Smuggling illicit fags on the rise

Customs detect cigarettes worth Rs.600 million in 2014:

By Kurulu Kariyakarawana

The seized stock was taken out of the Rank Container Terminal in Orugodawatta

Customs RTF officials examining the seized cigarettes

Last week the media had the opportunity to witness a major detection of illicit cigarettes made in the recent past. It was conducted by the Revenue Task Force(RTF) of the Sri Lanka Customs. RTF officials who seized a 40 foot container carrying four million cigarettes, neatly packed in cartons and packets were displayed to the media. Several other high scale detections made since January this year has given rise to serious doubt as to whether attempts to smuggle illegal cigarettes into the country had escalated.

Although the container was opened and displayed to the media last week, it arrived into the country about two months ago. A vessel named APL Coral set sail from Hong Kong carrying the long container among hundreds of other containers to Sri Lanka via Singapore. The cargo carrier arrived at the Colombo Port on July 2, 2014 and after necessary clearance, the container was unloaded from the vessel with a number of other containers carrying various types of cargo.

The RTF which has a long standing reputation among the special units in the Department for thwarting many unlawful attempts to smuggle various contraband into the country, such as dangerous narcotics, textile and cosmetics and valuable metals was alerted about a particular container that arrived in APL Coral. Customs Superintendent G B Gnanaraj who is attached to the RTF received reliable information about a container loaded with illicit cigarettes being sent to the country in the aforesaid vessel.

Once the container was unloaded into the Port it was sent to the Rank Container Terminal in Orugodawatta, where the RTF usually conducts inquiries relating to suspicious cargo.

Although there was credible information that the container was carrying illegal cigarettes, Customs officials decided to wait and observe until a consignee turned up to clear the consignment. Superintendent Gnanaraj who was tipped off by an anonymous informant, took immediate action to inform his superiors Director RTF K D Nicolas and Deputy Director Siripala Edirimanne.

Senior officials gave instructions to isolate the container from the rest and leave it intact until somebody came to claim the goods.

The consignment which had been declared as Industrial Chilling Machines, had been sent from a consignor in Hong Kong was addressed to two local consignees.

The addresses of two local companies had been stated in the Cusdec (Customs Declaration) from where the representatives will come and clear the cargo. One company was Wijeya Industries in Rajagiriya and the other was R M J Industries in Panchikawatta.

RTF officials waited almost a month and then realised that for some reason or other, nobody was clearing this consignment. They had by then started an inquiry to find the authenticity of the addresses and found that companies mentioned in the Customs Declaration did not exist. As suspected, false details of the consignee had been stated in the Cusdec and this confirmed the fact that there was illegal consignment in the container.

Yet, officials waited for sometime expecting the consignee to turn up at any moment to release the consignment and follow it up to reveal a major smuggling syndicate.

Having waited more than two months, Customs officials decided to prise open the container to see what was inside.

Instructions received from the Customs Director General Jagath P Wijeweera,RTF officials opened the container in a closed door environment. Although the opening of a container suspected to be carrying contraband is exhibited to the media, Customs officials are apprised of the contraband earlier. If such a container contains hazardous elements like radioactive material or poisonous gases it will not be safe for public viewing.

Proving that they had received valuable information leading to a successful detection, the RTF found a large stock of illicit cigarettes inside the 40 foot container, if by any chance it found its way into the country under the very nose of law enforcement authorities, it would have caused a considerable loss to the tax earnings as well as to the health of unsuspecting smokers.

Nine 4X4 foot wooden chests were brought out of the container using a forklift. It contained four million sticks of cigarettes in 200, 000 packets (each 20 sticks) in 20, 000 cartons (each 10 packets).

It was a brand named Top Mountain which is by law illegal to be sold, stored or smoked in Sri Lanka. Officials said that this particular brand which is popular in middle eastern countries had been seized on many occasions.

They found that the consignment of illegal cigarettes even consisted of fakes of the same brand. While the lettering of the usual brand was ‘Top Mountain’ there were some other packets which bore the name ‘Top Mountaain'. Pictorial warnings were depicted on the regular brand, the fakes did not carry them. After carefully examination the stock was handed over to the Customs Central Registry to be destroyed.

Superintendent Gnanaraj said although there were no consignees to claim the contraband the inquiry will not cease. The RTF has commenced a special investigation into the case where they have already recorded statements from the local shipping agents who were in charge of the cargo. He said it was the first time that a stock of illicit cigarettes had arrived from Hong Kong. In the past illicit cigarettes had arrived from Dubai and China. The RTF had already sought the cooperation of the Hong Kong Customs to identify the consignor and details of the consignee who was to receive this package.

It is suspected that since several major illegal consignments were seized this year, the international syndicates have changed the originating port to mislead local Customs officials. It is a common practice followed by Customs officials that once something illegal is detected, the sea route of that consignment is carefully monitored and looked into in future instances if suspicions are aroused.

It is now identified that in most instances of smuggling heroin into Sri Lanka is carried out through the Pakistan and Indian shipping routes. Vessels that come through these routes are then subjected to extra surveillance.

Also another suspicious fact was that all the wooden boxes in the consignment bore the label 'Transshipment', which is normally be pasted on cargo that is unloaded at a port of transit to be taken away by another vessel to a different destination. Once the cargo is labelled as 'Transshipment' and sent to a warehouse fora temporary period, it is highly unlikely for Customs officials to go through the consignment as it is in transshipment and will not enter into the country. But there have been instances where such cargo with transshipment labels were found to be smuggled into the country from temporary warehouses by shady clearing agents and wharf clerks.

Explaining instances where bulk loads of illicit cigarettes was smuggled into the country, Customs Spokesman Director Leslie Gamini told the Sunday Observer that there had been several significant cases detected this year where fags worth over Rs.600 million was seized. The last detection of four million cigarettes was valued at Rs.100 million, approximately pricing one cigarette at Rs.25. Usually the detected illegal cigarettes are valued according to the current street value of a cigarette in Sri Lanka.

Although locally manufactured cigarettes are sold at Rs.28 or Rs.30 (depending on the brand) most of these smuggled cigarettes are sold at a lower price to attract demand.

According to Treasury statistics, a cigarette being sold at Rs.28 at present is subjected to a government tax of close to Rs.23.The production cost of a stick is roughly about Rs.4 and some cents. It is learnt that local individuals responsible for such illicit business had been purchasing these illicit fags for at least Rs.5 a stick. They then sell it at a lower price such as Rs.20 to Rs 25 earning a massive profit.The revenue the government loses when such contraband enters the local market is massive.

A senior official attached to Ceylon Tobacco Company(CTC) who spoke on account of anonymity said that the bulk of such illicit cigarettes entering the country cause a grave loss of revenue to the Government as well as to authorised tobacco and cigarette manufacturers in Sri Lanka. When such substandard and perhaps fake products are being sold at low prices, consumers would eventually distance themselves from the locally produced brands.

According to Director Leslie Gamini, the Customs RTF has publicised a range of foreign cigarettes which are banned in Sri Lanka. They have identified certain illicit brands like Top Mountain, Team, Arsenal and Gold Flake which are commonly seized at seaports and airports. Importation of cigarettes is banned in Sri Lanka according to the Tobacco Tax Act No. 08 of 1999 except for duty free importation for purposes like distributing among diplomatic missions in the country and to be sold at duty free shops at the departure lounge of the airports.

Even foreign tourists and perhaps locals returning from overseas unknowingly bring foreign brands of cigarettes which is illegal according to the law. Although this law is not being implemented by the authorities it is illegal to smoke a foreign brand in the country whether somebody purchased it or received as a gift.

According to Customs statistics, the RTF had seized 6.84 sticks of illicit cigarettes in 2013 valued at Rs.171 million. In 2014 from January 01 to date the RTF had seized 24 million sticks of illicit cigarettes valued at Rs.600 million which is a large amount considering the fact that it was for nine months. Some of the major detections were in January, February, March and June when the largest in local history was reported which was 4.5 million sticks of cigarettes valued at Rs.126 million.

Director Gamini said that these seized stocks will be handed over to the CTC to be destroyed. Sometime ago when illicit cigarettes were seized they were sold at public auctions. But this law was changed by the Treasury several years ago and the CTC was ordered to pay a kind of a reward of 80 cents per stick of illicit cigarette to the Customs and then handed over to the CTC for disposal.

The seized cigarettes are destroyed by the CTC in the presence of Customs and Excise officials in a controlled environment. The fags bought by the CTC are crushed in a special grinder or crusher and the residue will be sent to a private cement manufacturing company in Puttalam or Trincomalee to be destroyed in gas burners.