Brussels, 15/07/2010 (Agence Europe) - The European Commission and 24 EU member countries have signed a 20-year cooperation agreement with British American Tobacco (BAT), the second largest company in the sector, to tackle the illegal trade in tobacco products. Under the legally binding agreement, announced on Thursday 15 July, BAT will work with the European Commission, its anti-fraud office OLAF, and member states' law enforcement authorities to help in the fight against contraband and counterfeit cigarettes.
Over the 20-year period, BAT will pay the Commission and member states US$200 million (€134 million). The group also pledged to make further payments in the event of future seizures of its genuine products in the EU, above specified quantities.
The commissioner responsible for tackling fraud, Algirdas Šemeta, said the agreement would “help greatly in combating the illegal trade in cigarettes”. He said that BAT, which initiated the agreement, would “build on its existing supply chain controls, by strengthening its review process for selecting and monitoring customers”. Similar agreements already exist with Japan Tobacco International (see EUROPE 9567) and Philip Morris International (see EUROPE 9281). The Commission says that the illegal trade in cigarettes is often used as a cover for “more sinister activities, such as terrorism and organised crime”.
Jack Bowles, BAT's Western Europe Director, says that counterfeiting and smuggling of tobacco products cost the EU and member states up to €10 billion in unpaid taxes every year. Some 75 billion cigarettes are smuggled into Europe every year. This means that almost 13% of all cigarettes sold in Europe are sold illegally. In 2008, BAT contacted the Commission for discussions on a cooperation agreement “to tackle this problem,” Bowles said.
Three EU member states, Spain, Sweden and Poland, did not sign the agreement for domestic procedural reasons which have to be respected, the Commission said. It hopes that they will join the agreement later. The €134 million will be paid in 20 equal annual tranches; the Commission will receive 10% and member states 90%, shared according to the number of counterfeit cigarettes seized.
The agreement introduces strong provisions and procedures for cooperation and intelligence sharing, to allow law enforcement authorities to take more effective action against criminals in Europe and around the world. In addition, BAT will build on its existing supply chain controls, by strengthening its review process for selecting and monitoring customers, to enhance its capabilities to track and trace certain packaging, and to provide expanded support to European law enforcement bodies in the battle against the illegal trade in cigarettes. Far-reaching product-tracking procedures are also included in the agreement, to enable enforcement bodies to determine the sources and destination of BAT brands and verify if they may be counterfeit. Consistent with the agreement, BAT will mark certain packaging with information indicating the intended market of retail sale, mark “master cases” of 10,000 cigarettes with machine-scannable barcode labels, and implement other procedures to improve the tracking and tracing of its products. (L.C./transl.rt)