Where there’s smokes
LINDSAY MURDOCH AND GEOFF STRONG
April 30, 2010
WHEN the last of Australia’s tobacco farms closed near the Victorian country town of Myrtleford about three years ago, Australian law enforcement agencies thought it would shut down a black market in what smokers know as ”chop chop”, or unbranded loose-leaf tobacco. But, it seems, little has changed.
”My corner store sells me half a kilo of chop chop under the counter for $70,” says a hard-core smoker in Geelong, who does not want to be named. ”That makes me 400 cigarettes and costs me less than half it would to buy them legitimately.”
Sydney University professor Renee Bittoun runs Australia’s only dedicated smoking cessation clinics in two of Sydney’s hospitals. She believes illegal tobacco, both locally grown and imported, is widespread and could account for a quarter of all tobacco being smoked in Australia.
Bittoun fears that the government’s increase in excise will further increase illegal tobacco’s market share, doing even more damage to the lungs of those who inhale its smoke.
”It is not hard to grow and, given it looks like big spinach, might not normally attract much attention. I have been told the Tax Office loses $400 million a year in excise due to illegal crops. Given the size of government excise, chop chop is very cheap and it is often sold under the counter by weight by unscrupulous tobacconists, grocers and even service stations.”
She says that although the regulated industry is gone, farmers can easily plant tobacco in an an isolated back paddock. ”They are paid cash in hand and its distribution is controlled by Mafia-like organised crime organisations.
”My information is that whenever there is a bust and a container of chop chop is seized, legal cigarette sales increase.”
While illegal tobacco continues to be grown in Australia – a backyard full of it was discovered in Sydney’s famous Bondi only a year ago – most of it comes from overseas.
According to customs officials at wharfs and airports, criminals are importing huge quantities of tobacco products into Australia and officials say they now expect the trade to increase following the hefty tax rise for cigarettes announced by the federal government.
Over the past three years, customs and border protection officers have seized 715 tonnes of tobacco and 217 million cigarettes in sea cargo. They can only guess at how much is being smuggled undetected, some of it in shipping containers filled with tobacco products worth millions of dollars.
According to a recent PricewaterhouseCoopers report that was commissioned by the tobacco industry, illegal tobacco now accounts for a staggering 12.8 per cent of total tobacco consumption in Australia, resulting in a $624 million revenue loss for the federal government.
The World Health Organisation has predicted that illegal tobacco consumption will outstrip legal tobacco worldwide by 2020. An estimated 10.7 per cent of global sales of tobacco are illicit, representing 600 billion cigarettes, according to the Framework Convention Alliance, a conglomerate of international non-government organisations that works to reduce the devastating health and economic impact of tobacco.
This represents revenue losses of between $US40 and $US50 billion to governments around the world.
Former Australian Customs investigator Richard Janeczko says tobacco smuggling has become as big a problem as the smuggling of drugs, weapons and wildlife.
”Tobacco smuggling is popular with criminals because the penalties are far less severe than [for] other crimes like drug smuggling,” says Janeczko, who was customs national manager for investigations until he retired in October last year.
”Some criminals have made the choice to smuggle tobacco because of that.”
Drug smugglers face up to 25 years’ jail, but the maximum penalty for tobacco smuggling is only 10 years. ”Drugs are a highly emotional issue for governments, while tobacco is seen as being quite benign,” says Janeczko, who now works as an industry consultant, including for tobacco companies.
Janeczko says reports indicate that some terrorist organisations are even using the trafficking of illegal tobacco to fund their activities. ”These range from the IRA to Middle Eastern groups,” he says.
Indeed, a 2008 report by the Royal Canadian Mounted Police identified 105 organised crime groups involved in illicit tobacco trading. Most of the groups were also involved in either drugs or weapons smuggling, or both. According to PricewaterhouseCoopers, tobacco smuggling has been linked to organised crime in Australia, including drugs, money laundering, identity fraud and stolen car rackets.
In Australia, the smuggling ranges from people arriving from overseas with more cigarettes in their luggage than they are allowed, to shipping containers that criminals hope will not be checked on arrival at ports.
”A container may be marked as containing pretzels and the criminals are prepared to run the gauntlet at the dock and hope it slips through unnoticed,” Janeczko says.
”The organisers are extremely difficult to catch.”
(In 2003, customs officers found 7 million cigarettes hidden in a shipping container in Sydney. The tobacco haul, which would have cost the federal government $1.5 million in lost duty, was found at Botany Bay in a shipment of decorations and novelties from China.)
Janeczko says that when governments raise the value of goods, such as cigarettes, law enforcement agencies worldwide have found they have had to step up their efforts to stop criminals flooding the market with illegal products.
The main source of black-market tobacco in Australia is now believed to be Indonesia, where the tobacco industry is largely unregulated.
The PricewaterhouseCoopers report says that as well as Indonesia, illegal tobacco has been coming into Australia from China, Vietnam, Syria, the Philippines, Brazil and the United Arab Emirates.
A confidential report by Australian Customs/Border Protection Services says that in the six months to December 2009, 12 consignments of illegal tobacco were intercepted – a 100 per cent increase on the same period in 2008. Eleven of the 12 were from Indonesia. Also, more than 37 million cigarettes were seized during the same six months – 39 per cent more than the same period in 2008.
Five of seven of these seizures were from China.
The PricewaterhouseCoopers report estimates that 2.3 million kilograms of illegal tobacco was consumed in Australia in 2009, representing a taxation revenue loss of $624 million, up from an estimated $450 million in lost government revenue from illegal tobacco sales in 2007.
Chop chop is a distinctly Australian term that is said to have been coined by staff at the tobacco manufacturer W.D. and H.O. Wills in the mid 1990s when they were coming to terms with the illegal trade on their business. It is supposed to refer to the production process of the illegal traders, who merely chop up the cured leaves.
While there are some who believe that smoking chop chop is less harmful that conventionally manufactured cigarettes, chemical analysis of various samples has found it to be contaminated with everything from raw cotton to cabbage leaves and grass clippings.
Of particular concern to health officials, a dense fungal contamination is usually found because of the way it is cured. This is believed to cause toxic responses in the lungs, liver, kidneys and skin ranging from allergies to bronchitis and asthma. This is in addition to the lung cancer caused by smoking all tobacco products.
Professor Bittoun says it is difficult to determine how much chop chop is being smoked because people are loath to admit doing something illegal. But a study done in her clinics in 2002 found that 43 per cent of her patients smoked it, with 83 per cent saying they did so because it was cheaper and 58 per cent because they believed it to be healthier.
Overseas evidence confirms the widespread use of illegal tobacco. In 2005, visiting professor Gilbert Geis of the University of California undertook a study of the use of chop chop for the Australian National University. While he refers to the difficulty of establishing real facts on smoking because people play down the amount they smoke, he cites British researchers aware of such underestimation who resorted to examining empty cigarette packets left by fans at a football match. They found 50 per cent were counterfeit, suggesting the cigarettes contained inside were composed of illegal tobacco.
But some health researchers believe the use of chop chop in Australia is not as great as others believe. Rob Moodie, chairman of the Preventative Health Taskforce, which recommended the increased excise and plain packet labelling, says it accounts for about 12 per cent of tobacco use in Australia.
He says the reforms will have little impact on chop chop use. ”It is much easier in Australia to manage illegal tobacco than it is in middle Europe, for example. I admit that policing illegal tobacco is going to have to be dealt with, but increasing the excise is likely to be a key tool to encourage smokers to give up.”
Professor Ron Borland, of Melbourne University and Cancer Council Victoria, believes the total use of illegal tobacco is even less than 12 per cent, but is relatively high in very low socio-economic groups such as the homeless. He says chop chop use has fallen since the demise of the local tobacco industry.