Tackling illegal trade

Our commitment

We will ensure the Company is included in policymaking leading to fair and balanced regulation and enhance our cooperation with governments to combat illegal trade.

Our targets

We will engage in dialogue with law enforcement agencies, with the goal to exchange intelligence regarding illegal tobacco products, in order to support the reduction of illegal tobacco products.

Experts estimate that over 10% of all cigarettes sold globally (excluding China) are illicit, with approximately 45 billion U.S. dollars in global tax revenue lost each year. This illegal trade fuels human trafficking, organized crime, and terror groups; and undermines legitimate tobacco businesses. It also causes harm to consumers, as uncontrolled products circumvent regulations and quality controls. Tackling illegal trade is a top priority for us, and our Anti-Illicit Trade team is recognized as the industry leader in combating this problem.

Our approach

Our global Anti-Illicit Trade team investigates the illegal tobacco trade and protects consumers and society, as well as our business, from criminal elements. It is made up of dedicated professionals with many years of public service in law enforcement, regulatory bodies, and governments. A key part of our business, the team works with our markets to secure our supply chain, and assist law enforcement to remove illegal tobacco from the marketplace. It maintains a robust dialogue with governments and law enforcement agencies on the threat of illegal tobacco through public-private partnerships. Our Anti-Illicit Trade team also supports other areas of our business with research on illegal tobacco and raises awareness of the problem among our business partners, consumers, and society in general. The team protects the JT Group’s business and reputation, supporting our long-term, sustainable future.

Increasingly, we are examining ways to tackle illegal trade across our entire value chain. This is resulting in a more transparent and collaborative relationship with suppliers of items such as tobacco leaf and cigarette filters. We have regular meetings with these suppliers and manufacturers to try to help them prevent their products from falling into the hands of criminal networks. Our Anti-Illicit Trade team also supports our compliance and purchasing departments by carrying out due diligence checks to ensure we are entering into contracts with trustworthy suppliers, and by helping these departments to implement JTI’s policies and procedures.

We continue to closely monitor the way in which organized crime groups use shipping routes and we are working with various law enforcement agencies across the world, such as the World Customs Organization, Interpol, and Europol, to help them track containers suspected to be transporting illegal goods.

the JTI approach to tackling illegal trade

Supporting business performance through anti-illicit trade programs

Our global anti-illicit trade programs create the opportunity for public-private partnerships to combat highly organized criminality. They are also designed to support our business performance by fulfilling all legal requirements, securing our supply chain, safeguarding and creating opportunities for volume and profit growth, while protecting our company’s reputation.

We measure their effectiveness against the below KPIs:
›› Number of seizures based on information we share with law enforcement
›› The level of illicit trade in our top markets through analysis of empty pack surveys, and the reduction we help achieve
›› Implementation of our compliance programs
›› Strengthening partnerships with law enforcement agencies, especially through training.

the JTI approach to tackling illegal trade

Protecting our business

In 2018 our Anti-Illicit Trade team provided 1,328 intelligence reports to law enforcement agencies, leading to the seizure of more than 2.7 billion illegal cigarettes. Based on our information, law enforcement raided more than 39 counterfeit tobacco factories and storage locations.

As a direct result of our work to tackle illegal trade, and based on seizure statistics, notified seizures of counterfeit products in the EU have increased by 82% over the past four years. During the same period, notified seizures of our own genuine products in the EU have decreased by 57%, thanks to our market’s efforts in securing our supply chain, with the support of the Anti-Illicit Trade team. This has been acknowledged by both the EU and the U.K.’s HM Revenue and Customs, which recognized JTI as an industry leader in the fight against illicit trade.

Protecting our business

Ensuring anti-illicit trade compliance

Legitimate market demand program

Companies worldwide seek to understand the demand for their products in their markets but there is a clear distinction between market demand, and “Legitimate” Market Demand (LMD).

JTI must comply with the European Union Cooperation Agreement signed in 2007. This means supplying tobacco products only in volumes that correspond with the legitimate demand of the intended market of retail sale.

With a commitment to doing the right thing, in the right way, our Anti-Illicit Trade Research team has developed a global methodology to assist JTI’s markets with a consistent and accurate approach to annual LMD calculations.

Our markets perform the LMD exercise in conjunction with their annual plan. This creates a proactive supply chain control mechanism to make sure that the planned sales volumes are in line with LMD. The components and parameters of the LMD estimation vary depending on each market’s unique characteristics and JTI’s product portfolio in that market, but the global methodology provides a logical and defendable standard.

One common factor among these varying calculations is that our demand estimations comply with all laws and regulations.

Track and trace

Our Track and Trace program has been an important element of our compliance policy for more than a decade. It helps our global efforts to support law enforcement agencies and has been developed with many of the biggest technology companies across the world, as part of our obligations within the EU Cooperation Agreement.

A highly technical and complex process, our Track and Trace program requires markings on all individual and aggregated levels of products. It helps us to track the movements of the products along the supply chain and supports our supply chain analysis. As a result, when seizures are brought to our attention, we can identify the source of diversion of the seized products and implement preventative measures.

In 2019, some JTI markets will be implementing a mandatory Track and Trace system. Among those countries will be the 28 Member States of the European Union, as per the European Tobacco Products Directive (TPD2). According to this directive, products must be tracked to the last economic operator before the first retail outlet in all Member States.

We are currently preparing for the important changes that the new EU Directive entails and are working with key stakeholders in order to comply in the most effective way, while ensuring our EU markets will not be disrupted.

International tobacco business (JTI) - Fighting the illegal trade

A global response to illicit trade

The Protocol to Eliminate Illicit Trade in Tobacco Products is the first protocol to the WHO Framework Convention on Tobacco Control (FCTC). It entered into force on September 25, 2018 and has so far been ratified by 48 Parties.

This international treaty aims to eliminate all forms of illicit trade of tobacco products, through several provisions that are binding on its Parties. We support the Protocol, as it provides global response to the global problem of illicit trade.

One of the main requirements is that the Parties must implement a Track and Trace regime by 2023 (for cigarettes) and by 2028 (for all other tobacco products). In order for this regime to be effective, we support the implementation of an architecture based on “open standards” and interoperability for every actor in the supply chain, whilst taking into account existing systems such as the new EU-wide Track and Trace system.

We also firmly believe that the fight against illicit trade can only be effective if governments develop ways to address products that are not covered by the Protocol, such as counterfeits or illicit whites.

Find out more about our case studies in the latest sustainability report