Skip to Main Content
The National Academies of Sciences, Engineering and Medicine
Committee on Law and Justice
Division of Behavioral and Social Sciences and Education
Understanding the U.S. Illicit Tobacco Market:
Characteristics, Policy Context, and Lessons from International Experiences
Illicit Tobacco

View, buy or download the report


Tobacco use has declined because of measures such as high taxes on tobacco products and bans on advertising, but worldwide there are still more than one billion people who regularly use tobacco, including many who purchase products illicitly.
By contrast to many other commodities, taxes comprise a substantial portion of the retail price of cigarettes in the United States and most other nations. Large tax differentials between jurisdictions increase incentives for participation in existing illicit tobacco markets. In the United States, the illicit tobacco market consists mostly of bootlegging from low-tax states to high-tax states and is less affected by large-scale smuggling or illegal production as in other countries. In the future, nonprice regulation of cigarettes – such as product design, formulation, and packaging – could in principle, contribute to the development of new types of illicit tobacco markets.

Understanding the U.S. Illicit Tobacco Market reviews the nature of illicit tobacco markets, evidence for policy effects, and variations among different countries with a focus on implications for the United States. This report estimates the portion of the total U.S. tobacco market represented by illicit sales has grown in recent years and is now between 8.5 percent and 21 percent. This represents between 1.24 to 2.91 billion packs of cigarettes annually and between $2.95 billion and $6.92 billion in lost gross state and local tax revenues. Understanding the U.S. Illicit Tobacco Market describes the complex system associated with illicit tobacco use by exploring some of the key features of that market—the cigarette supply chain, illicit procurement schemes, the major actors in the illicit trade, and the characteristics of users of illicit tobacco. This report draws on domestic and international experiences with the illicit tobacco trade to identify a range of possible policy and enforcement interventions by the U.S. federal government and/or states and localities.

This report was a collaboration between the Committee on Law and Justice and the Institute of Medicine's Board on Population Health and Public Health Practice

Sponsor: U.S. Food and Drug Administration

Related Reports

Tobacco Minimum Age coverPublic Health Implications of Raising the Minimum Age of Legal Access to Tobacco Products (2015)

At the request of the U.S. Food and Drug Administration, this report considers the likely public health impact of raising the minimum age for purchasing tobacco products. The report reviews the existing literature on tobacco use patterns, developmental biology and psychology, health effects of tobacco use, and the current landscape regarding youth access laws, including minimum age laws and their enforcement. Based on this literature, the report makes conclusions about the likely effect of raising the minimum age to 19, 21, and 25 years on tobacco use initiation. The report also quantifies the accompanying public health outcomes based on findings from two tobacco use simulation models.
Report Brief  ► Webinar

Tobacco Regulation cover
Assessing the Use of Agent-Based Models for Tobacco Regulation (2015)

This report describes the complex tobacco environment; discusses the usefulness of agent-based models to inform tobacco policy and regulation; presents an evaluation framework for policy-relevant agent-based models; examines the role and type of data needed to develop agent-based models for tobacco regulation; provides an assessment of the agent-based model developed for FDA; and offers strategies for using agent-based models to inform decision making in the future.  
Report Brief  ► Evaluation Framework
Related Materials

In the News

Loose Cigarette Arrests in NYC Drop in Year After Eric Garner's Death - The Wall Street Journal (July 15, 2015)

No Easy Solutions for Illicit Tobacco Trade - Richmond Times-Dispatch (May 23, 2015)

More Regulations, Taxes, Unlikely to Create a Tipping Point for a U.S. Black Market in Cigarettes - Science 2.0 (February 22, 2015)

Will We Experience a Tobacco Prohibition? - Pioneer News (February 22, 2015)

U.S. Falls Behind Other Nations on Tobacco Tax Evasion - Accounting Today (February 20, 2015)

Cigarette-Modifying Regulations Unlikely to Alter Illicit Tobacco Demand - Medical News Today (February 20, 2015)

Untaxed Cigarettes Snuffing out NY Tax Income - Utica Observer Dispatch (February 19, 2015)

CLAJ Home About CLAJ CLAJ Mission CLAJ Members CLAJ Staff News and Events Upcoming Events Past Events Our Work Overview Current Projects Past Projects Publications CLAJ Reports CLAJ Brochure Work With Us Our Study Process Study Process Brochure Getting to Know the Committee Process Overview for Sponsors Guide for Study Sponsors