From Complicity in Cigarette Smuggling to Promoting so-called Solutions

The Protocol to Eliminate Illicit Trade in Tobacco Products (text here) will enter into force on 25 September 2018. It builds on Article 15 of the WHO Framework Convention on Tobacco Control (WHO FCTC). It provides for measures to prevent illicit trade (secure supply chain by licensing, due diligence, record keeping, and comprehensive tracking and tracing), and to promote law enforcement as well as mechanisms for international cooperation (information sharing, mutual legal and administrative assistance, and extradition). The WHO FCTC’s general obligation to protect against the commercial and vested interests of the tobacco industry (Article 5.3) applies to the Protocol.  Furthermore, Parties may require the tobacco industry to bear any costs associated with a Party’s obligations to achieve the objectives of the Protocol, in compliance with WHO FCTC Article 5.3. The Protocol itself requires Parties to be transparent on their tobacco industry interactions with respect to tracking and tracing, non-delegation to the tobacco industry of track and trace obligations, and limiting interactions with the industry only to the extent strictly necessary for implementation. As preparations for the first session of the Meeting of the Parties to the Protocol (MOP1) (listed here) draws near,[1] concrete measures to protect the Protocol and any policies relating to illicit tobacco trade must be on hand. The first step is to identify the tobacco industry and its tactics, most prominently illustrated in the promotion of its track and trace system. Tobacco Industry’s Complicity in Smuggling The tobacco industry’s own internal documents and other evidence had sparked investigation and lawsuits around how the top transnational companies were fueling the illicit supply of cigarettes. In 2001, the International Consortium of Investigative Journalists (ICIJ) revealed that major tobacco multinational companies such as British American Tobacco (BAT), Philip Morris International (PMI), and RJ Reynolds had orchestrated smuggling networks in all major regions (Africa, Canada, China, Colombia, Europe, Middle East, Southeast Asia, and the United States) in order to increase profits. Canada, Columbia, Ecuador, the European Union as well as Belgium, Finland, France, Germany, Italy, the Netherlands, and Spain have joined suits against alleged fraud and smuggling of the tobacco industry. [1] MOP1 is set to be held in Geneva, Switzerland on 8-10 October 2018.

“The investigation by the Center’s International Consortium of Investigative Journalists is based on a review of thousands of pages of corporate and government documents and dozens of interviews with law enforcement officials, smugglers, and other sources worldwide. It indicates that tobacco smuggling is increasingly dominated — often with the knowledge and consent of the tobacco companies — by a handful of criminal organizations that in some cases have links to organized crime. The Italian Mafia in Western Europe, East European gangs, Triads in Asia, drug cartels in Colombia, and motorcycle gangs and the American mafia in North America all have become entrenched in the game. Licensed distributors for the manufacturers feed these organized crime syndicates billions of cigarettes worldwide, often with corporate knowledge.”  Source: ICIJ

Track and Trace Systems Developed by the Tobacco Industry PMI developed Codentify and licensed it for other transnational tobacco companies. Ultimately, the major tobacco transnational companies BAT, PMI, Imperial Tobacco, and Japan Tobacco International (JTI) banded together as Digital Coding and Tracking Association (DCTA) to promote Codentify to governments. Codentify was eventually sold to digital company Inexto. The tactic is to push for common standards on track and trace systems that would promote the implementation of Codentify in place of tax stamps. Companies linked with the tobacco industry and the development of Codentify, such as Arjo, FATA, Domino, FractureCode, Atos, and Essentra, have formed the Coalition Against Illicit Trade (CAIT), which promotes “industry operated solutions.” Two other international business organizations known to promote the same are the International Chamber of Commerce and the Business Action to Stop Counterfeiting and Piracy. Smuggling Research Funded by PMI Impact Systematic research has shown that tobacco industry-funded studies on illicit trade are grossly overestimated and framed to discourage tobacco tax increases. As the Protocol negotiations progressed, the number of tobacco industry-funded research also increased. In 2016, PMI launched a $100M global initiative to support “projects dedicated to fighting illegal trade and related crimes, such as corruption, organized crime and money laundering.” The initiative was viewed by the tobacco control community as a public relations stunt to wash off the industry’s history of contributing to illicit trade. Various public organizations, law enforcement agencies, private entities, and non-government organizations were invited to submit proposals and the first round of approved projects was published online (see Table B). Organizations/ Companies with Known Tobacco Industry Links

a. Organizations/ Companies Linked with Codentify

Digital Coding and Tracking Association (DCTA) An association based in Switzerland, DCTA is comprised of tobacco transnational tobacco companies (i.e., BAT, PMI, JTI, Imperial Tobacco, among others). It was created to promote Codentify to governments.
Coalition Against Illicit Trade (CAIT) A global coalition of businesses, including tobacco companies, CAIT promotes an “industry operated solution”; 6 of its 7 members are linked to the tobacco industry (Arjo, FATA, Domino, Fracture Code, Atos, Essentra).
Arjo Solutions Like Inexto, Arjo Solutions belongs to the French conglomerate Impala; CAIT member.
Atos A French digital services company involved in Codentify’s development, Atos promoted Codentify in Asia and Lithuania; CAIT member.
Domino A UK filters and security packaging company that has worked with the tobacco industry for 65 years; CAIT member.
Essentra A UK filters and security packaging company that has worked with the tobacco industry for 65 years; CAIT member.
FATA Logistic Systems FATA is an Italian logistics and transport company associated with development and promotion of Codentify; CAIT member.
FractureCode A Danish company that offers digital solutions including Codentify; reportedly used by BAT to promote Codentify in Africa (Kenya, Mauritius, and Uganda); CAIT member.
Inexto A French software provider, Inexto is part of the French conglomerate/ parent company, Impala, which purchased Codentify from DCTA.

Note: The information in this table is drawn from Gilmore, Gallagher, and Rowell’s peer-reviewed article published in Tobacco Control journal in 2018.

bOrganizations funded under PMI Impact

COUNTRIES ORGANIZATIONS Geographic Scope / *Topics Beyond Cigarette Smuggling Research
Albania Kazazi Consulting Bordering countries with Albania
Belarus Belbrand Belarus, Eurasian Economic Union, and European Union
Belgium PMO CVBA  
Bulgaria Center for the Study of Democracy Bulgaria, Greece, Italy, and Romania; *corruption risk assessment
Institute for Market Economics  
University of National and World Economy  
Croatia The Institute of Economics, Zagreb Balkan countries
Estonia Civitta Eastern Europe
France ADIT  Pan-European
Germany Kiel University  
Greece Hellenic Coast Guard *Procurement of boats
Italy Intelligence Culture and Strategic Analysis (ICSA) Foundation  
Research Centre on Security and Crime (RiSSC) *Drugs, digital market/ dark net
Siracusa International Institute (SII) Southeastern Europe; *training of judges, prosecutors, law enforcement, and customs officers
Transcrime Eastern Europe, Middle East & Africa (EEMA)
University of Palermo Mediterranean routes; *human trafficking
Lithuania Information Technologies Application (INTA) *Training program for x-ray scanners
Lithuanian Free Market Institute Czech Republic, Estonia, Latvia, Lithuania, Poland, and Sweden
Poland Institute of Law Studies of the Polish Academy of Sciences  
Romania Romanian Police Moldova, Serbia, Ukraine; *procurement of equipment, training
  Southeast European Law Enforcement Center (SELEC) Albania, Bosnia and Herzegovina, Bulgaria, Hellenic Republic, Hungary, Macedonia, Moldova, Montenegro, Romania, Serbia, and Turkey
Slovak Republic GLOBSEC *Global criminality and terrorism
Spain GTD (branches in Africa, France, Germany, and United Kingdom) *Development of systems
Switzerland Cross-border Research Association  
United Kingdom KPMG European Union, Norway, and Switzerland
  Panta Rhei Research Limited Company Europe; *criminality and terrorism
  Royal United Services Institute (RUSI) *Terrorist financing
  Turtle Group Consulting Italy; *narcotics, weapons, terrorism
  Oxford Economics  
United States BOTEC Analysis European Union; *includes e-cigarettes
California State University, Long Beach Research Foundation *Digital markets and Internet
Note: In January 2018, Utrecht University decided not to accept PMI IMPACT funding for its research and announced that its research will continue but will be funded by the University itself.

Provisions of the Protocol relating to the Tobacco Industry

Article 2Relationship between this Protocol and other agreements and legal instruments
  1. The provisions of the WHO Framework Convention on Tobacco Control that apply to its protocols shall apply to this Protocol.
Article 4General Obligations
  1. In implementing their obligations under this Protocol, Parties shall ensure the maximum possible transparency with respect to any interactions they may have with the tobacco industry.
Article 8 – Tracking and Tracing
  1. Obligations assigned to a Party shall not be performed by or delegated to the tobacco industry.
  2. Each Party shall ensure that its competent authorities, in participating in the tracking and tracing regime, interact with the tobacco industry and those representing the interests of the tobacco industry only to the extent strictly necessary in the implementation of this Article.
  3. Each Party may require the tobacco industry to bear any costs associated with that Party’s obligations under this Article.
Article 36 – Financial Resources Parties may require the tobacco industry to bear any costs associated with a Party’s obligations to achieve the objectives of this Protocol, in compliance with Article 5.3 of the WHO Framework Convention on Tobacco Control.