Track and Trace is a volume-control system which monitors the manufacturing and distribution of tobacco products. Its stated aim is combatting the illegal trade of tobacco products in Europe. The European system entered into force in May 2018 and is up and running since May 2019 for cigarettes and fine-cut tobacco. Other tobacco products, including products which are not subject to any known illegal trade such as pipe tobacco, chewing tobacco or traditional European nasal snuff will have to be tracked and traced as of May 2024.
The system was mainly designed for and exclusively based on large-scale cigarettes manufacturing overlooking the traditional European tobacco products and the way these are manufactured and distributed.
The European Track & Trace system requires that each tobacco package carries a Unique Identifier (UI) code that will be scanned and recorded all along the distribution chain and transmitted to both the manufacturer’s and the EU-wide database, allowing authorities to trace and authenticate tobacco products. This required an entirely new level of data transfer, as well as a highly developed IT infrastructure, and renewed packaging machineries. The system leads to around 720 million scans a day at EU level.
The system requires that European manufacturers or importers of tobacco products request a UI for each individual package from an independent organisation, the ‘ID Issuer’, which has been appointed by the Member State authorities. Manufacturers or importers of tobacco products must also set up (and integrate) a database (‘Primary Repository’) to store all the data related to every individual package. All this information is then copied into an EU-wide database (‘Secondary Repository’), which is operated by another independent third-party that was appointed by the European Commission only five months prior to the implementation deadline. In addition, each tobacco pack also must carry a ‘security feature’ consisting of at least five authentication elements that are determined by each Member State for their own markets. In most European countries, this additional obligation required to upgrade the stamps commonly used for excise tax collection.
How does this system work?
What is wrong with Track & Trace?
The European Union, with Track & Trace, establishes a self-imposed export ban
According to the European Commission, all products manufactured in the EU must carry the European UI codes on the packaging, including products destined for export to third countries. However, these EU codes can and are incompatible with national tracking and tracing measures in place or being adopted in certain third countries; or can and are incompatible with third countries’ national packaging and labelling regulations. Due to the absence of international interoperability European manufacturers are facing a de facto export ban imposed by the EU.
In its Impact Assessment, the European Commission estimated that some 3.2 billion unit-packs of tobacco products are exported yearly, which represents approximately 11% of the products falling under the scope of Track & Trace. For traditional European smoking tobacco, chewing tobacco and nasal snuff, export represented approximately 46 000 tons in 2018. By including products destined for export, the European Commission created a barrier to trade penalising its “own” companies and recognised that only later as an issue that needs to be addressed.
In consequence, this self-imposed EU export ban introduces a significant distortion of competition by rendering European smaller and mid-sized companies uncompetitive. These companies do not have manufacturing sites all over the world which would have allowed them to simply shift production to outside of the EU.