Europe cracks down on tobacco –

Tobacco companies lobbied European lawmakers heavily to dilute the new rules, and some changes made at the last minute weakened an earlier proposal. But the guidelines still represent a big improvement from current European rules. Lawmakers will now negotiate the changes with national governments and the European Commission before final rules are approved next year.

European lawmakers voted to increase the size of the warning labels on cigarette packs to 65 percent of the front and back of packs, up from 40 percent now. By contrast, warning labels in the United States are small text boxes that appear on the sides. A 2009 law instructed the Food and Drug Administration to require graphic warning labels that covered half of the front and back of cigarette packs, but after losing a court case on a set of labels, the F.D.A. has not yet come up with replacements.

The European Parliament also voted to ban flavored cigarettes three years after the rules are finalized and menthol cigarettes after eight years. The 2009 American law banned flavored cigarettes but left a decision on menthol to the F.D.A., which has not yet proposed any regulations. Studies have shown that flavored cigarettes make smoking more appealing to kids and young people and make it harder for addicted smokers to quit.

The most controversial part of the European rules concerned electronic cigarettes, the battery powered devices that people use to inhale nicotine vapors. These devices are safer than conventional cigarettes because they do not contain carcinogens and other toxic substances from burning tobacco. But nicotine in any form is highly addictive and can be dangerous, especially to young people. Under pressure from the makers of e cigarettes, European lawmakers rejected a proposal to regulate those products as drug delivery devices. But they did vote to confine their sale to adults and applied the same marketing and advertising rules to these products that apply to conventional cigarettes a significant improvement.

Only 23 American states have banned the sale of e cigarettes to people younger than 18, according to the Campaign for Tobacco Free Kids. The F.D.A. has said it intends to regulate these devices as tobacco products, but after years of studying the issue, it has not done so.

More than 700,000 Europeans and more than 440,000 Americans die from smoking related illnesses every year. Lawmakers in Europe have taken some important steps United States regulators should do the same.

Black market for cigarettes expands, costing e.u. billions –

The containers were actually crammed with more than 20 million illicit cigarettes smuggled by an unlikely ring that included a recruitment consultant, a scaffolding company owner and a millionaire Dubai businessman in plastics recycling who had fallen on hard times during Europe s economic downturn.

“He borrowed money and took the wrong route,” a lawyer said in open court earlier this year, apologizing for the gang s ringleader, Paul O Meara, 48, of Suffolk, England, adding that he “lived the good life,” but lost it all, and then risked his reputation “as a result, really, of the financial collapse.”

For years, law enforcement officers and smugglers have played cat and mouse in Europe, where contraband cigarettes are stashed in everything from furniture shipments to loads of Christmas trees. But Europe s four year old economic crisis is expanding the black market for cigarettes, robbing European Union nations of valuable revenue and drawing in a new class of smugglers.

In May, a judge in England scolded Terry Nolan, a blind man from Yorkshire, who was convicted after investigators found him stashing more than 200,000 contraband cigarettes, some behind a false wall in his garden shed. Mr. Nolan refused to reveal the source, claiming he was afraid of reprisals, and was given a five month suspended sentence after pleading guilty to evading more than $150,000 in excise taxes.

“You are 61 years old, and apart from a sentence in your youth for cannabis possession, you have remained law abiding for the last 40 years,” Judge David Tremberg lectured him in court, issuing a curfew and a fine of about $1,000. “At a time when the public purse is at breaking point, this business robs the country of much needed finances.”

Indeed, the impact of lost tax revenues is enormous, especially since the European Union is partly financed by customs duties, 75 percent of which are passed to the bloc by its member nations.

“The damage 1 billion euros missing in the E.U. budget and up to 9 billion euros missing in the member states,” according to Jens Geier, a German member of the European Parliament, who worries that the volume of smuggled cigarettes hints at serious structures of organized crime behind these illicit, everyman retailers.

Hard facts about this smuggling trade are found in the lowliest places the garbage. In annual surveys, financed by cigarette companies, researchers fan out to major cities in 27 European nations and collect crumpled cigarette packs. In turn those packs are analyzed by laboratories to determine how many are bought across the counter and how many are counterfeit. Some boxes are so meticulously produced in China, Dubai or Eastern Europe that they contain bogus tax stamps for different nations.

The latest results of the garbage scavenging showed the black market competition had increased to record levels. In Spain, illicit sales last year soared 300 percent to more than 4.6 billion cigarettes. In the struggling region of Andalusia, they showed, contraband cigarettes commanded 20 percent of the market.

In Ireland, smugglers are robust competitors with legal cigarette companies, reaching more than 17 percent. Over all, black market cigarettes continued a steady climb for the fifth straight year, topping 10 percent of consumption or 65 billion cigarettes, according to the annual report issued in June by KPMG for Philip Morris International.

Smuggling has flourished in particular in nations where the price of a pack of cigarettes has edged past $10, the result of rising taxes and tighter wallets.

“In times of economic crisis, especially a long economic crisis like the one Europe is experiencing now, people have less disposable income, and they are particularly interested in cheaper products,” said Simeon Djankov, deputy prime minister and finance minister of Bulgaria. There, he said, the market share of smuggled cigarettes more than doubled between 2008 and 2010.

In Dublin, Benny Gilsenan did his own personal research. When Ireland s economy started to founder in 2008 after the nation s real estate crash, Mr. Gilsenan noticed the regulars were dwindling from his store, Benny s, a 40 year fixture in the neighborhood.

Then he confronted a former customer, whom he could see smoking just a few hundred yards away. The man explained the math to him.

“I sell a pack for 9.20 euros, while they can get one for 3.20,” about $7.30 less, Mr. Gilsenan said, noting that his sales declined 40 percent in the last four years and resulted in layoffs of two employees. Since then, he and other shopkeepers have formed a group called Retailers Against Smuggling that is pressing for higher penalties for smugglers.

The turtle toy smuggling case was masterminded by Mr. O Meara, the businessman who embarked on what prosecutors called a “massive international smuggling operation.”

Among the seven men, sentenced earlier this year, none had previous records for smuggling, according to Paul Barton, assistant director of criminal investigations at Britain s HM Revenue & Customs.

According to investigators and court records, the turtle plot began sometime in 2009 when Mr. O Meara was struggling with debts and began work on setting up a haulage business called Vincent Logistics, which prosecutors described as a front company.

He received financial help from another member of the smuggling ring, Robert Doran, 47, a Dubai millionaire. The potential tax loss from the operation was more than $5 million for the British government, according to Mr. Barton, who said the plot had taken around four to five months to prepare and was so well organized that plotters marketed the cigarettes with glossy brochures. In the end it cost them prison sentences, ranging from two years to four and a half years.

Despite the emergence of middle class smugglers, investigators believe that criminal organizations are behind them.

Contraband tobacco is less lucrative than narcotics, but it is attractive because those caught receive much shorter prison terms.

While governments fret about lost revenue, law enforcement officers are concerned about how smuggling profits are reinvested in other criminal activities.

“A lot of people perceive this as a Robin Hood type of fraud and that the ordinary person in the street, who has a lot less money these days, is gaining the benefit,” said Austin Rowan, head of the unit responsible for cigarette smuggling at OLAF, the European Union s Anti Fraud Office. “But this trade is financing organizations that are involved in other activities including drugs smuggling.”