Chapter 31 Tobacco exports, imports and smuggling

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Tobacco exports, imports and smuggling: Smuggling

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An RJR executive has plead guilty to helping smugglers sell $700 million worth of

cigarettes on the Canadian black market.

Associated Press, March 26, 1999

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Cigarettes are being smuggled by the truckload from Virginia, where the cigarette tax

of 2.5 cents a pack is the lowest in the country, to New York, where the tax is $1.19,

the highest in the United States. New York is losing hundreds of millions of dollars a

year in unpaid taxes, estimated one distributor. A van holding 4500 cartons can reap

a profit of $52,425 per trip, and discount stores along I-95 in Virginia are dotted with

cars and vans with New York license plates. "Each customer loads shopping carts

with as many cigarettes as he can buy for under $10,000, the cash limit that triggers a

report to federal authorities." New York authorities believe that tobacco companies

knowingly oversupply Virginia stores in order to get the excess cigarettes to New

York.

Washington Post National Weekly Edition, March 13, 2000, pp. 30-31

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In December 1999, the government of Canada sued RJ Reynolds for $1 billion,

alleging that the company set up an elaborate network of smugglers and shell

companies to flood Canada with cheap cigarettes after steep tax increases in 1991.

Most of the smuggling was via the Mohawk Indian reservation in northern New York

State into Ontario. In 1984, 40% of all cigarettes sold in Canada were smuggled and

sold on the black market. The lawsuit contends that Reynolds worked hard to conceal

its links to the alleged scheme.

Associated Press, December 22, 1999

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Monday, July 24, 2000

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