WCO Reports the Current State of Illicit Tobacco and Alcohol Seizures

Established in 1952, the WCO (World Customs Organisation) is the global centre of customs experience, representing 185 customs administrations that collectively process approximately 98% of world trade.

As the global trade in goods and passenger flows returns to pre-pandemic levels, illicit trade is also increasing, reports the WCO in its newly released Illicit Trade Report (ITR). In particular, the report observed increases in illicit alcohol, cash, cocaine and methamphetamines/amphetamines.

First initiated in 2012, the WCO flagship publication showcases the efforts of the customs community to combat illicit trade and protect societies. The current edition focuses on seven key risk areas within customs enforcement: anti-money laundering and counter-terrorism financing, cultural heritage, drugs, environment, intellectual property rights and health and safety, revenue, and security.

While the report provides a detailed analysis of all seven sections, for ABN readers we covered the revenue section. Considering the available seizure data and fiscal impact of illicit trade in excise goods on governments, the revenue section explored two main categories of products frequently trafficked to avoid excise taxes worldwide: tobacco and alcohol.

While no significant changes were noticed compared to 2021, in terms of seizure percentages it is essential to mention that several countries have seen an increase in the illegal sale of tobacco products online, including through the darknet and social networks.

Trends in seizures

Tobacco products account for over two-thirds (69%) of all seizures, while beverages represent less than a third (31%). Amongst the tobacco categories, cigarettes comprise the majority of seizures (50%), followed by other tobacco products (15.7%), chewing tobacco (7.9%) and e-cigarettes (2.6%).

Alcohol products account for 31% of seizures. This percentage aligns with the long-term average. In 2017, alcohol products represented 30.3% of seizures; in 2018, there was a temporary drop to 29.4%.

46 countries reported 5,076 seizures of alcohol products, representing a 30.2% increase in 2022, compared to 2021, when 47 countries reported 3,898 cases.

Detecting illegal cases

WCO detects illegal cases based on methods, route and random controls (RRC), risk profiling, intelligence, and investigation. RRC remains the most productive detection method, with more than 50% of cases detected through this method in 2021 and 2022.

An important observation is the consistent increase in risk profiling as a detection method: 46.3% in 2022, 44.2% in 2021, 37.9% in 2019, and only 15.4% in 2018. However, it should be noted that the detection methods for tobacco seizures and seizures related to beverages differed in 2021 and 2022. Risk profiling is more prevalent for beverage seizures (66.2% of beverage cases and 40.8% of tobacco cases).

Modus operandi

Regarding routings and modus operandi related to tobacco trafficking, crossing land borders remains the most significant threat. On the other hand, for alcohol, most seizures (44%, or 3,312 out of 7,532) occurred in vehicles, including contraband hidden in compartments of cars, trucks, and vans.

A significant trend to note is the increasing number of mail seizures. As mentioned in the previous ITR, the number of mail seizures has become significant, accounting for 30.5% in 2022, similar to the figure reported in 2021. This is a considerable increase compared to the limited number of mail seizures in 2019 and previous years.

The report also provides case studies of WCO operations in 2022, which are worth reading:

1. An anti-illicit cigarette operation by Hong Kong Customs involved the seizure of 64 million sticks of suspected illicit cigarettes contained in six containers, with an estimated HK$ 180 million ($23 million) market value.

2. Portuguese customs’ Project Crocodile led to the seizure of 12 million illicit cigarettes.

3. Saudi Arabia detected 2,727 litres of illicit beverages via an x-ray machine. The products were conveyed by a truck and hidden within steel wire coils. Such a detection method allows a non-intrusive inspection of vehicles, and Saudi Arabia has been keen on developing such technology over the last few years.

4. In September 2022, two consignments of beer and wine, suspected of being intended for the illicit alcohol market in the UK, and originating in a warehouse located in Germany were seized in Rosslare Europort, Ireland. Neither consignment was travelling under duty suspension, nor were they duty paid. The Irish consignee recorded on the paperwork that it did not order or pay VAT or excise duties for either consignment.

It was the first time these types of consignments were detected in Ireland. Since the summer of 2022, there has been a noticeable increase in alcohol consignments travelling directly from the continent to Ireland, with Ireland being used as a transit route to get goods into the UK.

Raising concerns – illegal tobacco production sites

Another critical aspect highlighted in the report is the ever-increasing threat of illicit production facilities, with 18 seizures reported in 2022. The increase in the volume of counterfeit cigarettes detected in the EU has been partially attributed to illegal tobacco factories setting up shop right within the heart of the bloc, close to their target markets.

In Europe, while this threat was initially limited to certain countries, notably in central Europe, it has now expanded to other countries such as Belgium, Netherlands, and Spain. France also dismantled its first illegal factory in December 2021. Some of these facilities have the capacity to manufacture up to one million cigarettes daily.

Sharing is caring

The WCO calls for enhanced cooperation and data intelligence sharing between countries and agencies in strengthening the effectiveness customs law enforcement endeavours. It reiterates its commitment to improving data quality and analysis and, to this end, has been developing various data initiatives.

One such initiative is the CEN (Customs Enforcement Network) communication platform. In June 2022, the WCO launched a dedicated CENcomm platform focused on tobacco and alcohol fraud. It has also introduced the CEN data visualisation tool to assist the customs enforcement community in leveraging data analysis advantages. The tool’s graphs, charts and maps are generated from seizure data collected between 2019 and 2023, and reported to the CEN database by 174 customs administrations.

The 2022 ITR incorporates an expanded range of data and information sources to enrich the report further. It is currently available in English, with the French version set to be released shortly.

Readers can download the full report from www.wcoomd.org/en/media/newsroom/2023/june/the-world-customs-organization-releases-the-illicit-trade-report-2022.aspx.