23 Apr 2002 05:41 PM

In the first agreement of its kind, Customs & Excise today signed a Memorandum of Understanding (MoU) with the UK tobacco manufacturer, Gallaher Ltd (MoU attached). The agreement is designed to cement co-operation in tackling tobacco smuggling into the UK.

Rt Hon, Paul Boateng, Financial Secretray to the Treasury and Minister for Customs and Excise, said:

"We are pleased to have reached this Understanding with Gallaher to work together to drive down smuggling. We hope this will set a standard which all tobacco manufacturers will want to follow in minimising their brands presence in the smuggled market."


Notes to Editors

1. UK tobacco manufacturers have all publicly stated a wish to see an orderly market in the UK for their products and to co-operate with Customs to tackle smuggling. Customs have been in discussion with each of the manufacturers about that commitment with a view to each taking reasonable steps to minimise the chances of their brands being smuggled into the UK in large freight volumes. The signing of the MoU with Gallaher today is recognition that in their case a clear commitment to this end exists.

2. Tobacco smuggling into the UK is a major criminal enterprise. Over 20% of the cigarettes smoked in the UK are smuggled. The vast majority of these cigarettes are smuggled into the UK in large freight consignments typically in excess of 1 million cigarettes per load. Customs largest single seizure this year comprised 42 million cigarettes.

3. Customs have made a successful start to their tobacco strategy designed to reduce the size of the smuggled market within three years. That strategy has involved investing over three years £200 million in extra Customs officers, the latest freight x-ray scanning technology and the introduction of fiscal marks on all UK tax paid tobacco. Customs have been pleased to note widespread recognition from the tobacco industry that Customs action has begun to stabilise a smuggling situation which had been deteriorating very rapidly.

4. In all Customs seized 2.8 billion cigarettes in 2000-01 either in or en route to the UK. The vast majority of these cigarettes were originally manufactured in and exported from the UK. There are a variety of brands represented, but Regal and Superkings predominate representing 50% or more of Customs seizures of smuggled cigarettes whilst making up only 10% of the legitimate UK market.

5. The Memorandum of Understanding reads as follows:


The purpose of this MoU is to set the framework of co-operation between HM Customs & Excise and Gallaher Limited ("Gallaher") in order to minimise any obstacles to legitimate trade while minimising the smuggling of exported UK manufactured cigarettes back into the UK.

Within the limits of 'commercial-in-confidence' obligations, statutory restrictions and data protection legislation, HM Customs & Excise will:

- work and share information with Gallaher to identify, prevent and deter trade in counterfeit product;
- make Gallaher aware of any concerns about specific traders or destinations from which significant volumes of UK manufactured cigarettes are seized being smuggled back into the UK;
- forward to Gallaher samples from significant seizures of cigarettes purporting to be their brands for analysis;
- respond to any case specific information supplied by Gallaher on the illicit trade in tobacco; and
- meet regularly with Gallaher to review progress in tackling tobacco smuggling and the effectiveness of these co-operative arrangements.

HM Customs & Excise and Gallaher will respect the
'commercial-in-confidence' status of information provided by either party to each other subject always to any overriding legal obligations affecting either party to this MoU.

Gallaher already has a Policy on International Trade. It maintains that Policy, which relates to its exports of UK manufactured tobacco products, with the aim of minimising the presence of the company's brands in the UK illicit (duty evaded) market. From time to time that Policy may be revised and in such event HM Customs & Excise will be provided with a copy of the new policy.

To that end Gallaher:

- only supplies products where there is a legitimate demand for the product in the intended final markets and as necessary will share their understanding of that demand with HMC&E
- takes action where information indicates any substantial smuggling of its products to identify, so far as is reasonably practical, the supply routes and suspect export trade
- refuses sales where the end-sale (consumption) destination is in doubt
- if it discovers that any particular distributor has been shown to be behaving improperly or has reasons for believing that they may be, re-visits that trading relationship with a view to
discontinuing that relationship, if appropriate. In particular, if Gallaher concludes that any distributor is a smuggler of Gallaher products or that distributor is knowingly or recklessly supplying a smuggler with such products it will terminate that trading relationship with immediate effect
- provides Customs, upon request, with all relevant information about the intended destination of export consignments
- provides Customs with prompt access to data about export sales, including specific in-house codings and translations of those codings.

Issued by Customs and Excise Communications Division
For further information, please contact:
Steve Hallworth 020 7865 5095
Robert Buxton 020 7865 5010
Nadine Smith 020 7865 5715

HM Customs & Excise

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