30 Jun 2021
A traffic stop last year led officials in South Texas to a massive trove of illegal goods.
Not drugs, weapons or gems.
It was cigarettes. Cartons upon cartons of black market cigarettes for export.
An 80-year-old Mission man and two young associates were convicted and sentenced for trying to move the stash. The elder player in the scheme admitted he intended to smuggle nearly 423 million cigarettes through Texas into Mexico.
The case provides a glimpse into the operations of Chinese firms that are well on their way to taking over the global tobacco market.
Although cigarettes seem an unlikely product to smuggle — they’re legal in most places — they represent a lucrative business that can include big profits and tax savings. And they give those backing the smugglers a way into the economies of other countries and sometimes the leverage to persuade governments to put in place more favorable policies, reporting by the Organized Crime and Corruption Reporting Project shows.
Warehouses on the border
Jose Francisco Guerra owned and operated Victor M. Guerra Inc. Duty Free Shop, a customs brokering company in Hidalgo. On Jan. 15, 2020, Department of Public Safety troopers stopped a tractor-trailer in Hidalgo County loaded with 17 million cigarettes headed for Mexico, according to court documents. The shipping manifest had been falsified to indicate the vehicle was carrying used clothes, toys and purses, and the cigarettes lacked the applicable tax stamp as Texas law requires.
Homeland Security agents ultimately seized more than 422 million cigarettes from the company’s warehouses in Hidalgo and McAllen, including numerous brands banned in Mexico for health reasons, according to court documents.
The operation was a small part of a Panama-based network of shell companies sending huge amounts of Chinese cigarettes from the Colón Free Trade Zone — the second largest port in the world, at the Atlantic end of the Panama Canal — into Latin American countries where there is no legal market for them, according to an investigation by the Organized Crime and Corruption Reporting Project.
Reporting by the group, a global investigative journalism organization, found that firms are connected to convicted smugglers, as well as China’s massive state-owned tobacco company, The China National Tobacco Corp. is by far the world’s largest cigarette company. It controls almost half the global market, selling most of its cigarettes to the approximately 300 million smokers in China. But the sprawling conglomerate — often referred to simply as China Tobacco — is angling for an even larger share, and it has been forging new markets from Africa to Europe.
Journalists from the Organized Crime and Corruption Reporting Project and its partners found that China Tobacco cigarettes have flooded into countries from Mexico to Peru. The writing on the packs is Spanish, suggesting that they are made specifically for Latin American markets — even though Chile is the only country where it’s legal to sell them. Selling imported cigarettes legitimately requires a range of health, tax, commercial, and brand permits, which vendors have not sought or obtained elsewhere.
A company called Overseas United partnered with China National Tobacco Corp. subsidiary China Tobacco Hunan to build a factory in Panama that began churning out cigarettes in 2012. In turn, a related company, Finta Inc., was able to export more than 632 metric tons of cigarettes to Belize, Canada, and the United States between May 2013 and October 2018, international customs records show.
Finta’s main customer was Victor M. Guerra Inc. Duty Free Shop, according to customs records on the trade database ImportGenius. Finta sold the company more than 599 metric tons of cigarettes, which were shipped from Colón to Houston, and then brought to the company’s facilities in Hidalgo County, across the Rio Grande river from the Mexican city of Reynosa.
Customs data from ImportGenius show that Victor M. Guerra Inc. imported into the U.S. China Tobacco brands like Win, Golden Deer, and Nise, which Mexican authorities have seized in anti-smuggling operations over the years. In addition to buying from Finta, Victor M. Guerra Inc. received cigarette shipments directly from Overseas United, as well as another Finta-connected firm called Take Roll.
Jose Francisco Guerra, who is serving probation for trying to ship the goods from his warehouses, admitted to officials that he knew exporting contraband cigarettes into Mexico was illegal. He had been smuggling 400,000-cigarette shipments into Mexico on a regular basis and he intended to keep exporting cigarettes. Guerra agreed to forfeit his customs broker license, pay a fine and forfeit his interest in the cigarettes and items seized from his warehouse.
The total value of the cigarettes and equipment authorities seized was estimated at approximately $88 million.
Smuggling operations such as Guerra’s can be “very lucrative,” said Richard Halverson, a former official Homeland Security Investigations Houston office, who specialized in fraud investigations. Smugglers frequently ship contraband, falsely labeling goods with stamps that conceal the product’s country of origin. That let’s the smugglers avoid taxes and import duties.
By Gabrielle Banks, Houston Chronicle, 29 June 2021
Read more at Houston Chronicle
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