EU Report Backs Joint Effort to Trace Illicit Cigarettes


A Europe-wide system to track cigarettes should be run by the industry together with independent third parties, according to a draft report commissioned by the EU, in a blow to the companies hoping to secure an individual contract and big tobacco groups.

A new programme to trace illicit cigarettes is due to be up and running by May 2019, as specified by new EU tobacco legislation.

The measures are designed to prevent the smuggling and counterfeiting of cigarettes, which the European Commission says costs 10bn a year in lost revenue.

Under the new laws, EU countries must ensure that all packets of tobacco products are "marked with a unique identifier' and security stamp, in order to track the packet from factory to shop floor and ensure its legitimacy.

The European Commission is deciding whether to allow the tobacco industry to implement the track and trace programme, or whether it should be given to a third party.

The leaked draft report, seen by the Financial Times, says that tobacco companies should work with a number of third parties to implement the system.

The tobacco industry has argued that it should be allowed to run the system itself, saying that external influence would cause disruption. "I understand the need to trace, but I don't see why we need to give millions of profit to [a third party],' said one senior official at a tobacco company.

Anti-tobacco campaigners say that the industry cannot be trusted, however, given past allegations that some big tobacco groups have benefited from the smuggling of and illicit trade in cigarettes.

The draft report concludes that a mixed option scored highest on a range of measures, including "interoperability with other systems and ease of operation', and said that a solution operated solely by the tobacco industry would be the worst of the three possible outcomes.

The recommendation comes after the EU earlier this year ended a controversial $1.25bn tracing deal with Philip Morris International agreed in 2004, following criticism from lawmakers. MEPs had urged the commission not to renew the agreement, saying that it was ineffective and inappropriate.

The EU report adds that giving the contract solely to a third party would be technically unfeasible compared with the other options and could disrupt manufacturing. "The potential negative impact on the production process is high compared with the other two alternatives,' it notes.

Sicpa, a Swiss company which produces authentication technology, had been tipped as a favourite to land the contract.

Yet Sicpa, which plays a central role in the printing of European banknotes, has come under scrutiny in recent months over alleged corruption.

Its Brazilian arm is being investigated by Brazil's federal police over allegations that it paid bribes to secure contracts. Sicpa insists that it has not been involved in any irregularity, and is co-operating with the Brazilian authorities.

The report also suggests that the system is unlikely to be in place by the May 2019 deadline stipulated by the legislation, noting that "more time is needed "to establish the integration of such systems'. Enditem