Does the government of Guam hold one class of people to a lower standard than the rest of us must follow? Kandit recently went undercover to discover brands of cigarettes being sold on Guam three months after its manufacturer pulled the plug on sales throughout the United States.
We informed the Office of the Attorney General of Guam about our findings. The response we got is different from the way the OAG and law enforcement handled another cigarettes scandal in 2015.
Authorities in 2011 raided a small, Filipino-owned business after reports this small business was selling Marlboro cigarettes manufactured in the Philippines.
The authorities and the media labeled the cigarettes counterfeit, and dragged the small business owners – a man and his wife – through the mud. It wasn’t that the cigarettes were fake, or that they contained any more carcinogens than their American-made counterparts. The problem is that the cigarettes were made in the Philippines – by a company that was not part of the U.S. Master Settlement Agreement.
The MSA is a 1998 agreement between 52 state and territorial attorneys general, including Guam’s, and the major tobacco manufacturers selling cigarettes in the United States. Generally, that agreement means cigarette makers pay each member state and territory a sum of money per cigarette sold in each state or territory in perpetuity. Nationally, the added cost to manufacturers has raised the cost of smoking, making the habit less attractive.
Guam uses the money it receives from the participating MSA members to pay for the cost of the medical care associated with smoking-related illness, efforts to prevent young people from smoking in the first place, and technology for people with disabilities.
In exchange for these payments, the attorneys general of these states and territories have agreed not to pursue these cigarette makers in court for damages resulting from decades of misinformation and purposeful targeting of minors to take up smoking.
Non-participating Tobacco Manufacturer
Some manufacturers chose to be “Non-participating Tobacco Manufacturer.” While these companies do not pay into the tobacco settlement fund assigned by each state and territory under the MSA, they do make payments into a state-held escrow account.
The Twenty-fifth Guam Legislature and then-Gov. Carl Gutierrez on July 7, 2000, created this reserve fund. The law mandated that Non-participating Tobacco Manufacturers pay an assessment of 1.88 cents per cigarette sold on Guam, or generally almost 38 cents per pack into escrow.
One such Non-participating Tobacco Manufacturer on Guam is KT&G, which manufactures the brands Carnival, This, and Time on Guam.
The cigarettes are imported through its Guam distributor, MidPac. On December 16, 2021, and following damning investigation by the U.S. International Trade Commission, KT&G announced it had immediately ceased all U.S. operations.
KT&G brand cigarettes
Yet, as of the first week of March, its cigarettes still are being sold in several stores throughout the island.
“Every year we issue a conditional release, which means, yes, this company can sell these products here on Guam, because in KT&G’s case, they paid into escrow,” OAG spokeswoman Carlina Charfauros told Kandit.
The OAG is the entity responsible for the enforcement of the MSA. Under Guam law, the Superior Court of Guam may impose upon Non-participating Tobacco Manufacturers civil penalties for inadvertent and purposeful violations of the MSA. Two “knowing violations” can result in the prohibition of the sale of that company’s cigarettes for up to two years. According to the OAG, no such violations have yet occurred, even if KT&G already pulled its U.S. operations.
“The payments are due by April every year,” Ms. Charfauros said. “If they don’t make payment in April, then they have to pull those brands from the shelves.”
The last payment KT&G made into the escrow fund was in April 2021.
Pressed further about whether the April 2021 payment had satisfied KT&G’s sales on Guam through March 2022, Ms. Charfauros admitted, “The amount paid is based on the amount of cigarettes sold locally from the previous year.”
“If they don’t make payment in April, then they have to pull those brands from the shelves,” Ms. Charfauros said.
