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Tobacco

The revision of the Tobacco Products Directive: A chance to deal a body blow to Big Tobacco in 2021?

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In a study published on 6 January, scientists from King’s College London have finally put to rest the myth that smokers enjoy a degree of protection from COVID-19. Their research was clear: smokers who contract the novel coronavirus are more likely to suffer severe symptoms than non-smokers, and are twice as likely to end up in hospital. However, despite the whopping 209 million smokers in the wider European region (29% of total population), governments seem to have done precious little to ruffle the feathers of the tobacco industry throughout 2020. Will 2021 be different, writes Louis Auge.

Early signs are not looking great. A report published in late November by a coalition of NGOs looking at 57 countries warned that the tobacco industry managed to capitalise on governments’ preoccupation with the Covid-19 pandemic to further their agendas and curry favour with regulators. Many European countries figure either near the bottom of the list (Romania) or have opted for light-touch regulations (Germany, Spain), much to the disservice of public health. According to the NGOs, Big Tobacco used a mix of tactics to achieve its objectives, such as donating medical equipment, hiring former public officials or aggressively lobbying for its heated tobacco products.

However, with the upcoming revision of the EU’s Tobacco Products Directive (TPD) – slated for later this year – member states can wield the renewed interest that the coronavirus pandemic has sparked in efficient public health policies to set the record straight. While the regulatory fight is set to be a messy one, one arena has emerged in recent months as the leading candidate that could deal a blow to Big Tobacco’s stranglehold: the parallel tobacco trade.

A tale of two trades

The parallel tobacco trade refers to the act of purchasing cigarettes in a different country to that in which they are smoked. Thanks to price differences between neighbouring EU members, lucrative shadow markets have popped up all over the continent, contributing to the high prevalence of smoking and costing governments billions in lost tax revenue.

While the tobacco industry has long tried to deflect attention from the problem, by commissioning studies from KPMG (that have been exposed as relying on falsified data and faulty methodologies) to argue the phenomenon is caused by an increase in counterfeit cigarettes, the reality is much simpler. It is the tobacco companies themselves that oversupply certain countries so that smokers residing in areas with higher cigarette prices can benefit from lower prices. In Luxembourg, for example, customers who do not live in the country buy 80% of all cigarettes sold there.

A spate of recent scandals in France has put the parallel tobacco trade back on the agenda of the European Union. In late December, French MP François-Michel Lambert launched a suit against Philip Morris International (PMI) for their role in the parallel trade, in a case that could have severe repercussions for the tobacco giant. Next, in early January, the French ‘Association of Angry Tobacconists’ (ABEC), announced that they had filed a complaint in Brussels against tobacco price differentials between member states.

They have a point. According to statistics, the French smoke 54 billion cigarettes every year, but only purchase 38 billion from the 24,000 tobacconists who make up their official tobacco sales network. This means that 16 billion cigarettes smoked in France come from across the border. Half of these smokes can be traced to France’s immediate neighbours - Belgium, Luxembourg, Germany, Italy, Spain, Andorra - which all have lower tobacco taxes and entice smokers with lower prices.In reaction, the deputy leader of the MoDem parliamentary group, Bruno Fuchs, has said he will table a bold law that would have far-reaching effects across the continent if passed. The proposed law calls for the strict implementation of a key part of the 2018 WHO Protocol to eliminate illicit trade in tobacco products. Specifically, Fuchs is demanding the setting up of country-by-country tobacco delivery quotas, pegged exclusively to domestic consumption, in order to prevent tobacco companies from oversupplying certain countries. The WHO protocol has already been ratified by 60 countries (and the EU), so it would just be a case of enforcing the letter of the treaty. And because this international document sits higher up in the pecking order of international law than European directives and national laws, that shouldn’t pose legal problems.

Fuchs’ crusade has found allies within the European Parliament, where two leading MEPs, Cristian Busoi and Michèle Rivasi, have long called for the strict implementation of the Protocol. According to them, the TPD is currently incompatible with the WHO document, as the main European countermeasure for the parallel trade, a tracking and tracing mechanism free of industry interference, has been infiltrated by companies with strong ties to Big Tobacco. In a joint webinar organized at the end of December, the two MEPs pointed to the fact that Article 15 of the TPD allows the tobacco industry to choose the companies mandated to store tracking and traceability data. In addition, manufacturers have the ability to choose the auditors who are supposed to control them and with whom they also maintain close relations.

Fuchs, Busoi and Rivasi clearly show that the political appetite for taking on Big Tobacco is alive and well in Europe, and the proven correlation between tobacco use and the novel coronavirus is yet another example of the devastating impact smoking has on the human body. Revising the TPD in 2021 in accordance with the WHO Protocol would actually kill two birds with one stone: it would be a boon for public health by leading to lower smoking rates across Europe, and deal a financial blow to the war chest Big Tobacco has used to stall meaningful regulations. It’s a no-brainer.

EU

Member states urged to do more to enforce new tobacco legislation

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Some member states are failing to implement an EU law which bans flavours being added to tobacco products, it has been claimed, writes Martin Banks.

It is alleged that, despite the near year-old EU legislation, some tobacco companies have continued to launch extra menthol style products.

The Tobacco Products Directive (TPD), applicable in EU member states, imposed a ban on flavoured tobacco products.

The Directive includes measures on e-cigarettes, flavourings, additives and packaging.

Cigarettes and RYO (roll your own) tobacco may no longer have flavours such as menthol, vanilla or candy that mask the taste and smell of tobacco. It is hoped the move will help deter young people from taking up smoking by banning cigarettes with a ‘characterising flavour’ other than tobacco.

Governments across Europe, though, have criticised tobacco companies for allegedly trying to get around the ban. Member states are known to be now investigating the issue but have yet to take any firm action.

The European Commission, in turn, has deferred to member states,arguing that it is up to national capitals to enforce the EU wide legislation.

The directive, introduced last May, aims to prevent “characterising flavours” in cigarettes to make them less attractive to children and help smokers quit.

Some governments,including Ireland say they want the European ban on menthol cigarettes strengthened to stop tobacco companies side-stepping it.

The Irish Health Service Executive says it is “actively investigating” tobacco companies over alleged breaches of the menthol cigarette ban. Irish health minister Stephen Donnelly says that the directive is “being reviewed at EU level” and he would strongly support any revisions to the directive that would ensure that the provision in relation to the menthol ban is “robust”.

An appeal against the EU law change was attempted by Philip Morris, the manufacturer of cigarette brands such as Marlboro, but it was rejected by the European Court of Justice.

A number of member states are reportedly actively investigating products in their markets produced by some companies including Japan Tobacco International (JTI) which anti-tobacco campaigners and rival tobacco companies claim is in breach of the Tobacco Products Directive (TPD). 

Japan Tobacco International, the maker of Silk Cut, says it is “confident that all our cigarettes and rolling tobacco are fully compliant in the EU.”

Countries with new brands are believed to include Austria, Czech Republic, Estonia, France, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, the Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain, Sweden and the UK.

A 2021 “management plan” by the European Commission’s SANTE directorate said that “After the menthol ban took effect in May 2020, several Member States started procedures on determining characterising flavours in tobacco products.” 

A Commission official told this site that the “rules for the procedures and workflow for the determination process are laid down in Commission Implementing Regulation (EU) 2016/779 of 18 May 2016.

“The Commission has recently approved the methodology to assist in the determination of the characterising flavours in tobacco products. This is an important element going forward.”

The official added, “The Commission also works on the coordination of the efforts taken by individual Member States as regards their national procedures.”

Several member states have reported some suspected tobacco products containing characterising flavours on their respective markets and a few EU countries have started national investigation procedures about which they also informed the Commission.

A JTI spokesperson told this site, “We do not sell or plan to sell cigarettes or rolling tobacco with characterizing flavors in the EU. These products have been banned since May 20, 2016 (with a derogation for cigarettes and rolling tobacco with a characterizing flavor of menthol that expired on May 20, 2020). Some of our cigarettes and rolling tobacco still contain very low levels of menthol.”

The spokesman said, “This is permitted under the law, provided that the use of such flavorings does not produce a clearly noticeable smell or taste other than one of tobacco – which they do not. We provided the EU authorities with information on the ingredients of these products prior to selling them on the market, ensuring full transparency. We are therefore confident that all our cigarettes and rolling tobacco are fully compliant in the EU.”

The EU has claimed an overall successful application of the TPD even though there are still banned products thought to be circulating.

A commission press release last year said, “Cigarettes and roll-your-own (RYO) tobacco products may no longer have characterising flavours such as menthol, vanilla or candy that mask the taste and smell of tobacco. In the case of products with more than a 3% market share (e.g. menthol), the ban will apply as of 2020.”

A source at the European parliament said, “It seems that some companies are taking advantage of the slowness by member states to act and continue to launch extra menthol style products.

“The Commission may be looking to ban or restrict more products but surely it first needs to address the enforcement issue and the gaps in the current TPD.”

Flavouring is prohibited also in filters, papers, packages, capsules or any technical features allowing modification of the smell or taste of the tobacco products concerned or their smoke intensity1. The TPD bans characterising flavours ‘other than that of tobacco’, meaning that it is ‘an added component that cannot be found in natural tobacco leaves’.

According to the WHO, the tobacco epidemic is one of the biggest public health threats the world has ever faced, resulting in more than 8 million deaths each year. More than 7 million of those deaths are the result of direct tobacco use while about 1.2 million are the result of non-smokers being exposed to secondhand smoke.

Moreover, the economic costs of tobacco use are substantial and include significant healthcare costs for treating the diseases caused by tobacco use as well as the lost human capital that results from tobacco-attributable morbidity and mortality.

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Alcohol

Commission publishes public consultation on the taxation of cross-border alcohol and tobacco purchases in the EU

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The Commission has launched a public consultation on the taxation of cross-border alcohol and tobacco purchases in the EU. Under current rules, excise duty on alcohol and tobacco bought by a private individual for their own use and transported to another EU country is only paid in the country where the goods were bought. This is the case even if they bring these goods into another member state.

For both alcohol and tobacco products, the misuse of cross-border shopping rules for private individuals is a source of concern for several EU countries due to lost revenues and the negative impact on the effectiveness of national public health policies. The current EU rules of cross-border shopping of alcohol beverages and tobacco products by private individuals are being reviewed to ensure that they remain fit for purpose to balance the objectives of public revenues and health protection.

This is particularly important in the context of the European Action Plan against Cancer since taxation plays a pivotal role in reducing alcohol and tobacco consumption, in particular when it comes to acting as a deterrent to stop young people from smoking and abusing alcohol. The public consultation aims to ensure that all relevant stakeholders have an opportunity to express their views on the current rules and how they might work in the future. It includes questions on the effects of the current system, along with possible changes. The public consultation is available here and remains open until 23 April 2021.

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Cigarettes

Illicit tobacco trade: Nearly 370 million cigarettes seized in 2020

EU Reporter Correspondent

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International operations involving the European Anti-Fraud Office (OLAF) led to the seizure of nearly 370 million illegal cigarettes in 2020. The majority of the cigarettes were smuggled from countries outside the EU but destined for sale on EU markets. Had they reached the market, OLAF estimates that these black market cigarettes would have caused losses of around €74 million in customs and excise duties and VAT to EU and member state budgets.

 OLAF supported national and international customs and law enforcement agencies from across the world in 20 operations during 2020, in particular providing vital information on the identification and tracking of lorries and/or containers loaded with cigarettes misdeclared as other goods at the EU borders. OLAF exchanges intelligence and information in real time with EU member states and third countries, and if there is clear evidence that the shipments are destined for the EU contraband market, national authorities are ready and able to step in and stop them.

OLAF Director-General Ville Itälä said: “2020 was a challenging year in so many ways.  While many legitimate businesses were forced to slow or halt production, the counterfeiters and smugglers continued unabated. I am proud to say that OLAF’s investigators and analysts played a vital role in helping to track and seize these illegal tobacco shipments, and that OLAF’s cooperation with authorities across the globe has remained strong despite the challenging conditions. Our joint efforts have not only helped save millions of euros in lost revenues and kept millions of contraband cigarettes of the market, they have also helped us get closer to the ultimate goal of identifying and closing down the criminal gangs behind this dangerous and illegal trade.”

A total of 368,034,640 cigarettes destined for illegal sale in the EU were seized in operations involving OLAF during 2020; of these 132,500,000 cigarettes were seized in non-EU countries (primarily Albania, Kosovo, Malaysia and Ukraine) while 235,534,640 cigarettes were seized in EU member states.

OLAF has also identified clear patterns with regard to the origins of this illicit tobacco trade: of the cigarettes seized in 2020, some 163,072,740 originated in the Far East (China, Vietnam, Singapore, Malaysia), while 99,250,000 were from the Balkans/Eastern Europe (Montenegro, Belarus, Ukraine). A further 84,711,900 originated in Turkey, while 21,000,000 came from the UAE.

The main cigarette smuggling operations reported by OLAF in 2020 involved collaborations with authorities in Malaysia and Belgium, Italy and Ukraine, as well as a number involving authorities from across the EU and elsewhere.

OLAF mission, mandate and competences

OLAF’s mission is to detect, investigate and stop fraud with EU funds.

OLAF fulfils its mission by:

  • Carrying out independent investigations into fraud and corruption involving EU funds, so as to ensure that all EU taxpayers’ money reaches projects that can create jobs and growth in Europe;
  • contributing to strengthening citizens’ trust in the EU Institutions by investigating serious misconduct by EU staff and members of the EU Institutions, and;
  • developing a sound EU anti-fraud policy.

In its independent investigative function, OLAF can investigate matters relating to fraud, corruption and other offences affecting the EU financial interests concerning:

  • All EU expenditure: the main spending categories are Structural Funds, agricultural policy and rural
  • development funds, direct expenditure and external aid;
  • some areas of EU revenue, mainly customs duties, and;
  • suspicions of serious misconduct by EU staff and members of the EU institutions.

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