Study Forum

From: US FDA

***

VII. Conclusion

While it remains difficult to measure existing illicit trade markets and use existing data to reliably predict future demand for illicit tobacco products, it is possible to isolate some of the key factors that may encourage or discourage illicit trade in tobacco products. For example:

• Depending upon the standard, there might remain strong, legal demand for components that, while intended for legal products outside the scope of the standard, could be used to make an illicit product. If diverted into an illicit channel, such components would represent a means by which illicit trade in full-nicotine cigarettes might develop.
• Manufacturing costs for illicit tobacco products might be higher because of economies of scale, and large-scale production difficult to achieve (and easy to detect by enforcement authorities). This might limit how significant illicit trade could ever become.
• Assuming that the primary motivator in selling tobacco products that do not comply with a product standard is profit (which is the case with tax-evading illicit trade), a limited market combined with the risk of enforcement action and possible criminal prosecution could end up discouraging people from becoming involved. This is particularly likely to be true if there are other illegal markets providing higher profit potential.
• Consumer behavior and the number of available alternatives to products compliant with the standard would also impact the development of illicit markets.
  • To the extent that current smokers could evade product standards by manipulating legal products, there might develop an illicit market providing the mechanism to do so, which would face the same obstacles described above (cost of production, evading enforcement, etc.). Including restrictions on the sale of such products might result in the prevention of illicit trade hinging on enforcement.
  • If the product standard affected consumer “experience” and consumers could use other tobacco products to achieve the “experience” missing due to the product standard, there might be little interest in engaging in illegal behavior, particularly as time went on (stockpiling small supplies of products in advance of a standard seems likely in most cases, potentially impacting the timing and extent of consumer demand for alternatives, whether legal or illegal). Additionally, to the extent that consumers used a product standard such as a nicotine standard for cigarettes as an opportunity to quit the most harmful products, or tobacco products altogether, demand for illicit products would drop, especially over time.

While this draft paper represents only an initial step toward assessing the potential for demand for illicit tobacco products after an FDA product standard in general terms, understanding the limited research available, the potential price of such products, potential facilitators and consumer buying behavior, and the potential adulteration of legal tobacco products, as well as how illicit trade operates with respect to other products and locations may all help inform understanding of any potential demand that may develop due to a tobacco product standard.

Read Complete Attached Draft Study