The Tobacco Institute of Southern Africa · The views expressed in this document are those of The Tobacco Institute of Southern Africa ... Product affixed with fiscal marker but lack

The Tobacco Institute of Southern Africa

* Confidentiality Notice and Standard Disclaimer: The views expressed in this document are those of The Tobacco Institute of Southern Africa (TISA) which are based on information and analysis compiled by it drawn from research and numerous interactions and discussions with government stakeholders across the SADC

region. This document is intended solely to aid discussions with recipient government agencies to better collaborate on efforts to combat illicit trade in the region. TISA accepts no responsibility or liability for the information contained herein being misinterpreted, misused or

quoted out of context.

ILLICIT TRADE IN TOBACCO PRODUCTS: SOUTHERN AFRICA TISA AIT Conference – Cape Town

09 November 2015

Discussion points

• Illicit Trade: Southern Africa Overview

• Illicit Operational Methodologies

• Combatting Illicit Trade

• TISA’s Position Protocol Elements

Illicit Trade : Southern Africa

Combination

Transit/ Destination

Source

Destination

Source/ Transit

Incidence levels based on industry estimates; Except for South Africa & Botswana based on independent research

Source Country

Common Illicit Brands

Size of the Problem Market Types & Key Common Illicit Brands

What is illegal trade & its impacts?

Collective loss on excise only est. at over US$226Mn for SAA in 2014; 98% of which loss to SACU excise pool

* Confidentiality Notice and Standard Disclaimer Applies


Manufacturing Outside our Countries

• Mis-Declaration of product

• Non-Declaration of product

• Exploitation of Customs Processes-Countries

• Concealed Consignments

• Outright Smuggling

Illicit Trade: Operating Methods


Export vs Imports Variances

Note: Mozambique Trade Stats sourced is only available from June 2012 to November 2014. Zim cig exports converted to sticks from weights.

Statistics in weights (kg’s)

In-Transit Declaration Exploitation

Variance in Zim Exports & Moz Imports: 2.9Bn Cigarettes

**Zim Exports Est. Sticks on Secondary Axis

Export vs Imports Variances

Trend Evolution: Change in Destination Country Declarations

Change in Country

Declaration

Non-Declaration & Mis-Declaration of Product

WE – Purpose Code Exploitation

SARS Customs

Modernisation

As of Sep 2012

no WE Exports

Customs Declaration Processes Exploitation (The Southern Africa Case)

Operating Methods: Manufacturing Outside Our Countries


Illicit Trade: Operating Methods

Administrative Gap Mis-Declare & Non-Declare correct

amount of raw material

Administrative Gap Product affixed with fiscal marker but lack

of mechanism to determine actual production

Administrative Gap Under declaration of product to revenue

authorities “False Invoicing”

Illicit Manufacturing Inside Destination Countries

Excise Account Manipulation, enabled through: • Sophisticated Supply Chain Integration • Raw Material Smuggling

Ghost Exports Export Round Tripping

Opportunities in Combating Illicit Trade

Research, Analysis & Information

Sharing

Administrative Actions

Enforcement Actions

Engagement/ Integrated Approach

Short Term Opportunities exist in:

Collaboration and information sharing

Establishing Government to government dialogue to address illicit trade from source and transit countries

Operational Co-operation between Regional Revenue Authorities & Law Enforcement Agencies

Establishing government/industry collaborative forums to address illicit trade activities

Administrative Controls

Excise controls – Digital Product Marking/Verification

Analysis of Import – Export variances between SADC Members

Collaborative Investigations into individual export declarations history

Establishment of notification process of cigarette export declarations SADC

Enforcement

Establishing the fight against illicit trade as a national governmental priority

Ensure sufficient resourcing and / or dedicated cross-functional tobacco task force

Improving prosecutorial capacity and efficiency to effectively deal with current and future cases

Ensuring proper destructions of seized illicit products * Confidentiality Notice and Standard Disclaimer Applies

Combatting Illicit Trade in Cigarettes

Governments should include the fight against illicit trade in tobacco products as national priority ensuring sufficient resourcing to enable investigations and prosecutions of illicit operators


TISA Positions on ITP Elements x. Final Provisions

ix. Developments of the Protocol

viii. Settlements of Disputes

vii. Institutional Arrangements and Financial Resources

vi. Reporting v. International Cooperation

iv. Offences

iii. Supply Chain Control

ii. General Obligations

i. Introduction

1. Use of Terms

2. Relationship between this Protocol and other Agreements

and Legal Instruments

3. Objective

4. General Obligations

5. Protection of Personal Data

6. License, Equivalent Approval or Control System

7. Due Diligence

8. Tracking and Tracing

9. Record Keeping

10. Security and Preventative Measures

11. Sale by Internet, Telecommunication or any other

evolving Technology

12. Free Zones and International Transit

13. Duty Free Sales

14. Unlawful Conduct including Criminal Offences

15. Liability of Legal Persons

16. Prosecutions and Sanctions

17. Seizure Payments

18. Disposal or Destruction

19. Special Investigative Techniques

20. General Information Sharing

21. Enforcement Information Sharing

22. Confidentiality and Protection of Information

23. Training, Technical Assistance and Cooperation in Scientific, Technical and Technological

Matters

24. Investigation and Prosecution of Offences

25. Protection of Sovereignty

26. Jurisdiction

27. Law Enforcement Cooperation

28. Mutual Administrative Assistance

29. Mutual Legal Assistance

30. Extradition

31. Measures to ensure Extradition

32. Reporting and Exchange of Information

33. Meeting of the Parties

34. Secretariat

35. Relations between the Meeting of the Parties and

Intergovernmental Organisations

36. Financial Resources

37. Settlement of Disputes

38. Amendments to this Protocol

39. Adoption and amendment of Annexes to this Protocol

40. Reservations

41. Withdrawal

42. Right to Vote

43. Signature

44. Ratification, Acceptance, Approval, Formal Conformation

or Accession

45. Entry into Force

46. Depositary

47. Authentic Texts

x. Final Provisions





iv. Offences



i. Introduction

1. Use of Terms



3. Objective




7. Due Diligence


9. Record Keeping



evolving Technology


13. Duty Free Sales











Matters



26. Jurisdiction




30. Extradition




34. Secretariat







40. Reservations

41. Withdrawal

42. Right to Vote

43. Signature


or Accession


46. Depositary

47. Authentic Texts

x. Final Provisions





iv. Offences



i. Introduction

1. Use of Terms



3. Objective




7. Due Diligence


9. Record Keeping



evolving Technology


13. Duty Free Sales











Matters



26. Jurisdiction




30. Extradition




34. Secretariat







40. Reservations

41. Withdrawal

42. Right to Vote

43. Signature


or Accession


46. Depositary

47. Authentic Texts

x. Final Provisions





iv. Offences



i. Introduction

1. Use of Terms



3. Objective




7. Due Diligence


9. Record Keeping



evolving Technology


13. Duty Free Sales











Matters



26. Jurisdiction




30. Extradition




34. Secretariat







40. Reservations

41. Withdrawal

42. Right to Vote

43. Signature


or Accession


46. Depositary

47. Authentic Texts


Consideration: The interdependent nature of the elements

Supply Chain

International Cooperation

Offences


7. Due Diligence


9. Record Keeping


11. Sale by Internet, Telecommunication or any other evolving Technology


13. Duty Free Sales










23. Training, Technical Assistance and Cooperation in Scientific, Technical and

Technological Matters


26. Jurisdiction




30. Extradition




TISA Positions on ITP Elements

License manufacture of tobacco products and

manufacturing equipment

License retailing of tobacco products

License growing of tobacco

License transporting commercial quantities of

tobacco products or manufacturing equipment

License wholesaling, brokering, warehousing or

distribution of tobacco products or manufacturing

equipment

License, Equivalent Approval or Control System

Conduct due diligence before commencement and

during the course of a business relationship

Monitor the sales to their customers to ensure

quantities are commensurate with

demand

Report to the competent authority any activities in

contravention of the obligations arising from this

Protocol

Customer to become a blocked customer

Due Diligence

Establish a tracking and tracing system for all

products manufactured in or imported

Identification markings must be unique, secure and non-removable; form part of all unit packs and outers

within 5 years

Required information available directly or via a link to determine origin,

point of diversion to monitor and control

movement

Id marking must contain date & location of

manufacturing, product description and intended

market

Tracking and Tracing

The Tobacco Institute of Southern Africa

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The Tobacco Institute of Southern Africa · The views expressed in this document are those of The Tobacco Institute of Southern Africa ... Product affixed with fiscal marker but lack