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Failings of track and trace system once again highlighted

By February 8, 2018 February 26th, 2018 No Comments

EU Observer has published an interview with Luk Joossens of the Association of European Cancer Leagues. Mr Joossens correctly points out the need to step up the fight against illegal trade in tobacco and to implement an effective system to do so. His assertion, however, that it is too late for the European Parliament to veto the bill on a track and trace system is tinged with irony: regardless of whether the Parliament vetoes the bill or not, it is highly unlikely that the track and trace system will be implemented on time for 2019.

The referred Delegated Act on contracts with data storage providers is not the real problem, and it is rather caustic that some MEPs are worried it does not comply with the FCTC Protocol, whilst they failed to point that out for the implementing regulation that the Commission already adopted in December. What really is of concern is that the European Parliament allowed the Commission to adopt behind closed doors an Implementing Regulation that lacks coherence, set standards where no competency exists, establishes trade barriers for European companies, while failing to set standards where these are mandated and badly needed. It will be prohibitively costly and unworkable for mid‐sized and smaller firms, which will have to adapt their production facilities once again, just two years after they invested millions to comply with the labelling requirements of the TPD. Track & Trace obliges all companies in the tobacco sector to reorganise and modify their business and trading practices beyond what is necessary to establish a well-functioning track and trace system and beyond what the MEPs themselves and Member States required in 2014.

As Mr. Joossens says, “we do not know how it will work in practice”: neither the Commission nor the Member States know how the system will actually work. However, all three have continuously stated publicly that the system will work regardless. The real question, therefore, is not whether the MEPs should veto or not this Delegated Act, but what they can do to ensure that the Commission and the Member States do their utmost to facilitate the implementation of Track & Trace.

Peter van der Mark, Secretary General of ESTA said: “The need to implement a system to combat illegal trade is unquestionable. Illegal tobacco trade harms consumers, producers and government revenues. However, this does not make acceptable the introduction of an unnecessarily complex and costly scheme that is completely unworkable for smaller producers. The idea that it can be implemented on time for 2019 is in itself already completely unrealistic.

Read more about track and trace.


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ESTA members manufacture fine‑cut tobacco, pipe tobacco, traditional European nasal snuff and chewing tobaccos in 10 Member States and export their products across the entire world. Skilled craftspeople expertly apply age old techniques, perfecting the mixture of dozens of varieties, tastes, smells and flavours, continuing a centuries‑old tradition of fine European heritage. Up to the end of the last century, the manufacture of tobacco in Europe encompassed hundreds of small producers creating thousands of signature products. Over the past 30 years, smaller firms have been acquired by larger multinational companies or have ceased activities altogether, leading to employment reductions and the disappearance of traditional brands. In the manufacturing countries, tobacco production is often rooted in less advantaged regions and plays locally a key economic and social role. It deserves protection and at the minimum should be considered when developing regulation.

Read more about the European tobacco industry

Between 2008 and 2012, consumption of  fine-cut tobacco in the EU28 increased by 37%, even though the increase varies heavily per Member State. Because of the severe economic crisis, consumer disposable income was under pressure, impacting the growth of  fine-cut tobacco consumption. This increase demonstrates the price sensitivity of  fine-cut tobacco smokers. 
As the economic crisis subsided between 2012 and 2015, fine-cut tobacco consumption declined in the EU and the market adjusted, returning to its pre-crisis normal order. 
In 2016, sales of  fine-cut tobacco kept declining by 1.09% in the EU28. This long=term downward trend follows to an extent industry consolidation. 
Seemingly out of step, several eastern countries still experience percentage increases in fine-cut tobacco sales whilst starting at very low sales levels. This demonstrates the buffer function of fine-cut tobacco: cigarette consumers who can no longer afford this product find in  fine-cut tobacco a legal alternative to illegal cigarettes that are often smuggled from neighbouring countries outside the EU (see London Economics Study, June 2015). 
Sometimes fine-cut tobacco is mistakenly presented as a “hook” to smoking because of its relatively higher affordability when compared to cigarettes. 
The reality of the market shows a very different picture. In most European countries,  fine-cut tobacco was and still is a niche tobacco product enjoyed by “specialist” consumers and traditional tobacco enthusiasts who enjoy fine European craftsmanship. 
Few exceptions exist with high market shares in countries where fine-cut tobacco has a long history and forms part of the cultural heritage. In these specialised tobacco markets, the significance of fine-cut tobacco stems from its century-old local manufacturing. 
Read more about fine-cut tobacco
Every year, taxes on tobacco products raise more than €100 billion for EU governments. Tobacco tax policy must be delicately balanced to safeguard government revenues, protect fair competition, jobs and public health, whilst also deterring trade in illegal tobacco. Tobacco smuggling and sales of illegal tobacco products threaten this income and society at large. The fight against illegally traded tobacco is part of a wider effort to protect EU citizens. 
A successful implementation of Track & Trace will be of crucial importance, and requires workable standards that fit business and trading practices, making them likely to be internationally shared.
Read more about tobacco track & trace

The EU is characterised by a very diverse and flexible excise structure, which allows each Member State to set a balanced taxation of tobacco products respecting its national circumstances, interests and objectives.  Last year, excise revenues from smoking tobacco increased across the EU, even though sales declined. This clearly demonstrates the efficiency of the current flexibility left to national governments and that a “one size fits all” approach should not be considered. The few Member States (e.g. France, Netherlands) casting economic theory and the tax-bearing capacity of smoking tobacco aside had adverse effects with declining revenues whilst sales increased.

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An obvious correlation exists between the highest levels of illegal and non-­domestic consumption (e.g. France, UK, Ireland, Poland and Finland) and the highest taxation rates applied to fine-cut toconsbacco, in comparison with cigarettes.  The figures clearly show that any alignment of tobacco taxation, regardless of the products’ specificities, will prevent  fine-cut tobacco from fulfilling its buffer function, leading to increased illegal trade of cigarettes and driving down government revenues.

Read more about the relationship between tax and illegal trade