Making sense of Track & Trace

Adult smoker

The implementation of the Track & Trace legislation has been little short of shambolic with retailers having only a few weeks to register for the scheme despite countless months of preparation by HMRC ­– but what will it mean for you?

by Antony Begley

The government doesn’t have a great record when it comes to implementing new legislation around tobacco control in its various forms but the latest batch of rules – broadly referred to as Track & Trace (T&T) – has taken incompetence to a new level. Despite the legislation being in the planning for many months, it still took HMRC until just a few weeks ago to appoint someone to manage important elements of T&T which now only leaves retailers about three weeks to register before the legislation comes into force on 20 May.

As always, retailers are left with no choice but to suck it up and do as they are told, despite concerns over how effective T&T will be in achieving its aim of stopping illicit products entering the legal tobacco supply chain. At the end of the day, T&T is unlikely to have much of an impact on retailers, other than the obligation to register.

The real impact has been, and will continue to be, on manufacturers and wholesalers. Duncan Cunningham, Head of Corporate & Legal Affairs at Imperial Tobacco UK&I, comments: “Implementing Track and Track has been a significant project for us. Regulations state that all factory-made cigarettes (FMC) and roll your own (RYO) products must be compliant from 20 May 2019.” That has been a huge project for tobacco manufacturers, though FMC and RYO products already on the market before this date can be sold until 20 May 2020.

Mark Yexley, Head of Communications at JTI UK, also adds that wholesalers and retailers will continue to be able to sell cigarettes and RYO tobacco manufactured before 20 May 2019 up until 20 May 2020 without using T&T.

He says, however, that JTI UK is similarly committed to tackling the problem of illicit tobacco which has reached huge proportions. “HMRC estimates that some 15% of the cigarette market and 28% of the RYO market is illicit,” he says. “That equates to around £43.5bn of lost tax revenues since 2000.”

So what is Track & Trace?

Recognising the threat posed by the illicit tobacco trade, the revised European Tobacco Products Directive (EUTPDII) introduced secondary legislation on T&T and Security Features for all tobacco products. The means tobacco products need to be marked, says Cunningham, with “a unit level unique identifier plus five additional security features”.

In other words, it’s supposed to make them more difficult to produced fake packs – something which was obviously made an awful lot easier for criminals by the introduction of plain packs in 2016. Nonetheless, the idea is to stop illicit products entering the legal tobacco supply chain.

What do retailers need to do to remain compliant?

Once the T&T system is in place on 20 May 2019, all retailers will need to scan tobacco products into their stores. Retailers will also need to register and apply for a facility code by visiting the HMRC website at Retailers will require to have an Economic Operator ID Code for their business and a Facility ID Code for each of their stores selling tobacco. They can register for their Track & Trace ID codes from 30 April, HMRC has finally announced.

After a lengthy delay between announcing how Track & Trace would work and appointing someone to facilitate it, HMRC eventually handed the task to security and anti-counterfeiting specialist De La Rue at the end of February. The firm will start issuing IDs from 10 May, only 10 days before the legislation comes into effect.

There will, however be “minimal noticeable changes to retailers as a result of the legislation and no impact on customers”, comments Yexley.

How are the major manufacturers helping retailers with Track & trace?

“Imperial takes its regulatory obligations seriously,” says Cunningham. “We have established a dedicated team of experts across the EU and UK who are working to ensure compliance by 20 May 2019. Members of Imperial’s project team visited as many of our partners in the supply chain as possible, communicating the regulations, the possible impact on their businesses and the steps they need to take to ensure compliance.

“We are also continuing to raise awareness and build AIT advocacy among retailers, consumers, law enforcement, industry and politicians. At Imperial we are currently doing this via campaigns like Suspect it? Report it!”

How will the legislation affect wholesalers?

The legislation will impact wholesalers more heavily than retailers, especially in terms of specific equipment and scanning, since T&T’s tracking element ends with the outbound scanning to the first retail outlet.

What is the impact on manufacturers?

Ensuring readiness for Track & Trace across the supply chain presents a significant financial and logistical challenge for tobacco manufacturers.

“We believe it is essential, however, in stopping illicit tobacco products from entering the supply chain,” comments Cunningham, adding that: “We are fully supportive of this objective.”

What will the consequences of the legislation be for the industry and for retailers specifically?

Retailers will need to register and apply for a facility code to be able to receive tobacco orders from their suppliers or to collect stock from cash and carry depots.

Will it work?

According to JTI’s Yexley, the answer is a broad and qualified “yes”.

He comments: “Strict enforcement will be crucial for the legislation to have the desired effect on the illicit trade. The new security features will hopefully make it harder for criminal gangs to produce counterfeit products and the codes will act as a deterrent for retailers who are selling illegal tobacco alongside genuine as they could potentially lose the right to trade tobacco.”

He concludes however that “it’s more important than ever for retailers to report instances of illicit tobacco being sold in their area, rather than risking their tobacco business by engaging with the illicit trade”.