The Duty-Free Tobacco Sector and Lobby

What is the Duty-Free Tobacco Sector?

The duty-free industry is comprised of global, regional, and national operators that sell goods to international travellers which are exempt from paying certain local or national taxes and excise duties. Duty-free shops are located in places such as international airports, seaports, train stations, and cruise ships. As they operate in different jurisdictions, the rules and restrictions vary by location.¹

The duty-free tobacco sector appears to be growing. For instance, in England, cross-border tobacco purchases (including duty free) tripled from 5 per cent in 2019 to over 16 per cent in 2022.²

The Harms of Duty-Free Tobacco

It undermines public health

Improving public health is the primary rationale for taxing tobacco products, since it increases tobacco prices, in turn reducing consumption and related morbidity and mortality.³ The existence of duty-free locations legally decreases the cost of tobacco products, encouraging consumption by existing and potential smokers, as well as recent ex-smokers.⁴

It decreases government revenue

A 2015 analysis by the World Health Organization estimated that governments generate around US$270 billion annually in tobacco excise tax revenues.⁵ In bypassing taxes or duties, duty-free sales of tobacco products reduce tobacco tax revenues by about US$7 billion per year.⁶

It increases illicit trade

Duty-free creates lucrative incentives for the illicit resale of tobacco products by allowing legally purchased tobacco to be resold illegally at higher prices (see case study below). As such, the extent to which duty-free sales fuel the illicit tobacco trade is a topic of increasing focus internationally, with Article 13 of the Protocol to Eliminate Illicit Trade in Tobacco Products stating that evidence-based research must be conducted to “ascertain the extent of illicit trade in tobacco products related to duty free sales of such products.”⁷

Case Study: Duty-free stores and tobacco smuggling along the US-Mexico border

Duty-free stores, particularly those along state borders, can facilitate illicit tobacco trade by selling untaxed cigarettes in unlimited quantities.⁸ The United States Government Accountability Office has identified three main ways duty-free sales contribute to smuggling along the US-Mexico border:

1. Diversion into US commerce

Duty-free cigarettes, intended for international sale—meaning they are meant to cross the border—are sometimes illegally diverted back into the US domestic market without paying the required taxes. This occurs when purchasers, instead of using the cigarettes for travel as intended, resell them illegally in the same market where they were originally purchased.⁸

2. Smuggling into Mexico

Smugglers avoid paying Mexican taxes on US duty free cigarettes by concealing them when they are bought from American duty-free stores, in contravention of Mexican law.⁸

3. Smuggling back into the US

After being smuggled into Mexico, duty-free cigarettes sometimes re-enter the US illegally, avoiding customs declarations and tax payments before being sold on the black market.⁸

Smugglers take advantage of duty-free loopholes by making small transactions to evade financial reporting requirements, allowing them to move large quantities undetected, also known as ant smuggling.⁹

The Role of the Transnational Tobacco Companies

The TTCs – namely Philip Morris International (PMI), British American Tobacco (BAT), Japan Tobacco International (JTI), and Imperial Brands – orchestrated the illicit trade of tobacco products for decades. Documents made public in the 1990s revealed that major transnationals had knowingly facilitated the smuggling of their own products, in some cases dating as far back as the 1960s.¹⁰¹¹¹²

Evidence focuses largely on the TTCs using other jurisdictions where duty can be bypassed (e.g. free trade zones/special economic zones or sovereign territories with tax exemptions),¹³¹⁴ rather than duty free retail outlets for travellers. Nonetheless, such outlets have still been identified as drivers of illicit trade. For example, according to a 2019 report by the World Bank, duty-free zones in Chile such as Iquique Port and Santiago International Airport enable tax-free cigarette imports that are later diverted by smugglers into the domestic market. This is facilitated by Chile’s high duty-free cigarette allowance – up to seven cartons per traveller arriving by air. In Iquique, cigarettes imported for re-export to Bolivia and Peru often never leave Chile. Instead, they are smuggled back into the national market without paying excise or value-added taxes.¹⁵

Global Policy Responses

The regulation of duty-free tobacco products varies across countries, with each country setting its own limits for the quantity of tobacco products allowed per traveller. While some countries impose strict quantity limits, others prohibit duty-free tobacco sales altogether to curb consumption and prevent illicit trade.¹⁶ Despite these differences, duty-free tobacco products remain subject to international regulations and treaties that aim to prevent tobacco smuggling and ensure compliance with public health policies. Article 13 of the Protocol focuses specifically on duty-free sales of tobacco products, stating that “each party shall implement effective measures to subject any duty-free sales to all relevant provisions of this Protocol, taking into consideration Article 6 of the WHO Framework Convention on Tobacco Control.”⁷

A WHO report published in 2024 revealed that “fifteen Parties (24%) [to the Protocol] do not allow duty-free sales of tobacco and tobacco products in their jurisdictions.”¹⁶ Additionally, “thirty-seven Parties (60%) reported that all relevant provisions of the Protocol apply to duty-free sales of tobacco and tobacco products in their jurisdictions.”¹⁶ Many Parties reported the implementation of a range of measures to prevent “the diversion of tobacco products into illicit trade channels.”¹⁶ Such measures might include only permitting duty-free outlets in access-controlled areas such as airport terminals and ports, selling only to departing passengers and even deploying customs officers in duty-free outlets to ensure compliance.¹⁶

The Duty-Free Tobacco Lobby

The duty-free tobacco lobby consists of various organisations and industry groups. Notably, the International Association of Airport and Duty-Free Stores (IAADFS) and the Duty-Free World Council (DFWC) are key organisations in this space. They represent numerous duty-free retailers and suppliers – including major tobacco companies – and engage in lobbying efforts to influence regulations and policies affecting the duty-free market.¹⁷¹⁸

The IAADFS describes itself as “An international trade association whose members include operators of duty-free and travel retail stores and companies that supply products and services to those stores.”¹⁹ Its members include TTC entities such as BAT Travel Retail Limited, Imperial Tobacco International Gmbh, JTI Travel Retail Americas and Altria International Sales.²⁰

The DFWC presents itself as the “global voice for the duty- and tax-free industry.”²¹ It is on the European Union Transparency Register, which lists organisations and associations that carry out activities to influence EU policy and decision-making processes.²² Its entry states that the DFWC follows “legislation of relevance to their members linked to the products sold in duty-free and travel retail, as well as other relevant legislation linked to the duty-free market”.²³ It also targets the European Commission’s transport policy.²³ The DFWC’s members include the Tax-Free World Association (TFWA), a non-profit association of brands including TTC entities such as Altria International Sales, BAT Global Travel Retail Limited, Imperial Tobacco International Gmbh, and Philip Morris World Trade Sarl.²⁴

The duty-free lobby maintains close relationships with the TTCs, which supply duty-free tobacco products and participate in lobbying efforts through industry associations. This is clear from their shared opposition to regulatory measures, particularly restrictions under the Protocol to Eliminate Illicit Trade in Tobacco Products.⁷ According to an academic analysis of internal industry documents, during negotiations on the text of the Protocol, BAT and PMI worked to ensure that duty-free sales remained legal, preventing governments from banning them outright to close tax loopholes.²⁵ In order to avoid outright prohibition, the industry accepted regulations they could operate within, allowing duty-free tobacco sales to continue while resisting further restrictions.²⁵

Lobbying arguments and examples

The duty-free lobby presents several arguments to oppose measures to restrict duty-free tobacco sales. One frequent assertion is that duty-free retailers maintain secure and transparent supply chains, thereby not contributing significantly to illicit trade. As DFWC President Sarah Branquinho has stated:

“Our supply chain is one of the most secure and transparent in the world, and we have worked closely with customs and enforcement agencies across the world for decades to ensure criminal activities such as illicit trade have no place in it.”²⁶

The lobby also rejects any suggestion that the duty-free sector is a channel for illicit trade and has long argued that the Protocol should not be used to limit the availability of legal duty-free tobacco.¹⁸

The IAADFS has coordinated lobbying campaigns to enable duty-free stores to continue selling tobacco products and against proposed restrictions that could negatively impact the industry. In 2024, the IAADFS invested over US$645,000 in conferences and meetings to advance its advocacy efforts.²⁷ In 2016, Michael Payne, the Executive Director of IAADFS, stated that the association had spent about US$2 million lobbying against a proposed ban on the sale of duty-free tobacco (while the exact proposal to which Payne was referring is unclear, WHO FCTC negotiation documents and guidelines have previously discussed the potential banning of duty-free tobacco sales).¹⁷²⁸ Payne has also emphasised the impact of IAADFS’s advocacy work, stating that their efforts “have literally saved companies hundreds of millions of dollars” by preventing restrictive regulations.¹⁷ These initiatives highlight the industry’s proactive stance in maintaining favourable regulatory environments, particularly during the negotiations that led to adoption of the WHO FCTC, where IAADFS had 32 representatives advocating for tobacco interests.²⁹

In collaboration with Airports Council International and the International Air Transport Association, the DFWC issued a statement as a direct response to the Protocol. It criticises assumptions that link duty free with illicit trade, argued that duty free and travel retail should be protected from any adverse effects of measures to combat illicit trade, and called for an evidence-based approach to regulation, with cooperation between all stakeholders concerned.¹⁸³⁰ In a November 2024 presentation, DFWC President Sarah Branquinho encouraged those in the duty free sector to “mobilise immediately to ensure that Parties to the Protocol recognise that duty free in their country is a trusted retail channel” and called for “retailers in key markets to actively engage with Customs and taxation authorities”.³¹

The fourth Meeting of the Parties to the Protocol to Eliminate Illicit Trade in Tobacco Products (MOP 4), held in Geneva in November 2025, featured a provisional agenda item on potential future evidence-based research on topics relevant to several Articles of the Protocol, including Article 13.³² This agenda item referred to interviews with officials from eight Parties to the WHO FCTC, most of whom suggested that duty free was not a significant channel for illicit trade.³² However, the agenda item also stated that it had not been possible to produce an estimate of the relationship between duty free and illicit trade, and suggested that further investigative methods beyond interviews might be required.³²

However, no mandate was agreed at MOP 4 this research,³³ an outcome welcomed by the duty-free sector.³⁴ A December 2025 press release by the Tax Free World Association stated:

“Sarah [Branquinho] led the duty-free industry’s successful evidence-based campaign that resulted in the WHO’s decision at MOP4 to close discussions on any link between duty-free sales and illicit tobacco trade, marking a definitive end to allegations which the industry has always strongly disputed.”³⁵

Both IAADFS and the TTCs have opposed WHO measures that might impose tighter regulations. In 2009, IAADFS Executive Director Michael Payne stated “We have been working closely with Airports Council International, European Travel Retail Council and other organisations […] to ensure that the duty-free industry is not unfairly singled out and unduly restricted by potential WHO actions.”²⁹

Similarly, Beste Ermaner, Vice President of Duty-Free at PMI, said “The industry remains relentlessly focused on the defence of the duty-free tobacco category,”³⁶ making clear that protecting the duty-free sector remains a priority for the transnational tobacco companies.

Authors

Dana Al Sader, Dana Mustafa, Elena Villabona Palomero, Benoît Gomis, Allen Gallagher, Tom Gatehouse and Raouf Alebshehy

Further Reading

• International Association of Airport Duty Free Stores, official website
• Duty Free World Council, official website
• Ending duty-free tobacco sales would be good for health – and health budgets, J. Hoek, J.R. Branston, P. Gendall, The Conversation, 26 January 2026

Tobacco Tactics Resources

• Illicit Tobacco Trade
• Tobacco Smuggling
• JTI Involvement in Smuggling
• BAT Involvement in Tobacco Smuggling
• Imperial and Gallaher Involvement in Tobacco Smuggling
• Imperial Tobacco Canada: Involvement in Cigarette Smuggling

TCRG Research

• The case against duty-free tobacco sales: an analysis from Aotearoa (New Zealand), P. Gendall, J.R. Branston, J. Hoek, Tobacco Control Published Online First: 26 January 2026. doi: 10.1136/tc-2025-059848
• Effect of eliminating the sale of duty-free tobacco products: A natural experiment during the COVID-19 pandemic in Taiwan, 2020-2023, M. Sanna, M-K. Tsai, J.R. Branston, C-H. Liu, W. Gao, Tobacco Control Published Online First: 05 October 2025. doi: 10.1136/tc-2025-059650