british american tobacco p.l.c. sustainability report 2009 - Tackling illicit trade in Russia

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SUSTAINABILITY REPORT 2009
 

Within Russia, there are overall low levels of illicit trade; the share of contraband and counterfeit cigarettes is around 0.5 per cent of total consumption, which places Russia among the countries with the lowest levels of illegal tobacco products in the world.

However, because of a significant price gap between Russian tobacco products and those sold in the European Union (EU), the smuggling of Russian-made cigarettes in significant volumes into EU countries has become a serious problem. Legally produced products are smuggled into the EU, and criminal groups also try to manufacture products specifically for illegal export to EU countries.

British American Tobacco Russia runs an anti-illicit trade (AIT) programme structured around:

  • Raising with the Government the issues of tobacco illegal outflow from Russia to the EU, to promote anti-smuggling activities and make it part of the Russian law enforcement agenda; and
  • Providing support to law enforcement authorities to further restrict the low level of illicit trade within Russia.

As part of the programme, British American Tobacco Russia held AIT roadshows in Irkutsk, Khabarovsk and Ussuriysk. These are large transport hubs on the Russian-Chinese border and could be used as channels for Chinese-made counterfeit product. If a significant excise hike were to take place in 2010 then the flow of cheap Chinese fake cigarettes becomes a serious problem. During the roadshows, law enforcement officers learned about recent trends in production and smuggling of counterfeit cigarettes, and the main ways of identifying genuine versus fake products.

Shaping a more active Government approach to tackling illegal exports, including reallocating financial and human resources, is one of the key challenges in preventing tobacco illegal outflow from Russia to the EU. In 2009, through coordinated industry-wide advocacy, good progress was achieved:

  • In the opening speech at the Federal Customs Service Annual Intellectual Property Rights Workshop, the Deputy Head of the Service outlined tackling illicit exports from Russia to the EU as one of the key priorities;
  • Central Customs issued an internal order on intensifying customs control over the export of tobacco products from Russia to EU countries, including use of mobile X-ray inspection machines; and
  • At a British American Tobacco-sponsored AIT roundtable in Kaliningrad, a representative of the Federal Security Service announced that during the first half of 2009 more than one billion cigarettes were seized by Kaliningrad border guards.

The main focus for 2010 will be supporting Government activities to address illicit trade and providing law enforcement authorities with expert industry information to help them make more seizures of illicit product.