Very discretely, on Monday 4 September, the European Commission published its proposals for secondary legislation that could mean that all packets of cigarettes and packs containing several packets will soon be marked with a unique identifier.
Stakeholders will have until 2 October to submit their comments. Given what is at stake financially, it is to be expected that the discussion will be heated. The minutes of the Council of the EU speak of a €1 billion cost.
The directive on tobacco products (2014/40/EU) introduces a raft of measures to address the illegal trade in tobacco products, among which is a European identification and tracking system for the legal supply chain and a security feature that makes it possible to detect illegal cigarettes. The directive charged the Commission with determining the technical standards for these two features prior to their introduction in 2019 for cigarettes and roll-your-own tobacco, and in 2024 for all other tobacco products.
That, then, is what the Commission did on 4 September in publishing three documents: - an implementing regulation on technical standards for the establishment and operation of a traceability system for tobacco products; - a delegated regulation on key elements of data storage contracts; - an implementing decision on technical standards for security features applied to tobacco products.
Closer look at the measures
What the Commission is proposing is that all “unit packets” and “aggregated packages” entering the European market should carry a unique identifier.
Member states will be responsible for appointing an “independent third party” to generate the unique identifiers to consist of an alphanumeric code of up to a maximum of 50 characters for unit packets and up to 100 characters for aggregated packages. The codes will be valid for a six-month period from the date of receipt. Manufacturers and importers will be able to select the independent bodies to store the data relating to these codes in repositories and will be required to bear associated costs.
Security features designed to attest the authenticity of products will only feature on aggregated packages. They are to be composed of no less than five types of authentication elements, at least one of which is to be overt, at least one semi-covert and at least one covert. Member states currently using tax stamps or national identification marks that meet these conditions may continue to use them.
Last but not least, member states must ensure that issuers of unique identifiers, providers of repository services and anti-tampering devices are independent legally (the entity is not under the direct or indirect control of the tobacco industry, including a minority shareholding) and financially (the entity must generate less than 20% of its annual turnover through goods and services supplied to the tobacco sector) and that those responsible for the management of the entity must have no conflicts of interest with the tobacco industry.
At stake economically
The comitology procedure will apply with regard to the proposals: Parliament (by majority) and Council of the EU (by qualified majority) may oppose the proposal on the security feature while only a Council opinion (by qualified majority) is needed with regard to the tracking and tracing system.
According to a document seen by EUROPE, 17 member states spoke at the meeting of the high-level working group of directors general responsible for customs. Some states highlighted the tightness of the timescale and the load on companies. At least one member state made the point that the proposals focused solely on legally produced products when the impact study for the directive of tobacco products showed that the issue of “cheap whites” (cigarettes of little known brands legally produced outside the EU and smuggled in) was a far greater problem.
According to the minutes of the meeting, the Commission responded that the new system could nonetheless reduce smuggling of legal products and that other measures on illegal companies could still be discussed in the working group.
A further interesting piece of information appears in the minutes: reference to the potential cost of €1 billion. The document says that the member states asked the Commission to carry out an in-depth assessment of the cost of the traceability system, which is estimated at €1 billion. However, according to our information, this figure is only a Commission estimate.
Elsewhere, the Council tracking and tracing sub-group met on Wednesday 6 September, after publication of the proposals. According to a source, France highlighted the cost of the new system; Hungary, Denmark and Sweden argued for balanced implementation between SMEs and major manufacturers; Germany expressed the fear that the system would be unwieldy and costly for the distribution and trade sectors, adding that the Commission had not taken sufficient account of the member states’ comments. And several countries also argued that the timescale was unrealistic.
Reactions from stakeholders
Stakeholders will have until 2 October to submit the reactions to the new system and the security feature. At this stage, only a Slovak company, specialising in cigars (MY & MI s.r.o), has responded, criticising the system as too costly for small companies.
Japan Tobacco International (for the industry) and the anti-smoking organisation Smoke-Free Partnership have agreed to respond to questions from EUROPE.
“The texts published by the Commission’s Directorate General for Health (DG SANTÉ) – 95% based on the report by Everis consultants – is a backward step in the fight against illegal trading and is a perfect example of bureaucratic waste. DG Health advocates a system that is too complex and that focuses on monitoring legal products in the legal supply chain when a solution already exists and works. What is worrying is that it will miss the main causes of the illegal trade which come from outside the EU”, said Michelle McKeown on behalf of Japan Tobacco International, criticising the system’s lack of interoperability.
The anti-tobacco side of the argument welcomes DG Health’s timescale and approach. Florence Berteletti Kemp, head of the Smoke-free Partnership, argues that 56% of the products seized on the illegal market in 2015 came from the industry (project Sun and Star). She expressed concern, however, at the provisions on the independence of third parties. In her view, financial independence cannot be assured even if the third party generates less than 20% of its annual turnover through goods and services on the tobacco sector. She argues that parties should receive none of their finance from the tobacco sector, in line with the World Health Organisation framework convention on tobacco control. Kemp also regrets that the tracking and tracing system and the security feature are not linked.
See: http://bit.ly/2wSzLE2. (Original version in French by Sophie Petitjean)