New FCA Guidebook on Implementing Article 8 Track and Trace (written for Tax Stamp News, published by the International Tax Stamp Association)
Background
The Framework Convention Alliance (FCA) commissioned a guidebook[1]on implementing Article 8 of the Protocol to Eliminate Illicit Trade in Tobacco Products (the Protocol)relating to the tracking and tracing of tobacco products.
One of the challenges in implementing the Protocol lies in the fact that it was predominantly developed by health experts with little experience in illicit trade, customs administration, supply chain security or traceability programs, and separately needs to be implemented by customs agencies who are typically not traceability experts and who may not have developed deep domain expertise in dealing with tobacco in particular (and who, frankly, often seem to view the Protocol as largely a health-related instrument, not attaching the necessary importance to pursuing its implementation, as is evident from the relatively poor implementation rates of traceability across the globe.)
Approach of the guide
Article 8 sets out broad requirements for Parties to implement a tracking and tracing system, but does not specify business requirements or technological options that are immediately actionable or implementable, and interpretation of the requirements and translation into operational and technical specifications is required.
The guidebook was intended to be a simple, introductory overview for implementing agencies – and to a lesser degree perhaps also for those administering the Protocol in the FCTC itself – to better understand the key concepts, principles and terminologies used in traceability solutions, and to position agencies to better engage with potential solution providers. In that sense, the guidebook is intended to be a resource for policy makers that need to implement the Protocol. It provides an overview and historical context of how the Protocol came into being before providing an overview of the main elements of tracking and tracing and offering guidance on how policymakers can choose an appropriate system for their particular context. At 81 pages it makes for hefty reading, but in the process provides practical guidance on a broad range of issues and options agencies are likely to encounter.
The guide does not proscribe a specific system or approach but rather sets out options and considerations to form a basis from which Parties can make strategic decisions in relation to implementing their obligations under the Protocol, given the current state of track and trace technologies.
The guidebook is a first instalment, with the intention to publish additional, more detailed chapters in the future, including possibly a section on dealing with illicit tobacco in free trade zones.
What the guide contains
The first part of the guide is structured around a number of introductory sections: the Protocol’s objectives and key requirements under the Protocol; an overview of the illicit trade in tobacco in broad terms; key components, benefits and country successes achieved from the marking of tobacco products; supply chain events explained in simple terms; exploring the key components of a track and trace solution including unique identifiers, serialisation, aggregation, security features (types, layering and application methods), and tamper evident non-removable marks; authentication, and data management; and other supply chain security measures that agencies should consider, beyond just tax stamps and secure marks.
The second part of the guide focuses on practical considerations in the journey of implementing a track and trace and secure mark solution: the types of planning and analysis that is required upfront, estimating the size and prevalence of illicit trade, and understanding the agency’s customs capability gaps; designing a solution around a governance framework and considering the stakeholder universe; build considerations, including whether to use a straight tender or a public private partnership model; assessing the extent to which the agency’s legislative paradigm allows for the introduction of stamps and marks; and aligning the traceability program with a broader enforcement strategy.
Finally, the guide includes a series of other practical implementation considerations around independence, engagement with the tobacco industry, understanding key arguments advanced by the tobacco industry against track and trace, how to convert existing tax programs into full traceability programs, and measuring the outcomes and impact of traceability programs.
Importantly, throughout the guide, practical checklists are included for a range of issues, along with key questions agencies should ask themselves on the various aspects relating to the journey of implementing a secure mark and tax stamp program, making the guide less academic and more concrete.
How solution providers can use the guide
One of the key constraints in implementing track and trace programs lies in the fact that customs agencies – who are typically responsible for implementing these programs – are not traceability experts, and often tend to find it difficult to develop suitable tender specifications, or to engage appropriately with solution providers. This guide is primarily aimed at these implementing agencies, and with this audience in mind is written in a relatively accessible, simple style. Although it was not intended for subject matter experts who already have deep domain expertise, it should form a valuable weapon in any solution provider’s arsenal of tools in demystifying track and trace for potential client agencies, and has the potential to contribute towards closing the knowledge gap between vendors of traceability systems and governments seeking to procure a track and trace regime for tobacco products in order to fulfil their Protocol obligations. This can only mean more successful programs being implemented!
[1]FCTC Protocol to Eliminate Illicit Trade in Tobacco Products
Guidebook on Implementing Article 8: Tracking & Tracing, https://www.fctc.org/wp-content/uploads/2019/11/ITP-Guidebook-.pdf