Hong Kong Customs Seize $120 Million in Illicit Cigarettes
Hong Kong Customs reported Monday that it had intercepted a shipment of approximately 42 million illicit cigarettes with an estimated worth of HK$120 million (US$15.3 million) on the open market.
As part of an anti-illicit cigarette operation, officers uncovered the cigarettes in several containers in the Tuen Mun and Fo Tan regions last week. Had the shipments slipped past authorities and made their way onto the black market, it would have resulted in lost duty revenues of approximately HK$81 million ($10.2 million), officials said.
The 42 million cigarettes were discovered inside of four separate 40-foot shipping containers from both lorry trucks and container yards. Photographs released by police show the trucks packed to the brim, with more cigarette sleeves stacked in front of the trucks eight boxes high, 24 wide.
While not linked by Hong Kong authorities to this particular case, investigations by OCCRP have highlighted the role transnational tobacco companies play in smuggling their own product across the globe.
Big Tobacco companies such as Philip Morris International, British American Tobacco, and China Tobacco are believed to be smuggling or working with smugglers in order to penetrate new markets, avoid taxes, and establish brand loyalty among their users.
Experts such as Benoît Gomis from the University of Toronto have documented how tobacco companies can offer their product at a cheaper price if they divert it onto the black market, avoiding high excise taxes. This leads to more sales and ultimately greater profit, Gomis says.
This is reflected in the recent seizure made by Hong Kong authorities; the duty value for cigarettes on the island represents approximately 67 percent of its retail value.
Customs officials arrested two men aged 56 and 65, respectively, as part of the operation. The investigation remains ongoing.
Under the island’s import and export regulations, the illicit trade of cigarettes carries with it a maximum fine of HK$1 million ($127,500) and a potential maximum prison sentence of two years.
But this penalty is hardly even a drop in the bucket when compared to the lucrative enterprise that is the illicit tobacco trade.
In Venezuela, for instance, an OCCRP investigation uncovered how the consumption of illegal cigarettes had grown by 300 percent from 2019 to 2021. This resulted in annual tax revenue losses of US$130 million for the Venezuelan government.