Codentify, known as the Inexto Suite since 2016 (Image 1), is a product serialisation/pack marker system, marketed by the tobacco industry as a way to verify the authenticity of a packet of cigarettes, whether they are genuine product or counterfeit.
Codentify was originally developed and promoted by the tobacco industry as a non-secure authentication system to help determine if a tobacco product was authentic or counterfeit. It was later adapted by the industry for use as a means of verifying the tax status of tobacco products. Codentify is installed at the production line and prints unique codes on each tobacco packet. It details information about the supply chain process, including line and time of production, and adds a unique, random, set of 12 letters or numbers to each individual pack. The tobacco industry has been advocating for Codentify to be used as the internationally recognised standard for the tracking and tracing of tobacco products.
The World Health Organization’s (WHO) Framework Convention on Tobacco Control (FCTC) and its Protocol to Eliminate Illicit Trade in Tobacco Products (ITP) put technological solutions, via a global track and trace system (i.e. determining where a tobacco product was produced and following it through to the point of sale), at the heart of efforts to address the illicit tobacco trade. The ITP specifically stipulates that the tobacco industry should play no part in such a system due to documented evidence of the industry’s complicity in facilitating illicit tobacco trade.
See: Tobacco Smuggling.
Joint Tobacco Industry ProjectPhilip Morris International (PMI). Leaked tobacco industry documents have revealed that in 2010, in a highly unusual move, PMI licenced Codentify for free to its main competitors, British American Tobacco (BAT), Japan Tobacco International (JTI), and Imperial Tobacco.
The tobacco companies began working together to promote the technology, and in 2011 formed the pan-industry working group, the Digital Coding & Tracking Association (DCTA) to promote Codentify as an alternative to tax stamps.
The DCTA has promoted the system to governments, law enforcement agencies and others, including INTERPOL, the European Union, the International Tax and Investment Center, and the World Customs Organization.
- For more details, see: Digital Coding & Tracking Association (DCTA)
Attempts to Influence ITP in Favour of Codentify
Use of Third Parties
Codentify has been presented by the tobacco industry as a suitable track and trace solution based on the ITP’s requirements (Image 2), despite Codentify’s connections to the tobacco industry meaning that it is in breach of these requirements.
A 45-page internal BAT document setting out the company’s campaign plan for the fifth FCTC Conference of the Parties in November 2012, where the ITP was adopted, noted BAT’s preferred outcome on tracking and tracing as “Stamping and coding should be digital (Codentify).” A leaked DCTA document shows that the industry anticipated resistance to Codentify, outlining that governments “need to be convinced for themselves that this [Codentify] is a high quality solution, which works totally under their control and supervision, and which is supplied to them by a credible third party technology company.” Another leaked document expressed industry awareness that the South African Department of Health “voiced its concern and will not support an “Industry solution”.
In response, tobacco companies started using Front Groups to give the impression that Codentify was supported by independent parties (this tactic is known as a Third Party Technique). One of these groups was FractureCode, a Danish company established in 2002, offering track and trace, digital authentication and volume verification solutions including Codentify. BAT Whistle-blower Paul Hopkins’ Employment Tribunal documents state that FractureCode was “in the pay” of BAT by 2011, and leaked documents suggest that FractureCode’s roles included: “to guarantee to governments that the ‘Codentify’ system works” and “to promote and sell the system to governments”, and that FractureCode was promoting Codentify in Mauritius, Uganda and possibly Germany. French company ATOS, originally involved in Codentify’s development, and also named in leaked documents, may have played a similar role to FractureCode. It has promoted Codentify at the 2011 Asia-Pacific Tax Forum and been involved in the implementation of Codentify in Lithuania alongside DCTA.
Inexto’s Role as “Front Company”
In June 2016 the DCTA sold Codentify to a company called Inexto, an affiliate of the French Impala Group, for reportedly 1 Swiss Franc only. A press release stated that: “a specialised and independent technology company is now best placed to further develop this technology to ensure it remains state-of-the-art and fit for purpose.” The European Patent Register confirmed that Inexto now owns Codentify’s European patent (identified property rights of an invention)-EP1719070. When the sale was reported in the press, a PMI spokesperson was cited as claiming that the system “now complies with the EU's new Tobacco Products Directive (TPD) and the WHO's Framework Convention on Tobacco Control (FCTC).” The spokesperson further said that Inexto is now “fully independent from the tobacco industry.
Despite the claims that Inexto is independent from the tobacco industry, Martyn Day, a Member of the UK Parliament, told Parliament in December 2016 that some groups consider Inexto to be “merely a front company and that the system is still under the effective control of the tobacco firms”.
Inexto’s top officials are former long-time PMI employees who are credited with having created Codentify, according to patent records. Inexto’s Managing Director is Philippe Chatelain, who was PMI’s Director of Product Tracking Intelligence & Security for 14 years, and one of the inventors of Codentify. The other top officials are Erwan Fradet, PMI’s Product Manager for Codentify for five and a half years, and Patrick Chanez, who worked for PMI for over ten years in anti-illicit trade technology research and development. The three hold patents, along with PMI, to the track and trace technology. Importantly, PMI still owns the trademark (an identifying word, phrase, symbol, and/or design) to Codentify after the supposed take-over by Inexto. Chatelain was quoted in a June 2017 '’EUobserver'’ article as stating that, while Codentify is “maybe not compliant” with the independence and transparency requirements of the FCTC and the TPD, he is “100 percent sure” that Inexto complies with the TPD’s requirements because “a government will have control of the machine” and the system was redeveloped “from scratch” after being transferred to Inexto.
Concerns with Codentify
Former tobacco industry employees, NGOs, academics, and the FCTC Secretariat have criticised Codentify, arguing that it is not compliant with the ITP and is an ineffective track and trace mechanism for various reasons:
- Codentify is inefficient when compared to other solutions that incorporate material-based security features.
- The adoption of the Codentify system would mean that the tobacco industry, which has a well-documented history of facilitating tobacco smuggling, would control the track and trace system which monitors tobacco smuggling. This would result in a substantial component of global anti-illicit efforts ending up under tobacco industry control. Codentify has also been described as a “black box” that is protected by a tobacco industry patent, whereby its contents are unknown but are managed and controlled by the tobacco industry.
- As the codes are visible on the packs under the Codentify system, they are easy to copy and or falsify.
- Codentify would not store the codes in a linked database to enable it to function as a track and trace system.
- Codentify is not a tracking and tracing system. Tracking and tracing is defined in the ITP as “the systematic monitoring and re-creation by competent authorities or any other person acting on their behalf of the route or movement taken by items through the supply chain”. Codentify doesn’t meet the standards of several Articles in the ITP that require information on the supply chain process, including shipment date and destination and point of departure, which Codentify does not provide.
- Codentify seeks to abolish government-controlled tax stamps which could further take away the authority and control on tax administration from governments to the tobacco industry.
- Tax stamps feature physical high-security features in order to differentiate genuine codes from those that are duplicated or cloned. The key feature is the combination of digital (the unique identification code on a pack) and physical security elements (these may be overt e.g. holograms, covert e.g. fluorescent fibres, or forensic) which make new tax stamps difficult to counterfeit. Under the Codentify system, if the same code appears on two products, there will be no way of identifying which one is genuine and which is not.
- Unlike Codentify, tax stamp producers, also in the business of printing secure documents for government (passports, ID documents, currency), are subject to international standards that control their production and distribution processes.
- An FCTC review of track and trace systems, including Codentify, stated that independent audits would be necessary in order to ensure that the verification system could not be easily breached. With tobacco companies refusing to commit to such a measure, Codentify is a cause for concern.
- A former tobacco factory employee alleged that Codentify is flawed as, while codes link back to the factory where cigarettes packs are produced, the codes are not stored, and so Codentify is an insufficient system for tracking and tracing cigarettes: “No tracking, no tracing. Nothing. It doesn’t work. Codentify doesn’t store codes”. 
- Tobacco Smuggling
- Digital Coding & Tracking Association (DCTA)
- Tobacco Industry Attempts to Undermine the FCTC Illicit Trade Protocol (ITP)
- Gallaher versus its Cypriot distributor
- BAT Involvement in Tobacco Smuggling
- JTI Involvement in Smuggling
- PMI IMPACT
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