As distributors of tobacco products, FWD members help to ensure that age-restricted goods are sold legally through responsible retailers.
We are currently concerned about the implementation of tobacco tracking trace legislation, which was introduced in 2019 and is now subject to revision as the UK prepares to exit the EU.
Since the introduction of the highly successful Alcohol Wholesaler Registration Scheme (AWRS) in April 2017 (pushed for by FWD) we’ve seen a marked decline in the illicit trade in alcohol. However, there is still more work to be done on enforcement of this scheme and it is essential that the Government continues to be vigilant in tackling fraud and illegal traders.
Further, following the introduction of the Soft Drinks Industry Levy in April 2018, we are now concerned about the rise of a soft drinks grey market. It appears to be the case that unscrupulous importers are bringing stock into the UK that has not been subject to the levy.
The Government has published its response to the consultation on tackling tobacco duty evasion, which proposed linking sanctions to the tobacco track and trace system and extending HMRC’s traceabilityenforcement powers to Trading Standards officers. The Government has now published a policy paper on tougher sanctions to tackle the sale of illicit tobacco, with a six month period for removal of Economic Op- erator ID (EOID) codes for severe non-compliance and continued review of circumstances where it would be proportionate to seek a longer period of removal.
HRMC has now introduced Economic Operator ID (EOID) and Facility ID (FID) validation controls in the UK tobacco track and trace system, to check if an EOID or FID exists in the UK repository and ensure that data submitted to the UK Gateway complies with the UK track and trace system. There is a grace period for these new controls ending on June 27 2021, during which time messages containing an EOID or FID which fail the validation controls will generate a warning instead of an error message, allowing businesses to investigate any unrecognised EOID or FID codes, while continuing to move product through the supply chain.
At the end of the grace period, messages containing an EOID or FID that fail the validation controls will generate an error message. If you receive an error message, you must take action to correct the error before continuing to move the product through the supply chain.
If you submit a message that fails the validation controls, visit the Delarue website and check your EOID or FID codes. If you submit a message that fails the validation controls because of another business’s EOID or FID, you must advise them that their codes have failed the validation controls and that you will not be able to continue to supply tobacco products after June 27 until they have addressed the issue.
If a message is submitted that fails the validation controls because of another business’s EOID or FID, wholesalers must advise them that their codes have failed the validation controls and that they will not be able to continue to supply tobacco products after June 27 until they have addressed the issue.
From December 31 businesses will need to send their data to a new UK gateway and data repository which replaces the EU repository. Both are operated by De La Rue. Businesses in Northern Ireland will need to send data to both the new UK repository and the existing EU repository.
FWD members will need to get access credentials from De La Rue to enable you to connect and submit data to the UK gateway. These will be available from 26 October.
The uniform resource locator (URL) endpoint for scanning equipment will need to be amended to ensure that you can submit data to the UK Gateway.
If you submit data for tobacco products in Northern Ireland, the URL endpoint for your scanning equipment will need to be amended to allow you to simultaneously submit data to the UK and EU systems. To do this you will need to make arrangements with your scanning equipment solution provider to change the URL endpoint. De La Rue will issue the URL endpoint for the UK gateway by 12 October. Scanning equipment solution providers must complete the adjustments by 11pm on 31 December.
The Health Minister in Northern Ireland Robin Swann has announced a full consultation on Minimum Unit Pricing for Alcohol, to be launched “later this year.” Minister Swann said: “I have been closely following the Scottish Government introduction of Minimum Unit Pricing on Alcohol since 2018 and have been noting with interest the early positive evaluation reports. My Department has been working in conjunction with key stakeholders on developing a new substance use strategy and this will be issued for public consultation later this year. As part of the strategy, there will be a commitment to holding a full public consultation on the introduction of Minimum Unit Pricing for Alcohol in Northern Ireland within one year.”
FWD has written, jointly with ACS, to HMRC to request revision to anti-forestalling restrictions in advance of the Autumn Budget 2020, on the basis that the current restrictions do not adequately take account of the continuing impact of Covid-19 on the UK tobacco market and will result in major availability issues ahead of the Budget. We have asked that HMRC revise its allocation restrictions, in light of the unique cir- cumstances presented by Covid-19 and changing consumer shopping habits. These include more c-store tobacco sales since March, a decline in illicit tobacco and less travel meaning customers are not buying duty free and cheaper tobacco abroad, and the full implementation of track and trace on 20 May seeing some non-registered retailers exit the market.
Brexit and the future of Track and Trace
HMRC has written to FWD about the arrangements for the UK’s tobacco track and trace system at the end of the transition period, when we will lose access to the EU tracking system. To allow the system to continue to operate in the UK, HMRC has appointed De La Rue, the UK’s current ID issuer, to provide the additional services necessary for the system to function independently of the EU until December 2021.
The system will operate in largely the same way as it does now, but instead of routing all data to the EU system, it will be routed and captured in a new UK data repository. This will ensure that only the minimum changes necessary are made to reduce disruption and any additional burdens on businesses. HMRC will hold a procurement exercise later in the year to appoint a longer-term service provider from January 2022.
Some members are reporting rejections from the router from some customers, due to transcription errors in their tobacco ID numbers. FWD has requested that this information be provided in a format that can be copy and pasted rather than manual input and will update members when we have more information.
Until December 31, 2020, the EU Tobacco Track and Trace system will continue to operate in the UK and comply with The Tobacco Products (Traceability and Security Features) Regulations 2019. HMRC cannot say what their plans are for tobacco track and trace from January 1, 2021. There are three potential outcomes:
Sell-through period ends
All cigarettes and hand-rolling tobacco produced before May 20, 2019, which do not have security features and unique identifiers, must be sold by May 20, 2020. The end of the sell-through period means that all stock in depots should have been produced post 20th May 2019 and have unique identifier codes so they can be tracked through the supply chain. From May 20, 2020, wholesalers can only sell cigarettes and hand-rolling tobacco to retailers which have an Economic Operator Identifier Code and Facility Identifier Code – unless instructed otherwise by HMRC prior to that date.
Track and Trace Compliance after May
Track and trace regulations came into effect on May 20, 2019 and require distributors and wholesalers to record the sale and movement of cigarettes and hand-rolling tobacco products. HMRC’s approach to compliance during the sell through period is to support businesses involved in legitimate trade to comply while taking action against those who seek to deliberately avoid or abuse the rules. Following the sell through period, HMRC will continue to help businesses understand the requirements of the systems so that they can comply with the Regulations. HMRC say they understand there are issues wholesalers are still working out to comply with their scanning and reporting requirements under track and trace. If a business is unable or fails to comply with the Regulations, HMRC will consider what action to take on a case-by-case basis according to the facts of the particular case.
December 2019: HMRC has responded to our questions regarding outstanding issues with the track and trace system, which is attached to this update. Please let us know if the responses to the questions are able to resolve the issues you are experiencing in your business or if more clarification or detail is needed. The questions do not provide too much extra detail to what is already known, although there is some clarity about technical areas regarding despatch.
If you require further clarification or information, HMRC has asked if specific examples could be provided of the issues or operational difficulties that your business is facing so that they can provide a more detailed response.
Reporting product movements
The EU Commission has published a document of common reporting mistakes found since the EU Secondary Repository and Router have been in operation. Also published is the EU System of Tobacco Traceability information sheet, which outlines the rules for the reporting of product movement within the distribution chain.
The documents can be found here: https://ec.europa.eu/health/tobacco/tracking_tracing_system_en.
HMRC’s IT systems and forms have been updated for the recording of tobacco for heating (TfH). From 1 November 2019, traders are required to use the updated systems and forms to declare excise duty for any TfH products under Tax Type code 633. This process will replace previous instructions of recording TfH as hand-rolling tobacco.
Since November 2019, all TfH products must be recorded on forms and systems, as follows: TP7 (43633), W6 (31633) and W6D (633).
In addition, it will no longer be necessary to maintain additional records when using the updated IT sys- tems. Traders must however, retain any previous records that were used to verify the proportion of TfH recorded under the hand-rolling tobacco tax type of 619.