FOREIGN TRADE UNIVERSITY

ILLEGAL TRADE ACROSS THE BORDER

& CIGARETTE SMUGGLING

Group 2
1.Lê Thị Kiều Trang 636

2.Trần Ngọc Đào Viên 640

3.Hồ Diễm Phương 615

4.Đường Hạc Vũ 650

5.Huỳnh Thị Ngọc Thu 632

April 20, 2011

 A/ OVERVIEW OF ILLEGAL TRADE ACROSS THE BORDER

I.Definition

Illegal trade is commerce which is not authorized by law. The purpose of illegal
trade is to make unlawful profits from executing the fraudulant actions. The subjects in
the illegal trade include: sellers, buyers or both of them and the object is goods.

 Illegal trade across the border or smuggling is an act that is against the law by
evading taxes and import or export contraband items across the border. Avoiding border
checks, such as by small ships, private airplanes, similarly checking from overland routes is also
ignoring. it is also used on improper border passing of oneself for the purpose of immigration
that is against law and illega

 Another definition: Smuggling is the clandestine transportation of goods or

persons past a point where prohibited, such as out of a building, into a prison, or across
an international border, in violation of applicable laws or other regulations.

There are various motivations to smuggle. These include the participation in illegal
trade, such as drugs, illegal immigration or emigration, tax evasion, providing contraband
to a prison inmate, or the theft of the items being smuggled. Examples of non-financial
motivations include bringing banned items past a security checkpoint (such as airline
security) or the removal of classified documents from a government or corporate office.

II.The forms of illegal trade

1. Goods smuggling: is bringing goods into a country illegally. It may be because the
goods are illegal, such as drugs or weapons, or it may be to avoid high taxes. It can also
avoid inspections and reported income which means the goods may not meet standards,
or they won't have to pay income tax on the income.

The method of goods smuggling is those vehicles are used for smuggling ands
people who wants illegal immigration, they hide in vehicles. Similarly people hidden
things in their body, for this purpose they use their body cavity. Similarly they hide
goods under their cloths, in children balloons. It is amazing that many smuggler fly
from airport in regular bases.

Some articles are smuggled across the border: medicine, drug, tobacco, alcohol,
petrol, cosmetic, material, ready-made clothings, car accessories, regulators,
dynamos...

2. People smuggling
 With regard to people smuggling, a distinction can be made between people
smuggling as a service to those wanting to illegally migrate, and the involuntary
trafficking of people. An estimated 90% of people who illegally crossed the border
between Mexico and the United States are believed to have paid a smuggler to lead
them across the border.

People smuggling can also be used to rescue a person from oppressive

circumstances. For example, when the Southern United States allowed slavery, many
slaves moved north via the Underground Railroad. Similarly, during The Holocaust,
Jewish peoples were smuggled out of Germany by people such as Algoth Niska.

3.Human trafficking

This is the illegal trade in human beings for the purposes of reproductive slavery,
commercial sexual exploitation, forced labor, or a modern-day form of slavery.

Human trafficking involves an act of recruiting, transporting, transfering,

harbouring or receiving a person through a use of force, coercion or other means, for
the purpose of exploiting them. Every year, thousands of men, women and children
fall into the hands of traffickers, in their own countries and abroad. Every country in
the world is affected by trafficking, whether as a country of origin, transit or
destination for victims.

 There are three kinds of human trafficking:

a. Bonded labor: is referred to as debt bondage. Although it may be the type

of trafficking that is used the most around the world, the fewest amount of
people have knowledge of it. After a victim might have borrowed money
from an enforcer, he/she must repay him/her. There is never a legal
document involved, so the terms of repayment are usually unknown to the
victim. The victim also almost always works for a greater sum of money
than the sum of money he/she was “lent.”.

b. Forced labor: is most commonly defined as an ordeal where the

participants are required, not by their choice, to work for traffickers. They
are usually threatened physically if they do not abide to their enforcers. If
this is not the case there is some other type of cruel and unusual punishment
involved. Their traffickers “own” them in some way, and they are not
allowed their liberty. Some different categories of forced labor are domestic
servitude; agricultural labor; sweatshop factory labor; janitorial, food
service and other service industry labor; and begging.

c. Sex trafficking: the victims of which are almost always in severe

circumstances, and therefore easily spotted by most traffickers. Some of the
 easily identifiable circumstances are teens that have run away from home,
the homeless, people who have been forced to leave their native country
(refugees), and people with addictions to illegal substances. Although these
are the most likely to people to be trafficked, it doesn’t always work out
that way. Becoming a slave to sexual trafficking could happen to anyone,
no matter who they are and where they’re from.

4. Wildlife smuggling

Wildlife Smuggling: is when people sale or exchange of wild animal and plant
resources illegaly. In other words, it is a result from he demand for exotic species and
the lucrative nature of the trade.

III.The popular forms of illegal trade in Vietnam

In Vietnam, the illegal trade is expressed in many diferrent forms, and focus mostly
on the goods smuggling, human trafficking and wildlife smuggling.

- Goods smuggling: tobacco and alcohol are two articles that have been smuggled
most in the recent years. Besides, there are petrol, candy, sugar, household
appliances, motobike,...

- Human trafficking: forced labor and sex trafficking are two kinds of human
trafficking happening in Vietnam. The most distinct expression of this form is
smuggling the women and children across the north border . China, Taiwan, ,
Philipines, Korea and Singapore are the destination of that smuggling

- Wildlife smuggling: Vietnam is trying to prevent the smugglers who illegal exploit
and transport rare and valuable animals as well as the timber across the border.
One of them are in the Red List of Vietnam and world which need to be protected
and special care.

B.CIGARETTE SMUGGLING
I. SITUATION OF CIGARETTE SMUGGLING INTO VIET NAM
Prior to 1990, cigarette smuggling and its consumption had been a serious problem,
causing such bad effects as market disorder, domestic cigarette production being
infringed, harmful effect on people's health, costing the economy annually a great amount
of foreign currency to import the goods deteriorating its people's health.

Since then, the Vietnamese Government has been consistent with the policy of banning
the import and circulation of foreign cigarette in the Vietnamese market. This policy only
allows those entering the country to bring the foreign cigarettes into Vietnam for their
personal demand with the amount of no more than 400 cigarettes per time. As a result, it
can be easily confirmed that all the activities of transport, buying and selling foreign
cigarettes for commercial purpose in Vietnam are attributed to the cigarette smuggling
activities.

1. The scale of cigarette smuggling

According to the report of the anti-smuggling taskforce before 1990, as estimated, there
were up to 300-400 million packs of cigarettes smuggled into Vietnam with the value of
hundreds of millions of US dollars. In recent years, cigarettes smuggled into Vietnam's
market have still been of high level (about 50-100 million packs per year). However,
those of being arrested have been trivial. According to estimates of the Department of
Market Control (Ministry of Trade)1, the amount arrested accounts for only 5-10 percent
of the total smuggled cigarettes. From 1998 to 2004, The Market Control taskforce alone
has investigated, arrested an around 14 million packs of smuggled cigarettes.

Table 2: Amount of smuggled cigarettes investigated and arrested by related

functional authorities (Market control, Customs, Police, Border troops)

Year Amount arrested by the Statistics of the total amount

Market Control (in pack) arrested by functional
authorities (in pack)
1998 3,560,000 16,800,000
1999 2,762,265 14,700,000
2000 2,398,410 13,100,000
2001 1,678,776 9,200,000
2002 1,548,114 5,100,000

1
 2003 833,684 4,600,000
2004 800,000 4,400,000

The cigarettes smuggled into Vietnam have been transported by a variety of means, while
the controlling force was limited so the amount arrested was often minor/ unreasonable/
minute (often 5-10%) out of the total amount of smuggled cigarettes transported through
the area (in detail, see box 1). Further information on means of transport is as follow:

- Daily peak time for cigarette transportation is from 19 p.m to 4 a.m the next
day. Time of busiest smuggling yearly is from October to February the next
year. These months fall in winter and traditional festival season in Vietnam,
bringing the cigarette demand sharply increasing, thus raising the
smuggling rate.

- People involved in the cigarette smuggling are mainly local male youths
from 17 to 35 years old. These people are often proficient of border terrain
but unemployed, having no stable earnings, as a result often accept being
hired for transporting smuggled cigarette for a living.

- Forms of cigarette cross-border transportation are mainly carrying or

fastening to body. Once reaching Vietnam, cigarettes are gathered and then
continue to be transported by vehicles (motor, automobiles, boats, ships
etc.)

- The most popular kinds of cigarettes smuggled through checkpoints in

southern and central regions (Cau Sat, Moc Bai, Tan Hop) are 555, JET,
HERO, WHITE HORSE, MARLBORO… These types of cigarette are of
high sale turnover in the domestic market and highly lucrative for
smugglers, thus suffering high smuggling rate.

- Border gate Lao Cai (China side) hasn’t shown those types of cigarettes,
except those produced in China, which is not the Vietnamese’s favorite
type. As a result, smuggling has not existed at this border gate. In contrast,
in practice, such types of 555, DUNHILL etc. produced in Vietnam have
been exported to China through this gate with the amount of 400-500
thousand packs per year. On the other hand, leave cigarette (material for
producing cigarette) are often imported from China through this gate by
Vietnamese enterprises at about 1000 tones/year. The import of this leaf
cigarette is all granted permit by Vietnamese functional authorities.
2. The routes of cigarette smuggling

• By sea: seamen bring along packs of cigarettes hidden in under-decks, cockpits, etc. on
the way back from trans-continental trips. On reaching national water posts, they split
the packages into smaller ones, disperse them onto numbers of ships to make a
landfall. In case of being spotted by the authorities, they either run off or dispersed the
merchandises.

• By air: airline employees carry international brands of cigarettes into the country using
various methods, for example: hide cigarette packs in beverage and food storage
boxes, go through gates without custom declaration. (See box 2 for more information

• Illegal penetration from Duty free shops at airports and border gate. Employees
working there often find out ways to collect tickets and buy allowances for duty free
cigarettes from passengers. The cigarettes would then be made available to domestic
markets. (for more information, see Case 3)

• By road: This is the most common method of smuggling imported cigarettes.

Especially after the arrest and serious punishment of several large-scale cases (case no.
10, Nguyen Khuyen, judged for 10 years, 03 years jailed applied to Hang Co lane case
and 04 years to Geneco No.1 Train, etc.), smuggling operations have occurred rarely
by air, by sea or by post but mainly by road instead cross borderlines with hidden
magnates. Those smuggling activities focus mainly on westbound border routes of
Vietnam-Cambodia (mostly in the South-West areas) as well as Viet-Lao borderlines
(Lao Bao-Quang Tri area to be exact).

3. Types of cigarette smuggling

The mode of cigarettes smuggling to Vietnam become more sophisticated and cunning.
There are three types of cigarette smuggling into Vietnam.

a) Smuggling in small quantity by road

The porters (using motorbikes, bicycles, bring or hiding inside luggage…) are hired to do
cigarette smuggling through the borders. If there is strict control in the border, they hide
cigarettes inside clothes and run forward to two sides of frontier-pass, or transport by
canoes and junks in flooding seasons. There are different ways to transport small quantity
of smuggled cigarette. When facing the inspection forces, cigarettes are dispersed and
hided in people's houses and depend on the majority of people to overpower these forces
and pull the seized cigarettes back. There are even cases that, take advantage of pregnant
women to bar the pursuing vehicle, offend smuggling control forces, incite people against
smuggling control forces. Transporting smuggled cigarettes happens regardless of days
and nights. Due to the interlacing canals and channels in the South West, it is easy to
transport smuggled cigarettes on the other side of border to Vietnam and spread to canals
and channels in the South to penetrate deeply into the interior.

b) Cigarettes smuggling in large quantity

This type is carried out with means of transport such as boats, junks, engine canoes on
rivers or hided inside cargo trucks, passenger buses, tour buses…

c) Penetration from frontier passes

This type of smuggling is done under the form of commercial fraud that is colluding with
customs staff or hiding carefully to avoid customs declaration; the smuggled cigarettes
come from duty-free shops at airports, frontier passes to market.

4. Distributors and consumers of illegally imported cigarettes

When penetrating to the domestic market, the foreign illegally-imported cigarettes are
displayed for sale openly and in flooding, especially in big cities such as Ho Chi Minh,
Hanoi and other cities and towns. Buying and selling foreign illegally imported cigarettes
happen openly with plentiful of types from high-class to low-class ones in large number.
Foreign illegally imported cigarettes are delivered from spots; key markets, trading
centers… to retailers, private business shops (restaurants, hotels) and petty traders
(roadside shops). In addition, there are some enterprises, especially private ones, limited
companies involve stealthily (hiding these cigarettes under bar to provide customers, if
required…)

At present, there is no statistic data about dealers in this smuggled item, but in
general, foreign illegally-imported cigarette retailing spots are available everywhere,
especially in cities, towns to serve customers.

These are difficulties caused to the controlling and solving foreign illegally-imported
cigarettes in domestic market, and also present limits in the implementation of the Decree
No.278/CT prohibiting the import and trafficking of cigarettes produced out of the
domestic market since 1990 up to now.

Box 5: Distribution of foreign illegally imported cigarettes in Ho Chi Minh

Facts revealed through interviewing some people at foreign illegally imported

cigarette trading center in Ho Chi Minh (Hoc Lac market, District 5) were as
follow
• Smuggled cigarettes from the southern borders are mainly: Hero, Jet, 555
made by England…

• Smuggled cigarettes from the Central Region borders are mainly: 555 made
by Thailand, JET…

• Smuggled cigarettes from oceangoing vessels are mainly Dunhill…

• Each wholesaler of foreign illegally imported cigarettes at Hoc Lac market

sells about 1.200-1.500 pack/day (or about 400-500 thousand of pack per year).
The difference between the buying and selling price at the end of 2004 is from
VND600-1.200 per pack, depending on type of cigarettes.

• Brand names of foreign cigarettes in order from best selling to less selling
are: Hero, Jet, 555, Dunhill…

• Wholesale prices of some cigarettes at the end of 2004 were as follow

(ordering 50-100pack/time):

- 555 Thailand : VND420,000/10 packs

- 555 England : VND225,000/10 packs

- 555 Thailand : VND182,000/10 packs

- 555 Vietnam : VND148,000/10 packs

- HERO blue : VND65,000/10 packs

- HERO white : VND24,500/10 packs

- JET : VND87,500/10 packs

- DUNHILL flat, large : VND198,000/10 packs

- DUNHILL small like 555: VND148,000/10 packs

Note: Almost all foreign illegally imported cigarettes have no mark of country
origin and producer, with some exception such as UK or Singapore made. The
research team get information of the origin of those cigarettes by interviewing
people working at foreign illegally imported cigarette trading centers

Source: Survey by the research group in January 2005)

II. CAUSES AND MOTIVATIONS FOR SMUGGLING

1. Economic cause

Firstly, foreign cigarettes are tiny, easy to carry through borders, less capital but much
profit. Cigarettes are in various types and in large demand; it is very easy for cigarette
sellers to avoid being controlled by authorities… this is the fundamental cause for
cigarette smuggling.

Secondly, direct transporters of smuggled cigarettes are usually poor, no job and stable
income… so; they are very daring to transport to earn a living. The number of this force
is very large while authorities are unable to control the situation.

Thirdly, there are differences among border policies and import management policies of
Laos, Cambodia and Vietnam.

- In Laos and Cambodia, the tax on import and production of cigarettes is only 10%,
without the special consumption tax. While in Vietnam, beside the value added tax 10%
on cigarette production, there is special consumption tax from 45-65% depending on
types of cigarettes… therefore, the production cost of cigarettes in Vietnam is much
higher than the production cost or import cost from Laos and Cambodia. This difference
is strong motivation for smuggling foreign cigarettes to Vietnam from Lao and
Cambodia.

- These two States sign contracts or granting bids on collection to local

governments, the more cigarettes smuggled through border, the higher their revenue. So,
the local governments in Laos and Cambodia do not pay much attention to cooperation
with Vietnam in preventing the smuggled as committed in the signed border agreements
with Vietnam.

Fourthly, foreign cigarettes are smuggled and circulated in Vietnamese market with a lot
of sophisticated tricks. In addition, their continuously changing modes cause many
difficulties in controlling activities. The cost for fighting and preventing the smuggling
are very high, while there are no sufficient policies to encourage authorities. The income
that is reduced from re-export foreign cigarettes is not sufficient to pay for costs. Even
worse recently, the State has not allowed bonus from the value of the smuggled that is
confiscated. Therefore, there is no direct motivation to encourage authorities to prevent
the smuggled.

2. Lack of stringency in Vietnam’s policy and legal regulations on cigarette

smuggling

Firstly, the punishment on foreign illegally-imported cigarettes transporters, smugglers,

keepers and traders is light without any deterrent power on the smuggling network and
distribution. If found, they leave goods to rescue life, in case of being seized, they are
not afraid of being put into prison…

Secondly, regulations on cooperation in checking, solving among authorities are not

concrete resulting in the avoidance of authorities in many cases, causing difficulties to
each other and keeping the effectiveness of cooperation still low.

3. Inappropriate implementation of the policy and legal regulations

Firstly, Vietnam had banned import of cigarettes, but only limited at encouraging people
to reduce smoking without an absolute prohibition of smoking foreign cigarettes.

Secondly, the State has issued rather decisive administrative and criminal measures but
their applications in reality are still insufficient.

Thirdly, the state management of cigarettes, especially from checking, controlling to

solving stage has not carried out continuously, regularly, widely and strictly, but lack of
synchronous solutions instead.

Diagram 1: Routes of foreign cigarette smuggling penetrated into Vietnam

Cigarette from Singapore, Thailand, UK, Cambodia, Laos, Korea… include 555, JET, HERO,
WHITE HORE, MARLBORO, Long Beach, Texas 5, Marble, Sun Shine, Hero Light,
Paramount…

Airway: By Land: By sea:

Implementation by: air - Transportation by Implementation by:

hostess, entrance people automobile, motorbike, sailor, sea man, ship
bicycle, boat, carrying
into the country … on shoulder… passengers …
- Implementation by:
people who are
working for cigarette-

Central clues of cigarette-smuggling

Cigarette retail dealer; Restaurant, hotel, dancing

Cigarette transition
cigarette vender… Smoking hall…
stationspeople who use foreign
in the provinces,
cigarette
cities
III. RECOMMENDATION FOR PREVENTING CIGARETTE
SMUGGLING
1. Economic solutions

1. There should be investment policy to support for economics growth, hungry

eradication and poverty reduction in the remote and border areas to prevent the poor
in the border areas transport cigarette for daily bread.

2. There should be regulations on fine for foreign cigarette smuggling actions. Severely
punish the actions of transporting, trading foreign cigarette. Minimum fine level must
be equal to the annual income which they could gain from their business activities. If
not paying the fine, they will get tougher punishment.

3. Negotiate with the Government of the Laos and Cambodia countries to have similar
policies in managing import – export goods from Vietnam to reduce profit from
cigarette smuggling activities in these areas.

4. Strengthening support from the Government by financing, investing in facilities, and

modern means for the task force to fight against smuggling in general and cigarette
smuggling in particular to create stimulation for properly cadres and servants who
have to work during night and at difficult and dangerous places.

2. Solutions relating to policies and legal regulations

1. Reviewing legal documents and policies regarding cigarette business to amend and
adjust timely.

2. Enhancing the effectiveness of additional punishment sanctions and overcoming

consequences during processing administrative violation.

3. Treating organizations engaging in smuggling or carrying foreign cigarette through

frontier.

4. Enhancing sanction applied for the servants having cigarette smuggling and
transporting actions through frontier.

5. Inter-industrial Circular on concrete regulation of determining cigarette amount.

6. Building criminal treatment policy consistent with the smuggled cigarette

transportation actions through frontier and smuggled cigarette trading domestically.