Tag: Illicit trade

RLX Reeling From Illicit Flavored Vape Products

Creit: RELX
RLX Technology reported net revenues of RMB188.9 million ($27.5 million) for the first quarter of 2023, down from RMB1.71 billion in the same period of 2022. Gross margin was 24.2 percent during the quarter, compared with 38.3 percent in the comparable 2022 period. GAAP net loss was RMB56.3 million, compared with GAAP net income of RMB687.1 million in the same period of 2022. Non-GAAP net income totaled RMB183.6 million, down from RMB361.8 million in the same period of 2022.
RLX Technology attributed its struggles to fierce competition from illicit products. “We experienced an incredibly challenging first quarter as illegal-flavored products caused users’ slow shift to products that meet the national standards and drove our total revenues down to RMB188.9 million. Our gross margin declined as we incurred the full effect of the new excise tax in the first quarter,” said RLX Technology Chief Financial Officer Chao Lu in a statement.
“We are pleased that market conditions have improved, following the regulators’ strict actions to combat illegal products since March 2023. As a result, our sales are showing signs of recovery. Looking ahead, we will continue improving our operational efficiency and believe our profitability will gradually recover. Our resilient business model and solid cash position will support us as we navigate the market dynamics, enabling us to deliver sustainable value to our stakeholders as the industry regains momentum.”
According to RLX Technology co-founder, CEO and Board Chair Ying (Kate) Wang, the company remained focused on optimizing its product offerings under the new regulatory framework during the first quarter.
“While we strive to develop diversified, new, approved products that cater to users’ various demands, the prevalence of illegal products has posed near-term challenges to our sales and disrupted the recovery pace of the industry as a whole.
“The increasing efforts put forth by the regulators to crack down on illegal products have been encouraging, and we are hopeful that these will be effective in supporting the creation of fair and orderly market conditions, prompting a return to sustainable growth for law-abiding companies such as RLX Technology.
“If illegal products can be pushed out of the market, we believe adult users will gradually adapt to products that meet national standards. As a trusted e-vapor brand for adult smokers, we remain committed to providing compliant, superior products that meet our users’ needs as we continue exploring growth opportunities in the evolving industry.”

May 17, 2023
UK Trading Standards: Fake Vapes a Major Threat

Credit: Innovated Captures
According to UK Trading Standards officials, shops selling illegal vapes and the sale of vaping products to children are the top threats on the country’s High Streets.
Hundreds of thousands of vapes that flout current laws have been seized, according to BBC.
UK laws limit how much nicotine and e-liquid is contained in vapes, and which health warnings are required on packaging.
But some shops are selling vapes containing 12,000 puffs of e-liquid, when the law permits only about 600. Others contain illegally high levels of nicotine.
In the north-east of England alone, more than 1.4 tonnes of illegal vapes were seized from shops in the second half of last year, while in Kent there was a dramatic rise in counterfeit vaping products seized at Channel ports in December, with more than 300,000 removed.
January 19, 2023
China Gives 12 Years to Heat-not-Burn Smugglers

China’s Intermediate People’s Court of Fangchenggang City, Guangxi has sentenced a number of people for smuggling the hardware and tobacco sticks used in heated tobacco products.
It’s the first time China has made a judgement in a heat-not-burn smuggling case, according to the Fangcheng Customs Anti-smuggling Branch of the Nanning Customs Anti-smuggling Bureau.
The defendants were found guilty of smuggling ordinary goods and articles (IQOS Heatsticks and hardware), and were sentenced to fixed-term imprisonments ranging from 4 to 12 years and fines ranging from ¥200,000 to ¥1 million. The exact number of people sentenced was not reported.
One defendant was found guilty of money laundering and sentenced to 10 months in prison, suspended for one year, fined ¥20,000 yuan, and more than ¥420,000 in money laundering illegal proceeds was recovered.
The investigation began on April 21, 2021, under the unified deployment of the Anti-smuggling Bureau of the General Administration of Customs, the Nanning and Hangzhou Customs Anti-smuggling Bureaus, in conjunction with the tobacco departments of Guangxi, Zhejiang, Guangdong, Hunan and other places, synchronized in Fangchenggang, Guangxi, Shaoxing, Zhejiang, and Shenzhen, Guangdong, according to the release.
The illicit goods were collected and seized, and three criminal gangs smuggling the illegal products were successfully detained, and about 4,500 heat-not-burn products were seized.

December 2, 2022
Unintended Consequences

The number of crimes committed at specialty retail outlets has grown dramatically over the past few years.
By Timothy S. Donahue
Every year, hundreds if not thousands of cannabis dispensaries, vape shops and tobacco outlets are robbed or burglarized in the U.S. On July 10, in Lincoln, Nebraska, between 2 a.m. and 5 a.m., the police department responded to alarms at two vape shops where officers found shattered storefront glass at both locations. The thieves targeted CBD (cannabidiol) and Delta-8 THC (tetrahydrocannabinol) products. The pair of break-ins happened two days after another similar burglary, totaling three in as many days. The businesses lost tens of thousands of dollars in merchandise.
Timothy Goodman, a manager at the Lincoln Vapor location, said that break-in was just the latest in a string of six incidents in approximately the last two years, according to news reports. Goodman, who has worked at Lincoln Vapor for nearly four years, said it’s his understanding that every break-in can be linked back to the same group.
The burglars stole $2,000–$3,000 worth of merchandise in May 2021 and have lifted around $16,000 in products from the business through the last year and a half, according to Goodman. Most products were hardware and cannabis products, such as CBD and Delta-8 THC. “It’s frustrating beyond belief,” he said. “I wake up most nights in the middle of the night and check the cameras to make sure nobody got in.”
The rise in vape shop crimes may be an unintended consequence of recent regulatory actions, such as tax increases, flavor bans and raising the age to purchase vaping and tobacco products to 21, according to many industry experts. Richard Marianos, a senior law enforcement consultant who has served more than 27 years at the U.S. Bureau of Alcohol, Tobacco, Firearms and Explosives and who is now a consultant and adjunct lecturer at Georgetown University, says crime is often an unintended and overlooked consequence of regulatory constraints on the marketplace that encourage the growth of black markets.
Credit: Lexington Police Dept.
Marianos said that taxes and flavor bans bring prohibition, and prohibition brings crime. “These regulatory actions mean a dramatic increase in street sales to kids, and that is what we have seen all over the United States,” said Marianos. “If you have any form of tobacco harm reduction in your state, just throw that completely out the window [if you are going to implement flavor bans and raise taxes exorbitantly] because it forces young adults and people who can’t afford these products into a growing black market. In terms of law enforcement, the issue is that there has been 150 percent increase in smash-and-grabs because of the difficulty of purchasing these products.”
Sam Salaymeh, president and CEO of AMV Holdings, parent to a chain of 113 Kure CBD & Vape shops across the U.S., said that his stores have seen a major increase in crime over the past two years. During Covid-19 lockdowns in 2020 through early 2021, AMV stores had over 20 burglaries combined. “There is a myriad of stories that come with these break-ins, but the main theme is criminals are trying to get to high-value items that are small in size—and that would be the CBD/cannabis products … etc.,” explains Salaymeh. “This is happening more and more across the country.”
Credit: Manatee County Sheriffs Office
During a one-hour period on Dec. 20, five separate retail locations—three vape shops and two tobacco/vape outlets—suffered a string of robberies by three men wearing masks that crossed the Southeast region of Los Angeles County. A shop owner said the criminals pretended to be customers when one pulled a gun and demanded money while two others snatched merchandise from the store’s shelves, according to news reports.
Credit: UK Vapers
“We now have organized crews that go out and hit multiple stores like convenience stores, gas stations, vape shops in a single night or a weekend … they don’t go for cash registers; they want the tobacco products because they can sell it on the street cheaper than what it’s being sold for with these high taxes and these prohibitions,” says Marianos. “They’re making a fortune in the black market the same way the dope dealers are selling cocaine and heroin because the taxes on vaping and tobacco products are going through the roof.”
Crimes of convenience

In 2020, there were 102,677 robbery incidents and 102,677 offenses reported in the U.S. by 9,991 law enforcement agencies that submitted National Incident-Based Reporting System (NIBRS) data. Nearly 25 percent of those incidents were committed at convenience stores (13,721), gas stations (7,006) and specialty stores, where vape shops are lumped into (5,372) combined. If criminals are looking for quick cash, then robbing convenience stores or small specialty retail shops is one of the best ways to do it, according to the FBI.
John Cavanaugh, owner of California-based Vaping Industries, says that thieves have broken into his stores numerous times. Typically, thieves try to take what’s immediately available. “They broke in after hours … broke the glass, popped open the register, grabbed the cash, broke into my office, got the petty cash and then rolled out,” he said. “I think we are starting to see more robberies than burglaries lately, and I think that it’s an easier target to hit a vape shop or a smoke shop with guns because the layout is small, there’s only typically one or two employees and—especially with cannabis dispensaries—there’s a lot of cash on hand.”

Burglary

Robbery

The terms “burglary” and “robbery” are not interchangeable.
They have meaningful differences.
Burglary involves a person illegally entering a building to commit a crime while inside.
Robbery is typically when someone takes something of value directly from another person using force or fear.
There is a far greater chance that someone committing a robbery will do so armed compared to burglaries, which typically occur after hours.
Convenience stores accounted for nearly 13 percent of all violent crimes suffered in 2020, and gas stations accounted for about 12 percent.
Across North America, crimes involving vapor, tobacco or cannabis shops are getting more violent. On Dec. 3, in Calgary, Canada, officials said a “number of people” entered Jerry’s Smoke and Vape just after 6:30 p.m. According to a police report, one of the suspects pointed a gun at the clerk, and the bandits made off with cash and merchandise.
On Sept. 12, in British Columbia, a suspect entered a vape shop alone armed with a shotgun. After threatening an employee, the suspect took an undisclosed amount of cash and product before escaping on foot. Over the weekend of May 29 to June 1, 2020, thieves burglarized several cannabis dispensaries, distribution centers and cultivation in Los Angeles, Oakland, San Francisco and other cities, stealing legal commercial cannabis products and cash. On Sept. 11, 2021, in Calgary, Canada, three masked men entered a dispensary armed, held off staff and got away with a quantity of cannabis products.
Cavanaugh said robberies are more common at cannabis dispensaries than vape shops because cannabis dispensaries have a lot of cash on hand, especially in the U.S. where very few banks will work with marijuana businesses. There are also numerous illegal cannabis dispensaries, which perpetrators know are less likely to notify law enforcement.
“Before all of this started happening over the last few years, I didn’t really believe in upping my security. Now, I have to make sure that there are panic buttons, that my staff are properly trained for when somebody comes in with guns blazing,” he says. “They need to know to just give it all up. Give them the cash and whatever they want. It’s OK. It isn’t worth your life. I’m also now spending extra money for high-end security cameras and security systems. It’s frustrating.”
Crime prevention

According to Marianos, there are several reasons why thieves target convenience stores and gas stations and now vape shops and dispensaries: operating hours and low numbers of staff on site, and these types of stores have smaller layouts, so it’s easier to find the expensive/high demand products and there is the potential for large amounts of cash on-site.
“You don’t want it to make product accessible where somebody can just take a trash can, throw it through the window and get into your shop and take all your stuff,” says Marianos. “More cameras, limiting the amount of people that are coming in like they do at jewelry stores—these businesses need a similar model that retailers with high-end products have. In some higher crime areas, you may even have to hire a security guard.”
Vandalism, from smash-and-grab types of crimes, has occurred so often at AMV stores in recent years that Salaymeh says he has a toolkit in his garage ready to go at a moment’s notice with everything needed to board up a store. He says he involuntarily became an expert at it. Salaymeh says that while it is rare for AMV stores to alter operating hours, it is a tactic they have used in the past. He says that having at least two staff members at all times in some locations, installing security cameras and other security measures are the primary tools store owners have in their arsenal to help deter crime.
“Security cameras help us at least get the story behind what happened and potentially pictures of the thieves. We also try to limit the access potential thieves have to valuable product … and we’ve tried to keep the lights on after hours so that people can actually see that these products aren’t lying around or in display cases,” he says. “We leave the register drawer open so that people, when they walk up, they see there’s no cash.”
Another unintended consequence of overzealous taxation and regulation is the impact it has on local law enforcement, according to Marianos. He says enacting some of these rules are, in effect, giving police more work to do in terms of harassment violations that have no teeth instead of fighting real crime.
“Instead of being able to work on what they should be working on—to serve and protect—are we going to be calling the police because someone is vaping a flavor?” he asks. “What is law enforcement going to do with all this nonsense? What are they going to charge the guy with? What is the crime? Do you know what I mean? It becomes an hour and a half just sitting around trying to figure out what we’re going to do here.”
During his interview with Vapor Voice, Salaymeh’s phone rang. It was the security firm ADT. One of the Kure stores had an alarm going off. He said it happens multiple times a week. There is insurance available for specialty shops, but both Cavanaugh and Salaymeh say it is expensive. The deductible is often higher than the amount of damage suffered during a crime. Both say they rarely, if ever, claim any damages with their insurance companies.
Credit: Tulsa Police
Another overlooked result of rising crimes in these specialty sectors is the impact on the economy and the lives of employees. Cavanaugh said that crime has forced him to shutter two stores, and he now struggles to keep the doors open in his remaining location. Increases in crime, overregulation and misinformation concerning the health and safety of vaping, and the causes (illegal THC vaping products) of e-cigarette or vaping use-associated lung injury have been too much to bear.
“We are doing our best to deal with the reality of today’s vaping industry,” Cavanaugh said. “I want to keep my doors open, and people depend on us; that’s important.”
Salaymeh says he had to close some stores during the Covid-19 pandemic, some of which were temporary. The closures weren’t all crime-related, he explains, but most of them were. There was a period when stores were not allowed to be open, so burglaries were happening, and stores couldn’t sell anything to try to recover losses. “We’re trying to keep people employed. The height of the pandemic was a very, very, very difficult time for our company and many companies like us. The primary victims of these senseless crimes are the people who don’t have a job to go back to because I shut down 18 stores during that time,” he says. “Think about that.”

March 1, 2022
ITC Bans All Imports of Illicit Juul-Compatible Pods
Credit: JHVEPhoto
The U.S. International Trade Commission (ITC) has issued a general exclusion order that bans the importation of any unauthorized cartridges compatible with the Juul vaping system that infringe Juul Labs’ patented product designs, including compatible flavored pods and refillable pods.
This ruling follows a filing by Juul Labs submitted to the ITC on July 10, 2020, that sought a general exclusion order directed at all importers of unauthorized cartridges that copy Juul Labs’ patented pod designs without authorization.
“Today’s ITC ruling represents a major victory against manufacturers of illicit vapor products who seek to bypass regulations and undermine efforts to create a more responsible marketplace for the category,” said Wayne Sobon, vice president, intellectual property at Juul Labs, in a statement.
“In addition to targeting the importation of all infringing products, regardless of the brand, this sweeping action will provide the additional public benefit of helping rid the market of unauthorized Juul-compatible products that can be modified by the user, such as empty and refillable pods.”
February 22, 2022
Australian Crackdown on Nicotine Imports Starts Today
Beginning today, the importation of nicotine e-liquids will be closely monitored by the Australian Border Force. Currently Australians can import nicotine liquid for vaping from overseas or purchase it from a small number of participating pharmacies, provided they have a valid doctor’s prescription.
Credit: Belyay
Consumers who fail to include a nicotine prescription with their order will be subject to a fine of up to $222,000. The new system will work if enough doctors, pharmacists, smokers and vapers are willing to comply and are provided with sufficient information, according to the Sydney Morning Herald. The article reports that very few are interested in complying with the rules and most are poorly informed. Little effort has been made to disseminate information about the new arrangements.
More than 2.5 million Australians still smoke. The National Drug Strategy Household Survey estimated that the number of Australians vaping was 240,000 in 2016 and 520,000 in 2019. If the number of Australians vaping is still increasing, as many as 600,000 may be vaping now, according to the article.
At present, only a very small number of people vaping have a prescription as is required. Most nicotine supplies are imported without a prescription or purchased from the black market. If compliance with the new arrangements is poor, then some will return to smoking while others will purchase supplies from the black market. Neither are good outcomes.
October 1, 2021
CBP Atlanta Seizes Nearly 20,000 Counterfeit Vape Pens
U.S. Customs and Border Protection (CBP) officers last week seized nearly 20,000 flavored vape pens worth nearly $600,000 in Atlanta. According to the agency, last Wednesday, CBP Atlanta officers found 66 boxes of “Ricky and Morty” branded vape pens and e-cigarettes as they were inspecting a shipment and suspected the items violated copyright and trademark law.
Credit: CBP
The vape pens, which originated in a shipment from China, were to be distributed across Georgia, according to a statement. CBP contacted Warner Bros. Entertainment Inc. and confirmed they hadn’t licensed their copyright of the animated series for vape pens. Officers ultimately seized the 19,800 vape pens with an estimated retail price of over $590,00.
“One of our primary missions is to intercept merchandise that could pose a serious health risk to the consumer, but this shipment of counterfeit vape pens violated Intellectual Property Rights,” said Paula Rivera, Atlanta’s CBP port director. “CBP collaborates with many government agencies to enforce laws to protect the health and safety of the consumer and our communities.”
In January, CBP Chicago seized 50,000 illegal “Rick and Morty” vape pens. CBP says each year, they seize millions of counterfeit goods that could otherwise hurt the U.S. economy, threaten consumers and fund criminal activity. Counterfeit items are often sold in underground outlets or on third-party e-commerce sites, according to CBP. Consumers might think they’re buying a genuine product but are left with a poor-quality item.
Last year, CBP seized nearly $1.3 billion worth of goods that violated intellectual property rights. The FDA announced an increased enforcement priority of electronic nicotine delivery systems, and issued detailed guidance to the industry of these new enforcement priorities that regulate the unauthorized importation of tobacco products.
CBP provides basic import information about admissibility requirements and the clearance process for e-commerce goods and encourages buyers to confirm that their purchases and the importation of those purchases comply with any state and federal import regulations.
CBP conducts operations at ports of entry throughout the United States, and regularly screens arriving international passengers and cargo for narcotics, weapons, and other restricted or prohibited products. CBP strives to serve as the premier law enforcement agency enhancing the Nation’s safety, security, and prosperity through collaboration, innovation, and integration.
June 24, 2021