Combating Illicit Trade

Tobacco Trade Channel Integrity​
Our tobacco companies are committed to tobacco trade channel integrity and protecting our companies' brands from illicit trade.
Tobacco Trade Channel Integrity​
Our tobacco companies are committed to tobacco trade channel integrity and protecting our companies' brands from illicit trade.
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Each year adults spend billions of dollars buying tobacco products. The size of the tobacco industry makes it attractive to criminals who make counterfeit products or illegally import or smuggle genuine products across states or even countries.
While the vast majority of tobacco products sold in the United States are genuine and sold with all applicable taxes paid, illicit trade in tobacco products has an effect on adult tobacco consumers and our companies. The illicit tobacco trade undermines public health initiatives and negatively affects others, including:
  • retailers and wholesalers who lose legitimate sales to criminals;
  • federal, state and local governments which lose tobacco excise and sales taxes;
  • law enforcement authorities who must dedicate resources to combating the illicit tobacco trade; and
  • all of us, to the extent funds from the illicit tobacco trade may support organized, sometimes violent, criminal organizations around the world and in our communities.
Additionally, for Altria’s tobacco companies, the illicit tobacco trade undermines the investments they make in their brands and in the trade channels through which their products are distributed and sold.
For these reasons, our tobacco companies fight the illicit tobacco trade and dedicate resources to combat these criminal activities, including:
  • monitoring the marketplace through internet monitoring, consumer and trade reports, intelligence gathering, product purchase programs and discarded cigarette pack collections to better understand the illicit market;
  • clearly communicating to wholesalers and retailers the expectations and requirements that prohibit them from engaging in any form of illicit tobacco trade;
  • maintaining a system to monitor compliance with and address violations of the terms of our tobacco companies’ trade programs and policies;
  • supporting law enforcement and regulatory agencies at the federal, state and local levels to address the distribution and sale of illicit tobacco products;
  • investigating those involved in importing and selling illicit tobacco products and participating in programs designed to support law enforcement action;
  • pursuing litigation to protect our tobacco companies' trademarks;
  • shaping policy, legislation and regulation at the federal, state and local levels to improve the enforcement environment against contraband tobacco; and
  • implementing security features on our tobacco companies’ products so they can be distinguished from counterfeits.
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Here are a few examples of our companies’ approach:
Preventing Unfair Competition​
 
​Law-abiding wholesalers and retailers face unfair competition when illicit tobacco enters a market. Our tobacco companies require wholesalers and retailers to comply with all applicable laws and regulations as well as the terms of their trade programs and policies. For example, retailers are obligated to collect and remit applicable state and local excise taxes.

Our tobacco companies’ trade programs and policies create incentives to help maintain the integrity of tobacco trade channels. For example, PM USA limits the volume of cigarettes sold in a single retail transaction to make it more difficult for purchasers who intend to illegally resell cigarettes in higher-tax states to acquire large volumes of cigarettes. Trade partners who violate our programs or policies are subject to financial penalties and termination of program participation. We review wholesale customer and retail trade partner compliance.
Helping on the Front Lines
 
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 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 have 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 and other illegal tobacco products, usually cigarettes.​
Taking Action Through Litigation & Legislation
 
​We take action against third parties for infringing company trademarks and other intellectual property rights.
 
For example, PM USA has filed​ lawsuits against retailers who sell counterfeit versions of PM USA cigarettes and importers who bring them into the U.S. The company has also filed civil lawsuits against website operators who sell counterfeit and illegally-imported versions of PM USA cigarettes.
 
During the past several years, PM USA filed almost 200 lawsuits against nearly 4,000 retailers and Internet sites for violating its trademark rights.
 
We also actively work with legislators and regulators at both the federal and state levels to help develop public policy designed to combat illicit trade activity and impose more stringent penalties for violations of anti-trafficking laws.
 
At the federal level, we were an early supporter of all major anti-contraband tobacco laws enacted during the past 15 years, including The Prevent All Cigarette Trafficking Act. The PACT Act, enacted in 2010, prohibits the sale of cigarettes or smokeless tobacco products over the Internet without the seller paying the required state excise taxes. In addition, it generally makes cigarettes and smokeless tobacco non-mailable through the U.S. Postal Service.
 
We have been a leading supporter of state model anti-contraband legislation that requires all cigarettes to be tax-stamped, requires all businesses selling cigarettes to be licensed, imposes significant reporting and record-keeping requirements and increases state civil and criminal penalties.​
 
Examples of How We Fight the Illicit Tobacco Trade
There are many ways that Altria Client Services’ Brand and Trade Channel Integrity department helps fight the illicit tobacco trade. A few examples are as follows:​​
  • Law enforcement is on the front lines in combating the illicit tobacco trade and we support these efforts in a number of ways. Two such ways are we train law enforcement officers on illicit tobacco trade issues and support investigations around the country. In 2014, we trained 1,944 law enforcement officers and supported investigations that led to 79 arrests.
  • The New York State Cigarette Strike Force (managed by the New York State Department of Taxation and Finance) continues to combat illegal tobacco trafficking and sales and we support them in these efforts. Driven by relatively high state and local excise taxes on cigarettes (up to $5.85 per pack), illegal cigarette trafficking has become a significant public policy and law enforcement issue in New York City and New York State. The multi-agency strike force is composed of state, local and federal agencies dedicated to stopping the influx of contraband tobacco products into New York. It also focuses on tracing illicit financial gains from criminal activity. BTCI supported numerous New York law enforcement investigations – resulting in numerous arrests of cigarette traffickers.
  • Sometimes detecting illicit tobacco products can be difficult as traffickers may go to great lengths to keep them concealed from law enforcement agents. To help law enforcement agents detect concealed tobacco we have tobacco-detection canines​ that we make available to law enforcement when requested. These canines have proven to be such a valuable resource that, in 2015, we added a third tobacco-detection canine, based in Chicago to support the Cook County Department of Revenue’s efforts in combating illicit cigarette trafficking.
  • Our wholesale and retail trade partners are important in the fight against the illicit tobacco trade. This is why we actively monitor compliance with, and address violations of, Altria’s tobacco companies’ wholesale and retail programs and trade policies. In 2014, BTCI initiated account reviews of 95 direct customer and retail locations where we identified potential program or policy violations that may indicate involvement in cigarette trafficking. BTCI, through Altria Group Distribution Company, ended relationships where we found significant violations.
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