Latest Smuggling Ring the 'Tip of the Iceberg'

NYACS, New York police chief call for stronger laws against black market

Melissa Vonder Haar, Freelance Writer

NEW YORK -- Earlier this month, New York state Attorney General Eric Schneiderman and New York City Police Commissioner Ray Kelly announced the indictment of 16 members of a large-scale smuggling operation, which brought in over a million cartons of untaxed cigarettes, generating some $55 million in black market sales. (See related story for details). While this is good news for New York tobacco retailers, it underscores the growing problem of the thriving tobacco black market--a market that costs such law abiding retailers sales on a daily basis.

"We applaud the enforcement agencies for interdicting this smuggling ring," New York Association of Convenience Stores (NYACS) president Jim Calvin told Tobacco E-News. "Unfortunately, it's only the tip of the iceberg. The Washington, D.C.-based Tax Foundation recently reported that smugglers now control 61% of New York's cigarette market – the result of exorbitant tax rates that make illegal cigarette trafficking irresistible to criminals."

New York's police commissioner Kelly echoed Calvin's concerns about the black market problem plaguing the city's retailers and police forces alike, expressing his views in an op-ed for The New York Post.

"Cigarette smuggling might appear to be a victimless crime, but last week's arrests illustrate how it is not," Kelly wrote. "Cracking down on cigarette-tax evasion is vital not only for public health but also for businesses and public safety as well."

New York's council is currently reviewing the Sensible Tobacco Enforcement bill, which would apply steep penalties for the sale, possession or concealment of both untaxed cigarettes and counterfeit stamps; the state legislature is considering a similar bill that would increase both the civil and criminal penalties for those found possessing untaxed or counterfeit cigarettes and also make it easier for law enforcement to seize contraband tobacco products.

"Contraband cigarettes … place law-abiding retailers at a competitive disadvantage to retailers selling illegal, untaxed cigarettes at artificially low prices," Kelly said, noting that 46% of New York City tobacco retailers inspected by the Department of Finance were found to have untaxed cigarettes.

"Make no mistake: We have a responsibility both to protect the taxpayer and to make certain we are neither targeted nor exploited by terrorists," he wrote.

The news from New York could also have implications on a national level--especially if the U.S. Food & Drug Administration (FDA) were to ban the sale of menthol cigarettes, which many fear would further fuel the black market.

Gregg Perry, a spokesperson for Greensboro, N.C.-based Newport cigarette maker Lorillard Inc. told The Winston-Salem Journal that the company "has been talking about the contraband issue in the menthol context for a long time, and this is just another reminder that the contraband problem currently exists."