By popular request.

First, the why-do-we-bother. First and foremost it’s a business requirement. We protect our brand reputation just like any other brand owner. We produce products that our consumers like and build brand loyalty by ensuring product quality. If a consumer has a bad experience with one of our products, he’s likely to chuck it and switch to a competitor. Secondly, our product is consumed. You know what is in a genuine product – no matter what you might think of the dread habit, think chocolate bars, or baby milk powder if it helps, the principles are the same – but as you will have seen, if the product is produced in filthy conditions in an abandoned chicken farm… Thirdly, counterfeits cut into our sales – it is unfair competition.

Anti-counterfeit operations are also a common good. The penalties for smuggling cigarettes – whether genuine or counterfeit, btw – are laughable in a way that the penalties for smuggling weapons, say, are not. If you consider that the profit on a 20′ container-load of counterfeit cigarettes can be around 350k US, and 200k or so for smuggled genuine product, a 10k US fine is just overheads. Money made on smuggling cigarettes is also used to finance other crime, as well, as I’ve mentioned before.

Then there’s a big – no, make that freakin’ enormous – new reason to spend money on anti-illicit trade operations. The major international cigarette companies have signed an agreement with the EUSSR which obliges us to pay tax on any seizure of 50,000 or more – genuine – cigarettes found to have been illegally transported for sale into any EUSSR country. This means that we pay tax on the product twice, once in the country of origin, and again in the country of seizure, , unless, of course, the products were intended for duty-free sale. But there’s more. If the total number of seized cigarettes exceeds 400,000, we pay twice the tax – and it goes up in increments until we could end up paying four times the tax!

Counterfeit cigarettes do not count towards the totals, of course, and neither do cigarettes that we can prove have been sold by us, or our agents, to retailers as we can clearly, no matter how good our business controls in the supply chain might be, have no control over what individual retailers do with the cigarettes they stock.

So, all seizures are notified to the brand owner – this happened before the agreement with the USSR, btw, as the major manufacturers have been co-operating with the authorities to reduce smuggling for many years – and we have to go and inspect each seizure and account for them all, if we can; counterfeit, sold at retail or duty-free, to try to limit the penalty tax bill.

How is it done? All producers of branded goods have some means of identifying the genuine article. The pattern on a Gucci handbag, for example, is extremely precise. The recipe for a chocolate bar or a tin of baby milk-powder is similarly precise, as is the design, colours and even shape of the tin or other container. There are also product codes, distribution codes and other identifiers for each SKU, (stock-keeping unit) that a manufacturer produces and these can change quite quickly as SKUs are produced by different shifts or sourced from different places – they can also, of course, be changed deliberately at intervals to keep them unique and make life harder for counterfeiters. Manufacturers usually have some sort of covert marking system that will make a definite – and legally defensible – identification of genuine product possible. Cigarettes are no different. Obviously, I am not going to detail here, in plain sight, exactly what we look for, you’ll have to take my word for it that we can differentiate between counterfeit and genuine product. To do it, of course, we have to examine all of the goods. If the product is still in ‘outers,’ cartons or shrink-wrapped blocks of 200, it is much easier and the inspection is much quicker. If the goods are in a heap of single packs, the process is much more time-consuming as each pack has to be examined individually. Even if the goods are still in their outers, each one must be checked as the wise-guys have taken to unpacking the outers, mixing packs of genuine and counterfeit goods into blocks of 200 and re-wrapping them.

So, all of that was the cause of my 800 km round trip, five locations in three long days and something on the order of half-a-million sticks examined. If you’re still reading, you must have found this mildly interesting, at least 🙂