Associate Minister of Health Casey Costello apologises for the confusion over a tobacco tax statement she made on January 30.
Video / Parliament TV
Smugglers are using sophisticated tactics to bring tobacco into New Zealand, according to Customs.
One study claims almost one in four cigarettes sold in New Zealand are from the black market.
Customs says those responsible are “serious criminals”, often crime syndicates also smuggling harder drugs and weapons.
Bosses of organised crime syndicates are using Facebook marketplace, churches, internet cafes, ethnic supermarkets, language schools and construction sites to sell tens of millions of dollars’ worth of illicit tobacco into New Zealand communities.
These illegal sellers are getting around Facebook algorithmsby translating product names into different languages, according to Customs.
Customs says the work is being done by organised crime groups, who are importing “large quantities” of tobacco into the country, most notably by sea, using “sophisticated smuggling tactics that mirror those used for drug smuggling.”
Those responsible are serious criminals, “not just opportunists having a go because they’re worried about the price of tobacco”, Customs has told a University of Auckland project that has been monitoring the sale of illicit tobacco in New Zealand since 2022.
The operation involved 132 packages of undeclared cigarettes and tobacco sent from Asia to six addresses in Gisborne and Napier throughout 2023 and 2024.
More than half the packages arrived at a Napier shoe shop, and cigarettes and tobacco were sold on 539 occasions at Asian Food House in Gisborne.
The offending defrauded New Zealand of about $541,240, according to the summary of facts.
Chief Customs officer fraud and prohibition Nigel Barnes told the Herald there was nothing to suggest managers of the shoe store were aware that the packages contained illicit goods.
“There was a person employed at the shoe shop who took those mail items and supplied them to the person they were working for.
“It is a proven smuggling method: that you send goods somewhere that is not connected to the primary place you are conducting your business, as an effort to disguise the true destination of the goods” he said.
Police estimate 740kg of illicit tobacco was seized in a South Island illicit tobacco bust in April. Photo / NZ Police.
Barnes told the Herald tobacco smuggling like this is increasing in New Zealand.
“The trend is for larger and more organised smuggling methods,” he said.
“Last November we seized more than two million cigarettes, in sea cargo, in a consignment from Cambodia.
“It’s part of the trans-national organised crime ecosystem. It [requires] suppliers, financiers, distributors and launderers.”
In mid-April, a 42-year-old Christchurch man was sentenced to three-years and four months’ jail for his involvement in an illegal tobacco importing and manufacturing operation that resulted in one of the South Island’s biggest seizures for Customs.
A machine for manufacturing cigarettes discovered by Customs during a raid in Christchurch. Photo /NZ Customs Service
About 740kg of illicit tobacco was seized, representing at least $1.56m in tax evasion. The bust also discovered machinery used to manufacture individual cigarettes, cigarette boxes, and cigarette branded labels - ingredients for an unlicensed cigarette factory.
New tobacco industry research claims almost one in four cigarettes smoked in New Zealand is sourced illegally.
The research was commissioned by tobacco producers British American Tobacco NZ and Imperial Brands, and carried out by independent researchers FTI Consulting.
It found the use of illegal tobacco grew 37% in New Zealand in 2023, and estimated the annual consumption of illicit products in New Zealand had grown to 332 tonnes of tobacco.
Data released by KPMG in 2023 said one in eight cigarettes smoked in New Zealand came from the illicit market.
Other studies estimate the lost excise tax from the sales of illegal tobacco at between $194 million and $330 million annually.
Nigel Barnes of Customs with confiscated tobacco products discovered in raids on illicit operations. Photo / Customs
In 2020, customs seized a single shipment of 2.2m cigarettes imported by a Malaysian organised criminal group.
While that bust was welcomed, Customs later discovered the operation had managed to smuggle five other shipping containers into New Zealand undetected.
Outlets for illegal tobacco have included bars on the West Coast, internet cafes, workplaces, construction sites, ethnic supermarkets, churches, community groups and online including Facebook marketplace.
In the 2022 budget, Customs received a $10.3m increase specifically to target tobacco smuggling operations, and a dedicated tobacco team was created.
It has found that tobacco-smuggling busts often lead them to more serious crimes.
“We often end up identifying drugs, firearms, and other illicit commodities during our tobacco investigations,” Barnes said.
Customs officers have found sophisticated cannabis-growing operations a floor above an illegal cigarette factory.
Barnes said almost half of all seizures originated from China, and the Middle East is rising as a “significant” source of illicit tobacco into New Zealand.
The New Zealand Customs Service inspecting items for contraband in an Auckland Customs-controlled area. Photo / Ben Dickens
Barnes said Customs wanted to do a lot more than just seizing the smuggled product. They want to arrest people “and ideally seize their assets too.
“If we simply leave them in play, then there’ll be more consignments en route,” he said.
“The supply of illicit tobacco . . . is significant. It’s cheap, easy to get hold of [overseas], easy to ship to New Zealand, and the yields in New Zealand are quite high.
“Illicit tobacco is not just a tax issue. It’s an organised crime issue. We frequently come across other serious crime types when we investigate illicit tobacco.”
Neil Reid is a Napier-based senior reporter who covers general news, features and sport. He joined the Herald in 2014 and has 33 years of newsroom experience.
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