The cigarette smuggling centre of Europe

Smoking in Ireland fell sharply after the workplace ban and we briefly led the world in anti-smoking measures. Six years on, the country is a tobacco smuggling blackspot, and a quarter of cigarettes smoked here are illegal. In the first of a two-part series, PAUL CULLEN, Consumer Affairs Correspondent, reports

ON A DREARY winter day in Kildare town, there’s little sign at the town’s market that illegal cigarettes are on sale. Some stalls are openly selling counterfeit DVDs but a tour fails to reveal anyone who can give a smoker a quick fix.

I buy some bananas at the fruit-and-veg stall and ask where cigarettes can be had. The woman nods towards a van-cum-stand selling washing powder and bleach, fronted by a middle-aged man.

The guy who sells cigarettes isn’t around today, I’m told, and the man moves away beneath the awning as a Garda car rounds the corner. My trip has been wasted, it appears, and I slouch off, until someone taps me on the back. “What would you like? We have them all,” says a boy, aged no more than seven, with the confidence of an accomplished salesman. I hunker down and ask for John Player Blue. He tells me to wait.

The boy crosses the road and disappears into the back of the stall with the man. After a short while, the boy emerges with a packet under his arm. He wants €45 for the carton of 200 – which would normally retail for more than €80 – and refuses to haggle. In return for my €50 note, he gives me a fiver peeled off a wad of notes pulled from his pocket.

This scene is replicated throughout Ireland on any given day. One in four cigarettes smoked in the country today is illegal. In the space of a few years, a vast network has sprung up to offload counterfeit or contraband cigarettes in markets, on the street, through the internet and even through mainstream shops.

Just a few short years ago, Ireland was a world leader in the war against smoking, but today we hold a more dubious distinction, as the European “capital” of cigarette smuggling.

Six years ago, the workplace smoking ban was introduced amid predictions that smoking would become a habit of the past. For a while, the smoking rate dipped from 29 per cent to 23 per cent of the population. Today, though, smuggling is a booming racket costing the Exchequer at least €400 million a year and smoking prevalence is back up at 29 per cent.

Last year, Ireland recorded the largest single seizure of smuggled cigarettes made in the EU. Increasingly, this country is seen as both a destination and a trans-shipment point for counterfeit and contraband tobacco.

In Dublin, traditional shopping streets such as Moore Street and Meath Street are favourites of black-marketeers, as are bingo halls. Markets everywhere are magnets for the trade. In Co Tipperary, a former county councillor sells cigarettes from his car. According to gardaí, Travellers are involved in the trade in Cork and Mullingar. Community noticeboards, even in churches, frequently carry ads offering cigarettes.

Deirdre Healy, corporate affairs manager of John Player Sons, says the cigarettes I bought most likely came from a factory in China and were imported by a circuitous route to Ireland. I don’t smoke, but I try them out on friends and colleagues who do. None can tell the difference and some even prefer the counterfeit cigarette.

Year on year, seizures of illegal cigarettes are up, but both health campaigners and tobacco companies say the authorities are not doing enough to control the problem. The Garda Síochána is criticised for not taking the issue seriously, while the courts are faulted for excessive leniency in imposing penalties. Elaborate laws govern the selling and advertising of tobacco in legitimate outlets, yet the inspectors who carry out checks do nothing about illegal selling.

But if all smoking is lethal, should we care where the cigarettes come from? Dave Godwin, head of criminal investigations with the Revenue’s Customs Service, which has responsibility for tracking down smugglers coming through the country’s airports and ports, says we should.

“We’re seeing clear evidence of the involvement of organised crime gangs in the smuggling,” he says. “People think this is a victimless crime, but the taxes lost to the Exchequer could be used to fund much-needed schools and hospitals.”

The illegal cigarette trade is now one of the most profitable forms of crime and is the number-one method of defrauding EU taxpayers, according to the Commission’s Anti-Fraud Office (Olaf). As lucrative as the drugs trade, it is increasingly favoured because the penalties for being caught are far lighter. Last year, there were 163 convictions for cigarette smuggling, though only 14 resulted in a prison sentence. The average fine was just over €500.

The current Finance Bill envisages a tenfold increase in the maximum penalty for handling contraband, from €12,695 to €126,970.

Despite of the success of the Customs Service in detecting huge consignments of illicit product, smuggling continues to diversify and grow. Last year, the value of smuggled cigarettes seized by customs was more than €218 million, up 60 per cent on the previous year. Almost 60 per cent of this total related to counterfeit cigarettes and the rest was contraband, ie, genuine cigarettes illegally imported from countries where the tax and the overall price of a packet is much lower than in Ireland. “Eighteen months ago I would have said this was primarily an urban phenomenon,” says Vincent Jennings, of the Convenience Stores and Newsagents Association, “but now we’re getting reports of illicit selling in every town in Ireland.”

From markets to bingo halls, betting shops to large workplaces, the illicit trade in fake cigarettes is booming. Anti-smoking group Ash says it has reports of schools and dole queues being targeted by the smugglers.

At the same time, tobacco smuggling has taken on many characteristics of the illegal drug trade: the deployment of children as mules and gofers, the use of pay-as-you-go mobile phones to evade detection, and the development of sophisticated re-supply networks to allow a dealer to keep stocks low, thereby minimising the risk of detection or serious penalties. Think of an episode of The Wire in an Irish country market and you get some idea of the nod-and-wink language of illegal cigarette supply in hundreds of locations around the country.

The trade continues to assume new forms. Last year, for the first time, the Customs Service seized water-pipe tobacco arriving from the United Arab Emirates. Detections of hand-rolled tobacco have increased. Also for the first time, a consignment of semi-processed tobacco, complete with false packaging and rolls of filters, was discovered en route from Denmark. Officials believe there may be a cigarette manufacturing plant in operation in the Border area, but as yet nothing has been found.

Smuggling takes many forms and operates on many different levels, which is partly why the authorities are struggling to deal with the problem. Small-time smugglers bring back bag-loads of contraband cigarettes from the Canaries or eastern Europe and sell them on to subsidise their travel (the importation of up to 200 cigarettes is permitted from outside the EU for personal use). The financial temptation is stark: in Ireland, €6.71 of the €8.37 you spend on a pack of 20 cigarettes goes to the State in the form of duty and taxes; while in countries such as Russia and the Ukraine, a pack costs as little as 50c.

But often what looks like harmless DIY smuggling is criminally planned and vast in scale. Last year, astonished customs officers, swooping on one flight from eastern Europe to Dublin, uncovered an attempt by 35 of the passengers to bring in more than 500,000 cigarettes. Once they knew they were going to be checked, the passengers fled without collecting their loads.

The smuggled cigarettes are offloaded in a variety of ways. The Customs Service is seriously concerned about a rise in detections in mainstream retail shops. In one west of Ireland town, a staff member in a local shop was telling customers he could procure their cigarettes more cheaply until warned off recently by gardaí.

“We’re often told that it’s down to a shop manager trying to make a killing, but I’d be sceptical about that,” says Dave Godwin.

Increasingly, though, the cigarettes being smuggled into Ireland are counterfeit rather than contraband. That means a loss not only for the Exchequer but also for the tobacco manufacturers. China is the giant of the counterfeit cigarette world, though you won’t get anyone in authority to say it openly, for fear of causing offence.

“What we’re seeing is not the product of some back-street operation – it comes from mainstream production plants making significant revenue,” says one informed source.

The EU and China signed an agreement in 2004 under which the Chinese agreed to tackle fraud and counterfeiting – but as one sceptical official says, “the proof of the pudding is in the results, and they are not good”.

The turning point for the cigarette industry came in November 2008, when two large seizures turned up large quantities of John Player Blue, a brand specific to Ireland.

“Up to then, we thought we were safe, because Ireland is such a small market,” says Deirdre Healy. “We were shocked to find that Irish products were being counterfeited.”

Since then, other brands have turned up in Irish versions, complete with health warnings in English and Irish and fake tax stamps. To the untrained eye, they look like the real thing, but with a selling price of just over half the normal cost. Healy says companies frequently get complaints from customers who have smoked counterfeit cigarettes with a “funny taste”. The industry mutters darkly about findings of rat droppings and urine in some samples, but hasn’t carried out tests to prove this.

THE INDUSTRY SPENDSa lot of time trying to get an idea of the type of fake product making its way into the country. Three out of every 10 empty packets it retrieves from the floors of pubs, nightclubs and race meetings are from outside Ireland, and any information garnered is then passed on to the Customs Service and the Garda Síochána. Legitimate retailers are hurting.

“Newsagents have three drivers of business: newspapers, the lottery, and cigarettes. If people aren’t buying their cigarettes from us, we’re losing the chance to sell them other goods they would have bought if they entered our stores,” says Vincent Jennings.

He adds that cigarette smuggling is not taken seriously enough because it is classed as a Revenue offence. The same people who smuggle cigarettes also supply firearms and pornographic DVDs, Jennings claims. “If people are prepared to breach the law by smuggling cigarettes, why would they stop at that?” he asks.

Retailers and manufacturers blame the high price of cigarettes in Ireland for the massive growth in smuggling. At €8.40, Ireland has one of the highest average counter prices for a pack of 20 cigarettes in the EU. The same pack costs €3.45 in Spain, and the gap between Irish and Spanish prices has more than doubled in a decade. Health groups reject any link between price and crime, pointing to the high rates of smuggling in some eastern European countries where cigarettes are cheap.

The Minister for Finance, Brian Lenihan, last year estimated the loss to the Exchequer at about €380 million, though the Irish Tobacco Manufacturers Advisory Committee (Itmac), which represents the big three companies – JTI, John Player Sons, and PJ Carroll – puts the damage at almost double this figure.

Itmac complains that while the Office of Tobacco Control (OTC) monitors legal outlets carefully, it does nothing when shops are found to be selling contraband.

“You can be caught defrauding the State by selling smuggled product and still hold your licence to sell legal tobacco,” Healy points out.

The OTC declined to be interviewed for this article, saying it had no mandate in the policing and monitoring of smuggling.

Cat-and-mouse games with X-ray eyes

IT’S 5.50AM on a bitterly cold morning in Dublin Bay and the frontline in the war against smuggling has just been established in a quiet lay-by near the port. The first boats are arriving across the Irish Sea and lorry drivers are revving their engines, preparing to disembark.

Over at the lay-by, a team of customs officers have arrived in what looks like a large truck. They lay out traffic cones while one of the team, Christine Hurley, flicks a switch on the truck. The rear end swivels to one side, creating a large gantry on the other. The mobile vehicle inspection system, the State’s largest X-ray device, is ready.

Inside the back of the truck, a bank of screens shows the first lorry selected for checking, which has been parked outside by its driver. Hurley flicks another switch and our truck reverses, its gantry passing over the container and scanning its contents.

This is the technology responsible for many of the finds of smuggled cigarettes and other contraband regularly reported in the newspapers. Last October, for example, Hurley and her colleagues found almost 11 million cigarettes in a container.

It takes 30 seconds for the device to scan a container and another few minutes for customs officer Ciaran Moulton to analyse the results. That’s a far cry from the manual inspections of old. “You’d open the container door and the tyres or whatever would start falling on top of you, and you’d ask yourself ‘how far do we go here?’,” Hurley recalls. On another occasion, customs officers, following a tip-off, had to wait two weeks for a consignment of fish to thaw. “You can imagine the smell after that,” says Moulton.

Today’s first lorry, coming from Holland, is carrying a mixed load. The images on the screens resemble a charcoal drawing, with solid objects, such as the wire strengtheners in tyres, showing darkest. The system’s software allows Moulton to zoom in on areas of interest, or to vary the colours to make the image more readable. Crucially, the scanner, manufactured by Nuctech in China at a cost of €2 million, can distinguish organic material, such as tobacco or drugs, from inorganic material. The X-rays can penetrate almost one metre of steel, and last year detected a load of cannabis concealed in granite plinths.

There are now two such scanners in operation at Irish ports. This one is based in Dublin, while another is moved around the smaller ports. The Customs Service plays cat and mouse with smugglers, who are constantly seeking the entry point of least resistance. It’s an unequal battle, given the number of routes a smuggler has to choose from.

Our first load is cleared, and the driver is allowed to leave. By now, a queue of lorries has formed, chosen at random from the ferries or selected for a specific reason, such as a high-risk profile or intelligence.

Over the following hours, loads of oranges, plants, tyres, clothing and copper tubing are checked, but nothing more suspicious is found than a few crates of wine, which are deemed to be in order. Paul Cullen

THE SMOKE SMUGGLERS

Monday: the illicit cigarette trade and the State’s response

By Paul Cullen and Conor Lally