New Tenders Emphasise Need for Traceability on Multiple Products

Over the past few months, a number of interesting tenders for tax stamps and track and trace systems have been issued by various revenue authorities across the world. Most of these tenders are characterised by two things: 1) their need for extensive systems that cover physical tax stamps, secure track and trace, and even production line monitoring; 2) their need for systems that cover a wide range of products.

Here, we provide a round-up of some of those tenders.

Tax stamps and traceability for Mauritius

The Mauritius Revenue Authority (MRA) has issued a tender for secure excise stamps with accompanying traceability system. The contract is for two years for the following annual quantities: 

• Wet-glue paper cigarette stamps in sheets – 55 million

• Pre-cut cigarette stamps – 6 million

• Self-adhesive paper spirits stamps in reels – 13 million

• Self-adhesive, round polymer wine stamps in reels – 8 million

• Self-adhesive, polymer beer stamps in reels – 2 million.

The closing date for submission of bids is 14 July 2021.

All stamps must carry visible and invisible security features. The cigarette and spirits stamps, in particular, must carry at least two features that consumers can use to visually verify the product, and there must be at least five invisible features.

The specific features that the tobacco stamps must carry are:

• Two kinds of invisible fibre, fluorescing yellow and blue, incorporated into 70 gsm, UV-dull paper substrate.

• Multi-colour UV dots, also incorporated in the substrate.

• Guilloche pattern.

• Microtext.

• Image that is only visible in UV light, plus name of printer also visible in UV.

• MRA logo in thermochromic ink reacting at 35°C. The bidder should advise how MRA field inspectors can check for this feature without removing the plastic wrapper on the cigarette pack.

• An image (or text) manipulated at a microscopic level to generate a large image in the background of the stamps. For example, the words ‘Mauritius Revenue Authority’ might be used to generate an image of the Mauritian coastline.

• Taggant-coated holographic stripe allowing for yes/no or unique identification with an electronic reader. The stripe should be overprinted with at least three colour guilloche patterns.

The stamps for spirits, wine and beer are also required to carry most of these security features.

All stamps must be serialised with a unique alphanumeric code, containing a check digit verifier generated by an algorithm. The unique code must be linked to a secure database, containing information that includes excise stamps in stock and in use; specific stamp ranges or designs allocated to a particular manufacturer; damaged and unusable stamps; irregularities such as fraudulent use and other acts of non-compliance.

Mauritius has been using tax stamps on cigarettes since 2008 and on spirits since 2013. In 2020, tax stamps were extended to wine and beer. The tender process for the procurement of the stamps is carried out every two years and is open to national and international bidders.

Tax stamps and production monitoring in Georgia

Georgia has issued a tender for the provision of excise stamps in tangible (ie. physical stamp) and intangible (ie. direct marking) form. The deadline for submission of bids is 22 July 2021.

The law in Georgia mandates the use of tax stamps on excisable alcoholic beverages (including beer but not including wine, which is not excisable); tobacco products (including raw tobacco and tobacco waste); and liquids with or without nicotine, for use in electronic cigarettes. In addition, non-alcoholic beverages, including mineral water and fresh water, are subject to mandatory marking.

Georgia has had a tax stamp and traceability system in place for a number of years, consisting of paper-based tax stamps on tobacco products and spirits, and serialised secure on-product marking for beer, mineral water and soft drinks, provided by SICPA.

The tender documents include a useful breakdown of the number of stamps/direct marks issued in 2018-2021 for each product category. In 2020, for instance, 74.4 million stamps/marks were issued for beer, 7.9 million stamps for spirits, 313.7 million stamps for tobacco products, and 606.2 stamps/marks for non-alcoholic beverages – for a total of 967.5 million stamps/marks in 2020.

The tender requires physical stamps to be supplied as either self-adhesive or dry labels and to carry at least four authentication elements: one overt, one semi-covert, one covert, and one forensic. The direct marks must also carry authentication features to protect them against duplication and forgery.

Both the stamps and direct marks must adhere to different substrates (such as cardboard, metal, glass, or polycarbonate), and be compatible with high-speed automated label application equipment and production lines.

Each stamp/mark must carry a unique and encrypted identifying code in the form of a 2D barcode, which is recorded in a central traceability system. Bidders are required to provide access to an iOS and Android compatible smartphone app, allowing the user to verify the stamped product by scanning the barcode and retrieving information from the central system.

Furthermore, the solution provider is required to install and configure production line monitoring equipment, which will ensure that each product is properly marked, and each unique code recorded in the central database, along with information such as product category, brand, product name and volume, corresponding tariff class, manufacturing location, production line, and date and time.

The production monitoring system must be able to transfer production information to a central database in real-time. It must also be able to detect defects in the marking process and generate relevant alerts, as well as integrate with the production lines so as to be able to halt their operation, in the event of a defect being identified.

For imported products and local, low-speed, partially automated production, bidders must provide an application that allows economic operators to record the usage of tangible stamps and corresponding production information in a central database.

With regard to field inspection, bidders must furnish government agencies with 100 electronic field inspection devices for authenticating the physical and digital elements of the stamps and marks and for tracing product-related information via the unique identifier on the stamps. The devices must be capable of authenticating stamps either when connected to telecommunication networks or when offline. They must also be equipped with GPS functionality in order to automatically capture and report the location of an inspector.

Bidders must provide a central database system, hosted in a secure location defined by the Georgia Revenue Service. The database will record all events related to the production, import and inspection of the products.

Bidders must also demonstrate the concept of how a so-called command and control centre will be structured and how it will ensure the monitoring of deployed equipment, effective production and provision of services.

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Tax stamps and production monitoring in Malawi

The Malawi Revenue Authority (MRA) has issued a tender for a tax stamp, monitoring and authentication solution for the local production, importation, and distribution of tobacco, spirits, wine, beer, maheu (non-alcoholic drink made from fermented maize), soft drinks, energy drinks, bottled water and sugar. The deadline for submission of bids was 18 June 2021.

All tax stamps must contain the following security features:

• At least one visible security feature to assist unaided visual authentication of the stamp.

• At least one security feature to assist traders such as importers, wholesalers, distributors, and retailers to authenticate the stamps applied to products under their custody, through a smartphone or tablet.

• At least one invisible security feature, verifiable by smartphones/tablets or other devices to assist MRA field inspectors.

• At least one forensic element to unequivocally assist laboratory analysis and legal procedures.

The tax stamps must also be tamper-evident and able to be applied to different substrates such as cardboard, metal, glass, and polycarbonate. And they must be compatible both with high-speed automated printing and scanning equipment and low-speed manual application processes.

Each stamp must be uniquely identified by a code that is presented in both alphanumeric and secure 2D barcode form. The codes will be generated by the solution provider and stored in a secure central database. They will contain data that will be defined during the design phase.

The tender also calls for the solution provider to install and maintain production line monitoring equipment and systems to ensure that products are correctly marked, counted, and activated, in near-real time. This will enable MRA to reconcile the number of tax stamps printed against the number of stamps counted or damaged.

Upon activation, the unique code on each stamp is associated with the manufactured product and its corresponding production information, such as brand, manufacturing location, date and time, and production line.

The solution provider is also required to develop an app for smartphones/tablets and other devices, to enable both field inspectors and the public to scan the tax stamp on products in the market to immediately determine their authenticity.

The app should be able to connect to the central database and other internal systems while the officer is out in the field.

It should allow him to record locations and events, as well as upload tax stamp information to the central system through a secure and encrypted connection. It should also allow for data to be stored locally when there is no connection.

The solution provider will be responsible for creating a data management system to receive, store, process, report and make available all uploaded and recorded data gathered from the supply chain.

Tobacco track and trace for UK

At the end of May 2021, the UK’s HM Revenue & Customs (HMRC) issued an information notice to alert interested parties and invite potential suppliers to a virtual engagement event in June, where the subject under discussion was the country’s tobacco track and trace system.

The ultimate intention of the HMRC is to award a five-year concession contract to a single supplier for the system, as required under the WHO FCTC Protocol to Eliminate Illicit Trade in Tobacco Products (which the UK is party to).

The supplier’s main responsibilities will be to deliver an ID issuer service to ensure all tobacco products are marked with unique identifiers, as well as to provide a data repository and router for storing data relating to products, which is accessible to HMRC. Other services may be required as HMRC continues to define the requirements during the tender process.

The track and trace system was originally introduced by all European Union member states, including the UK, in 2019, as part of the EU Tobacco Products Directive (TPD). The directive also requires tobacco products to carry at least five security features, which, in the case of the UK, are applied to the products in the form of a non-fiscal authentication label.

The current supplier of the traceability system and security features for the UK is De La Rue. As the current traceability contract expires on 30 June 2022, HMRC is now seeking a supplier to deliver this solution from 1 July 2022.

Although the UK is no longer part of the EU, it still has in place the traceability and security feature systems introduced under the TPD. However, for all future tenders, the HMRC now refers to the FCTC Protocol as the regulatory instrument behind its systems, as opposed to the TPD.

The FCTC Protocol traceability requirements are similar to those of the TPD in that they require parties to implement track and trace on tobacco products manufactured in or imported into their territory, based on unique, secure and non-removable identification markings, such as codes or stamps, applied to all unit packets and outside packaging of tobacco products.