Hennessy Cognac comparison

 A picture depicting an authentic and authorized bottle of Hennessy Cognac for retail purposes versus a nonconformance bottle which is smuggled into the country.

“Illicit trade continues to deprive local businesses of sales, and every sale counts to keep law abiding people employed and shops open.

Illegal sales of alcohol also deprive the country of state funds that support our schools, hospitals, pensions, roads and jobs.

Products sold illegally are not checked or regulated are a serious health risks to consumers. Illicit trade affects all consumer goods and products such as clothes, makeup, alcohol, cigarettes, pharmaceuticals, fashion jewelry, food etc.

This requires a collaborative effort with public and private sectors addressing the issue with key law enforcement authorities to develop methods to deal with the scourge of illicit trade.”

As much as twenty percent of key brands of imported scotch, vodka and cognac are likely to be smuggled into the shores of Trinidad and Tobago through illicit means.

This is based on a 2014 study produced by global research centre Euromonitor International. According to the study, illicit alcoholic beverages are defined as those not complying with the regulations and taxes in the countries where they are consumed, resulting in revenue loss, and brand degradation for legitimate manufacturers, as well as reduced tax revenue for governments.

In many countries, consumers do not consider buying illicit alcohol to be a serious crime, as they perceive these purchases to be “good deals”. In Trinidad and Tobago, it was found that the majority of illicit alcohol is sold and bought during the Christmas period through formal channels such as supermarkets, wholesale distributors, liquor stores and shops.

Nicholas Hospedales, Director of Premium Beverages at A.S. Bryden & Sons acknowledged the severity of the issue and said all genuine products such as Johnnie Walker Scotch Whisky, Black & White Scotch Whisky, Absolut Vodka and Hennessy Cognac contain manufacturer codes to ensure quality, or if needed, to make a recall, but illicit traders remove product codes before it arrives into the country, making the shipment untraceable. He said, “The products are sourced through the grey market where operators remove the product codes, and it is then smuggled through duty-free ports like Panama, St. Maarten or Curacao, and sold in supermarkets and so on.” He noted two years ago a local supermarket brought in cases of Johnnie Walker Black and Hennessy to sell, but the manufacturers’ codes had been removed. The removal of the codes meant that the product labels did not meet the standards of the Chemistry, Food & Drug Division of the Ministry of Health and the products were removed from the shelves.

In another example, Mr. Hospedales said several years ago the home of a Port of Spain merchant was raided and in their search police officers found huge quantities of contraband liquor.

The owner was arrested and fined TT$10,000 and banned from obtaining a license, “The owner could no longer sell alcohol, so what did he do? He applied for a liquor license under a family member’s name and operated as normal from thereon.”

He said this is “a slap on the wrist” for the illicit trader and unfair to legitimate businesses everywhere.

The effects of illicit trade on the alcohol industry in Trinidad and Tobago has been debilitating, Hospedales noted, and it has not only affected profit margins, but advertising, sponsorship, and promotions. He said, “All the work we have done to make our brands (like JWB) what they are, is being fully undermined. The impact on the country is significant as a result of lost tax revenue. In 2014, EuroMonitor International estimated the losses to be approximately US $8.6 million in Trinidad and Tobago, however that was before our local tax increase in 2016 so now it is probably significantly higher.”

Mr. Hospedales, who has over 14 years of experience in the local alcohol distribution market, says now is the time to generate meaningful conversations with agencies such as the VAT Office, Board of Inland Revenue, Police Service, Customs and Excise Division, Chemistry Food & Drug Division in order to form a cohesive approach in tackling the scourge of illicit trade. He is suggesting four approaches – 1) reassess the duty structure, 2) review the internal processes of the Customs and Excise Division to ensure the containers are correctly screened and the associated consignees are red flagged, 3) revision of the laws to ensure the penalty matches the crime and 4) ensure enforcement of the existing laws and officers are trained to distinguish contraband from genuine goods. Mr. Hospedales said this surmountable task which could be done possibly through the establishment of a Revenue Authority.

Agreeing with the statement that increased cohesiveness is needed amongst state agencies, Darrin Carmichael, Board Director of Crime Stoppers Trinidad and Tobago said, “Our collective goal must be to reduce illicit trade by making it harder – denying traffickers access to transportation, putting up barriers to their illegal activities, and holding people and businesses accountable for their actions, and those who look the other way, or spend the illicit proceeds of these crimes, must be held to account.”

According to Mr. Carmichael, one of the most pervasive forms of corruption and criminality in the world is illicit trade. He stated, “To us here in Trinidad and Tobago, illicit trade strikes at the heart of our national security with our vulnerability with our open coastline. It recognizes neither national borders nor national interests, distorts economic development by depriving our country of duties and taxes.”

One of the mandates of Crime Stoppers Trinidad and Tobago is to increase awareness of illicit trade and encourage members of the public to give information anonymously. To this end, a stakeholders’ group has been established comprising importers, exporters, suppliers, and businesses. This group will be supported by an operational joint taskforce comprising the Trinidad and Tobago Manufacturers Association, and members, the Trinidad & Tobago Bureau of Standards, Intellectual Property Office, Crime Stoppers Trinidad and Tobago, Customs and Excise Division and the Trinidad and Tobago Police Service which is headed by Deputy Commissioner of Police Jayson Forde. Mr. Carmichael noted that while the work of the joint task force may have been impeded due to the COVID-19 pandemic, businesses recognized that illicit traders used this opportunity to intensify their activities by adopting illicit imports and taking advantage of the crisis. He said it ranged from selling inferior/substandard face masks, PPE wear and pharmaceuticals and is testimony to how ruthless these criminals can be.

Once the task force is up and running, Carmichael said it will draw on existing information, identify gaps in knowledge, and commission research and actions to plug the gaps. It will also call on companies to implement a “zero tolerance” policy towards illicit trade.

Globally of the 42.3 million HL LAE (hectolitres of alcohol equivalent) of total alcohol consumed each year, approximately 25.8% is illicit. In other words, nearly 10.9 million HL LAE of illicit alcohol is consumed annually in 24 countries including Latin America, the Caribbean, Africa and Eastern Europe.

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