Why Illicit Trade is bad for everyone
Illicit trade is broadly defined as any exchange of goods or services that a national or international law maker deems to be illegal. The term encompasses counterfeiting, piracy and intellectual property theft, and plagues industries across the world.
As these criminal activities result in millions of lost sales opportunities every year, illicit trade presents significant implications for the wider international economy. Thankfully, with some of the most secure and transparent supply chains in the world, duty free and tax free retailers can tackle illicit trade in a united and robust fashion. Illicit trade hurts all stages of the duty free industry, both economically and commercially, which is why we take a zero tolerance approach to the practice.
Recent disruptions to supply chains and global shipping routes, in combination with the rapid rise of e-commerce, have provided traders of illicit goods with a fountain of new opportunities to exploit. It is therefore unsurprising that a recent report by the OECD estimated that up to 5.8% of EU imports are now counterfeits. As the trade of counterfeit and pirated goods is a dynamic and ever-changing phenomenon, the duty free industry’s approach to tackling the practice has adapted to reflect this. With such transparent and highly controlled supply chains and retail channels, our industry is able to continuously monitor the risk of illicit trade, ensure any risk is neutralised before it occurs, and adjust industry-wide efforts to tackle it.
The illicit trade of tobacco products – namely cigarette smuggling – is estimated to cause a EUR 10 billion loss to the EU and national budgets every year. This captures the damage illegal practices cause to the duty free industry and the wider economy. To this end, the World Health Organization (WHO) Protocol to Eliminate the Illicit Trade in Tobacco Products was introduced to provide a global framework for eradicating the practice. The duty free industry fully supports the implementation of the Protocol’s provisions, which include the establishment of licensing, a tracking and tracing system, a requirement for record keeping, and other security and preventive measures.
As the majority of these measures are already standard practice without the need for regulation, the duty free industry strongly rejects any implication that it could be a source of international illicit trade. The purpose of the WHO Protocol is to eliminate illicit trade practices, and it should not be used as a vehicle for the WHO to achieve other policy objectives, such as limiting the availability of legal duty free tobacco to legitimate customers.
Over the next two years, the duty free industry will work together to ensure our anti-illicit trade credentials remain strong and well understood across all our categories. We will continue to support the anti-illicit trade enforcement community, and assist governments in countering this growing international threat. Illicit trade affects all sectors of the duty free industry, from customer perception, to industry validity and economic progression. To continue combating this, regulators and governments must demonstrate a greater deal of trust in the industry. As duty free sales support transport infrastructure, lower flight costs, and enhance the overall consumer experience, this trust is vital for the continued recovery of international travel.