The Black Supermarket

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Regulators struggle to stem the tide of smuggled drugs, meats, guns, cigarettes, animals, and other goods.

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Although smuggling is associated primarily with narcotics, each year, large volumes of unauthorized consumer goods are smuggled into the United States as well. In the face of high domestic demand, regulators are struggling to keep unauthorized goods out of the U.S. economy.

For example, disposable, flavored e-cigarettes are extremely popular. Between 2020 and 2022, their market share doubled to account for 52 percent of all vaping sales. During that same period, the number of e-cigarette products available to U.S. consumers nearly tripled to more than 9,000.

Yet most of those products are illegal. In 2022, the U.S. Congress expanded the FDA’s authority to enforce a ban on flavored e-cigarettes, which regulators argue attract underaged consumers. E-cigarette manufacturers must now receive FDA approval before importing or selling their goods. To date, FDA has only approved a dozen products from three manufacturers.

Even so, these products are booming. The story of Elf Bar—the most popular e-cigarette in the world—explains why. A Chinese firm called iMiracle, manufactures Elf Bar in Shenzhen, a Chinese manufacturing hub where nearly 95 percent of the world’s e-cigarettes are made. With Elf Bar leading the way, Chinese manufacturers have flooded the U.S. market with unauthorized, disposable, flavored e-cigarettes.

But when FDA ordered customs officials to seize imports from some of the most popular brands, including Elf Bar, the manufacturers simply changed the names of their products or their companies. In some cases, importers even intentionally mislabeled shipments of e-cigarettes to sneak around customs officials. And as famous products like the original Elf Bar officially went out of production, counterfeiters quickly smuggled in unauthorized replacements. Despite its awareness of the problem, FDA has explained that it simply lacks the resources to stem this influx of unregulated and illegal products.

Smuggling extends far beyond e-cigarettes. Each year, smugglers sneak millions of dangerous counterfeit cigarettes into the United States. Last year, high egg prices triggered an influx of smuggled eggs. At the United States’ southern border, there is an evergreen market for illicit Mexican bologna. Chinese couriers also regularly hide illegal meats in shipments of consumer goods. Even wild animals are ripe for smuggling, as demonstrated when a man recently attempted to sneak 13 live parrots across the border in a duffle bag. And illicit drugs such as fentanyl and xylazine, which contribute to the historic levels of addiction and overdose deaths in the United States, are smuggled in dizzying volumes.

Nor are illicit imports the only problem. In 2022, nearly 3,000 cars were stolen and smuggled out of the United States. And each year, as many has 500,000 guns are smuggled from the United States to Latin America, purportedly for use by organized criminal networks.

It is unclear why law enforcement has been unable to manage smuggling-related problems. One  analyst suggests the issue may be a lack of discipline within U.S. Customs and Border Patrol (CBP), which is responsible for monitoring imports and exports under the Tariff Act of 1930. Others suggest that the problems lie in the sheer logistical complexity of monitoring the southern border.

In this week’s Saturday Seminar, scholars discuss the problem of smuggling in the United States.

  • In a Brookings Institution commentary, senior fellow Vanda Felbab-Brown traces the fentanyl supply chain from China to Mexico to the United States. Felbab-Brown explains that some Chinese-regulated chemicals used to make fentanyl have other legitimate uses as well. As a result, Chinese sellers can produce a reportedly “unlimited and endless supply” of fentanyl component chemicals without necessarily violating Chinese law, Felbab-Brown reports. She explains that Chinese sellers often target Mexican drug traffickers directly, advertising their ability to circumvent customs. The cartels then synthesize the final fentanyl product and smuggle it to the United States for sale, Felbab-Brown notes. Felbab-Brown’s research also reveals that Chinese criminal networks are expanding and diversifying their operations in Mexico.
  • In an article for the CATO Institute, David J. Bier argues that the fentanyl crisis in the United States is a direct consequence of the U.S. government’s drug control policies. Bier observes that many politicians justify efforts to end asylum protection in the United States by attributing the rise in fentanyl overdoses in recent years to immigrants crossing the border illegally. Bier instead contends that border enforcement will not stop fentanyl smuggling because the drug is overwhelmingly smuggled by U.S. citizens for U.S. citizen consumers. Rather than build a border fence or increase funding for the federal border patrol agency, Bier recommends that the U.S. government facilitate harm reduction and addiction treatment.
  • From fiscal years 2016 through 2020, 91 percent of illicit drug seizures at select immigration checkpoints involved U.S. citizens, reports the U.S. Government Accountability Office (GAO), an independent, non-partisan Congressional research agency. GAO analyzed data collected by the U.S. Customs and Border Patrol, the federal border patrol agency, and concluded that nearly half of all immigration checkpoint encounters involved drug seizures and that most of those seizures involved U.S. citizens. But GAO also found that data collected from checkpoints were unreliable because Border Patrol agents failed to consistently report key events like drug and property seizures, and that only about half of Border Patrol checkpoints even used the agency’s system for reporting data from secondary inspections, where most contraband is uncovered.
  • In an article in the Suffolk University Law Review, William R. Slomanson of Thomas Jefferson School of Law demonstrates that smuggling is a two-way street by highlighting the flow of hundreds of thousands of guns from the United States to Mexico each year. Slomanson analyzes a 2021 lawsuit brought by the Mexican government —which is currently on remand in federal district court—accusing U.S. gun manufacturers of arming Mexican cartels and aiding in cartel violence. Although Slomanson argues that the court is likely to dismiss the case for lack of personal jurisdiction, he predicts that Mexico will “win the moral war.” According to Slomanson, the lawsuit could encourage stronger U.S. legislative and diplomatic responses to the gun smuggling problem.
  • In a recent article for the Brookings Institute, Vanda Felbab-Brown describes how drug trafficking organizations grew to control both legal and illegal Mexican fisheries. Felbab-Brown explains that the takeover began when Mexican cartels took notice of the high profit margins enjoyed by poachers who targeted protected fish species, such as totoaba. Once the cartels had monopolized illicit fishing, they began to capture legitimate fishing trades as well, Felbab-Brown explains. She also notes that the cartels may have begun to operate their own seafood processing plants to ensure their products go to market in the United States, then sell their high-quality catch to U.S. consumers by forging provenance documents required for imports.
  • In a recently published report, GAO observes that U.S.–Mexican anti-smuggling policies have largely failed. In the report, GAO acknowledges that bilateral illegal trade is one of the major challenges of U.S.–Mexican cooperation. To reduce that trade, GAO explains, U.S. policymakers have spent $3 billion during the last 15 years to fund Mexican anti- drug trafficking programs and to reduce drug use and firearms trafficking domestically. But GAO notes that those U.S. policymakers have not set specific, measurable goals or plans for assessing their progress. Consequently, GAO concludes, policymakers cannot demonstrate that their spending has yielded measurable results.

The Saturday Seminar is a weekly feature that aims to put into written form the kind of content that would be conveyed in a live seminar involving regulatory experts. Each week, The Regulatory Review publishes a brief overview of a selected regulatory topic and then distills recent research and scholarly writing on that topic.