BUSINESS | Asean loses billions of dollars to illicit cigarette trade

Member states of the Association of Southeast Asian Nations (ASEAN) are losing billions of dollars due to rampant smuggling of tobacco products, according to a report.

Customs leaders from 10 ASEAN member states (AMS), along with partners China, Japan, Korea and Australia convened on June 4 to 6 for the 33rd Meeting of ASEAN Directors-General of Customs in Phu Quoc, Vietnam to forge enhanced customs cooperation, tackle illicit trade activities and boost regional trade.

ASEAN countries lost close to $3 billion in tax revenue due to illicit tobacco products in 2017. In the Philippines, around P100 billion or $1.9 billion was lost every year because of cigarette tax evasion.

Thailand also reported tax losses of THB7 billion in 2021 or $202 million, with an illicit incidence rate of about 10-percent.

“The concentration of illicit cigarette consumption is most prominent in Indonesia, Malaysia, the Philippines and Vietnam, which collectively accounted for about 95 percent of the region’s total illicit consumption in 2017,” according to a report by the Transnational Alliance to Combat Illicit Trade (TRACIT) and the EU-ASEAN Business Council.

“Cigarettes are exported from Indonesia to several countries in the region, predominantly the Philippines, through ports such as Nunukan and Tarakan. Further, the Philippines also receives a large volume of imports from Vietnam, Cambodia, and India that transit through Singapore,” the TRACIT report said.

Local authorities identified the areas in the Philippines such as Palawan, Zamboanga, Sulu and Tawi-Tawi as critical entry points for cigarette smuggling, with illicit products entering from Indonesia, Malaysia, Cambodia and Vietnam, according to news reports.

The TRACIT report said that other tobacco products such as smokeless tobacco are also vulnerable to illicit trade. Bans on e-cigarettes in Singapore and Thailand have contributed to an increase in the smuggling of vaping products from neighboring Malaysia, a major producer of e-cigarettes.

In Thailand, the TRACIT report found that “brands that are exported from Vietnam and Indonesia and that appear to have consignees based in Singapore, Hong Kong, Malaysia and the United Arab Emirates are likely considered goods in transit which receive less scrutiny by Customs. These same brands are seized during law enforcement efforts in the Thai market; whereas Cambodia has exported brands destined for Thailand that are not sold legally in the market.”

The Customs meeting updated recent progress in ASEAN customs integration, including the signing of the ASEAN Authorized Economic Operator Mutual Recognition Agreement (AAMRA). Six countries—the Philippines, Brunei, Indonesia, Malaysia, Singapore and Thailand—have implemented the AAMRA pilot program.

A recent Joint Customs Control (JCC) operation resulted in the confiscation of illegal tobacco products including 1,250 kilograms of dried tobacco leaves and over 50,000 packs of illicit cigarettes due to the collaborative efforts of the Philippines, Malaysia, Singapore, Thailand and Vietnam.

ASEAN countries also agreed to develop guidelines for better information exchange between customs authorities and e-commerce operators to stop illicit traders from using online platforms to distribute counterfeit and illegal products.

The meeting also focused on discussing issues, including programs and solutions to complete the goals identified in the ASEAN Customs Development Strategy Plan for 2021-2025, with emphasis on exchanging electronic documents through the ASEAN Single Window and implementing the ASEAN Customs Transit System (ACTS) which simplifies customs procedures for goods moving between countries.

Vietnam Customs Director General Nguyen Van Can, ASEAN Customs Chair for 2024-2025, emphasized that it was time for ASEAN customs to “join hands for a new journey with higher targets on integration and connectivity,” to successfully realize the ASEAN vision of “One Vision, One Identity, One Community”.

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