Customs busts reveal cigarette scam
The arrests of three people, including two airline employees, in connection with smuggling cigarettes into Grand Cayman this month revealed just a small part of a massive problem that some local business owners say they’ve known about for years, but which authorities have done little to combat.
Essentially, people are evading import duty by sneaking otherwise taxable items like cigarettes and alcohol past airport customs officers.
“We are aware that there’s a growing trend of smuggling involving duty-free cigarettes, and we have identified the varying techniques used,” Acting Customs Collector Samantha Bennett said this week. “These cigarettes will eventually end up on the black market, but we will make every effort to stop those criminals who seek to make money from smuggling of goods, whether the goods are legal or illegal.”
In the specific case, a three-day operation by customs led to the arrests of two airline employees, a 21-year-old woman and a 26-year-old man. Later on, a 35-year-old woman was arrested upon arrival in Grand Cayman.
The items involved were seven cartons of duty-free cigarettes. The three have been arrested and released on bail, but “charges were anticipated,” Ms. Bennett said.
The collector said it was likely the three individuals would face fines upon conviction and that it was a concern that public sector employees had been revealed as participants in these activities. “They’re people in an area of trust,” she said.
According to local business owners, this bust is not the first time illegal attempts to avoid paying duty on cigarettes or other products have been made.
“The smuggling is major. The duty on a carton of cigarettes is $42, so that’s why they’re smuggling in the cigarettes,” Reflections Liquor-4-Less owner Prentice Panton said. “You could make more money smuggling cigarettes than smuggling marijuana.”
The lost duty on seven cartons smuggled in during the recent customs case amounts to $294.
David Dibben of CEL Distributors in Cayman believes his company has missed out on major cash in recent years due to the smuggling of alcohol and cigarettes.
“It’s a huge, huge loss of sales because of this,” Mr. Dibben said. “It’s not only smuggling, we’ve had to enforce trademarks to go and seize stuff from people. You don’t know exactly how it affects your business, you can only go from where your high point was to where you’ve seen your sales decline … in the last three years.”
In recent years, Mr. Dibben said, companies have become more savvy, falsifying invoices for products they did not pay duty on. He lauded the customs department and Ms. Bennett for taking steps to finally address the issue.
“There was no enforcement basically [in the past],” he said. “[Companies] that falsify invoices should be held accountable as well.”
Robert Hamaty of Tortuga Rum Company Ltd. said he had been made aware of situations where duty-free products purchased at Owen Roberts International Airport never left the jurisdiction and were simply handed to someone outside the airport to take back into Grand Cayman.
He said Tortuga’s duty-free store at the airport sells a carton of cigarettes for US$39.50. No duty is charged on a carton that leaves the island, but if the carton is secretly kept in Cayman, it would then avoid the CI$42 duty normally charged.
Mr. Panton said he’d heard of other methods of smuggling where suitcases holding 50 cartons of cigarettes were flown in and left on the airport floor, somehow making it into the parking lot without being charged duty. One such case is worth $2,100 in duty.
Current prices for cigarettes in Cayman range from the “lowest” end, about CI$7.25 per pack to more than CI$10 per pack. Both Mr. Panton and Mr. Dibben agreed the high prices, brought on by increases in duty, has created something of a “black market” for smugglers.
“When they put the duty up … it breeds crime,” Mr. Panton said. “It’s liquor as well, you know [that gets smuggled].”
Chamber of Commerce President Johann Moxam said Mr. Dibben recently spoke with Chamber council members at length regarding smuggling issues about which Mr. Moxam said he was gravely concerned.
“The Chamber has received complaints from its members and we are in the process of gathering all the relevant facts and we hope to get a meeting with Samantha [Bennett] and also with the ministry responsible for enforcing relevant laws,” Mr. Moxam said.
“The black market that is developing in Cayman and the lack of enforcement negatively impacts the business community and the wider community … and it is an area that we would encourage the government to look at. We congratulate the government on their operations and efforts thus far.”