Source: European Network for Smoking and Tobacco Prevention (ENSP) event
Subject: Towards an EU-wide traceability of tobacco products: ensuring an independent and efficient system to fight illicit trade and protect public health
Date: March 2 2017
Documents available for download:
On March 2, the European Network for Smoking and Tobacco Prevention (ENSP) organised an event on “Towards an EU-wide traceability of tobacco products: ensuring an independent and efficient system to fight illicit trade and protect public health”. During the different presentations, panellists highlighted the cost of tobacco to European societies in terms of public health, finances and security. Experts then presented different possibilities for the European track and trace system for tobacco products that needs to be put in place before 2019 following the Tobacco Products Directive entry into force in June 2016. Please find a summary of the discussion below.
Opening speech
Gilles Pargneaux (S&D, FR) thanked everyone for coming. He explained that the event will address a very important issue which is the tracking and tracing of tobacco products. He thanked ENSP for making the event possible and which is an important group of influence also working at scientific level.
He then explained that 2017 is a very important year. The Tobacco Products Directive entered into force in May 2016. The secondary legislation on the tracing of tobacco products has to be adopted this year to be fully implemented by 2019. As a Vice-Chair of the ENVI Committee he wanted to recall that the illicit trade of tobacco products is a public health issue . Indeed, if illicit trade was eliminated it would represent a decrease of consumption of around 2%. Smoking is responsible for 6 million premature deaths each year in the world, including 700 000 in Europe. The elimination of illicit trade would also make it possible to increase tax income and contribute to national security as well as lead to a decrease in crime activities. Illicit trade in tobacco products is estimated to be USD 40 to 50 billion a year. In the case of the EU, it represents USD 10 to 12 billion each year of fiscal cost.
He said that there are big expectations regarding the EU. When implemented, the EU will be the first regional system to have a tracing system for tobacco products and it will set an example. It is important to have this debate today to take stock of the different steps and to have better visibility regarding the different scenarios. He added that the tracing of products is already implemented in Turkey and Kenya with positive results. He also mentioned that tracing already exists in other sectors, noting that the specificity of tobacco industry cannot be ignored however.
He noted that there were no tobacco industry representatives are not in the room. As the chair of the European Parliament Working Group against interference of tobacco industry, he said it would be a bit weird to sit at the same table. He added that they wanted to abide by Article 5.3 of the FCTC WHO Convention . Policies are not to be influenced by the trade interest of the industry.
On February 21, Japan Tobacco International sponsored an event on the global fight against illicit trade in tobacco products, he stated, before adding that everyone knows the limit of a system from the industry. Industrial players tend to complain about the cost of tracing. It can be seen with the agri-food industry which complains about the cost of tracing for meat. The cost of tobacco tracing is between 0,9 and 1.1 cents per pack. When one knows the benefits generated by the tobacco industry, it is a small cost. He added that the issue of the cost can indeed seem quite irrelevant when one knows the cost this represents for European societies.
He finally highlighted that in the framework of this debate, they do not want to promote one technology specifically.
Session 1: Latest trends in the global illicit trade of tobacco products
New trends in illicit trade & the ways to combat it: the role of the WHO FCTC protocol
Kummer Peiry, Senior Legal Officer, WHO FCTC Secretariat in Geneva, said thatMr Pargneaux gave a very extensive overview of the facts and figures related to illicit trade. She then explained that she will talk about the protocol and the role it will have to play. The consequences of illicit trade are a loss of government revenue, increased organised crime and an impact on public with people having easier access to these products. Talking about the FTCF Protocol to eliminate illicit trade in tobacco products, she said that the EU has acceded to the protocol as well as 6 Member States. The Protocol is not yet in force because it requires 40 parties before it can enter into force. At this point, she does not know when this might happen. Several countries are in the process of ratification . She hoped that the accession of the EU will prompt a domino effect with regards to the accession of Member States. The protocol is very complex and it is a technical treaty. It is not a public health treaty but a treaty about preventing illicit trade. She explained that it has three substantive parts:
Explaining the slowdown in further ratifications, she said that there are several reasons. The first one is relations inside governments because work has to be done by several ministries. The second concern of the FCTC Secretariat is the interference of the tobacco industry with the process of ratification. They heard from countries notably in Africa that the tobacco industry representatives are going to parties and saying to government representatives that they can be a solution for tracking and tracing. They try to promote their own systems as the solution. This is a big concern and one that is difficult to address. The third reason for the slowdown is that the implementation of the Protocol is costly and technically complicated. How to ensure that it is not the tobacco industry that takes this in hand? The key of this can be found in Articles 8.12, 8.13 and 8.14 of the Protocol. She noted that the Conference of the parties has asked the Secretariat to assist parties with any questions they may have about the ratification as parties are asking how to implement the Protocol.
Finally, she said that hopefully the Secretariat will be getting some support to promote awareness from the EU. There is a grant project provided for by the EU and it is in the final stage of discussions. It will focus on eastern Member States of the EU through working with academics to raise awareness on how this works.
The fight against illicit trade of tobacco products in the EU: challenges and prospects
Georg Roebling, Head of the Unit Customs and Tobacco Anti-Fraud Policy, OLAF, said that this event had already overcame a big challenge by getting health and customs people in the same room.
He then explained that OLAF is the lead service in the European Commission to fight tobacco trade . The European Commission put forward 3 years ago a wide ranging paper on its vision on illicit trade. That strategy paper set up avenues for actions to address the situation. It was accompanied by an Action Plan and in the last few years, they have worked through the Action Plan in cooperation with Member States. They are working on a progress report on the Action Plan, he added.
He then highlighted the importance of the FCTC. The EU was able to ratify the Protocol and now Member States are going through national ratification. He thanked the Slovak Presidency for their work on this. Illicit tobacco trade is a global phenomenon so it needs a global response. He added that the European Commission monitors the progress of Member States and promotes the Protocol with third countries. He told the audience that he was just coming back from China where he met Chinese authorities who are very actively looking into this protocol. He also has meetings with Russia, Moldova, Ukraine and other countries.
OLAF has set up an independent laboratory analysing seized cigarettes. They also carried out a study on the cost of sanctions and ordered a Eurobarometer on the perception of citizens of illicit tobacco trade. The more we know about the buying side, the better, he said. He hoped the Eurobarometer would give insight to create awareness campaigns. OLAF coordinates in very close cooperation with Member States with joint customs operations. OLAF also does investigations of its own as well. In 2015, 618 million cigarettes were seized in operations in which OLAF participated in. Thanks to the combined efforts from Member States who are at the forefront of the fights and OLAF, they have been able to reverse the trend of declining seizure of cigarettes. There has been an uptake in the volume of seizure after the publication of the strategy.
Finally, he talked about the challenges of fighting illicit trade in tobacco products:
Q&A session
A journalist from Euractiv said that it seemed that the European Parliament does not want cooperation with the industry after 2022 and the end of the last agreements with the industry . Nevertheless, OLAF cooperates with the tobacco industry in terms of intelligence. Can you follow illegal trading without the help of the tobacco industry?
Georg Roebling, Head of the Unit Customs and Tobacco Anti-Fraud Policy, OLAF, said that last year the European Commission let expire the agreement with Philipp Morris but the other agreements continue. He explained that they try to get information from as many sources as possible and the more they can learn from different sources the better.
A journalist from Euractiv asked if that meant that the Commission does not agree with European Parliament.
Georg Roebling, Head of the Unit Customs and Tobacco Anti-Fraud Policy, OLAF, replied that the more they listen to different sources the more they get information.
Gilles Pargneaux (S&D, FR) noted that there has been a decrease in seizure of illicit tobacco trade from 2010 to 2015 and now it is increasing again so the cooperation between the EU and the industry to fight against illicit trade was a totally falsified operation. He added that the EU has ratified the WHO protocol and these agreements should be done in 2020. He then denounced Belgium, Denmark, The Netherlands, United Kingdom, Cyprus, Slovenia, Sweden and other countries for not ratifying the Protocol. He explained that he recently had an appointment with customs officers in the UK. On the one hand they are saying that they are champions in the fight against illicit trade of tobacco products but the State does not want to ratify the Protocol.
Georg Roebling, Head of the Unit Customs and Tobacco Anti-Fraud Policy, OLAF, said that they are in very close contact with many authorities in the EU and processes are moving forward. He was confident that over the coming months more Member States will come forward. It is very important if you want to make an impact to also implement this outside the EU, he added, because that is where illicit cigarettes come from.
Kummer Peiry, Senior Legal Officer, WHO FCTC Secretariat in Geneva, stated that they cannot push any States to enter the protocol. In the aces of the EU, it is slightly different because they focus on countries who do not have the capacities to help them whereas within the EU these are not really the concerns preventing ratification.
A representative from the European Cancer Leagues noted that the question from the journalist is not relevant after June 2016 because the EU now cannot work with industry.
He then explained that there is data from the industry based on a KPMG report about the amount of cigarette smuggling in the EU bur OLAF does not want to use this report because it comes from a commercial source. What about having its own data?
Georg Roebling, Head of the Unit Customs and Tobacco Anti-Fraud Policy, OLAF, said that they are trying to widen the analytical base faction. They have identified questions with Member States on the quality and the level of details of statistics available. This data comes from customs services and it is about seizure but the question remains on the table: can we do more? This is very expensive and they need to make sure that it is worth spending public money on.
Gilles Pargneaux (S&D, FR) mentioned the possibility of going to capitals to organise a conference to understand why Member States are not signing the Protocol.
Session 2: Towards an EU system for Tracking and Tracing tobacco products: implementing articles 15 and 16 of the EU Tobacco Products Directive.
Dr Andrzej Rys, Director in DG SANTE, EU Commission, explained that DG SANTE is closely working with colleagues from OLAF and other services. The European Commission strongly supports the Protocol. They were strongly involved in the negotiations and were able to get the ratification. He added that Commissioner Andriukaitis during the meeting of Ministers of Health in December addressed this issue of ratification. The Commission is now assessing the phase of the implementation of the tracking and tracing system.
Talking about the Tobacco Products Directive, he mentioned that health was the main concern and talked about the number of premature deaths and attractiveness of tobacco products for young people. If access to these products is easy, it undermines the public health aim of the legislation. Illicit tobacco products are not complying with labelling and ingredients provisions . They are cheaper products which are more easily available to young people. Illicit trade creates a global problem and it is important to work with countries such as Belarus and Ukraine to understand their role in the game and to help them.
In the EU, Articles 15 and 16 of the Tobacco Products Directive regulate the tracking and tracing system and provide full control of the supply chain to fight against illicit trade. In doing so, the Directive respects the obligation of the FCTC Protocol. The task to establish such a system is an ambitious one. The Commission is currently preparing the implementing measures. They are committed to doing this task and to have a system fully compliant with the FCTC Protocol. He recalled that the implementation should be finalised by May 2019. The Commission is fully committed to ensuring the effective implementation notably through Better Regulation.
With regards to preparatory work , he noted that the Commission did a feasibility study and then an impact assessment which form a basis to address secondary legislation to be adopted by the end of 2017. The Commission also launched a consultation for Member States, stakeholders and experts. He talked about the last workshop organised in December 2016 and said that it was great to listen to the different views that exist. He stressed that consultation with the tobacco industry is limited to what is needed for the legal process in line of FCTC protocol
On the structure of the system, he said that the final question is: how effective is the system we are going to produce? It should be an integrated system and should directly come from Articles 15 and 16. We have the framework and now we have to implement the framework, he said. He mentioned the possibility of having unified identifier places on tobacco products. The Commission is looking at the generation, application, verification of unified identifiers and how product movement in the supply chain are recorded and transmitted. Data needs to be available to competent authorities for the surveillance process. Storing data is also important. The interoperability of the system at large is also key and competent authorities should be able to read all packages.
In developing implementing acts , the Commission wants to be fully compliant with the FCTC protocol. We do this work to make sure that public health is protected. Fiscal income is also very important also because of public health issues. He noted that they share this view in the Commission who has a united voice on this issue.
Q&A session
Gilles Pargneaux (S&D, FR) said that the impact assessment mentioned several options for the implementation of the track and tracing system. Option A is an option operated by the industry, Option B is operated by third party and then the last one is a mixed operation. The Protocol says that obligations of the parties should not be delegated to the industry. Therefore, we have to cancel options A and C, he said. He also wondered how the Commission envisages the task sharing between the Commission and the Member States.
Dr Andrzej Rys, Director in DG SANTE, said that the Commission willassess all these options in relation to the FCTC. On the second question, this is the main issue: how to work with Member States? The interoperability of the system is important here especially with regards to the free movement of products in the Single Market. How the national systems will communicate with each other is also important as well as the importance of the speed of the process.
A representative of the Smoke Free Partnership wondered if it is true that the European Parliament will have no say in the discussion of the implementing acts. Who will be involved on the side of the Member States for adopting the implementing acts? Will it be custom authorities or Ministries for Health?
A representative of DG SANTE from the Health in all policies, global health, tobacco control Unit, DG SANTE, replied that the Commission is keen to get the views of the European Parliament which is a partner in this work. In terms of procedure, they will follow the normal procedure for implementing acts . The European Parliament will receive an invitation to expert groups when it is discussed. They will also be informed via the comitology register. There is also scrutiny, she added. On the question about Member States, she said that this is a decision of each Member State to know who takes part in the meeting. The Commission encourages health, customs and finance ministries to work closely together.
A representative from Atos asked if the authentication would be open to Member States but also consumers?
Filip Borkowski, Team Leader – Tracking & Tracing of Tobacco Products, DG SANTE , replied that this is still under reflection. This is one of the question in the consultation with the stakeholders. They will be an identifier on the pack, if it is readable by smartphones then consumers can be involved. This is still to be discussed.
Session 3: Tracking and tracing: key learnings from other industries and international best practices
Can existing T&T technologies be easily transferred to tobacco products?
Zbigniew Sagan, Chief Technology Officer, Advanced Track & Trace, France, explained that his company has been involved in tracing and fighting against smuggling. What could we learn with activities related to tracing in order to transpose this experience and provide keys in order to build an efficient system in the field tobacco track and trace?
He said that his company was one of the first companies that participated to create standards relating to anti-counterfeiting. They provided print press to manage unique identifiers and authenticating solutions for example. They also work on pharmaceuticals, food and cosmetics and in almost all cases the track and trace number is unique but to make the system work correctly an authenticator is necessary. Only IT is not enough to provide an answer. He explained that he works with ISO on this subject and talked about several ISO projects (ISO 19564, ISO 19988 and ISO 20229).
He then stated that everything that is printed on a pack of cigarettes or any security labels should behave in term of a related function as a track and trace and authenticating device. It is important to involve a large public, he said, as with big data the more information we more, the more chances we have to detect fraudulent situations. There is a need to have a method to enable customers and inspectors to use smartphones and to be able to be sure that the code is consistent. He then explained that his company is currently providing such a technology for the wine industry. They provide 300 chateaux in the Bordeaux area with tracking system based on single IDs .
On the interpretation of Article 15 of the Tobacco Products Directive, he said that there is an ambiguity which is discussed by the tobacco industry. It is possible to rely on existing legislation and see convergence between printing data and electronic data and the spirit of Article 15 is saying that it is important to have trustful data. Using a cryptographic method could be done. What is very efficient and facilitates a tracking system is the fact that an UID is provided by a third party. In that case, manufacturers would only read up the code. Today it is not possible to have the same tool for two different manufacturers, he noted. The tobacco manufacturer should not become a force of proposal but coordination is needed because the features would be affixed on the pack by the manufacturers. They need to provide the required information as well and since it can be done electronically, this kind of interaction is possible with manufacturers. Interoperability is the major challenge to be addressed, he added.
International best practices in T&T of tobacco products
Leszek Bartlomiejczyk, Consultant & expert in Track and Tracing systems, ENSP, explained that he has 25 years of working for agreements, ICT companies and companies responsible for tracking and tracing for tobacco goods. Now he is an independent consultant.
He explained that some countries already have a track and trace system. They are government systems and not industry systems.
In the USA , there are a tracking and tracing systems in three States: California, Michigan and Massachusetts. The key thing is to have comprehensive solutions and the most important thing in the US is the licensing of production, machinery and elements of the supply chain. If you do something that is not appropriate, you can lose this license.
Turning to Turkey , he said that it was the first country to build a full system and the first results were impressive. They increased tax collection by more than 30% in the first year and decreased the overall consumption in the country. The system is very focused on including customers in verifying the legitimacy of the products by using phone apps to check the legitimacy of a product.
In Brazil they combined legislation with technology. They started an automatic control of production on production lines of all manufacturers. This is controlled by government inspections. They also did it for beer and other alcohols. They are using these automatic devices swath video surveillance. They make 6 photos of each bottle of beer to verify its compliance, he noted.
In Kenya they also implemented a tracking and tracing system in 2013 and they focused on a comprehensive solution. They started by controlling logistics chains. All trucks that move cigarettes are sealed with an electronic seal that can be controlled by GPS. If you open the truck, then there is an automatic alert. If the truck moves 50 meters away from the route there is an alert. They achieved a huge progress in case of revenue recovery, he noted.
He then explained that tracking is the concept of marking products by unique identifiers and then registering all movements of the good. Tracing is finding a product and finding out where it is from. In both concepts, if it is not done in real time , it makes no sense and the system can even be used to justify crime. Immediate access to data is very important, he stressed. The system has to be interoperable in the EU and countries which want to export to Europe. There are some standards that can already be used and which are developed by GS1, EPSI, ISO standards. He explained that GS1 uses a random number while for EPSI there is a segmentation of the number. The EU needs to consider if it wants to use segmentation or not. His advice is to put the category of the producer and then the country. It helps to recognise the products more easily.
He then said that if you control the supply chain it is easier to control the illicit trade. Thinking about retail is also important. Multi-level security features are very important. You can use two IDs, one visible and another invisible he said. Track and trace can also help confirm the visible movement of the goods outside a country; it is more helpful than a simple declaration. This could help eliminate carousel fraud. If you extend track and trace to retail shop, you have full control, he added. Customers and retailers will deliver data about what was sold compared to what was produced.
Closing speech
Dr Francisco Rodriguez Lozano, President of the European Network for Smoking and Tobacco Prevention (ENSP), recalled that tobacco is the leading cause of preventable diseases in the EU. The tobacco industry has the sole responsibility for all of this. It is a highly toxic, damaging and addictive product. Therefore, Member States need to protect citizens. Governments have put up taxes to make tobacco less accessible to children and young people who are the targets of the tobacco industry. Taxes are a way for Member States to address the consequences of tobacco but illicit trade needs to be tackled. Governments need a tracking and tracing system which is now mandatory. The tobacco industry is itself sometimes guilty of illegal trade, he added. Therefore, the EU should not consent to a traceability system on which the tobacco industry would have control. The industry is part of the problem and they are not part of any solutions.
Gilles Pargneaux (S&D, FR) said that the illicit trade of tobacco products is a question of health, finance but also terrorism financing. Mokhtar Belmokhtar or “Mr Marlboro”, he explained, has generated all of his fortune though illicit cigarette trade. Even DAESH are finding resources through the illicit marketing of tobacco products.
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