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ONTRACKThe T&T system under the TPD is aimed at combatting illicit trade within the European Union. Illicit trade amplifies the negative effects by making it cheaper for people to buy tobacco products. Illicit tobacco products are less likely to comply with EU rules, such as the obligation to carry combined health warnings. As clarified in the IAs, the T&T system is also being used to comply with Article 8 of the Protocol to Eliminate Illicit Trade in Tobacco Products to the World Health Organization’s Framework Convention on Tobacco Control, which was ratified by the European Union. To tackle illicit trade, the TPD provides for the establishment of an EU-wide T&T system for the legal supply chain of tobacco products under Article 15. The T&T system is complemented by a system of security features to help detect counterfeit products under Article 16. Tracking and tracing tobacco at the pack level from the manufacturer down to the last economic operator before the first retail outlet, will allow the authorities to follow the route and source of genuine product.
The “first retail outlet” is defined under the IAs as the facility where tobacco products are placed on the market (i.e. made available to consumers in the EU) for the first time, including vending machines. Thus, economic operators before the first retail outlet include all direct and indirect customers along the tobacco supply chain as distributors, wholesalers, cash & carries, key accounts with central warehouses, vending vans, warehouses, transporting companies, and importers involved in the trade and ownership of tobacco products.
There are two key steps:
(1) Appointment of ID Issuer
Each Member State must appoint an independent ID issuer, which is charged with two critical tasks.
First, the appointed ID issuer must generate UIs, composed of numbers and/or letters, for unit packets, and where requested by economic operators, for aggregated packaging. These UIs need to be applied to the product within a period of six months.
Second, ID issuers are also responsible for issuing 'identifier codes' for all relevant economic operators, facilities and machines, so they may be easily identified under the system. These identifier codes are needed in order to request for a UI. These identifier codes are also needed when sending logistical and transactional information to the repositories system.
(2) Setting up of Repositories System
In the meantime, each manufacturer and importer of tobacco products will be required to conclude a contract with a data storage provider to host the T&T data exclusively related to their products (“primary repository”). The Commission will examine each draft contract and the suitability of all proposed providers, particularly in terms of independence and technical capability, and thereafter, approve or reject them. In the absence of a reply by the Commission within three months, the contract and the provider will be deemed to be approved.
Once the primary repository providers have been selected and approved, the Commission will be responsible for selecting the provider of a 'secondary' repository. The secondary repository will store all T&T data (including those stored in the various primary repositories) and be responsible for ensuring that Member State authorities have access to a single data set. The repositories system will provide authorities with an overview of all product movements.
Once these key steps have been completed, the T&T system will begin to take shape. The relevant tobacco products will begin to be marked with UIs, and their movements scanned and recorded throughout the supply chain as of May 20th 2019 for cigarettes and roll-your-own/make-your-own products and from May 20th 2024 for other tobacco products (OTP).
Subcategories included in OTP definition:
Nicotine pouches (without tobacco) are not in scope of T&T requirements of TPD.
All packs will carry a UI (track and trace code). Depending on the manufacturer, the UI is likely to be located in a black box at the bottom of the pack. There may also be minor adjustments to other features on the pack in order to accommodate that black box.
The UI, which is applied to the pack at the time of production, contains, among others, the following information:
This UI enables the authorities to track every step in the supply chain, from the factory to the first retail outlet.
Each participant in the tobacco supply chain will need to prepare and assess how the TPD and the IAs will impact their business processes. Please find below some of the matters that should be considered:
The IAs provide that cigarettes and make your own / roll-your-own products manufactured prior to May 20th, 2019 without UIs may still be distributed within the supply chain (from factory to retail store) until May 20th, 2020 (i.e. without a requirement to scan). For other tobacco products manufactured prior to May 20th, 2024 without UIs may still be distributed within the supply chain (from factory to retail store) until May 20th, 2026 (i.e. without a requirement to scan).
However, from May 20th, 2019 for cigarettes and make your own / roll-your-own products and from May 20th 2024 for other tobacco products economic operators are required to scan and report movements and transactions of any new TPD-compliant tobacco SKUs (i.e. those packs that contain UIs) which they have in stock.
Economic operators can purchase “off the shelf” solutions that provide both the hardware and software required to scan and transmit TPD data.
Alternatively, they can choose to build their own solutions, or update their existing systems to become TPD enabled.
If they already have hardware, then they may be able to use TPD compliant software which is available in the market, but due to the technical T&T requirements of TPD only a limited set of hardware will be compatible.
If hardware is not already in place, basic equipment such as a smartphone and/or scanner for higher volumes in order to ensure the capability to scan will likely be needed, but this will be dependent on each economic operator’s business needs and software selection.
Ultimately, it is each economic operator’s responsibility to adapt its operational and logistics systems to comply with the T&T requirements of the TPD and the IAs.
Economic operators will purchase the hardware from their supplier of choice, bearing in mind the amount that is subject for reimbursement, as communicated by the SPOC. The hardware (scanner) that is necessary to support TPD requirements is already available in the market.
Economic operators have various options when assessing their software needs for TPD compliance. The economic operator may choose to purchase an off the shelf solution from the supplier(s) available in the market, choose to develop/enhance their existing internal systems, or alternatively engage directly with another development partner capable of delivering a TPD compliance solution.
Depending on their business needs and the suitability/complexity of their existing solutions, economic operators may be able to enhance their existing solutions to support TPD. Again, they will do this by using their own internal resource, or by engaging directly with a development partner.
Due to the format and codes (UIs) being the same for OTP as they are for cigarettes, make your own / roll-your-own products, the same equipment solution can be used for the purpose of OTP T&T scanning.
The implementing act specifies four types of data carriers for encoding the TPD information. Decoding the information from the data carrier depends on the encoding of the information performed by the manufacturers, and therefore, its suggested for the economic operator to evaluate each supplying manufacturer’s encoding specifications to ensure his solution of choice has the ability to decode the correct information.
Attached is the encoding specifications prepared by BAT, JTI, IB and PMI, which is an open standard that anyone is free to use. Standardisation of the encoding between manufacturers greatly simplifies the decoding of information, and improves the possibility of using a single solution for scanning tobacco products.
DCTA EU-TPD Coding Details
All economic operators will have to adapt their processes to make sure scanning and transmitting data according to TPD principles will be carried out. The current level of automation and the set-up of the operations will affect any adjustments to the Route to Market. For instance, a highly automated economic operator will have different points to consider compared to an economic operator with little to no automation. It is critical that the process is carefully reviewed by the economic operator to understand where scanning has to take place and when data transmission has to happen – either before or after the event. These duties will have an impact on all economic operators.
Penalties for non-compliance with the requirements of the TPD differ per Member State. Also, under the IAs, a Member State may deactivate the EOID of a non-compliant EO in the system.
Click here for all the Article 15, TPD related documents that the European Commission has made available for the public.
The actual procedure needs to be defined by the ID issuer appointed in each Member State. The Implementing Acts provide for the following:
Please refer to the specific articles for additional information. Click here to access the official Journal and pick the preferred language:
Once an economic operator makes his choice of the supplier to purchase the hardware, they can arrange the details of setting up and training directly with the supplier.
Economic Operators can go to a supplier of their choice but will receive a reimbursement according to the amount calculated on the SPoC portal.
Economic Operators are free to select any supplier or equipment of their own choosing, making sure that the selected solution enables the Economic Operator to read and transmit the recorded data of the tobacco products to the appointed data storage facility.
Once the Economic Operator receives the level of reimbursement for the equipment from the Single Point of Contact (SPoC), they can contact the supplier of their choice and arrange the details for the acquisition of the needed solution for their business directly with that supplier. After providing proof of acquisition, order or other proof of installment of TPD-related equipment to read and transmit recorded data for tobacco products for your business to the SPoC, the SPoC will assess your submission and proceed with the reimbursement up to the amount calculated and communicated to you through the SPoC portal.
If a manufacturer does not participate in the model, the Economic Operator will need to contact it directly to seek its contribution to the necessary equipment costs.
The industry has selected a third-party company, SGS Société Générale de Surveillance SA (“SGS”), to act as the SPoC assisting all Economic Operators (Economic Operators) throughout the reimbursement process. With more than 95,000 employees, SGS is the world’s leading inspection, verification, testing and certification company, and it is recognized as the global benchmark for quality and integrity. SGS recognizes the fundamental importance of confidentiality, data privacy and security and is committed to protecting the privacy of all its customers and partners across all its business operations.
All Economic Operators involved in the trade of tobacco products from the manufacturer to the last Economic Operator before the first retail outlets, need to obtain the equipment that is necessary for the recording of the tobacco products purchased, sold, stored, transported or otherwise handled. The “first retail outlet” is defined as the facility where tobacco products are placed on the market (i.e. made available to consumers) for the first time (e.g. supermarkets, gas stations, tobacconists, newsagents, etc.) Track & Trace finishes with the outbound scanning to the first retail outlet. Under the lAs, the only obligation of operators of first retail outlets is to secure an economic operator ID and a facility ID.
For the reimbursement (claims) calculation, SGS is using factual economic operator data and objective criteria verified by independent consultant company:
The equipment unit equivalent is that equipment assessed as necessary for economic operators to be able to read and transmit recorded data of tobacco products to the repository system in order to comply with their reporting obligations according to the TPD and the Implementing Acts issued by the European Commission.
The solution is composed of scanning devices with software linked to a public cloud and has the following capability:
Several logistics operational processes are covered, per Annex 2 of the Implementing Acts:
Additionally, the cloud allows for several administrative tasks:
Technical specifications might be found on the SGS OnTrack platform or the EUROPEAN COMMISSION webpage by using the link below Technical Specifications
You can prepare for the registration by gathering information about your business; in particular by:
The “scanning unit” includes the equipment, comprising the hardware and software, that is necessary for the recording of the tobacco products purchased, sold, stored, transported or otherwise handled.
Before an Economic Operator proceeds with his reimbursement claim, he can contact the SGS helpline through the available options provided in the OnTrack portal and ask SGS to amend the appropriate fields. Depending on the level of amendments required, SGS might need to audit and validate the accuracy of the input.
The SPoC will not provide this information. Any integration with an operator’s local systems needs to be carried out by the Economic Operators themselves. It is outside the manufacturers’ obligation. The Economic Operator can engage with a solution integrator to develop a solution that meets their individual requirements, but this will be at their own cost.
The participating manufacturers acknowledge the fact that a number of Economic Operators have been working in advance to accommodate the needed changes deriving from TPD 2019 and might have already invested in sourcing the equipment needed to read and transmit the recorded data to the repositories system before the SPoC model goes live or in advance of the OTP May 20th 2024 deadline. These Economic Operators will still need to apply through SPoC, provide their input and process their facility claims like every other Economic Operator.
When the process reaches the step of a reimbursement claim, an Economic Operator can provide proof of purchase or acquisition of the needed hardware and software, which may also include proof of investment made in the past towards TPD compliance. SGS might need to audit and validate the accuracy of proof of investment and will then compensate the Economic Operator up to maximum of the calculated reimbursement amount.
The industry recognizes that any previous reimbursement may not be fully sufficient to cover any extra equipment now required to scan and report additional volumes of OTP. Therefore from 2024 an Economic Operator can potentially supplement their original claim if the additional impact of OTP is sufficient to justify this, as calculated again by the SPoC.
SGS is treating with confidentiality all information provided to them. SGS has taken all necessary steps and security precautions in accordance with world-recognized industry standards as well as Art. 5(1) f and Art. 32 of the GDPR to minimize the risk of confidentiality, integrity and availability losses of any data provided by the Economic Operators processed by SPoC. The Data will be hosted and processed in Europe. The main data center of Microsoft is located in NL/Amsterdam, with DR (disaster recovery/fail-over) being located in IE/Dublin.
Please refer to clause 1 (d) of Part 1: SGS General Conditions of Service in the SGS On-Track Terms of Use available in the portal.
All data is treated confidentially and only processed to the extent it is necessary for the performance of the Single Point of Contact for the provision of equipment under Article 15 (7) TPD II.
Competitively sensitive data of the manufacturers or Economic Operators will not be shared with the Participating Manufacturers or Economic Operators. SGS shall keep confidential all information, instructions and documents that are submitted by the Economic Operators through the web portal and SGS shall not use or authorize or permit the use, copy or disclosure of Economic Operators’ submitted Information or any part of it except:
Note that the above shall not apply to Economic Operators’ submitted information which:
All data is treated confidentially and only processed to the extent it is necessary for the performance of the Single Point of Contact for the provision of equipment under Article 15 (7) TPD II. SGS processes data in accordance with Article 5 (1) (f) and Article 32 GDPR. It has taken all necessary steps and security precautions in accordance with world- recognized industry standards to minimize the risk of confidentiality breaches, integrity and availability losses of Participating Manufacturers’ and Economic Operators’ Personal Data that is processed to provide the Services. Data is stored in the EU with separate centers for the main data facility and the disaster recovery facility for back up.
SGS is the world’s leading inspection, verification, testing and certification company. We are recognized as the global benchmark for quality and integrity. With more than 95,000 employees, we operate a network of more than 2,400 offices and laboratories around the world.
What to know more about Tobacco Products Directive? Who is eligible to apply for reimbursement? How to register a reimbursement request? Do not hesitate to contact our support team.