August 1, 2020
If one wanted a metaphor for the challenges of developing an FCTC-compliant system to track and trace tobacco products, then perhaps the European Union’s (EU) system which came into force on 20 May 2019 can provide one.
The EU’s system is in line with the Tobacco Products Directive (TPD) which provides for the establishment of an EU-wide track and trace system. But the EU system should not be considered a blueprint for Parties to the FCTC Protocol to Eliminate Illicit Trade in Tobacco Products (ITP).
The Framework Convention Alliance (FCA) examined the EU’s tracking and tracing system, identified important policy considerations, outlined technical aspects of the system and provided key recommendations in its policy briefing: “Why the EU tracking and tracing system works only for the EU.”
- Parties to the Illicit Trade Protocol should not choose a tracking and tracing (T&T) solution which, as in the case of the EU TPD, allows for the delegation of obligations to tobacco companies, such as the choice of the data storage providers. This would be a breach of the independence requirements of the ITP.
- Parties to the ITP should require that providers of data storage services and generators of unique identifiers (UIs) should not be selected by the tobacco industry itself and furthermore have no links to the development of the tobacco industry’s track and trace solution(s).
- Parties to the ITP should use authentication elements and anti-tampering devices (such as digitally signed alphanumeric codes1, security ink as found in tax stamps). Digital signatures prevent third parties from generating their own codes. Security features prevent the copying of the UI.
- Parties to the ITP should ensure that all authentication elements are supplied, installed and controlled by authorities independent from the tobacco companies.
- Parties to the ITP should require that the Unique Identifier include only the elements listed in the ITP (date and place of manufacturing, manufacturing facility, product description and where available intended market of retail sale), not the longer list required by the EU.
- Parties to the ITP should give serious consideration as to whether a time stamp is necessary
THE STRENGTHS OF THE EU SYSTEM
It can be said that a major strength of the EU’s system is that it covers all economic operators in the tobacco products supply chain, in line with Article 8.10 of the ITP, requiring the broadening of the scope of the applicable system in such a manner as to discharge all appropriate and relevant obligations “at the point of manufacture, import or release from customs or excise control.”
In addition, independent companies (not tobacco companies) will generate the unique identifiers for tobacco products. “All movements of tobacco products in the EU will be recorded and all economic operators (including retailers), all facilities and production lines will receive an identification code and will be identified.”
But the strengths of the EU’s tracking and tracing system are only half of the story. The shortcomings of the system and its unique European context require that other ITP Parties take a close look under the hood before they consider adopting the system wholesale.
THE SHORTCOMINGS OF THE EU SYSTEM
- With this in mind, a major flaw in the EU system is that it is in conflict with Article 8.12 of the ITP – allowing for the delegation of obligations (manufacturers and importers can choose data storage providers and auditors) to tobacco companies.
- Further, independent third parties do not have sufficient control over the unique identifiers that are applied to tobacco products at the time of manufacture. This is a weakness that the tobacco industry can exploit to flood the black market with cigarette packs that have no (or cloned) unique identifiers.
- When it comes to the rules for third parties and data storage companies involved in the EU system, several data storage providers with historical links to tobacco companies have already been appointed to be part of the EU tracking and tracing system.
- Another element of the EU system is that the security feature is used to authenticate the pack, but not necessarily the unique identifier. Article 8.3 of the ITP requires “unique, secure, and non-removable identification marking.” Furthermore, the EU system only requires that 1 out of 5 authentication elements be sourced from an independent provider.
- The longer list of elements to be included in the unique identifiers results in an unnecessarily complex EU system requiring input from the tobacco industry with traceability data gathered from multiple sources. This model will prove a significant challenge particularly for middle and low income countries. In contrast, the ITP only requires that the unique identifiers include date and place of manufacturing, manufacturing facility, product description and where available intended market of retail sale.
- The EU system requires a timestamp at the time of manufacture. This seems to be a good idea, on the surface. But make no mistake: timestamps add another layer of complexity and create a problem when tax stamps are used for traceability purposes because tax stamps are generated in advance of the manufacturing.
- “Parties to the ITP should question whether a time stamp is necessary and whether it can be replaced by the use of a camera and/or an anti-tampering device which records the time of production and controls the correct applications of labels or stamps on the packs.”