Cigarettes being smuggled into Finland from Russia

Proportion of illegal tobacco in overall consumption is increasing

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An increasing share of the tobacco products smoked in Finland is being illegally imported into the country. The smuggling of cigarettes from Russia is again showing an upward trend.
      The illegal tobacco products are delivered across the length and breadth Finland through a distribution network. The smuggling of cigarettes causes the state annual tax revenue losses of tens of millions of euros.
     
Based on the earlier estimates made by Finnish Customs and the Ministry of Finance, some 5 per cent or approximately 250 million cigarettes are imported into Finland illegally every year.
      While smuggling is increasing, the proportion of illegal tobacco has grown, as the legal sales of tobacco products have remained stable and travellers’ legitimate imports have slightly declined.
      However, financial secretary Petri Malinen from the Ministry of Finance estimates that the proportional growth has not been very significant so far.
      When it comes to the tobacco industry, they assume that the proportion of illegal consumption is appreciably higher.
      Director Ron Op de Beke from Philip Morris International, who is in charge of monitoring the smuggling situation, says that the proportion could well be in the region of 15 per cent.
     
During the first six months of the year, Finnish Customs confiscated a total of nearly nine million cigarettes. The pace has been accelerating in the autumn while the financial crisis is continuing.
      ”It looks as if the smuggling of cigarettes would be increasing”, reports Mika Lopmeri, the Senior Inspecting Officer from the Eastern Customs District of Finland.
      It has been noticed on the eastern border that particularly the quantities of illegal cigarettes stashed in passenger cars have been on the increase recently.
      Even as many as 400 cigarette cartons have been found stuffed into a passenger vehicle.
      Smuggling activities are becoming more and more organised, as frequently the loads which have been seized at frontier crossing points have had the same destination.
      ”Typically, bulk illegal imports can be divided into several batches”, Lopmeri notes.
     
Tobacco can also be imported on buses so that the number of cartons based on the number of passengers is kept within the permissible limits.
      On the Finnish side of the border, all cigarettes are collected from the passengers and put on the market. Such "legal smugglers" have been sought in Russia by advertising in newspapers and on the Internet.
      Those smugglers who import only small quantities of tobacco often stay at the border in order to look for potential buyers.
      It is common for vendors to sell tobacco products on the parking lots of those supermarkets favoured by Russians.
      ”Small-scale business is often conducted fairly openly. We have tried to intervene in such activities on a regular basis”, says Senior Customs Inspector Marko Laitinen from the Eastern Customs District of Finland.
     
Criminals find smuggling lucrative, as there is a huge price difference between the tobacco products sold in Finland and those sold in Russia.
      In Russia, one carton of 200 cigarettes can be bought for less than five euros, which is only one-tenth of the Finnish price. Marko Laitinen estimates that the value of an illegal carton is around EUR 15 in Finland.
      Further factors contributing to the attractiveness of smuggling include tax increases.
      The price of one pack of cigarettes rose by around 30 cents from the beginning of 2009, while another 15 cents will be added to the price at the beginning of next year.
     
The number of confiscations has also somewhat grown as a result of a new rule stating that all cigarette packs are to carry health warning labels written in Finnish and Swedish.
      Cigarette packs for sale in Russia do not carry such warnings, and without them a passenger is allowed to import only one carton. Previously it was possible to import several cartons if one paid the related taxes on the border.
      All confiscated cigarettes are destroyed by crushing.
     
The smuggling of cigarettes is a huge business worldwide. New distribution routes and channels are created as soon as the old ones have been destroyed.
      Based on various estimates, approximately 11 per cent of all tobacco products sold worldwide have been smuggled. The smuggling of cigarettes causes states annual tax revenue losses of tens of billions of euros.
     
A group of investigative journalists revealed a year ago that a chain of factories in Russia’s Kaliningrad and in other parts of Eastern Europe has manufactured tobacco products worth at least USD 1.0 billion to be smuggled onto European markets.
      The Jin Ling cigarettes made in those factories were nearly unknown some years ago, but today the brand imitating the Camel logo is a common sight on the Central European markets.
     
A part of illegal tobacco products originally come from factories which also make cigarettes that are manufactured and imported legally.
      The proportion of counterfeit cigarettes of all confiscated tobacco products in Europe has been more than 50 per cent. Frequently, such counterfeit products come from China, but a number of factories making counterfeit cigarettes have also been found in EU countries.
      In Finland, such counterfeit cigarettes are seldom found among smuggled tobacco products.


Previously in HS International Edition:
  Finland considers further tightening of Tobacco Act (5.2.2009)
  Prison sentence for illegal importation of smokeless tobacco (30.3.2007)
  Cigarette personal import limits upheld but with altered reasoning (20.5.2009)
  Retailers group against tighter law on tobacco products (13.5.2009)

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