English
Italiano 32.5 million packs of cigarettes
The European Community at the crucial test.
Philip Morris, according to the agreement of July 9th 2004, signed with the European Community, besides interrupting its smuggling activities also has to stop supplying the parallel market; this market is legal, but it can easily be transformed into an additional source of supply for smugglers. Logically, the Colossus must collect everything it has put onto this market, giving up part of its business. In short: it has to give back some money.
Yesmoke, from the stipulation of the Agreement between Philip Morris and the European Community on July 9th, up to that fateful day of November 16th 2004, when its cigarettes sent by the Yesmoke shop in the USA were seized, found 32.5 million packs of Marlboros on the market. How did Yesmoke find these? Anyone could have found them.
Of these 32.5 million, 12.5 million are materially present in Yesmoke's warehouses, and 19.6 million were sold online between July 9th and November 16th 2004; this can be confirmed by the evidence provided by Philip Morris itself.
“Philip Morris and R. J. Reynolds have had a determining role in the direction, management and control of the contraband operations within the European Community through company directives issued at top company levels”. – Official EU Documents
With this premise, Philip Morris cannot be credible when it affirms that it no longer supplies the parallel market as it has always done. In fact, what interest could Philip Morris have in obstructing this business if part of the goods ends up in the hands of smugglers? And how did it get into those hands? Following routes that Philip Morris does not reveal… otherwise what smuggler would it be?
Tobacco's official distributors, active in all countries around the world, purchase from the manufacturers a quantity of cigarettes greater than the requirements and the demand of their countries' markets. The surplus cigarettes the representatives then sell on the free market. Thus cigarettes officially destined to one country are sold legally in other countries. This is the parallel market, a market that exists for cigarettes as well as for automobiles, electronics, etc.
The agreement that requires Philip Morris to pay a fine, for all the smuggling carried on in the European Community, of 1,200 million dollar in ten years, in installments, speaks clearly: PM must not only stop its smuggling, but it must also make every effort to prevent its cigarettes from ending up in the hands of smugglers.
The agreement
UE Commission President: Romano Prodi
The smuggling debate between PM and the European Community was not concluded on a single day, on that “historic” July 9th 2004 when the agreement was signed. We can imagine that the discussions were started quite a long time before, maybe years. But up to July 9th, Philip Morris made absolutely no effort to interrupt or reduce the supply of cigarettes to the parallel market and to Yesmoke.
Last summer there was an abundance of Philip Morris products, mostly coming from its plant in the Philippines, that had never been seen before on the parallel market. In the opposite direction, the Colossus began, two and a half years ago, a ruthless war against on-line commerce… to which it continued to supply cigarettes in great quantities.
In APPENDIX B, E.C. COMPLIANCE PROTOCOLS, the Agreement states that — Philip Morris International be provided active and effective support for its efforts to deter any act or practice that favors or facilitates the use of its cigarettes in smuggling or as a vehicle to launder illegal proceeds.
Is it possible that PM should not be obliged to clean the market of all its butts? Instead they prefer to ignore the responsibility of the initial vendor, Philip Morris, in violation of the Agreement, and they prefer to not touch the proceeds coming from the sale of those products.
We read further on in APPENDIX B — These Protocols are designed to achieve the Parties' joint objective of meaningful cooperation, in particular between Philip Morris International and OLAF, the European anti-fraud organism, in eliminating the sales of smuggled and/or counterfeit Cigarettes as well as any associated Money Laundering.
It's true: Philip Morris, today, is working with the police: because the ex-smuggler, that will not clean its cigarette butts off the market because it does not want to give back the money, would have to investigate itself!
So where do those 32.5 million packs come from?
Yesmoke knows perfectly well where they come from: the European Community. All the boxes, in fact, including the ones coming from the Philippines, passed through Holland before arriving at Yesmoke's warehouse in Balerna (Switzerland).
In Rotterdam, there are top-level logistics companies, which for decades have provided the logistics services of the parallel market of cigarettes - and it is all completely legal. And even today (on March 1st 2005) they are fully operational. Just like other companies in other parts of the world.
In Holland today, anyone can legally buy on the parallel market any brand one wants. The only significant phenomenon is a reduction of the offer and an increase in the prices, but this is a physiological factor of the market, that balances the abundance of last summer. It is a characteristic and that has always existed in markets, that are subject to periods of greater or lesser availability of the product, just like the stock market.
At the duty-free logistics point in Rotterdam, in Dutch territory, therefore, also the European Community, Yesmoke's cigarettes are in transit and have not formally entered Europe, because they have not yet passed through customs. Any taxes due, in the country of final destination, that may be European or not European, have not yet been paid. Rotterdam is a world center of the parallel market.
But if we want to consider these goods as possible material for supplying smugglers, we must take into consideration that it has not been “customs cleared”, otherwise what good would it be to smugglers? It is in Europe, that's all. Otherwise where would it be?
The Agreement between Philip Morris and the European Community was stipulated between two parties in conflict, one of clever people and the other of stupid ones… or is it a pact between friends to “fix” things privately?
Useful links
- You Pay for Your Mistakes
- Anti-Contraband and Anti-Counterfeit Agreement and General Release
- Appendix A: Policy Statement on Compliance with Fiscal, Trade and Anti-Money Laundering Laws
- Appendix B: Anti-Contraband and Anti-Counterfeit Agreement and General Release
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