JTIP warns of more cigarette smuggling via backdoor during holiday season

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October 22, 2020

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Japan Tobacco International (JTI) has appealed to law enforcement agencies to intensify its anti-smuggling efforts in the country’s regions, particularly in Visayas and Mindanao, as more contraband cigarettes are expected to enter the country’s backdoor during the yuletide season.

JTI Philippines (JTIP) General Manager John Freda said key areas in Mindanao and Visayas have been traditional backdoor channels for illegal cigarettes and a series of seizures in the ports of Visayas and Mindanao over the past weeks are indicative that smuggling syndicates are stocking up.

Freda noted that in recent weeks, a series of seizures and interceptions were made by the anti-smuggling team of Bureau of Customs (BOC) in the ports of Cebu, Cagayan de Oro, Zamboanga and Davao.

In Cebu, the BOC hauled in a total of P148 million in illegal cigarettes during August alone followed by the interception of two containers filled with cigarette contraband worth P88.1 million in the first week of September. For the entire month of September, BOC Cebu destroyed a total of P180 million worth of smuggled goods, 36% of which were illegal cigarettes.

Bacolod, Iloilo and Tacloban in the Visayas have also encountered rising incidents of cigarette smuggling in the recent past.

In Mindanao, BOC teams intercepted some P96.6 million worth of illegally imported cigarettes in the port of Davao while destroying P50 million worth of illegal cigarettes in Cagayan de Oro, both happening in the first week of October.

Seizures were also recently conducted by law enforcement units in the port of Zamboanga where P1.5 billion of illegal cigarettes including raw materials were destroyed. 

Freda nevertheless lauded the series of successful operations made by the BOC and Bureau of Internal Revenue (BIR) in recent months as smuggling incidents became rampant amid the pandemic.

“I understand that for a country with so many islands like the Philippines, it is a huge challenge to control the problem, but the deterrents need to be stronger,” Freda said.

He said illegal tobacco trade is a growing problem in the country, which requires more government attention and “absolute vigilance.”

“Stiffer sanctions are required. We need to see people being caught and brought to justice in a way that deters others from being part of this criminal endeavor,” Freda said even as he reiterated his call for higher penalties and sanctions against tobacco smugglers to sharpen the deterrence.

He said more smuggling attempts are expected with increasing frequency during the yuletide months even with a quarantine in effect.

“Syndicates will surely try to cash in on this and compete with legal and tax-paying tobacco players as the pandemic drags on until Christmas and even beyond New Year,” Freda pointed out.

He stressed coastal borders and port cities in the Visayas and Mindanao must be put under tighter watch to thwart smugglers taking advantage of the current situation.

Freda likewise cited a JTI global study, which showed that organized criminal groups around the world are capitalizing on the COVID-19 pandemic to operate their illicit tobacco trade.

The JTI report, which covered 50 countries, also noted “a strong presence” of tobacco smugglers in the Philippines. JTI markets in the Philippines cigarette brands Winston, Camel, Mevius, Mighty and Marvels.

According to the JTIP GM, illegal tobacco trade is considered a lucrative business for criminals who make huge profits with very low risk of getting caught and “insignificant” penalties.

This deprives the government of collecting revenues, with both contraband and counterfeit cigarettes being smuggled without paying taxes.

According to the World Bank, the global trade in illegal tobacco is already worth an estimated $40 billion to $50 billion each year.

The government has also been confronted with a diminished collection from tobacco excise tax since the pandemic hit in early March.

The latest preliminary Department of Finance (DOF) data showed that the excise tax take from tobacco, e-cigarettes and alcohol amounted to P140.1 billion as of end-August, down 13 percent from P161.8 billion during the first eight months of last year.

From January to August, tobacco excise tax collections dropped to P95.7 billion from P111.3 billion a year ago, while those from alcoholic beverages declined to P44.4 billion from P50.5 billion a year ago.

The stringent COVID-19 quarantine from mid-March to May affected both the supply of and demand for alcohol and tobacco products as factories stopped production for the local market while movement of nonessential goods was restricted, including liquor bans imposed by some local government units to discourage social drinking.

At the height of the lockdown, illicit cigarette traders raked in as they took advantage of the dwindling availability of tax-paid cigarettes.

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