Illicit Trade – RRPs: International

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UK: January 2024

The number of illegal vapes seized in the UK more than quadrupled1 as the authorities have taken hold of 4.5Mn vapes (weighing nearly 10 tonnes) in the first 10 months of 2023. According to the figures released to the BBC in response to an Freedom of Information (FOI) request, the UK Border Force seized just 4,430 vapes in 2021 and close to 1Mn vapes in 2022.

Border Force is responsible for intercepting illegal vapes coming into the UK from overseas. In most cases, Border Force seizes vapes for breaching product safety rules; to a lesser extent, it also seizes counterfeit vapes (i.e. fake versions of the vapes registered with the Medicines and Healthcare Products Regulatory Agency) and shipments breaching customs procedures.

Once products enter the UK, the responsibility falls to Trading Standards teams at local councils. Trading Standards seized more than 1.5Mn vapes last year – up from next to none in 2020. In Manchester, a hub for both the legal and illegal vape trade, Trading Standards seized 158,000 illegal vapes in 2023 – a more than tenfold increase year-on-year basis. Meanwhile, vape seizures in the London borough, which covers the Heathrow airport, declined by more than 80% to 224,000 in 2023 as the increased enforcement around the Airport led the importers to use other routes.

India: January 2024

The Ministry of Health & Family Welfare demands Director General of Police (DGP) to act against illegal sale of e-cigarettes2 and to issue necessary instructions to all the police stations to implement the PECA (Prohibition of Electronic Cigarettes Act 2019) requirements. The Ministry further required the DGP to provide monthly data on PECA violations.

The Ministry points out to the consumer complaints (i.e. e-cigarettes being sold despite the prohibition) as an indication of proper inspection and monitoring not being conducted at the state level. Production, importation, exportation, transportation, storage, distribution, sales and advertising of e-cigarettes are banned in India under the PECA which came into force in 2019.

Australia: November 2023

Australian Border Force seized 32 tonnes of vapes in one month3. Therapeutic Goods Administration (TGA) states that 92% of the seized products were unlawful and more than 60% were disposable vapes from brands already deemed in breach of the minimum safety and quality standards. Currently, illegally importing/supplying “unapproved therapeutic goods” (such as nicotine vapes without a TGA-license/permit) carries a punishment of up to five years in prison and/or A$1.25Mn fine in Australia.

Recall: Nicotine is classified under the Poisons Standard as a “prescription only medicine” (Schedule 4)4 in Australia, except for smoking tobacco and NRTs (preparations for buccal/trans-dermal administration used as an aid in withdrawal from tobacco smoking).

Finland: October 2023

Finnish Customs reported 80% drop in the illegal importation of snus during the January – September 2023 period5. The reduction in snus seizures coincides with the lifting of nicotine pouch importation ban (see below for further details) and the liberalization of nicotine pouch sales – suggesting a potential shift in consumer behavior following the availability of nicotine pouches in the Finnish market.

Recall: In April 2023, the Finnish Medicines Agency (FIMEA) reassessed the classification of the nicotine pouches6 and decided that nicotine pouches can no longer routinely be classified as medicinal products (solely based on the fact that they contain nicotine, a substance with pharmacological influence). FIMEA also stated that nicotine pouches largely meet the definition of tobacco substitute and their regulation should be included in tobacco legislation.

Mexico: September 2023

According to a recent Nielsen survey, 10% of the Mexican adult population are currently using some type of electronic nicotine delivery device7 – despite both e-cigarettes and heated tobacco products are banned in the country. The e-nicotine market is estimated at MXN5Bn (US$280Mn) with 77% of the e-nicotine consumers being in the age bracket of 19-39 years old.

Background

The World Health Organization (WHO) defines “illicit tobacco trade” as “any practice or conduct prohibited by law and which relates to production, shipment, receipt, possession, distribution, sale or purchase including any practice or conduct intended to facilitate such activity”.

The most common form of illicit tobacco trade for cigarettes are:

– Contraband: genuine cigarettes that have been bought in a low-tax country and which exceed legal border limits or are acquired without taxes for export purposes, to be then illegally re-sold in a market with higher prices

– Counterfeit: cigarettes manufactured without authorization of the rightful owners and with intent to deceive consumers and to avoid paying duty

However, the situation is different for the RRPs. Like the category itself, the illicit trade in RRPs (heated tobacco, e-cigarettes and modern oral tobacco) are also in a nascent stage.

– E-cigarettes: As the category is largely un-taxed (i.e. no excise tax), prices vary little from one market to another. Thereby, contraband is not a relevant issue. Moreover, as there are no strong brands or technologically superior products (- with underlying technology being shared by the manufacturers), counterfeit is not a relevant issue either. Illicit trade activities most commonly observed for the category include: e-cigarette sales in countries/channels where the category is banned and selling e-cigarettes that don’t comply with the legal specifications in terms of nicotine content and/or flavors. The current situation of illicit trade in modern oral tobacco is similar to that of e-cigarettes.

– Heated tobacco: This category can be seen as the extension of traditional tobacco for which both contraband and counterfeit could be relevant. However, the emergence of sizable consumer group and well-known brands are the two prerequisites for the illicit product. PMI’s TEREA/HEETS (used with IQOS) is probably reaching a tipping point in this regards. There are already some reported cases of contraband heated tobacco sticks. However, considering the technology involved in the IQOS product, PMI is better positioned to fight the illicit trade when compared to the conventional cigarettes.

References:

  1. Over four million illegal vapes seized at border – BBC News ↩︎
  2. Health ministry directs State DGP to act against illegal sale of e-cigarettes – Hindustan Times ↩︎
  3. $11m haul of illegal nicotine vapes seized at the border | Kalgoorlie Miner (kalminer.com.au) ↩︎
  4. https://www.tobaccoinaustralia.org.au/chapter-18-e-cigarettes/18-13-legal-status-in-australia ↩︎
  5. https://www.helsinkitimes.fi/finland/finland-news/domestic/24253-decline-in-illegal-snus-imports-linked-to-the-deregulation-of-nicotine-pouch-sales.html ↩︎
  6. https://www.fimea.fi/web/en/-/fimea-supports-legislative-reform-concerning-nicotine-pouches ↩︎
  7. https://politico.mx/5-datos-para-entender-el-mercado-del-vapeo-en-mexico ↩︎

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