doodledee

Interesting case in the Supreme Court today. Canada tried to sue R.J. Reynolds for $1B in lost tax revenue as a result of cigarettes being smuggled into Canada.
From AP story:

Canada's lawsuit alleged that R.J. Reynolds and related companies set up an elaborate network of smugglers to flood Canada with black market cigarettes after the government doubled taxes on tobacco in 1991. Authorities said the ring smuggled $687 million worth of cigarettes and alcohol into Canada from 1991 to 1997 through the St. Regis Mohawk Reservation that straddles the Canada-New York border.

I was surprised by this case for two reasons.

First, I was surprised that Canada was suing an American company in an American court. Why not just sue them in Canadian court? After doing some reading, I guess I still don't quite understand their reasons, but the fact that they did is more or less the basis for the Supreme Court rejecting the case. Apparently there's some really old law - literally from like the 16th century - that says it's illegal for a US court to assist a foreign country in collecting their taxes. In this case, the Supreme Court wasn't even sure if that was a valid law anymore, so they asked the White House to weigh-in on the issue. I gotta believe they knew the answer to that one before they asked.

Secondly, I was surprised to hear that cigarette smuggling was such a big deal. Turns out it's a way, way bigger deal than I thought. There are huge smuggling rings that operate domestically and all over the world.

An organization was recently broken-up that bought cigarettes in North Carolina, where taxes are low, and drove them to Michigan, where taxes are high. They were pulling in $10,000/week and sending the profits to Hammas. Who knew?

Internationally, estimates are that as many as one third of all cigarettes exported from the United States end up on the black market. That's like 300B cigarettes/year. The EU is suing RJR - again, in US Courts (huh?) - only they're claiming that Saddam Hussein is making tons of money off illegal smokes. That's one way to get attention in Washington, I guess.

The ugliest part is the allegation that cigarette companies aren't just aware of the problem, they're involved in it. And what's worse, they admit it, they support it, they rely on it, they depend on it. It's just gross.