Hannah Bardell – 2016 Parliamentary Question to the HM Treasury

The below Parliamentary question was asked by Hannah Bardell on 2016-03-15.

To ask Mr Chancellor of the Exchequer, what the cost to the public purse is of (a) access by HM Revenue and Customs to the Codentify system to pilot its use for tobacco product authentication, (b) staff time to use that system and (c) other costs incurred through use of that system.

Damian Hinds

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.

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.

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.

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.

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.

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.

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,

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.

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.