The pilot of auction of domestic cigarettes for domestic sale of illegally imported cigarettes confiscated and the quality is not compliant with the regulations on the system of legal documents on cigarettes consumed domestically.

 Direction: "For smuggled cigarettes which are confiscated and still have quality, experimentally auction implementation for domestic sale or re-export; The pilot duration is one year, then it will be assessed each year to extend the pilot. "It is not exactly compatible with the Law on Tobacco Control.

According to Article 15 of the Law on Tobacco Control 2012 and Article 22 of Decree 67/2013 / ND-CP, cigarettes legally consumed in Vietnam must meet the following conditions:

  According to Article 15 of the Law on Tobacco Control 2012 and Article 22 of Decree 67/2013 / ND-CP, cigarettes legally consumed in Vietnam must meet the following conditions:

 - To  label in Vietnamese;

- To print health warnings in both words and images (as prescribed, it must occupy at least 50% of the area of each front and the back of the bag on top, bottom, box).

- To stamp or print codes, bar codes;

- Must be registered for protection of intellectual property rights in Vietnam;

- To enter production date, expiry date. Most cigarettes imported into Vietnam (mainly Jet and Hero cigarettes, currently account for 80-90% of total cigarette smuggled into Vietnam [1]) do not meet and fully comply above provisions;

- To comply with national technical standards on tobacco. According to the National Technical Regulation on cigarettes, issued together with Circular No. 23/2015 / TT-BYT, cigarettes are illegally imported into Vietnam at present do not conform to the standard. Specifically, the standard only allows for a maximum content of Tar in cigarette smoke is 16.0 mg/ cigarette and the maximum content of Nicotine in smoke is 1.4 mg / cigarette:. However, this content for the cigarettes Jet and Hero (the two types of cigarettes accounted for 80-90% of total cigarettes smuggled into Vietnam) up to Tar: 19.6 mg / cigarette (exceed 12.2 %); Nicotine: 2.09 mg / cig (over 49.2%) for Jet and Tar cigarettes: 18.9% mg / cigarete (over 11.8%); Nicotine: 2.04 mg / cigarette (over 49.2%) for Hero cigarettes. Even for cigarettes imported into Vietnam for the first time before carrying out import procedures, traders shall have to send samples to agencies and organizations with analysis and testing functions designated by competent state agencies. to analyze the samples in accordance with the requirements of food safety regulations, standards or regulations of the current law of Vietnam (Circular No. 37/2013 / TT-BCT of the Ministry of Industry and Trade on import of cigarettes, Cigar).

Smuggled cigarettes confiscated, which do not meet all of the strict requirements mentioned above, are still auctioned for domestic consumption, as legitimate cigarettes are not in compliance with current regulations.Allowing the pilot auction of smuggled cigarettes for domestic consumption will create a very dangerous legal loophole for smugglers to take advantage of, legalizing the smuggling of illegally imported cigarettes into consumption in Vietnam. Implications from the above analysis are that public health is seriously threatened. The state budget will also lose a significant amount of VND10,000 billion annually [2] and will increase several times if the smuggled cigarettes confiscated that are sold for domestic sale or re-sale. The reason is that the confiscated cigarettes do not pay any taxes but are sold only through auction.

 Legitimate cigarette producers will also be seriously affected by unhealthy competition and the unfairness of smuggled cigarettes that are sold at auction for domestic consumption when legally cigarette producers must be paid compulsory taxes at a very high level (including special sales tax at the rate of 70% and up to 75% from January 1, 2019) the tobacco tax rate will be 1.5% and will increase to 2% from May 1, 2019, value added tax at the rate of 10%, and for imported cigarettes, the preferential import tax rate up to 135%), pay a lot of money to comply with tobacco control regulations but are subject to equal competition from smuggled cigarettes sold auctions for domestic consumption do not pay tax, do not pay any fees for compliance with regulations on tobacco control.

Moreover, it is difficult and costly time to identify smuggled cigarettes that still have quality or not, which can generate a lot of management costs for quality inspection, auctioning, preservation and transport…

2. Re-export of illegally imported cigarettes that  are smuggled and confiscated

Most smuggled cigarettes ( for example  JET cigarettes, HEROs currently account for 80% -90% of smuggled cigarettes in Vietnam) are unsuitable for other countries in the region and are only known and practiced by Vietnamese smokers. Currently consumed only in Vietnam market. In addition, cigarettes are sensitive products, strictly controlled by countries around the world, requiring tobacco products to be exported must also meet the basic technical criteria prescribed and applied by the receiving country (on Tar content, Nicotine, health alert ..). Due to failing to print health warnings, not printing the place of manufacture, printing time and without quality certificates, these smuggled cigarettes do not meet the conditions for being imported into other countries.

From the above analyzes, it can be seen that the re-export of illegally imported cigarettes smuggled does not meet the requirements of reality and is not effective. The re-export only increases the risk of smuggling, facilitating smuggled cigarettes to be brought back to Vietnam more easily and nullifying the counter-smuggling efforts of the functional forces.

The re-export of confiscated cigarettes smuggled has been implemented in accordance with Decision No. 1112 / QD-TTg dated 21 August 2012. After two years of pilot implementation, this practice has shown that there are too many inadequacies in both control and implementation. In Quang Tri Province, functional forces have marked a batch of illegal cigarettes before re-export, but only after a short time, the same batch of imported cigarettes illegally smuggled into the Vietnamese market.

Furthermore, legally re-export of confiscated cigarettes is not consistent with the provisions of the FCTC Framework Convention on Tobacco Control (FCTC). Under Clause 4 (c) of Article 15 FCTC, confiscated cigarettes must be destroyed [3]. Therefore, the Prime Minister issued Decision No. 2371 / QĐ-TTg in 2014 on the confiscation of confiscated cigarettes (still valid) to replace Decision No. 1112 / QD-TTg.

3. The effectiveness of the destruction of smuggled cigarettes confiscated for prevention and controlof cigarette smuggling

Before Directive 30 / CT-TTg of 2014 on strengthening tobacco prevention and control ("Directive 30") and Decision 2371 / QD-TTg of 2014 on the implementation of imported cigarette destruction confiscated ("Decision 2371") is issued, the situation of smugged cigarettes are always alarming. According to statistics, the amount of smuggled cigarettes into Vietnam in 2012, 2013 and 2014 is 20.1 is billion cigarettes, 21.3 billion cigarettes and 19.8 billion cigarettes [4] (equivalent about 1.055 million bags, 1.065 million bags and 990 million bags), accounting for approximately 20% of total cigarette consumption in Vietnam.

However, after Directive 30 and Decision 2371, smuggled cigarettes prevention and control showed strong changes. In 2015, the first year of smuggled cigarettes destruction and support for disposal costs, 15,064 cases were seized, 10,754,247 bags were seized, 10,147,156 bags were culled. The amount of cigarettes smuggled into Vietnam in 2015 was estimated at only 14 billion cigarettes [5] (equivalent to about 700 million bags). The destruction of smuggled cigarettes has brought into play the effect of reducing the smuggled cigarettes by about 30% compared to that in 2014, creating conditions for enterprises to produce cigarettes legally in the country to restore production, payments to the state budget increased by more than VND1 trillion (6.2%). Thus, Directive 30 and Decision 2371 are very effective in the prevention and control of smuggled cigarettes and should be maintained and promoted, especially in the time the Ministry of Finance issued. Circular No. 196/2016 / TT-BTC revising Circular 19/2015 / TT-BTC, thereby increasing the level of support for smuggling capture and destruction work of cigarettes from VND 3,500 / bag to VND 4,500 bag

Based on the above analysis, the situation of smuggling cigarettes is increasing, the Vietnam Tobacco Association found that the licensing of illegal cigarettes was confiscated for domestic consumption. or re-export is very dangerous, creating serious legal loophole for smuggling into Vietnam, increasing risk of smuggled cigarettes will lead to a loss of state budget revenues. Therefore, in order to limit the loss of national budget, protect public health, limit the damage of smuggled cigarettes to the legitimate tobacco production and trading business, the Vietnam Tobacco Association urgently proposes the Government’s Prime Minister to consider continuing maintainance of the destruction of smuggled cigarettes confiscated instead of auctioning confiscated cigarettes for domestic consumption or re-export