Six of the leading global travel retailers accounting for combined industry revenues worth around $20 billion* are initial signatories to a new declaration opposing illicit trade.
Aer Rianta International, Dubai Duty Free, Dufry, Gebr. Heinemann, Lagardère Travel Retail, and Qatar Duty Free are the first spate of duty free and tax free retailers to back the next phase of the ‘Duty Free: Trusted, Transparent, Secure’ campaign, jointly launched last year by Tax Free World Association and Duty Free World Council.
Major brand owners have also indicated their wiliness to commit to the zero-tolerance declaration on illicit trade, counterfeiting and intellectual property theft, as other retailers are encouraged to join.
Those retailers that have backed the declaration (details below) are advising their supplier partners to follow suit in denouncing such illegal practices by implementing clear illicit trade policies.
In a joint statement, DFWC and TFWA says this will build on similar commitments made by retailers through the UN Global Compact and acts to demonstrate a united front in distancing the industry from any claims associated with the fraudulent trading of goods labelled as duty free.
Sending a clear message
Sarah Branquinho, President, DFWC said: “There is no place in our industry for companies that engage in illicit trade. Illicit trade in all its forms causes substantial societal harm and costs our industry significant lost sales opportunities.
“It can also cause our industry reputational harm when illicit or counterfeit goods are fraudulently mislabelled as ‘duty-free’ in an attempt to lend authenticity to the product. Ultimately, consumers should be aware that when they purchase goods labelled as duty-free outside of a licensed duty-free retailer, it is very likely to be a counterfeit product.
“Our industry already boasts one of the most transparent, trusted and secure supply chains in the world. We are proud of our industry’s credentials and commit to maintaining these high standards.
“Today, some of the major players in our industry are making clear their ongoing stance against illicit trade and will be encouraging their suppliers to follow suit. There can be no room for doubt – the duty and tax-free industry has zero tolerance for illicit trade in all its forms. We want to send a clear message worldwide – when you shop in a duty free shop, you can do so with complete confidence.
“Our announcement today builds upon the decades of trust that we have built up with our customers, governments, customs authorities, and industry partners. DFWC, TFWA and the initial signatories are keen to grow the momentum behind this initiative and are confident the industry will be fully behind it.”
What does the declaration say?
The declaration, supplied to TRBusiness, is clear cut in its language and the commitment it asks of DF&TR stakeholders worldwide.
Duty and tax free retailers are asked to declare their full support in the global war against all forms of illegal and illicit trading, assisting the relevant authorities in their ongoing efforts ‘against this heinous form of criminality’.
They should commit to conducting business with companies that possess ‘clear, unambiguous and meaningful anti-illicit trade policies’.
In turn, duty and tax free suppliers are called upon to pledge their support to the same causes while declaring that they ‘will never support, condone, or be involved in any form of illicit trade and that we comply with all applicable laws and regulations during the sourcing, manufacturing and distribution of our products’.
How can it be applied?
The DFWC and TFWA declaration is for all companies retailing or supplying tax and duty free goods for sale. Retailers and suppliers may wish to include this within existing retailer-supplier agreements. The declaration is not intended to replace existing agreements in place. Rather, it is designed to be complementary and bolster such agreements as the UN Global Compact.
Why is it important?
According to DFWC and TFWA, DF&TR channels lose millions in lost sales opportunities every year to criminals involved in illicit trading, counterfeiting and intellectual property theft.
While it is difficult to determine an exact figure, the OECD has estimated the total 2019 global trade in counterfeit and pirated products stood at US$464 billion, or 2.5% of world trade.
In the same year and in the EU alone, counterfeiting was thought to account for 5.8% of imports to the trading bloc, representing €119 billion.
Within GTR, activities such as fraudulently labelling and marking tax-evading goods as ‘duty free’ for authenticity erodes consumer trust. The practice disproportionately and unfairly affects one of the most tightly controlled, secure, transparent and legitimate supply chains in the world, the industry has stated unequivocally.
DFWC and TFWA brand illicit trade in all its forms ‘a blight upon society’, with proceeds from such activities helping to fund criminality, terrorism and human trafficking, while obstructing investment in ‘the brands of tomorrow’.
While many retailers insist that supplier partners have strict rules around environmental protection or the human rights of workers and third parties, a further commitment on eradicating illicit trade is ‘a natural extension of these policies’.
A briefing paper released last year in support of the Duty Free: Trusted, Transparent and Secure campaign set out the scale of the problem across global categories such as luxury, cosmetics and perfumes, alcohol and tobacco, while offering several important recommendations, including better regulation of informal and casual retail channels and tighter controls regarding free trade zones (FTZs) and special economic zones to tackle illicit trade ‘hotspots’.
DF&TR is often ‘mistakenly or casually associated’ with FTZs, say the associations. Duty and tax free retail zones are distinct from FTZs in that the latter facilitates trading subject to a specific customs regulatory environment, generally not subject to customs duties, while duty and tax free sales can only occur within a highly regulated and tightly monitored travel network.
*Based on 2022 reported and estimated figures