BOTEC Analysis 73 FAYERWEATHER ST. CAMBRIDGE, MA 02138 LOWRY HEUSSLER, GENERAL COUNSEL

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ILLICIT TOBACCO MARKETS IN THE UNITED STATES Current Status and Prospects 12/31/2012 Mark Kleiman, Kate Pfrommer, Tim Shaw

Cigarette Smuggling in the United States Introduction

Taxes and regulations create opportunities for profitable evasion. The United States is home to a substantial illicit cigarette trade, consisting of imports of untaxed (often counterfeit) product from abroad, sales to non-Indians (face-to-face or mail-order) from Indian reservations, and smuggling from low-tax areas to high-tax areas. That trade is estimated to account for about 17 percent of unit sales, representing evaded taxes of about $5 billion. I Other advanced economies face similar problems; some of them have higher illicit-market shares, and in some cases there are links to large-scale criminal organizations, to violence, and even to the financial support of terrorist groups. The U.S. domestic illicit tobacco market has not been the subject of much scholarly attention, and neither volumes nor trends can be known with any precision. The industrial organization and mechanics of the trade are also only poorly understood. There is reason to think that, at current prices, enforcement levels, and penalties, illicit tobacco trading offers a sufficiently attractive set of options to induce new entry into the field, potentially expanding volumes and reducing prices. Given the relatively small share of illicit purchases in the overall market and the lack of publicity, it is possible that many, perhaps most, consumers of cigarettes have not carefully considered their options for avoiding tobacco taxes, and that they would be willing to purchase untaxed product if it were convenient to do so. Moreover, such markets may be subject to positive-feedback effects leading to "tipping" phenomena: it seems likely that some people who do not buy illicit tobacco when that behavior is rare (not wanting to be perceived as lawbreakers) would be willing to do so if they thought the behavior common (not wanting to see themselves as suckers). A ban on menthol could influence the illicit markets both directly and indirectly. A substantial number of current menthol smokers tell survey interviewers that they would try to quit smoking rather than switch to non-menthol product if menthol cigarettes were no longer available. But given the low success rate in attempts to quit smoking (below 20%) it seems likely that some of them would fail to quit, even after repeated tries. No one has asked menthol smokers directly whether they would be willing to buy illicit product, but given the choice between legal non-menthol cigarettes and illicit menthol cigarettes, some of them would surely choose to stick with menthol, thus creating a potential new market for cigarette smugglers.

Excise-tax figure is from Gary Fields (2009) "States go to war on cigarette smuggling," The Wall StreetJournal, July 20, online.wsj.com/articie/SB124804682785163691.html. Illicit share oftotal sales is estimated from lost excise taxes and total state and federal excise taxes of $24.3 billion, tobaccoissues.com/excise_taxes.aspx. 1

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The potential magnitudes are substantial. About 25 percent of current cigarette volume is menthol product, while as noted about 17 percent is currently untaxed. If half of menthol smokers tried to quit and half of them failed, and if half of those who failed preferred illicit mentholated product to licit non-mentholated product, that would add 3 percent of total volume to the illicit market, an increase of about 18 percent. Such an increase might create second-order effects. If an increase in illicit purchasing made that activity seem more normal and accepted, current menthol and non-menthol smokers would be more likely to patronize illicit sources. Moreover, if more illicit sellers emerged to meet the new demand, that would make untaxed product more easily available to all smokers, and that might reduce illicit prices as well. Any claim concerning health benefits from the proposed ban on menthol smoking needs to be balanced against the risks (to health and other values) of a larger illicit tobacco market. In what follows, we present some calculations about how illicit tobacco dealing might function. Mechanics and Price Differentials

Cigarette taxes can be evaded by: Travel by consumers in high-tax jurisdictions to sellers in low-tax jurisdictions (including Indian reservations) Hand-to-hand transactions between consumers and illicit dealers in cigarettes Hand-to-hand transactions between consumers and sellers of strictly illicit drugs (not reported, but possible) Horne delivery. The cigarettes sold in those transactions may be: Genuine, tax-paid product Genuine, untaxed product Counterfeit, off-brand, or unbranded domestic product Counterfeit, off-brand, or unbranded international product. The average cost of a pack of cigarettes in New York City is $12.50, while in Virginia, a three-hour train ride away, the average cost is only $5.43. 2 A carton of counterfeit "Marlboro" cigarettes from China can be bought online for under $20, less than $2 per pack. 3

The Awl (2012) "What does a pack of cigarettes cost in each state now?" theawl.com/2012/06/pack-of-cigarettes-cost 3 Cigarettes Onlinesale.com. "Marlboro cigarettes price: Reds." cigarettesonlinesale.com/200-marlboro-cigarettes. 2

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Illicit Cigarette Distribution Mechanisms

"Mom and Pop" Operations A potential means of distributing illegal cigarettes would be through small-scale operations in which individuals buy cigarettes in a state where taxes are lower (in this scenario, Virginia) and transport them to otherwise legitimate retailers or to illicit vendors selling hand-to-hand or making home deliveries. This business would entail four operational problems: acqulSltlon, transportation, distribution, and obtaining enough working capital for an initial load of cigarettes and its transportation. Cigarettes could be transported by vehicle (driven by the distributor or an employee) or by common carrier. Costs are not prohibitive in either case. The trunk of a large sedan is roughly 21 cubic feet and the carrying capacity of a typical SUV is around 100 cf. A carton of cigarettes fills approximately 0.05 cf. We assume that the sedan's trunk would be full, but the SUVs would operate at half of their carrying capacity to keep the cigarettes out of view, which amounts to roughly 420 and 1,000 cartons, respectively, in a single trip, or 4,200 and 10,000 packs. The distributor's profits would depend on price negotiations with the retailer purchasing the cigarettes, but for the purpose of this scenario we will assume $500 per day. The illicit market cost per pack of cigarettes would thus include that $500 and transit costs. Table 1 shows the added cost per pack for both methods of transportation, assuming the source of the cigarettes is Virginia. 4 Table 1. Added cost per pack, in passenger vehicle, from VA Mode

Car SUV

Minimum (500 roundtrip) $.10 $.04

miles

Maximum roundtrip)

(750

miles

$1.16 $.51

Costs vary with the distance to the retailer. With an average price per pack in Virginia of $5.43, the initial outlay is between $19,800 and $24,200 for a full car and $46,500 and $57,700 for a half-full SUV. Common-carrier shipment could run afoul of the Prevent All Cigarette Trafficking Act (PACT), but the diligence of inspections is unknown and may be low. Other costs are very modest. The shipping weight of a carton of cigarettes is less than one pound; FedEx Transit costs include gas/diesel at current average prices and a lodging cost of $100 a night.

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will ship a 50-pound parcel from Richmond to New York City in two business days for $25. The cost of transportation is thus less than a nickel a pack, plus whatever an illicit entrepreneur would have to pay someone in the source jurisdiction to purchase the cigarettes, pack them, and arrange for shipping. This approach avoids the costs and risks of road transportation and greatly reduces the need for working capital; 50 cartons of cigarettes purchased in Virginia plus shipping to New York would cost in total less than $3000. Commercial Distribution from Virginia and Abroad

Stepping up to truck-scale transportation strains a mom-and-pop operation's capabilities, but offers greater potential rewards. A 17-foot moving truck has a capacity of 865 cf. and a 40-foot semi-trailer 2,300 cf., or 17,000 and 47,000 cartons, respectively. An operation that could make a profit of at least one dollar a pack would net $170,000 or $470,000, enough to attract the attention of major criminal organizations. Such organizations are likely able to dodge state and federal taxes, as well. 5 The per pack cost of transit in this scenario drops dramatically compared to mom-andpop operations. Table 2 shows the cost per pack of transporting by moving truck or semitrailer, given the same assumptions as before. 6 Table 2. Added cost per pack, in truck, from VA Mode

Moving truck Semitrailer

Minimum (400 roundtrip) <$.01 <$.01

miles

Maximum (5,600 miles roundtrip) $.04 $.02

Transit costs per pack decrease significantly as the size of shipments increases. The main cost driver is then the source cost of cigarettes. This type of large-scale transportation would be ideal for both distributors of cigarettes between states with differing taxes (e.g., Virginia and New York) and smugglers of illicit foreign cigarettes from (e.g., in shipping containers from China which can be loaded onto semi-trailers).

The GAO reports that such activity has occurred, though its prevalence is unknown. U.S. General Accounting Office (2004) "Cigarette smuggling: Federal law enforcement efforts and seizures increasing," Washington. gao.gov /assets/250 /242601.pdf. 6 Similar results are found even as driver pay increases. The maximum transit cost per pack increases to only $.10 and $.04 for a moving truck and semi-trailer, respectively, with a driver paid $2,000 a day. 5

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Different sources have a range of potential costs for distributors. For example, cigarettes could be purchased in Virginia legally for $5.43 a pack and then shipped illegally to other states with higher taxes. At higher risk and reward, the distributor could also divert cigarettes, avoiding both state and federal taxes, for $3.15 a pack. Finally, a smuggler could import low-quality product from China. The average cost for a pack in China is $.84;7 a 40' container, holding roughly 450,000 cigarettes, costs less than $10,000 to ship from China (at a negligible 2 cents a pack), for a source cost of $.86 before transit to the U.S . Clearly, if consumers were concerned only about price and were willing to buy lowquality cigarettes or had access to illicit products, they would be able to obtain a pack of cigarettes at much less than current prices. Illicit Cigarette Retail Operations

In either distribution scenario, the retail sale of cigarettes would pose a challenge to the retailer. Assuming that a typical smoker smokes a pack a day, each customer would purchase only three cartons a month. The number of customers required per type of ' shipment listed above is described in Table 3. Table 3. Number of customers required by shipment scenario

Type of Shipment Car SUV Moving truck Semi

Number of Customers Required per Month 140 333 5,666 15,666

The most effective way of reaching so many customers would be to tap into existing customer bases of operations that could sell cigarettes on the side, such as comer stores or drug dealers. For example, consider a convenience-store owner who buys a carful of cigarettes (420 cartons) and has 15 regular, trusted customers interested in purchasing one illicit carton per week. It would take less than seven months for the owner to sell all of the product, profiting $840 if he decides to sell at a markup of $2 per carton. Drug dealers might be able to find similar numbers of trusted customers interested in regular purchases. 8

7 Euromonitor International (2012) "Cigarettes in China." euromonitor.com/ cigarettes-in-china/report. 8 Note, however, that consumers of illicit product tend to buy through friends, and it is unlikely that most smokers have drug-dealer friends. (Australian Customs and Border Protection Service (2007) "Customs charges four over smuggled cigarettes." Canberra. customs.gov.au/site/content9610.asp.) Also, a drug dealer who risks substantial imprisonment for mere possession of one easily concealable product with a high profit margin may be reluctant to increase his or her visibility and vulnerability to arrest by also selling a lower margin, higher bulk product.

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If the retailer's source is taxed Virginia cigarettes, a $1 per pack markup yields a 17% to 22% profit margin, depending on distance and mode of transport. Depending on the existing price gap, this markup could be higher or lower. In order to identify where such operations would be feasible, we have mapped the price gaps for distribution by car and by moving truck in Figures 1 and 2. Figure 1. Price gap by state, shipped by car from Virginia, taxed

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Figure 2. Price gap by state, shipped by moving truck from Virginia, untaxed

We see that mom-and-pop operations can be price-competitive in only a few states, due to their reliance on more expensive transit and the source cost of their cigarettes. In contrast, larger scale operations can be competitive in many states, both through negligible unit shipping costs and the ability to engage in riskier activity to lower source costs (e.g., shipping from abroad or dodging both federal and state taxes). Complications for the Illicit Sale of Cigarettes

Market Participation in Illicit Markets Based on Existing Data These endeavors would be limited by the willingness of consumers to participate in illicit markets. Some consumers would simply not be willing to participate in illegal activity at all, while others would require a significant financial incentive to do so. This willingness should also be affected by the type of product that is being offered. Cigarettes transported illegally from Virginia would be of familiar brands; the quality of the product would not be in question and consumers with strong brand loyalty could maintain use of their products. In contrast, imported cigarettes offer greater savings but would likely be either knockoffs of popular brands, gray-market product,9 or other brands altogether. Willingness to participate would presumably be lower due to unfamiliarity with the brand

Suein L. Hwang (1999) "Tobacco: As cigarette prices soar, a gray market booms," The Wall Street journal, January 28, p. 81.

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as well as a concern for quality of the product. CDC reports have found that contraband cigarettes from China have much higher levels of cadmium, thallium, and lead, in addition to contaminants such as animal feces, beetles, and plastic shavings. lo Participation rates in illicit markets have been estimated domestically and internationally. In New York and Chicago, the percentage of cigarettes purchased illegally from other states has been estimated by collecting discarded packs and examining the tax stamp (or lack thereof) I 1,12 Mathematical modeling that compares numbers of cigarettes sold within a state to the projected consumption based on numbers of smokers 13 implies a very high willingness to participate in smuggling. In the Chicago study, only 25% of littered packs had the municipal Chicago tax stamp and only 36% had the county stamp. Modeling also estimated very high rates of interstate evasion based on tax differentials. The authors did not note any off-brand international cigarettes, but the portion of untaxed packs from an illicit source outside of the U.S. was very small.

Alternative Consumer Choices Consider a smoker in Chicago. He might be able to: Buy cigarettes legally Drive to a lower-tax state to purchase cheaper cigarettes Purchase cigarettes from a mom-and-pop operation smuggling from Virginia Purchase cigarettes from a large organization smuggling cigarettes from Virginia (taxed or untaxed) 5) Purchase cigarettes illegally from abroad

1) 2) 3) 4)

Table 4 summarizes the price per pack of each option: Table 4. Retail price per pack, by scenario

Chica

0

Consumer Choices Le al

Price er Pack $8.55 14

Bruce Levinson (2011) "An inquiry into the nature, causes and impacts of contraband cigarettes," Washington: Center for Regulatory Effectiveness. 11 Marin K. Kurti, Klaus von Lampe, and Douglas E. Thompkins (2012) "The illegal cigarette market in a socioeconomically deprived inner-city area: the case of the South Bronx," Tobacco Control, doi:l0.1136/tobaccocontrol-2011-050412. 12 David Merriman (2010) "The micro-geography of tax avoidance: Evidence from littered cigarette packs in Chicago," American Economic Journal: Economic Policy, 2(2): 61-84. 13 Michael LaFaive and Todd Nesbit (2010) "Cigarette taxes and smuggling 2010." Midland, Mich.: Mackinac Center for Public Policy. 14 2011 average Illinois price + county/city cigarette taxes. tobaccofreekids.org/research/factsheets/pdf/0267.pdf. 10

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Buy legally in Indiana Mom-and-pop, NC + $1 markup Commercial smuggling, NC, taxed +$1 markup Commercial smuggling, NC, untaxed + $1 markup International smuggling, China, 200% markup

$5.20 (+ 20 mile drivel $6.27 $5.62 $4.16 $1.74 15

This comparison illustrates that smuggling from even very-low-tax states may not be competitive with "casual" smuggling (i.e., the customer buying directly in a lower-tax neighboring state). A distributor might have to pair such smuggling with more extensive tax evasion. It also may be easier for criminal organizations to establish distribution networks in

markets distant from lower-tax jurisdictions. Chicago is only about 25 miles from Indiana. On the other hand, Seattle also has very expensive cigarettes but is 175 miles from low-tax Oregon. (Also note that only the import option would be available for menthol cigarettes in the event of a ban.) Illicit Cigarette Market Enforcement

Some evidence suggests that continued increases in state and federal cigarette taxes have increased demand for contraband or smuggled cigarettes. However, as Figure 3 shows, this need not necessarily be so. Figure 3. UK cigarette prices and illicit market share, 1996-2009 $6.00

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$3.00 ~ $2.00 $1.00

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UK Cigarette Prices UK Tax Evasion Estimates

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It is highly unlikely that a consumer would actually see this price; this figure simply demonstrates that imported cigarettes could easily undercut current prices. 15

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Enforcement policies that target cigarette smuggling have met with mixed success. 16 , 17 A higher risk of being caught comes with a greater reward for organizations that can successfully smuggle cigarettes, attracting the interest of organized crime. 18 A menthol ban could stimulate illicit activity and thus increase the need for enforcement; current enforcement seems below the level needed to prevent the growth of illicit activity even in the absence of a menthol ban. Therefore consideration of a ban cannot responsibly go ahead without consideration of the requisite enforcement effort, andgiven positive feedbacks-it should probably not go ahead until such an enforcement effort is in place.

The Effect of a Menthol Ban on the Illicit Market It appears that many menthol smokers would be willing to purchase menthol cigarettes illegally in the event of a ban. A recent survey indicated that 25% of menthol smokers would "find a way to buy a menthol brand" instead of quitting smoking or switching to a non-menthol brand. 19 There are approximately 18 million menthol smokers in the United States?O If the survey is correct, 4 million menthol smokers would try to fmd a way to purchase menthol cigarettes illegally-certainly enough to attract the attention of drugtrafficking organizations. In addition, there is evidence that smokers have greater access than non-smokers to illegal markets and are more willing to participate in illegal activity. The National Survey on Drug Use and Health21 asks respondents whether they have smoked in the past month, their history of arrests, and their access to different types of drugs. Table 5Error! Reference source not found. compares those responses for smokers and non-smokers.

These estimates are based on several sources: HM Customs and Excise (2000) "Tackling tobacco smuggling," London: HM Treasury. HM Revenue and Customs Department (2007) "Autumn performance report," London: HM Treasury. Michael Eriksen, Judith Mackay, and Hana Ross (2012) The Tobacco Atlas, Fourth Ed. Atlanta: American Cancer Society. 17 Suggested prices for retail cigarettes: Tobacco Manufacturing Association, "UK cigarette prices 1990-2012." the-tma.org.uk/tma-publications-research/factsfigures /uk -cigarette-prices. 18 Kevin Johnson (2011) "Violent criminals expand into Cigarettes," USA Today, April 18. 19 Richard J. O'Connor, et al. (2012) "What would menthol smokers do if menthol in cigarettes were banned? Behavioral intentions and simulated demand," Addiction, 107(7):1330-1338. 20 Substance Abuse and Mental Health Services Administration (2010) "National Survey on Drug Use and Health," Washington: U.S. Department of Health and Human Services. 21 Ibid. 16

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Table 5: Risk factors of smokers and menthol smokers: Arrests and access to illegal drugs

Ever arrested Arrested in the past month Easy access to marijuana Easy access to cocaine Easy access to crack Easy access to heroin Approached by someone selling drugs (past month)

Non-Smokers 11.2% 1.4% 49.9% 21.9% 20.6% 13.5% 5.0%

Past-Month Smokers 32.7% 8.0% 69.0% 35 .0% 29.9% 17.9% 15.7%

Smokers in general have a greater propensity for these risky activities. Not only would illicit-cigarette dealers be able to provide cigarettes at a much lower price than legal sources, but they would be catering to a more receptive market. As noted, the majority of illicit cigarettes entail tax evasion by purchasing cigarettes from lower-tax jurisdictions. Under a menthol ban, illicit cigarettes might instead be provided by black-market organizations, potentially increasing their revenue and customer base. These risks, along with the tradeoff of enforcement costs, should be weighed seriously before a ban on menthol cigarettes is instituted. The ranks of illicit smokers in the United States are considerably smaller than those of menthol smokers willing to entertain illicit purchases. Illicit Cigarette-Market Enforcement Strategies

In order to contain its small illicit (or counterfeit) market, the United States should consider enforcement tactics developed elsewhere. State court rulings and some other anti-smuggling legislation to prevent cigarette distributors from taking advantage of tax loopholes have been on the rise in the past 15 years. The Prevention of All Cigarette Trafficking (PACT) Act of2010 prohibits the U.S. Postal Service from shipping cigarettes. This legislation was intended to reduce the market for online and mail-order sales, but it has hit Native American cigarette distributors hard. A Seneca nation leader estimated that 65% of tobacco revenues would be lost along with 1,000 local jobs tied to mail-order cigarette sales?2 However, common carriers such as FedEx and DHL are not subject to the same ban and are used by online cigarette vendors instead. Analysis of the benefits of stricter enforcement strategies yield two that are particularly relevant to the United States:

22 Arec Barrwin (2010) "PACT Act is signed into law," Olean (NY] Times Herald, April 3. freerepublic.com/focus/f-news/2485860 /posts. 11

1. Tightening the supply chain: Refers to working with cigarette companies to

prevent the illegal sale of cigarettes from the manufacturer and distributors before national or local taxes can be applied. This includes increased scrutiny over the stated destination of exported cigarettes. An investigation in the UK discovered that c'igarette companies were exporting large quantities to countries such as Afghanistan or Latvia, where there was no market for UK cigarettes. However, smugglers would base their operations in these destination countries and then smuggle and resell these same cigarettes back to the UK.23 Canada had a similar issue with exports to the United States, where distributors could then sell or smuggle out the cheaper product back to Canadian customers. 24 In 2006, a non-binding MOU was signed by cigarette companies to encourage cooperation with measures to prevent smuggling. 25 This broad tactic of cooperating with-or inducing cooperation from-producers is largely unavailable in enforcement against strictly illegal substances. 2. Increased enforcement personnel: In response to high rates of smuggling in the late 1990s, the UK, Spain, Canada, and other countries enlarged their customs and anti-counterfeiting agencies. Spain in particular reported success in redUCing the market share of smuggled cigarettes by investing 44 million euros in stopping the entrance of cigarettes at the container level in addition to coordinating efforts with neighboring Gibraltar and Andorra. 26 Some of the success cases involved major tobacco companies shipping huge quantities to small countries such as Latvia, making it very hard for the companies to claim ignorance of diversion. That parallel may not hold for smuggling operations based in a large country such as Mexico or China. These strategies focused resources on reducing the supply of illicit cigarettes instead of trying to stop illicit dealing at the street level. Agencies tracking tobacco diversion include the Bureau of Alcohol, Tobacco, Firearms and Explosives (ATF) and the Alcohol and Tobacco Tax and Trade Bureau (TTB), as well as customs and police. However, tobacco enforcement accounted for only two percent of ATF's 2009 cases. A U.S. Department of Justice report indicates that coordination within the office remains a more ad hoc, decentralized enforcement effort with only minimal intelligence sharing between federal and state enforcement. 27 That only two percent of resources are now employed in 23 Luk Joossens and Martin Raw (2008) "Progress in combating cigarette smuggling: controlling the supply chain," Tobacco Control, 17(6):399-408. 24 Nachum Gabler (2011) "Combatting the contraband tobacco trade in Canada," Calgary: Fraser Institute. 25 Action on Smoking and Health (2011) "Tobacco smuggling: Fact sheets." ash.org.uk/files/documents/ASH_122.pdf. 26 Joossens and Raw, op. cit. 27 U.S. Department of Justice (2009) "The Bureau of Alcohol, Tobacco, Firearms and Explosives' efforts to prevent the diversion of tobacco," Washington: Office of the Inspector General, Evaluation and Inspections Division. 12

tobacco investigations suggests substantial capacity to ramp up enforcement m percentage terms, without gutting other missions. Public-relations campaigns have also been effective in reducing the demand for illicit cigarettes. Surveys conducted in the UK and Australia explore the motivation and behavior of those who smoke illicit cigarettes. In the UK, the Nutrition Environment Measures Survey (NEMS) survey found that 36% of smokers admitted to purchasing illicit cigarettes, primarily through a network of friends. Buyers of illicit cigarettes are more likely than licit buyers to be male, 18-34, unemployed, and struggling financially. Most were strongly motivated to buy illicit cigarettes because it made smoking affordable and they could buy in bulk. 28 Similarly, Australian smokers turn to illicit cigarettes because of financial difficulty, and they are able to purchase through friends: 60% of smokers are aware of illicit tobacco products, although others also reported that they had purchased counterfeit cigarettes without being aware they were not legal. 29 A survey about attitudes and purchasing habits in the UK found that certain popular beliefs keep people from buying counterfeit products. Less than 20 percent of shoppers admitted to ever buying a counterfeit product of any kind. Of those that decided not to buy counterfeit products, over 60 percent cited concerns about poor quality, in addition to worries about being caught, lack of safety, and funding organized crime. Only two percent of respondents indicated there was no way in which they would be dissuaded from purchasing counterfeit goods. 3o Penalties Associated with Illicit Tobacco Smuggling Although federal and state governments in the U.S. lose an estimated $5 billion annually in revenue from unpaid tobacco taxes, penalties for smuggling remain relatively minor. 31 As Table 6 shows, penalties for possessing smuggled tobacco often include confiscation of the product, a fine of around $1,000, and the possibility of jail time. Penalties are more severe for dealing or distributing, with most including jail time and penalties of over $5,000 depending on the amount seized. In addition to the penalties below, some states and counties have additional sanctions. For example, "the transportation of contraband cigarettes through Maryland is a felony and carries a fine of $50 per carton and/or two years imprisonment. The possession of

28 NEMS Market Research (2009) "North of England illicit tobacco survey," Bellingham, UK. 29Deloitte (2012) "Illicit trade of tobacco in Australia: Report for 2011." Potts Point, NSW, Australia: British American Tobacco Australia Limited. 30 (n.a.) (2012) "New YouGov research on counterfeits," brandi.org/20 12/01/05 Inew-yougav-research-on-caunterfeits. 31 Jaossens and Raw, op. cit. 13

contraband cigarettes in Maryland is a misdemeanor and carries a maximum flat fine of $1,000 and/or imprisonment up to one year.,,32

32 Shawn J. Soper (2012) "Increased cigarette smuggling penalties eyed," The Dispatch (Ocean City Maryland), April 6.

mdcoastdispatch.com/articles/2012/04/06/Top-Stories/Increased-CigaretteSm uggling-Penalties-Eyed. 14