EUobserver opinion: PMI: We have common ground with EU on tobacco smuggling

In recent months, there has been a great deal of talk in Brussels about the measures used to tackle the illegal trade in tobacco products, notably the 12-year anti-illicit trade agreement between the European Commission, member states and Philip Morris International (PMI), which ends later this year.

The question of whether or not the agreement is renewed has become the defining feature of this debate. Portraying this as an issue dividing interested parties into opposing camps may make for good headlines, but in reality, there is more common ground about what is needed to fight the illicit trade than is often assumed.

One example of common agreement is the World Health Organisation’s Framework Convention on Tobacco Control (FCTC) Anti-Illicit Trade Protocol, which contains many of the measures in our agreement with the EU and shares our commitment to tackle this problem in every part of the world.

Another area of common ground is in Article 15 and 16 of the Tobacco Products Directive (TPD) dealing with traceability and tamper proof security features for tobacco products.

Huge reduction in seizures

We have legitimate, and well publicised concerns about parts of the TPD but we fully agree with the EU on the need for strong tracking and tracing systems. So much so that we have gone even further by extending their scope globally, without waiting for the TPD or the protocol to come into effect to do so.

The anti-illicit agreement with the EU has been a useful vehicle for far-reaching supply chain control measures, such as know-your-customer due diligence and tracking and tracing, which have so effectively reduced the flow of counterfeit and contraband cigarettes over the last 12 years. However, our priority is not the agreement; it is the measures contained within it.

Our shared efforts have delivered an 85 percent reduction in seizures of PMI counterfeit and contraband cigarettes, they have resulted in compliance training for 37,000 employees and 7,000 law enforcement officers across the EU, and led to at least 87 illicit trade factories being raided, inspected and shut down for good. Throughout this period, EU authorities have had free and unimpeded access to our factory data and product flows.

Critics who claim the agreement has failed are missing the point that the FCTC Protocol contains the very same measures that have been tried, tested and proven to reduce levels of illicit trade in the EU.

Another frequently debated issue is how to best track and trace the flows of legitimate cigarettes. Contrary to some reports, we are not in the track and trace business. Under the anti-illicit trade agreement, we were obliged to secure our product flows and developed the technology to do so at a time when no similar system existed.

The system we developed complies with all of the criteria set out in the TPD and FCTC Protocol, and can be controlled and run independently by state authorities, fully in line with Article 5.3 of the FCTC. However, we are not bound to one solution or system. Just like any commercial entity we look for the most effective and cost efficient solutions, and the best way of ensuring this is through a range of independently approved, open standard, systems competing in a free market.

Any track and trace system should be based on verification, not trust, and should be monitored by an independent auditor appointed by the authorities, as required by the TPD.

Looking ahead, there is broad recognition that the nature and composition of the illegal trade in cigarettes has changed. The reduction in flows of contraband and counterfeit cigarettes has been replaced by a huge increase in so-called illicit-whites, branded cigarettes manufactured outside the EU for the sole purpose of smuggling. This now represents over 37 percent of Europe’s illicit tobacco trade.

It is for the European Commission and member states to decide the future of the anti-illicit trade agreement. With or without its renewal, our priority remains the measures contained within it. Our ongoing commitment to continue our efforts and investments around the world to tackle illicit trade remain intact and stronger than ever.

Alvise Giustiniani is the head of Philip Morris International's Global Head of Anti-Illicit Trade Department