OTTAWA – The black market, cross-country tobacco trade has created an underground economy Canadian authorities fear could be used to finance overseas terrorism, internal RCMP intelligence documents obtained by Canwest News Service show. The materials also indicate RCMP intelligence predicted the expansion of the underground tobacco trade shortly after the federal government shelved plans in the early 1990s to invade several Mohawk reserves. The government chose instead to lower tobacco taxes to undercut the financial incentive for smuggling.

The underground tobacco trade now spans the country, with authorities finding Mohawk-made cigarettes from Newfoundland to Vancouver Island, according to an RCMP intelligence analysis from 2008.

Black market tobacco also greases an underground economy in Canada worth hundreds of millions of dollars, supplying money for a range of illegal enterprises that could include terrorism, according to an RCMP Quebec division intelligence report for January and February 2008, obtained under the Access to Information Act

“By offering tobacco products at a better price, smugglers stimulate an underground economy within which its profits could be used to finance illegal activities,” said the report. “These activities [include] the smuggling of drugs and firearms, the financing of terrorism, money laundering, among others.”

The RCMP claim 105 crime groups are involved, at different levels, in the illegal tobacco trade.

Police, however, have not yet found firm links between tobacco and terrorism, said RCMP Sgt. Michael Harvey, who works out of Cornwall, Ont., on the doorstep of Akwesasne, a Mohawk reserve straddling the Canada-U.S. border that sits about 100 kilometres west of Montreal.

Sgt. Harvey said police traced money made by a Middle Eastern group from the purchase and reselling of Akwesasne-made cigarettes to a Middle Eastern country. What the money was used for remains unclear and the investigation is ongoing, he said.

Asian groups have also been traced sending home money made off illicit cigarettes, he added.

Illegal cigarette factories on the U.S. side of Akwesasne supply the majority of tobacco contraband in Canada, authoritiessay. Foreign-made cigarettes, including Chinese, are also present.

A source involved in the Mohawk tobacco trade said the RCMP are using the word terrorism to justify another attempt against Mohawk sovereignty.

“The cigarette trade is our economy. It has decreased the crime rate with the aboriginal population. It has employed people and it is part of our inherent rights,” said the source.

The RCMP compare the current situation with what it faced in the early 1990s during rampant tobacco smuggling fuelled by high Canadian taxes.

In response, authorities planned a major operation targeting several Mohawk communities including Akwesasne, along with Kahnawake and Kanesatake near Montreal. The Canada Security Intelligence Service, commandos from Joint Task Force Two, 2,000 RCMP, 2,000 Surete du Quebec and more than 2,000 Canadian Forces members trained for the operation dubbed Operation Campus and Operation Scorpion-Saxon, according to a recently published academic paper written by Timothy Winegard, an Oxford doctoral candidate who studies the relationship between the military and First Nations.

The threat of “bloodshed” and a “nationwide indigenous uprising” forced the shelving of plans, wrote Mr. Winegard, in his paper, The Forgotten Front of the Oka Crisis: Operation Feather/Akwesasne, published in the Fall-Winter 2009 edition of the Journal of Military and Strategic Studies.

But the cigarette war was far from over.

Smugglers, adjusting to lower margins caused by lower taxes, expanded across Canada and diversified their smuggling, a 1996 RCMP intelligence analysis said.

“As predicted, this reduction in smuggling was short lived,” said the analysis. “Smuggling networks have become so deeply entrenched that they will transport and distribute any commodity that will result in profit.”

As taxes creep up, the RCMP continues to make noise. But it’s doubtful anything will change. The cost of shutting down the trade remains too high for both Canada and the U.S., says Mr. Winegard.

“Both governments recognize the potential for immediate and prolonged violence, not only within Mohawk territory, but with the possibility of it spreading to other First Nations communities,” Mr. Winegard said.

“An unofficial, status-quo remains in place.”

nationalpost.com, June 14, 2010

“In May, observers believed growers were generally taking the optimistic approach, planting acreages close to or equal to last year.” Tobacco growers faced a tough marketing reality as they transplanted their 2010 crop. Contracts from buyers were down substantially from 2009, and it wasn’t clear how much leaf could be sold without a contract.
The choices were:
• Play it safe and plant less.
• Plant some tobacco without a contract and take a chance a market to sell uncontracted tobacco will materialize.
In May, observers believed growers were generally taking the optimistic approach, planting acreages close to or equal to last year.

“We are looking at cuts in contracts of about a fifth, but farmers here seem to be planting about the same amount as last year,” says Hassel Brown, East Bend, N.C., which is near Winston-Salem. “We are going to have to be resourceful in selling this crop.”

One leaf dealer, Rick Smith of Independent Leaf in Wilson, N.C., estimated in May that there will be about 50 million pounds of flue-cured tobacco grown off contract.

“We would expect about 400 million pounds of flue-cured based on what the companies contracted,” says Smith. “But it is probably going to be closer to 450 million pounds.”

If there is a bumper crop this fall, there is going to be a problem, says Smith. But he thinks a big crop would still get sold.

“There are a lot of pounds floating around without a contract,” he says. “But I don’t expect farmers will have to store it. It will enter the trade at some price.”

Roger Quarles, president of the Burley Tobacco Grower’s Cooperative Association and a Georgetown, Ky., burley grower, thinks burley contracts are down at least 15 percent. “It may be more,” he says. “That indicates a lot of off-contract tobacco.”

By Quarles’ calculation, we might be looking at 30 to 40 million pounds of wildcat burley, roughly twice as much as last year.

“But I don’t think that is reason for panic,” he says. “We had off-contract tobacco in 2009, and it appears all of it got sold.”

Will Snell, Kentucky Extension agricultural economist, believes burley production might be down more than appeared on the surface.

“My best guess, and it is simply a guess, is that we are down 20 to 25 percent in burley contract pounds,” he says. “The March burley planting intentions report indicated a 4 percent cut beltwide. I would expect actual plantings to drop more, probably in the neighborhood of 10 percent. If a good crop materializes, that would result in a buyers’ market, especially for non-contract pounds.”

That contracting for the 2010 crop is down should not surprise us, says Blake Brown, North Carolina State University Extension economist.

“It reflects what is going on in the retail market in the developed markets. We are seeing more tax increases on tobacco products and more adoption of the World Health Organization protocols on tobacco.”

The atmosphere for tobacco in all the developed markets is relatively hostile right now, and developed countries are where U.S. tobacco generally goes.

Just a few months ago, the outlook for U.S. exports this year seemed more promising.

“We thought we were okay in exports,” Brown says. “The exchange rate was considered favorable, and the price of our tobacco was low relative to Brazil, our chief competitor.”

Those factors remain in effect, and there is some reason for optimism. “The domestic tobacco companies have been using more tobacco than they have bought for several years, which means they have been pulling their inventories down,” says Brown. “If a high-quality crop could be produced, as it was last year, the companies might choose to buy more than planned.”

A few auction warehouses remain from the old days, and they could take some of the excess tobacco off the market.

Five auction warehouses for burley operated in Kentucky in 2009, and there may be one or two more this year, says Quarles.

“The auction system here worked very well in 2009,” says Quarles. “Farmers had good luck selling their tobacco at auction, and that has encouraged them to think they can plant without contracts. But remember — there is no guarantee the system will work this well again.”

One auction for flue-cured is expected to operate in 2009, in Wilson, N.C.

In addition, there is one new leaf-marketing vehicle. At the beginning of the year, Quarles’ cooperative formed a new corporation called U.S. Growers Tobacco Company (USGTC) which accepts, processes and stores the tobacco of participating farmers until prices become favorable.

The farmer receives no payment on delivery but receives all the eventual payment, minus 10 cents per green pound for the services, and normal storage and processing charges.

“Farmers retain ownership of the tobacco until it is sold,” says Quarles.

USGTC began accepting tobacco after the regular sales season ended in February, and Quarles says the corporation has already sold much of its take from the 2009 crop.

“We have sold our higher-graded tobacco,” he said in May. “We still have some of the lower quality grades. Buyers are looking at it.”

USGTC accept all types, and a little more than half of what it took in was flue-cured.

Quarles believes the corporation, which served a bit like the old stabilization pools, had a positive effect on the price.

“We are sure that simply because USGTC was there, the overall market average was raised a little.”

However this crop gets sold, Quarles isn’t panicking. “All farm commodities go through market fluctuation,” he says. “Tobacco is just another commodity.”

June 8, 2010, by southeastfarmpress.com

Exactly one year ago this month, the Family Smoking Prevention and Tobacco Control Act was signed into law by President Barack Obama. This act gives the Food and Drug Administration unprecedented authority to regulate tobacco like any other consumer product. Big Tobacco has been the most unregulated consumer product on the market, but this new law removed those special protections. Why should we care? Because every day, 3,500 kids try a cigarette for the first time.

A year later, we are starting to see results of the act.

Candy flavorings that appeal to youths are no longer allowed to be added to cigarettes.

Mild, light and low-tar adjectives are banned.

Tobacco sponsorship of sporting events has been banned.

Locally, the North Texas community is taking action with the North Texas Coalition Against Tobacco to educate about the dangers of tobacco use.

This coalition also encourages smoke-free ordinances to be adopted by cities in our area.

I want to thank Congress, Obama and the public health community for standing up to Big Tobacco and fighting to make this landmark legislation.

June 8, 2010, by dallasmorningviewsblog.dallasnews.com

National’s Tau Henare says tobacco company Philip Morris may be forced to appear before the Maori Affairs select committee’s inquiry into the tobacco industry. British and American Tobacco have previously fronted but Henare, who chairs the committee, told the Sunday Star-Times that Philip Morris had refused. “It’s about respect for the constitutionality of the Parliament. We make laws, we get rid of laws, and I think we deserve a bit of respect,” Henare said.

He wrote to the company last week warning it he will ask Parliament’s Speaker Lockwood Smith to issue a summons to force it to show up.

Under Parliament’s rules this is possible but is rarely used.

A spokeswoman for Philip Morris said the company “would consider the committee’s request to appear before it.”

June 7, 2010, tvnz.co.nz

June 06, 2010 – RICHMOND, Va. — Current Marlboro Lights cigarette consumers will have to get used to new lingo when asking for their brand of choice at tobacco retailers and convenience stores, as tobacco companies are adjusting labels and brands to conform to new U.S. Food and Drug Administration regulations going into effect June 22. The FDA ruled cigarette packs no longer can feature names such as “light,” “mild,” “medium” or “low,” as adult smokers may wrongly think are less harmful than their “full-flavor” counterparts, The Associated Press reported. Because of this, cigarette manufacturers are removing the wording and emphasizing the colors of the packs.

For example, what is today known as Marlboro Lights will be known as Marlboro Gold, and its Marlboro Menthol Milds will be known as Marlboro Menthol Blue Pack. Philip Morris USA, owned by Altria Group, made more than 150 packaging changes to comply with the new restrictions, according to the report. It also included inserts in packs and displays at retail locations telling customers, “In the Future, Ask For…” with identifiers of the new names or brands.

R.J. Reynolds Tobacco Co., made slight changes to some of its brands’ packs, but for some, it was simply removing the words like “light” on already colorful packages, the AP reported.

Customers may find asking for their new brand cumbersome.

“I’ll ask for Newport Light 100s, and I’ll let them decipher it,” 52-year-old Joe McKenna, a teacher and longtime smoker from Pearl River, N.Y., told the AP. McKenna’s brand, made by Lorillard Inc., is now known as Newport Menthol Gold. “It’s just kind of ridiculous in the sense that you know they’re harmful for you.”

Anti-tobacco advocates, though, say colors are just as bad as the words, the AP stated. Tobacco companies argue they have the right to let adult smokers know which products are which.

Companies insist the words tell smokers about the taste, feel and blend of a cigarette, not health risks. The cigarettes usually feature different filters and milder-flavored blends.

Studies show that about 90 percent of smokers and nonsmokers believe cigarettes described as “light” or have packages with certain colors are less harmful, David Hammond, a health behavior researcher at the University of Waterloo in Canada, told the AP.

Colors shape perceptions of risks on all products, Hammond said in the report, giving as an example mayonnaise and soda, which usually use lighter colors on packaging to distinguish between diet, light and regular products.

He called the removal of the words on cigarette packs “necessary, but not sufficient measures” to improve public health or reduce false perceptions.

“This is essentially mopping up the worst excesses of what the courts in the U.S. have judged to be deceptive advertising,” he told the AP. “Tobacco companies are going to need words to distinguish their brands; it’s just a question of identifying what descriptors or words lead to false beliefs.”

He suggested further restrictions on both colors and words such as “smooth” and “slim.”

But the tobacco industry argues that further packaging restrictions will cause confusion.

“Absent this information, massive confusion in the marketplace would result,” James E. Swauger, vice president of regulatory oversight for R.J. Reynolds Tobacco Co., wrote in a letter to the FDA. If the FDA were to ban colors, consumers wouldn’t be able to distinguish between brands, and manufacturers could be limited to one type of cigarette per brand, as they’d have no other way to distinguish their products, he wrote in the letter.

June 7, 2010, csnews.com

MANILA, Philippines – Lawmakers from tobacco-growing provinces in Northern Luzon criticized Health Secretary Esperanza Cabral for issuing an administrative order that compels local cigarette manufacturers to violate two pertinent national laws that govern the tobacco industry. Deputy House Speaker and Ilocos Sur second district Rep. Eric Singson said Cabral’s rule appears designed to make local cigarette makers, exporters, and importers defy Republic Act 9211, or the Tobacco Regulation Act of 2003; and Republic Act 9334, otherwise known as the Excise Tax Act of 2005.

The Philippines already has RA 9211, which mandates health warnings on cigarette packaging, Rep. Singson reminded Cabral. The Tobacco Regulation Act specifically states that “no other printed warnings, except the health warning and the message required in this section (Section 13)…shall be placed on cigarette packages.”

Cabral wants graphic health warnings printed on each pack of cigarette. She also called for the removal of so-called “descriptors” in every pack of cigarette, such as “lights.”

Singson said removing these modifiers would put the Bureau of Internal Revenue (BIR) in a difficult situation as descriptors such as the word “light” was allowed by RA 9334.
“How can Cabral, by mere executive order, amend an act of Congress?” he said.

Cabral’s administrative order also forces exporters to break the tobacco regulatory laws of countries importing cigarettes from the Philippines as they will be compelled to print graphic health warnings prescribed under Cabral’s administrative order.

Singson, president of the influential 39-member Northern Bloc, said Cabral’s administrative order encroaches into Congress’ power to make laws.

“We would like to remind the honorable secretary that it is only Congress which is empowered to pass legislation to flesh out an international treaty,” Singson said, insisting that “a mere administrative order would not suffice.”

For his part, La Union Rep. Victor Ortega, incoming head of the Northern Bloc, said it appears that Cabral is deliberately going against Congress on her issuance of the administrative order.

“There were several bills filed to amend RA 9211, including a bill to put graphic health warnings on tobacco packaging. Said bill was thoroughly discussed upon but was eventually rejected after a series of meetings and consultations by a congressional technical working group formed by the Committee on Health,” said Ortega. “And then there’s the matter of jurisdiction.”

Under RA 9211, the Inter-Agency Committee-Tobacco was created to have exclusive jurisdiction on matters involving cigarette packaging, advertising, sponsorship, public smoking, etc. On the other hand, Executive Order No. 245 (Series of 1987) grants exclusive jurisdiction to the National Tobacco Administration on matters relating to “production, standardization, classification, grading and trading of tobacco and tobacco products.”

“Today, there are specific agencies created under special laws already regulating the tobacco industry — from tobacco production to cigarette packaging. Clearly, the DOH Secretary went beyond her authority when she issued the administrative order. Cabral’s actions should be consistent with these special laws,” Ortega said.

“We want to avoid a situation where multiple agencies will exercise jurisdiction over the same issue, which will only lead to confusion,” he added.

June 7, 2010, philstar.com

A coalition of retailers wants government to take action against contraband tobacco, warning the new Harmonized Sales Tax (HST) will only fuel the problem they say is costing Ontario $1 billion a year in lost revenue. And the Canadian Cancer Society joined the Coalition Against Contraband Tobacco’s call for government action, but says the solution shouldn’t include any reduction in taxes. The coalition says a survey of cigarette butts found outside three high schools shows about 25% of London high school students who smoke are buying contraband tobacco sold by organized criminal gangs also smuggling weapons and drugs.

“The problem with these cheaper cigarettes is that probably more young people are going to smoke and that’s not in anybody’s interest in terms of health or taxes,” said Steve Tennant, vice-president of the Ontario Convenience Store Association.

“Tobacco taxes help pay for our hospitals and our schools. . . . When the HST comes in, that will just add fuel to a fire that’s already burning.”

Tennant also noted criminals selling contraband tobacco will sell to minors, unlike retail stores selling legal tobacco that are fined if they sell to minors. That only defeats anti-smoking initiatives, said Tennant.

Convenience stores are being hard-hit by the increase in the sale of contraband tobacco — not only through tobacco sales, but fewer smokers going in the stores means fewer purchases of other goods.

London NDP MP Irene Mathyssen endorsed the coalition’s call for more government action.

“Parents in our community are obviously concerned about the health of their children,” Mathyssen said in a news release. “Cheap contraband cigarettes continue to infiltrate our schools, leading to our kids getting hooked on smoking. This is a serious problem and one on which all levels of government need to work together to solve.”

Tennant said much of the contraband is smuggled through First Nations near the border after being manufactured and packaged in the U.S. with no government scrutiny or regulations, which could also pose a higher health risk.

Tennant said any discussion about cracking down on contraband must include First Nations, adding criminals, not First Nations governments, are selling the contraband tobacco. He said one of the solutions would be for First Nations to impose taxes they would keep that would drive up the prices of contraband, discouraging consumers.

Another solution, Tennant agreed, would be lowering tobacco taxes, making contraband less attractive to smokers.

The main thrust of the coalition is to get all levels of government, schools and enforcement agencies meeting to talk about how to tackle the problem.

“What we’ve got so far is a lot of finger-pointing between the federal and provincial governments and nothing is getting done,” Tennant said.

Rob Cunningham, senior policy analyst with the Canadian Cancer Society, said decreasing taxes is not the solution, but agreed contraband tobacco “is impeding the progress to reduce smoking.”

“Higher tobacco taxes are the most effective strategy to discourage smoking, especially among our youth, and we oppose any reduction. But we think the federal and provincial governments can take other effective action.”

Cunningham said the federal government can “persuade” the U.S. government to shut down illegal tobacco factories in the U.S. and block the sale of tobacco supplies to similar factories operating in Canada. As well, the society wants the temporary border crossing at Cornwall to become permanent since it appears to be an effective “choke point” blocking contraband.

The society is also urging the province to implement better controls of tobacco sales on First Nations land and give municipal police the authority to enforce contraband laws. “It’s an enormous problem but there are remedies that we strongly feel should be implemented,” Cunningham said. It’s estimated up to 50% of tobacco products bought in Ontario are contraband and that the lost tax revenue totals about $2.4 billion nationwide, Tennant said. The coalition’s goal is to see the amount of contraband reaching consumers reduced to about 10% of tobacco sales.

The Coalition Against Contraband Tobacco held a news conference outside the Springbank Mini Mart store on Springbank Dr. Thursday, where owner Amiti Modi has seen sales drop in the two years since he bought the store. He’s also seen two convenience stores closed.

By JOE BELANGER THE LONDON FREE PRESS, June 4, 2010, lfpress.com

We examine China’s plan to ban smoking in public by January 2011, despite being home to a third of the world’s smokers. When the smoking ban goes into effect in China next year, smoking will be banned in all public venues, workplaces and public transportation. However, anyone who lives or has lived in the world’s biggest tobacco consuming country — 30 percent of the worlds smokers, world’s largest tobacco grower and cigarette producer — rightfully doubts how effective the new law is going to be.

Try, try again

In 1995, the Guangzhou government banned smoking in public spaces, but the minor fine of RMB 20 dished out to offenders did not deter people. After a while, the smoking ban existed on paper only.

In 1997, Hunan Province introduced a smoking ban in public venues, but it met the same end as the Guangzhou law. The Beijing government declared a smoking ban in public places in May 2008, nonetheless, the ban did little and anti-smoking volunteers, when they were around, were ignored with no enforcement ability.

Shanghai implemented a partial smoking ban before the 2010 Expo and although it has helped a bit, technically smoke-free venues around town still have ashtrays on the tables.

Take with one hand, give with the other

It is soon going to be five years since China signed the WHO Framework Convention on Tobacco Control whether the decision by China’s Ministry of Health to ban smoking in January 2011 is merely lip service to meet the commitment that China signed over four years ago.

“Can such a big policy that will have huge effects in so many aspects be carried out within such little time?”

The article is doubtful at best, considering, it says, that China’s state Tobacco Bureau plans in the next five years to create 12 new tobacco brands that will achieve projected sales of RMB 40 billion, and most of the products are to be sold to domestic consumers.

While the Ministry of Health is working hard on realizing the promise made to the WHO, another government body is working on their tobacco sales strategies. We agree, that it doesn’t seem to add up.

If the government could cut the supply of tobacco, and also persuaded smokers not to smoke, then it’d work, but it’s almost a fairy tale, declared researchers.

What people say

Although some voices in cyber space give their blessings to the smoking ban, those in favor are few and far between. Most Chinese citizens have responded negatively to the policy.

“Drainage oil is tolerated but second-hand smoking is not?” asks Yidong Xinyewu.  “With all the cigarettes I’ve smoked in my life, I don’t release as much smoke as any factory chimney. Why not close down some factories first?”

“No smoking in Internet cafes? No smoking at restaurants and bars?! How ridiculous! I suggest the government take control on housing prices and close the gap between the rich and the poor before they deal with cigarettes,” vents citizen Lao Biaoge from Liangshan.

Another comment by Er Yu Xiao Heng compares smoking with drinking. “Smoking only damages health while drinking damages the society and health. Why isn’t drinking banned?”

With such strong voices against the ban, others express their skepticism about how it will be enforced, a common problem for previous provincial smoking regulations.

“It is funny to talk about smoking ban unless a pack of cigarettes was sold for RMB 50 several times more than they are currently sold for or punishment for smoking was as heavy as taking drugs,” says Kuaile Rensheng from Dongguang. “But the government simply doesn’t want to lose the huge tax income from tobacco.”

“If all tobacco factories were closed, no one would be smoking, but there’d be so much tax loss,” agrees Gu Guanglin.

With cigarettes so cheap and the country’s long smoking history, this smoking ban looks like the government is drawing in more than it can exhale. We look forward to finding out. At least until 2011 Chinese scientists have found a good use for all those cigarette butts lying around.