From: China Daily
By Michelle Fei (HK Edition)
Cigarette smuggling has leapt more than 45 percent since the tobacco tax took a big jump earlier this year. Potential profits are so high that the illicit tobacco trade is drawing high numbers of small entrepreneurs. Michelle Fei reports.
It was around 7 pm at Luohu Port, Shenzhen, when a middle-aged woman, dressed casually in a black shirt and black sports trousers, walked into a duty-free shop and asked for a carton of cigarettes. A few minutes earlier the woman had crossed the Shenzhen checkpoint. The store clerk hardly looked at her, handing over the cigarettes without hesitation.
Outside, the walkways were crowded with pedestrians – a typical scene as the sun set in the west.
Back inside the duty free shop, the female customer slit open the cigarette carton and one by one removed ten packs. Something in her manner made it look as if she’d done this before. Then she rested one legs on a nearby fire extinguisher, peeled back her trouser leg and started pushing the cigarettes into her socks. When she had completed the task she rolled down her trouser legs, packed up and quietly headed for the Hong Kong checkpoint. Her manner was perfectly serene as if what she had just done was completely normal. The saleswoman, who saw the whole thing unfold, seemed to think it was perfectly normal, too. She showed no surprise, nor did the customers standing nearby. A casual witness would hardly believe there was a crime in progress.
The woman clearly was breaking the law, bringing 200 cigarettes into Hong Kong, nearly ten times of the duty-free limit of 19 cigarettes. This could have earned her a two-year prison sentence, the maximum for smuggling cigarettes into Hong Kong. That and HK$1 million fine is under the Dutiable Commodities Ordinance.
“You can buy as many duty-free cigarettes as you want from me, as long as you are not caught by the Customs,” said a staff member of a tobacco retail store outside the Luohu Port, in response to a question from a China Daily reporter, acting as an ordinary smoker.
“There are many ways for you to avoid being caught by the Customs. You can just hide the tobacco under your clothes or simply put them in your pocket. The scanning machines only check luggage, not for human beings,” said the anonymous retailer, a young man in his 20s.
On the shelves were many brands of cigarettes from Hong Kong, Macao and Vietnam, offered at duty-free prices that legally are available only inside the port. When asked how he managed to stock so many duty-free tobaccos, he replied only that he could guarantee these were the same as were being sold at the duty-free shops inside the port.
“It’s normal for people to buy one to two cartons of cigarette to cross the border. The scanning machine are not very smart – it cannot identify cigarettes if you just put them inside your bag,” said a female in another retail store located on the second floor of the Luohu Port shopping mall.
A restaurant located next to the woman’s store even sales take-away boxes for people to pack up cigarettes to cross the border. The boxes, it was claimed, “work every time”.
A pack of Lucky Strike, a popular brand, cost around HK$24 in a normal store. At the nearby duty-free shop, the brand was selling for HK$15 a pack in the duty-free shop inside the Luohu Port and Shenzhen Bay Port. In Hong Kong, after tax, it would cost around HK$48-HK$50.
The profit in cigarette smuggling is so high that people are being drawn in despite enhanced security.
Between January and August this year, some 77 million sticks of illicit cigarettes were seized at cross-boundary control points in Hong Kong. That was 45.3 percent more than the same period of 2010.
Cases involving contraband cigarettes showed a slight increase of approximately 4 percent to 857 cases, compared 2010, according to the Hong Kong Customs. The Customs believed that such figures reflected the effectiveness of its enforcement actions.
The Customs was also aware of “couriers” using “ants moving house” tactics to smuggle in illicit cigarette via cross-boundary control points, such as the woman China Daily observed in the Luohu duty-free shop.
The Customs plans no specific measures to crack down on these “couriers”.
For one thing, the majority of the illicit cigarettes were smuggled across the border in vehicles loaded with other cargoes or concealed at the rear of the vehicles or inside false compartments of cargo containers. For another thing, the Customs is also concerned about personal privacy and human rights elements when body checks are involved.
“So far, checking of human bodies, even if checking for legal reasons, still remains very sensitive and has already drawn complaints from society. Thus we have no plans to tighten body checks, despite the risk of cigarette smuggling, or even illicit drug trafficking,” said a spokesman for the Hong Kong Customs.
In Hong Kong, illicit cigarettes are sold by “peddlers”. Some peddle on street. Some entrepreneurs even take phone orders. Areas with heavy pedestrian traffic, such as Mong Kok, Yau Ma Tei, Sham Shui Po, Chai Wan and Wan Chai, are so-called black spots for illicit cigarette peddling, according to the Customs.
After a crackdown, peddlers are more cautious nowadays. Phone calls made by China Daily to a peddler were passed on to a “secretary”, claiming that only “friends” and “acquaintances” can talk to the “boss” directly.
The first casualty in these “black sports” for illicit cigarette selling are the newsstands which also depend on cigarette sales. Business at news stands is said to have shrunk by 20 percent since the tobacco tax was raised 41.5 percent after the 2011-2012 Budget.
“It’s getting harder and harder for us to keep the business going. Cigarette smuggling had seriously affected our business. Many stands have closed,” said Liu Sair-ching, chairman of the Coalition of Hong Kong Newspaper and Magazine Merchants. The organization includes over 35,000 newsstands.
Nelson Chow, professor of the Department of Social Work and Social Administration at the University of Hong Kong, reckoned the scenario involving illicit cigarettes “couriers” was a result of “supply and demand”.
“In Hong Kong, rich people are more aware of the harms of smoking, thus the majority of smokers are people from middle or lower class with less income. Heavy tobacco taxes left them either to quit smoking, or to turn to illicit cigarettes, which are almost half the price of the taxed ones,” said Professor Chow. Despite a non-smoker, Chow understands that it is hard for smokers to quit smoking, if they feel the need to relax from high working stress and long working hours.
“The Customs’ concern over such ‘couriers’ is understandable. On one hand, the ‘couriers’ did commit an offense. However, it was not that serious compared with drug trafficking or other crimes. It’s right for the Customs to focus on more serious crimes,” said Chow.
“Personally I support the raising of tobacco taxes, but I don’t believe charging more tax is an effective way to get people to quit smoking,” said Chow.
He believes that, similar to regulating street hawkers, the government should take more strict measures to crack down on cigarette smuggling when it was on the rise. But there seems no way to give a clear cut.
