COMMISSION STAFF WORKING DOCUMENT EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT Accompanying the document COMMISSION IMPLEMENTING REGULATION (EU) .../... on technical standards for the establishment and operation of a traceability system for tobacco products and COMMISSION IMPLEMENTING DECISION on technical standards for security features applied to tobacco products
Date: 2017-12-15
Institutions: Directorate-General for Health and Food Safety, European Commission
Subjects: approximation of laws, consumer information, information storage and retrieval, labelling, marketing standard, packaging, technical standard, tobacco, tobacco industry, traceability

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   EUROPEAN COMMISSION  Brussels, 15.12.2017  SWD(2017) 456 final  COMMISSION STAFF WORKING DOCUMENT  EXECUTIVE SUMMARY OF THE IMPACT ASSESSMENT  Accompanying the document COMMISSION IMPLEMENTING REGULATION (EU) .../... on technical standards for the establishment and operation of a traceability system for tobacco products  and  COMMISSION IMPLEMENTING DECISION  on technical standards for security features applied to tobacco products {C(2017) 8429 final} - {C(2017) 8435 final} - {SWD(2017) 455 final} - {SEC(2017) 531 final}  
 
 
Executive Summary Sheet 

Impact assessment on the Implementing acts under Articles 15(11) and 16(2) of the Tobacco Products Directive 
(TPD) 2014/40/EU  

A. Need for action 

What is the problem and why is it a problem at EU level? 
The problem is illicit trade in tobacco products, the level of which remains high in the EU. Illicit tobacco products 
are not compliant with tobacco control legislation and provide artificially cheap supplies of tobacco that affect the 
uptake  and  prevalence  of  smoking.  Articles  15  and  16  of  Directive  2014/40/EU  (TPD)  aim  to  address  this  by 
providing for systems of traceability and of security features for tobacco products in the EU to secure the supply 
chain and facilitate product authentication. The provisions on traceability (Article 15) require all unit packets of 
tobacco products produced in, destined for or placed on the EU market to be marked with a unique identifier and 
their movements recorded throughout the supply chain (from the manufacturer to the last level before the retail 
outlet). The provisions relating to security features (Article 16) require all unit packets of tobacco products placed 
on  the  EU  market  to  carry  a  security  feature  to  facilitate  their  authentication.  The  Commission  is  required,  via 
implementing acts, to lay down technical specifications for the establishment and operation of these systems.  

These acts should address the following issues:  

1) marking of packages with a unique identifier;  

2) recording and transmission of data to a data storage facility;  

3) processing, storing and accessing data;  

4) compatibility of components of the traceability system; and 

5) technical specifications for security features. 

What should be achieved? 
The measures are expected to enable the smooth functioning of the single market while ensuring a high level of 
health protection. They will also enable the EU to meet its international obligations under Article 8 of the FCTC 
Protocol to Eliminate Illicit Trade in Tobacco Products.1  
What is the value added of action at the EU level? 
Harmonised implementation of the systems of traceability and of security features across the EU will be ensured, 
enabling Member States to meet their obligations under the TPD and the FCTC Protocol. Member States will be 
able  to  ensure  the  systems  function  in  a  workable  and  interoperable  manner,  coherent  with  the  smooth 
functioning of the single market. 

B. Solutions 

What are the various options to achieve the objectives? Is there a preferred option or not? If not, 
why? 
The TPD requires the Commission to adopt implementing acts to address the main outstanding issues related to 
the systems to be established. These and the various policy options to address them are set out below. 

1a. Marking packages with a unique identifier: This issue is at the core of the traceability system. A proper 
assignment  of  responsibility  related  to  the  marking  of  packages  is  central,  for  meeting  the  requirement  for 
authorities to control the system (FCTC Protocol).  

Policy options assessed:  
1a/1: Industry operated model;  
1a/2: third party operated model;  
1a/3: mixed solution model. 

1  See:  http://apps.who.int/iris/bitstream/10665/80873/1/9789241505246_eng.pdf?ua=1&ua=1The 
Illicit  Trade 
Protocol was adopted by the Conference of the Parties to the FCTC in November 2012. In addition to the EU, at 
the time of drafting, six EU Member States have ratified the Protocol: Austria, France, Latvia, Lithuania, Portugal 
and Spain. 

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1b. Recording and transmitting data: a key consideration is the time that elapses  between an event and its 
transmission to the data storage system(s). TPD does not define rules on this.  

Policy options assessed:  
1b/1: near real-time time lag;  
1b/2: one day time lag;  
1b/3: one week time lag. 

1c.  Processing,  storing  and  accessing  data:  secure  data  storage  that  offers  full  accessibility  to  competent 
authorities is essential.  

Policy options assessed:  
1c/1: decentralised storage per manufacturer/importer;  
1c/2: decentralised storage per Member State;  
1c/3: combined model. 

2.  Compatibility  of  components  of  the  traceability  system:  to  facilitate  the  scanning  process  for  economic 
operators, information should be encoded on tobacco packages in a pre-defined way. The authorised variety of 
data carriers should be defined.  

Policy options assessed:  
2/1: single data carrier per packaging level;  
2/2: limited variety of data carriers per level;   
2/3: a free system. 

3. Security features: the method of applying security features is important for ensuring that they are able to fulfil 
their function, meet TPD requirements and allow for innovation.  

Policy options assessed:  

3/1: printing or affixing;   
3/2: printing or affixing or a combination of printing and affixing. 

(Preferred options are marked in bold) 

What are different stakeholders’ views? Who supports which option? 
For  issue  1a)  most  economic  operators  favoured  option  1a/1.  Public  health  organisations  and  many  solution 
providers favoured option 1a/2. Member States generally favoured option 1a/3. 

For  issue  1b)  most  economic  operators  favoured  option  1b/2.  Public  health  organisations  and  many  Member 
States favoured option 1b/1. Option 1b/3 was generally considered less effective. 

For  1c)  economic  operators  generally  supported  option  1c/1.  Many  Member  States  and  public  health 
organisations stressed importance of a centralised overview of data (as per option 1c/3). 

For 2) and 3) stakeholders generally agreed that the most suitable options were 2/2 and 3/2, respectively. 

C. Impacts of the preferred option 

What are the benefits of the preferred option (if any, otherwise main ones)? 
They are expected to deliver considerable social and economic benefits estimated at EUR 3.8 billion per year. 
This will happen through a reduction in illicit tobacco products in circulation in the EU. While part of this will be 
substituted  by  increased  legal  sales,  it  will  also  lead  to  a  decrease  in  total  tobacco  consumption  (by  0.6 %), 
thereby contributing to protecting public health. Increased legal sales will increase tax revenues and profits for 
economic operators. 

What are the costs of the preferred option (if any, otherwise main ones)? 
The  annualised costs are estimated  at EUR  159  million,  including  EUR  138  million  for  the  traceability  system. 
This includes the establishment and operation costs. It is assumed that economic operators will incur the bulk of 
the costs, which are estimated at EUR 155 million. The unit cost of the traceability system is estimated at below 
half  a  eurocent.  This  is  unlikely  to  translate  into  meaningful  increases  in  the  price  of  tobacco  products 

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manufactured in the EU. 

What are the impacts on SMEs and competitiveness? 

SMEs may be more affected by the costs of implementing the systems than larger companies. Acknowledging 
this, the TPD provides  for a  longer transitional period for tobacco products  other than cigarettes and roll-your-
own  tobacco,  whose  manufacturers  are  often  SMEs2,  meaning  they  have  longer  to  adapt.  An  additional 
transitional  period  for  SMEs  is  likely  to  be  envisaged,  e.g.  in  relation  to  the  time  lags  for  recording  and 
transmitting data. Positive unintended consequences in competitiveness and  innovation in the sector providing 
traceability and security feature technologies are expected. 

Will there be significant impacts on national budgets and administrations? 
The  measures  are  expected  to  result  in  an  additional  EUR  2  billion  per  year  in  collected  taxes  (i.e.  VAT  and 
excise duties). As to costs, the competent authorities are expected to incur around EUR 4 million per year. 

Will there be other significant impacts? 
The  unit  cost  of  the  traceability  system  is  estimated  at  below  0.5  cents.  This  is  unlikely  to  mean  meaningful 
increases to prices of tobacco products manufactured in the EU. Therefore, the  measures are not expected to 
have negative impact on international trade or the competitiveness of the EU tobacco industry.  
Proportionality  
The proportionality of all the options was evaluated by assessing the extent to which they: 

1) are suitable to achieve the operational objectives identified;  
2) are necessary to achieve these objectives; and 
3) allow these objectives to be achieved at maximum benefit and minimum costs.  

The  options  best  meeting  the  above  criteria  were  identified  as  preferred.  In  assessing  the  preferred  options, 
estimated benefits versus estimated costs were taken into account. 

D. Follow up 

When will the policy be reviewed? 
Article 28 of the TPD requires the Commission to submit a report to the European Parliament and to the Council 
no later than five years from 20 May 2016. 

2   Article 15(13) of Directive 2014/40/EU sets out that the systems for traceability and security features should 
be  in  place  by  20 May  2019  for  cigarettes  and  roll-your-own  tobacco  products,  and  by  20 May  2024  for  all 
other tobacco products. 

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