Foreign cigarettes are not imported, but they are everywhere

Imported foreign cigarettes are assessed close to 600% duty  – a wall considered too high to cross. Yet, cigarettes of UK, UAE, and South Korean brands cross this barrier and make their way from ports to stores and roadside stalls. In a group of five smokers taking a smoke break at a corner shop, at least one will be smoking slim, a so-called low-nicotine cigarette.

Oris, Esse, Mond, Dunhill, 555 are among the common foreign brands available even in village markets. They come in packs with no tax stamp known as banderol, therefore lawbreaking. Customs have no record of importing these cigarettes, so no revenue is earned from this highly-taxed item.

For importing cigarettes worth Tk100, more than Tk596 is payable as duties and taxes, as per the customs tariff rate in place for four years now. Commercially imported cigarette packs must have a printed warning in Bangla essentially warning of the harmful effects of smoking. But the foreign brands being sold do not have any such warning. 

"In that sense cigarettes are not being commercially imported. Some cigarettes are imported through diplomatic bonds for consumption by diplomats," said Khairul Bashar, deputy commissioner of Chattogram Customs House. 

Under the current baggage rule, an air traveller to Bangladesh can import one carton (200 sticks) of foreign cigarettes, he adds.

The illegal cigarettes arrive in containers of fibre or corn powder or any other raw material or even in incoming air passengers' baggage and reach the market without paying any duty. 

Duty on tobacco accounts for 12% of total revenue and any leakage here is of significant concern to customs who occasionally find stashes of smuggled foreign cigarettes at ports.

Experts say these are just a tip of the iceberg as local market share of illicit cigarettes is estimated to be between 2% to 4%.    

On 27 June, customs officials caught the Dhaka-based company Hamco Corporation with  five million Mond brand cigarettes, misdeclared as goods from Thailand. The market value of these cigarettes is estimated at Tk5 crore, with potential duty evasion amounting to Tk30 crore.

This follows a December 2021 incident where Chattogram importers Bappu Enterprise and Arafat Enterprise tried to evade Tk230 crore in revenues by importing counterfeit cigarette banderols under the tag of offset paper from China.

Seizures are just a fraction of the illicit

Customs authorities have uncovered several instances of misdeclared imports at Chattogram port but experts say these seizures are only a fraction of the illegally imported cigarettes entering the country.

High-duty cigarettes are smuggled into the country disguised as items like knives, blades, breadmaking products, synthetic fibres, steam irons, sweet corn, baking powder, and industrial materials.

A February 2024 study by Oxford Economics found illicit cigarette consumption in Bangladesh rose fivefold in FY23 compared to FY16, leading to an estimated government revenue loss of Tk800 crore. The market share of illegal cigarettes in FY23 exceeded 4%, up from less than 1% in FY16.

A senior official from a leading Bangladeshi cigarette company told TBS that smuggled and misdeclared cigarettes now make up about 2% of the country's total consumption, a figure that is steadily growing.

Md Farid Uddin, a former NBR member, told TBS, "Only a tiny fraction of illegally imported cigarettes, brought in through misdeclaration, get caught. This is largely because of the collusion of importers, their C&F agents, port officials, and some customs officials." 

He added that the steep import duties on cigarettes deter legal imports, thereby facilitating illegal smuggling. 

Cigarette brands like Oris, Mond, Dunhill, 555, Esse, and Ezee do not have necessary production licences in Bangladesh, making their legal manufacturing within the country prohibited. 

Despite such occasional seizures, these cigarettes are openly available in the market, driven by high demand, particularly for slim cigarettes.

The Bangladesh cigarette market is categorised into four price segments—premium, high, medium, and lower—as per government regulations. These illicit brands sell cheaper than those in the premium and high segments. 

Illicit cigarettes cut sales of local cigarettes

NBR data show that sales of premium and high-segment cigarettes produced by local companies declined by 22% and 19%, respectively, from July to February in FY24.

An NBR senior official told TBS, "Illicit cigarettes are a major cause of the decline in sales of locally produced cigarettes." 

In addition to smuggled foreign brands, counterfeit and fake banderol cigarettes are also illegally sold across the country. Reports frequently highlight seizures of counterfeit cigarette shipments and discoveries of factories using fake banderols.

Cigarettes remain a crucial revenue source for the government, despite ongoing health debates. In FY23, the government collected approximately Tk35,000 crore from this sector, constituting about 12% of total revenue.

Significant portion of the racket remains out of reach

According to the NBR and other sources, a syndicate operating from Chattogram is responsible for smuggling foreign cigarettes and banderols, with involvement from some customs officials. 

Information from the NBR's Central Intelligence Cell (CIC) and Customs Intelligence and Investigation Directorate (CIID) indicates that Chattogram-based companies like Bijoy International Tobacco and Tara International Tobacco dominate the illegal cigarette trade in Bangladesh. 

Raids in May uncovered counterfeit cigarette factories in Cox's Bazar's Chakaria area operated by these entities.

When contacted, Chattogram City Corporation Councillor Abdus Sabur Liton, owner of Bijoy International Tobacco and Tara International Tobacco, said, "Customs Intelligence found nothing at my establishment. If they had any evidence, they would have filed a case."

Chattogram Customs House filed separate cases against Bappu Enterprise and Arafat Enterprise in December over the seizure of counterfeit banderols. Despite efforts, insiders claim another powerful syndicate continues to import foreign-brand cigarettes through collusion with corrupt officials at ports and customs.

Although cases are filed against importers and C&F agents caught with illegal consignments, ringleaders often evade capture. 

Sources in the NBR and Customs Intelligence report that no criminal cases related to seizure of illegally imported cigarettes have been resolved. Passengers caught with illegal cigarettes at airports face no legal repercussions; officials simply confiscate the cartons. 

In 2022, the ACC initiated 11 cases related to cigarette seizures, implicating nine current and former Chattogram Customs House officials, 11 importer-entrepreneurs, 14 C&F agent representatives, and three trespassers.

Customs automation essential to stop illegal cigarette imports

Experts say modernising customs and implementing 100% scanning at ports are crucial to stopping illegal cigarette imports. 

Md Farid Uddin of the NBR said, "It is impossible to stop illicit cigarettes unless 100% of imported goods are scanned. With the current capacity of the NBR, maybe 50% of shipments can be scanned." 

He added that during his tenure, port surveillance teams had to check imported goods at unloading points. However, this has become difficult due to the increase in imported containers. He stressed the need for technological advancements to effectively curb illegal imports. 

Additionally, he calls for increased vigilance in the field to identify counterfeit banderols and illegal cigarette factories.

NBR's intelligence team seeks DC's assistance in conducting raids

According to NBR sources, a five-member committee, led by CIID Director General M Fakhrul Alam, has been formed to curb the import and supply of illegal cigarettes. 

He told TBS, "The committee has already started its investigation by reviewing information on establishments importing cigarette ingredients. We have already visited two establishments."

In early April, the NBR sent a letter to the Cabinet Division, requesting that deputy commissioners take measures to stop the supply of smuggled cigarettes. 

The existing Import Policy Order requires "Smoking is injurious to health" to be printed on the packet of imported cigarettes, similar to local ones. However, the letter says that this rule is not being followed, as foreign cigarettes are widely available even in remote areas, including Dhaka.