Nicotine - Illicit, Bootleg, & Alternative Markets

Regulations, Laws, and Money motivate people to circumvent the rules and to seek alternative ways to get products to consumers. As lawmakers look at future regulations, they must consider the unintended consequences of those regulations. This page will attempt to track some of those consequences.

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Avoiding Taxes and bans

2020: Article: Native American Reservations a Haven for New York Vape Shops

• New York State’s 20 percent excise tax on vapor products and nearly 9 percent sales tax also do not apply to the Shinnecock and other tribes. Essentially, Silva said, patrons can spend almost 30 percent less than they normally spend, and nobody has to worry about breaking the law.

2015: Book: Understanding the U.S. Illicit Tobacco Market

• Tobacco use has declined because of measures such as high taxes on tobacco products and bans on advertising, but worldwide there are still more than one billion people who regularly use tobacco, including many who purchase products illicitly. By contrast to many other commodities, taxes comprise a substantial portion of the retail price of cigarettes in the United States and most other nations. Large tax differentials between jurisdictions increase incentives for participation in existing illicit tobacco markets. In the United States, the illicit tobacco market consists mostly of bootlegging from low-tax states to high-tax states and is less affected by large-scale smuggling or illegal production as in other countries.

2013: Article: Cigarette smuggling makes WA tax revenue go up in smoke

• Washington’s Department of Revenue estimates the state lost about $376 million in tax revenue in 2012 to cigarette tax evasion. An estimated 35 percent of the cigarettes in Washington are contraband.

Black Market

2021: Article: Tobacco ban ends at state prisons

• Mississippi officials are hoping that lifting the ban on smoking inside prison will help curb the huge contraband trade that some inmates estimate may run in the millions.
• Officials say that name-brand cigarettes will be sold at current prices in the prisons’ canteens. Cigars and smokeless tobacco products will also be sold.
• “We all know that many of our clients are paying exorbitant prices for ‘black market’ tobacco and are smoking in their cells around other prisoners,” he said. “Providing places to smoke legally and more safely outside and using money from tobacco sales for reentry services and job training sounds like a step in the right direction to me. We’ll see how the actual implementation goes.”

2021: Press Release: CBP, FDA Seize Unapproved E-Cigarettes Worth $719,453

• Many counterfeit products are likely produced in unregulated facilities with unverified ingredients posing a serious health concern to consumers. It is especially alarming when these types of counterfeit and unapproved products find their way into the hands of children as studies indicate.

2020: Article: Native American Reservations a Haven for New York Vape Shops

• “I’m going to speculate, but I think the black market is still so significant that we’re not seeing any spillover,” he said of his solid business so far. “You would figure that we’d be stampeded. That’s not been the case.”

2020: Press Release: CBP Officers in St. Louis Seize Dangerous Vaping Pens

The shipment was mislabeled as Air Humidifier, a common practice used by smugglers.

• 2020: Press Release: Baton Rouge Officers Seize Unauthorized Atomizers

While the overwhelming majority of international trade is legitimate, there are those who attempt to exploit the industry for illicit purposes.

• 2020: Press Release: CBP Officers Seize more than $1.7 Million Dollars in Unapproved e-Cigarette Products in Allentown, PA

The shipment arrived from China on September 18 manifested as “LED lights” and was destined to an address in Northampton County, Pennsylvania.

• 2020: Press Release: Philadelphia, Pittsburgh CBP Officers Seize Nearly Half-Million Dollars in Unapproved e-Cigarette Products

U.S. Customs and Border Protection (CBP) officers at the Port of Philadelphia and the Port of Pittsburgh have been seizing counterfeit and unapproved vaping products since June, racking up 48 combined seizures worth an estimated $444,000.

2019: Article: Banning flavored tobacco will create problems for law enforcement, ex-State Police leader says

• Law enforcement has not been afforded the opportunity of participating in legislative discussions or intentions to impose a ban. The impact of these proposed bans will fall squarely on the shoulders of state and local law enforcement.
• I believe that New Jersey’s flavor ban legislation is a well-intended health policy that unfortunately is at odds with public safety. It opens a back door to the creation of interstate smuggling organizations and spurs the growth of illegitimate local markets profiting from the sale of outlawed tobacco products. For law enforcement, concerns are very real. And they’re not just blowing smoke.

2016: Video: Black market tobacco floods Australian market

• As cigarette prices have risen, illegal tobacco or chop-chop is being imported into the country in increasing amounts. The Feed went undercover with Customs to see how hard it was to buy.

2020: Article: Vape law seen as boosting $10B illegal market

• The task force concluded that the new law will lead to an increase in smuggling activity and black market sales. Rich Marianos, who served 27 years at the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives, told the task force that the illegal tobacco trade along Interstate 95 on the East Coast is a $10 billion industry that is already working to fill the void created by Massachusetts' new law.

Counterfeit

2020: Article: State police: Man was peddling counterfeit vape devices

• Massachusetts, USA
• He was charged with sale of electronic nicotine systems with expired registrations and with forging stamps and symbols.

2020: Press Release: CBP Officers in Cincinnati Seize over 72K Counterfeit Pod Packets

U.S. Customs and Border Protections officers in Cincinnati seized a shipment of 72,500 counterfeit disposable flavored pods packets on March 12. The shipment arriving from Hong Kong and heading to Georgia contained 153 cartons containing the Pop Blue Razz Disposable Vaping devices. The pods, if they were real, were valued at $1,147,500.

• 2019: Press Release: CBP Officers in St. Louis Seize Harmful Counterfeit Juul Pods

U.S. Customs and Border Protections officers at the port of St. Louis recently seized 2,379 counterfeit Juul pods.

• 2019: Press Release: Philadelphia CBP Seizes more Counterfeit Electronic Cigarette Pods

The trademark holders verified that the products were counterfeits. The e-Cigarettes shipment was appraised at $11,500.

2019: Video: Fake Cigarettes from Blumentritt

• Fake cigarettes being sold for by illegal vendors along Blumentritt, Manila City. Real or fake, both can give you cancer. But the fake ones might get you there even faster. There are various studies worldwide which proved counterfeit cigarettes are even more dangerous than regulated cigarettes. "The research team’s study concluded that there were much higher concentrations of toxic heavy metals consistently found in counterfeit cigarettes that were seized in the U.S. compared to genuine brands." - Department of Sciences at John Jay College of Criminal Justice

Crossing Borders / Alternative Locations

2020: Article: Native American Reservations a Haven for New York Vape Shops

• Because they are members of the tribe and conduct business on their sovereign land, the New York State flavor ban does not apply.

Flavor Ban Loopholes

• NOTE: a quick google search will find thousands of blogs, articles, and videos on how to flavor off the shelf products or how to make your own products from scratch. Most of these "resources" fail to give any type of information on what flavorings should or shouldn't be used (such as don't use oily products). The information on google will tell you how to flavor cigarettes, cigars, pipe tobacco, shisha, chewing tobacco, and liquids for vapor products. We will provide a few examples below.

2020: Article: Tobacco firm’s new Rizla cards to get round 2020 menthol cigarette ban slammed by charity

• Imperial Tobacco launched Rizla Flavour Infusions - ‘cards’ that can be used to add a menthol flavour to traditional tobacco products.

2020: Video: Turning heatsticks/cigarettes into menthol

• How to video that teaches consumers how to use menthol crystals to flavor non-menthol tobacco products

2015: Video: Smoking tips how to make Cigarettes taste menthol

• This resourceful user of tobacco products demonstrates using flavored cough drops to make her cigarettes taste like menthol

2011: Video: Flavoring Shredded Tobacco

• Another how to video to show consumers how to flavor tobacco products. The creator of this video used water, glycerin, brown sugar, maple syrup, honey, and cocoa.

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