COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE EUROPEAN PARLIAMENT Stepping up the fight against cigarette smuggling and other forms of illicit trade in tobacco products - A comprehensive EU Strategy
Date: 2013-06-06
Institutions: European Commission
Subjects: fight against crime, illicit trade, tax evasion, tobacco

EUROPEAN 
COMMISSION 

Brussels, 6.6.2013  
COM(2013) 324 final 

COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE 
EUROPEAN PARLIAMENT 

Stepping up the fight against cigarette smuggling and other forms of illicit trade in 
tobacco products - A comprehensive EU Strategy 

{SWD(2013) 193 final} 

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TABLE OF CONTENTS 

COMMUNICATION  FROM  THE  COMMISSION  TO  THE  COUNCIL  AND  THE 
EUROPEAN  PARLIAMENT  Stepping  up  the  fight  against  cigarette  smuggling  and  other 
forms of illicit trade in tobacco products - A comprehensive EU Strategy 

1. 

2. 

2.1. 

2.2. 

2.3. 

2.4. 

2.5. 

3. 

3.1. 

3.2. 

3.3. 

Introduction .................................................................................................................. 4 

Nature and Scale of the EU problem of illicit tobacco trade ....................................... 5 

The nature of illicit trade.............................................................................................. 5 

The scale and scope of illicit trade in the EU............................................................... 6 

Third country origins of illicit tobacco products.......................................................... 7 

Illicit EU production .................................................................................................... 9 

Seized brands and seizure locations........................................................................... 10 

Factors contributing to the illicit trade ....................................................................... 11 

Incentives are high and loopholes are substantial ...................................................... 11 

Supply chain control measures do not match the threat............................................. 12 

Challenges for enforcement authorities ..................................................................... 13 

3.3.1.  Customs and tax authorities ....................................................................................... 13 

3.3.1.1.  Risk management ....................................................................................................... 13 

3.3.1.2.  Control methods, equipment, training and IT tools ................................................... 14 

3.3.2.  Other enforcement authorities.................................................................................... 14 

3.3.3.  Collaboration across authorities and EU actors ......................................................... 15 

3.3.4.  Corruption .................................................................................................................. 15 

3.3.5. 

International cooperation with third country authorities............................................ 15 

3.4. 

Low disincentives: Sanctions imposed by the Member States are relatively low ..... 16 

4. 

4.1. 

4.2. 

4.3. 

The way forward ........................................................................................................ 16 

Measures to decrease incentives ................................................................................ 16 

Measures to secure the supply chain.......................................................................... 17 

Measures to strengthen enforcement.......................................................................... 18 

4.3.1.  Addressing challenges of EU enforcement authorities .............................................. 18 

4.3.1.1.  Risk management ....................................................................................................... 18 

4.3.1.2.  Operational actions..................................................................................................... 18 

4.3.1.3.  IT tools and equipment............................................................................................... 19 

4.3.1.4.  Cooperation between EU authorities ......................................................................... 19 

4.3.1.5.  Specific problem area(s) ............................................................................................ 19 

4.3.1.6.  Sharing of expertise and best practices ...................................................................... 20 

4.3.2.  Enhance cooperation with major source and transit countries................................... 21 

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4.4. 

Strengthening sanctions ............................................................................................. 22 

5. 

Conclusion.................................................................................................................. 23 

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COMMUNICATION FROM THE COMMISSION TO THE COUNCIL AND THE 
EUROPEAN PARLIAMENT 

Stepping up the fight against cigarette smuggling and other forms of illicit trade in 
tobacco products - A comprehensive EU Strategy 

INTRODUCTION 

1. 
According  to  the  estimates  of  the  European  Anti-Fraud  Office  (OLAF)  the  illicit  trade1  in 
cigarettes  causes  annual  financial  losses  of  over  EUR  10  billion  in  the  budgets  of  the 
European  Union  and  its  Member  States2.  These  losses  come  from  unpaid  customs  duties  as 
well as taxes, including value added taxes (VAT) and excise duties. Cigarettes constitute the 
biggest share of illicit tobacco trade, but other tobacco products (such as hand rolling tobacco) 
are also traded illegally.  

A decade ago, illicit trade was mainly constituted of large-scale container smuggling of well-
known brands of cigarettes. In the last years, the relative share of smuggling of these ‘main 
brands’3,  has  decreased.  On  the  other  hand,  counterfeiting,  illegal  production  and,  most 
importantly,  smuggling  of  ‘other4  brands’  (produced  mainly  outside  the  EU  in  quantities 
vastly exceeding the demand on those national markets) are on the rise. 

Illicit  tobacco  trade  is  not  only  an  economic  issue.  In  addition  to  significant  damage  to 
national  and  EU  revenues,  the  illicit  trade  fuels  the  shadow  economy.  In  fact  it  is  almost 
exclusively the domain of organised criminal  groups  operating  across  borders. Furthermore, 
from a health point of view, illicit trade undermines policy initiatives aimed at reducing the 
consumption  of  tobacco  products,  particularly  amongst  vulnerable  groups  such  as  young 
people and low income groups. Illicit tobacco products are for the most part not produced in 
accordance with requirements of EU tobacco products legislation5. 

The  European  Commission  and  Member  States  have  already  taken  action  to  curb  illegal 
tobacco  trade.  For  example,  legally  binding  Cooperation  Agreements  have  been  concluded 
with four of the world's leading cigarette manufacturers6. In 2011, the Commission presented 
an  Action  Plan  to  tackle  smuggling  at  the  EU's  Eastern  land  border7  to  address  problems 
identified  in  that  particular  geographical  area.  However,  the  analysis  of  the  available 

1 

2 

3 

4 

5 

6 

7 

In  this  Communication,  ‘illicit  trade’  is  understood  to  include  different  types  of  (international) 
smuggling  of  both  genuine  and  counterfeit  tobacco  products  (mainly  cigarettes),  as  well  as  illicit 
internal EU production and distribution. 
The estimation is based on seizures reported by the Member States which amounted to 4.5 – 4.6 billion 
cigarettes per year between 2005 and 2011.   
Including  brands  of  the  four  main  global  producers:  Philip  Morris  International,  Japan  Tobacco 
International, British American Tobacco and Imperial Tobacco Limited. 
For  the purpose  of  this  Communication  the  expression  "Other brands"  is  used  to describe brands not 
produced  by  the  four  manufacturers  with  which  the  EU  and  the  Member  States  have  Cooperation 
Agreements. These cigarettes are often referred to as ‘cheap whites’. 
For example as regards provisions on ingredients and the obligatory presentation of health warnings on 
the package. 
Philip  Morris  International  (July  2004),  Japan  Tobacco  International  (December  2007),  British 
American  Tobacco  (July  2010)  and  Imperial  Tobacco  Limited  (September  2010),  see  on 
http://ec.europa.eu/anti_fraud/investigations/eu-revenue/cigarette_smuggling_en.htm.  
Commission  Staff  Working  Document  accompanying  the  Commission  Anti-fraud  Strategy,  Brussels, 
24.6.2011, SEC(2011) 791 final, hereinafter referred to as ‘Eastern Border Action Plan’. 

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information8 shows that despite these efforts, overall the illicit trade is increasing in the EU. 
The  EU  faces  a  rising  illicit  influx  of  other  brands  coming  from  outside  the  EU  as  well  as 
increased illicit production and distribution inside the EU.  

Furthermore,  illicit  trade  in  tobacco  products  is  certainly  not  exclusive  to  the  EU  –  it  is  a 
world-wide  problem.  Indeed,  in  November  2012,  the  176  Contracting  Parties  to  the  WHO 
Framework  Convention  on  Tobacco  Control  (FCTC)  adopted  a  Protocol  to  the  Convention 
specifically to address the problem of illicit trade in tobacco products9. 

The problem is significant and it is global. It manifests itself in different modes at the borders 
and within the EU. The illicit trade is influenced by demand and supply factors, and by the 
lack of effectiveness of control measures. Its substantial financial impact on the budgets of the 
EU and the Member States is very serious, in particular in the current economic crisis in the 
EU. It is clear that a comprehensive approach to the problem of illicit trade in tobacco is thus 
called for.  

This Communication outlines the nature and scale of the EU problem of illicit tobacco 
trade, identifies factors that contribute to it, and proposes a comprehensive EU Strategy 
to fight the problem in the EU.  

The  Strategy's  comprehensive  approach  takes  into  account  that  the  fight  against  the 
illicit  trade  is  a  cross-cutting  issue  that  is  affected  by  many  factors  and  drivers  and  in 
turn involves a broad range of EU and/or national policies. 

2. 

NATURE AND SCALE OF THE EU PROBLEM OF ILLICIT TOBACCO TRADE 

2.1. 

The nature of illicit trade  

Illicit tobacco trade encompasses different phenomena, which are to a certain extent different 
and require different responses at different levels. The different forms of illicit trade include:  

• 

• 
• 

(international)  smuggling  of  genuine  tobacco  products  (i.e.  main  brands  and  ‘other 
brands’)  
(international) smuggling of counterfeit cigarettes, and  
illegal  production  and  distribution  within  the  EU  (no  customs  duties  involved,  unpaid 
VAT and excise duties).  

International smuggling (of both genuine and counterfeit goods) can involve:  

• 

false/incorrect  declarations  (declaring  the  wrong  description/value/origin/etc.  of  goods  – 
incorrect customs duties are paid, if any, unpaid VAT and excise duties),  

•  concealing  goods  inside  legitimate  cargo  or  vehicles  or  on  passengers  (unpaid  customs 

• 

duties, VAT and excise duties), and finally, 
illegal border crossing, avoiding authorities altogether (unpaid customs duties, VAT and 
excise duties).  

Within  the  EU,  illicit  trade  encompasses  illicit/unauthorised  production  and  distribution 
within  the  EU  customs  territory  (including  across  different  tax  jurisdictions).  Illicit 
distribution  includes  goods  produced  inside  the  EU  declared  for  export  or  for  intra-EU 
delivery  and  moved  under  VAT  and  excise  suspension  but  never  leaving  the  EU's  customs 
territory or delivered to a consignee within the EU that is indicated in the excise document in 

8 
9 

See Chapter 2. 
Protocol to eliminate illicit trade in tobacco products (hereinafter referred to as the ‘FCTC Protocol’). 

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EMCS10 or in the VAT return, and also imported goods released into free circulation in the 
EU under VAT and excise suspension, which are then distributed illegally without payment of 
VAT  and  excise.  It  also  includes  withdrawal  from  transit  regime  of  goods  which  are  then 
illegally sold inside the EU (unpaid customs duties, VAT and excise duties).  

The scale and scope of illicit trade in the EU 

2.2. 
Studies on the subject acknowledge11 that it is particularly difficult to measure illicit trade 
because  of  the  illegal  and  clandestine  nature  of  the  activity.  However,  some  estimates  are 
available12.  Illicit  cigarette  consumption  in  the  EU  has  been  estimated  by  one  EU-funded 
study to be 8.5% in 200713 of the overall consumption. The KPMG Project Star Report 201214 
estimated 8.4% illicit consumption for 2007, 8.6% for 2008, 8.9% for 2009, 9.9% for 2010, 
10.4% for 2011 and 11.1% for 2012. This corresponds to an increase of 30% over the last 6 
years..  

The  seizures  reported  by  the  Member  States  confirm  that  cigarettes  constitute  by  far  the 
biggest part of seizures of tobacco products15, although some significant seizures of Hand 
Rolling  Tobacco  (HRT)  were  also  recorded.  Other  tobacco  product  types  do  not  appear  in 
significant numbers.  

2.3. 

Third country origins of illicit tobacco products 

According  to  available  data,  the  main  countries  of  provenance  for  smuggled  tobacco 
products are, in the order of importance: China, the United Arab Emirates (UAE)16, Vietnam, 
Malaysia, the Russian Federation, Singapore, Belarus and Ukraine. 

10 
11 

12 

13 
14 

15 

16 

2001, 

available 

and  Combat  Tobacco 

Smuggling,  David  Merriman, 

Excise Movement and Control System, see footnote 29. 
For  example:  Luk  Joossens,  Pricing  Policies  and  Control  of  Tobacco  in  Europe  (PPACTE),  Work 
Package 5, deliverable 5.2: Illicit tobacco trade in Europe: issues and solutions, August 2011, available 
at: 
http://www.ppacte.eu/index.php?option=com_docman&task=cat_view&grid=65&Itemid=29 
(hereinafter  referred  to  as  "Joossens");  World  Bank  Economics  of  Tobacco  Toolkit,  Understand, 
at 
Measure 
http://siteresources.worldbank.org/INTPH/Resources/7Smuggling.pdf. 
For this Communication, analysis was based mainly based on official information (seizure reports) on 
the provenance, types and brands of the products that was provided by the Member States' authorities to 
the Commission (OLAF) through the Anti-Fraud Information System (CIGINFO submodule created on 
the basis of Title II of Council Regulation 515/1997 EC of 13 March 1997, OJ L 82,22.3.1997, p.1.) in 
2010 and 2011, and on information provided to OLAF by the Member States in the framework of the 
Task  Group  Cigarettes  (an  annual  meeting  organised  by  OLAF  with  authorities  from  EU  Member 
States and some non-EU countries), complemented by industry reports (i.e. information provided by the 
four  tobacco  manufacturers  with  which  the  EU  has  legally  binding  Cooperation  Agreements  and  the 
KMPG Project Star Report), the Tobacco Reports by the World Customs Organisation (WCO), as well 
as threat and risk analysis done by EUROPOL and FRONTEX.  
Joossens, p. 13.  
KMPG  Project  Star  Report  2012,  commissioned  by  Philip  Morris  International  Management  S.A., 
http://www.pmi.com/eng/media_center/media_kit/Documents/Project_Star_2012_Final_Report.pdf 
According to the WCO last Customs and Tobacco Report 2011, cigarettes remain the main challenge on 
a global level, too. 
In China, the ports of Shekou, Xiamen, Guang, Zho, Huang Pou, Ningbo and Yantian were signalled 
most often by the Member States; in the UAE the ports signalled are those of Jebel Ali and Dubai. 

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Chart 1. Routing information  

Quantity (in pcs cigarettes) 

Brand Type 

Major Brands 

Other Brands 

Number of Seizures 

China continues to be the source country for the majority of seized cigarettes. Analysis of the 
seized samples demonstrates that these are mainly counterfeit cigarettes. Illicit consignments 
seized  were  shipped  either  directly  to  European  seaports  or  transhipped  via  Singapore  and 
Malaysia, where the illicit trade is aggravated by the insufficient control in the free zones. 

Whilst in the past the UAE appeared mainly as a point of transhipment, current information 
clearly  points  to  its  new  role  as  an  important  production  location  for  other  brands17, 
particularly in its free zones. 

Greece appears to be a major target for entries of shipments from China and UAE.  

Consignments  are  often  transhipped  in  Egypt,  Turkey  and  other  ports  in  the  Eastern 
Mediterranean. 

Despite measures already undertaken, the EU Eastern border also continues to be a target for 
illicit trade, particularly the Baltic region. The main countries of provenance there are Russia, 
Ukraine  and,  increasingly,  Belarus.  In  the  case  of  Russia  (and  also  UAE),  most  of  the 
products  seized  are  genuine.  This  means  that  they  are  produced  legally,  but  in  quantities 
greatly  exceeding  local  demand  in  source  countries.  Whether  duties  are  paid  in  their 
originating  country  or  not,  these  products  are  then  smuggled  into  the  EU.  Analysis  by 
FRONTEX confirms that cigarette smuggling is one of the main problems affecting the EU 
Eastern  border,  and  suggests  a  significant  scale  of  smuggling  from  the  Western  Balkan 
countries.  It  also  suggests  that  cigarette  smuggling  significantly  affects  the  work  of  border 
authorities on the Eastern land borders, including on the land borders with Turkey, and with 
Western Balkan countries18. 

17 
18 

Such as Richman, Manchester, Marble, Gold Mount, Capital.  
See for example the Eastern border Annual Overview, 2012, 
http://www.frontex.europa.eu/assets/Publications/Risk_Analysis/EB_AO.pdf.  

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The modus operandi of smuggling varies greatly. Goods arrive via shipping container, road-
going vehicles (lorries, vans, cars), by sea or river on small vessels, on trains and also in air 
freight and by post. The entry of tobacco products concealed with other goods continues to be 
the  most  important  modus  operandi.  Repeated  smuggling  of  small  quantities  (so  called  ant-
smuggling)  is  a  significant  problem  in  the  border  regions.  Sometimes  this  traffic  is  well 
organised and the small quantities are consolidated into larger loads before being transported 
to other Member States for sale on the illicit market.  

It has to be underlined that organised crime plays an important role in the illicit trade which 
aggravates the problem further19. Illicit tobacco trade is a high profit and low risk activity and 
therefore  particularly  attractive  to  organised  crime  groups  which  have  the  possibility  to 
launder the large profits derived from the illicit trade.  

2.4. 

Illicit EU production  

Significant  amounts  of  cigarettes  are  probably  also  produced  illegally  inside  the  EU.  The 
number of known illegal factories has increased rapidly: in 2011, Member States discovered 
nine illegal factories estimate to have a combined production capacity of more than 9 million 
cigarettes per day. In 2010, only five such factories were discovered.  

Seized brands and seizure locations 

2.5. 
The share  of  other brands  seized compared  to main  brands20 is steadily increasing  and 
reached around 58% in 2011. The measures implemented by the four big manufacturers under 
the Cooperation Agreements, such as tracking and tracing of tobacco products, due diligence 
in relation to customers and prevention of money laundering, have clearly led to a significant 
reduction in the presence of these companies' products on the illicit market. 
Some of the other brands21 that were seized throughout the analysed period were seized in 
quantities  similar  to  main  brands,  or  show  strong  upward  trends22,  which  is  a  clear 
indication that they are well established on the illicit markets. Significant quantities of certain 
other brands23 are produced inside the EU.  

An  analysis  of  the  seizure  location  type/mode  of  transport  shows  that  while  seizures  at 
seaports continue to represent the highest seized quantities, inland seizures have increased 
and also reached a significant level in both number of seizures and quantities seized.  

19 

20 
21 
22 
23 

See  also  in  EU  Organised  Crime  Threat  Assessment  OCTA  2011  Report  by  EUROPOL  at 
http://www.europol.europa.eu/publications/European_Organised_Crime_Threat_Assessment_(OCTA)/
OCTA_2011.pdf, p. 24-25. 
See footnote 4.  
E.g. Jin Ling. 
E.g. Fest, Richman, Gold Mount. 
E.g. Raquel, Gold Classic. 

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Chart 2. Seizure location type 

Seizure Location Type 

SEAPORT 
INLAND 
UNKNOWN LOCATION 
LAND BOUNDARY 
WAREHOUSE 
OTHER LOCATION 
MAIL CENTRE 
PORT (MARINA) 
AIRPORT 
FREE TRADE ZONE 
INLAND PORT 
RAILWAY 
HIGH SEAS 
INLAND WATERWAY 

Quantity (in pcs of cigarettes) 

Number of seizures 

3. 

FACTORS CONTRIBUTING TO THE ILLICIT TRADE  

Trade in tobacco products is complex because of the multitude of rules and requirements (e.g. 
different tax rules) that apply. Thus dealing with legitimate trade requires application of both 
standard  EU  customs  procedures  and  rules  and  complex  national  tax  procedures  for 
classifying,  valuing  and  applying  the  correct  tax  rates.  As  a  consequence,  also  dealing  with 
illicit trade (its incentives, disincentives and control) is a complex affair.  

The illicit trade in cigarettes is stimulated by four drivers mainly:  

(1) 

(2) 

(3) 

(4) 

high incentives and substantial loopholes;  

supply chain control measures do not adequately match the scale of the threat;  

enforcement authorities face certain general and specific challenges;  

low disincentives: sanctions are low.  

If a strategy is to be successful in fighting cigarette smuggling it has to address the incentives 
and disincentives, as well as the control factors, simultaneously. 

3.1. 

Incentives are high and loopholes are substantial  

Tobacco products are in general highly taxed in the EU. Import duties are high, between 40 
and 58%24. The total tax incidence (incl. VAT) lies between 70.12% of the tax included retail 
selling price (TIRSP) on cigarettes of the weighted average price (WAP) in Luxembourg and 
88.97% in the United Kingdom.  

As  many  of  these  factors  vary  nationally,  price  differences  (as  paid  by  the  end  consumer) 
regarding  tobacco  products,  both  within  the  EU  and  in  comparison  to  its  neighbouring 
countries are significant. In the area of excise duties on cigarettes, the gap between the lowest 
taxing Member State and the highest one amounts to EUR 206.41 per 1000 cigarettes – over 
four  euro  per  pack  of  20  cigarettes  -  creating  a  strong  demand  and  incentive  also  for 
illegitimate distribution across tax jurisdictions inside the EU. Similar ranges in excise rates 
exist for other tobacco products.  

Although price gaps have narrowed between EU countries, prices in countries on the Eastern 
border remain up to eight times lower. The significant differences in the tax inclusive retail 

24 

There are around 200 different preferential and non-preferential duties applicable to tobacco products. 

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selling prices have created an environment for purely tax induced cross-border shopping and 
for smuggling and fraud. Cross-border shopping is entirely legitimate and, indeed, constitutes 
one of the benefits of the internal market provided the products are purchased by individuals 
for  their  own  personal  use.  However,  there  is  a  thin  line  with  intra-EU  "smuggling"  where 
individuals purchase tobacco in other Member States ostensibly for their use but instead sell it 
without paying excise duty in the Member State of consumption.  

The excise gap with neighbouring third countries is even significantly larger.  

The complexity of applicable rules also creates incentives for illicit activities. In particular 
taxation legislation concerning tobacco goods is complex in the EU context, especially since 
much of it is national. The definition of excisable tobacco products retains a high degree of 
complexity  and  also  the  number  of  classification  and  definition  problems  is  increasing  for 
certain  products25.  Furthermore,  there  are  "grey  areas"26  and  loopholes  between  smuggling 
and  rightful  importation  of  tobacco  (and  also  alcohol)  and  products  within  the  relief 
thresholds on importation applicable to travellers, both coming from third countries as well as 
intra-EU travelling.  

Measures  to  restrict  the  release  for  consumption  of  large/excessive  volumes  of  tobacco 
products  immediately  prior  to  a  tax  increase  (forestalling)  currently  are  also  not  sufficient. 
Creating overstocks released for consumption prior to a tax increase leads to a remarkable tax 
avoidance and reduces the Member States’ revenue collection.  

More generally, identification and classification of tobacco products (and their origin) can be 
difficult and require specialist equipment or laboratory analysis.  

These  gaps  and  loopholes  form  a  significant  economic  incentive  for  smuggling  and  other 
forms of illicit trade. 

3.2. 

Supply chain control measures do not match the threat  

In light of the clear incentives for criminals to engage in illicit trade, measures to control the 
tobacco supply chains, either by authorities or by economic operators themselves, are largely 
insufficient.  

Apart  from  existing  agreements  with  the  main  manufacturers,  there  are  so  far  no  legal 
measures at EU level that oblige economic operators engaged in the tobacco supply chain to 
conduct  due  diligence  during  the  course  of  their  activities27.  There  is  also,  at  this  stage,  no 
general  legal  obligation  in  place  for  producers  or  importers  to  monitor  the  movement  of 
cigarettes and other tobacco products through their supply chain (tracking). In the absence of 
such measures, it is very difficult (even impossible) for the authorities to determine at which 
point a product was diverted into the illicit trade (tracing). 

Considering the context of the trends and incentives outlined above, the current requirements 
on  economic  operators  to  control  supply  chains  must,  despite  some  success  with  regard  to 
contraband of main brands, clearly be considered insufficient.  

25 

26 

27 

Like raw tobacco, cigarillos (Brands like "Next, Partner, Braniff, Skjold" etc), diet tobacco (dried ice 
expanded tobacco), water pipe tobacco etc. 
These grey areas mainly concern the definitions of "travellers" and "occasionally entering the EU when 
coming from a third country". 
F. ex.: customer identification requirements; requirements to monitor the sales to ensure that quantities 
are  commensurate  with  the  demand  within  the  intended  market,  reporting  to  the  authorities  of  any 
evidence that a customer is engaged in unlawful activities. 

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3.3. 

Challenges for enforcement authorities  

On the enforcement side, customs and tax authorities are the key players in the fight against 
smuggling from third countries. Border guards and police also have a role to play. Police and 
tax  authorities  –  and  in  several  Member  States  also  customs  –  are  key  players  in  the  fight 
against  illicit  EU  production  and  distribution.  All  of  the  involved  authorities  (customs,  tax, 
police or border guards) face an important number of difficulties. Some of these are general 
(e.g. challenges related to data exchange, risk management and targeting) and some specific 
to illicit trade in tobacco. Furthermore, cooperation mechanisms between authorities and EU 
bodies do not always exist to allow effective collaboration between them, which hinders the 
overall effort.  

3.3.1.  Customs and tax authorities  

Customs authorities make use of their staff, IT systems and control procedures and equipment 
to detect a host of illicit international traffic of goods, notably including tobacco products. EU 
customs authorities are, by virtue of being a customs union and having a common legal basis, 
closely  networked  via  shared  IT,  joint  expert  groups  and  exchange  of  officials28.  EU  tax 
authorities also engage in various forms of administrative cooperation to combat tax fraud and 
evasion  across  the  EU.  A  host  of  IT  systems  and  networks  managed  by  the  Commission 
supports  cooperation  between  the  authorities  in  this  work29.  This  cooperation  includes  not 
only  exchange  of  risk  information30  but  also  trans-European  networks  to  control  the 
movement  of  goods  in  suspension  of  customs  duties  and  other  taxes.31  Nevertheless,  both 
customs  and  tax  authorities  face  a  number  of  challenges  in  fighting  external  and  intra  EU 
illicit tobacco trade.  

3.3.1.1.  Risk management  

Customs authorities have developed in recent years a common framework to manage risks in 
relation to commercial  supply  chains movements of  goods crossing  the  EU  external border. 
As was recently highlighted in the Communication on customs risk management and security 
of  the  supply  chain32,  EU  customs  authorities  face  a  number  of  challenges  in  terms  of  the 
implementation of effective risk management. These relate namely to quality, availability and 
sharing of data as a basis for effective risk management, control and investigation activities.  

The  Communication  identified  specific  problems  with  the  data  provided  by  economic 
operators as  basis  for conducting risk analysis, in the capacity of EU customs authorities to 
use and share risk information among themselves and with other authorities, as well as a need 

28 

29 

30 
31 
32 

Customs cooperation/mutual assistance based on Regulation 515/1997; IT infrastructures: AFIS (Anti-
Fraud Information System) and MAB (Mutual Assistance Broker); CIS (Customs Information System) 
E.g. CRMS (Customs Risk Management System) /RIF (Risk Information Form) – Article 13 of Council 
Regulation (EEC) No 2913/92 establishing the Community Customs Code, OJ L 302, 19.10.1992, p. 1–
50,  and  Article  4g  of  Commission  Regulation  (EEC)  No  2454/93  laying  down  provisions  for  the 
implementation of Council Regulation (EEC) No 2913/92 establishing the Community Customs Code, 
OJ  L  253,  11.10.1993,  p.  1–766,  NCTS  (New  Computerised  Transit  System)  –  Article  353  of 
Commission  Regulation  No  2454/93,  EMCS  (Excise  Movement  and  Control  System)  –  Commission 
Regulation (EC) No 684/2009 of 24 July 2009 implementing Council Directive 2008/118/EC as regards 
the computerised procedures for the movement of excise goods under suspension of excise duty, OJ L 
197,  29.7.2009,  p.  24–64,  VIES  (VAT  information  exchange  system)  –Council  Regulation  (EU)  No 
904/2010  of  7  October  2010  on  administrative  cooperation  and  combating  fraud  in  the  field  of  value 
added tax, OJ L 268, 12.10.2010, p. 1–18, VIESCLO (Central Liaison office for indirect taxation).  
CRMS/RIF. 
NCTS. 
COM (2012) 793, 8.1.2013. 

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to  improve  cooperation  and  data  and  analysis  sharing  with  both  economic  operators  and 
international partners. Proposals for further measures to improve the capability of customs to 
manage supply chain risks for all goods have been put forward including greater convergence 
in  the  use  of  the  information,  data  sources,  tools  and  methods  used  by  customs  to  pinpoint 
risks  and  analyse  commercial  supply  chain  movements.  Implementation  will  also  impact 
significantly on the ability of EU customs to combat the problem of tobacco smuggling.  

3.3.1.2.  Control methods, equipment, training and IT tools 

Controlling for certain types of smuggling such as illicit tobacco concealed in legitimate cargo 
or in (passenger or commercial transport) vehicles is also made difficult by lack of adequate 
types of control equipment such as scanners and sniffer dogs. Not all Member States dispose 
of adequate level of such equipment to protect their external borders. The level and quality of 
awareness  and  training  of  officers  can  also  impact  on  national  effectiveness  in  dealing  with 
smuggling.  

Within  the  internal  market,  tackling  smuggling  of  cigarettes  requires  national  networks  of 
inland  detection  teams  aiming  at  disrupting  and  dismantling  the  supply  and  distribution  of 
illicit tobacco at retail, work and private premises. This embraces the establishment of mobile 
control  units  (second  line  control)  and  the  extension  of  controls  to  inland  checkpoints  and 
markets. Not all Member States have implemented this practice. 

While a number of specific IT tools exist to support the fight against illicit cigarette trade at 
EU level, there is also evidence that certain of the existing IT systems currently are not used 
to  their  full  potential.  For  example,  the  new  CIGINFO  reporting  module  in  the  Anti-Fraud 
Information  System  (AFIS)  shows  clear  improvements,  yet  despite  the  efforts  to  streamline 
and  simplify  reporting  of  seizures  from  Member  States,  some  crucial  information  is  still 
systematically missing or incomplete. Information in terms of movements of tobacco products 
(NCTS, EMCS) is also not yet fully exploited with new technologies such as data analytics. 

3.3.2.  Other enforcement authorities  

Police and border guard authorities also have a role to play in fighting the different forms of 
illicit  trade  in  tobacco  products.  The  responsibility  of  the  protection  of  the  external  borders 
lies with the Member States, based on a set of common European rules and procedures. They 
play a key role in detecting tobacco products illegally transported across the EU green border. 
The  Member  States'  authorities  are  assisted  in  fighting  cross-border  crime  by  FRONTEX33. 
FRONTEX  carries  out  risk  analysis,  coordinates  operational  cooperation  between  Member 
States and develops and operates information systems enabling the exchange of information, 
amongst other tasks. 

As fighting illicit trade in tobacco products is primarily the task of customs, the role of police 
authorities varies from one Member States to the other. However, police plays a key role in 
fighting  organised  crime  and  associated  crimes,  such  as  money-laundering.  The  European 
Police Office (EUROPOL) supports the Member States police authorities in the fight against 
serious crime, and in particular illegal manufacture and distribution of tobacco products in the 
EU,  including  organised  VAT  fraud.  EUROJUST34  supports  cooperation  between  the 

33 

34 

Council  Regulation  (EC)  No  2007/2004  of  26  October  2004  establishing  a  European  Agency  for  the 
Management of Operational Cooperation at the External Borders of the Member States of the European 
Union, OJ L 349, 25.11.2004, p. 1. 
Council Decision 2002/187/JHA of 28 February 2002, OJ L 63, 6.3.2002, p. 1.  

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competent  authorities  of  the  Member  States  in  order  to  render  their  investigations  and 
prosecutions of serious crimes more effective. 

3.3.3.  Collaboration across authorities and EU actors 

An  effective  policy  aimed  at  tackling  illicit  trade  in  tobacco  products  requires  a  targeted 
cooperation  among  national  law  enforcement  and  investigating  agencies.  The  creation  of 
designated task forces, embracing customs and finance guards, police as well as any other law 
enforcement  agency  has  proven  to  be  successful.  Nevertheless,  this  is  not  a  widespread 
practice within the European Union. 

Also at EU level, intelligence and information exchange among EU bodies involved in fight 
against  customs  fraud,  organised  crime  and  cross-border  crime  (OLAF,  EUROPOL, 
EUROJUST and FRONTEX) needs to be improved. 

3.3.4.  Corruption  
Finally, numerous studies35 and OLAF cases have shown that corruption in law enforcement 
authorities  impedes  the  effective  fight  against  illicit  trade,  in  particular  where  corruption 
affects customs authorities36. Corruption of officials actually remains one of the main methods 
used by the smugglers to cover their illegal activities.  

3.3.5. 

International cooperation with third country authorities  

A significant dimension of the problem of illicit tobacco trade is international. Information on 
risks, trends, threats and in particular in the context of investigations requires a high level of 
exchange  of  information  and  cooperation  with  authorities  of  source  and  transit  countries. 
Degree and quality of cooperation between the EU and third countries differs widely and is 
sometimes  very  difficult.  Due  to  joint  efforts,  cooperation  with  Ukraine  and  Moldova  has 
improved  in  the  past  two  years,  contrary  to  the  situation  concerning  Belarus.  Operational 
cooperation  with  Russia,  China  and  Malaysia  is  good,  but  considerable  problems  remain 
because  of  the  size  of  illicit  trade  originating  from  these  countries.  There  is  insufficient 
operational  cooperation  from  Singapore  and  UAE  in  relation  to  the  free  zones  in  these 
countries. Corruption in  law  enforcement authorities  is  also  an important problem  in source 
and transit countries outside the EU. 

3.4. 

Low disincentives: Sanctions imposed by the Member States are relatively low 

Despite the obvious incentives, and the huge profits that are being made through illicit trade, 
smugglers  face  relatively  low  risks  in  the  EU,  not  to  mention  elsewhere37.  Sanctions  for 
cigarette smuggling differ to a great extent across Member States. They vary in terms of the 
approach to sanctioning (administrative or criminal) as well as the gravity of the penalties. In 
one Member State, the maximum sentence for the most serious cases of such offences might 

35 

36 

37 

in  EU  border  control,  Gounev,  Philip/Dzhekova, 

E.g.  Study  on  Anti-corruption  measures 
Rositsa/Bezlov, Tihomir, 2012,  
http://www.frontex.europa.eu/assets/Publications/Research/Study_on_anticorruption_measures_in_EU_
border_control.pdf;  Integrated  Report  on  Pricing  Policies  and  Tobacco  Control,  Study  carried  out  for 
the European Commission under the Seventh Framework Programme), Currie, Townsend, Leon Roux, 
Godfrey, Gallus, Gilmore, Levy, Nguyen, Rosenqvist, Clancy, 2012.  
Final report of the Study on Examining the links between organised Crime and Corruption, by Philip 
Gounev  and  Tihomir  Bezlov,  Centre 
the  Study  of  Democracy,  2010,  p.  96-97, 
http://ec.europa.eu/dgs/home-
affairs/doc_centre/crime/docs/study_on_links_between_organised_crime_and_corruption_en.pdf. 
Certain neighbouring countries have, worryingly, recently decriminalised cigarette smuggling.  

for 

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be imprisonment of up to one year, while in others perpetrators can receive penalties of up to 
ten  years.  Similarly,  the  levels  of  fines  differ  significantly.  The  significantly  diverging 
sanctions  provide  an  opportunity  for  smugglers  to  choose  their  entry  points  to  the  EU 
according to where the lowest sanctions apply.  

4. 

THE WAY FORWARD 

In  the  proposed  way  forward,  actions  have  been  identified  to  address  all  aspects  of  the 
problem.  Nevertheless,  to  focus  scarce  resources,  emphasis  is  put  on  those  measures  that 
promise  the  most  immediate  effects,  i.e.  on  securing  the  supply  chain  more  effectively  and 
strengthening enforcement. Actions related to the following measures are listed in the Action 
Plan accompanying this Communication. 

4.1.  Measures to decrease incentives  

Currently  the  scope  for  harmonising  excise  duties  within  the  EU,  not  to  mention  with 
neighbouring countries, is limited. Nevertheless, while pursuing this idea in the longer term 
within the EU and with Eastern neighbours in particular, other measures can be taken in the 
immediate and short term to reduce incentives and loopholes.  

For example, the definition of excisable tobacco, which retains a high degree of complexity, 
could benefit from simplification by aligning it with customs definitions. A precise definition 
of  excisable  products  based  on  objective  criteria  is  a  pre-condition  for  lowering  the 
administrative  burden  on  both  economic  operators  and  tax  authorities,  thereby  reducing 
loopholes and ensuring a higher degree of compliance with excise legislation.  

As  far  as  the  grey  area  between  smuggling  and  rightful  importation  by  travellers  is 
concerned,  the  Commission  is  considering  elaborating  technical  guidance  to  support  the 
Member States in using objective criteria when applying the relief thresholds for travellers.  

Regarding  forestalling,  it  needs  to  be  explored  whether  basic  common  rules  on  anti-
forestalling  could  limit  tax  avoidance  while  avoiding  competitive  distortions  between 
economic  operators  established  in  different  Member  States.  Anti-forestalling  measures  are 
linked  to  the  evidence  of  the  payment  of  excise  duties.  Trusted  operators  that  have  entered 
into agreements ensuring higher compliance standards should possibly be able to benefit from 
longer transitional periods in order to prove the payment of excise duties.  

Not only incentives for smugglers, but also those for consumers need to decrease. In order 
to discourage citizens from buying illicit cigarettes and other tobacco products, the negative 
impact  of  illicit  trade  should  be  made  better  known  to  the  wider  public,  in  particular  the 
impact on national finances and the involvement of organised crime, as well as the fact that 
illicit products  do  not comply with EU tobacco products legislation,  for  example as regards 
provisions on ingredients and the obligatory presentation of health warnings on the package.  

The Commission will  

- examine how to simplify the application of the excise rules, e.g. through technical guidance;  

- explore limiting tax avoidance by introducing basic common rules on anti-forestalling; 

- expand the already existing targeted actions in cooperation with the interested and willing 
Member States in order to raise public awareness about the damage caused by and the specific 
risks associated with the consumption of illicit tobacco products. 

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4.2.  Measures to secure the supply chain  

As  a  first  and  foremost  measure  to  better  secure  tobacco  supply  chains  the  EU  and  the 
Member States have a common interest to sign, ratify and effectively implement the FCTC 
Protocol, including measures regarding licencing of manufacturing equipment, due diligence, 
and provisions on the free zones inside the EU.  

Most importantly, the Protocol obliges the Parties to establish a tracking and tracing system 
for all tobacco products that are manufactured in or imported onto its territory (Article 8)38. 
The key element of such a system consists of unique identification markings which will assist 
in determining the origin and the point of diversion of the products into the illicit trade. It will 
enable the monitoring and control of the movement of tobacco products and their legal status 
by  the  competent  authorities  of  the  Parties  (i.e.  Member  States  and  European  Commission) 
and  also  include  information  exchange  with  the  international  partners  via  the  Global 
information  sharing  focal  point  at  the  WHO  Secretariat  of  the  FCTC.  Such  a  tracking  and 
tracing  system  will  improve  the  control  of  the  supply  chain  significantly  and  reinforce  the 
existing measures applied to the movement of excisable products inside of the EU (EMCS-for 
EU goods or NCTS- for non-EU).  

The basic  features  of the national tracking and tracing  systems  should be determined at  EU 
level, in order to avoid distortions in the EU internal market of tobacco products. This would 
be  achieved  through  the  adoption  of  the  Commission's  recent  proposal  for  a  new  Tobacco 
Products  Directive  (TPD)39.  In  order  to  ensure  full  traceability  of  tobacco  products  and  to 
make sure that there are only compliant products on the EU market, the proposal (Article 14) 
foresees  tracking  and  tracing  measures  at  packet  level  for  tobacco  products  throughout  the 
supply  chain  (excluding  retail).  The  proposal  foresees  that  tobacco  manufacturers  shall 
conclude contracts with independent third parties that provide data storage capacities for such 
system  ensuring  full  transparency  and  accessibility  by  Member  States'  authorities  and  the 
European Commission.  

In addition, the proposal also foresees a security feature on all tobacco products, which should 
help consumers and authorities to distinguish between genuine and counterfeit products. 

Therefore,  the  Commission  proposal  for  a  new  Tobacco  Products  Directive  contains,  in  its 
Article 14, provisions on tracking and tracing which are fully in line with the FCTC Protocol 
as far as the EU trade in tobacco products is concerned. 

The Commission will propose measures 

- to sign, ratify and implement the FCTC Protocol at EU level; 

-  to  ensure  compliance  with  the  provisions  of  the  Protocol  as  far  as  matters  falling  into  EU 
competences are concerned. 

The European Parliament and the Council should adopt the Commission proposal for a new 
Tobacco Products Directive as soon as possible, including the proposed measures on tracking 
and tracing. 

38 

39 

For cigarettes, the Parties are obliged to introduce the requirement within five years from the entry into 
force of the Protocol, for other tobacco products within ten years (Article 8 (3)). 
COM(2012)788  final  of  19.12.2012,  Proposal  for  a  directive  on  the  approximation  of  the  laws, 
regulations  and  administrative  provisions  of  the  Member  States  concerning  the  manufacture, 
presentation and sale of tobacco and tobacco related products.  

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4.3.  Measures to strengthen enforcement 

4.3.1.  Addressing challenges of EU enforcement authorities  

4.3.1.1.  Risk management  

The  implementation  of  actions  identified  in  the  Communication  on  Customs  Risk 
Management,  specifically  on  quality  of  data  to  be  supplied  by  economic  operators,  and  its 
accessibility  and  sharing  for  risk  management  purposes  will  provide  a  stronger  and  more 
coherent  and  coordinated  framework  for  risk  management  and  can  improve  the  targeting  of 
suspicious  operations  (including  involving  tobacco  products).  The  sharing  of  analytical 
information with EU customs offices and other EU actors with a role in the fight against 
illicit  international  trade  will  increase  the  capacity  of  the  operational  authorities.  This 
improved framework will contribute significantly to the fight against all forms of illicit trade, 
including tobacco smuggling.  

4.3.1.2.  Operational actions  

Operational actions carried out under the Eastern Border Action Plan are already suggesting 
promising results and should continue to be implemented under this Strategy. As part of the 
EU Customs Risk Management Framework, the area of cigarette smuggling has been assigned 
a Priority Control Area (PCA) for the year 2013 to ensure more intensive EU-wide risk based 
co-ordinated  controls40.  Complementing  the  PCA,  a  regional  JCO  is  organised  by  the 
Commission  and  Romanian  customs,  involving  also  Ukraine  and  Moldova.  Following  from 
the  results  of  these  actions,  specific  recommendations  will  be  defined  and  implemented  to 
strengthen systematic EU capacity to identify and target identified common risks in the area 
of cigarettes. Following positive final analysis of the results, it may also be recommended to 
organise further targeted actions on illicit tobacco trade, possibly involving specific high-
risk  factors  such  as  consignments  coming  from  key  source  countries  such  as  the  UAE  or 
established risk hubs.  

Weaknesses  in  Joint  Customs  Operations  (JCO)  identified  by  the  Council  Customs 
Cooperation Working Party (CCWP)41 should be addressed and the information sharing in the 
context of a JCO should be improved.  

Information  on  the  geographical  origin  of  illegal  tobacco  consignments  can  be  improved 
through technical analysis of samples from products seized in the Member States. 

4.3.1.3.  IT tools and equipment  

With regard to existing IT tools such as CIGINFO, Member States should be encouraged to 
use these to their full potential. At the same time, the Commission will increase its feedback 
on the results of its analysis of the seizures. The Commission and Member States authorities 
could explore the use of Container Status Message (CSM) data to target suspicious shipments 
related to cigarette smuggling. Possibilities for a more effective use of other equipment such 
as automated licence plate and container code recognition tool infrastructure (by sharing 
the information obtained via the tool at regional or EU level) will also be explored. 
The  exploitation  of  ATIS42  to  gather  trends  based  on  data  analytics  in  order  to  support 
Member States in their operational risk targeting should be considered. A similar exercise on 
the basis of EMCS transactions could also be envisaged.  

40 
41 

Commission Regulation (EEC) No 2454/93, Articles 4g – 4j. 
DOC 9947/4/11 LIMITE ENFOCUSTOMS 38 REV, Project Group 4.6. of the 4th Action Plan of the 
2009 Strategy on customs cooperation (Doc. 15198/09 ENFOCUSTOM 118 ENFOPOL 272). 

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Customs  modernisation,  including  infrastructure  and  equipment,  could  possibly  be  better 
supported by EU structural funds in the future if EU Member States are aware and prioritise 
the objective in their national envelopes accordingly. 

4.3.1.4.  Cooperation between EU authorities  

In addition to specific actions to improve sharing of risk information and greater exploitation 
of supply chain data through development of common risk management tools and methods at 
the EU level as identified in the Communication on Risk Management, the planned reform of 
the  European  Anti-fraud  Office  (OLAF)  should  pave  the  way  for  enhanced  cooperation 
between OLAF, EUROPOL, EUROJUST and FRONTEX in the context of investigations43. 
The agreement found still needs to be formalised. The proposal for a reform of EUROPOL44 
has also paved the way for an enhanced information exchange for investigations.  

Shared information and intelligence among the various authorities involved in the protection 
of  the  external  borders  contributes  to  preventing  and  fighting  this  particular  type  of  cross-
border crime. It is therefore important that OLAF and FRONTEX share intelligence under the 
EUROSUR  system  at  EU  level,  and  customs  authorities  take  part  and  provide  input  at 
national level to the EUROSUR45 system. 

4.3.1.5.  Specific problem area(s)  

The  specific  and  acute  problem  of  Greece  as  a  major  entry  point  will  be  addressed  in  the 
context of the Task Force Greece46 and the technical assistance provided to the reform of the 
General Secretariat for Public Revenue.  

The Commission will 

-  organise  further  targeted  actions  both  within  the  EU  and/or  with  third  countries  using  the 
most appropriate existing tools such as PCAs, regional and/or international JCOs; 

- address the weaknesses identified in Joint Customs Operations; 

-  continue  its  work  on  scientific  research  and  analytical  methods  in  the  fight  against  illicit 
tobacco trade; 

- provide increased feedback to Member States regarding analysis of seizures; 

-  propose  measures  to  interlink  and  gather,  at  central  level,  information  obtained  through 
automated licence plate and container code recognition tool, in order to make the information 
available to the other Member States; 

-  provide  additional  assistance  to  the  customs  authorities  of  the  Member  States  to  identify 
currently available and future programmes in order to support and modernise EU customs in 
terms of customs infrastructure, equipment (including for the Customs Laboratories), systems 
and services; 

42 
43 
44 
45 

46 

The Anti-Fraud Transit Information System is an AFIS application, see footnote 28. 
COM(2011) 135 final.  
COM(2013) 173 final. 
Commission  Staff  Working  Document  Determining  the  technical  and  operational  framework  of  the 
European  Border  Surveillance  System  (EUROSUR)  and  the  action  to  be  taken  for  its  establishment 
(SEC(2011)145 final). 
This should include funding of additional customs equipment under Hercule II and III, and work with 
the Greek national authorities in order to identify and remove weaknesses in controls. 

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- facilitate access as regards Member States use of available and future funding instruments 
and programmes; 

-  address  the  specific  problems  in  Greece  through  appropriate  action  in  the  context  of  the 
Greece Task Force.  

The Commission and the Member States should  

- on the basis of the results of the PCA, define and implement recommendations to strengthen the 
EU capacity to identify cigarette smuggling. 

The European Parliament and the Council should adopt  

- as soon as possible, the pending review of the OLAF Regulation;  

- the Commission's proposal for a reform of EUROPOL.  

Member States should improve reporting in CIGINFO. 

4.3.1.6.  Sharing of expertise and best practices 

As a general measure, it is essential to optimise and coordinate available resources both at 
national and EU levels in order to reinforce enforcement capability and capacity. Specifically 
in  the  area  of  international  cigarette  smuggling,  successful  implementation  of  national 
strategies has contributed to the reduction of the illicit trade in a number of EU countries.  

Sharing  of  experience  and  expertise  can  create  important  synergies  and  allow  identifying 
the  latest  and  most  efficient  technologies  and  methods  both  for  prevention  and  detection 
purposes. This sharing of expertise, as well as a future pooling of resources are fundamental 
objectives of the future Customs and FISCALIS 2020 Programme47. These can also partially 
be supported in the fight against fraud through the Hercules III programme. The fight against 
cross-border  criminal  activity  can  also  be  supported  through  the  Internal  Security  Fund, 
Instrument financial support for border management and the common visa policy48.  

Sharing  of  national  practices  in  the  fight  against  customs  crime  (mainly  smuggling)  is 
undertaken  in  the  Council  Customs  Cooperation  Working  Party.  A  specific  group  has 
undertaken to improve the possibilities to tackle the threat of serious and organised crime in 
tobacco smuggling, through new forms of cooperation and investigative techniques49.  

A  coordinated  approach  could  also  be  considered  for  trainings  for  the  different  law 
enforcement staff on the specificities of trade in tobacco products, which is highly complex 
even  in  its  legitimate  form.  Specific  measures  and  experience  sharing  on  addressing 
corruption could also be undertaken at EU level. For these purposes, the Commission should 
assist the Member States to organise staff exchanges between competent national authorities 
involved in anti-smuggling efforts. 

The Commission will 

-  develop  a  specialised  training  module  for  law  enforcement  authorities,  together  with  the 
Member States, CEPOL and (in the future) EUROPOL;  

47 
48 
49 

COM(2012) 464 final and COM(2012) 465 final. 
COM(2011) 750 final. 
The  Project  Group  on  Action  5.1  "To  improve  the  possibilities  to  tackle  the  threat  of  serious  and 
organised crime in tobacco smuggling, through new forms of cooperation and investigative techniques".  

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- assist Member States in ensuring sharing of best practices in the fight against customs crime 
and  fight  against  corruption,  including  by  providing  financial  assistance  from  the  Hercule 
programme for the purpose of staff exchanges. 

4.3.2.  Enhance cooperation with major source and transit countries 

The  main  source  and  transit  countries  need  to  share  information  concerning  their  legal 
cigarette production and distribution, threat assessments and information related to organised 
crime, as well as cooperation and assistance in concrete investigations.  

To  this  end,  the  EU  has  to  make  better  use  of  and  raise  the  problem  within  the  existing 
frameworks  of  cooperation  with  China  such  as  the  existing  framework  created  under  the 
Customs cooperation and Mutual Administrative Assistance Agreement (CCMAA50). The EU 
should also use the current and future Association Agreements with European Neighbourhood 
countries and the Stabilisation and Association agreements with the Western Balkans to their 
full  potential.  Thus,  the  issue  should  be  raised  systematically  at  the  competent  ministerial 
meetings  under  the  Neighbourhood  Policy  as  well  as  the  High  Level  Seminars  on  Customs 
Cooperation.  Steps  should  be  taken  to  encourage  harmonised  approaches  to  convergence  of 
excise structures and rates between neighbouring partner countries, through existing or newly 
established  multilateral  fora,  to  reduce  to  the  minimum  incentives  for  smuggling  caused  by 
disparities between countries. 

Implementation  of  the  Strategic  Frameworks  for  customs  cooperation  with  Russia,  Ukraine 
and  Moldova  should  continue,  in  particular  in  terms  of  setting  up  mechanisms  allowing 
discussing  cooperation  on  tackling  customs  fraud,  including  possible  joint  actions,  and  a 
similar  Framework  should  be  endorsed  with  Belarus.  The  negotiations  of  Administrative 
Cooperation Arrangements between OLAF and the Ukrainian and Moldovan Customs should 
be finalised by July 2013, and negotiations should start with Russia and Belarus.  

Although there is no bilateral framework for cooperation with the UAE, the EU has to address 
the  problem  with  the  UAE  at  political  level,  in  addition  to  reinforcing  EU  controls  on 
consignments coming from the UAE and organising targeted operations. 

The EU should also continue providing technical and financial assistance to the European 
Neighbourhood  countries,  Western  Balkans  and  Turkey  in  order  to  fight  against  the  illicit 
trade, including corruption in customs and other law enforcement authorities.  

Also  the  partnership  and  cooperation  agreements  with  Vietnam,  Malaysia  and 
Singapore51 should serve as a basis for enhanced cooperation in the fight against organised 
crime. The proposed anti-fraud provisions in free trade agreements (FTA) with these countries 
must be used for enhanced cooperation in customs matters. Such anti-fraud provisions will be 
systematically proposed in all of the EU's international trade and/or cooperation agreements.  

The entry into force and implementation of the FCTC Protocol will bring a new dimension 
to the fight against the illicit trade also at global level, through the track and trace regime and 
the Global information sharing focal point located at the WHO FCTC Secretariat, and also by 
enhancing  judicial  cooperation  in  criminal  matters  and  mutual  legal  assistance  in  legal 
matters. Apart from the WHO itself, also the WCO and Interpol can play an important role in 

50 
51 

OJ L 375, 23.12.2004, p. 20. 
The  PCA  with  Vietnam  was  signed  in  June  2012,  the  negotiations  with  Singapore  and  Malaysia  are 
advanced. Negotiations for the FTA with Singapore were concluded in December 2012.Negotiations on 
FTAs with the other countries are on-going.  

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encouraging  their  members  to  ratify  and  implement  the  FCTC  Protocol  and  take  efficient 
measures on that basis. 

The Commission will 

- intensify its work with China, European Neighbourhood countries, Russia, Western Balkans 
and Turkey in the areas of customs cooperation and the fight against cigarette smuggling; 

-  examine  the  usefulness  of  posting  additional  EU  liaison  officers  to  important  source  and 
transit countries; 

-  propose  relevant  anti-fraud  provisions  to  be  systematically  included  in  the  negotiating 
mandates for relevant international agreements;  

- promote signature, ratification and implementation of the FCTC Protocol in particular by the 
main source countries, inter alia through a close cooperation with the WCO and a reinforced 
cooperation with Interpol and through financial support and technical assistance to the WHO 
FCTC Secretariat and non-EU countries. 

The Commission and the European External Action Service (EEAS) will raise the problem of 
illicit tobacco traffic systematically at EU level with the main source and transit countries, in 
particular the UAE. The Commission will propose joint action plans between the EU and the 
main source countries. 

The  Commission  will  and  the  Member  States  should  ensure  cooperation  with  the  Global 
information sharing focal point at the WHO FCTC Secretariat. 

4.4. 

Strengthening sanctions  

In terms of disincentives, effective and dissuasive sanctions, including criminal sanctions are 
needed across the EU to successfully curb the illicit tobacco trade. The Commission will have 
an external study carried out on existing penalties in the Member States specifically relating 
to  the  illicit  trade  in  tobacco  products  and  in  particular  smuggling,  and  the  way  they  are 
applied by the courts.  

Several existing, more general initiatives already offer possibility to increase the disincentives 
to  illicit  tobacco  trade.  For  one,  the  provisions  of  recently  adopted  WHO  FCTC  Protocol 
require Contracting Parties to adopt legislative and other measures to establish as unlawful a 
list  of  conducts  under  their  national  law,  and  to  ensure  that  persons  held  liable  for  the 
unlawful  conduct  are  subjected  to  effective,  proportionate  and  dissuasive  criminal  or  non-
criminal  sanctions.  The  study  to  be  launched  will  also  monitor  compliance  with  the  FCTC 
Protocol, and based on the results, the Commission will consider proposing legislative action.  

Furthermore, the Commission has already proposed in July 2012 the adoption of a Directive 
on the fight against fraud to the Union's  financial interests by means of criminal law (‘PIF-
Directive’)52  harmonising  the  definitions  of  crimes,  levels  of  minimum  and  maximum 
sanctions and periods of time limitations which still vary in the EU Member States. If taken 
up  by  Member  States,  this  could  contribute  to  the  effort  to  tackle  the  problem  of  differing 
sanctions  in  the  Member  States.  Furthermore,  the  Commission  will  propose  in  2013  an 
approximation of the definitions of customs infringements and non-criminal sanctions.  

52 

COM(2012) 363 final, 2012/0193 (COD), Proposal for Directive of the European Parliament and the of 
Council on the fight against fraud to the Union's financial interests by means of criminal law. 

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The Commission will  

- carry out an external study on existing penalties in the Member States the objective of which 
will also be to analyse the transpositions of the FCTC Protocol; 

-  table  a  proposal  to  approximate  definitions  of  customs  infringements  and  non-criminal 
sanctions. 

5. 

CONCLUSION 

Combating illicit trade in tobacco products requires both political commitment and concrete 
actions  in  order  to  protect  the  financial  interests  of  the  EU  and  the  Member  States,  to  fight 
against cross-border crime and to protect the citizens from goods which do not comply with 
tobacco control legislation. 

Certain measures and initiatives have been adopted and are being implemented. Others are in 
the  pipeline,  and  still  others  need  to  be  reinforced.  Above  all,  the  problem  of  tobacco 
smuggling is a complex and global problem. For effective results, it needs to be addressed in a 
comprehensive  way,  both  geographically  and  in  terms  of  rules,  resources  and  procedures 
addressing demand, supply, control and enforcement.  

The  implementation  of  the  Strategy  set  out  in  this  Communication  and  the  measures  and 
actions  associated  thereto,  set  out  in  the  attached  Action  Plan,  would  address  the  identified 
problems and drivers and thus significantly strengthen the fight against the illicit trade in the 
EU and support the implementation of the existing measures and policies. 

The  Commission  invites  the  European  Parliament  and  the  Council  to  discuss  the  measures 
proposed in this Communication and its Action Plan and to support the Commission and the 
Member States in their implementation. The Commission will monitor the implementation of 
the Action Plan, which should be concluded by the end of 2015, in particular its effects on the 
different  drivers  of  the  problem,  and  will  prepare  a  report  after  three  years  from  the 
publication of this Communication.  

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