New PMI report highlights progress made in tackling product diversion

November 08, 2017
Anti-Diversion Committee Progress and Outlook Report 2016-17

Though illicit trade in tobacco is a global problem for the industry and wider society, there are some markets where diversion of tobacco products remains a particular issue.  PMI’s Anti-Diversion Governance Committee was set-up to address the issue.   

In September this year, PMI has published its second Anti-Diversion Governanace Committee Progress and Outlook Report, which looks at progress made in 2016 and 2017 regarding the potential diversion of PMI products in seven identified ‘hot-spot’ areas: Algeria, Australia & South Korea, Belgium, Poland, Senegal, Serbia and Ukraine. The good news is that in all but two of them the incidence of diverted products has decreased.   

The progress report looks at the diversion problem from various angles, in order to understand the issue not only from the outflow perspective (i.e. where the products came from) but also from the inflow perspective (i.e. where the products were found).

Delving into some of the report’s findings, EU Member States such as Poland or Belgium were examined because of their geographical position and their pivotal role in the supply chain movements inside the EU. Factors such as tax and price difference between two jurisdictions and important movement of workers were taken into consideration, as they can encourage those not playing by the rules to become illicit traders. 

Countries bordering the EU, such as Serbia and Ukraine, are often access points for diversion into EU markets but the report demonstrated progress being made on better controls of the supply chain, effective collaboration with authorities, and constant awareness inside the company. In Serbia alone last year, 220 PMI employees and 130 of its distributor’s employees were trained in anti-diversion techniques.

‘Low-volume, high-frequency’ smuggling remains an issue in Algeria too. The country has strong historic links with France, with large numbers of people of Algerian heritage now living in France. This means there’s significant flows of people travelling between the two countries. The difference in tax and price in tobacco in the two countries has led to frequent smuggling from Algeria into France. As a result, the market’s Anti-Diversion action plan was re-evaluated by the Committee in Q2 2017. Enhancements to that plan now include a carton tracking pilot program expected to be completed by Q4 2017.

Collaboration and market responsible actions were key to tackle the diversion of our products.  By sharing knowledge and by understanding the interrelationships between the issues affecting the different areas, the markets with the help of the Anti-Diversion Working Group, were able to implement the most effective measures.   Looking back at the results, we have certainly won many battles, but the fight against the diversion of our products continues.

Frank Bode

Written by Frank Bode

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