From: Richmond Times-Dispatch
By: John Reid Blackwell
Officials with China’s government-controlled cigarette industry are in the Richmond area this week meeting with executives and managers at the top U.S. cigarette maker, Philip Morris USA.
The topic of their discussions is a problem common to both: How to fight cigarette counterfeiting.
“Our experience has been that most of the production of counterfeit Marlboros does come from China,” said Michael Thorne-Begland, director of brand integrity for Henrico County-based Altria Group Inc., the parent company of Philip Morris USA.
Often, the counterfeits are made illegally in caves or on farms, “in completely unregulated and unsanitary conditions,” he said.
Millions of packs of counterfeit cigarettes are illegally shipped into the United States every year to be sold on the black market, Thorne-Begland said.
The company’s leading brand, Marlboro, is the main target, and counterfeiters have developed highly accurate reproductions of the brand’s packaging.
A six-member delegation from China was scheduled to arrive in the Richmond area Monday for several days of meetings with Philip Morris USA and Altria representatives, in what Thorne-Begland said is an informational and fact-finding mission to lay the groundwork for future efforts against counterfeiting.
The group also is scheduled to meet with local, state and federal law enforcement officials in New York.
The primary market for counterfeits is urban areas with relatively high cigarette taxes such as New York City. Websites also have popped up to sell untaxed counterfeits.
As many as 3 million packs of untaxed, counterfeit Marlboros are sold every year in New York City alone, Thorne-Begland said.
“It is almost always the case that they do not have federal or state excise taxes,” he said. “So the federal government and states probably lose tens to hundreds of millions of dollars a year in taxes.”
Philip Morris USA has sued some retailers and websites in New York, Florida and other areas for selling counterfeit Marlboros.
Between 2001 and 2006, cigarettes made up 18 percent of all goods, measured by value, seized by federal customs and border patrol agents, making them the second most popular item smuggled into the United States behind apparel.
A 40-foot cargo container of 10 million cigarettes costs just $175,000 to manufacture and ship to the United States, but it can be sold in the United States for $2 million to $4 million, Altria reported in a report to the U.S Food and Drug Administration.
Thorne-Begland said the company has been working with Chinese officials for several years to tackle the problem, but this is the first time a delegation has traveled from China to the U.S. specifically to discuss cigarette counterfeiting.
China is the world’s largest cigarette market; its tobacco industry is government controlled.
The delegation includes representatives of the State Tobacco Monopoly Administration, the Provincial Tobacco Monopoly Administration’s enforcement division, the Ministry of Public Security, and the General Administration of Customs anti-smuggling division.
“We think it shows their willingness to continue to work with U.S. industry to fight counterfeit cigarette trafficking,” Thorne-Begland said.