Smuggling of cigarettes into Pakistan

ASIM YAQOOB - Cigarettes have been smuggled into Pakistan as a means of creating brand awareness and loyalty to international brands, when import restrictions or high import taxes and customs fee prevent the Introduction of legally imported cigarettes. Brands smuggled into Pakistan fell into two types, international brands such as Dunhill, Marlboro.
In the early and mid-1990, smuggled brands were a major concern for PTC. Smuggled cigarettes have been referred to under a variety of terms such as general trade, transit and duty not paid. The main transit brand was Dunhill, then a Rothmans International brand, with Marlboro also making up a component of the transit market.
At the end of 1991, PTC estimated that transit brands accounted for 24% of the premium market, a market share that continued into 1996. During this period, PTC considered an inability to increase prices a key factor in its declining profitability. Cigarettes were smuggled into Pakistan through Afghanistan, a fact known by BATUKE since the mid-1980s.  In 1984, two documents by BATUKE and one by Singapura United Tobacco Limited (SUTL), a Singaporean manufacturer that supplied smuggled British American Tobacco (BAT) brands throughout Asia, assessed the status of smuggled brands into Pakistan.  The summary of the visit found that smuggled brands, including State Express, B&H, Dunhill, Marlboro and Kent, were being smuggled into Pakistan over the Afghan border.  The report suspected that unmarked brands arriving in Afghanistan from SUTL, were being passed into Pakistani market.
The three main entry points were Torkham along the Khyber Pass, Baiur, Suat, Mingora and Parachinar. However, PTC felt at this time that distribution out of the tribal areas was becoming wider and an emerging threat.
The general trade into Afghanistan from SUTL in December 1998 doubled from 64 million cigarettes to 112 million cigarettes compared with December 1988. The cigarette smuggling route into Pakistan from Afghanistan was outlined in a graphic that indentified two suppliers to the Afghani and Pakistani markets.
Along with SUTL, a supplier named Sarwar Bros shipped BAT brands into Torghundi and Hairatan in Afghanistan. The coordination of cigarette smuggling is also very important. In the 1991 BATUKE company plan, it was noted that the ‘Far East Area teams are developing domestic, duty free and general trade opportunities in Pakistan. In a 1992 assessment of new market opportunities in Pakistan, it was stated that the current transit from SUTL into Pakistan is estimated top be 255 million’ but wit increased import of liberalization and BATUKE local entry, that transit will stabilize around 100 million.
Beginning in 1992, BATUKE began a shift from simple knowing about smuggling form Afghanistan to Pakistan to actively managing it. A BAT and a SUTL reprehensive went to Pakistan for better understand the general trade market. In February 1992 they reported on their tour of four major general trade markets. Karachi, Quett, Lahore and Rawalpindi. At each site, wholesale prices for smuggled cigarettes were recorded, along with the popularity of BAT cigarettes relative to competitors. In Quetta, where cigarettes arrived form Torghundi, Afghanistan via Kandahar and Chaman, BAT and SUTL representatives met with major buyers and began negotiating with one in particular, identified as Hayatullah, to become the sole agent of transit brands into Afghanistan and Pakistan.
BAT has coordinated a smuggling operation into Afghanistan since at least 1984. It shipped smuggled cigarettes to Afghanistan through two overseas manufacturers, SUTL and Wesimex and possibly others. As widely reported, cigarette company documents show that Philip Morris and BAT each took steps to increase the smuggling of their brands into Venezuela as a part of price war that began when their prior price-fixing agreement broke down.
On the other hand the major tobacco companies have fought cigarette tax increases and other tobacco control measures by claiming they will spark massive increases in cigarette smuggling and black markets. But stories in The Wall Street Journal, The Guardian ands other media reveal that British American Tobacco (BAT), the world’s largest multinational tobacco company, has been supporting and profiting from the same cigarette smuggling schemes that tobacco claim are caused by policies to reduce tobacco use.
According to the article, UK regulators have find BAT $1.03 million for oversupplying cigarettes in to the low-tax Belgium market to be smuggled back into UK, where Tobacco Taxes are much higher. This tactic violates UK law. The tobacco companies long history of relying on the illegal sales of cigarettes has been documented in Africa, Asia, Europe, Middle East, South and Central American.
Tobacco companies have also knowingly supplied tobacco products used in cigarette smuggling operations by illegal drug traffickers seeking to launder money. Tobacco use in the world’s leading cause of preventable death. Tobacco killed 100 million people in the 20th century and is projected to kill one billion people in the 21st century unless governments act to prevent it.
Pakistani government authorities need to be more prudent with the matter of these in order to curb the illicit trade and impose heavy duties and fines on the MNC whose products are sold in the Pakistani markets through the umbrella of local representatives, smugglers.

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