Track & Trace
ESTA believes that this secondary legislation is a clear example of bad law-making, and is far removed from the Commission’s avowed commitment to better regulation. These Acts lack coherence, setting standards where no competency exists while failing to set standards where they are mandated and badly needed. Where it correctly sets standards, many are too complex, making them unlikely to be internationally shared.
The problems with the regulation are myriad. For example, according to the implementing regulation, the competent ID Issuer is the entity appointed in the Member State in which the products are manufactured or imported, and should be recognised as such by other Member States. However, the regulation also allows Member States to derogate from this mutual recognition principle, mandating that its own appointed ID Issuer is the only competent entity for its market. This entirely defeats the internal market objective of the European Tobacco Products Directive. As a further example, the Decision on security features completely ignores the harmonisation purpose of the 2014 TPD by not setting uniform standards.
Many elements that are crucial for the operation of the track & trace system are still unknown today. For example, the obligation for tobacco products to carry a Unique Identifier also applies to products intended for export outside EU jurisdictions, even though these do not fall under the scope of the 2014 TPD. However, the Commission failed to anticipate that the EU Unique Identifier could be incompatible with existing packaging regulations in third countries. For example, plain packaging regulations in Australia and New Zealand prevent European manufacturers from exporting EU-made products to these countries, and it is still unclear whether EU companies will be able to as of May 2019.
Ultimately, implementing this tracking & tracing system will be extremely costly for mid-sized and smaller firms, risking further market consolidation. It obliges all companies in the tobacco supply chain to reorganise and modify their business and trading practices beyond what was necessary to establish a well-functioning track and trace system, as specified in the TPD. Whilst the Impact Assessment indicates an overall and annualised cost of 0,005216 EUR per packaging unit, an estimate which was solely based on the cigarette production speed and volume of the largest companies, it is already clear from the little information that is available that this system will cost 10 to 15 times more for smaller companies manufacturing fine-cut tobacco.
Tracking and tracing tobacco products in the EU means that the movements of around 29 billion tobacco packages per year are monitored, or 80 million units per day.
The European Commission adopted the Track & Trace Regulation disregarding smaller, mid-sized and family-owned companies. It left manufacturers and Member States with the responsibility to implement an incredibly complex system with insufficient standards, too little harmonisation, inadequate support, and not enough time. For these reasons, Member States should allow flexibility to ensure the system can become operational by the May 2019 deadline.