MEPs to quiz tobacco giant

Date: 12/12/1996

By Rory Watson

THE American conglomerate Philip Morris will give evidence behind closed doors to a small group of MEPs next week as the European Parliament completes the first stage of its detailed investigation into the scale of transit fraud in the Union.

The hearing with one of the world's largest cigarette manufacturers follows a recent visit by the special committee of inquiry to Antwerp to investigate the steps being taken to clamp down on fraud which is costing the EU and member states' national budgets billions of ecu.

“We looked at the docks, the containers, two warehouses for storing cigarettes and spoke to customs officers, investigating magistrates and freight forwarders. The visit helped a lot of the pieces of the jigsaw to fall into place,” explained British Labour MEP John Tomlinson, who is chairing the year-long inquiry.

Cigarettes have increasingly become a target for fraudsters as legitimate consignments are diverted on to the black market. As they never reach their intended destinations, the stolen goods avoid excise duties and provide lucrative profits for the criminals involved.

Antwerp is considered one of the keys in trying to uncover the routes and devices used to perpetrate such frauds.

During its extensive inquiries this year, the committee has heard that between 1988 and 1992, 44 billion American cigarettes were exported annually to the Union. Of these, all but 1 million entered through Antwerp.

Last year, the overall figure reached 85 million, of which 71 million came in via the Flemish port. Three million entered the EU through the Netherlands. The remainder used ports in Germany and Finland, both close to the countries of eastern Europe - widely suspected of being staging posts for stolen cigarettes which are then sent back to the Union.

“The illegal trade in international cigarettes is a form of unfair competition against national companies and local brands. Antwerp cannot ignore the fact that a large percentage of these stocks of cigarettes will not be sold legally,” said Luk Joossens, an expert on the tobacco industry.

The European Confederation of Tobacco Retailers has told the inquiry committee it estimates that the annual cost of the cigarette fraud amounts to 5 billion ecu a year in lost fiscal revenue and 900 million ecu in lost retail profits.

It has identified the phenomenon to be most widespread

in Austria, where contraband cigarettes were estimated to make up 15&percent; of the 2 billion cigarettes smoked last year. In Italy the figure was 11.5&percent; and in Germany 10&percent;.

Philip Morris will be the second major cigarette manufacturer to appear before the parliamentary inquiry which began in January. MEPs have already heard evidence from Rothmans of Pall Mall International Ltd, which was especially critical of the failure of national authorities to take a tougher and more consistent approach in rooting out the fraud.

After listening to next week's evidence, the committee intends to sift through the information it has received from 16 separate hearings and over 35 written submissions from many different professions, organisations and individuals involved in the transit trade.

By drawing attention to the phenomenon and by investigating the mechanics of the various scams, the committee is convinced it has succeeded in pushing the fight against transit fraud higher up the Union's agenda.

Angered that an already-leaky system was extended to the four Visegrad countries in July, MEPs have also won a pledge from Internal Market Commissioner Mario Monti that no more expansion will be contemplated before badly-needed reforms are in place.

British Conservative Euro MP Edward Kellett-Bowman aims to produce a preliminary report setting out possible ways of plugging the holes in the transit system by mid-January.

The committee then intends to finalise its recommendations with customs operators before formally presenting them to the full Parliament in March.