Examination of Witnesses(Questions 160-179)
MR RICHARD
BROADBENT AND
MR MIKE
WELLS
MONDAY 29 APRIL 2002
160. The chap who comes into the pub and says
"here, I want some cigarettes"?
(Mr Broadbent) I am interested in the person supplying
in the pub.
161. Finally, on this advertising campaign,
I have done a little focus group on this side of the Committee
and not a single person, with the exception of Barry Gardiner
who says he vaguely remembers something he saw about a year ago,
has seen any of these adverts or remembers seeing them. It is
not a very effective advertising campaign if people do not remember
them.
(Mr Broadbent) I bought some leaflets just in case
that I will hand out after the hearing. Like all campaigns which
are intended to get value for money it is a targeted campaign,
so although at the general public level there are recognition
rates around the 40% mark, if you look at HGV drivers we have
increased recognition rates from 60% odd to over 80%.
162. So they know they have got to really hide
it.
(Mr Broadbent) They know they have got to really hide
it, indeed. Or, indeed, retailers. Recognition rates have gone
up very materially with retailers. We focus advertising on certain
groups.
163. Not on smokers?
(Mr Broadbent) We do a certain amount of general advertising
as well. We target it at what we perceive to be particularly high
risk groups.
Mr Davidson
164. I wonder if I could just follow on the
points about resourcing starting with counterfeiting. Around 17%
or so of the trade, as I understand it, is counterfeit. Can you
just clarify are there particular brands that are counterfeit,
that disproportionately are counterfeit, and what have you done
to publicise that?
(Mr Broadbent) As my colleague mentioned, probably
the most popular counterfeit brand is Benson & Hedges, which
is interesting because the smuggled brands are predominantly Regals
and Superkings.
165. Sorry?
(Mr Broadbent) There are two brands which make up
about half of the entire smuggled market and they are Regals and
Superkings and they are both made by the same tobacco manufacturer.
The most popular counterfeit brand is Benson & Hedges which
actually is much less of a problem in smuggling.
166. Have you considered the question of publicising
the fact that there is, say, a 50/50 chance that a packet of such
and such a brand will have a combination of camel's droppings
and cabbage because it is completely counterfeit? That would damage
their sales I would have thought.
(Mr Wells) One of the things that is important to
distinguish is between sales in the retail market, which we believe
are predominantly legitimate (in other words the retail market
is rarely the source for smuggled cigarettes) and the typical
sources for illegal cigarettes. We have considered whether it
would be wise in terms of those typical illegal sources to make
the point that a large proportion are counterfeit, and indeed
there has been some publicity in the tabloid press about that.
In our view, whether these are cigarettes that are illegal are
the genuine product (in the sense that they are the brand they
are purported to be) or whether they are counterfeit makes little
difference from our point of view; we are equally concerned either
way. Equally, from a health point of view, cigarettes, whether
they are counterfeit or legitimate, do damage to your health.
We have considered that but decided against it.
167. You presumably want to damage the market
and making it known that, for a particular brand, very few of
them are legitimately made and smuggled but there is a large proportion
of them that are counterfeit and if you are buying brand X in
a pub it is likely to be camel droppings and cabbage would damage
their trade quite considerably. They might then buy other smuggled
brands but at least you might have knocked one element of it on
the head. I am surprised that you have not considered doing something
like that.
(Mr Broadbent) It is quite interesting and we should
think about it. There are two issues, one is how big a share of
the total market is the counterfeit Benson & Hedges, but also
we would need to be very careful if we advised people about buying
Benson & Hedges because we must not damage the legitimate
trade.
168. On the question you mentioned about Hong
Kong being a particular place from which counterfeit cigarettes
are coming, presumably in those circumstances from China, I am
not clear to what extent that in itself has been publicised. Having
been to Hong Kong not all that long ago, they seemed very keen
to indicate that they are above board and a centre of probity
and so on and so forth. I am pretty sure if it was going to damage
Hong Kong's international reputation they would see their way
to taking action on this if they were incentivised in some way
by the threat of bad publicity. Have you considered that?
(Mr Broadbent) Again there may be a role for publicity.
We have made our anxieties known to the authorities in Hong Kong.
There is obviously a question about at what point you go public
if you like. We have never hidden the fact that we think there
is product coming out of the Far East but, there again, there
is product coming out of many places.
169. A delegation of MPs went there and several
other places in China and nobody mentioned this to us at all.
If it had been such a big issue I would have thought it would
have been drawn to our attention in some way. The staff in the
British Consulate did not mention it either. You might be passing
it on but passing this information on in secret does not seem
particularly helpful. Maybe I could move on. I wanted to pick
up this question of the tobacco companies. I understand the point
about Andorra but what is the saying "as one Andorra closes
another opens"! You mention that there were other locations
where this was happening. Presumably you are able to identify
the companies who are selling into markets in exactly the same
way. I must confess I cannot identify a reason why you should
not publicise that.
(Mr Broadbent) No, I entirely understand that. Let
me try and go through it. About half the smuggled market is made
up of two brands, Regals and Superkings, which are both manufactured
by Imperial. Very significant volumes of those brands are exported
to third countries where there is no material domestic market
share that Imperial holds. We have a system in place with all
manufacturers where we seek to go through with them what their
export destinations are, who the customers are, what the contracts
are, and we issue warnings to them in the form of red and yellow
cards if we think they are high risk customers. When we seize
goods we also have a system where the tobacco company is asked
to track and trace where those goods came from. Clearly when one
company accounts for 50% of the smuggled market share, you are
very dependent on the co-operation you get from that company in
being able to respond quickly and fully to those flows. Although
Imperial put out a press release just a few days ago saying they
had a good history of co-operation with Customs & Excise,
our view would be different; I think it has been quite a challenging
process.
170. What a wonderful euphemism that is! It
would be helpful if you could give us a note as to what the new
Andorras are and also some information about the companies who
are exporting there with no record of having sales there. I think
that that would certainly be something that would really be quite
helpful to the Committee and we would want to take that up with
the companies involved. I am fascinated by your concept of yellow
and red cards. It would be helpful if you could give us a list
of the occasions when they were issued.
(Mr Broadbent) I can give you a couple of examples
now. We issued a red card and a yellow card to Imperial in relation
in one case to Afghanistan and another case to Moldova. That would
be an example where we would say they are very, very high risk
exports.
171. It would be helpful if we had a list of
dates of those and then possibly the Committee would want to follow
up whether or not exports continued from the companies involved.
(Mr Broadbent) I am happy to try and help the Committee.
I just need to be conscious that the information is often given
to us in confidence. We can give it to you and you must make your
own judgments.[6]
172. Indeed. Can I clarify about retailers.
It is my impression that just over the Channel in France there
are a number of British retailers who are selling British brand
tobacco which is clearly for carriage back into the United Kingdom
and that is where a number of Britons are buying their over the
limit cigarettes to try and smuggle in. What dialogue have you
had with companies in these matters?
(Mr Broadbent) There are a number of outlets, some
are British owned, some are French owned. Of course, if you speak
to the owners they say, "It wasn't us, it is somebody else."
That analysis is largely right. Where we have focused in that
case is on a very, very tough interdiction policy. One of the
announcements in the autumn was that white van trade was down
by 76% last year. That is one of the areas where we have have
made most rapid progress.
173. Can I follow up this point about "it
wasn't us, it was somebody else". There are several schools
in my area who do not accept that line with heroin or any other
product. Can you clarify whether or not any of major supermarkets—Sainsbury,
Tesco, Safeway—are in that position of selling goods which
are likely to be imported into this country and using the defence
"if we did not do it, somebody else would do it"?
(Mr Broadbent) That last bit I would say was my own
phrase and I recognise it was probably a slightly sloppy one.
(Mr Wells) There are several UK supermarket chains
including Tescos that operate in Calais. I know a number of others
do also. In fact, most of the smuggled tobacco, strangely enough,
is retailed in Luxembourg and Belgium rather than France because
the rates are cheaper in Luxembourg and Belgium.
174. Tesco have branches there then, do they?
(Mr Wells) I am not sure that they do. Clearly there
is a perfectly legitimate shopping market going on in France.
It is perfectly legitimate to buy your cigarettes or alcohol or
any other products in France and bring them back for your own
use. That is not an insubstantial amount of the tobacco consumption
in the United Kingdom.
175. That was one of the points I wanted to
pursue as well, the question of how much it is appropriate for
individuals to come back into this country with duty paid. I think
I heard you say the figure of 800 at one point. Is that correct?
That would be your indicative level?
(Mr Broadbent) For cigarettes.
176. Anybody bringing in more than 800 in would
be liable to seizure?
(Mr Broadbent) 800 is simply an indication of what
is reasonable for personal use. You can bring in any amount you
wish if it is for your personal use. It is re-selling it for use
of other people which is the offence. 800 is the indication we
give. Above that you may have to answer questions. In fact, many
of the people who are stopped with more than 800, we ask them
a few questions and they say, "I have got 1,500 but I smoke
them," and that is fine. Above 800, if you are stopped, you
have got to satisfy us that they are for your personal use.
177. Has there been any co-operation from companies
like Tesco in limiting sales to 800 or 1,000 or any reasonable
amount?
(Mr Broadbent) There have not been lengthy discussions
about trying to limit sales in supermarkets overseas. There is
work, for example, with P&O to get people to understand the
800 limit if they get stopped above 800.
178. I wonder if I could pick up this question
of free import of goods that are bought overseas. Presumably other
elements of Customs would seize pornography which might very well
have been bought legitimately but standards vary. The fact that
something has been bought duty paid somewhere else in the EU does
not automatically give someone the right to import it, does it?
(Mr Broadbent) There is an absolute prohibition on
certain forms of obscene material. In the case of tobacco you
are allowed to bring tobacco to this country as long as it is
for your personal use. The 800 is just an indication.
179. Because pornography raises issues beyond
sales within a Single Market, am I right in thinking that since
the EU does not have competence in health matters that it would
be entirely appropriate for the British Government to say "for
health reasons we are raising tax levels and we are saying either
no imports duty paid or 800 maximum"?
(Mr Broadbent) No, I do not think it does have that
freedom because the Government's freedom is constrained by Article
7 (as amended) of the Convention which says we shall not take
steps that will restrict freedom of trade.
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