Hike in prices a boon to black market cigarettes

A group of seniors were sitting at the corner park near Sinseol-dong station in Dongdaemun District, eastern Seoul, drinking and smoking on Tuesday morning. The cigarettes were withdrawn from a plastic bag with “duty free” stamped on it.

When asked where they got the cigarettes, the seniors pointed across the road to Pungmul market. Upon arrival to the market, a JoongAng Ilbo reporter asked merchants where to get duty-free cigarettes. The merchants led the way to a health-food store selling vitamins and health products. There was no indication that the store sold cigarettes.

When asked for duty-free cigarettes, the counter clerk looked around and then pulled out a cardboard box from under a table. It contained about 40 cartons of Esse cigarettes.

“22,000 won ($21.50),” said the clerk, putting a carton of 10 cigarette packs in a black plastic bag. With each pack costing 2,200 won, that is 300 won cheaper than the regular market price.

The clerk said the cigarettes are delivered by runners from stores on the American army bases. The store buys cartons for 19,000 won each.

“The smugglers deliver cigarettes not only to us and but to two other markets in Seoul,” the clerk said. “It’s been difficult to get stocks since the government raised cigarette prices. I used to sell a carton of cigarettes for 20,000 won, but now I raised the price.”

Although the retailer knows the sales are illegal, he said it was hard to quit because he has many regular customers.

“We don’t necessarily crack down on illegal cigarettes for now,” said an official of Dongdaemun police department. “But we will set an investigation plan soon.”

The city and district governments are in charge of countering the illegal trade in cigarettes in Seoul.

“We report illegal cigarette trade to the police if we receive civil complaints,” said a city hall official. “But we don’t implement any regulations ourselves.”

The illegal cigarette trade last year multiplied by 13 compared to the previous year, reaching 43.7 billion won. This year, the amount has reached 66.4 billion won through July. From 2010 to August of this year, 79.8 billion won in tax revenues have been lost, according to a report from the Korea Customs Service received by Rep. Park Maeng-woo.

Black market cigarettes come from American army bases or leak in through airports and seaports.

“Retailers take advantage of the weak surveillance of cars coming out of American army bases,” said Yang Yeong-gu, head of the international criminal investigation department at the Seoul Metropolitan Police Agency.

“Once the price of cigarettes goes up, the black market swells as cheaper cigarettes are smuggled in from Southeast Asia,” said Choi Bi-o, policy chief of the Cigarette Consumer Protection Association. “In the case of Australia, the black market in illegal cigarettes has taken 20 percent of the total consumed cigarettes since the price on cigarettes was raised in 2010.”

“The Korea Customs Service will have to come up with ways to eradicate the illegal cigarette trade cooperating with the police, prosecutors and local governments,” said Rep. Park Maeng-woo.

BY JANG HYEOK-JIN [ypc3c@joongang.co.kr]