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<p>Tobacco products classified as ‘illicit’ in the UK include anything on which duty
has not been paid but should have been paid. This includes counterfeit products, brands
manufactured legally overseas but not legally sold in the UK, and genuine products
originating in the UK and overseas but diverted from legitimate supply chains by criminals.
Because of this, HM Revenue and Customs (HMRC) officers use a variety of ways to identify
illicit product. Testing product authenticity is one mechanism.</p><p> </p><p>To test
product authenticity, HMRC uses identifiers required by legislation, for example,
Fiscal Marks which manufacturers are required to print on specified tobacco products
to show they are UK duty paid, as well as voluntary tools used by the manufacturers.
One such voluntary tool is Codentify.</p><p> </p><p>Codentify was developed and introduced
by the major tobacco manufacturers on their own initiative through the Digital Coding
and Tracking Association (DCTA). HMRC played no part in the development or introduction
of the system nor did HMRC require that it be introduced. Codentify codes already
feature on packs and are there regardless of any HMRC use of them. HMRC took a policy
decision, in line with the commitment to tackle illicit tobacco, to examine whether
these existing codes could provide a useful additional tool to help officers authenticate
product in the field.</p><p> </p><p>The trial is concerned only with the use of Codentify
for product authentication, and no other aspect of the system is being used or evaluated.
Codentify requires no specialist equipment or training. Officers are provided with
basic guidance and access to an online system. No charge is made for use of the system
and, as no procurement was needed, there was no requirement for HMRC to run a tender
exercise. As this is a trial only, no Ministerial approval was required or has been
sought.</p><p> </p><p>A number of HMRC officers have been given access to the system
and trained by HMRC colleagues. The time spent on this activity is minimal and is
estimated to be less than one staff year in total.</p><p> </p><p>HMRC has explained
the use of Codentify as a potential product authentication tool to colleagues in Border
Force and Trading Standards. However, they have not provided training to any officers
in those organisations.</p><p> </p><p>The EU Tobacco Products Directive introduces
a requirement for a pan European security feature and track and trace systems. The
European Commission, working with Member States, is considering proposals and have
yet to determine any technical specifications,</p><p> </p><p>HMRC is aware of a wide
range of potential track and trace and security feature solutions on the market. They
are not evaluating, and, given the current position on the Directive, could not evaluate
any products against its requirements. The aspects of Codentify being used are entirely
separate from the requirements of the Directive.</p><p> </p><p>In accordance with
regulatory requirements, when technical specifications are determined, HMRC will ensure
that any evaluation against them ensures no unfair competitive advantage or obstacles
to competition.</p>
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