So, BAT would have us believe, in their own words, that, ‘All suppliers undergo an independent on-site audit, conducted by the global audit firm, Intertek, in order to be appointed as a supplier and then are re-audited every three years. The Intertek audit includes criteria covering forced labour, child labour, wages and hours, health and safety, environment and management systems. We also use our integrated supply chain due diligence programme to assess supplier’s inherent risks, using a series of independent indices. We prioritise those suppliers identified as being exposed to the highest risks for either a self-assessment or an on-site audit.’10
But this same company seemingly then tells us that it has no control over where its cigarettes end up; that it simply ships cigarettes in response to orders.
It is something of a mystery why the company would so intently secure its upstream supply chain for inputs into its manufacturing process, but do very little to secure its downstream supply chain for its outputs, in fact going so far as to very clearly state that it has no control over where its cigarettes end up or who they are sold to.
On Philip Morris’ own website, the company says that it only marks and tracks a percentage of its own cigarettes11 (in 2017, the last year for which I could find data, they say they were only marking 75% of their packs) and we don’t know to what extent the other big tobacco companies are using it.
In the JTI reply to my request for comment, they noted, ‘We have implemented far reaching anti-illicit trade measures, aiming at securing our supply chain. The tracking and tracing of our products are also part of supply chain control: at this date, 75% of our global production is tracked and traced.’
But why only track 75% of your packs?12
Every expert and his dog has recommended that all tobacco packs should be securely marked, so that packs can be traced through the supply chain, and so that we can see where a pack came from. Big tobacco has been telling the world that it has its own track and trace solution that can do just that: Codentify.
Codentify’s genesis is important: it was developed as part of the obligations imposed on PMI under its agreement to settle smuggling related charges in the EU (that would be the same agreement that saw PMI having to pay compensation to the EU to the tune of $1,25 billion for the smuggling of its packs). They subsequently licensed it for use by all of the big tobacco companies. It creates a code (really just an alpha-numeric number) that is printed directly onto packs during manufacturing, so – if you know how to read it – it could in theory tell you who made the pack.13
Like many others, I am sceptical of Codentify-type digital tax verification solutions (in other words, one that simply uses an alphanumeric code to mark cigarette packs, without another visual security feature like a physical tax stamp), simply because they are easy to copy or clone, with the same code being reprinted on multiple packs. You would only know that a pack had a fake code on it if you scanned a second item with the same code. It is a highly inefficient enforcement tool from a customs agency perspective – the cost of detection, in terms of the sheer number of checks an enforcement officer would have to do to detect duplicate codes far exceeds the potential revenue loss.14 In a peer-reviewed paper, tobacco control economist Hana Ross – along with my colleague Michael Eads – estimated that in a relatively small market, a law enforcement authority would have to inspect almost 31 000 packs per week to have a 95% certainty that it did not miss a fraudulent pack under Codentify-type systems. A material-based track and trace solution – so, using a physical tax stamp – would require only 59 pack inspections a week to have the same level of confidence.15 (Inexto, which bought Codentify, claims Professor Ross is not a track and trace expert. I’m not sure that is true, but she is a world-renowned expert specialising in the economics of tobacco, and her team’s math adds up. Read the paper, make up your own mind.)
In Europe alone where 30 billion-plus fast-moving consumable items move through the market every year I am happy to argue that the statistical probability of finding a twin code is next to nil.
The digital tax verification-type solutions being advocated for by the tobacco industry are hardly more than a fig leaf for a morally bankrupt industry.
Not too long ago – in 2013 – BAT was accused of bribing a politician in Kenya to make sure that a cigarette track and trace tender was not awarded to an independent service provider.16 In Uzbekistan they tried to convince government to introduce a tax stamp traceability system for smaller manufacturers, but from which it wanted to be exempted itself.17
After SARS announced a tender for a traceability solution to mark cigarette packs – after 12 years of promising to do so – in the space of less than six months, around 22 directly-related articles appeared in the media. Of those, only 3-13% argued in favour of a secure marking solution (one of them by Eads, one by the tax stamp association ITSA, and one by South Africa’s Council Against Smoking). The rest all advanced an industry line that sought to delay, derail or dilute SARS’ efforts to better secure the tobacco supply chain. The media onslaught was relentless: the new system had been ‘rushed’, ‘would capture only the legal market’, would ‘drive illicit trade up further’, accused SARS of ‘wasting billions of rands’, and the industry raised concerns about rolling out such a ‘sophisticated system’. And yet every single expert agrees that traceability is the one key solution to curbing illicit tobacco. But it works to big tobacco’s advantage if the supply chain stays opaque. Because they need our governments to believe that big tobacco has it all under control, and that additional checks and balances on big tobacco’s supply chain are not necessary.
Between industry rhetoric and administrative capture, governments around the world are simply not adopting good practice measures that could easily regulate the tobacco supply chain. One would also have imagined that the tobacco industry could easily have taken a leaf from what other industries are doing to better secure their own supply chains.
The ability to know where your products are, or to trace a product back to where it came from, is not something that is unique to the tobacco industry. It is something that other companies with commodities that are far less susceptible to criminality have faced and quite successfully manage.
For many consumer products, traceability is an issue mostly because of the genuine desire to protect their brands and their reputation, and so they can coordinate product recalls if necessary.
We generally don’t associate cigarettes with product recalls because there are not that many recorded instances, but it does happen: PMI had to recall 8 billion cigarettes (worth $100 million) because the filters used had been sprayed with a plasticiser containing half a dozen chemical contaminants, which together formed methyl isothiocyanate, a commercial pesticide used as a soil fumigant. PMI explained that, given the ‘complexities’ of the tobacco distribution system, it could not track where the 8 billion cigarettes had been shipped to.18
Eight billion cigarettes, and nobody knew where on earth they were.
Many other industries, with commodities that are far less hazardous, and that are far less vulnerable to criminal enterprise, and that are far less susceptible to tax evasion, have implemented far more robust supply chain security solutions than the tobacco industry has.
Something as obscure and innocuous as a simple tube of toothpaste travels along a far more secure supply chain than tobacco does, despite the fact that tobacco kills far more people, loses governments far more in unpaid taxes, is far more susceptible to smuggling, and is far more intrinsically linked to organised crime.
When one begins to unpack the reasons other products are regulated, a curious question emerges: Why on earth are the supply chains around cigarettes not being regulated more and better?
How is it possible that tubes of toothpaste, or tins of infant
