Thursday

24th Aug 2017

Focus

Cigarette tracking rules risk being derailed by lobbyists

  • Tobacco control activists fear that an EU tracking requirement will turn out to be a dead letter, if the tobacco industry is allowed to control the tracking system (Photo: Nuno Silva)

Starting from May 2019, tobacco companies will be required to show that they always know where their products are in the supply chain, to prevent them from smuggling their own goods to evade taxes.

But anti-smoking activists fear that the track and trace obligation could end as a dead letter if tobacco lobbyists succeed in convincing civil servants from the EU member states that the system could be controlled by the tobacco industry itself.

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  • The idea of tracking and tracing is that each cigarette package will have a unique code, which can be checked in a database. (Photo: Lindsay Fox)

The obligation has been established in the tobacco products directive of 2014.

However, the directive left it to an expert committee to define the specific features of how the track and trace system should look – work which is still ongoing.

In November 2015, the European Commission estimated the legislative work on tracking and tracing would be finished by the end of this month, but a year ago it changed the schedule. It now expects the work to be finished by the end of 2017.

“It's perceived as a technical dossier. … [But] it is a public health dossier,” said Florence Berteletti, director of Smoke Free Partnership.

She said she is "happy" that the discussions are going in the direction that the "unique identifier code", which will be slapped on each packet of cigarettes, will be done by an independent third party.

"What still needs to be clarified ... is the definition of independence,” said Berteletti.

She is particularly on her guard against Codentify, a system that is promoted by the major tobacco producers as the best technology to provide for tracking and tracing.

Codentify is the tobacco industry's main candidate to fulfil the track and trace obligation. It was owned by tobacco giant Philip Morris International (PMI) until last year, after which it was sold to French company Impala, and rebranded as Inexto.

EUobserver wrote about the sale one year ago, and the circumstances that gave critics the idea that Inexto was a front company.

'Nothing to hide'

At the time, EUobserver could not reach Inexto's managing director, Philippe Chatelain, for comments, but earlier this year he reached out to us through an intermediary and agreed to an interview.

“I have nothing to hide,” said Chatelain, a Swiss engineer and one of Codentify's inventors.

He worked for PMI for over a decade, and developed a technology that produces unique codes for each cigarette package.

Through the Codentify system, PMI was able to fulfil a track and trace obligation it agreed to under a deal with the EU back in 2004.

The EU-PMI agreement, which also included a payment of around €1 billion to the bloc, settled an accusation that PMI had been smuggling its own goods to avoid paying taxes.

“I'm still very proud of this invention. We created a technology which works,” said Chatelain.

He said PMI sold the system because it decided the technology is “not their core business”. Impala wanted the technology because it saw it could roll it out in other sectors as well, said Chatelain.

There was nothing nefarious about the circumstances, he added.

The new company is dominated by sixteen former PMI employees, since Impala only wanted to conclude the purchase if they joined the new company.

It is located a stone's throw from PMI and several other tobacco companies in Lausanne because Chatelain demanded that his employees could stay there – the new parent company is based in Paris.

“We are independent,” he said.

'Don't trust Big Tobacco'

Of course Chatelain would say that, said anti-tobacco lobbyist Berteletti. “That's in their interest.”

She said she doesn't trust the tobacco industry, and said there were alternatives available to Inexto.

“Of course we don't trust them, and no one should trust them,” noted Berteletti, highlighting that tobacco companies have been caught smuggling their own goods, and heavily lobbied the tobacco products directive.

They are also heavily involved in the technical discussions about the track and trace requirements, which are coordinated by the European Commission.

Tobacco companies are advocating that the commission adopts an “industry-operated solution”, but not always using verifiable statements.

Fake endorsement

Take the following statement by the Digital Coding & Tracking Association (DCTA), a joint venture between PMI and three other tobacco companies, which promotes Codentify.

DCTA responded to a consultation invitation by the commission, arguing that the industry-operated system is “the most robust solution” and “endorsed by authorities across the European Union, including the European Anti-Fraud Office”.

But the head of the EU's anti-fraud office (Olaf) told EUobserver that it was not true.

“We do not endorse anything,” said Giovanni Kessler, director-general of Olaf.

“I was not aware of this statement that you are just reporting to us. … It is not for us to endorse, we haven't endorsed, we don't endorse, we will not endorse any specific way to do the tracking and tracing,” he added.

DCTA did not respond to a request for comment.

Independence

The EU's new tobacco directive says the “independence and transparency” of the track and trace system must be ensured, something which is also required by a World Health Organisation (WHO) treaty signed by the EU – the Framework Convention on Tobacco Control (FCTC).

Philippe Chatelain said that while Codentify is “maybe not compliant”, he is “100 percent sure” that Inexto complies with the EU directive, as well as with the FCTC, because the system was redeveloped “from scratch”.

“A government will have the control of the machine,” he said.

The EU commission told EUobserver in a written statement that no decisions have been made.

“Various policy options are being considered by the commission and analysis and consultation are still underway,” said a commission spokeswoman.

Florence Berteletti said she expected the commission to propose a draft legal act before the end of the Summer, but noted that member states will then vote on it, and could amend it.

She said she was “very pleased and reassured” that it is the commission's directorate-general for Health and Food Safety that has the lead, but noted that member states often don't send public health experts to the meetings of the subgroup on tracking and tracing.

Member states send customs experts

At a subgroup meeting last December, 26 member states sent an expert from their finance, tax, or customs department, while only six sent an official from their ministry of health.

"The member states send overall customs experts, and not public health experts. It's a shame,” said Berteletti.

She noted that tracking and tracing cigarettes is not only about making sure national governments receive the taxes they are due.

“Illicit trade ... puts on the market cheap products,” she said, adding that this stimulates consumption.

“If you put on the market cheap cigarettes, then young people will smoke them. If you keep the price high, then it has an impact on consumption and smokers may not quit, but may smoke less.”

Investigation

Scant evidence EU tobacco deal curbed smuggling

A ‘landmark’ agreement with tobacco company PMI was supposed to bring down cigarette smuggling. But it is very difficult to estimate the success of the deal, which is up for renewal in 2016.

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