As excise taxes increase, so do the prices of tobacco products. The increased cost of cigarettes creates a financial incentive for criminals to engage in contraband cigarette trafficking. Criminal organizations exploit these higher costs by selling smuggled, counterfeit, illegally-imported and stolen tobacco products for their own financial gain.
The illicit trade includes trafficking in:
- smuggled cigarettes (genuine cigarettes intended for sale in the United States for which applicable excise taxes have not been paid);
- counterfeit cigarettes (cigarettes not manufactured by or with the consent of the trademark owner);
- illegally imported cigarettes (cigarettes manufactured for sale outside the United States);
- and stolen cigarettes (cigarettes that become contraband as a result of crimes such as truck hijacking, theft from cargo shipments and warehouses, or stealing from retail stores).
Illicit trade is a concern for our business, law enforcement and regulatory authorities, as well as wholesalers and retailers. Illicit activity deprives governments of tax revenue and hurts law-abiding businesses. Tobacco diversion costs the states and the federal government more than $5 billion in annual revenue from unpaid excise taxes1. One shipping container of counterfeit cigarettes represents more than $900,000 in state and federal tax losses2.
Contraband cigarette sales undermine trade programs that PM USA offers wholesalers and retailers to responsibly market and sell its products, and harms legitimate cigarette wholesalers and retailers who can face unfair competition when lower-priced contraband cigarettes are introduced into a market.
Altria’s tobacco operating companies (PM USA, U.S. Smokeless Tobacco Company, and John Middleton) actively work to address the problem of contraband tobacco products.
- We support federal, state and local law enforcement and regulatory agencies to address the sale and distribution of contraband tobacco products.
- We monitor the marketplace through intelligence gathering and product purchase programs to understand contraband cigarettes and other tobacco product trends.
- We enforce trade policies at the retail and wholesale level.
- We pursue civil remedies, including litigation, to protect our trademarks.
We support federal and state legislation to better protect the legitimate channels of distribution, impose more stringent penalties for the violation of laws, and provide additional tools for law enforcement. For example, at the federal level, our tobacco companies strongly supported the 2010 Prevent All Cigarette Trafficking Act (The PACT Act). The PACT Act strengthens federal laws governing Internet sale of cigarettes and smokeless tobacco products.
Altria's tobacco operating companies support three websites: