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Moldova remains fertile ground for tobacco smuggling rings.

MOLDOVA would appear to fit the description of a far away country about which the world knows nothing. But its location, adjacent to Romania, (one of the two most recent European Union (EU) member states, Ukraine, the Black Sea and the disputed, politically uncertain region of Transnistria (which remains formally part of Moldovan territory, while its government has little authority there), is extremely familiar, and favoured, by counterfeit cigarette producers and traffickers.

Moldova's favourable soil means tobacco growing is one of the few industries currently with potential in this poverty-ridden country (whose GDP per person was US$2,500 in 2008, says the US Central Intelligence Agency. Legitimate production is flourishing: in 2007, 5,600 hectares were grown; the target for 2010 is 10,000 ha, according to the Moldovan Chamber of Commerce. And the country's officially declared production of manufactured tobacco products rose by 7.9% in 2009, compared with 2008, according to Moldova's National Bureau of Statistics. According to a combination of government figures and tobacco industry analysis, around 2.5 billion to 3 billion cigarettes produced in Moldova were exported in the financial year of 2008/09, a figure that also includes local counterfeits.

Two years ago a report from EU police agency Europol highlighted how Moldova had become a major conduit for illegal cigarettes to find their way into the lucrative European market. Problems of counterfeit tobacco escalated when Romania joined the EU in 2007, creating a straightforward route for cigarettes through a lightly policed border, with the opportunity, once inside Romania, to move further west without the border and visa checks previously required. Expert sources say that Moldova is the source of 16.9% of duty not paid cigarettes on the Romanian market, and that counterfeit cigarettes sourced from Moldova increasingly appear on the Italian market.

Incentives for tobacco smuggling also came from the imposition of tighter tobacco controls in eastern EU and accession states. This has raised the price of legitimate tobacco in Romania, Croatia, Serbia and Bulgaria and increased the market for cheaper, illegal products. In Romania, anti-smoking tax rises have led to a 50% price growth over the past 12 months. For comparison, in 2009, a packet of Kent cost Euro 1.51 in Romania but only Euro 1.05 in Moldova; Pall Mall Euro 1.37 and Euro 0.52 respectively, and Viceroy Euro 1.35 and Euro 0.37. "Huge profits can be made by smuggling legitimate cigarettes from one country to another, making the region highly attractive to organised crime groups," said Soren Kragh Pedersen, a spokesman for Europol.

Contraband cigarettes are exported from Moldova in two ways: secreted in lorries or vans; and via online sales, with the distribution of smuggled "discount cigarettes" with Ukrainian excise stamps through numerous Moldova-based online stores, which deliver them to customers worldwide.

Typically, online sellers from Moldova offer counterfeit Marlboros and other imitations of Western brands and ship them to Europe and the USA via post office and courier services. To circumvent customs, cigarette boxes are usually labelled with fake duty-paid stamps and false contents descriptions, according to regional tobacco industry analysts.

Four major international companies have a presence in the country, Philip Morris International (PMI), Japan Tobacco International, Imperial Tobacco and British American Tobacco (BAT). In 2008, both BAT and PMI signed separate Memorandums of Understanding with the Customs Service of the Republic of Moldova on joint efforts to combat smuggling and to protect intellectual property rights. The memorandums provide for the exchange of information regarding cases of cigarette smuggling as well as for joint activities for exchange of experience on issues related to the illicit traffic of tobacco products.

Last December, PMI extended its Memorandum of Understanding (MOU). "The MOU provided a framework for information exchange, provision of training for customs officers, inspection of seized tobacco products (bearing our trademarks), and measures to ensure the destruction of cigarettes seized by customs," said Anne Edwards, director of external communications for PMI.

According to Edwards, seizures of illicit cigarettes both in Moldova and on the border crossing points with Romania have increased since the memorandum was signed, and include the destruction of 0.24 million counterfeit Marlboro cigarettes in June 2008. Agreements with other producers are understood to be under negotiation.

"The tobacco manufacturers have a common interest in combating the illicit tobacco trade because it harms their brands and profits, and therefore collaboration with law enforcement agencies is actively encouraged by both sides," said Europol's Pedersen.

Last year, BAT ran a training course in Moldova for customs officers, and Moldovan government officials attended a course run by BAT in Odessa. In May 2008, PMI provided product knowledge training to officers from central and regional customs, and provided counterfeit recognition toolkits to help detect counterfeit cigarettes bearing PMI trademarks. Similar technical training was offered to economic crime police officers of the ministry of the interior. Fundamental to efforts to reduce the smuggling trade has been a tightening of Moldova's border with Romania and the policing of the banks of the River Nistra that separate Moldova from its breakaway territory of Transnistria. Recent data suggests some improvements on this front, and Romanian Border Police reported seizures of illegal cigarettes amounting to 7.32 million cigarette packs in 2009.

The EU Border Assistance Mission (EUBAM), which has 200 staff along the 1,222 km border with Ukraine and Transnistria, has also aided Moldova in bolstering its borders. In the past 18 months, according to EUBAM, Moldova's Border Guard Service has provided extra equipment and staff and additional training has been organised to improve the professionalism of its border officers. EUBAM has also helped Moldovan and Ukrainian authorities to halt a number parcels labelled with forged certificates of origin, fake duty paid stamps and false contents descriptions--the basis of online orders for counterfeit tobacco.

EUBAM provided assistance to the Information and Security Service of Moldova in an intelligence-led operation against the smuggling of cigarettes from Ukraine to Moldova, destined for the EU market. In 2008, a further Euro 8.2 million was committed to an European Coomission-financed project to purchase mobile x-ray scanners, thermo-imaging binoculars and systems, and biometric passport readers.

Many challenges remain, as Agnes Horvarth of the EU's Anti-Fraud Office (OLAF), acknowledges. "When an illegal factory is identified and located, OLAF works with the relevant law enforcement authorities to close the factory," she said. "Although there have been rumours of illicit production in Moldova, the information has been of a general nature and not specific enough to follow-up."

OLAF continues to work closely with Moldovan authorities, and with brand holders to holders to identify counterfeit cigarettes and consignments of packaging materials destined for illicit production facilities in Moldova. "This cooperation may be in the context of specific operational activity and on a more general basis, for example through EUBAM," said Ms Horvath. Moldovan customs service officers attend OLAF's annual conference on tackling counterfeit and contraband cigarettes.

Quite how matters will unfold is unclear. Tobacco manufacturers argue that high prices encourage smuggling, but in December last year the Moldovan government announced an increase of the ad-valorem component of the excise for filter cigarettes for 2010 from 3% to 12%.

While some experts feel that real and genuine progress has been made since 2008, others question how effective these measures can be in the face of determined and skilled criminal organisations. The EU police officers involved operate in an advisory capacity and do not have the power to police the area or to make arrests.

The key issue, they argue, is political will, within Moldova and at EU level in Brussels. A UK-based tobacco crime expert welcomed any improved border security and tightening border controls on the Moldovan side of the border, but said that EUBAM's responsibilities should be extended. "There's a need to bridge and facilitate the cooperation between the Moldova and Romania Border Law Enforcement. Liaison with the major tobacco companies could support enhancing the capacity of Moldova law enforcement authorities and other areas subject to cooperation," said the expert, who did not want to be named.

PMI agrees with this approach. "The daily field operations of law enforcement agencies are key in the fight against counterfeit in Moldova," said PMI's Edwards. "There is a need for internationally coordinated investigations into the criminal networks profiting from counterfeiting activities. We would also like to see more law enforcement resources devoted to dismantling the networks that sell counterfeit cigarettes."

According to a diplomatic source in the capital Chisinau, who also asked not to be identified, there has been minimal progress. "There have been several seizures of tobacco there in recent months and some arrests," said the diplomatic source. "But local police often do not have the ability or desire to stop illegal goods and people crossing that border," he said. "As for bribes -well, there is no firm evidence for it but I doubt you need firm evidence to know that it happens.

"The greater problem is that the Transnistria border is effectively not policed at all. Because the price of tobacco is high right now in adjoining countries, it inspires and encourages people to undertake this kind of trafficking. These are not ordinary people; these are organised gangs, though in truth they don't have to be that well organised because they still don't face a lot of obstacles."
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Author:Rowe, Mark
Publication:International News
Geographic Code:4EXUR
Date:Jan 1, 2010
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