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British American Tobacco and the “insidious impact of illicit trade” in cigarettes across Africa

British American Tobacco and the “insidious impact of illicit trade” in cigarettes across Africa Tob Control: first published as 10.1136/tc.2008.025999 on 10 July 2008. Downloaded from http://tobaccocontrol.bmj.com/ on June 15, 2024 by guest. Protected by copyright. Research paper British American Tobacco and the ‘‘insidious impact of illicit trade’’ in cigarettes across Africa 1 2 3 4 5 6 E LeGresley, K Lee, M E Muggli, P Patel, J Collin, R D Hurt 4 Bank Note Pvt, Ottawa, ABSTRACT systematically search BAT’s publicly accessible Ontario, Canada; Centre on Objectives: To provide an overview of the complicity of corporate documents produced in response to Global Change and Health, smoking and health litigation has improved British American Tobacco (BAT) in the illicit trade of London School of Hygiene and because of enhanced online access and improved cigarettes across the African continent in terms of Tropical Medicine, London, UK; searching capabilities available at the British Mayo Clinic, Nicotine Research rationale, supply routes and scale. Program, St Paul, Minnesota, American Tobacco Document Archive (BATDA) Methods: Analysis of internal BAT documents and USA; London School of developed in 2004. industry publications. Hygiene and Tropical Medicine, 5 Understanding cigarette smuggling in Africa is Results: BAT has relied on illegal channels to supply London, UK; Global Health important for two reasons. First, smuggling is Policy, Centre for International markets across Africa since the 1980s. Available Public Health Policy School of substantial and, according to BAT’s estimates, is documents suggest smuggling has been an important Health in Social Science 16 growing, thus undermining public health efforts component of BAT’s market entry strategy in order to gain University of Edinburgh Medical to address the upward trajectory of tobacco use on leverage in negotiating with governments for tax Buildings, Edinburgh, UK; the continent. Documents suggest smuggling has Nicotine Dependence Center, concessions, compete with other transnational tobacco Mayo Clinic, Rochester, occurred in at least 40 of 54 African countries, companies, circumvent local import restrictions and Minnesota, USA including countries with the largest populations. unstable political and economic conditions and gain a Second, African countries have been particularly market presence. BAT worked through distributors and Correspondence to: vulnerable to the loss of customs revenues as a local agents to exploit weak government capacity to gain Dr Monique E Muggli, Mayo Clinic, Nicotine Research consequence of cigarette smuggling. According to substantial market share in major countries. Program, St Paul, MN 55105, the Commission for Africa, customs revenues Conclusions: Documents demonstrate that the compli- USA; [email protected] provide up to one-quarter of government revenue. city of BAT in cigarette smuggling extends to Africa, Therefore, smuggling weakens the already limited which includes many of the poorest countries in the Received 28 April 2008 capacity of many African governments to achieve world. This is in direct conflict with offers by the company Accepted 25 June 2008 broader economic development goals. to contribute to stronger international cooperation to This paper focuses on BAT, which historically tackle the illicit tobacco trade. has had a large market presence in Africa; at times, having a market share of over 90% in 11 sub- Saharan African countries and an overall market It has been estimated that 10.7% of global cigarette 19 20 share of about 15% across the continent. The sales were attributed to illicit trade in 2006. The company publicly asserts, ‘‘British American illicit tobacco trade, primarily smuggling and Tobacco companies do not smuggle. We do not counterfeiting, significantly harms public health condone smuggling, and we do not encourage or ‘‘by making cigarettes cheaper, more accessible and collude with others to smuggle on our behalf’’. more difficult to regulate’’. Article 15 of the World Internal documents, however, suggest that contra- Health Organization’s Framework Convention on band had been central to BAT’s corporate strategy Tobacco Control (FCTC) makes broad provision across Africa. While distributors and local agents for measures to combat the illicit trade in tobacco ran day-to-day operations, documents describe products. In 2006, the Conference of the Parties to how BAT knowingly supplied cigarettes to such the FCTC agreed to convene an expert group to parties for contraband purposes while simulta- ‘‘prepare a template for a protocol on illicit trade.’’ neously relying on legal exports as cover for larger- In February 2008, negotiations commenced aimed scale smuggling. A more comprehensive under- at developing such a protocol by 2010. standing of TTCs and cigarette smuggling in Africa Contraband is a key component of illicit trade, supports the need for strengthening collective and previous analyses have detailed the complicity measures across countries to effectively address of transnational tobacco companies (TTCs) in the problem. 6–8 8–11 cigarette smuggling in Europe, Asia, North 8 8 America and Latin America, including the TTCs’ modus operandi in the illicit tobacco trade. To METHODS date, there has been no scholarly analysis of such This paper is based on internal documents from activity in Africa, although important revelations the Guildford Depository and BATDA. The obsta- were put forth about British American Tobacco cles to accessing, and the limitations of working (BAT) and smuggling in Africa by the Campaign with, BAT documents have been previously 22–25 for Tobacco-Free Kids, UK Action on Smoking and described. This paper is based on an iterative 12 13 Health and investigative journalists in 2000–1 search strategy, commencing with an on-site This paper is freely available including evidence heard by the UK House of search at the Guildford Depository during 1999– online under the BMJ Journals Commons Health Select Committee. Since these 2001 at the file level using the depository’s unlocked scheme, see http:// reports, which were based on a small number of crude index to search keywords based on tobaccocontrol.bmj.com/info/ unlocked.dtl documents available at that time, the capacity to African geographical names, staff and recognised Tobacco Control 2008;17:339–346. doi:10.1136/tc.2008.025999 339 Tob Control: first published as 10.1136/tc.2008.025999 on 10 July 2008. Downloaded from http://tobaccocontrol.bmj.com/ on June 15, 2024 by guest. Protected by copyright. Research paper which is ‘‘illegal’’. In not using the black market ETA is at a euphemisms for smuggling such as ‘‘transit’’, ‘‘duty not paid’’ 810 26 27 significant disadvantage to other companies. and ‘‘general trade’’ (GT). Two key files were identified from this initial research (FJ3201 and BB0123), which led to In some countries, where cigarette imports were not 9 12 132829 initial revelations in 2000–1. Since 2004, improvements permitted, contraband was seen as the only supply route: in document access at BATDA, which houses electronic copies of the documents located at the Guildford Depository, has Zaire … is changing into a GT [General Trade] market and there 30 31 enabled systematic full-text searching at the keyword level. is no reliable information regarding the current levels of imported Keyword searches of the online collection were carried out brands and the shares … Imports into Malawi, and Uganda are between 2004 and 2007 using individual names, brands and specifically banned and the only route in will be by GT. associated parties. Advanced Boolean searches were undertaken In other cases, smuggling was supported even where legal using combined keywords. Document analysis incorporated imports were permitted. In a 1991 memo, BAT marketing several validation techniques within a hermeneutic process, executive, Joe Green considered the distribution strategies for including corroboration of interpretation among authors and Cameroon in terms of two scenarios where (1) legal imports attempted triangulation of findings via trade publications, were permitted and (2) legal imports were prohibited. Even if newspaper articles and academic journals. legal imports were allowed, Green stated, ‘‘GT shipments will remain the mainstay of our activity ... . The Malabo distribution RESULTS channel will have to be maintained … . Maintain a minimum Business rationale for smuggling cigarettes in Africa cover level of BHSF [Benson and Hedges brand] via legal imports’’. ‘‘Alternative routes…to keep the franchise alive, meet targets and fend off competition.’’ The scale of the contraband market in Africa Documents suggest that the contraband trade accomplished Although comprehensive data of smuggled product by volume several goals for TTCs in Africa. First, cigarette smuggling or value remain elusive owing to the illegal nature of the trade, allowed TTCs to gain leverage in negotiations, similar to that BAT’s sales figures for certain years estimate that contraband used with governments for improved market access and foreign 34 represents a high proportion of the total market in some African investment similar to efforts in Vietnam, the former Soviet 7 11 countries. In West Africa, the flow and amount of contraband Union and China. In Africa, contraband helped tobacco across countries is described for 1987 in figure 1. Sales of Lucky companies argue for altered (invariably, reduced) taxation. For Strike by country for 1993 (table 1) suggest that contraband example, a document concerning Nigeria states: (general trade) comprised 45% of market in Nigeria, 14% in PMI [Philip Morris International] wish[es] to propose an industry Zaire and 12% in Ghana. All three countries were described as presentation to the Nigerian Government for a specific import prohibiting legal imports. For 1987, BATUKE estimated the duty to replace ad valorem rate. The objective would be to percentage of the total market from transit, and its own legalise ‘profitable’ imports thus providing the Nigerian percentage contribution to each market (table 2). The total Government with revenue currently lost by the proliferation of transit market in Nigeria was estimated to be 4%, while GT [General Trade]. BATUKE’s contribution was around 55%. In Cameroon and Burkino Faso, the transit market was 0.5% and 0.55%, with Similarly, minimising taxation was described as a motive to BATUKE’s contribution around 68% and 60% respectively. In engage in contraband tobacco trade by BAT in Nigeria. terms of estimated value, documents describe BATUKE’s transit Second, cigarette smuggling has been a response to intense business in Niger was worth about £14 million in 1989 and £10 regional competition among TTCs for establishing and growing million in Nigeria in 1990. market share. BAT, for example, observed the growing contra- band trade, and perceived the need to do the same to remain competitive. After visiting the Ghanaian subsidiary Pioneer The role of distributors and transiteers in Africa Tobacco Company, Russell Cameron, of BAT UK & Export Keeping BAT ‘‘at arm’s length from transit customers’’ (BATUKE) commented, ‘‘[We] will continue to be cautious in Documents describe how BAT worked through distributors our SEFK [State Express Filter King] business in Togo … . that, acting as middlemen, purchased cigarettes from BATUKE However, our competition were [sic] outsupplying us by 250% and then supplied them to ‘‘transiteers’’ —a term used to refer in transit terms’’. Another 1987 document stated that ‘‘The to those parties that physically transport contraband across 49 50 price differential [between SEFK and competitor’s brands] borders. A key distributor for BAT in Africa from 1977 to the highlights the potential for increased SEFK transit across the late 1980s was the Liechtenstein-based company Sorepex, which Togo/Ghana border. Further routes of entry need to be BAT characterised as being a ‘‘gravy train’’ for the company. investigated to realise this potential’’. Sorepex was later succeeded by Gerconal Holdings, a wholesale Third, contraband has acted to circumvent barriers to market distribution company used by BAT until at least 1999. access posed by government restrictions or local conditions. In A key function of distributors was to insulate BAT from the late 1990s, BAT recognised that trade barriers were direct contact with transiteers, thus reducing the risk of substantial in Africa and noted that ‘‘instability will continue detection and prosecution. Soropex, for example, ‘‘provide[d] to characterise the African political scene’’. In Angola, for ‘cover’, albeit increasingly flimsy, for BAT in some fairly shady example, BAT considered disposing of its 50% ownership of business’’. In Cameroon, Empresa dos Tabacos de Angola (ETA) in 1993 because of the It was agreed that Michel Chevaly [of Sorepex] was in an civil war: exposed position and in [the] future JMT [John Ticehurst, Resurgence of the civil war since October 1992 has had its toll on BATUKE] should not travel with him in Cameroon. One of the the economy of an already battered country … pushing most main functions of SOREPEX was to allow BAT to keep at arm’s businesses towards the use of the parallel and the black market, length from transit customers—particularly in Cameroon. 340 Tobacco Control 2008;17:339–346. doi:10.1136/tc.2008.025999 Tob Control: first published as 10.1136/tc.2008.025999 on 10 July 2008. Downloaded from http://tobaccocontrol.bmj.com/ on June 15, 2024 by guest. Protected by copyright. Research paper Figure 1 Flow and volume of BATUKE cigarettes via the contraband trade in West Africa (1987). Reproduced from the original document in the British American Tobacco Document Archive (Fenn ). … a particular customer … has opened two new routes to Sudan: Developing and managing border crossings i. From Chad: N’Jamena to Abeche and Adre (Sudan border) Documents show that distributors offered BAT detailed knowl- ii. From RCA: Bangui to Biaro (Sudan border). It is anticipated edge of major entry points to the African continent, including that 800 cases of BHSF [Benson and Hedges brand] will go via Port Said, Egypt, for North Africa, Djibouti for East Africa and these routes in July. Malabo, Equatorial Guinea, for West Africa. Entry points appear to have been selected on the basis of historically Plans to conceal cigarettes among other merchandise and successful passage for contraband and an onward network of falsify documents on the origin of the stock were made known supply. to BAT: Once contraband reached the continent, distributors’ knowl- edge of specific border crossings for onward supply to individual Sales departing from Malabo to North Cameroun and Chad. Via countries was critical. In 1987, Sorepex reported: three transporters: Sodisa, Mouchili and Bogno … (1) For the first time, Bogno will buy 300 cartons: this is the In August there will be a shipment by sea. If this shipment goes capacity of his truck, taking into account the other merchandise smoothly then future shipments will be by sea for cost saving which will ‘hide’ the cigarettes purposes…. (2) Each time, I will ask M & B [Mouchili and Bogno] to sign a Zone II—others document testifying that the cigarettes have really been exported from the North. I will countersign this document which will enable BAT to pay them—via Sorepex …[translated from original Table 1 Lucky Strike sales by selected African country (1993)* French] Country Local Imports General trade Total market Similarly, the supply routes for State Express Filter King Cameroon 2955.0 0 246.0 3241.0 cigarettes to Sierra Leone were described in 1985 as follows: Ghana 1670.0 0 232.5 1902.5 Kenva 6072.5 14.9 0.0 6087.4 In the three weeks, Bah [smuggler] had sold 300 of the 420 cases. Malawi 1061.7 0.2 0 1061.9 Next SEFK will be sent (via) Conakry, instead of via Dakar Mauritius 1254.7 1.4 0 1247.1 (where two borders had to be crossed). Transit Conakry/ Nigeria 6600.0 0 5400.0 12 000.0 Freetown would be by lorry … (estimate 1/2 containers monthly, Sierra Leone 472.1 400.2 0 872.3 ie 600 cases SEFK for Sierra Leone). Later they want BHSF, which South Africa 31 339.8 0 0 31 339.8 would be stuffed in same container, but documents/cases, would Uganda 1385.6 0 139.5 1525.1 have to be marked ‘in transit’. Zaire 2200.0 0 357.0 2557.0 Zimbabwe 2128.0 0 0 2128 Similarly, to avoid detection between Niger and Nigeria, Sorepex reported that ‘‘[D]irect imports to Nigeria [would be] through Mr *Reproduced from the original document in the British American Tobacco Document Archive. Adji…[who] would disguise the cigarette importations by calling Tobacco Control 2008;17:339–346. doi:10.1136/tc.2008.025999 341 Tob Control: first published as 10.1136/tc.2008.025999 on 10 July 2008. Downloaded from http://tobaccocontrol.bmj.com/ on June 15, 2024 by guest. Protected by copyright. Research paper Table 2 Total market by proportion from transit and transit market by proportion from BATUKE for selected African countries (1987)* BATUKE Total % Total Country market Local Imports Transit market % Imports % Transit. Nigeria 11.5 7.5 – 4.0 19.1 – 55 Sierra Leone 1.5 1.0 – 0.5 4 – 12 Ghana 2.0 1.75 – 0.25 2 – 14 Cameroon 3.5 3.0 – 0.5 10 – 68 Liberia 0.5 0.25 0.1 0.15 8 42 – Guinea-Conakry 1.6 – 1.6 40 40 – Senegal 2.0 1.4 (0.5) 0.6 10.1 26 – Cote d’Ivoire 3.8 3.4 (1.5) 0.2 0.2 3.1 50 5 Mali 2.0 0.8 0.8 0.4 – – – Burkina Faso 1.2 0.45 0.55 0.2 23 51 60 Benin 0.6 – 0.6 5 5 – Togo 0.6 – 0.6 3 3 – Gambia 0.3 – 0.3 1 1 – Mauritania 0.4 – 0.15 0.25 4 9 – Total 31.5 19.55 (2.0) 5.5 6.45 *Reproduced from the original document from the British American Tobacco Document Archive (Fenn ) BATUKE, British American Tobacco UK & Export. the shipment something else, e.g. matches …’’. In Zaire and Where one mode of transport became unavailable, the Sudan, distributors informed BAT of dangerous local conditions at distributor investigated alternatives: border crossings: The Djibouti Government has again closed the port for dhow [Arab sailing vessel] trade thereby preventing re-exports to Point 38 is an area of land on the Zaire/Sudan border near Somalia by this route. As on the previous occasion, our Uganda, it is somewhat of a no-man’s land and is a major centre distributor in Djibouti is investigating methods of supplying for barter. Because of the dangers in the area and the customs Somalia by overland route. situation in Kenya the lorries in convoys of 30–50 trucks are escorted through Kenya and Uganda by the army....Dr Kaboash would like to supply Benson & Hedges through this route and feels that 500 cases every 2 months would suffice with shipment ‘‘Taking more control of the business’’: BAT pursues stronger local by sea to Mombasa [sic] and that this business should start in presence April. This appeared to be an interesting opportunity which we The illegal nature of the business, and often unstable market should follow up. conditions, at times, led to tensions among BAT, Soropex and local agents, which may have played a part in BAT’s efforts to Another consideration in identifying border crossings was the have more control over its transit business. For example, in volume of potential trade to be achieved. In Sudan, Sorepex Djibouti, the failure of prepaid contraband to arrive raised the reported that an additional smuggling route might not only question of which party should incur the loss, with transiteers appease transiteers, but also would ensure larger distribution: 65 66 apparently threatening to cease moving BAT contraband. In Guinea, BAT became concerned that transiteers were also Re. Sodisa: I asked Daher to create a second sales circuit, parallel to his customary route, and to negotiate directly with the smuggling competitors’ brands: Sudanese who sell their gum Arabic [adhesive for cigarette One of Bobo’s key distributors, Hadi, the agent in Labe ´, has just papers] in Bangui (bypassing Ousta as intermediary). This will agreed to act as a transiteer for Marlboro. This is obviously in enable him to crack the monopoly of the Birao [city in Central direct conflict with his role in Bobo’s organisation and in the African Republic] dealers, whilst keeping them on his side (by view of the BAT representative is totally unacceptable. paying them commission and selling them small quantities of cigarettes) because these people are indispensable in negotiating These concerns followed earlier suspicions that a BAT border crossings; Daher will use this new circuit to sell 300 cartons which we will send him at the end of March. [Translated employee based in Guinea was also smuggling Marlboro from original French] cigarettes: For many countries, flexibility in the mode of transport (road, Enlarging previous info, RG [BAT executive Rob Galgut] said that PR [B&W executive Paul Richardson] had been known to rail, sea and air) was another important consideration. In boast that he made more selling containers of [sic] Marlboro than Guinea, military aircraft were used for air transport during the 61 he got from BAT/B&W… PR worked for BATUKE at one time, wet season. While the choice of transport was influenced by was well connected with transiteers, particularly in Conakry. time and cost, the deciding factor seemed to be likelihood of detection: BAT may have also sought more control of the business owing to a perceived loss of income from transit sales because of CIGARETTES BY AIR Cigarettes are arriving at Conakry Airport unstable market conditions in Africa. In 1987, BATUKE sought on a fairly regular basis. Air transport is obviously more to reduce reliance on Sorepex, as a cost-saving measure, but also expensive than traditional methods but it is quicker and customs because of the distributor’s failure to execute plans as at Conakry airport are certainly less strict and organised than at 62 46 port. expected. As described by BAT staff, ‘‘[w]e are continually 342 Tobacco Control 2008;17:339–346. doi:10.1136/tc.2008.025999 Tob Control: first published as 10.1136/tc.2008.025999 on 10 July 2008. Downloaded from http://tobaccocontrol.bmj.com/ on June 15, 2024 by guest. Protected by copyright. Research paper to be good (Ghana, Cameroon) ... this is highly political and the improving our knowledge of the transit end markets and taking best interests of the who[le] BAT group may not be the deciding more control of the business. Steps are being taken to diminish 64 factor … I accept that in retrospect we may have been over our reliance on Sorepex’’. optimistic about its [L&B] potential in Togo, Benin, Niger, but In West Africa, BAT established its own staff on the ground the main reason for its launch in those markets was not to to effectively bypass the distributor. At the same time, it was exploit domestic markets but for GT opportunities. important for the company that Sorepex remained to be seen as in command within ‘‘sensitive markets’’. For example, in Using small legal sales as cover seems to have been standard business agreements intended to govern the relationship practice for BAT in Africa. In Zaire the company evaluated between BAT and Sorepex into the 1990s, it was reported that: various options for undertaking this process: BAT has ‘‘staffed up’’ in West Africa to the point where there is There are two questions key to Sorepex’s future business in duplication of efforts between SOREPEX and BAT (UK&E). Our Zaire. objective now is to preserve the ‘‘fac ¸ade’’ that SOREPEX (a) Can Sorepex with BAT Z’s [BAT’s subsidiary in Zaire] represents between us and the sensitive markets of Togo, Benin, permission appoint another official importer who will pay taxes Niger (Unit I) and Equatorial Africa (Unit II), but at the same to act as cover for transit business? ... time, enable the BAT field force to take over the management of (b) If it is not feasible, would BAT Z consider selling official this important business. imports to Sorepex client directly and so enabling cover? A 1988 BATUKE document suggests that the company In Sierra Leone, it was recognised that the instigation of legal subsequently incorporated the role of the distributor, in cover could help ‘‘fend off the competition’’. In Nigeria, where developing and maintaining supply routes for contraband, into legal imports commenced in 1990, a handwritten memo the role of the company’s own ‘‘Red Sea/Central’’ area manager: describes the desire to create a ‘‘legal cover’’ for contraband: Transit—as a result of the hard currency shortages and internal Obviously it is practically impossible to develop a pure GT chaos and corruption in most markets there is a growing demand [general trade] brand, thus a home base is necessary. It would for transit. The Job Holder is required to evaluate routes, prices therefore seem logical to import legally some quantity, allowing and risks, then to recommend action to the Area Manager. He is also for an advertising campaign to take place … also required to exercise judgement over sales/shipments when markets are supplied by more than one source. Constant Similarly, Paul Richardson asserted that legal imports would vigilance is necessary in pricing because of the competitiveness of serve as a cover for smuggling Kool cigarettes and for enabling the area and the problem of parallel shipments between various the brand’s local promotion: territories within the Middle East and West Africa. Kool is considered to be the best B&W product offering for the BAT staff, such as Paul Richardson (BritCo, BAT subsidiary in Nigerian market. ... Both legal and transit importing would be Niger), also appeared to take a more active role tracking the required to properly—and profitably—develop the brand … Legal movement of contraband: imports would be loss making and significantly under invoiced because of Nigeria’s high duty rates. Legal [sic] imports would I would however like to take the opportunity [afforded by a trip however establish a legitimate presence and enable B&W to to Abidjan, Ivory Coast] to visit Sierra Leone en route primarily promote the brand. to assess the volume of 555 transit and to a lesser extent that of Lucky Strike. I would also be interested in finding out if any of the Gladstone brought through Conakry port ‘‘in transit for 69 DISCUSSION Sierra Leone’’ is actually being consumed there. Internal BAT documents demonstrate that the use of cigarette smuggling to gain market access to emerging markets extended to the African continent. Documents suggest that the contra- Using legal sales ‘‘to provide cover for advertising and GT band trade had helped BAT gain leverage in negotiating with business’’ governments, compete for market share, circumvent local In 1986, BATUKE recognised that legal sales of certain brands import restrictions and overcome local political and economic remained low in volume in West Africa. However, documents instability and gain a market presence. Although senior also suggest that low volume trade served two essential business executives have denied company involvement, or attributed purposes: (1) to enable BAT to advertise its brands in key illicit activity to rogue individuals, documents suggest contra- markets and (2) to facilitate much larger sales via the contra- band had been strategically central to furthering corporate band trade. As described in a 1991 memorandum on Cameroon objectives. to senior BAT executives: When the issue…was discussed where BATUKE wish to appoint Implications for tobacco control policy a domestic importer enabling us to provide cover for advertising Designing effective legislative and administrative initiatives and GT business, Sir Patrick [Sheehy, BAT Industries Chairman] An understanding of the organisation and logistics of cigarette felt that it was perfectly acceptable for BAT Cameroon to smuggling in Africa provides essential insights for designing recommend a domestic importer for BHS [Benson & Hedges effective legislative and administrative responses. Contraband Specials]. tobacco trade is exceedingly dynamic in terms of supply routes and modes of transport. It is not a consequence of price Another 1991 memo, regarding the launch of a new brand in differentials. Contraband trade has been an integral element of West Africa, suggests similar intentions to use newly introduced BAT’s market entry strategy, which is not driven by short term legal cigarettes as cover for contraband sales: financial gain, but rather efforts are undertaken to advance longer-term corporate objectives. Therefore, policy responses The reasons why we were so enthusiastic about Lambert & Butler were: ... the possibility of GT exploitation were considered cannot focus solely on current mechanisms of smuggling, Tobacco Control 2008;17:339–346. doi:10.1136/tc.2008.025999 343 Tob Control: first published as 10.1136/tc.2008.025999 on 10 July 2008. Downloaded from http://tobaccocontrol.bmj.com/ on June 15, 2024 by guest. Protected by copyright. Research paper especially those reliant on controls at the border, because these agreements with customs authorities in some 35 countries. In policy strategies are likely to be circumvented. Legislation must November 2007, shortly before WHO-led negotiations com- be expansive, and the process for amendment sufficiently menced towards a protocol, BAT stated that it ‘‘look[s] forward flexible to ensure that smuggling means not yet exposed are to partnering with governments in the development, negotia- tion and implementation of an effective illicit trade protocol’’. either captured or can be quickly added to the regulatory In Africa, based on the emphasis placed by the Commission for response. Given that smuggling abetted by TTCs in country X Africa on the role of customs reform in promoting regional most often occurs between countries Y and Z, effective economic development, BAT along with Unilever has co- legislative controls should include conspiracy to smuggle in sponsored the Business Action for Improving Customs another country. Administration in Africa (BAFICAA). BAFICAA aims ‘‘to help Similarly, measures that seek only to deter contraband by governments realise that the private sector can be an active removing the immediate economic gain will fail to address how partner in improving the customs environment’’, and that the industry uses smuggling tactically, often as a loss leader, ‘‘the private sector must be the driver of change’’. BAT’s recent either to undermine competition or drive governments into position paper on the proposed FCTC protocol claims that the making policy decisions that best suit TTCs’ needs. group is ‘‘well placed to offer views on a package of practical In addition to sufficiently large fines applied at the corporate measures’’ to reduce tobacco smuggling. level, actively enforced criminal penalties that include incarcera- The findings of this paper suggest that BAT’s complicity in tion for corporate officials is warranted. The potential for contraband trade extended across the African continent, and lengthy prison sentence imposed on senior tobacco company that its efforts to contribute to international cooperation to officials will probably create a far greater deterrent effect than address this problem should be understood in this context. In confiscation of product and profits on those instances where reality, BAT’s proposals seek to advance corporate interests and contraband is intercepted. Perhaps most important of all, undermine an effective global response to tobacco smuggling. sharing of information and reciprocal enforcement of judgments For example, BAT has prioritised the problem of counterfeit will be essential. Transborder movement of information and cigarettes, for which protection and redress already exists via judgments is necessary to combat transborder smuggling of trade agreements. According to BAT chairman Jan du Plessis, cigarettes. contraband serves to ‘‘deprive governments of tax revenues and harm legitimate businesses and their suppliers, distributors and Regional and global considerations retailers … [and] stimulate and fund criminal activity’’. Such The documents reviewed in this paper reiterate the importance statements, however, must be evaluated within the context of of addressing the contraband trade from a regional and global this paper’s analysis of BAT’s complicity in contraband activity perspective. The illicit supply of BAT cigarettes to Africa has in Africa, which adds to existing documentation of such activity been carried out, via distributors and transiteers, with little elsewhere in the world. regard for national borders. Furthermore, the limited capacity of customs and excise in many African countries has been unable CONCLUSION to prevent the establishment of regional supply routes across Documents show that BAT has advanced its corporate interests the continent. These findings support the conclusion of the First by systematically exploiting strategic opportunities to supply Session of the Intergovernmental Negotiating Body on a the contraband tobacco trade throughout Africa. To date, BAT Protocol on Illicit Trade in Tobacco Products, of the WHO and its senior directors have remained unaccountable via FCTC, for ‘‘incorporating strong provisions on international litigation or public inquiry for these activities, which was cooperation’’. epitomised by the abandoned investigation by the UK Effective deterrents, including criminal sanctions as advo- Department of Trade and Industry in 2004 amid reports of cated here, will only happen if manufacturers remain legally political pressure. The lack of public accountability to date for responsible for their products as they move through the supply these activities, in some of the world’s poorest countries, starkly chain. This will require a systematically collected evidentiary undermines BAT’s claims of corporate social responsibility. base at all stages. That evidence can be most readily derived Above all, it calls into question efforts by the TTCs to be using a licensing system throughout the supply chain and the recognised as legitimate participants in global tobacco control. sort of closely monitored tracking and tracing system suggested by others. LIMITATIONS Of all WHO regions, Africa represents the region with the Information from customs and law enforcement bodies indicate greatest need for technical assistance to gather and analyse data, that smuggling is a major and growing problem in Africa, based develop and maintain tracking and tracing systems, and on frequency and size of seizures, although there remains no investigate and prosecute alleged offenders. Africa would benefit systematic collection of data. On the role of TTCs, one from the sharing of experiences of other regions, and the commentator writes, ‘‘[b]ecause of the illegal nature of establishment of a regional resource centre for ‘‘enriching the smuggling, empirical research into firm participation has been skills sets of enforcement agencies’’. TTCs’ role in policy development What this paper adds This paper affirms the need to exclude TTCs from involvement in the development of policies to combat tobacco smuggling. This paper adds to the existing evidence of the transnational The industry has adopted a public position of promoting actions tobacco companies’ (TTCs) knowledge of and complicity in to tackle contraband as part of ‘‘balanced regulation’’ framed cigarette smuggling and is the first detailed and comprehensive within claims of corporate social responsibility. BAT, in analysis of internal tobacco industry documents regarding the particular, has depicted itself as working with governments TTCs’ smuggling activities in Africa. worldwide to combat illicit trade by, for example, signing 344 Tobacco Control 2008;17:339–346. doi:10.1136/tc.2008.025999 Tob Control: first published as 10.1136/tc.2008.025999 on 10 July 2008. Downloaded from http://tobaccocontrol.bmj.com/ on June 15, 2024 by guest. Protected by copyright. Research paper 20. Oluwafemi A. Regional summary for the African region. In: Shafey O, Dolwick S, daunting if not impossible to undertake’’. While publicly Gunidon GE, eds. Tobacco control country profiles. 2nd ed. Atlanta: American Cancer available tobacco industry documents remain limited by their Society, 2003. selective nature in terms of dates, countries and limited public 21. British American Tobacco. Smuggling: our view. Available at http://www.bat. com/OneWeb/sites/uk__3mnfen.nsf/vwPagesWebLive/ availability of documents withheld under the legal doctrine of 395A40387E7B8033C12571EA0053C5A3?opendocument&SID = &DTC (accessed 15 attorney-client privilege, they none the less offer critical insights January 2008). into the link between contraband and corporate strategy. 22. MacKenzie R, Collin J, Lee K. The tobacco industry documents: an introductory handbook and resource guide for researchers. London: London School of Hygiene & Funding: This research is supported by the National Cancer Institute, US National Tropical Medicine, 2003. Available at http://www.lshtm.ac.uk/cgch/tobacco/ Institutes of Health, Grant Numbers R01 CA90791 and 2R01 CA91021-05. 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J Int Marketing 2003;9:317–33. 346 Tobacco Control 2008;17:339–346. doi:10.1136/tc.2008.025999 http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Tobacco Control Unpaywall

British American Tobacco and the “insidious impact of illicit trade” in cigarettes across Africa

LeGresley, E; Lee, K; Muggli, M E; Patel, P; Collin, J; Hurt, R D
Tobacco Control – Jul 10, 2008
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Tob Control: first published as 10.1136/tc.2008.025999 on 10 July 2008. Downloaded from http://tobaccocontrol.bmj.com/ on June 15, 2024 by guest. Protected by copyright. Research paper British American Tobacco and the ‘‘insidious impact of illicit trade’’ in cigarettes across Africa 1 2 3 4 5 6 E LeGresley, K Lee, M E Muggli, P Patel, J Collin, R D Hurt 4 Bank Note Pvt, Ottawa, ABSTRACT systematically search BAT’s publicly accessible Ontario, Canada; Centre on Objectives: To provide an overview of the complicity of corporate documents produced in response to Global Change and Health, smoking and health litigation has improved British American Tobacco (BAT) in the illicit trade of London School of Hygiene and because of enhanced online access and improved cigarettes across the African continent in terms of Tropical Medicine, London, UK; searching capabilities available at the British Mayo Clinic, Nicotine Research rationale, supply routes and scale. Program, St Paul, Minnesota, American Tobacco Document Archive (BATDA) Methods: Analysis of internal BAT documents and USA; London School of developed in 2004. industry publications. Hygiene and Tropical Medicine, 5 Understanding cigarette smuggling in Africa is Results: BAT has relied on illegal channels to supply London, UK; Global Health important for two reasons. First, smuggling is Policy, Centre for International markets across Africa since the 1980s. Available Public Health Policy School of substantial and, according to BAT’s estimates, is documents suggest smuggling has been an important Health in Social Science 16 growing, thus undermining public health efforts component of BAT’s market entry strategy in order to gain University of Edinburgh Medical to address the upward trajectory of tobacco use on leverage in negotiating with governments for tax Buildings, Edinburgh, UK; the continent. Documents suggest smuggling has Nicotine Dependence Center, concessions, compete with other transnational tobacco Mayo Clinic, Rochester, occurred in at least 40 of 54 African countries, companies, circumvent local import restrictions and Minnesota, USA including countries with the largest populations. unstable political and economic conditions and gain a Second, African countries have been particularly market presence. BAT worked through distributors and Correspondence to: vulnerable to the loss of customs revenues as a local agents to exploit weak government capacity to gain Dr Monique E Muggli, Mayo Clinic, Nicotine Research consequence of cigarette smuggling. According to substantial market share in major countries. Program, St Paul, MN 55105, the Commission for Africa, customs revenues Conclusions: Documents demonstrate that the compli- USA; [email protected] provide up to one-quarter of government revenue. city of BAT in cigarette smuggling extends to Africa, Therefore, smuggling weakens the already limited which includes many of the poorest countries in the Received 28 April 2008 capacity of many African governments to achieve world. This is in direct conflict with offers by the company Accepted 25 June 2008 broader economic development goals. to contribute to stronger international cooperation to This paper focuses on BAT, which historically tackle the illicit tobacco trade. has had a large market presence in Africa; at times, having a market share of over 90% in 11 sub- Saharan African countries and an overall market It has been estimated that 10.7% of global cigarette 19 20 share of about 15% across the continent. The sales were attributed to illicit trade in 2006. The company publicly asserts, ‘‘British American illicit tobacco trade, primarily smuggling and Tobacco companies do not smuggle. We do not counterfeiting, significantly harms public health condone smuggling, and we do not encourage or ‘‘by making cigarettes cheaper, more accessible and collude with others to smuggle on our behalf’’. more difficult to regulate’’. Article 15 of the World Internal documents, however, suggest that contra- Health Organization’s Framework Convention on band had been central to BAT’s corporate strategy Tobacco Control (FCTC) makes broad provision across Africa. While distributors and local agents for measures to combat the illicit trade in tobacco ran day-to-day operations, documents describe products. In 2006, the Conference of the Parties to how BAT knowingly supplied cigarettes to such the FCTC agreed to convene an expert group to parties for contraband purposes while simulta- ‘‘prepare a template for a protocol on illicit trade.’’ neously relying on legal exports as cover for larger- In February 2008, negotiations commenced aimed scale smuggling. A more comprehensive under- at developing such a protocol by 2010. standing of TTCs and cigarette smuggling in Africa Contraband is a key component of illicit trade, supports the need for strengthening collective and previous analyses have detailed the complicity measures across countries to effectively address of transnational tobacco companies (TTCs) in the problem. 6–8 8–11 cigarette smuggling in Europe, Asia, North 8 8 America and Latin America, including the TTCs’ modus operandi in the illicit tobacco trade. To METHODS date, there has been no scholarly analysis of such This paper is based on internal documents from activity in Africa, although important revelations the Guildford Depository and BATDA. The obsta- were put forth about British American Tobacco cles to accessing, and the limitations of working (BAT) and smuggling in Africa by the Campaign with, BAT documents have been previously 22–25 for Tobacco-Free Kids, UK Action on Smoking and described. This paper is based on an iterative 12 13 Health and investigative journalists in 2000–1 search strategy, commencing with an on-site This paper is freely available including evidence heard by the UK House of search at the Guildford Depository during 1999– online under the BMJ Journals Commons Health Select Committee. Since these 2001 at the file level using the depository’s unlocked scheme, see http:// reports, which were based on a small number of crude index to search keywords based on tobaccocontrol.bmj.com/info/ unlocked.dtl documents available at that time, the capacity to African geographical names, staff and recognised Tobacco Control 2008;17:339–346. doi:10.1136/tc.2008.025999 339 Tob Control: first published as 10.1136/tc.2008.025999 on 10 July 2008. Downloaded from http://tobaccocontrol.bmj.com/ on June 15, 2024 by guest. Protected by copyright. Research paper which is ‘‘illegal’’. In not using the black market ETA is at a euphemisms for smuggling such as ‘‘transit’’, ‘‘duty not paid’’ 810 26 27 significant disadvantage to other companies. and ‘‘general trade’’ (GT). Two key files were identified from this initial research (FJ3201 and BB0123), which led to In some countries, where cigarette imports were not 9 12 132829 initial revelations in 2000–1. Since 2004, improvements permitted, contraband was seen as the only supply route: in document access at BATDA, which houses electronic copies of the documents located at the Guildford Depository, has Zaire … is changing into a GT [General Trade] market and there 30 31 enabled systematic full-text searching at the keyword level. is no reliable information regarding the current levels of imported Keyword searches of the online collection were carried out brands and the shares … Imports into Malawi, and Uganda are between 2004 and 2007 using individual names, brands and specifically banned and the only route in will be by GT. associated parties. Advanced Boolean searches were undertaken In other cases, smuggling was supported even where legal using combined keywords. Document analysis incorporated imports were permitted. In a 1991 memo, BAT marketing several validation techniques within a hermeneutic process, executive, Joe Green considered the distribution strategies for including corroboration of interpretation among authors and Cameroon in terms of two scenarios where (1) legal imports attempted triangulation of findings via trade publications, were permitted and (2) legal imports were prohibited. Even if newspaper articles and academic journals. legal imports were allowed, Green stated, ‘‘GT shipments will remain the mainstay of our activity ... . The Malabo distribution RESULTS channel will have to be maintained … . Maintain a minimum Business rationale for smuggling cigarettes in Africa cover level of BHSF [Benson and Hedges brand] via legal imports’’. ‘‘Alternative routes…to keep the franchise alive, meet targets and fend off competition.’’ The scale of the contraband market in Africa Documents suggest that the contraband trade accomplished Although comprehensive data of smuggled product by volume several goals for TTCs in Africa. First, cigarette smuggling or value remain elusive owing to the illegal nature of the trade, allowed TTCs to gain leverage in negotiations, similar to that BAT’s sales figures for certain years estimate that contraband used with governments for improved market access and foreign 34 represents a high proportion of the total market in some African investment similar to efforts in Vietnam, the former Soviet 7 11 countries. In West Africa, the flow and amount of contraband Union and China. In Africa, contraband helped tobacco across countries is described for 1987 in figure 1. Sales of Lucky companies argue for altered (invariably, reduced) taxation. For Strike by country for 1993 (table 1) suggest that contraband example, a document concerning Nigeria states: (general trade) comprised 45% of market in Nigeria, 14% in PMI [Philip Morris International] wish[es] to propose an industry Zaire and 12% in Ghana. All three countries were described as presentation to the Nigerian Government for a specific import prohibiting legal imports. For 1987, BATUKE estimated the duty to replace ad valorem rate. The objective would be to percentage of the total market from transit, and its own legalise ‘profitable’ imports thus providing the Nigerian percentage contribution to each market (table 2). The total Government with revenue currently lost by the proliferation of transit market in Nigeria was estimated to be 4%, while GT [General Trade]. BATUKE’s contribution was around 55%. In Cameroon and Burkino Faso, the transit market was 0.5% and 0.55%, with Similarly, minimising taxation was described as a motive to BATUKE’s contribution around 68% and 60% respectively. In engage in contraband tobacco trade by BAT in Nigeria. terms of estimated value, documents describe BATUKE’s transit Second, cigarette smuggling has been a response to intense business in Niger was worth about £14 million in 1989 and £10 regional competition among TTCs for establishing and growing million in Nigeria in 1990. market share. BAT, for example, observed the growing contra- band trade, and perceived the need to do the same to remain competitive. After visiting the Ghanaian subsidiary Pioneer The role of distributors and transiteers in Africa Tobacco Company, Russell Cameron, of BAT UK & Export Keeping BAT ‘‘at arm’s length from transit customers’’ (BATUKE) commented, ‘‘[We] will continue to be cautious in Documents describe how BAT worked through distributors our SEFK [State Express Filter King] business in Togo … . that, acting as middlemen, purchased cigarettes from BATUKE However, our competition were [sic] outsupplying us by 250% and then supplied them to ‘‘transiteers’’ —a term used to refer in transit terms’’. Another 1987 document stated that ‘‘The to those parties that physically transport contraband across 49 50 price differential [between SEFK and competitor’s brands] borders. A key distributor for BAT in Africa from 1977 to the highlights the potential for increased SEFK transit across the late 1980s was the Liechtenstein-based company Sorepex, which Togo/Ghana border. Further routes of entry need to be BAT characterised as being a ‘‘gravy train’’ for the company. investigated to realise this potential’’. Sorepex was later succeeded by Gerconal Holdings, a wholesale Third, contraband has acted to circumvent barriers to market distribution company used by BAT until at least 1999. access posed by government restrictions or local conditions. In A key function of distributors was to insulate BAT from the late 1990s, BAT recognised that trade barriers were direct contact with transiteers, thus reducing the risk of substantial in Africa and noted that ‘‘instability will continue detection and prosecution. Soropex, for example, ‘‘provide[d] to characterise the African political scene’’. In Angola, for ‘cover’, albeit increasingly flimsy, for BAT in some fairly shady example, BAT considered disposing of its 50% ownership of business’’. In Cameroon, Empresa dos Tabacos de Angola (ETA) in 1993 because of the It was agreed that Michel Chevaly [of Sorepex] was in an civil war: exposed position and in [the] future JMT [John Ticehurst, Resurgence of the civil war since October 1992 has had its toll on BATUKE] should not travel with him in Cameroon. One of the the economy of an already battered country … pushing most main functions of SOREPEX was to allow BAT to keep at arm’s businesses towards the use of the parallel and the black market, length from transit customers—particularly in Cameroon. 340 Tobacco Control 2008;17:339–346. doi:10.1136/tc.2008.025999 Tob Control: first published as 10.1136/tc.2008.025999 on 10 July 2008. Downloaded from http://tobaccocontrol.bmj.com/ on June 15, 2024 by guest. Protected by copyright. Research paper Figure 1 Flow and volume of BATUKE cigarettes via the contraband trade in West Africa (1987). Reproduced from the original document in the British American Tobacco Document Archive (Fenn ). … a particular customer … has opened two new routes to Sudan: Developing and managing border crossings i. From Chad: N’Jamena to Abeche and Adre (Sudan border) Documents show that distributors offered BAT detailed knowl- ii. From RCA: Bangui to Biaro (Sudan border). It is anticipated edge of major entry points to the African continent, including that 800 cases of BHSF [Benson and Hedges brand] will go via Port Said, Egypt, for North Africa, Djibouti for East Africa and these routes in July. Malabo, Equatorial Guinea, for West Africa. Entry points appear to have been selected on the basis of historically Plans to conceal cigarettes among other merchandise and successful passage for contraband and an onward network of falsify documents on the origin of the stock were made known supply. to BAT: Once contraband reached the continent, distributors’ knowl- edge of specific border crossings for onward supply to individual Sales departing from Malabo to North Cameroun and Chad. Via countries was critical. In 1987, Sorepex reported: three transporters: Sodisa, Mouchili and Bogno … (1) For the first time, Bogno will buy 300 cartons: this is the In August there will be a shipment by sea. If this shipment goes capacity of his truck, taking into account the other merchandise smoothly then future shipments will be by sea for cost saving which will ‘hide’ the cigarettes purposes…. (2) Each time, I will ask M & B [Mouchili and Bogno] to sign a Zone II—others document testifying that the cigarettes have really been exported from the North. I will countersign this document which will enable BAT to pay them—via Sorepex …[translated from original Table 1 Lucky Strike sales by selected African country (1993)* French] Country Local Imports General trade Total market Similarly, the supply routes for State Express Filter King Cameroon 2955.0 0 246.0 3241.0 cigarettes to Sierra Leone were described in 1985 as follows: Ghana 1670.0 0 232.5 1902.5 Kenva 6072.5 14.9 0.0 6087.4 In the three weeks, Bah [smuggler] had sold 300 of the 420 cases. Malawi 1061.7 0.2 0 1061.9 Next SEFK will be sent (via) Conakry, instead of via Dakar Mauritius 1254.7 1.4 0 1247.1 (where two borders had to be crossed). Transit Conakry/ Nigeria 6600.0 0 5400.0 12 000.0 Freetown would be by lorry … (estimate 1/2 containers monthly, Sierra Leone 472.1 400.2 0 872.3 ie 600 cases SEFK for Sierra Leone). Later they want BHSF, which South Africa 31 339.8 0 0 31 339.8 would be stuffed in same container, but documents/cases, would Uganda 1385.6 0 139.5 1525.1 have to be marked ‘in transit’. Zaire 2200.0 0 357.0 2557.0 Zimbabwe 2128.0 0 0 2128 Similarly, to avoid detection between Niger and Nigeria, Sorepex reported that ‘‘[D]irect imports to Nigeria [would be] through Mr *Reproduced from the original document in the British American Tobacco Document Archive. Adji…[who] would disguise the cigarette importations by calling Tobacco Control 2008;17:339–346. doi:10.1136/tc.2008.025999 341 Tob Control: first published as 10.1136/tc.2008.025999 on 10 July 2008. Downloaded from http://tobaccocontrol.bmj.com/ on June 15, 2024 by guest. Protected by copyright. Research paper Table 2 Total market by proportion from transit and transit market by proportion from BATUKE for selected African countries (1987)* BATUKE Total % Total Country market Local Imports Transit market % Imports % Transit. Nigeria 11.5 7.5 – 4.0 19.1 – 55 Sierra Leone 1.5 1.0 – 0.5 4 – 12 Ghana 2.0 1.75 – 0.25 2 – 14 Cameroon 3.5 3.0 – 0.5 10 – 68 Liberia 0.5 0.25 0.1 0.15 8 42 – Guinea-Conakry 1.6 – 1.6 40 40 – Senegal 2.0 1.4 (0.5) 0.6 10.1 26 – Cote d’Ivoire 3.8 3.4 (1.5) 0.2 0.2 3.1 50 5 Mali 2.0 0.8 0.8 0.4 – – – Burkina Faso 1.2 0.45 0.55 0.2 23 51 60 Benin 0.6 – 0.6 5 5 – Togo 0.6 – 0.6 3 3 – Gambia 0.3 – 0.3 1 1 – Mauritania 0.4 – 0.15 0.25 4 9 – Total 31.5 19.55 (2.0) 5.5 6.45 *Reproduced from the original document from the British American Tobacco Document Archive (Fenn ) BATUKE, British American Tobacco UK & Export. the shipment something else, e.g. matches …’’. In Zaire and Where one mode of transport became unavailable, the Sudan, distributors informed BAT of dangerous local conditions at distributor investigated alternatives: border crossings: The Djibouti Government has again closed the port for dhow [Arab sailing vessel] trade thereby preventing re-exports to Point 38 is an area of land on the Zaire/Sudan border near Somalia by this route. As on the previous occasion, our Uganda, it is somewhat of a no-man’s land and is a major centre distributor in Djibouti is investigating methods of supplying for barter. Because of the dangers in the area and the customs Somalia by overland route. situation in Kenya the lorries in convoys of 30–50 trucks are escorted through Kenya and Uganda by the army....Dr Kaboash would like to supply Benson & Hedges through this route and feels that 500 cases every 2 months would suffice with shipment ‘‘Taking more control of the business’’: BAT pursues stronger local by sea to Mombasa [sic] and that this business should start in presence April. This appeared to be an interesting opportunity which we The illegal nature of the business, and often unstable market should follow up. conditions, at times, led to tensions among BAT, Soropex and local agents, which may have played a part in BAT’s efforts to Another consideration in identifying border crossings was the have more control over its transit business. For example, in volume of potential trade to be achieved. In Sudan, Sorepex Djibouti, the failure of prepaid contraband to arrive raised the reported that an additional smuggling route might not only question of which party should incur the loss, with transiteers appease transiteers, but also would ensure larger distribution: 65 66 apparently threatening to cease moving BAT contraband. In Guinea, BAT became concerned that transiteers were also Re. Sodisa: I asked Daher to create a second sales circuit, parallel to his customary route, and to negotiate directly with the smuggling competitors’ brands: Sudanese who sell their gum Arabic [adhesive for cigarette One of Bobo’s key distributors, Hadi, the agent in Labe ´, has just papers] in Bangui (bypassing Ousta as intermediary). This will agreed to act as a transiteer for Marlboro. This is obviously in enable him to crack the monopoly of the Birao [city in Central direct conflict with his role in Bobo’s organisation and in the African Republic] dealers, whilst keeping them on his side (by view of the BAT representative is totally unacceptable. paying them commission and selling them small quantities of cigarettes) because these people are indispensable in negotiating These concerns followed earlier suspicions that a BAT border crossings; Daher will use this new circuit to sell 300 cartons which we will send him at the end of March. [Translated employee based in Guinea was also smuggling Marlboro from original French] cigarettes: For many countries, flexibility in the mode of transport (road, Enlarging previous info, RG [BAT executive Rob Galgut] said that PR [B&W executive Paul Richardson] had been known to rail, sea and air) was another important consideration. In boast that he made more selling containers of [sic] Marlboro than Guinea, military aircraft were used for air transport during the 61 he got from BAT/B&W… PR worked for BATUKE at one time, wet season. While the choice of transport was influenced by was well connected with transiteers, particularly in Conakry. time and cost, the deciding factor seemed to be likelihood of detection: BAT may have also sought more control of the business owing to a perceived loss of income from transit sales because of CIGARETTES BY AIR Cigarettes are arriving at Conakry Airport unstable market conditions in Africa. In 1987, BATUKE sought on a fairly regular basis. Air transport is obviously more to reduce reliance on Sorepex, as a cost-saving measure, but also expensive than traditional methods but it is quicker and customs because of the distributor’s failure to execute plans as at Conakry airport are certainly less strict and organised than at 62 46 port. expected. As described by BAT staff, ‘‘[w]e are continually 342 Tobacco Control 2008;17:339–346. doi:10.1136/tc.2008.025999 Tob Control: first published as 10.1136/tc.2008.025999 on 10 July 2008. Downloaded from http://tobaccocontrol.bmj.com/ on June 15, 2024 by guest. Protected by copyright. Research paper to be good (Ghana, Cameroon) ... this is highly political and the improving our knowledge of the transit end markets and taking best interests of the who[le] BAT group may not be the deciding more control of the business. Steps are being taken to diminish 64 factor … I accept that in retrospect we may have been over our reliance on Sorepex’’. optimistic about its [L&B] potential in Togo, Benin, Niger, but In West Africa, BAT established its own staff on the ground the main reason for its launch in those markets was not to to effectively bypass the distributor. At the same time, it was exploit domestic markets but for GT opportunities. important for the company that Sorepex remained to be seen as in command within ‘‘sensitive markets’’. For example, in Using small legal sales as cover seems to have been standard business agreements intended to govern the relationship practice for BAT in Africa. In Zaire the company evaluated between BAT and Sorepex into the 1990s, it was reported that: various options for undertaking this process: BAT has ‘‘staffed up’’ in West Africa to the point where there is There are two questions key to Sorepex’s future business in duplication of efforts between SOREPEX and BAT (UK&E). Our Zaire. objective now is to preserve the ‘‘fac ¸ade’’ that SOREPEX (a) Can Sorepex with BAT Z’s [BAT’s subsidiary in Zaire] represents between us and the sensitive markets of Togo, Benin, permission appoint another official importer who will pay taxes Niger (Unit I) and Equatorial Africa (Unit II), but at the same to act as cover for transit business? ... time, enable the BAT field force to take over the management of (b) If it is not feasible, would BAT Z consider selling official this important business. imports to Sorepex client directly and so enabling cover? A 1988 BATUKE document suggests that the company In Sierra Leone, it was recognised that the instigation of legal subsequently incorporated the role of the distributor, in cover could help ‘‘fend off the competition’’. In Nigeria, where developing and maintaining supply routes for contraband, into legal imports commenced in 1990, a handwritten memo the role of the company’s own ‘‘Red Sea/Central’’ area manager: describes the desire to create a ‘‘legal cover’’ for contraband: Transit—as a result of the hard currency shortages and internal Obviously it is practically impossible to develop a pure GT chaos and corruption in most markets there is a growing demand [general trade] brand, thus a home base is necessary. It would for transit. The Job Holder is required to evaluate routes, prices therefore seem logical to import legally some quantity, allowing and risks, then to recommend action to the Area Manager. He is also for an advertising campaign to take place … also required to exercise judgement over sales/shipments when markets are supplied by more than one source. Constant Similarly, Paul Richardson asserted that legal imports would vigilance is necessary in pricing because of the competitiveness of serve as a cover for smuggling Kool cigarettes and for enabling the area and the problem of parallel shipments between various the brand’s local promotion: territories within the Middle East and West Africa. Kool is considered to be the best B&W product offering for the BAT staff, such as Paul Richardson (BritCo, BAT subsidiary in Nigerian market. ... Both legal and transit importing would be Niger), also appeared to take a more active role tracking the required to properly—and profitably—develop the brand … Legal movement of contraband: imports would be loss making and significantly under invoiced because of Nigeria’s high duty rates. Legal [sic] imports would I would however like to take the opportunity [afforded by a trip however establish a legitimate presence and enable B&W to to Abidjan, Ivory Coast] to visit Sierra Leone en route primarily promote the brand. to assess the volume of 555 transit and to a lesser extent that of Lucky Strike. I would also be interested in finding out if any of the Gladstone brought through Conakry port ‘‘in transit for 69 DISCUSSION Sierra Leone’’ is actually being consumed there. Internal BAT documents demonstrate that the use of cigarette smuggling to gain market access to emerging markets extended to the African continent. Documents suggest that the contra- Using legal sales ‘‘to provide cover for advertising and GT band trade had helped BAT gain leverage in negotiating with business’’ governments, compete for market share, circumvent local In 1986, BATUKE recognised that legal sales of certain brands import restrictions and overcome local political and economic remained low in volume in West Africa. However, documents instability and gain a market presence. Although senior also suggest that low volume trade served two essential business executives have denied company involvement, or attributed purposes: (1) to enable BAT to advertise its brands in key illicit activity to rogue individuals, documents suggest contra- markets and (2) to facilitate much larger sales via the contra- band had been strategically central to furthering corporate band trade. As described in a 1991 memorandum on Cameroon objectives. to senior BAT executives: When the issue…was discussed where BATUKE wish to appoint Implications for tobacco control policy a domestic importer enabling us to provide cover for advertising Designing effective legislative and administrative initiatives and GT business, Sir Patrick [Sheehy, BAT Industries Chairman] An understanding of the organisation and logistics of cigarette felt that it was perfectly acceptable for BAT Cameroon to smuggling in Africa provides essential insights for designing recommend a domestic importer for BHS [Benson & Hedges effective legislative and administrative responses. Contraband Specials]. tobacco trade is exceedingly dynamic in terms of supply routes and modes of transport. It is not a consequence of price Another 1991 memo, regarding the launch of a new brand in differentials. Contraband trade has been an integral element of West Africa, suggests similar intentions to use newly introduced BAT’s market entry strategy, which is not driven by short term legal cigarettes as cover for contraband sales: financial gain, but rather efforts are undertaken to advance longer-term corporate objectives. Therefore, policy responses The reasons why we were so enthusiastic about Lambert & Butler were: ... the possibility of GT exploitation were considered cannot focus solely on current mechanisms of smuggling, Tobacco Control 2008;17:339–346. doi:10.1136/tc.2008.025999 343 Tob Control: first published as 10.1136/tc.2008.025999 on 10 July 2008. Downloaded from http://tobaccocontrol.bmj.com/ on June 15, 2024 by guest. Protected by copyright. Research paper especially those reliant on controls at the border, because these agreements with customs authorities in some 35 countries. In policy strategies are likely to be circumvented. Legislation must November 2007, shortly before WHO-led negotiations com- be expansive, and the process for amendment sufficiently menced towards a protocol, BAT stated that it ‘‘look[s] forward flexible to ensure that smuggling means not yet exposed are to partnering with governments in the development, negotia- tion and implementation of an effective illicit trade protocol’’. either captured or can be quickly added to the regulatory In Africa, based on the emphasis placed by the Commission for response. Given that smuggling abetted by TTCs in country X Africa on the role of customs reform in promoting regional most often occurs between countries Y and Z, effective economic development, BAT along with Unilever has co- legislative controls should include conspiracy to smuggle in sponsored the Business Action for Improving Customs another country. Administration in Africa (BAFICAA). BAFICAA aims ‘‘to help Similarly, measures that seek only to deter contraband by governments realise that the private sector can be an active removing the immediate economic gain will fail to address how partner in improving the customs environment’’, and that the industry uses smuggling tactically, often as a loss leader, ‘‘the private sector must be the driver of change’’. BAT’s recent either to undermine competition or drive governments into position paper on the proposed FCTC protocol claims that the making policy decisions that best suit TTCs’ needs. group is ‘‘well placed to offer views on a package of practical In addition to sufficiently large fines applied at the corporate measures’’ to reduce tobacco smuggling. level, actively enforced criminal penalties that include incarcera- The findings of this paper suggest that BAT’s complicity in tion for corporate officials is warranted. The potential for contraband trade extended across the African continent, and lengthy prison sentence imposed on senior tobacco company that its efforts to contribute to international cooperation to officials will probably create a far greater deterrent effect than address this problem should be understood in this context. In confiscation of product and profits on those instances where reality, BAT’s proposals seek to advance corporate interests and contraband is intercepted. Perhaps most important of all, undermine an effective global response to tobacco smuggling. sharing of information and reciprocal enforcement of judgments For example, BAT has prioritised the problem of counterfeit will be essential. Transborder movement of information and cigarettes, for which protection and redress already exists via judgments is necessary to combat transborder smuggling of trade agreements. According to BAT chairman Jan du Plessis, cigarettes. contraband serves to ‘‘deprive governments of tax revenues and harm legitimate businesses and their suppliers, distributors and Regional and global considerations retailers … [and] stimulate and fund criminal activity’’. Such The documents reviewed in this paper reiterate the importance statements, however, must be evaluated within the context of of addressing the contraband trade from a regional and global this paper’s analysis of BAT’s complicity in contraband activity perspective. The illicit supply of BAT cigarettes to Africa has in Africa, which adds to existing documentation of such activity been carried out, via distributors and transiteers, with little elsewhere in the world. regard for national borders. Furthermore, the limited capacity of customs and excise in many African countries has been unable CONCLUSION to prevent the establishment of regional supply routes across Documents show that BAT has advanced its corporate interests the continent. These findings support the conclusion of the First by systematically exploiting strategic opportunities to supply Session of the Intergovernmental Negotiating Body on a the contraband tobacco trade throughout Africa. To date, BAT Protocol on Illicit Trade in Tobacco Products, of the WHO and its senior directors have remained unaccountable via FCTC, for ‘‘incorporating strong provisions on international litigation or public inquiry for these activities, which was cooperation’’. epitomised by the abandoned investigation by the UK Effective deterrents, including criminal sanctions as advo- Department of Trade and Industry in 2004 amid reports of cated here, will only happen if manufacturers remain legally political pressure. The lack of public accountability to date for responsible for their products as they move through the supply these activities, in some of the world’s poorest countries, starkly chain. This will require a systematically collected evidentiary undermines BAT’s claims of corporate social responsibility. base at all stages. That evidence can be most readily derived Above all, it calls into question efforts by the TTCs to be using a licensing system throughout the supply chain and the recognised as legitimate participants in global tobacco control. sort of closely monitored tracking and tracing system suggested by others. LIMITATIONS Of all WHO regions, Africa represents the region with the Information from customs and law enforcement bodies indicate greatest need for technical assistance to gather and analyse data, that smuggling is a major and growing problem in Africa, based develop and maintain tracking and tracing systems, and on frequency and size of seizures, although there remains no investigate and prosecute alleged offenders. Africa would benefit systematic collection of data. On the role of TTCs, one from the sharing of experiences of other regions, and the commentator writes, ‘‘[b]ecause of the illegal nature of establishment of a regional resource centre for ‘‘enriching the smuggling, empirical research into firm participation has been skills sets of enforcement agencies’’. TTCs’ role in policy development What this paper adds This paper affirms the need to exclude TTCs from involvement in the development of policies to combat tobacco smuggling. This paper adds to the existing evidence of the transnational The industry has adopted a public position of promoting actions tobacco companies’ (TTCs) knowledge of and complicity in to tackle contraband as part of ‘‘balanced regulation’’ framed cigarette smuggling and is the first detailed and comprehensive within claims of corporate social responsibility. BAT, in analysis of internal tobacco industry documents regarding the particular, has depicted itself as working with governments TTCs’ smuggling activities in Africa. worldwide to combat illicit trade by, for example, signing 344 Tobacco Control 2008;17:339–346. doi:10.1136/tc.2008.025999 Tob Control: first published as 10.1136/tc.2008.025999 on 10 July 2008. Downloaded from http://tobaccocontrol.bmj.com/ on June 15, 2024 by guest. Protected by copyright. Research paper 20. Oluwafemi A. Regional summary for the African region. In: Shafey O, Dolwick S, daunting if not impossible to undertake’’. While publicly Gunidon GE, eds. 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