Sunday

22nd Oct 2017

Big Tobacco suspected of dodging EU anti-smuggling rules

  • A smoker in Lausanne, Switzerland. A Lausanne-registered company bought the tobacco industry's track-and-trace tool earlier this month (Photo: Caribou)

Tobacco companies have sold their anti-smuggling system to a third party to comply with upcoming EU rules, but critics say the new owner is a front company.

The track-and-trace system, Codentify, helps tobacco firms and customs authorities to find out where a pack of cigarettes was produced and is used to combat smuggling - a multi-billion euro criminal industry in Europe.

Thank you for reading EUobserver!

Subscribe now for a 30 day free trial.

  1. €150 per year
  2. or €15 per month
  3. Cancel anytime

EUobserver is an independent, not-for-profit news organization that publishes daily news reports, analysis, and investigations from Brussels and the EU member states. We are an indispensable news source for anyone who wants to know what is going on in the EU.

We are mainly funded by advertising and subscription revenues. As advertising revenues are falling fast, we depend on subscription revenues to support our journalism.

For group, corporate or student subscriptions, please contact us. See also our full Terms of Use.

If you already have an account click here to login.

It was set up in the wake of cooperation agreements between the EU and the four major tobacco companies, which required the firms to keep track of their products.

Tobacco companies had previously been suspected of smuggling their own goods in an effort to avoid paying taxes.

Codentify was owned by the tobacco industry until last month.

The cooperation agreements, one of which, with Philip Morris International (PMI), is due to expire in less than three weeks, were non-legislative contracts and did not require the track-and-trace system to be separate from the tobacco industry.

However, new EU legislation, as well as upcoming World Health Organisation (WHO) rules, specify that the system should be independently owned.

The WHO has previously expressed criticism of Codentify, which it said lacked transparency “and might have features that only the tobacco industry is aware of”.

Spokespersons for Philip Morris International, and for the joint venture that sold Codentify, told this website via email on Monday that the system now complies with the EU's new Tobacco Products Directive and the WHO's Framework Convention on Tobacco Control (FCTC).

The FCTC is an international treaty, also signed by the EU, which aims to curb tobacco smuggling.

“Inexto is fully independent from the tobacco industry," said PMI spokesman Andrew Cave, referring to the Swiss-registered company that bought Codentify.

Inexto is registered in the Swiss city of Lausanne, at an address that is a five-minute drive from the offices of Philip Morris International (PMI) and British American Tobacco Switzerland.

Inexto was founded this year and owned is owned by a French group called Impala, which has several daughter companies specialising in industries that range from energy to manufacturing.

The receptionist at Inexto's mother company, Impala, said she did not know Philippe Chatelain, Inexto's managing director, but told EUobserver he would be called back. This has yet to happen.

Chatelain, and two other top officials of Inexto, have worked for PMI for over a decade. They left the firm just last month.

EUobserver was made aware of the sale and make-up of the new company by Oscar Larsson, a student at the Open University of London. He runs a blog, called Why It's Bad in which he is critical of the Codentify tool.

"This is not an innocent purchasing of a legitimate technology,” Larsson told this website in an email.

“These are not just former employees from PMI, they are the dedicated core of the whole Codentify concept. Their names are on the patents and they are the inventors of this intentionally flawed system, designed by the tobacco industry to serve the tobacco industry and not the European Union”, he said.

Other critics of the tobacco industry also questioned the motives behind the sale.

Anna Gilmore, director of the tobacco control research group at the University of Bath, said Inexto could not be considered sufficiently independent from the tobacco industry.

“Given the tobacco industry's long history of involvement in the illicit tobacco trade, a genuinely independent system would be a threat to the industry,” she told this website via email.

“It is therefore attempting to have governments implement its Codentify system by setting up intermediaries and front organisations to promote Codentify,” she added.

Luk Joossens, advocacy officer of the Association of European Cancer Leagues, said the sale was “a predictable move”, adding that tobacco companies will now “pretend” that Codentify is no longer part of the tobacco industry.

The FCTC's secretariat, which has taken aim at Codentify before, repeated its opposition in a response to this website.

“Whether or not the new company will truly be independent of the tobacco industry, or if it will continue to defend the interests of the tobacco industry with just one more degree of separation remains to be seen,” said Vera Luiza da Costa e Silva, head of the secretariat of the FCTC.

She added that even if the track-and-trace (T&T) system was independent, it would still lack transparency.

“If the new company’s purpose is to continue to promote Codentify as a T&T system allegedly in compliance with the protocol, then this independence is irrelevant, since ... analyses of Codentify have found it to not be compliant with protocol recommendations on T&T,” said Da Costa e Silva

The Digital Coding & Tracking Association (DCTA), which owned Codentify until 1 June 2016, said Inexto "is fully independent from any tobacco company".

DCTA is a joint venture by British American Tobacco, Imperial Tobacco Limited, Japan Tobacco International, and Philip Morris International.

"The three individuals you reference are no longer employees of any tobacco manufacturer and their jobs transferred to Inexto as part of the technology sale," a DCTA spokesperson said by email, without revealing his or her name.

"Their deep knowledge of the technology, combined with their understanding of the complexities involved in the tobacco supply chain, means they offer Inexto unique expertise which will be necessary as the technology continues to evolve as a world-class, open source solution”.

The European Commission did not respond to requests for a comment.

Tobacco firms defend value of EU deals

With an EU anti-smuggling deal with Philip Morris due to expire, EUobserver talked to tobacco lobbyists from two competing firms that have similar arrangements.

Macron puts trade policy on summit table

France's president wants a "political discussion" on EU trade policies at Thursday's summit, amid domestic concerns over Canada and South America deals. But his colleagues are likely to avoid a lengthy debate.

News in Brief

  1. Rajoy to trigger Article 155 on Saturday in Catalan crisis
  2. EU conducts unannounced inspection of German car firm
  3. Lithuania calls for new EU energy laws
  4. EU leaders aim for December for defence cooperation
  5. Juncker says hands tied on Russia pipeline
  6. Czechs set to elect billionaire Andrej Babis
  7. Italian regions hold referendums on more autonomy
  8. EU leaders refuse to mediate Catalonia conflict

Stakeholders' Highlights

  1. Mission of China to the EUPresident Xi Jinping Proposes Stronger Global Security Governance at Interpol Assembly
  2. European Friends of ArmeniaEU Engagement Could Contribute to Lasting Peace in Nagorno-Karabakh
  3. UNICEFViolence in Myanmar Driving 12,000 Rohingya Refugee Children Into Bangladesh Every Week
  4. European Jewish CongressBulgaria Applauded for Adopting the Working Definition of Antisemitism
  5. EU2017EENorth Korea Leaves Europe No Choice, Says Estonian Foreign Minister Sven Mikser
  6. Mission of China to the EUZhang Ming Appointed New Ambassador of the Mission of China to the EU
  7. International Partnership for Human RightsEU Should Seek Concrete Commitments From Azerbaijan at Human Rights Dialogue
  8. European Jewish CongressEJC Calls for New Austrian Government to Exclude Extremist Freedom Party
  9. CES - Silicones EuropeIn Healthcare, Silicones Are the Frontrunner. And That's a Good Thing!
  10. EU2017EEEuropean Space Week 2017 in Tallinn from November 3-9. Register Now!
  11. European Entrepreneurs CEA-PMEMobiliseSME Exchange Programme Open Doors for 400 Companies Across Europe
  12. CECEE-Privacy Regulation – Hands off M2M Communication!

Latest News

  1. The mysterious German behind Orban's Russian deals
  2. Mogherini urged to do more on Russian propaganda
  3. Turkey funding cuts signal EU mood shift
  4. Posted workers top EU agenda This Week
  5. Leaders lobby to host EU agencies at summit's margins
  6. Legal tweak could extend EU control on Russia pipeline
  7. Ukraine language law does not harm minorities
  8. EU begins preparations for Brexit trade talks

Stakeholders' Highlights

  1. ILGA-EuropeHealth4LGBTI: Reducing Health Inequalities Experienced by LGBTI People
  2. EU2017EEEHealth: A Tool for More Equal Health
  3. Mission of China to the EUChina-EU Tourism a Key Driver for Job Creation and Enhanced Competitiveness
  4. CECENon-Harmonised Homologation of Mobile Machinery Costs € 90 Million per Year
  5. ILGA-EuropeMass Detention of Azeri LGBTI People - the LGBTI Community Urgently Needs Your Support
  6. European Free AllianceCatalans Have Won the Right to Have an Independent State
  7. ECR GroupBrexit: Delaying the Start of Negotiations Is Not a Solution
  8. EU2017EEPM Ratas in Poland: "We Enjoy the Fruits of European Cooperation Thanks to Solidarity"
  9. Mission of China to the EUChina and UK Discuss Deepening of Global Comprehensive Strategic Partnership
  10. European Healthy Lifestyle AllianceEHLA Joins Commissioners Navracsics, Andriukaitis and Hogan at EU Week of Sport
  11. Nordic Council of MinistersNordic Council Representative Office Opens in Brussels to Foster Better Cooperation
  12. UNICEFSocial Protection in the Contexts of Fragility & Forced Displacement