Keeping ‘Track & Trace’ on the new Tobacco rules

The ‘track and trace’ proposals in the EU Revised Tobacco Products Directive, due to be introduced on 20 May 2019, put in place a new method of tracking sales of legitimate tobacco products through the supply chain.

Under the new rules manufacturers have to tag products both visibly and invisibly on individual packs, cartons and containers. To sell tobacco from their outlets, retailers must apply for an ‘economic operator identifier code’ for their business and a ‘facility identifier code’ for each store. They will not be able to purchase tobacco products without showing these codes. And wholesalers selling tobacco to retailers will have to check the retailers’ codes in every sale and advise their retail customers of their duties.

The Track & Trace rules follow on from the Tobacco Products Directive, ‘TPD,’ which came into force in May 2017. Will Hill, Head of Legal & External Affairs at BAT takes up the story:

“The first thing to remember is that ‘TPD’ is actually ‘TPD2.’ The Directive came to a head in 2014 and was voted on in 2015. ‘TPD’ covers the tobacco industry and e cigarettes. It takes in the combined health warnings, as in the text base and photos, which the law says must take up 65% of the pack. It also stipulates the new minimum pack size of 20 sticks for cigarettes and 30g for hand rolling tobacco.

“‘TPD’ came into force on 20 May 2016. That was the manufacturing cut off point, after which all products had to have the new health warnings and the pack sizes changed. For the consumer-facing part of the industry, 20 May 2017 was when everything had to be ‘clean’ and everything the retailers had on shelf had to be complicit.”

“The UK government imposed the “plain packaging” rules after the EU passed the Tobacco Products Regulations 2015 Directive. When an EU directive is passed it has to be transposed into member states’ law, hence we had the Tobacco & Related Products Regulations Act 2016, or ‘TRPR’, which gave the UK industry a year to comply.

“The other hangover is Track & Trace, which goes live on 20 May 2019. The delay on implementing T&T up to now is due to the difficulty in securing agreement on how to do it. Different countries have different ways to have their excise revenue covered: some countries have tax stamps, others don’t.

“Once TPD is approved at EU level, responsibility for implementing it falls on different people. Manufacturers have to notify every new product to the UK government via the Department of Health, specifically Public Health England for tobacco and MHRA for e cigarettes.

“With Track and Trace a lot of enforcement is down to HMRC/Customs and Excise and the Border Force. The UK is facing a perfect storm, with retailers here charging high prices for tobacco products but consumers having easy access to cheap prices in other countries, 8 Euros here versus 3 Euros elsewhere. It’s the Border Force’s job to stop mass smuggling, but the criminals are getting much more sophisticated, bringing in as much as 30kg at a time.”

How The Suppliers See It

“The entire industry has been engaged with the EU on this initiative,” says Will Hill, Head of Legal & External Affairs at BAT, “with people from the industry articulating their views, as well as health professionals and consumer groups.” Imperial has also closely monitored developments on T&T since the adoption of EUTPDII and the secondary legislation, says Chris Street, Head of Sales and Marketing Operations, Imperial Tobacco.

The products covered: The ‘track and trace’ proposals cover cigarettes and hand rolling tobacco as of now,” says Will Hill at BAT. “Other tobacco products will be included from 2024. The makers of pipe tobacco and snuff are generally small specialist companies and track and trace would be a massive investment for them. E cigarettes aren’t covered at all by Track & Trace.”

Chris Street at Imperial Tobacco confirms that EUTPDII secondary legislation on T&T and SF applies to all tobacco products, but not vaping items:

“Factory Made Cigarette (FMC) and Roll Your Own (RYO) products must be compliant from 20 May 2019. Noncompliant FMC and RYO products already on the market before this can remain on sale until 20 May 2020. Other tobacco products like cigars and pipe tobacco must be compliant by May 2024, and can remain in the retail trade until May 2026. Vaping products are not covered by the legislation and therefore not subject to T&T or SF requirements.”

What the shoppers will see: Will Hill at BAT reckons we won’t see any impact on consumer sales, “as they shouldn’t know it’s happening,” though independents will have to scan products out and wholesalers will have to scan them in and out.

Chris Street at Imperial Tobacco agrees: “We don’t believe the implementation of T&T will have any discernible impact on tobacco sales in independents, wholesalers or supermarkets. However, the system will help identify illicit tobacco products in the supply chain more easily and combat the growing trade in illegal tobacco.”

Life after Brexit: After we leave the EU, Will Hill at BAT is firm that it won’t be the end of Track & Trace:

“The TPD has been translated into UK law, so it’s here to stay. The final form of Track & Trace that we have post Brexit depends on the deal, but the database will sit with the European Commission so whatever happens, it will exist in some shape or form. Also, the public health community is enthusiastic about it.”

Chris Street at Imperial Tobacco concurs: “The legislation has now become UK law. Irrespective of the UK leaving the EU, the UK government appears to remain committed to introducing a global Track and Trace system for tobacco products under the World Health Organization Framework Convention on Tobacco Control Illicit Trade Protocol.”

Keeping it legal: The requirements of Track & Trace are different to the regulations controlling sale of cigarettes and tobacco, because they are about controlling smuggling, says Will Hill:

“The other regulations in the TPD were about public health, and were intended to reduce tobaco consumption. This Track & Trace element focuses on illicit product.”

Chris Street at Imperial Tobacco agrees: “The Track & Trace requirements are significantly different. EUTPDII secondary legislation requires tobacco products to be marked with a unit level unique identifier (UI) plus additional security features. As far as tobacco manufacturers are concerned, once they have received their UIs they can then commence producing compliant packs.

There will be penalties for retailers and wholesalers who don’t comply with the new regulations, but they have not been spelt out yet.

* Will Hill, BAT: “We don’t know the penalties yet but under the Tobacco & Related Products Regulations Act 2016, or ‘TRPR,’ there are custodial sentences and fines. There are two elements of crime to this, complying with the Track & Trace rules and avoiding duty, either as an individual or corporately.”

* Chris Street, Imperial Tobacco: “HMRC is leading the implementation of T&T in the UK and sanctions will be issued for non-compliance. Final confirmation around enforcement has yet to be issued by HMRC, but traditional penalties for non-compliance include imprisonment, a fine, or both.”

* Will Hill, BAT: “As an industry the manufacturers, retailers and wholesalers see it as a significant undertaking. There’s a financial cost to all this and a lot of time will be taken up but being pragmatic, it needs to be done.

* Chris Street, Imperial Tobacco: “Retailers and wholesalers across the UK are currently working hard to implement the new requirements, which are complex and require significant preparation and planning. Imperial continues to work closely with our valued customers across all parts of the tobacco supply chain to help them understand and implement the new requirements.”

BAT, JTI and Imperial Tobacco all have dedicated teams working on this initiative: n Will Hill, BAT: “As with any significant change, we have a crossfunctional team covering the supply chain, financial regulatory affairs and trading. We’re also dealing with it through our channel sales people.”

* Chris Street, Imperial Tobacco: “Imperial takes its regulatory obligations seriously and has established a dedicated team of experts across the EU and UK, who are working to ensure compliance by 20 May 2019.”

* Mark Yexley, JTI Head Of Communications: “JTI has a full project team at both local and HQ level dedicated to the implementation of this legislation in the UK and across the EU. This will only be possible with collaboration between the manufacturing industry and the wholesale sector as a whole. To ensure timescales are met and continuity of supply is maintained, this collaboration should be a priority over the coming months.”

** STOP PRESS **

HMRC are hosting a series of guidance sessions throughout Autumn 2018 to help the trade understand how the legislation will impact their day-to-day business practices. Tobacco manufacturers and importers, wholesalers and cash and carry depots, logistics operations, distributors and symbol group retailers are invited to participate in these sessions.