FEATURE: Chinese villages produce fake cigarettes for Japan

Asian Economic News, August 7, 2000

TOKYO, July 31 Kyodo

On the surface, several farming villages near the port city of Xiamen in China's southeastern province of Fujian appear as calm as any other Chinese villages, with no outsiders believing in the existence of clandestine bases.

''In fact, there are village-wide underground plants to manufacture counterfeit cigarettes,'' a tobacco broker says in a hushed voice at his home in Shanghai.

He says that by using highly efficient machines obtained illegally from other Chinese plants or through smuggling from overseas, these underground plants are doing everything to produce counterfeit cigarettes -- from package printing to paper rolling, packing and transportation on a village basis.

''Counterfeit cigarettes are an important revenue source for these villages. If there is information about police raids, village authorities immediately tip off those concerned,'' the broker said.

In various parts of Japan, phony Seven Stars and Mild Seven Lights, best-selling brands of Japan Tobacco Inc. (JT), the government's effective monopoly, have turned up recently across Japan.

After the principal offenders were arrested, a joint investigation task force formed by the Tokyo Metropolitan Police Department (MPD) and the Ibaraki and Gunma prefectural police headquarters discovered that the cigarettes were smuggled from China, where counterfeits of any commodity prevail.

Investigation sources point to the possibility that the cigarettes were produced specifically for the Japanese market, expressing concern that the discovered fake cigarettes, the third-most smuggled product from the Chinese mainland following shotguns and stimulant drugs, might be just the beginning of a new smuggling trend.

The Shanghai broker says per-pack production cost is 1 yuan (about 13 yen or 12 cents), with buyers ordering the cigarettes in units of tens of thousands of cartons. If brokers pay a 20-30% deposit, manufacturers will bear the risk of transporting them to designated points, he says.

Counterfeits of not only Chinese but also foreign-produced cigarettes, including Marlboro, exist on the market, and their smuggling into Europe has also been confirmed.

A Chinese trader who has lived in Japan for three years says trademark violation is nothing more than a legal concept in a capitalist society. ''Forged cigarettes don't kill people. Chinese who manufacture them never feel a sense of guilt,'' the trader said.

On June 24, about 95,000 packs of bogus cigarettes were confiscated from the office of real-estate company Yazaki Sangyo in Tokyo's Shinjuku Ward. When a pack was opened, black leaves fell to the floor.

A high-ranking MPD officer said, ''You can't easily tell the difference between real and forged cigarettes just by looking because of the elaborate workmanship used for the fakes. However, the volume of leaves is one-third of real ones.''

''Various kinds of leaves are mixed. They taste terrible and the quality is quite inferior,'' a JT public relations official said.

So far, five people have been arrested on suspicion of violating Japan's Trademark Law, and more than 200,000 packs of counterfeit cigarettes have been confiscated.

Tsuneo Iioka, 51, the prime suspect in the case, has allegedly told police a Chinese national talked him into the smuggling operation around 1996 while they were serving prison sentences together in Japan.

Iioka, who runs a bone-setting clinic in Ibaraki Prefecture, northeast of Tokyo, said that, using the Chinese national as an intermediary, he traveled to Fujian Province.

While there he had 575 cardboard boxes of forged cigarettes hidden under sandals shipped to Yokohama port in mid-May and then sold them to brokers for between 120 yen and 150 yen a pack, he said.

The joint police investigation task force believes Iioka is behind the smuggling of all counterfeit cigarettes found throughout Japan from northeastern Japan to Kobe in western Japan and Okinawa.

Japanese is printed on the packages of the smuggled cigarettes, and quarters concerned agree that they were manufactured deliberately for Japan. But police officers say they fail to understand why the smugglers went through so much trouble to import cigarettes that smokers can easily identify as fake once they light up.

The margin of profit for Iioka's operation was about 80 yen per pack, with the deal yielding around 20 million yen at most.

''The tobacco business cannot be done without a policy of maintaining a narrow profit margin and a large sales volume. A 'market survey' might be the purpose this time,'' a police officer said.

The Chinese government is going all out in its purge of counterfeit goods under the slogan ''Da Jia (crackdown on fake commodities).''

Shou Rongfang, chief of a task force at tobacco monopoly authorities in Shanghai, says, ''We confiscated 60 truckloads of fake and smuggled cigarettes in November last year and burned them. About 1,500 underground plants manufacturing fake cigarettes were found across the country in the first half of this year.''