License to operate - why tobacco needs to embrace better regulation

The effect illicit trade has on the tobacco industry is just the tip of the iceberg. It funds organized crime and terrorism, deprives public authorities of tax revenues, and misleads consumers. Everyone is affected by this scourge.

There are, nonetheless, many ways to fight back; one part of the solution is effective licencing regimes. The efficacy of licensing regimes is not widely known, but is as important as other anti-illicit trade tactics.

But what does licensing really mean? And how can it help fight illicit trade?

Simply put, it would mean that everyone who manufactures, exports, or imports tobacco and tobacco manufacturing equipment would not be able to operate unless they comply with the licensing regime’s requirements. Such entities would have to be able to provide details of any tobacco products and manufacturing equipment they use, and give multiple other information about the products they manufacture, import or export, be it tobacco products or the manufacturing equipment.

But it’s not just about information. It’s also about action.

More specifically, there must be an expectation and a sense of urgency from anyone holding a license to proactively work with authorities. License holders have a big role to play when it comes to preventing illicit trade, and they are also the ones who have the right to expect the same level of compliance from their business partners. This has been the way PMI operates.

We believe that proportionate licensing regimes help further the goal of doing what is right. For example, the scope of a licensing scheme for machinery should be carefully tailored, as cigarette-producing machines have up to 20,000 parts; it is simply not feasible to require a license for every individual part.

PMI is not alone in calling for this type of licensing regime. For starters, it’s an article in the recently adopted WHO FCTC Protocol to Eliminate Illicit Trade in Tobacco Products. It was a subject consulted on by the UK’s Customs agency, HMRC, in 2016 with a conclusion that a licensing scheme for tobacco manufacturing machinery should only cover machinery. This point ended up being reflected in the legislation The Tobacco Products Manufacturing Machinery (Licensing Scheme) Regulations 2018 which came into force in the UK in 2018.

Countries should consult on matters that are as important to the business as licensing. Cooperation with legitimate industries has proven to be the most effective way of fighting illicit trade, and we encourage all interested parties to reach out to PMI and other companies from the tobacco supply chain.

For more details on why PMI believes licensing is an important tool in fighting the illicit trade and how we believe it should be implemented, please read our corresponding position paper.