F k C ti fF k C ti fFramework Convention for Framework Convention for Tobacco ControlTobacco Control

John W. Colledge IIIJohn W. Colledge IIIggConsultantConsultant

Customs and Illicit TradeCustoms and Illicit TradeAntiAnti--Money LaunderingMoney Launderingy gy g

Supervisory Special Agent Supervisory Special Agent (Retired)(Retired)

U.S. Customs Service and U.S. Customs Service and Department of Homeland Sec ritDepartment of Homeland Sec ritDepartment of Homeland SecurityDepartment of Homeland Security

Tobacco Merchants AssociationTobacco Merchants AssociationWilli b Vi i iWilli b Vi i iWilliamsburg, VirginiaWilliamsburg, Virginia

May 25, 2010May 25, 2010

Framework Convention for Framework Convention for T b C t lT b C t lTobacco ControlTobacco Control

The WHO FCTC in response to theThe WHO FCTC in response to the globalization of the tobacco epidemic and is an evidence-based treaty thatand is an evidence-based treaty that reaffirms the right of all people to the highest standard of healthhighest standard of health.

Ad t d 21 M 2003Adopted on 21 May 2003.

Came into force on 27 February 2005.

Framework Convention for Framework Convention for T b C t lT b C t lTobacco ControlTobacco Control

Non-price measures to reduce the demand for tobacco.

Price and tax measures to reduce the demand for tobacco.

Core supply reduction.

General ObligationsGeneral Obligationsgg“Industry Interference”“Industry Interference”

Article 5 3Article 5 3Article 5.3Article 5.3In setting and implementing their public g p g phealth policies with respect to tobacco Control Parties shall act to protect theseControl, Parties shall act to protect thesepolicies from commercial and other vested interests of the tobacco industry in accordance with national law.

Protocol To Eliminate Illicit T d i T b P d tTrade in Tobacco Products

At its second session in July 2007, theConference of the Parties (COP) decided (decision FCTC/COP2(12)) to establish an Intergovernmental Negotiating Body (INB)open to all Parties to draft and negotiate a protocol on illicit trade in tobacco productswhich will build upon and complement theprovisions of Article 15 of the WHO pFramework Convention on Tobacco Control.

Protocol To Eliminate Illicit Trade in Tobacco Products

Supply Chain Controls Organized Crime. Supply Chain Controls. Due Diligence. Licensing. R d k i

g

Corruption. Record keeping. Tracking and tracing. Illegal Manufacturing.

Terrorism.

Internet or remote sales.

Duty free sales.

Proceeds of Crimes.

International y Foreign or free trade

zones. Seizure penalties.

Cooperation.

Seizure penalties.

Due DiligenceDue DiligenceDue DiligenceDue Diligence

“Due diligence” means conducting aDue diligence means conducting a reasonable, state-of-the-art investigation before the commencement of or during thebefore the commencement of, or during the course of, a business relationship for the

f t i i h th b ipurpose of ascertaining whether a business partner or prospective business partner is

l i ith bl b t dcomplying with or can reasonably be expected to comply with his or her legal obligations under this Protocol.”

LicensingLicensingLicensingLicensingMust license: manufacture of tobacco products and manufacturing

equipment; and i t t f t b d t d import or export of tobacco products and

manufacturing equipment.Endeavor to license:dea o to ce se retailing of tobacco products; growing of tobacco (small-scale exception) transporting commercial quantities of tobacco

products or manufacturing equipment; and holesaling brokering areho sing or distrib tion wholesaling, brokering, warehousing or distribution

of tobacco , tobacco products or manufacturing equipment.

TracingTracingTracingTracing

“Tracing” means the re-creation by competentTracing means the re-creation by competent authorities or any other person acting on theirbehalf of the route or movement taken bybehalf of the route or movement taken by tobacco, tobacco products or manufacturing

i t d i th f t f t bequipment used in the manufacture of tobaccoproducts through their respective supply

h i f f t l di t ib tichains of manufacture, sale, distribution, storage, shipment, import or export, or any part thereof.

TrackingTrackingTrackingTracking

“Tracking” means systematic monitoringTracking means systematic monitoring by competent authorities or any otherperson acting on their behalf of the routeperson acting on their behalf of the routeor movement taken by tobacco, tobacco products or manufacturing equipmentproducts or manufacturing equipmentused in the manufacture of tobacco products through their respective supplyproducts through their respective supplychains of manufacture, sale, distribution,

t hi t i t tstorage, shipment, import or export, or any part thereof.

Unique Identification Unique Identification M ki A ti l 7M ki A ti l 7Markings Article 7Markings Article 7

(Tracking and Tracing)(Tracking and Tracing)(Tracking and Tracing)(Tracking and Tracing)

ConsensusConsensus.Status quo with regional or national systems.Unique secure and non removableUnique, secure and non-removable.Codes or stamps.All it k t kAll unit packets, packages.Cigarettes – within five years.OOther Tobacco Products – within ten years.

Unique Identification MarkingsUnique Identification Markingsq gq gData RequirementsData Requirements

D t d l ti f f t Date and location of manufacture. Manufacturing facility. Machine used to manufacture tobacco products Machine used to manufacture tobacco products. Production shift or time of manufacture. First customer data. First customer data. The intended market of retail sale. Product description. Any warehousing and shipping. The identity of any known subsequent purchaser. The intended shipment route, destination, point of

departure and consignee.

Global Information Sharing Global Information Sharing F l P i tF l P i tFocal PointFocal Point

Not a database.

Switching centerSwitching center.

Not under tobacco industry control.

Record KeepingRecord KeepingRecord KeepingRecord Keeping

No consensus.Disagreements over requirements and g

scope.Records requirements would supportRecords requirements would support

tracking and tracing.Five yearsFive years.Common format.

Security and [Other] Security and [Other] P ti MP ti MPreventive MeasuresPreventive Measures

No consensus.Enactment of administrative and

criminal laws to address illicit tobaccocriminal laws to address illicit tobacco trade.InterminglingIntermingling.Contents may be incorporated into

th ti lother articles.

Sale by Internet, Sale by Internet, Telecommunications or anyTelecommunications or anyTelecommunications or any Telecommunications or any

Other TechnologyOther Technology

No consensus.Four options.Three options intended to ban allThree options intended to ban all

technology based sales.One option called for sales to beOne option called for sales to be

governed by the Protocol and other FCTC obligationsFCTC obligations.

Free Zones Free Zones ( k F i T d Z )( k F i T d Z )(aka: Foreign Trade Zones)(aka: Foreign Trade Zones)

No consens sNo consensus.Two options – one included equipment to

manufacture tobacco products inputs andmanufacture tobacco products, inputs, and specific tracking and tracing, customer identification and verification, security andidentification and verification, security and preventive measures. Other option – “use of all relevant measures as provided in this Protocol.”

Implementation in three years. Intermingling.

Duty Free SalesDuty Free SalesDuty Free SalesDuty Free Sales

No census.General lack of understanding of the g

systemic threat posed by duty free sales.Three options.Three options.Ban all duty free sales.Ban duty free sales in free zonesBan duty free sales in free zones.Individual sales.

Existing United Nations Existing United Nations TreatiesTreatiesTreaties Treaties

and Programsand Programsgg

Three drug related treaties.ee d ug e ated t eat es

Convention against Corruption.

Global Program against Money-Laundering.

The United Nations Convention against Transnational Organized Crime and its Protocols.

United Nations Global Counter-Terrorism Strategy.

The Reason for the The Reason for the C t b d T b T dC t b d T b T dContraband Tobacco TradeContraband Tobacco Trade

John W Colledge IIIJohn W Colledge IIIJohn W. Colledge IIIJohn W. Colledge IIIConsultantConsultant

Customs and Illicit TradeCustoms and Illicit TradeAntiAnti--Money LaunderingMoney Launderingy gy g

(775) 224(775) 224 01330133(775) 224(775) 224--01330133jwcolledgeiii@johnwcolledge.comjwcolledgeiii@johnwcolledge.com

www.johnwcolledge.comwww.johnwcolledge.com