© sicpa security solutions – may 2014 - n°2 government security solutions wco it conference 2015...

© SICPA Security Solutions – May 2014 - n°2

GOVERNMENT SECURITY SOLUTIONS

WCO IT CONFERENCE 2015 TECH TALK # 2IT SUPPORT FOR TFA IMPLEMENTATION

HOW TRACK AND TRACE SYSTEMS CONTRIBUTE TO THE TFA

Christophe RENARD


CASE STUDIES

1. THE PRODUCT CONTROL CHALLENGES


MAIN DRIVERS FOR ‘SECURE’ TRACK & TRACE

Counterfeit products damage

consumer health

Tax fraud due to under-declaration of production

Smuggling avoids controls & taxes,

and fuels organised crime

Lack of data & evidence hinders law enforcement and prosecutions


TRACK AND TRACE

Foreign Manufacturer

Exporter, Port, Customs International Transport / Transit Customs

National Distribution & SalesImporter

Foreign National

Port

Tracking and tracing can be differentiated into forward and backward.

Tracing = Origin and path of item

Tracking = location of item along its logistics chain


LEGISLATION ABOUT PRODUCTS AUTHENTICATION / TRACEABILITY IS EXPANDING (EXTRACT)

US Consumer Products Safety

Improvement Act 2008

US FDA e-Pedigree

2006

California e-Pedigree

2008

US FDA Drug Quality &

Security Act 2013

EU Toys Safety Directive

2009/48/EC

EU General Food Law

EC/178/2002 (art. 18)

EU Falsified Medicine Directive

2011/62/EU

WHO Framework Convention on

Tobacco Control Protocol 2012 (COP5)

EU Tobacco Products Directive

2014/40/EU


CROSS BORDER TRADE REQUIRES RELIABLE INFO

Foreign Manufacturer

Exporter, Port, Customs International Transport / Transit Customs

National Distribution & SalesLocal

Importer

Foreign National

Importer & Port

1’000’000 100’000’000

Manifests & Packing docsHS Classification Valuation (ACV)

Product description / content

Origin certificatesConformity certificates

(A)EO details

@

What if documents are fake, details are wrong, products are not those declared: how can Customs find the truth rapidly without impacting clearance process speed?

. . . .

.

.

Docs, declarations, history, AEO status

Risk assessment

Inspection (NII,…)

Clearance

.

for in circulation

Self declarations, SAD, documents & data3rd party inspection / notified bodies docs & data3rd party laboratories docs & dataForeign Customs (G2G, AEO, IPM) docs & data


POST-CLEARANCE AUDITS MAY BE TOO LATE

CustomsNational

Distribution & SalesLocal Importer

National

Importer & Port

Once products are released to the market:

• 100% certainty of goods’ origin cannot be guaranteed

• Documentation may be modified

• Responsible actors along the distribution chain may be difficult to trace

• What consumers buy may be counterfeited without means to proove it or find counterfeiters

• Tax may not be paid (Carousel fraud)

• Legitimate economic operators suffer from smugglers

• Concern for high risk, high value, sensitive, prohibited or restricted goods

??

Smuggling / counterfeiting hinders local economy, tax collection and consumer health... and is expanding…


CASE STUDIES

2. HOW CAN MARKING, AUTHENTICATION AND TRACEABILITY ASSIST CUSTOMS


SYSTEMS AGAINST SMUGGLING AND COUNTERFEITING EXIST

4 key pillars are required

Create product identity: Secure marking and activation of legitimate goods by legitimate producers / importers

Create product history: Distribution chain events tracking

Effective authentication and traceability inspections by law enforcement agents and economic operators

Data gathered for and managed by the Government, shall be trusted and interoperable with other systems

1 2 3

4


PRODUCT INDENTITY - EVOLUTION OF TECHNOLOGIES

Increased security

Serialisation, unique numbering data > central database

Digital security

Product SKU data

Production data

Distribution logistics data

Packaging aggregation data

QR codes, logistics codes

Business Intelligence

Internet of things, interoperable Big Data

+

+

+

+

+

+

+

+

Paper stamps, substrates, tamper-evidence

Material security

Overt security features, inks, guilloche

Semi covert, covert security features, inks

RFID chips, security seals

Security

+

+

+

Inspection devices, smartphones+


DIGITAL + MATERIAL SECURITY TOGETHER FOR PRODUCT AUTHENTICITY, ORIGIN AND DISTRIBUTION HISTORY

Secure codes / marksidentifier linking product and process for authentication and traceability

Labeling obligation:Product Name,

Ingredients / Contents,Expiry Date

CUSTOMS BRAND OWNER

SKU / SerializationTraceability / Match

DISTRIBUTORWeb / smartphone / device for authentication and traceability of machine & human readable codes

CONSUMER Web / smartphone / device

for authentication of machine & human readable

codesPOINT OF SALEWeb / smartphone / device for authentication and traceability of machine & human readable codes


AGGREGATION TO FACILITATE CUSTOMS ACTIVITIES

PRODUCT

PACKAGING

MASTER CASE

CONTAINERPALLET

Container codes

Government Data Management System: contains all data to facilitate law enforcement activities. Data may be exchanged with other Agencies (Tax, Health…), or regional control systems (EMCS…)

Aggregation data, shipment / reception data, reconfiguration data, waste data

Use of existing standards for logistics & consignment codes / symbology


Administration has access to data:•Products planned to be imported•Products importedfrom a reliable source

1

3

4

5

6

7

8

2

1. Importer orders stamps 2. Upon Gvt approval, importer

receives coded stamps

Information / Data FlowSecure Mark FlowProduct Flow

PROCESS FOR IMPORTS

3. Stamps shipped to foreign manufacturer

4. Stamps applied on products by foreign manufacturer and activated

5. Stamped products shipped by foreign manufacturer

6. Customs clearance7.Importer declares reception of stamped products 8.Inspections along distribution chain and at point of sale; consumer authentication

3b

4b

5b

3b.Stamps kept by importer

4b.Stamp applied before clearance

5b.Stamps activated

2


CROWD SOURCING TO GENERATE DATA AND INTELLIGENCE AGAINST FRAUD

Public / consumers

Law Enforcement AgentsPoints of Sale

Importers, Distributors

Manufacturers

Trust: Authenticate products

AEO, trust

AEO, trust

Trust

Hundreds

Thousands

Thousands

Thousands

Millions


CASE STUDIES

3. TRACK AND TRACE CONTRIBUTION TO THE WTO TRADE FACILITATION AGREEMENT


Article # Title Sub title Articles of interest Track and Trace

Article 3 Advance Rulings 3.9.1 - Origin of goods = assessment of goods vs Agreements on Rules of Origin

Marked products

Article 5 Other Measures to Enhance Impartiality, Non-Discrimination and Transparency

1. Notification for enhanced controls or inspections

2. Detention3. Test Procedures

5.1.a - Guidance based on risk to define level of controls or inspections

Marked products, Trusted traders

Article 6 Disciplines on Fees and Charges Imposed on or in Connection with Importation and Exportation1. General Disciplines on Fees and Charges Imposed on or in Connection with Importation and Exportation2. Specific Disciplines on Fees and Charges Imposed on or in Connection with Importation and Exportation3. Penalty Disciplines

6.1 - Fees for imports and exports

Truster traders (AEO)

HOW TRACK &TRACK CONTRIBUTES TO TFA



Article 7 Release and Clearance of Goods1. Pre-arrival Processing2. Electronic Payment3. Separation of Release from Final

Determination of Customs Duties, Taxes, Fees and Charges

4. Risk Management5. Post-clearance Audit6. Establishment and Publication of

Average Release Times7. Trade Facilitation Measures for

Authorized Operators8. Expedited Shipments9. Perishable Goods

7.1 - Pre-arrival processing7.4 - Risk management (high vs low, and selectivity)7.5 - Post-clearance audits7.7- Trade facilitation measures for AEOs including supply chain security7.8 - Expedited shipments –> 1.d - international security tracking techno, and 1.g - record of compliance.7.9 - Perishable goods

Data on / of marked productsTrusted traderField inspections for authenticationData records of AEOs in the DMSSupply chain securityDMS data transfer to other IT systems (e.g. Customs) authenticationData records of AEOs in the DMSSupply chain securityDMS data transfer to other IT systems (e.g. Customs)





Article 8 Border Agency Cooperation DMS data capture and access

Article 9 Movement of Goods Intended for Import under Customs Control

Marked products, DMS

Article 10 Formalities Connected with Importation, Exportation and Transit

1. Formalities and Documentation Requirements2. Acceptance of Copies3. Use of International Standards4. Single Window5. Preshipment Inspection6. Use of Customs Brokers7. Common Border Procedures and Uniform

Documentation Requirements8. Rejected Goods9. Temporary Admission of Goods and Inward and

Outward Processing

Data in DMS

Article 12 Customs Cooperation 1. Measures Promoting Compliance and

Cooperation2. Exchange of Information(3-12. are related to exchange of information)

DMS data to focal points


CASE STUDIES

4. CONCLUSION


KEY SUCCESS FACTORS FOR TRACK AND TRACE

Government willingness to implement a track and trace programme for selected products (e.g. excise) with supporting legislation.

Selection of a system provider working for the Government and independent from the industry to ensure data integrity.

Full implementation necessary to combat fraud (no loopholes).

System in the hands of and controlled by the Government.

Start with a few products (high value, high tax) then expand.

Multi-layered security made of material-based and digital-based security along the 4 pillars.

Interoperable system for data interface with other systems.

Open to existing standards (logistics).

Effectiveness of law enforcement activities with adequate authentication and traceability tools.

Effectiveness of sanctions leading to transparency and protection of legitimate economic operators.


DOES IT WORK? SOME CLIENTS’ TESTIMONIALS

ALBANIA “384 economic operators registered, out which 168

have been registered with the tax authorities before the implementation of the new law.

50 cases of violation have been evidenced. The unpaid excise tax is about USD 660,000, while the imposed

fines are USD 1,692,000”Arlinda Mulgeci, Deputy General Director of the Albanian

Customs Administration at the World Customs Organization (WCO) Conference in Dubai, May 2013

BRAZIL“Tax collection in the beverage industry increased considerably with this more advanced approach to monitoring production, known as SICOBE. In the tax

arena, certain tax avoidance tactics exist that efficient measures, like this system, eliminate.

SICOBE makes it possible to more reliably and accurately monitor [the production of each beverage]

in real time.”Otacílio Cartaxo, Secretary of the Brazilian federal tax

authority, quoted in Folha de Sao Paulo, 6 Apr’10

CALIFORNIA“California is pleased with the encrypted cigarette tax stamp

and we recommend the technology for use in other

states. The use of our encrypted stamp has significantly

increased effectiveness and efficiencies in the duties

performed by the enforcement officers. The system attributes

provide California with the technology needed to stay a

step ahead of the counterfeiters and cigarette tax

evaders.”Lynn Bartolo, State of California

Chief Special Taxes and Fees Division, in a letter dated 24

Feb’11


KENYA “The winner for the Best Tax Stamp Programme was the Kenya Revenue Authority for its Excisable Goods Management System.. …The introduction of the system has led to enhanced tax compliance, faster access to stamps andimproved service delivery, and has resulted in KRA seizing over 300,000 illegitimate products from about 900 outlets, prosecuting more than 150 offenders and increasing excise revenue on spirits by 53% between February and June 2014.”

Tax Stamp News Volume 6 – n° 9 / September 2014

GEORGIA“SICPATRACE® implementation has started in Georgia in February 2012 and is fully operational on tobacco, alcohol and beer products. I would like to express my

gratitude towards the company and highlight its excellent performance for reaching the objectives

and requirements set by the contract between SICPA and GRS.”

George Bubuteishvili, Head of Service Department, LEPL Revenue Service (GRS) in reference letter to

SICPA, 2013

SOME CLIENTS’ TESTIMONIALS -2

MOROCCO

“The aim of marking is to create traceability, to know in real time the production of the ones and others. The experience in a certain number of countries, in particular Brazil and Turkey, shows that this system offers a strong prospect. The increase in declarations reached 20% after the marking installation. We therefore suspect that the amounts of the statements were previously somewhat undervalued. Apart from that, we made a

certain number of controls which also resulted in several recoveries...”

Zouhair Chorfi, Director General of Morocco's administration of customs and indirect taxes, interviewed by L’Economiste,

12 Oct’12


CLIENT TESTIMONIALS EXTRACTS - 3

“NATIONAL BEER PRODUCTIONWith the installation of SICOBE (Beverage Production Control System), it was possible to control and monitor the beverage production, especially with soft drinks and beer.”

BRAZIL - Soft drinks and beer industry publicly recognises the benefits of the system to control and monitor their production.

http://afrebras.org.br/en/setor/cerveja/producao/


CASE STUDIES

5. SICPA OVERVIEW


Founded in CH in

1927

countries

3000employees

30

180Sales to

countries

Offices in

50+engineering expertise

SICPA - AT A GLANCE


SICPA - GLOBAL ROLE

Securing most of the world’s currencies, and value documents

with high security inks

Mark, authenticate, track and trace a wide range of

products

140 billion banknotes / year

76 billion products / year

Specimen

Specimen

Specimen


SICPA - GLOBAL PRESENCE

© sicpa security solutions – may 2014 - n°2 government security solutions wco it conference 2015...

Documents

sicpa security solutions

eu slide

ipm docs data slide

logistics chain slide

bodies docs data

traceability assist

documents data

tfa christophe renard