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    Illicit Cigarette Trade Creates Woes for Retailers

    Decades-old crime grows more serious.

    By Melissa Kress, Convenience Store News

    WASHINGTON, D.C. -- This March, The Tax Foundation released a report highlighting the illicit cigarette trade in the United States. Shortly after, New York Gov. Andrew Cuomo announced a new Cigarette Strike Force -- composed of state, local and federal agencies -- to crack down on illegal tobacco trafficking and sales in the Empire State.

    A few months later, Winston-Salem, N.C.-based Reynolds American Inc. (RAI) launched a special website called the "New Tobacco Road" to draw attention to cigarette smuggling and the issue's seriousness for the tobacco industry and all its players, including convenience store retailers and wholesalers.

    While the black market trade of cigarettes is not a problem of the 21st century -- it has been around for decades, in fact -- the situation is getting more serious.

    "This isn't a new problem. It has been around since the late '70s when there were studies and research done about this issue. But we have seen it become a more serious issue as organized criminal enterprises look at illicit cigarette trade as part of their portfolio," explained Bryan Hatchell, director of communications at RAI. "It is becoming the currency of organized crime."

    The "New Tobacco Road" refers to Interstate 95 along the Eastern Seaboard and the website is specifically meant to point out this issue. Along the I-95 corridor, criminals are taking advantage of the opportunity to make huge profits from the illicit sale of tobacco products, Hatchell said.

    RAI is not the only tobacco company taking aim at this problem. Combating the illicit trade also has been a major part of Richmond, Va.-based The Altria Group Inc.'s corporate responsibility platform for several years.

    The Brand & Trade Channel Integrity Department within Altria's law department works toward an end. Its efforts include communicating to trade members that distribute Altria's products at wholesale and retail; maintaining a system to monitor compliance and address violations of the terms of trade programs; supporting law enforcement and regulatory agencies at all levels; and investigating those involved in importing and selling illicit cigarettes.

    "Those are some big-bucket things we do as a company to protect our business and the legitimate cigarette distribution system," said Brian May, senior manager of communications at Altria, the parent company of Philip Morris USA.

    The illegal cigarette trade has moved beyond the average person traveling south to buy cartons of cigarettes at cheaper prices.

    "More and more, we are finding organized crime, ethnic street gangs and even terrorists getting into the game because it's the new currency for the criminal. It's more profitable than narcotics," said Rich Marianos, a retired assistant director with the federal Bureau of Alcohol, Tobacco, Firearms and Explosives. "It's a $5.5-billion loss to this country a year in tax avoidance, tax evasion and just plain old stealing from the American taxpayer."

    By Melissa Kress, Convenience Store News
    • About Melissa Kress Melissa Kress joined EnsembleIQ's Convenience Store News in November 2010. Her primary beats include alcoholic beverages and tobacco. Kress has been a professional journalist since 1995. A graduate of West Virginia University, she began her career in community journalism before moving to business-to-business publishing in 2000, covering commercial real estate.

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