Nothing positive about tobacco farming

EACH year Malaysia spends an average RM20bil to treat tobacco-related illnesses, with an estimated RM4bil channelled for lung cancer, heart and chronic obstructive airway disease treatment. The staggering figure represents almost 10-fold compared with a mere RM2.5bil tax revenue collected from the local tobacco industry itself. The revenue gap is far too wide especially when the healthcare cost outstrips any economic gain from tobacco corporate taxes.

It is indeed ironic that this is happening when Malaysia has never been a large tobacco leaf producer by world standard and tobacco has never been a major contributor to the country's economy. Therefore, recent moves by the Government to phase out such a disadvantaged tobacco farming sector in Malaysia seems to be the right path to take. Back in 2010, the three-decade-old Malaysia Tobacco Board was dissolved and replaced with Malaysia Kenaf and Tobacco Board with the focus on kenaf to be the alternative cash crop for tobacco growers.

Also, with the Asean Free Trade Area (AFTA) taking effect the same year, domestic tobacco growers were finding it less viable and uncompetitive compared with their lower-cost peers from Thailand, Indonesia, Vietnam and the Philippines. Conditions took a turn for the worse among local tobacco farmers, especially in major growing areas in Kelantan, Terengganu, Kedah and Perlis when the Government decided to terminate subsidies on tobacco farming to comply with AFTA and the World Health Organisation regulations.

In the late 1990s, Kelantan as the main tobacco growing state produced an estimated nine million kg of tobacco, followed by Terengganu with about 3.2 million kg, Kedah 1.1 million kg and Perlis 1 million kg. At the same time, the estimated RM6.4bil tobacco industry in Malaysia is also seeing a decline in business mainly due to contraband cigarettes, including smuggled “kretek', duty-unpaid and “counterfeit” cigarettes. Hence, given such negative developments engulfing the traditional tobacco growers, the Government is now urging them to switch to food-based crops that may support the country's food production in the advent of a global food crisis.

But this time round, there needs to be a stricter enforcement unlike the previous futile attempts to swap tobacco with other cash crops, which do not really have high commercial gains. Towards this, the Malaysian Agriculture and Research Develop-ment Institute (Mardi), which previously is closely associated with rubber, had started introducing new high-yielding and good-quality agriculture cash crops such as sweet potato, groundnuts, sweet corn, roselle, watermelon and sweet pumpkin to become the alternative lucrative crops to replace tobacco.

For example, Vitato which is a new variety sweet potato developed by Mardi has managed to attract the interests among many tobacco farmers in Kelantan and Terengganu given its high yield of about 40 tonnes per ha, good commercial value and versatility to be processed into flour as well as beauty products. In fact, a RM5mil Vitato processing plant in Besut, Terengganu, will commence production next year and plans are afoot for the plant to source raw materials from farmers in the surrounding areas to ensure no disruption in supply.

Roll-Your-Own Cigarette Shop Operations Halted

Just when Port's Smoke Shack owner Corey Judson thought all would return to normal with his Roll-Your-Own cigarette shop, a court decision again put the brakes on his operation. After getting word on Aug. 17 that pending legal action would allow him to operate without manufacturers' license — a requirement created under a law passed in July as part of the federal transportation bill, one that RYO stores hired attorneys and created a petition to overturn — Judson said he had his store ready to start operating RYO machines by Aug. 20. But on Aug. 20, Judson learned that the U.S. Sixth Circuit Court of Appeals ruled on a different case from 2010 that again classified RYO cigarette shops as manufacturers, and that he would now have until Aug. 27 to stop operating his machines without that license.

"We find that the Highway Act mooted the underlying controversy with regard to roll-your-own tobacco," judges wrote in their ruling. Requiring RYO cigarette shops to have manufacturer licensing means they are required to pay the same taxes and obtain the same permits as big-name tobacco manufacturers to continue allowing customers to use rolling machines on the premises. Judson said that means the carton of 200 self-rolled cigarettes that did cost $33.50 would have a $22.50 tax applied to it. Judson said a group of RYO stores in Wisconsin planned to have a conference call with attorneys Monday afternoon to make a plan to continue fighting the change.

The first time Judson's operations were halted, he came up with a temporary means to helping his business survive: selling RYO machines for $85 each that people can use in their homes; in the first week of that plan, he sold out of his six machines. He also sells roll-your-own supplies, candles and a few other miscellaneous items.

EU Probes Cigarette Deal That May Have Aided Syria

The European Union is investigating whether its Syrian sanctions were violated by the sale of cigarettes to a firm linked to cousins of Syrian President Bashar al-Assad, according to corporate documents seen by The Wall Street Journal. The sale by a Switzerland-based unit of Japan Tobacco Inc. 2914.TO +0.30% in May 2011 went to a firm then at least partly owned by the Makhlouf family, according to the documents. The Makhloufs, first cousins of Mr. Assad, are helping finance his bloody crackdown on the Syrian uprising, according to both the U.S. and the EU. Syrian dissidents said this sale and a larger one involving millions of cartons to the Syrian state tobacco company provided the regime with a cash infusion at a time of growing economic isolation, because the cigarettes could be resold for much more than they cost.

The dissidents added that the Assad government uses cigarettes as a form of payment for the irregular military forces and militias, known as the shabeeha, who have had a central role in its violent crackdown. "Cigarettes are a favorite form of payment for the shabeeha," said Ammar Abdulhamid, a Syrian dissident and human-rights activist based in Washington. Businessman Rami Makhlouf is the scion of the family and widely regarded as Syria's richest man. The EU placed financial sanctions on him, as well as on his brothers Iyad and Ihab, on May 23, 2011, for their alleged role in helping to finance Mr. Assad's actions.

Four days later, the corporate documents show, Japan Tobacco International SA, or JTI, delivered 450,000 cartons of cigarettes through a Cyprus-based distributor to a firm called Syria Duty Free Shops Ltd. that JTI acknowledges was then at least partly Makhlouf-owned. The EU's antifraud office, OLAF, confirmed it is investigating the business of JTI, which is based in Geneva, but declined to provide any details. Guy Côté, a spokesman for JTI, said it strictly adheres to all EU sanctions and is cooperating with the investigation. "We have not processed any sales to Syria Duty Free since May 19, 2011," he said. This would have been four days before the EU imposed sanctions on the Makhloufs. Mr. Côté said that the EU has never banned trade with Syria Duty Free Shops itself, and that Rami Makhlouf was removed from the list of that firm's owners in 2008.

Mr. Côté confirmed that Syria Duty Free Shops documents showed that one Makhlouf brother, Ihab, was among its owners last year. "After the arrival of that single shipment, we learned that one of the owners was on the sanctions list," Mr. Côté said. He said JTI stopped all cigarette sales to anyone in Syria this past February. Syria Duty Free Shops has subsequently been sold to a Kuwaiti company, according to Arab media reports. JTI parent Japan Tobacco Inc. is 50%-owned by the Japanese government. An official at the Japanese Foreign Ministry's Middle East section said that "we are not aware of" an EU investigation or JTI's cigarette shipments to Syria.

A Syrian embassy spokeswoman in Washington declined to comment. Attempts to reach Rami Makhlouf were unsuccessful. Japan has imposed its own Syrian sanctions. It placed sanctions on Rami Makhlouf and his father in the second half of 2011. U.S. and EU sanctions against Syria focus especially on energy and finance. The Journal reported last week that the Syrian regime had laid plans to use Russian banks as part of an effort to avoid these sanctions and export some of its oil to raise hard currency. Russia and China have blocked attempts at the United Nations Security Council to pass similar international sanctions.

Some fighters in the rebel Free Syrian Army also are paid in cigarettes. "If you can't provide your people with cigarettes, they won't stay with you," said Louay Sakka of the Syrian Support Group, which lobbies for the Free Syrian Army. On the same day in May 2011 when JTI cigarettes were delivered to the Makhlouf-linked company at the Syrian port of Latakia, JTI delivered 4.2 million cartons of Winstons to Syria's state-owned tobacco company, General Organization of Tobacco, or GOT, according to the documents seen by the Journal. GOT wasn't on the EU's sanctions list at the time; it has since been added. GOT paid roughly 24 cents a pack—an average reduced by some 160,000 10-pack cartons of Winstons provided free to the state company—according to the documents, which JTI didn't dispute.

Greek study finds e-cigarettes no threat to heart

Electronic cigarettes, an increasingly popular option among smokers trying to quit, do not appear to pose a threat to the heart, according to results of a clinical study presented on Saturday. Greek researchers said e-cigarettes - battery-powered metal tubes that transform liquid laced with nicotine into vapour - had no adverse effects on cardiac function in their small trial.

"Electronic cigarettes are not a healthy habit but they are a safer alternative to tobacco cigarettes," Dr Konstantinos Farsalinos from the Onassis Cardiac Surgery Center in Athens told the annual meeting of the European Society of Cardiology. "Considering the extreme hazards associated with cigarette smoking, currently available data suggest that electronic cigarettes are far less harmful and substituting tobacco with electronic cigarettes may be beneficial to health." Farsalinos and his team examined the heart function of 20 young smokers before and after smoking one tobacco cigarette against that of 22 e-cigarette users before and after using the device for seven minutes.

While the tobacco smokers suffered significant heart dysfunction, including raised blood pressure and heart rate, those using e-cigarettes had only a slight elevation in pressure. The Greek clinical study was the first in the world to look at the cardiac effects of e-cigarettes. Another small study, also in Greece, reported earlier this year the devices had little impact on lung function. Farsalinos acknowledged bigger studies were still needed to examine the possible long-term effects of e-cigarettes, while other doctors attending the medical meeting in Munich were cautious about giving them a clean bill of health just yet.

"Obviously, the e-cigarette has the advantage of not having the thousands of other chemicals, besides nicotine, that a real cigarette has," said Dr Russell Luepker of the University of Minnesota. "I don't think it's conclusive but there's no doubt if you expose someone to fewer bioactive chemical compounds there is going to be less effect." E-cigarettes were first made in China in 2003 but are now sold around the world and used by millions of people.

Tobacco Companies Broke Law by Selling Untaxed Cigarettes

A federal judge ruled last week that two tobacco wholesalers illegally skirted paying millions of dollars in taxes by selling truckloads of untaxed cigarettes to retailers on an American Indian reservation on Long Island, which then resold them in the city at cut-rate prices. The judgment, which could cost the wholesalers up to $15 million in penalties, was the latest victory in a battle that the city and state have waged for years to collect taxes on cigarettes sold by Indian-owned businesses to non-Indians.

The city has argued that the availability of cheaper cigarettes is a public health concern because taxes were in part a way to discourage smoking. Cigarette tax stamps are $43.50 per carton in New York; thus, a pack of cigarettes — about $12 to $14 — includes $4.35 in taxes. Federal law prohibits wholesalers from selling large quantities of cigarettes without paying state or local taxes on the goods. Wholesalers selling to Indian retailers are exempt from paying the tax if the cigarettes are resold only to other Indians. In 2006, the city sued three wholesalers — which buy the cigarettes from the manufacturer and resell them to retailers — for violating the law.

One of those, a Long Island company, Mauro Pennisi, sold more than 11 million cartons of unstamped cigarettes to Indian retailers from May 2008 to January 2011, mostly on the Poospatuck Reservation, where fewer than 500 people live, according to the written opinion of Judge Carol B. Amon of the Eastern District of New York. A Queens company, Gutlove & Shirvint, sold more than 10 million cartons during that period to the same tribe, including nearly 400,000 in one month alone. (The city estimated that the tribe’s average demand for one month would be 270 cartons.)

After the lawsuit was filed, the defendants voluntarily stopped selling to the Indian retailers, a move that took place not long after new state legislation clarified the circumstances under which cigarettes sold on Indian reservations were exempt from taxes. But Judge Amon ruled that the companies should have stopped selling long before. “The vast majority, if not all, of the unstamped cigarettes the defendants sold to reservation retailers were resold to and consumed by non-Native Americans,” Judge Amon wrote in her decision. “Any reasonable wholesaler would have been well aware of that fact.”

The judge found that the city did not prove its case against a third company, Day Wholesale. The companies’ lawyers did not return calls seeking comment. “This decision demonstrates the strong legal basis for the city’s efforts to curb illegal tobacco sales,” Michael A. Cardozo, head of the city’s Law Department, said in a statement released on Wednesday.

Cigarette makers win label challenge

The federal government can't require tobacco companies to put large graphic health warnings on cigarette packages to show that smoking can disfigure and even kill people, a divided federal appeals court panel ruled Friday. In a 2-1 decision, the U.S. Court of Appeals in Washington affirmed a lower court ruling that the requirement ran afoul of the First Amendment's free speech protections. The appeals court tossed out the requirement and told the Food and Drug Administration to go back to the drawing board. The decision is considered a blow to one of the Obama administration's major public health initiatives, raises the prospect of another U.S. Supreme Court tobacco battle and opens the door to further challenges of FDA's regulatory scheme. Some of the nation's largest tobacco companies, including R.J. Reynolds Tobacco Co., sued to block the mandate to include warnings to show the dangers of smoking and encourage smokers to quit lighting up. They argued that the proposed warnings went beyond factual information into anti-smoking advocacy. The government argued the photos of dead and diseased smokers are factual in conveying the dangers of tobacco, which is responsible for about 443,000 deaths in the U.S. a year. The nine graphic warnings proposed by the FDA include color images of a man exhaling cigarette smoke through a tracheotomy hole in his throat, and a plume of cigarette smoke enveloping an infant receiving a mother's kiss. These are accompanied by language that says smoking causes cancer and can harm fetuses. The warnings were to cover the entire top half of cigarette packs, front and back, and include the phone number for a stop-smoking hotline, 1-800-QUIT-NOW. In the majority opinion, the appeals court wrote that the case raises "novel questions about the scope of the government's authority to force the manufacturer of a product to go beyond making purely factual and accurate commercial disclosures and undermine its own economic interest — in this case, by making 'every single pack of cigarettes in the country (a) mini billboard' for the government's anti-smoking message."

EU considering cigarette logo ban to deter smoking

The European Union is considering banning logos on cigarette packs as part of an upcoming review of its law to deter smoking, a spokesman said on Thursday, a day after Australia's highest court upheld a similar ban. The Australian court dismissed a legal challenge to the government's ban, in a case filed by British American Tobacco , Britain's Imperial Tobacco, Philip Morris and Japan Tobacco. The ruling means that starting in December, all cigarette packs sold in Australia will brandish plain olive packaging.

The EU will publish a draft revision to its 2001 Tobacco Products Directive in the fall, and may introduce more stringent rules on packaging as well as extend legislation to newer tobacco products such as electronic cigarettes. "Many things are being discussed, including the possibility of plain packaging," Antonio Gravili, a spokesperson for the European Commission, told a news briefing. Printing larger graphic images on cigarette packs of the diseases linked to smoking is another option, Gravili said. The World Health Organisation (WHO) says smoking is "one of the biggest public health threats the world has ever faced". Smoking causes lung cancer, which is often fatal, as well as other chronic respiratory diseases.

It is also a major risk factor for heart diseases, the world's number one killers. The WHO predicts smoking could kill 8 million people every year by 2030 if governments don't take more action to help people quit. The EU's 2001 Directive required all member states to ensure that cigarette packs carry text health warnings and in 2005 the Commission recommended a series of graphic images to illustrate health risks. Most EU countries have since adopted these pictures. Once the directive's revision is completed, it will need the approval of the EU's 27 countries and over 700 members of the European Parliament before it can become law.

Anti-smoking lobbies in Brussels say plain packaging could prevent the young from getting hooked because a cigarette brand can become a badge in the same way that sports shoes and mobile phones can. Tobacco firms say a packaging ban would infringe on their intellectual-property rights and boost sales of fake or illegally imported cigarettes. In the EU, Britain has worked the most to make plain packaging national law. The British government finished a four-month consultation on plain packaging last week. It is expected to make a decision on whether to push ahead with legislation this year.

A lawyer who advises companies on the draft legislation said companies could oppose the ban on grounds that it prevents free trade because manufacturers outside Britain would have to change packaging for the British market. "If there was a European-wide initiative on plain packaging then this would reduce the scope of a challenge," said lawyer Paul Medlicott at law firm Addleshaw Goddard. Figures from the Global Tobacco Surveillance System, a group set up by the WHO and the U.S. Centers for Disease Control, show that Europe has the world's highest rate of smokers aged 13-15.