France has been the worst hit by illegal tobacco among the countries of the EU, and Algeria is one of its main suppliers. EURACTIV recently discussed the situation with the European Anti-Fraud Office (OLAF). It stated that France can seek OLAF’s support in tackling mass smuggling from Algeria and set up a joint operation. France has probably not requested any such support to date, which has not failed to draw some criticism. Although the influx of Algerian cigarettes has been on a general decline, it has still badly affected France, causing a shortfall of just over €650 million in revenues in 2017.
According to the most recent estimates of Project Sun, a study conducted by KPMG and the Royal United Services Institute, cigarette smuggling in Europe is on the decline. In 2017, the volume of smuggled and counterfeit cigarettes fell by 7.4% from 2016. Smuggled and counterfeit cigarette consumption now accounts for 8.7% of total consumption in 2017 – a drop of 0.4 points from 2016.
Despite these encouraging signs, cigarette smuggling continues to be a troublesome scourge on the European Union, with an annual estimated revenue loss of €10 billion. This smuggling is also a source of funding for traffickers and criminal and terrorist groups.
France is at the bottom of the class
There are some 7.6 billion contraband and counterfeit cigarettes in circulation in France, making up 13.1% of total consumption. But according to the website Le Monde du Tabac, if one also takes cross-border purchases into account (11.5%), then 24.6% of the cigarettes consumed in France in 2017 were not purchased on the French tobacconist network.(1)
The prime source of these smuggled cigarettes is no longer a secret: Algeria is a major supplier on the French market. Although the influx of cigarettes from Algeria fell by 23% in 2017, the country is still the point of origin for 26% of all smuggled and counterfeit cigarettes in France.
Marseilles is a key location
Marseilles is one of the key entry points for smuggled cigarettes from Algeria. Last July, EURACTIV highlighted how widespread such trafficking is in the city, despite the presence of CCTV cameras and policing on the ground. An article in the regional daily La Provence reported that “in the second quarter of 2018, more than half (55.1%) of the tobacco consumed in the city was not from the French tobacconist network, a striking rise of 20.7 points compared to the last quarter of 2017”.
In 2017, Eurobsit reported on the dismantling of what was considered the largest of the known tobacco networks operating at the port of Marseilles. This group sold 68,400 packs between January 2015 and November 2016. The cigarettes were shipped by boat by Algerian Ferries, with the complicity of crew members.
High frequency, low volume micro-scale trafficking is hard to detect
The case of the ferries is typical of how the various organised criminal networks operate: cigarettes arrive in France by boat or plane in small, but frequent and regular amounts. Passengers serve as ‘mules’ to transport the goods, as do some of the crew on the ferries and planes.
The traffickers’ motivation can be summed up as high profit, low risk.(2) The wide gap in taxation between France and Algeria encourages this type of trafficking. And this does not likely to change, as the incentivizing price differential for small traffickers is only set to keep gradually rising between now and 2020. The price of a packet of cigarettes is planned to go up to 10 Euros for French tobacconists, while the current price in Algeria is around €1.10.(3) This will mean an even greater margin for the traffickers. Despite the downward trend in flows from 2016 to 2017, the cigarette packet price hike risks creating a haven for thousands of ‘trabendistes’(4) and boosting the influx of Algerian cigarettes into France. Even more so, given how non-dissuasive the judicial sanctions are.
Interviewed by Eurobsit, Philip Morris International (PMI), a leading international tobacco company, highlighted that “the company was very aware of the issue and taking a number of steps to tackle it. Most recent measures in Algeria for instance include the ongoing deployment of direct sales distribution of PMI’s products to retail, which enables improved volume monitoring throughout the country. This was made possible thanks to an adaptation of the applicable regulations, which also now foresee tougher penalties for retailers involved in product diversion. Furthermore, a more granular tracking and tracing system will be introduced, allowing tracking at carton level. All these efforts and achievements are the fruit of PMI’s collaboration with its Algerian partners and Algerian authorities. The outflow of PMI products from Algeria remains nonetheless a top priority for PMI’s global anti-diversion strategy and PMI is committed to collaborating with authorities, both in Algeria and in France, to help putting a stop to the smuggling of its products.”
Tolerance for this trafficking is running thin
Smuggled tobacco has raised various questions: two French parliamentarians recently raised the issue during question time to the government. Charles de Courson asked questions about Franco-Algerian cooperation and asked the government if France was doing everything within its powers to tackle the problem. Pierre-Yves Bournazel flagged up security issues at Place de la Chapelle in Paris’ 18th arrondissement to the Interior Minister. He particularly drew attention to cigarette trafficking and called for tougher laws.
But Place de la Chapelle is not the only neighbourhood to have fallen victim to unchecked cigarette smuggling. On 9 November this year, France’s Council of State acknowledged the “unacceptable shortfalls” being suffered by residents of Château-Rouge neighourhood in the 18th arrondissement, which is also overrun by trafficking.
Gérald Darmanin, who has been France’s minister for Action and Public Accounts since May 2017, has made various statements on the subject, declaring himself to be determined to stand up to the trafficking, which is harmful to consumers and State finances alike. There has been a noticeable increase in the number of seizures, as Le Monde du Tabac has reported in its weekly reports on customs seizures. But such political willpower have to square up to a phenomenon which has become increasingly widely socially accepted in recent years.
- Marché parallèle : 24,6 %’, Le Monde du Tabac, July 2018.
- Romain Capdepon, ‘Trafic de cigarettes à Marseille: ‘’Ça peut rapporter plus que le shit !’’’, La Provence, December 2016.
- ‘Project Sun 2017’, KPMG, July 2018.
- This Algerian word for small-time smugglers is taken from the Spanish world ‘contabando’, which means contraband.