Disagreement Reigns Over Role of EU Track and Trace

Tobacco stakeholders and the European Commission disagree over the practical value of the EU track and trace system on tobacco products, implemented across all member states in May 2019 as part of the Tobacco Products Directive, reports EURACTIV.

According to the then Health Commissioner Vytenis Andriukaitis, the aim of the system was to help combat illicit trade.

‘The EU has taken a big step forward in combatting the illicit trade in tobacco products,’ the former Commissioner said.

However, a reply by current Health Commissioner Stella Kyriakides to a parliamentary question has sent confusing messages about the role of the tracing system.

‘The system collects information that relates solely to the legal supply chain of tobacco products including cigarettes and roll-your-own tobacco that are currently the only two categories of tobacco products covered by the system. The system does not provide any information on the illicit trade of these products,’ she said.

Peter van der Mark, Secretary General of the European Smoking Tobacco Association (an association of tobacco manufacturers) disagreed with this statement, saying that the Commission’s idea behind track and trace had always been to identify points of diversion from the legal to illegal supply chain.

Commenting on Kyriakides’s answer, he said: ‘the reason the Commission has never carried out any evaluation of the system and never communicated concrete information on its outcome is probably because there is nothing to be proud of,’ adding that ‘illicit producers and smugglers across Europe are still unbothered and continuing their very lucrative business’.

Indeed, according to an annual KPMG report, funded by the tobacco industry, illicit tobacco consumption in the EU increased by 3.9%, or 1.3 billion cigarettes, in 2021, following a 2.3% growth in 2020.

According to Van der Mark, therefore, the system has not worked since its ‘stated’ objective was to curb illicit trade.

‘In 2021 alone, close to 100 illegal tobacco factories were dismantled within the EU, so illicit production in the EU itself is on the rise, and there is little indication that illicit trade has reduced since track and trace was established. To be noted that customs reports when illicit factories are dismantled often indicate that the production is destined to high-taxing countries such as France,’ he said.

Indirect observation

However, an EU official, speaking to EURACTIV, defended the track and trace system saying it is a key element of the Commission’s strategy to fight against illicit tobacco.

‘Since its launch in May 2019, the system has captured and stored information concerning over 100 billion packs of cigarettes and roll-your-own tobacco products, ie. the two categories of tobacco products that are currently covered by the system, and the logistic and financial operations concerning almost a million economic operators and over one and a half million facilities,’ said the official.

He explained that although the system collects information that relates solely to the legal supply chain of tobacco products, it also enables ‘indirect observation’ of the illicit trade by ‘allowing member states to identify irregularities in tobacco product movements and determine when a product was diverted into the illicit market’.

‘For this reason, the system has made a significant contribution to the EU’s fight against the illicit tobacco trade since 2019,’ the official added.

No mention of this in OLAF report 

Although the EU official was adamant as to the effectiveness of the traceability system against illicit trade, the European Anti-Fraud Office (OLAF), in its annual tobacco seizures press release, made no reference to the system whatsoever.

Given that tobacco smuggling is a central part of OLAF’s investigative activities – in its capacity as the office mandated by the EU to protect the Union’s financial interests against fraud and corruptive practices – it should be the first organisation to be monitoring and reporting on the effectiveness, or otherwise, of the system.

During 2022, OLAF participated in international operations that led to the seizure of 531 million illicit cigarettes, more than 205 tonnes of raw tobacco and 65 tonnes of water-pipe tobacco. This compares to 437 million seizures in 2021 and 251.4 million in 2019. The majority of the cigarettes impounded in 2022 – 316.7 million (59.5%) – were seizures from illicit production within the EU.

OLAF Director-General Ville Itälä said: ‘these seizures have saved roughly €153 million in lost customs, excise and VAT revenue that would have ended up on the taxpayers’ tab’.

It would have been useful to know, however, whether the improvements in supply chain visibility afforded by the track and trace system had contributed to these increased seizures.