Imperial and Gallaher Involvement in Tobacco Smuggling

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In the mid-1990s, the two main British-based tobacco companies whose market was predominantly in the UK were Gallaher, now part of Japan Tobacco International and Imperial Tobacco. But their domestic market was declining and they needed to find new markets. So they sold abroad. Although this is perfectly legal, by the late 1990s Imperial Tobacco and Gallaher were exporting billions of cigarettes to countries where almost no one smoked them. These cigarettes were then entering the black market and were being smuggled back into the UK.


"Very Suspicious" Behaviour

The 1990s saw the number of cigarettes being seized by UK Customs and Excise rocket. In 1995, HM Revenue and Customs seized 32 million cigarettes.[1] By 1999 this had increased to 1.3 billion [2] and by 2000-1 it was just under 2 billion, [3] with some 17 billion cigarettes being successfully smuggled into the country.[4]

“It is very suspicious that brands mainly smoked in the UK are transported to several countries apparently with no reason,” a spokesman for the EU Anti-Fraud office said at the time.[5]

Smuggling Via Andorra, then the Balkans, then Cyprus

By 1997, EU investigators became alarmed at what they recognised as a new smuggling route opening up. The EU anti-fraud unit reported a “significant increase in exports to Andorra of brands popular in the United Kingdom”. The EU investigators noted that “importations were far in excess of the amount required for local consumption.” [5]

When Andorra was closed down, the smuggling route changed. In October 1997 Italian Customs seized what became the first of many Superkings and Regals off the Adriatic Coast, coming from Montenegro and other Balkan countries. “Before 1997, it had never happened. Since then we have seized many cigarettes destined for the UK market,” said an Italian Prosecutor from Bari at the time. By the late 1990s, according to the EU Anti-Fraud Office, over 40 per cent of cigarettes seized on the Adriatic coasts coming from Montenegro by speedboat were British-made. [5]

The next country to become a "hub" was Cyprus, where the cigarettes were transported in their billions. In 1999, leaked export figures from HM Revenue and Customs revealed that Imperial was on course to ship some five billion cigarettes there in one year alone. [5]

The UK Becomes the 'Focal Black Market' in Europe

In 1999, a review of cigarette smuggling by the World Customs Organisation concluded that the "United Kingdom is the main target country for cigarette smuggling activities and takes the first place of the 'cigarette black markets' in Europe".[6] The following year, 2000, the same organisation concluded that: "The United Kingdom is still the focal black market in Europe followed by Germany".[7]

Also in 2000, a new report from HM Customs and Excise confirmed that over half the cigarettes seized in the UK were brands manufactured by Imperial Tobacco. The report confirmed that half the cigarettes seized were Regal and Superkings – both made by Imperial.[2] Whereas the average return rate for a cigarette made in the UK was 16 per cent; the return rate for Regal and Superkings, two of Imperial brands, was 65 per cent.[8]

At the time, Imperial maintained it was doing everything it could to stamp out smuggling. “What we are doing is legal, but the law is being broken at some point,” says Imperial’s spokesman Paul Sadler. “We have thought long and hard about smuggling within the company, and we don’t believe there is anything more that we can do”.[5]

Also see:

Anti-Smuggling Agreements with the Authorities

In April 2002, in the first agreement of its kind, HM Customs and Excise signed a Memorandum of Understanding (MoU) with Gallaher. The agreement was designed to cement cooperation in tackling tobacco smuggling into the UK, and was subsequently updated in 2006. [9] [10]

Just over a year later, in July 2003, Imperial Tobacco also signed a Memorandum of Understanding with HM Revenue and Customs "formalising jointly developed protocols to combat the smuggling and counterfeiting of tobacco products" [11], which was also updated in 2006.[12]

The following year, the European Commission and 26 participating Member States of the European Union signed a multi-year agreement with Japan Tobacco International, which had taken over Gallaher, that included an "efficient system to fight against future cigarette smuggling and counterfeiting." [13]

TobaccoTactics Resources

  • This page is part of the historical section of Tobacco Smuggling, which also includes:

TCRG Research

Visit Tobacco Control Research Group: Peer-Reviewed Research for a full list of our journal articles of tobacco industry influence on health policy.

TCRG Blogs


  1. T. P. Connolly, Fax to the Money Programme, 7 October 1998,
  2. 2.0 2.1 A. Rowell, "Anti-Tobacco Smuggling Campaign Vindicated", The Big Issue South West, 15 - 21 January 2001
  3. HM Customs and Excise, Tackling Indirect Tax Fraud, November 2001
  4. Select Committee on Public Accounts, Supplementary Memorandum Submitted by HM Customs and Excise, 2002-3, Appendix 3
  5. 5.0 5.1 5.2 5.3 5.4 A. Rowell, R. Cookson, "No Smoke Without Fire", The Big Issue South West, 2 - 8 October 2000
  6. World Customs Organisation, Regional Intelligence Liaison Office for Western Europe, Zollkriminalamt, Project Lasso - Review 1999 - Cigarette Smuggling in Europe
  7. World Customs Organisation, Regional Intelligence Liaison Office for Western Europe, Zollkriminalamt, Lasso 2000 - Review on Cigarette Smuggling in Europe
  8. Select Committee on Public Accounts, Supplementary Memorandum Submitted by HM Customs and Excise, 2002-3, Appendix 3
  9. HM Revenue and Customs, Gallaher - First Tobacco Manufacturer To Sign Customs Memorandum To Tackle Fraud, 23 April 2002
  10. Gallaher, Memorandum of Understanding Between HM Revenue and Customs and Gallaher, March 2006
  11. Memorandum of Understanding Between HM Customs & Excise and Imperial Tobacco Limited, 14 July 2003
  12. Memorandum of Understanding Between HM Customs & Excise and Imperial Tobacco Limited, 1 March 2006
  13. Europa, European Commission and JT International (Japan Tobacco) sign 15-year Agreement to combat contraband and counterfeit cigarettes, Brussels, 14 December 2007