1. Tracing, Tracking & the Draft Illicit Trade Protocol
With
John W. Colledge III
February 8, 2012

2. Introduction Patricia Lambert Director International Legal Consortium
Campaign for Tobacco-Free Kids

3. Questions and Answers
Type your questions here throughout the webinar and
we will answer them at the end.

4. John W. Colledge III Consultant on Anti-Illicit Trade
Supervisory Criminal Investigator
(Retired)
Department of Homeland Security
and
the U.S. Customs Service

5. Moderator Aaron Schwid Legal Advisor International Legal Consortium
Campaign for Tobacco-Free Kids

6. FCTC Article 15(2)
“Each Party shall adopt and implement effective... measures to ensure that all unit packets and packages of tobacco products and any outside packaging of such products are marked to assist Parties in determining the origin of tobacco products, and... assist Parties in determining the point of diversion and monitor, document and control the movement of tobacco products and their legal status.”

7. First session Fourth session Second session Fifth session
Intergovernmental Negotiating Body (INB) on a Protocol on Illicit Trade in Tobacco Products (ITP)
First session
11 – 16 February 2008
Fourth session
Second session
14 – 21 March 2010
20 – 25 October 2008
Fifth session
Third session
29 March – 4 April 2012
28 June – 5 July 2009

8. Illicit Trade Protocol
Supply Chain Control
Licensing
Customer ID and verification
Tracking and Tracing
Record Keeping
Security Measures
Internet Sales, free zones and duty-free sales
Offenses
Search, Seizure, and Disposal
Investigations, Prosecutions, and Penalties
International Cooperation, Reporting, and Administrative Issues

9. What is “Tracking” & “Tracing?”
Tracing is a post seizure or investigative tool used to reconstruct the flow of merchandise, including contraband, to its source.
Ex: Controlled Delivery
Tracking is a proactive crime prevention tool to follow merchandise while it moves through the supply chain.
Ex: Computer detects anomalies

10. Examples of Product Markings
Firearms and Explosives

11. Examples of Product Markings
Alcoholic beverages

12. Examples of Product Marking
Pharmaceuticals

13. Examples of Product Marking
Currency

14. Examples of Product Marking
Software

15. Why Track & Trace? Safeguard high value merchandise.
Protect public health and safety.
Collect and protect revenue.
Deter diversion, theft, and corruption.
Provide investigative tools.
Ensure product authenticity.

16. Divergent Needs in Tracking & Tracing Systems
Tobacco Industry Interests
Protect profits
Deter theft
Protect trademark
Government Interests
Collect and protect revenue (taxes and tariffs)
Interdiction – contraband seizure
Investigations and prosecutions
Protect public health and safety
Discourage illicit trade and corruption
Conflicting Interests
Knowledge is power. Who controls the process and information?
Tobacco = $
Tobacco industry’s historic and ongoing participation in illicit trade

17. Comprehensive System
Trace and Trace systems secure products moving through the supply chain.
The product itself needs to be secured with advanced anti-counterfeiting systems at the start of production.
Unique Identification Numbers alone are insufficient for securing each product and preventing illicit trade.
Control and audit measures need to be in place at the points of sale to prevent illegal products from entering into legal circulation.

18. Example of Tracking & Tracing System
© De La Rue Limited 2012

19. Centralized Secure Data Center
Must be government controlled and operated
© De La Rue Limited 2012

20. Code Request
© De La Rue Limited 2012

21. Codes Applies and Activated
© De La Rue Limited 2012

22. Distribution
© De La Rue Limited 2012

23. Customer – First Consignee
© De La Rue Limited 2012

24. Consumer – Wholesaler or Retailer
© De La Rue Limited 2012

25. Government Enforcement
© De La Rue Limited 2012

26. Example of Track & Tracing System
© De La Rue Limited 2012

27. Basic Markings
Tax Stamp
Philip Morris Codes

28. Basic Markings - Other Tobacco Products
One-dimensional barcode
One-dimensional barcode

29. Digital Tax Stamp Features
© De La Rue Limited 2012

30. What is Radio Frequency Identification (RFID)
Generic term for a system that transmits the identity of an object wirelessly using radio waves
RFID transmits a unique serial number
Cost-prohibitive at the pack level (for now) ( (

31. Examples of Current Tax Stamps
Digital Tax Stamp –Massachusetts, USA
SICPA Securink Corporation
Philip Morris International
Switzerland

32. Examples of Current Tax Stamps
Canada SICPA excise stamp

33. Data Requirements in the Draft Illicit Trade Protocol
Date and location of manufacture
Manufacturing facility
Machine used to manufacture tobacco products
Production shift or time of manufacture
First customer data
The intended market of retail sale
Product description
Any warehousing and shipping
The identity of any known subsequent purchaser
The intended shipment route, destination, point of departure and consignee
This data is collected and maintained by
government agencies in your country!
Article 7, Draft ITP

34. Examples of Other Useful Data Linked to a Comprehensive System
Brand name
Trademark holder
Harmonized tariff schedule number
Customs Duties and payment record
Taxes paid and payment record
Previously reported stolen, destroyed, seized or returned to the manufacturer
Importation for destruction, date and location of intended destruction. (usually the trademark holder)

35. Current Enhanced Systems
National Systems
Albania
Brazil
Canada
Dominican Republic*
Ecuador*
Germany*
Guatemala*
Jamaica
Kenya
Kosovo
Kyrgyzstan
Lebanon*
Morocco
National Systems
(continued)
Panama*
Peru*
Portugal*
Spain
Thailand
Turkey
Ukraine
Subnational Systems
California (USA)
Massachusetts (USA) (
*Codentify® - Developed and patented by
Philip Morris International

36. History of ITP Article 7 and the INB
Experts group (2006).
Developed the concept.
Established definitions.
Major ITP Article 7 Issues
Changing concepts and definitions.
Marking packs and cartons.
Existing National and regional systems.
Marking other tobacco products.
Relationship with ITP Article 5 – Licensing.
Data fields.
Tobacco industry or government controlled systems.
Global information sharing focal point.

37. What is “Tracking” and “Tracing” in ITP Article 7
“Tracking” means systematic monitoring by competent authorities or any other person acting on their behalf…
“Tracing” means the re-creation by competent authorities or any other person acting on their behalf…
Article 7, Draft ITP

38. Tracking and Tracing ITP Article 7
Unique, secure and non-removable
Codes or stamps
All unit packets, packages
Cigarettes – within five years
Other Tobacco Products – within ten years

39. Required Key Elements for ITP Article 7
Covert Codes – Invisible with encoded information that can be decoded by specialized readers. A visible unique code can be copied and when applied on an illegitimate product suggests legitimacy that is misleading.
Codes at Unit Pack Level – Origin information of products can be compromised by switching of master case contents. Unit pack is the unit of taxation as well as sale. Relevant security information needs to be put at pack level.
Real-Time Information Access – In the fast moving environment of cigarettes, delay in detection of illicit trade will result in ineffective control. Real-time visibility is critical to enforcement.
Best Available Technology – Currently secure track and trace systems using covert codes are operational in several countries.

40. What is “Consensus”? Tentative agreement on the text
ITP Article 7 is not final until the entire draft Protocol is final
“Nothing is agreed until everything is agreed.” Ian Walton, INB Chair.
INB delegates must be prepared to lobby and negotiate any possible changes that could occur related to ITP Article 7

41. Major Unresolved Issues
Who controls the systems? Industry, Governments, vendors?
Tracking Requirements
Global Information Sharing Focal Point

42. Industry Control and Influence of Systems
“Obligations assigned to a party shall not be performed by or delegated to the tobacco industry.” ITP Art 7 (12)
Previously signed “legally and binding” cooperation agreements between the governments and tobacco manufacturers

43. Tracking Systems Tracking is defined, but not fully developed
ITP should prioritize tracking on the same level or higher than tracing
Many existing systems are described as T&T systems, but they are really only tracing systems

44. Global Information Sharing Focal Point
Not clearly defined in the ITP draft
Make queries or requests to Global Information Sharing Focal Point
Exchange relevant data
Based at the WHO in Geneva
Government controlled data and systems – not industry controlled

45. A Possible Solution for the Global Information Sharing Focal Point
NLETS. org
National Law Enforcement Telecommunications System nlets.org

46. What System Does My Country Need?
Government-controlled system free of the tobacco industry.
A system that is based upon governmental needs of revenue (including customs), police and prosecutors.
A system that is based on how tobacco flows to local market, considering manufacturing, free zones, imports, exports and illicit trade
System that integrates other taxed products such as alcoholic and other beverages.
Costs passed to the tobacco industry or users, external financing, funding arrangements with security system vendors.

47. Conclusion
Tracking and tracing was intended to aid in the collection and protection of government revenues, not tobacco industry trademarks and profits.
It is not necessary to wait for a finalized ITP.
Tracking and tracing will not solve all your problems.
There are many myths surrounding tracking and tracing – educate yourself!

48. Tracing, Tracking & the Draft Illicit Trade Protocol
Questions and Answers

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