Smuggling is a multi-dimensional phenomenon and is affected by a wide range of factors, mainly tied to the national economical system and social, political and geographical condition of the country as well as some international factors. Despite its small share in household spending, tea consumption has continuously increased over the last several decades, with most of the demand being responded through unofficial import i.e. smuggling. Between 1997 and 2002 the share of smuggled tea in the national consumption has increased significantly from 44% to 66.7%. The drastic increase in import tariff for tea in 1989 from 3.24% to 84.46% did not serve to its goal which was supporting locally grown tea. Interestingly enough, smuggled tea in 2002 passed 89 thousand tons. This increase in the share of smuggled tea in national consumption has caused a series of problems for tea growers and causing some cultural, security and commercial negative effects. On the policy level, initiating reasonable tariffs seem to be the most effective. This study shows that any tariff above 25% will in fact fosters the smuggling for tea. On the other hand this change in the tariff will lower the importing cost of tea. As a result, local tea price and its quality should be carefully monitored and controlled simultaneously. This paper uses local and international (ITC) statistics to estimate the volume of tea export to the country in the period of 1997-2002 which lies in the third national development plan. In the end, some recommended policies and findings are presented which could be used to solve the existing problem in the tea sector.
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