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MEP poses tax-harmonization question

| April 14, 2014

The European Commission has been asked whether it intends in the near future to propose the harmonization of excise duties on tobacco products within the union, so as to combat tax tourism.

In a preamble to a number of questions, French MEP Marie-Thérèse Sanchez-Schmid said that on March 14, 2013, the European Court of Justice ruled that France, by imposing strict quotas on purchases of cigarettes originating in other EU member states, had failed to comply with the rules on the free movement of goods within the countries of the EU. “The French National Assembly subsequently amended the tax code in relation to these quotas in December 2013,” she said.

“Consequently, since 1 January 2014, individuals have been permitted to bring 10 cartons of cigarettes and 1,000 cigars originating in another EU member state into France. The regulations also allow these new quotas to be applied to cars with five occupants, i.e., up to 50 cartons (10,000 cigarettes) and 5,000 cigars per vehicle.

“This is a matter of great concern for tobacconists in border regions: Cross-border purchases already account for between 15 percent and 20 percent of the French market. Every year some 500 million packs are smoked in France after having [been] purchased in Belgium, Spain, Italy or Luxembourg, the countries with the cheapest cigarettes in Europe.

“Purchases of this type correspond to an annual loss of some 2.5 billion euros in tax revenue.”

The MEP then went on to ask:

1. Does the Commission not believe that raising quotas to 10 cartons of cigarettes per person risks benefiting the black market above all else?

2. Could France reduce these quotas without infringing the ruling of the European Court of Justice, so that it may continue to fight against smoking and smuggling?

3. Does the Commission intend in the near future to propose a bill on harmonising excise duties on tobacco products in the Union in order to combat tax tourism?

The commission is due to answer these question in writing.

Korea’s state health insurer to sue tobacco firms over disease costs

| April 14, 2014

South Korea’s state health insurer said today it was going to court to seek an initial KRW53.7 billion ($51.9 million) from KT&G and the local units of Philip Morris and British American Tobacco to offset treatment costs for diseases linked to tobacco smoking, according to stories by Reuters and Arirang TV & Radio.

“We believe the NHIS [National Health Insurance Service], as it takes responsibility for the health of the public and oversees the insurance budget, has a natural duty to bring this tobacco lawsuit,” NHIS lawyer An Sun-young told reporters.

The damages sought were based on data about payments by state insurers for patients with three types of cancer associated with smoking, the NHIS added.

According to a story in the Korea Times at the end of January, the NHIS had decided to file a damages suit against KT&G and other tobacco companies seeking up to KRW333 billion. The decision was said to have been made to go ahead with the claim despite the fact that the Ministry of Health and Welfare opposed the suit.

But in late March, a story in The Korea Economic Daily said the NHIS was poised to launch its suit, but it mentioned only KT&G, not other tobacco companies, and the amount of compensation to be claimed was still to be determined—somewhere between KRW53.7 billion and KRW230.2 billion.

Meanwhile, the Ministry of Strategy & Finance has expressed doubts about the litigation. “Although fully in agreement with the principle, the National Health Insurance Service will have a hard time to prove criminal intent on the part of the tobacco company,” the ministry was quoted as saying.

Beijing to ban tobacco smoking—again

| April 14, 2014

A draft regulation published on Friday would ban public money being used in Beijing to buy tobacco products for gifts or public functions, according to the Xinhua News Agency quoting the city’s legal affairs office.

The draft regulation on smoking control, which has been put out for public comment, would prohibit also tobacco smoking in enclosed public places, tobacco advertising and promotions, and sales from vending machines.

It is not known when the new regulations are due to be put into effect.

Xinhua noted that tobacco smoking is banned already in enclosed public places through a 2011 regulation whose enforcement is said to have been “very poor.”

EU Commission watching waterpipe use

| April 14, 2014

The EU Commission is monitoring the use of waterpipes within member states and, under the new Tobacco Products Directive, will be able to apply stricter ingredient regulations to waterpipe tobacco should there be a substantial increase in sales of this product or in its use among young people.

This was part of an answer given by the commission in response to questions from Sergio Paolo Francesco Silvestristo, an Italian member of the European Parliament.

“The nargile, also known as the tobacco water pipe, is often thought less dangerous to smoke than cigarettes,” the MEP said in a preamble to his questions. “But a study by a Mexican university has found the opposite: that the nargile poses the same risks as any other method of consuming tobacco.

“The urine of daily nargile users was found to contain nicotine metabolite levels equivalent to those in people who smoke 10 cigarettes a day, a sufficient quantity to cause addiction. Likewise nargile use influences the development of the same tumours and breathing disorders as those caused by cigarettes, with the added risk of transmission of herpes and hepatitis C. There is also a risk of carbon monoxide poisoning, partly because the average time of use ranges from 20 to 80 minutes, a period in which a quantity of smoke equivalent to 100 cigarettes can be inhaled.”

Silvestristo then went on to ask: whether studies had been carried out in Europe on the consequences for human health of using the nargile; whether the commission held data on nargile use in member states; and whether there were campaigns to raise awareness about nargile use in Europe.

The commission replied that it was aware of the health consequences of waterpipe use as indicated in various scientific reviews and publications from health authorities, including the World Health Organization. “To ensure that consumers are aware of the health risks, all packages of waterpipe tobacco already today must carry text warnings,” it said in reply. “Studies on health effects have been carried out in particular in middle-East countries where the use of waterpipes has a long tradition. However, a rise in waterpipe use has also been observed in European countries including an increasing use among young people.

“This is why the revised Tobacco Products Directive which will enter into force in May has stronger provisions for these products,  including the mandatory use of large pictorial health warnings on packages and the possibility for a stricter ingredient regulation if there is a substantial increase in the sale of waterpipe tobacco or in its prevalence among young people.

“To monitor the use of waterpipes in the EU, the Commission included a question on this issue in the latest Eurobarometer survey on tobacco (2012). Furthermore, the revised Tobacco Products Directive foresees that the Commission reports on market developments and consumer preferences on waterpipe tobacco and its flavours within five years following transposition.

“While the Commission encourages Member States to inform consumers about the harmful effect of all tobacco products, it does not plan a targeted information campaign on waterpipes.”

Good growth in JT’s domestic sales

| April 14, 2014

Japan Tobacco Inc.’s domestic cigarette sales volume during March, at 12.7 billion, was increased by 30.1 percent on that of March 2013, 9.7 billion, according to preliminary figures issued by the company on Friday. The March 2013 figure was down by 3.6 percent on that of March 2012.

Volume during April 2013–March 2014, at 120.1 billion, was up by 3.3 percent on that of April 2012–March 2013, 116.2 billion, which was increased by 7.2 percent on that of April 2011–March 2012.

JT’s market share stood at 62.2 percent during March, at 61 percent during April 2013–March 2014, and at 59.6 percent for the full year to the end of March 2013.

JT’s domestic cigarette revenue during March, at ¥69.3billion, was increased by 29.6 percent from its March 2013 revenue, ¥53.4 billion.

Revenue during April 2013-March 2014, at ¥658.7 billion, was increased by 3.0 per cent on that of April 2012-March 2013, ¥639.5 billion.

Lorillard to host results conference call

| April 14, 2014

Lorillard is due to host a conference call for analysts and investors from 1 p.m. Eastern Time on April 24 following the release of its first quarter 2014 results.

The conference call will be hosted by chairman, president and CEO, Murray S. Kessler, and CFO and executive vice president, finance and planning, David H. Taylor.

The news release and a live webcast of the conference call will be available under the Investor Relations section of Lorillard’s website at

Investors will be able to access the conference call by dialing 888-239-6824 (domestic) or 706-902-3787 (international). The passcode for the event is 28927750.

The conference call will be available for replay in its entirety through May 1, either at Lorillard’s website or by dialing 855-859-2056 (domestic) or 404-537-3406 (international), and using the passcode 28927750.

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