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

2021: Article: Black market cigarettes a growing boom trade in Western Australia, warns ex-top border cop

• The founder of Border Force's illegal tobacco squad says one in five cigarettes smoked in Australia is illegal and demand has spawned a smuggling trade worth hundreds of millions of dollars each year, with a recent record-breaking case in Western Australia.
• the black market for illegal tobacco – imported mainly from Asia and the Middle East – has grown, with the ATO estimating about $650 million in potential tobacco excise revenue was lost in 2017-18.

2021: Article: Man receives $100k fine after AGLC seized nearly 6,700 pounds of contraband tobacco

• The potential lost tax revenue of the products was estimated by Alberta Gaming, Liquor and Cannabis (AGLC) to be more than $972,000.

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.

2017: Article: Second Illinois man charged with using fake business to buy and sell $3M in tax-exempt cigarettes

• Most of the cigarettes Khatib bought were allegedly sold in Chicago, where the state excise tax is $1.98 per pack compared to 17 cents per pack in Missouri. Khatib and Qaddoumi allegedly kept the inflated profits.

2017: Article: Women allegedly bought up cigarettes in low-tax Missouri to sell in high-tax New York

• The women admitted they had driven around the St. Louis area in a rented car buying them up [160 cartons of cigarettes], with plans to sell them back in New York. In addition to the recovered cigarette cartons, police found about two dozen fake credit cards that the women apparently used to buy them.

2015: Report: 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.
• This report estimates the portion of the total U.S. tobacco market represented by illicit sales has grown in recent years and is now between 8.5 percent and 21 percent. This represents between 1.24 to 2.91 billion packs of cigarettes annually and between $2.95 billion and $6.92 billion in lost gross state and local tax revenues.
• PDF version
• Citation: National Research Council. 2015. Understanding the U.S. Illicit Tobacco Market: Characteristics, Policy Context, and Lessons from International Experiences. Washington, DC: The National Academies Press. https://doi.org/10.17226/19016.

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: Testimony in Netherlands pertaining to a potential flavour / flavor ban: Regulation of e-cigarette flavours – a response

• Signed by 24 experts from around the world
• Covers 12 key points including prohibition and black markets

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.

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.

2020: Article: UK Study: TPD Regulation Pushes UK Vapers to The Black Market

• The restrictions caused some people to buy higher strength e-liquids and prohibited components on the black market via countries where regulations do not apply such as China and the US.

2019: Letter: Letter by Iowa Attorney General Thomas Miller to Michelle Marston, Chief of Staff, Office of Management and Budget

• Flavor bans would cause:
  • A transfer of the supply of flavored products from legitimate American businesses to highly professional consumer-facing Chinese internet-based suppliers.
  • The development of a new and flourishing black market in flavored nicotine e-liquids manufactured by amateurs, opportunists, and criminal enterprise. Black markets that will supply both adults and teens with no discipline regarding age. This in itself carries risks – black markets may supply adulterated products made in unsanitary, unregulated conditions. Many participants in this trade are likely to expose adolescents to other black-market products (liquids containing THC, meth and other illicit drugs and other illicit products). It is conceivable that this will increase the overall risks to both adults and adolescents.
  • Migration of users to the existing unregulated sub-culture of DIY mixing of nicotine and food flavors.

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.

2019: Blog: Killing Us with Kindness: Democrats’ War on Vaping Costs Lives

• Shutting down the licensed retailers who have every incentive to follow the law will not simply make vaping go away. Instead, it will drive the millions of e-cigarette users into the black market. There, consumers will have little guarantee about the safety of the products they’re buying, dealers have no incentive to check customers’ age, and regulators have a limited ability to track or stop them.
• For those vapers reasonably fearful of black market products, there is also the do-it-yourself route. “Homebrewing” e-liquid may eliminate the risks of vaping the harmful chemicals found in black market products. But it also comes with its own dangers. These new dangers stem from the challenges of choosing safe ingredients, in safe concentrations, and avoiding contamination. Not everyone will get it right all of the time.

2019: Article: Police raid hookah, e-cig sellers

• Thailand
• The detainees were charged with possessing and providing contraband products, and violating the tobacco control law and migrant workers' law. These offences carry maximum jail terms of five years and/or fines up to 600,000 baht.

2017: Article: Sharp rise in smuggling and sale of e-cigarettes

• E-cigarettes are hot on the black market, given the rising number of cases the authorities have investigated in recent years in Singapore.

2016: Article: What the E-Cigarette Black Market Will Look Like if FDA Stomps Industry

• Danger and death expected if vaping is driven underground.
• The black market is going to be absolutely huge on this. There are going to be lots of enterprising people selling to their fellow vapers in bars.

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.

2014: Article: E-Cigarette Users Would Ignore Bans, Turn to Black Market, Survey Finds

• About 79 percent of respondents said they would “look to the black market” if products they use “were banned tomorrow," while 14 percent said they would return to smoking analog cigarettes.
• Home-blended e-liquid would become common in response to flavor bans. This runs counter to the regulatory goal, which is to ensure safety.

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

2017: Study: Counterfeit Electronic Cigarette Products with Mislabeled Nicotine Concentrations

• We introduce 2 novel issues in the e-cigarette industry, the production of counterfeit refill fluids under a brandjacked label and inclusion of nicotine in 81.3% of the counterfeit products labeled 0 mg/mL. This study emphasizes the need for better control and monitoring of nicotine containing products and sales outlets.
• PDF Version
• Citation: Authors: Omaiye, Esther E.; Cordova, Iliana; Davis, Barbara; Talbot, Prue - Source: Tobacco Regulatory Science, Volume 3, Number 3, July 2017, pp. 347-357(11) - Publisher: Tobacco Regulatory Science Group - DOI: 10.18001/TRS.3.3.10

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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