The cigarettes we manufacture should be sold in compliance with all laws and regulations.
The illicit cigarette trade undermines the investment we make in our brands and in the legitimate trade channels through which our products are sold. It also undermines public health initiatives and creates unfair competition for legitimate businesses that are unable to compete with illicit cigarette distributors and sellers.
While illicit cigarette trafficking is a business and public health issue, it’s also a revenue and criminal issue. Federal, state and local governments lose billions of dollars a year in uncollected cigarette taxes and fees and must contend with other, sometimes violent, crimes that are associated with illicit cigarette trafficking. Drawn by high profits and relatively low risk, a variety of criminals engage in the illicit distribution and sale of cigarettes in the U.S. These criminals range from small-time smugglers to organized criminal groups.
The illicit cigarette trade poses an ongoing concern for our business, government and law enforcement, as well as the legitimate wholesale and retail trade channels. That’s why, through Altria’s Brand & Trade Channel Integrity (BTCI) department, we play an active role in addressing this problem and supporting the work of regulatory and law enforcement authorities. BTCI helps protect the integrity of its brands and the legitimate trade channels through which our brands are distributed and sold.
The vast majority of Marlboro cigarettes in the market are genuine cigarettes we manufactured and are sold legally with all appropriate taxes paid. However, we do not want consumers to inadvertently purchase illicit cigarettes. Illicit cigarettes can take a number of forms, including counterfeit, genuine smuggled cigarettes and illegally-imported (or grey market) cigarettes.
Illicit cigarettes are more likely to be found at sources such as flea markets, online sellers, street sellers (including sidewalk and backpack vendors), and places where cigarettes are not generally sold (e.g. beauty salons). Deeply discounted cigarettes are more likely to be either counterfeit cigarettes or cigarettes that have been illegally smuggled. If the price of Marlboro cigarettes seems too good to be true, it probably is.
If a retailer pulls a pack of cigarettes from a source other than the fixture behind the counter, such as a hidden drawer or box under the counter, it may be counterfeit or illegally smuggled product. We only sell our products in the U.S. All foreign variations of Marlboro and our other brands cannot be legally imported into or sold in the U.S.
Cigarettes should have the state tax stamp of the state in which it was purchased. For example, cigarettes purchased in California should have a California state stamp on the bottom. Cigarettes with the wrong state stamp are most often illegally smuggled or counterfeit. However, North Carolina, South Carolina and North Dakota do not require tax stamps.
We play a major role in helping to suppress illicit tobacco trade activity. Here are a few examples:
Law-abiding wholesalers and retailers face unfair competition when illicit cigarettes enter a market. We expect wholesalers and retailers of our products to comply with all applicable laws and regulations as well as the terms of our trade policies and programs. For example, retailers are obligated to collect and remit applicable state and local excise taxes.
Our trade policies and programs create incentives to help maintain the integrity of tobacco trade channels through our wholesale and retail partners. For example, limits on the volume of cigarettes sold in a single retail transaction make it more difficult for purchasers who intend to illegally resell cigarettes in higher-tax states to acquire larger volumes of cigarettes. Trade partners who violate our policies or programs are subject to financial penalties and up to termination of program participation. Cigarette sales should only occur where there is reliable age verification, such as in face-to-face transactions.
We actively monitor the marketplace for evidence of illicit trade. We do this by monitoring the Internet, calls from consumers and the trade. We also purchase tobacco products at retail outlets across the country and collect discarded cigarette packs to understand the nature and extent of illicit trade in key markets.
Law enforcement is on the front lines in the battle against illicit tobacco products. We support law enforcement by:
- providing information and actionable intelligence gathered through market monitoring and investigative programs;
- providing law enforcement with product, training, funding and information to support ongoing investigations;
- inspecting and authenticating product packaging; and
- destroying seized product.
We work with law enforcement in a variety of locations across the country. For example, we’ve supported numerous investigations by law enforcement agencies in California, New York and Virginia involving illicit trade. These investigations have led to hundreds of arrests and significant seizures of smuggled tobacco products, usually cigarettes. In Los Angeles, law enforcement and the judicial system are fighting cigarette trafficking with a comprehensive approach that is working.
The application of state excise tax stamps is an important component of a comprehensive approach to address contraband cigarettes. Because excise tax rates vary from state-to-state, it is important that each state require stamps that signify the tax has been paid and identifies that the product is for sale in a specific state.
Cigarette traffickers exploit the variance in state excise taxes to generate illegal profits at the expense of legitimate, tax-paying businesses. To address this problem, all states should require that a tax stamp be affixed to each pack of cigarettes. These stamps should include a serial number or, where applicable, a stamp that denotes that the cigarettes are tax-exempt (e.g. qualified Native American sales).