Skip Navigation Links

Landmark Study Paves the Way for EU Tobacco Traceability

23 September 2015

Following the adoption of the revised EU Tobacco Products Directive in 2014, the EU Commission has released a highly anticipated technical feasibility study on possible options for the track and trace systems and security features required by the Directive.

The study provides a starting point for what will become a set of EU-wide technical standards that not only comply with the Directive, but that also meet the track and trace requirements of the global WHO FCTC Protocol to Eliminate Illicit Trade in Tobacco Products.

One of the key general findings of the study is that there is no ‘one size fits all’ solution, and that traceability can be achieved via multiple approaches with respect to technology, solution architecture and governance.

Another finding is that the estimated benefits of tobacco traceability outweigh the costs to industry and government (as demonstrated in the study’s extensive cost benefit analysis).

The study proposes four distinct options for track and trace systems, as well as four options for overt and covert security features (this distinction does not mean, however, that the two functions cannot work together – as demonstrated by the options for a combined solution proposed in the study).

Traceability options

1. Industry-operated solution

The first traceability option is an industry-operated one, where the EU Commission prescribes the standards for pack marking, data recording and interoperability, but where the solution is operated by the tobacco manufacturers, each with their own data repository. The repositories are managed by an independent data management provider.

The generation, application and recording of the unique traceability code required for each tobacco unit is performed by the manufacturers. This option is generally consistent with the industry’s Codentify® digital coding system.

Although this option offers a low administrative burden for the government, and a low cost burden for tobacco manufacturers, there is uncertainty over its compatibility with the WHO FCTC Protocol, which calls for governments to refrain from delegating their obligations to the tobacco industry.

Another concern is one of data storage. Under this option, each manufacturer has his own data repository, and each repository could conceivably be managed by different third party providers. This may lead to a fragmented situation where data from one repository is not compatible with that from another.

The study therefore advises the use of a single repository for traceability data, as well as a single data management provider.

2. Single EU-wide solution independent of industry

In this option, the EU Commission prescribes the standards (as for option 1) but, unlike option 1, one or more providers – who may be independent of the tobacco industry – are appointed to implement and operate a single, EU-wide traceability system with a single data repository.

This option offers the advantage of full government oversight on tobacco traceability throughout the supply chain, as well as the separation of track and trace data from industry production data. Also, the consolidation of data storage in a single location simplifies administration and cross-state analyses.

However, the main disadvantage is the reduced flexibility that comes with a single prescribed solution. And there is also the issue of how to deal with already existing solutions.

3. National ‘Blends’

Option 3 is a blended solution where the EU Commission mandates minimum standards (for product marking, data recording and interoperability) and each member state establishes its own solution, choosing to appoint either the tobacco manufacturer or an independent provider to implement the system.

In addition, each state appoints a data management provider as the repository for national traceability data.

Option 3 gives member states high levels of autonomy, and increases market opportunities for medium-sized solution providers.

But the downsides include lower economies of scale resulting from the fragmentation of solution and data management providers, as well as a high dependence on interoperability among numerous providers and data sources. These disadvantages negatively impact the costs, making this the most expensive option.

4. Combined Traceability/Security

This option proposes a synergy between traceability and authentication by combining a unique identifier with a set of security features – much like those used on tobacco tax stamps. In fact, further synergies can be realised by those member states already using tax stamps that meet the security feature requirements of the Directive.

This option does not, however, require those states not using tax stamps to implement them. The combined unique identifier/security feature still needs to be applied in these states, and should still serve the combined purposes of authentication and traceability.

The generation and production of the unique identifier occurs during the production of the security feature element.

This option leverages the same label applicators and related systems and infrastructure already in place in most states for tax stamps, with the addition of a camera vision system on the production line to capture each unique identifier and record the manufacturing and product data.

Apart from the advantage of synergy, option 4 reduces the risk of production downtime caused by generating and marking codes on the production line.

Furthermore, the embedding of traceability elements in the security feature allows the feature itself to be controlled and tracked prior to application on the product.

The disadvantages with this option include the need for online connectivity to access all traceability information during field inspections, as only basic information can be decoded from the unique identifier in offline scenarios.

Security Feature Options

Moving now to the four options for security features. In all four cases, the study proposes that the features be applied via a label (or tax stamp). This is because a secure label allows the use of a wide range of security elements, applied within a controlled facility by a security printer.

1. ‘Tax Stamp’ Solution

This option is based on the fact that the security feature requirements of the EU Directive and the features used in modern tax stamps share similar objectives. These objectives include the need for multilevel, robust, cost-effective security features, as well as technologies and application methods suitable for tobacco products, and minimal impact on tobacco manufacturers.

Some of the disadvantages of using tax stamps, however, include limitations on the size of the stamp; the need for a tax stamp ordering, inventory and control system; the need for an additional station on the production line for applying the stamp, and the need for additional measures to prevent removal and reapplication.

2. Supplementing a ‘Digital Only’ System

This option addresses the idea that the alphanumeric code the industry uses for traceability could also be used for authentication, since the code is visible and therefore provides overt security.

However, a product cannot be authenticated by its unique identifier alone, says the study, as the result does not confirm whether the code has been copied. Furthermore, a mobile device is needed to authenticate the code, which makes it a semi-covert, rather than overt, security feature.

The study therefore recommends the use of additional authentication elements carried on a label for this option.

3. Fingerprinting

Option 3 proposes a security package that includes a technology to record the intrinsic, unique variations – or ‘fingerprints’ – that reside within a specific area of each tobacco pack. The fingerprints are stored in a reference repository and can be linked with the unique identifier on the pack.

As fingerprinting is a covert feature requiring a device for authentication, it is supplemented by a label carrying overt and forensic features.

Fingerprinting provides a very strong covert security element and a robust method for authenticating the packaging itself (thereby addressing eventual issues of reused and counterfeit stamps).

However, there is concern that this option may carry high implementation costs generated from the equipment required to create and store the fingerprints. In addition, not many solution providers currently exist who can offer an effective solution.

4. Combined Traceability/Security

Option 4 proposes a combined authentication/traceability mechanism where multi-level security features sit together with a secure, machine-readable serialisation code on the same label.

This option is in fact the same as traceability option 4 described above.

Next steps

The study was not intended to provide tender-ready specifications, but rather to lay out multiple options for consideration.

The next step is for the EU Commission to conduct a follow-up study based on feedback subsequently received from different stakeholders.

The planned date for the adoption of the technical standards for traceability and security features under the EU Directive is Q2 2017, with implementation planned for 2019.

The full study is available here:

http://ec.europa.eu/health/tobacco/docs/2015_tpd_tracking_tracing_frep_en.pdf

 

Association

Association

© International Tax Stamp Association
10 Windmill Business Village
Brooklands Close
Sunbury-on-Thames TW16 7DY
United Kingdom

info@tax-stamps.org
Sitemap
Privacy Policy
All rights reserved.
All trademarks acknowledged