By JAMES GARDINER

Counterfeit cigarettes have hit New Zealand.

When $1 million worth of smuggled tobacco was seized it turned out to be fake "Marlboro" cigarettes from China.

Tobacco manufacturers have been told that this country is no longer immune to the international problem of counterfeiting.

The Customs Service yesterday began its first prosecution for counterfeit cigarettes after the seizure in Auckland last month of nearly two million smuggled "Marlboro" brand cigarettes inside bed bases and mattresses in a shipping container from China.

The cigarettes had a potential street value of nearly $1 million - $250,000 the assessed value of the cigarettes and $718,000 in Government excise that the alleged smugglers were trying to avoid paying.

Four men and a company have been charged in the Auckland District Court and were remanded without plea yesterday.

The men face jail terms of up to six months and fines of up to $750,000, three times the assessed value of the goods, on counts of knowingly importing goods with misleading labelling.

They and the company, New Zealand Shanghai Trade Ltd, are also charged with conspiring to defraud the revenue of Customs, for which the penalties are identical.

The company's sole shareholder and director is Xiaoliang Zhu of Central Park Drive, Henderson.

Zhu, aged 38, is also one of the four accused, along with Shengliang Bai, 40, of Panmure, Jiayang Pei, 37, of Glenfield, and Jiaxing Pei, 43, of Glenfield. Only Zhu and Bai appeared in court yesterday. They were ordered to surrender their passports as a condition of bail.

The Peis did not appear and are believed to be overseas.

Marlboro manufacturer Philip Morris sent a representative from Melbourne to confirm that the cigarettes were counterfeit.

Customs officials say they are not aware of a large-scale blackmarket of smuggled or counterfeit cigarettes in this country.

The police say most of the blackmarket tobacco sold in pubs and clubs comes from robberies and burglaries. At $9 to $10 a pack of 20, cigarettes are frequently targeted by thieves.

In a knifepoint North Shore garage holdup a week ago, the robber got $240 cash and nine cartons of cigarettes worth $850.

Customs revenue fraud team leader Terry Brown said counterfeit cigarettes had been a growing problem overseas and his staff had been on the lookout.

Although small quantities of undeclared cigarettes were routinely seized at the airport, they were destroyed and it was not known if they were counterfeit.

Philip Morris was obviously sensitive to protecting its brand and "reacted with due haste" when told of the seizure.

Marlboro, an American brand associated through its advertising with motorsport and cowboys (the "Marlboro Man" died of cancer), is favoured by Asian smokers.

Philip Morris spokeswoman Catherine Parker said it would take an expert to recognise that the packaging was counterfeit.