Monday, 9 December 2013

Enforcement of Tobacco Laws in the U.S.A.: Effect on Distributors and Retailers at Six Nations

Turtle Island News, December 3, 2013, p. 4 has an article entitled,  2009 law didn’t halt cigarette deliveries from Indian tribes, shipping records show.  If the gist of this article is correct, the “tax free” cigarette businesses throughout Indian Country are in a lot of trouble.  It seems that after all these years, various laws and fines have convinced shipping companies and wholesalers and pretty well all within the nexus of cigarette product distribution and sales, that perhaps their days are numbered.  Could it be that within a couple of years, the many cigarette shops / shacks which dot the landscape on and around local Indian Reserves will be a fixture consigned to history, and will one by one vanish due to supply side economics.  What is fueling this change is the strict and tight enforcement of the laws that could have been applied years ago – but for sundry reasons the authorities in Canada and the U.S.A. have been less than enthusiastic in going for the jugular on this illegal practise of smuggling and distribution of untaxed cigarettes which are then retailed locally, and internationally (e.g., in Europe). 
Many Reserve families have made a small fortune in this business over the past 15 or so years, and this is all in danger of evapourating – removing one major source of “business” revenue on Reserves.  It occurs that the practise was so blatant, and the people involved so brazen, that eventually the whole enterprise had to come collapsing down.  Some reasons include, the lost revenue to for example States such as New York; and the unabashed sale of product to minors.  Under these conditions it is surprising, at least to me, that the status quo has been maintained for so many years with little overt "tampering".
Today the name brand (e.g., Marlboro) distribution has dried up, and only the off brand locally made Native cigarettes have been available to the sellers on or near Reserves.  It is estimated that Native Wholesale Supply (apparently an arm of GRE) has sold 1.5 billion dollars of illegal untaxed cigarettes, and the State authorities in Idaho and Oklahoma as well as New York are going after them aggressively with law suits.  Clearly many thought that they better make hay while the sun shines or else they could lose all – which is the process which seems to be facing even a mega operation such as Grand River Enterprises (GRE).  Although there is still the question as to whether anything produced on the Reserve can be taxed, the authorities have gone after other links in the chain and for example sued one of the shippers for $81 million dollars.  So the pipelines to the primary markets (e.g., New York City which has decided to tackle the problem head on using the Courts) can be shut down.  It is unclear at this point what effect these goings on within the upper eschelons will have on the local “ma and pa” retail shops.  Local distribution at Six Nations may survive unscathed since action on this front would bring to the fore the thorny matter of taxing that which is made on the Reserve lands, and stays on Reserve lands.  Not so fortunate will be those operating online sales or “buyers clubs”, which have of late been shut down as these businesses are being revealed for what they are.  Business men involved in these dealings, from Florida to Washington D.C., to Virginia, to Montreal are being indicted and will likely do jail time.  The writing is on the wall.  The U.S. ATF (Alcohol, Tobacco and Firearms) and similar agencies are finally serious about dealing with the problem of the many faceted operations selling untaxed cigarettes.  At the local level, it seems that the shops situated off the Reserve would be most vulnerable if a major crackdown was in the cards.

Cigarettes have been seen by some as a solution to the poverty which for generations has gripped so many Iroquoian Reserves / Reservations, but today circumstances are such that, no one can count on tobacco being part of the tribe’s economic solution much longer.  The article in Turtle Island News was largely focused on the activities in Seneca Country.  If my understanding of information floating about is correct, GRE has seen the future and has diversified, which might buffer it from the full impact of the loss of the cigarette manufacturing and distribution part of its operation.  None the less, this is going to be a serious blow to a once thriving local industry.
I often wonder if the business was kept “low key” whether we would be seeing this trend.  What typically happens is that if someone gets away with say smuggling a few cartons of untaxed cigarettes, and the authorities do nothing, a process kicks in.  Those involved become more brazen and up the ante, with the belief that they are impervious to the Federal and State / Provincial laws.  For a time the American and Canadian Governments played the role of enablers.  However, escalation brings expansion and risk taking and eventually a line is crossed and with a full dossier of facts, "the Feds" will act, and once committed, will set their sights on eliminating the problem alltogether.  So once again the facts ultimately demolish the beliefs which were all along built on a weak foundation. 

As it happens, I drive by the GRE headquarters on a frequent basis.  I look at the trappings of an apparently healthy business and wonder what is truly in store for all who are involved.  My guess is that things will begin to unfold pretty quickly at some point - change is in the wind - but it is anyone's guess as to what we will be seeing in terms of the vendors along the local roads.


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