. Reynold's former Northern Brands unit will pay C$75 million.
As part of the civil settlement, R.J. Reynolds has agreed to pay the governments C$325 million ($325 million). The company is also bound to adopt packaging, marking and other measures that will assist the Canadian governments in their efforts to combat the movement of contraband tobacco products in Canada, in the event it decides to sell tobacco products in Canada in the future.
The settlement comes after more than ten years of litigation both in the United States and in Canada and enables the company eliminate continuing expense, inconvenience and distraction to its core business and "the uncertainties inherent in continuing to litigate complex matters of this nature."
R.J. Reynolds currently does not conduct business in the Canadian tobacco market. R.J. Reynolds and its parent company, R.J. Reynolds Tobacco Holdings, Inc., sold its international businesses, including RJR-Macdonald, Inc., its former Canadian affiliate, to Japan Tobacco Inc. in 1999.
RJR Nabisco (National Biscuit Company) Holdings Corp. announced on March 9, 1999 that it had completed the sale of its international tobacco business to Japan Tobacco, Inc. for $8 billion, including the assumption of $200 million of net debt.
Japan Tobacco's JTI-MacDonald unit will pay C$150 million to settle out of court claims brought by federal and provincial governments.
In a separate development, Northern Brands International, Inc., a subsidiary of R.J. Reynolds Tobacco Holdings, Inc., also entered into a plea agreement with the Ministry of the Attorney General of Ontario. The agreement requires Northern Brands to pay a fine of C$75 million. Northern Brands was created in 1992 for the purpose of transacting all sales of RJR-Macdonald tobacco products in the United States and was accused of conspiracy to aid others in the sale and possession of contraband cigarettes in the early 1990s. Northern Brands ceased being an operating company in 1997.
The Canadian government hailed the settlements, saying it collected a total of C$1.7 billion from the industry as punishment for the smuggling. The Non-Smokers Rights Association called the deal a "sellout," because the government lawsuits had originally claimed C$10 billion in damages against JTI-MacDonald and its related companies.
Canadian authorities had once described the smuggling operations as the largest corporate fraud scheme in the country's history, while R.J. Reynolds blamed the lawsuits on an overzealous anti-tobacco lobby.
The industry remains in litigation over attempts by Canadian provinces to collect for the health care costs of treating illnesses caused by smoking. (Alberta joins some other provinces in suing tobacco companies..); Canada - tobacco companies may face C$200 billion in claims..)
References: R.J. Reynolds Settles Canadian Government Claims With $325 Mln. - Update; R.J. Reynolds Agrees to Pay Canada C$325 Million (Update1) by Joe Schneider, Bloomberg.com, 4/13/2010; Firms settle Canadian cigarette smuggling case by Allan Dowd, Reuters, 4/13/2010.
Read more...
Canada - tobacco firms settle cigarette smuggling case..
Ontario - NO new measures to curb youth smoking..
"There's lots of talk about consideration for various options, but as far as concrete actions, there's just no answers," said OCAT director Michael Perley.
The Saskatchewan government recently raised the price of a carton of cigarettes by $5.40, making it the most expensive place in Canada to buy a carton. The province also announced new contraband measures, including different tax markings for tax-exempt tobacco and a better tracking system for tobacco sold on reserves. Saskatchewan also reduced the limit of tax-exempt tobacco allowed on First Nations reserves. It has been reduced from three cartons per week per person, down to just one.
Perley said his group hasn't been able to get information from the Ontario government on what exactly the formula is here for tax-exempt limits on cigarettes for reserves. "We get no answers," he said.
Eastern Ontario, meanwhile, Perley said, remains one of the most prolific entry points for contraband cigarettes made just south of the border, near Cornwall, primarily from St. Regis territory in the U.S. Because the majority of the smokes come from factories in the U.S., OCAT has called on the Prime Minister's Office to get involved in the issue and start talks with U.S. officials.
"That's the level that's needed," Perley said. "It's become an international issue."
While Ontario and the feds have failed to take action, Perley said more and more teens are taking up smoking because of the cheap prices and easy access associated with contraband cigarettes. "Some kids actually think native products are more natural, and as a result, not as harmful," Perley said.
According to figures from OCAT, more than 60,000 Ontario students in grades 7 through 12 smoke contraband cigarettes. "If there had not been cheap contraband, how many wouldn't have started smoking, or would have quit?" Perley asked.
While protecting health is the main goal for OCAT, Perley sounds mystified to understand why the Ontario government would allow contraband cigarettes to eat such a huge chunk out of provincial revenue, while at the same time allowing organized crime to flourish off sales from the illegal trade.
According to the CCSA, 22% of all cigarettes purchased in the country are sold illegally, with almost one-third of those purchased on First Nations reserves.
Perley also wants to see more municipal police forces in Ontario start to join the fight against contraband tobacco. "They could bring a huge amount of intelligence to the RCMP (Royal Canadian Mounted Police), Revenue Canada, and other agencies," Perley said.
Reference: Waiting for the next move TOBACCO: Group wants province to follow Saskatchewan's lead, Posted By DAVID NESSETH DNESSETH@STANDARD-FREEHOLDER.COM, 4/12/2010.
Canada - Obama visit - help STOP cigarette smuggling from U.S..
Canada - cigarette smuggling related briefs:
Ontario - don't cut provincial tobacco taxes to try to reduce contraband tobacco traffic..;
Canada - nearly one in five packs of cigarettes smoked by Canadian teen smokers are contraband products..;
Canadian Tobacco Use Monitoring Survey - 2008..;
Ontario, Canada - illegal cigarettes are everywhere..;
Canada - half of smokers have tried to quit..;
Canada - illegal cigarette trade - Imperial Tobacco President Kemball comments..;
Canada - Imperial Tobacco Head - Illegal Cigarettes..;
Imperial Tobacco - Canada Head - Canada growing crisis of illicit tobacco sales..; Imperial Canada - stop illegal tobacco sales rather than raisng tax on tobacco..; Canada - will higher tobacco prices lead to increase in illicit cigarettes..;
Canada - to launch an advertising campaign on the problem of tobacco smuggling..;
Nova Scotia - buying smuggled tobacco you encourage organized crime..; Ontario Businessmen - want government to crack down on illegal cigarettes..;
Imperial Tobacco Canada - slow illegal cigarettes/sue tobacco companies..;
As tobacco prices rise - increase in illegal cigarette trafficing..; Canada - Obama visit - help STOP cigarette smuggling from U.S..;
Canada economic recession losing billions in unpaid tobacco taxes..;
Canada - Police arrest 46 in tobacco crackdown..;
Imperial Tobacco Survey - Canadian Illegal Tobacco Trade..;
Canada - Introduction of Tobacco Stamp to combat contraband...
Read more...
Indonesia - slower annual growth expected in tobacco exports..
“It will be good enough if we can make cigarette exports grow by 15 percent — slower than the 18 percent realized in the past three to five years – because it is becoming harder to export cigarettes nowadays,” he said.
“For example, the United States has banned [clove] flavored cigarettes [to be sold in its domestic market], with the issuance of a new bill, while the European Union (EU) has further limited smoking areas available to the public.”
The US Food and Drug Administration has banned cigarette flavorings, including clove or kretek, cherry and chocolate, since last year as sweet flavors are considered to encourage young people to smoke. (Indonesia - launches formal dispute with WTO over U.S, ban on clove cigarettes..)
Indonesia is among the world’s five largest cigarette makers, besides China, India and the US, and the world’s largest kretek cigarette producer. Indonesian cigarettes make up 99 percent of the US market for the kretek product. Indonesia also exports tobacco and tobacco products to the EU (tobacco and cigars) and former Soviet Union countries, as well as other developing countries in Africa and Asia.
According to the ministry’s latest data, in 2008 unprocessed tobacco exports were worth US$151.02 million, while cigarette and cigar exports stood at $357.8 million.
The ministry has forecast tobacco exports will reach $401.7 million and cigarette and cigar exports will reach $1.06 billion by 2015, the data shows.
Warsono said he had yet to receive data on exports of tobacco and its products in 2009.
Meanwhile, the government is limiting the production of domestic cigarettes — only for sale in the domestic market — to promote public health over dangers of smoking.
The government’s limit on domestic cigarette production is set at 240 billion sticks by the end of this year — a decline from 245 billion sticks produced last year. The limit will eventually reach 260 billion sticks by 2015.
The government also has increased excise tariffs on cigarettes from Rp 65 per stick to a maximum of Rp 320 per stick, depending on whether they are hand-rolled or machine-rolled, to discourage people from smoking. The regulation came into force on January 1 this year.
The government also has increased import duties to 40 percent and has imposed 40 percent excise tariffs on imported cigarettes for the same reason.
Indonesian cigarette companies employ about 600,000 people with total sales revenues of more than Rp 800 trillion (about $8.8 billion) a year.
Reference: Rising anti-smoking policy hurting RI tobacco exports, Mustaqim Adamrah, The Jakarta Post, 4/12/2010.
Indonesia related news briefs:
Indonesia - launches formal dispute with WTO over U.S, ban on clove cigarettes..;
Indonesia - parents encourage 4-year old boy to continue smoking habit..;
Hemoglobin obtained from pigs may be used in cigarette filters..;
Indonesia - government may raise cigarette tax and cut cigarette output..;
Indonesia - Muhammadiyah-owned university students demonstrate against edict against smoking..;
Indonesia - kretek cigarette maker Gudang Garam's 2009 net profit jumps 84 percent..;
Indonesia - persons accused of eliminating clause designating tobacco as addictive..;
Indonesia - second largest Muslim organization launched a fatwa against smoking..;
Indonesia - RATIFICATION OF FCTC MAY RAISE INDONESIA'S BARGAINING POWER.. ;
Indonesia - 18 tons of illegal cigarettes destroyed..;
Indonesia - Government to limit cigarette production..;
Indonesia - BAT, Bentoel shareholders approve planned merger..;
Indonesia - another protest rejecting the new cigarette excise tax..;
Indonesia - workers from small cigarette producers protest excise tax increase..;
Indonesia - cigarette industry has pledged to stage a demonstration to protest a government plan to increase excise tax.;
Indonesia - the last paradise for a puff in Southeast Asia..;
Indonesia - trade minister officials want to meet with US counterparts to discuss ban on clove cigarettes..;
Indonesia - PT BAT Indonesia to merge with PT Bentoel International Investama Terbuka..;
Indonesia - missing tobacco regulation in approved Health Law..;
Indonesia - section on tobacco in health bill disappears..;
Indonesia - Constitutional Court by close vote rules that tobacco ads can continue..;
Indonesia - parent smoking can negatively affect the nutrition of children..;
Indonesia - new council member suspect in cigarette fraud case..;
Indonesia - an NGO commission assists cigarettes must be banned in films..
Indonesia - a paradise for tobacco companies..
Indonesia - after buying cigarettes very little left for food..;
Indonesia - will they ratify the first world public health treaty..;
Indonesia - last paradise to smoke in public places in Southeast Asia..;
Indonesia - Industry minister to close tobacco to new foreign investment..;
Indonesia Finance Ministry to cap tax deductions for tobacco companies..;
Indonesia - Smoking hits poor families the hardest, making the poor even poorer..;
Indonesia - Cigarette makers defy crisis, grows stronger..;
Indonesia - government may raise cigarette excise tax next year..;
WHO - Indonesia is crying out for your help..;
Indonesia - dispute with U.S. over banning the use of clove in cigarettes..;
Indonesia 'cash cow' for Philip Morris International..;
Tobacco industry has long targeted young people as "replacement smokers";
Indonesia - district court dismisses request to ratify FCTC..;
Asean Countries - Tobacco Industry Blocking Global Treaty On Tobacco..; Indonesia - farmers hold rally protest tobacco controls..;
Indonesia - tobacco farmers reject Islamic council's edict..;
Indonesia - Ulema Council - debate results is split on smoking..;
Indonesia - Withdraw Sponsorhip of Another Rock Concert..;
Indonesia to increase tax on tobacco products..;
Semarang, Indonesia - Cigarette Smoking Areas to be Prepared..;
Jakarta, Indonesia - Malls help enforce non-smoking ban..;
Indonesia - federal anti-smoking laws in one year - MAYBE..;
Indonesia - NGO's (non-government organizations) Demand the Government Ratify WHO's FCTC.;
Indonesia to raise cigarette tax by 6 to 7% in 2009..;
Surabaya, Indonesia - anti-smoking bylaw 10/2009 - FOR REAL??
Indonesians smoking more than ever before..;
Indonesia further rise in the excise tax would hurt the cigarette industry..;
Alicia Keys - Jakarta Concert (July 31st) tobacco companies forced to withdraw sponsorship.. and
Most Indonesians support moves to ban tobacco advertisements...
Read more...
Indonesia - launches formal dispute with WTO over U.S, ban on clove cigarettes..
April 13, 2010 - Indonesia is launching a formal dispute at the World Trade Organization (WTO) against the United States over a U.S. ban on clove-flavored cigarettes, an official at Indonesia's WTO mission said on Monday, April 12th.
Back on June 19, 2009 we reported that Indonesia, the largest maker of clove cigarettes, may complain to the WTO about U.S. legislation that gives regulators expanded powers to regulate tobacco products, including possible bans on flavors such as clove but NOT menthol..
Directly related news briefs:
FDA regulations ban on clove cigarettes Indonesia may protest to WTO - background information provided..;
Indonesia - dispute with U.S. over banning the use of clove in cigarettes..;
Public health experts are questioning why menthol flavoring in cigarettes, received special protection as Congress tries to regulate tobacco for the..
Under WTO rules, the two countries now have 60 days to resolve their differences through consultations, otherwise Indonesia can ask the WTO to create a panel of experts to rule on the issue.
The case is only the fifth brought at the WTO by Indonesia, the world's 21st biggest exporter.
Kretek cigarettes account for the bulk of tobacco consumption in Indonesia, the world's fifth biggest tobacco market, although unflavored or "white" sticks are gaining in popularity.
Indonesian exports of cigarettes and cigars totaled $357.8 million in 2008, the last year for which data is available.
Only relatively small numbers of kretek cigarettes are exported, and anecdotally they are coveted by young people in the United States who see them as an alternative to more conventional brands.
Foreign tobacco producers, keen to gain a bigger share of expanding markets for cigarettes in emerging economies, have been buying up Indonesian manufacturers to acquire kretek brands and expertise and build on the potential for white stick sales.
Last June, the world's No. 2 cigarette maker, British American Tobacco, bought an 85 percent stake in Indonesia's fourth largest cigarette maker by volume, PT Bentoel Internasional Investama.
Philip Morris International acquired the majority of Hanjaya Mandala Sampoerna in 2005. Other Indonesian manufacturers include Gudang Garam and unlisted conglomerate Djarum
Reference: Indonesia takes U.S. to WTO over clove cigarette ban, Jonathan Lynn GENEVA (Editing by Michael Roddy and Peter Cooney), 4/12/2010.
Indonesia related news briefs:
Indonesia - parents encourage 4-year old boy to continue smoking habit..;
Hemoglobin obtained from pigs may be used in cigarette filters..;
Indonesia - government may raise cigarette tax and cut cigarette output..;
Indonesia - Muhammadiyah-owned university students demonstrate against edict against smoking..;
Indonesia - kretek cigarette maker Gudang Garam's 2009 net profit jumps 84 percent..;
Indonesia - persons accused of eliminating clause designating tobacco as addictive..;
Indonesia - second largest Muslim organization launched a fatwa against smoking..;
Indonesia - RATIFICATION OF FCTC MAY RAISE INDONESIA'S BARGAINING POWER.. ;
Indonesia - 18 tons of illegal cigarettes destroyed..;
Indonesia - Government to limit cigarette production..;
Indonesia - BAT, Bentoel shareholders approve planned merger..;
Indonesia - another protest rejecting the new cigarette excise tax..;
Indonesia - workers from small cigarette producers protest excise tax increase..;
Indonesia - cigarette industry has pledged to stage a demonstration to protest a government plan to increase excise tax.;
Indonesia - the last paradise for a puff in Southeast Asia..;
Indonesia - trade minister officials want to meet with US counterparts to discuss ban on clove cigarettes..;
Indonesia - PT BAT Indonesia to merge with PT Bentoel International Investama Terbuka..;
Indonesia - missing tobacco regulation in approved Health Law..;
Indonesia - section on tobacco in health bill disappears..;
Indonesia - Constitutional Court by close vote rules that tobacco ads can continue..;
Indonesia - parent smoking can negatively affect the nutrition of children..;
Indonesia - new council member suspect in cigarette fraud case..;
Indonesia - an NGO commission assists cigarettes must be banned in films..
Indonesia - a paradise for tobacco companies..
Indonesia - after buying cigarettes very little left for food..;
Indonesia - will they ratify the first world public health treaty..;
Indonesia - last paradise to smoke in public places in Southeast Asia..;
Indonesia - Industry minister to close tobacco to new foreign investment..;
Indonesia Finance Ministry to cap tax deductions for tobacco companies..;
Indonesia - Smoking hits poor families the hardest, making the poor even poorer..;
Indonesia - Cigarette makers defy crisis, grows stronger..;
Indonesia - government may raise cigarette excise tax next year..;
WHO - Indonesia is crying out for your help..;
Indonesia - dispute with U.S. over banning the use of clove in cigarettes..;
Indonesia 'cash cow' for Philip Morris International..;
Tobacco industry has long targeted young people as "replacement smokers";
Indonesia - district court dismisses request to ratify FCTC..;
Asean Countries - Tobacco Industry Blocking Global Treaty On Tobacco..; Indonesia - farmers hold rally protest tobacco controls..;
Indonesia - tobacco farmers reject Islamic council's edict..;
Indonesia - Ulema Council - debate results is split on smoking..;
Indonesia - Withdraw Sponsorhip of Another Rock Concert..;
Indonesia to increase tax on tobacco products..;
Semarang, Indonesia - Cigarette Smoking Areas to be Prepared..;
Jakarta, Indonesia - Malls help enforce non-smoking ban..;
Indonesia - federal anti-smoking laws in one year - MAYBE..;
Indonesia - NGO's (non-government organizations) Demand the Government Ratify WHO's FCTC.;
Indonesia to raise cigarette tax by 6 to 7% in 2009..;
Surabaya, Indonesia - anti-smoking bylaw 10/2009 - FOR REAL??
Indonesians smoking more than ever before..;
Indonesia further rise in the excise tax would hurt the cigarette industry..;
Alicia Keys - Jakarta Concert (July 31st) tobacco companies forced to withdraw sponsorship.. and
Most Indonesians support moves to ban tobacco advertisements...
Read more...
Prohibit the sale of inexpensive machine-made cigars.
As part of the rule.. Prohibits the sale of cigarette packages with less than 20 cigarettes..
But an even more important rule would be to Prohibit the sale of inexpensive (cheap, low priced) cigars sold individually (single, loosies) at convenience stores and gas stations. Such cigars are often marketed in youth-friendly flavors such as cherry, apple and lime and are sold for as little as 80 cents to $1. (John Middleton challenges ban on single cigar sales..)
Kathleen Dachille, Director of the Center for Tobacco Regulation at the University of School of Law: Studies have shown that the cigars have become increasingly popular among young people in predominantly black communities and can be a gateway to a lifelong cigarette habit. Many young people smoke cigars for the tobacco, but they can also be easily hollowed out and filled with marijuana. She said requiring that cigars be sold in packs of five will raise their price enough to deter some young people, who will also balk at having to keep and store the packs. If we can prevent children from initiating smoking with a very popular attraction, we may prevent a tobacco user from becoming addicted. (John Middleton challenges ban on single cigar sales..)
John Middleton Co., operating company of Altria Group Inc., Black & Mild is the most popular brand of cigars for smokers 12 and older. Nearly a quarter of 18- to 24-year-old blacks in the Baltimore area smoke B&M cigars.
Black & Mild increased its retail share, in 4th quarter 2009, of the machine made large cigar category by 1.2 share points to 30.6%. (Highlights - Altria - Q4 2009 Earnings Conference Call and more..)
The FDA Principle Deputy Commissioner, Dr. Joshua M. Sharfstein: When the Baltimore city's health commissioner noted that a new rule makes cigar sales consistent with the regulations requiring cigarettes be sold in packs of 20. Sharfstein - “These cigars pose every bit of the risk that cigarettes do”. The city’s code authorizes the health commissioner to abate nuisances, which Baltimore Mayor Sheila Dixon said is defined as “any health or safety hazard.” (Baltimore, MD bans inexpensive single cigar sales..)
For further information on the importance of probibiting the sale of individual (single) inexpensive cigars refer to with Dr. Sharfstein.
Some related news briefs:
Part 2: avoidance of nicotine addiction - remove the flavoring from all tobacco products..;
Baltimore, MD bans inexpensive single cigar sales..;
John Middleton challenges ban on single cigar sales..;
Tennessee - steps up enforcement banning sale of single cigarettes..;
October 1, 2008 - District of Columbia cigarette excise tax will increase from $1 to $2..
Ohio youth are using cigars and smokeless tobacco products and it is a continuously growing problem..
Read more...
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