Suggestion 1: Ensure that amendments to the Tobacco Hazards Prevention Act enforcement rules are practical and avoid unintended consequences.

The tobacco industry has previously submitted multiple recommendations concerning the issue of additives banned in tobacco products. Whether during the bill review process in the Legislative Yuan or during the second draft announcement stage, industry has consistently emphasized the importance of formulating policy based on current market conditions. We note the government’s responsibility to safeguard consumers’ freedom of product choice and to develop appropriate countermeasures to address the potential increase in illegal tobacco trade following the implementation of such policies.

The second draft amendment to the enforcement rules of the Tobacco Hazards Prevention Act, announced on August 8, 2024, covers a broad range of legally available tobacco products. Many of the additives listed for prohibition are substances that naturally occur in tobacco or are essential to the manufacturing process. We believe that the proposed ban would not only affect flavored tobacco products but may also impose significant operational challenges on lawful businesses seeking to comply with the new regulations while continuing to manufacture and supply products lawfully.

Furthermore, there are concerns within the tobacco industry regarding the authority granted to the Ministry of Health and Welfare under the parent law to impose additive bans without the need for public consultation or scrutiny. This discretionary power creates implicit pressure on lawful tobacco businesses, limiting their ability to plan and adjust operational strategies, and may result in unnecessary financial losses. Moreover, the absence of a transparent review process introduces regulatory uncertainty, making it difficult for industry to anticipate and respond to the broader economic and market impacts that may arise from the implementation of such policies.

In addition, the policy overlooks the longstanding practice of Taiwan-based tobacco companies producing tobacco products exclusively for export. The draft provisions do not provide an explicit exemption for export-only tobacco products. This omission is expected to have a direct adverse impact on the financial performance of Taiwan’s manufacturing and export sectors and may further affect the job security of workers employed in related manufacturing facilities.

Any policy amendment will inevitably have an impact on industry. It is therefore essential that the government provide sufficient time for lawful businesses to make the necessary adjustments and ensure compliance with new regulatory requirements. Despite this, both the first and second draft announcements of the proposed additive ban have stipulated an implementation period of only 18 months from the date of announcement, without consideration of the complexity and operational adjustments required.

The government has cited European Union legislation as one of the references for the proposed policy. In view of this, we recommend that if the additive ban is implemented, the EU’s actual practice should be adhered to in the process. Specifically, the EU established a scientific committee to conduct reviews based on scientific methods, followed by a gradual and orderly implementation approach. Under the EU model, the additive ban policy was announced in 2014 and came into effect in 2016, with a complete ban on special flavored tobacco products implemented in 2020. This approach provided the industry with a five-year period to adjust production lines, manage inventory, and comply with the policy.

Based on domestic and international experience, large profit margins are not the sole factor driving the rampant trade of illicit tobacco products. When tobacco control policies are excessively tightened and consumer demand cannot be satisfied through the legal market, there is a heightened risk that demand will shift to the illegal market, further fueling illicit trade. For example, following the implementation of Lithuania’s flavored tobacco ban in 2020, Lithuanian border authorities intercepted nine million sticks of menthol cigarettes within six months of the ban taking effect. This figure is three times higher than the quantity seized over the same period in the preceding three years.

The tobacco industry believes that when formulating tobacco control policies, the government should consider the prevailing social environment, consumer behavior, and current market conditions. Policy changes should be implemented in a reasonable, gradual, and predictable manner. Such an approach would help mitigate potential domino effects triggered by shifts in consumer expectations and reduce the risk of unintentionally driving demand toward the illicit tobacco market.

Suggestion 2: Leverage next-generation technology to combat new tactics in the illicit tobacco trade.

The Ministry of Finance convened an anti-illicit trade meeting on February 20, 2025, during which the enforcement results for the previous year were announced. In 2024, more than 11.2 million packs of illicit tobacco products were seized, and several illegal underground factories were discovered and shut down. The estimated tax revenue loss resulting from these activities exceeded NT$570 million. We applaud the great efforts made in combating illicit trade.

However, the tobacco industry observes that in recent years, the nature of illicit tobacco trade has shifted. While large-scale border smuggling was previously the primary source, illicit trade has increasingly evolved into a decentralized model, with underground tobacco factories engaging in small-scale production within Taiwan. This change in the pattern of illicit activity presents new challenges for regulators and demands a recalibrated strategy to address the evolving risks more effectively.

Illicit traders have adopted new tactics resembling an “ant-moving” model, in which production machinery is disassembled into multiple parts abroad and imported separately into Taiwan for reassembly. This method is designed to evade regulatory detection while enabling continued illicit production, clearly reflecting a marked shift in the tactics employed by illegal trade networks. By contrast, authorities’ continued reliance on public reporting and tips to identify and investigate illicit activities is a reactive approach that lags behind the increasingly sophisticated methods used by illicit traders.

The issue of illicit tobacco trade is multifaceted. In view of increasingly deceptive and evolving criminal tactics, we suggest that the government consider developing a cross-ministerial and cross-departmental strategy to counteract these crimes. In addition, we recommend the introduction of new enforcement technologies, enhancing risk analysis capabilities and strengthening overall enforcement effectiveness.

Combating illicit tobacco trade is a common goal shared by industry and government. The growth of illegal trade activities directly undermines public health policy objectives, reduces national tax revenues, and diverts government resources from other critical enforcement priorities. By adopting modern enforcement strategies, the government can effectively reduce the financial losses associated with illicit trade, enhance regulatory efficiency, and strengthen national security. These efforts will contribute to the establishment of a stable and predictable market environment, delivering benefits to both the government and lawful businesses.