Who are they, where did they come from and what are they doing?
We have some idea. We have scraps of information we’re piecing together from the few people who aren’t scared to offer them but we dont have everything. After-all, that’s all part of the mystery, isn’t it?
Let be clear before we start – This isn’t a sweeping shot at all businesses in these two areas. We purchase from and supply some fantastic businesses in both of these areas which is the case for the most part. What it is, is the start of an internal industry investigation spanning close to a dozen other businesses into counterfeiting of the products we supply, the safety of past, present and future customers, and an overall look at what damages an industry, through the eyes and experiences of those who operate in it.
Welcome then, to part two of “Things that upset Ben”…
Why the “The Birmingham and/or Manchester boys”?
No idea. This is just what most refer to them as. Whenever they’re mentioned, this seems to be the common nomenclature. Its not just these two locations though. Bolton and a few others are fast moving up the ranks but the first two are the most common.
Who are they?
Wholesalers, mostly. Down little alleyways, in basements, houses, market stalls, secret underground shopping malls. These aren’t your average stand up business with flashy websites and a huge online following of happy customers. Often you have to know who to ask, where and when. They only supply a small number of people who then filter the products outward. They import almost anything from home-wares to consumer electronics, cosmetics to furniture. Anything that China produces and they can make money from. There’s nothing wrong with that though. You could argue that for the most part, everyone in the vape/e-cigarette industry is doing the same thing, us included.
So whats the problem?
Counterfeiting. VAT fraud (see my previous blog post) and according to some their activities even extend to organised crime like money laundering and drug trafficking. We cant comment on the last two and I’ve no interest or time to go digging into it. But we can look at the first two because they’re both directly relevant to and impacting everyone who operates in this industry.
What do we have?
We have some names; personal and business. We have some inside information on the way they conduct their business and who with, where and when. You name it, its happening. So lets just look at the two things above.
First up, counterfeiting.
Its covers everything but we’re focusing on cells here. We’re sent dozens of cells for testing in addition to the database of information we’ve accumulated from test orders with businesses across the UK who’ve been highlighted as potentially selling counterfeit cells. At the moment we cant supply the information we’ve gathered because it would damage current investigations but we work closely with authorities and any useful information is passed on. This includes the products themselves, the results of our tests and any other supporting information/documents.
Its not difficult to understand the “why”. Its easy to compete in a highly competitive industry if you’re selling a product at 20% less that everyone else. You can buy Sony VTC5A wholesale in the UK for circa £3, or Samsung 25R for around £1.50 and of course, there’s no VAT. At the time of writing, you cant get legitimate Sony VTC5A cells that cheap. Likewise, £1.50 for a Samsung 25R is considerably less than what even we pay and we can turn over upwards of 30-40,000 of them each month when supply is good. Why are they so cheap? Because the VTC5A were old stock VTC4, and the Samsung 25R we’re actually almost identical in performance to a 26F and you get what you pay for. Counterfeits.
Throwing the big “V”.
Value. Added. TAX. Value? Debatable. Added? Always. Tax. We’re (mostly) all used to that aren’t we? We all hate it for different reasons but you have to pay it or you go to prison. Some have even spent some time being looked after at Her Majesty’s Pleasure that ironically, they didn’t pay for. If you know the right names to Google you can even view the local newspaper articles online. But if you set up the business in a family members name and go right back to what you were doing, that’s all good right? (/sarcasm)
Another way of grabbing business and extra profit is not charging or paying VAT, or worse, charging it to appear legitimate when not actually VAT registered. VAT law in the UK can be complicated in areas but there are plenty of ways it can be quickly and easily set up and any business accountant can walk you through it with ease. The government says “Tax doesnt have to be taxing”, and it really isn’t. Its as easy to bend as it is to comply.
So how are they doing it? (This is not a how to guide!) – Some are very un-creative. They just dont charge VAT despite being well over the threshold at which they should and when HMRC come knocking, they close the business. Some take advantage of the “Flat rate” VAT scheme whereby they pay a far lower rate of VAT but in return, cant reclaim VAT on purchases and when they hit the threshold where they should convert to full rate (20%) VAT, they close the business and open under a different name. This was easier before the GDPR. They can no longer transfer customer data meaning they lose everything. (that said, if they’ll skirt VAT, i cant see them complying with that either).
Then there’s the really creative ones. They take a bit of skill and some foreign help. What if i told you its possible (with the right connections), to import a container of stuff, pay the VAT and import duty, empty it, put all the boxes back (along with some junk to make weight) and then ship it back as “goods not required” or “Faulty”, have it signed for the other side, then claim the VAT amount back? I honestly nearly fell off my chair and almost sent my mouthful of coffee into the face of my contact when i heard that for the first time. This is actually happening, in our industry, probably as i write. I didn’t even know what to say!
Crazy isn’t it? The lengths people will go to just to get one up on a competitor and one over on their customers. Instead of focusing on top quality customer service, keeping ahead of trends and having the right products at the right time and enjoying the healthy competition it creates, they just take a giant metaphorical crap all over our industry in the name of a few extra quid while putting all of our safety and livelihoods on the line.
If you have any information on the source of counterfeit cells, please let us know in complete confidence in an email to firstname.lastname@example.org We keep records of which cells turn up where in order to trace them backwards. If you have any information about VAT or any other type of business fraud, you can report it completely anonymously here – www.gov.uk/report-vat-fraud
That’s all, for now… Let us know what you think below!
Ben – Sales Director