European Tobacco Products Directive

Robert Sykes, Commercial Development Director at Essentra, explains how the European Tobacco Products Directive may impact on the packaging industry and what is already being done to protect consumers and fight the illicit trade in counterfeit and smuggled product.

1) What is the European Union Tobacco Product Directive and its objectives?

The World Health Organisation's Framework Convention on Tobacco Control (FCTC) Protocol requires the implementation of systems to track and trace tobacco products throughout the supply chain. As a result of this the European Commission has recently revised its Tobacco Products Directive (TPD) and is currently drafting implementing and delegated acts for Article 15 - Tracking & Tracing and Article 16 - Security Feature.
How Article 16 is implemented in particular will have an ongoing effect on the packaging industry. If the commission goes ahead and defines the very specifics of visible and invisible security features on the packaging in implementing acts, given both visible and invisible security feature technologies evolve with unprecedented speed, the status quo would be cemented for years.

2) Why is the illicit tobacco trade such a concern?

Illicit tobacco is a crime that's significance is often underestimated. It's seen as something that only hurts the industry. Yet that pack of cigarettes bought in the pub is part of a criminal trade that, according to KPMG, accounts for up to 12% of the global cigarette market and more than 58 billion cigarettes in the EU alone. A single lorry of illicit cigarettes can net more than €1.3m for the criminal gangs that are largely behind this trade. Part of annual profits estimated at €5bn each year, these proceeds are often used to fund other illegal activities such as people trafficking, drugs and even terrorism. Not only do the criminals profit, but Treasuries, and public spending, lose out, as smugglers don't pay excise duty.

3) What options are being considered regarding changes to packaging?

A number of security measures are being considered, from solutions built into the pack, such as invisible inks, digital codes and forensic technology to paper-based stick-on authentication stamps. The commission is also considering whether or not to mandate features according to a set of open standards or whether to stipulate one proprietary system.
The worry of mandating a one-size-fits all, EU-wide, security feature is the risk of giving counterfeiters a specification for them to copy; particularly is that is a relatively easy to forge stamp based solution. Furthermore, even genuine paper based stamps can be removed, stolen or diverted and reused on other products to legitimise an illegal product.

4) When will decisions be made and the laws come into force?

The European Commission included tracking and tracing (Article 15) and product authentication (Article 16) in its Tobacco Products Directive, which came into force on 19 May 2014.
The European Commission is still considering the best way to implement this Directive. The implementing acts directives will be determined by early 2017.

5) Why is the legislation relevant to the packaging industry?

The security feature mandated by Article 16 will be incorporated into and attached to the packaging, affecting the manufacturing process. Packaging already plays an essential role in the fight against counterfeit tobacco products and there are a range of security solutions and technologies in the market to enable this.

6) Would this affect current packaging?

In consumer goods, from alcohol and pharmaceuticals to cigarettes, the issue of the illicit trade in potentially harmful counterfeit and contraband products is being tackled by a wide variety of innovative covert, overt and forensic solutions within packaging to authenticate genuine products. And this variety of supply of solutions and suppliers is an essential part of staying ahead of counterfeiters and enabling packaging companies to deliver continued value in protecting brands and products for companies.
Dependent on the solution or solutions mandated by the directive the packaging industry could have to adapt to a specified proprietary solution which would stifle competition and prevent new innovative authentication measures being implemented.

7) What is the industry's preferred solution?
We fully support the objectives of Article 16 of the EU TPD, in terms of improving efforts to tackle the illicit trade. However, based on our experience, we would urge the EU to include two principles that we believe are key in relation to ensuring the effectiveness of Article 16

i. Specification of a standard, not a prescribed technology
In our opinion, prescribing a single solution as the security feature within Article 16 runs the risk of providing counterfeiters with a 'recipe' for manufacturing illicit tobacco products, as much as it helps to protect genuine ones. Were the technology to be compromised - either through direct counterfeiting or 'passing off' - then there would be no accepted alternative solution to counter this, nor to provide a mechanism by which consumers could validate a product's authenticity.
ii. Make the security feature an intrinsic part of the pack
We believe that the implementing act should also ensure the security feature takes a multi-layered approach, combining instantly recognisable visible features together with hidden covert and forensic elements as an intrinsic part of the pack, rather than having to be separately applied.

In this way, the security device cannot be removed or reused, and the feature therefore verifies the authenticity of the pack - and not just the security feature itself. Taggant technology for example, is directly integrated as part of the packaging and immediately demonstrates through the use of simple readers if the pack is genuine, ensuring highly effective product authentication.
By taking these key principles into account the implementing act should ensure - even in the event of a technology being compromised - that there are other available options and, importantly, that there are a range of authorised suppliers which are able to provide a range of credible alternative security solutions. Also by integrating technology directly onto the packaging this ensures the product can be authenticated as genuine and not just the security feature itself.

8) Why would this be favourable to the packaging industry?

Defining a standard, not a prescribed technology, ensures the ability to use a variety of security features within packaging to protect against counterfeit and benefits a number of packaging technology providers not just one, ensuring competiveness as well as security.

9) Are these solutions being implemented in any other markets?

While Europe looks at blanket solutions for the TPD, Member States like the UK are already leading the field in implementing authentication technology from digital codes and unique identifiers to the use of secure covert technologies such as taggant inks. It is this layered approach that works best, whether it's illicit cigarettes or other products facing similar challenges at the hands of counterfeiters, like alcohol and pharmaceuticals.

10) What will be the impact of proposals in to introduce standardised packaging for tobacco products in the UK and Ireland?

While we do not know what the results will be in these markets, it is likely the introduction of standardised packaging could offer an opportunity for criminals to more easily create counterfeit products. As such, the requirement to use integral, covert and overt authentication measures becomes more pressing as consumers and authorities will not be able to use packaging designs as a visual identification of a product's authenticity. It should be noted that plain packaging is not part of the EU TPD.

11) What is the industry doing to ensure its voice is heard in Brussels?

Companies are engaging with European political representatives to ensure the voice of the packaging industry is heard in the debate around and creation of the implementing acts.

The illicit trade isn't going away; and if anything the criminals are getting ever more sophisticated. The European Commission has the ability to implement standards across the region that make it much harder for counterfeit and contraband to slip through the net, but it must be careful not to prescribe a 'recipe' for criminals in this fight against counterfeit products. Open standards keep the industry innovating, a prescribed solution makes it easier for the criminals to catch-up.