Philip Morris Offers 'Cheaper' Technology to Curb Smuggling

Source from:  Malaya 07/22/2010

Tobacco maker Philip Morris will offer government a much cheaper technology using a numeric bar-code system to help curb smuggling. The system will cost less than 10 centavos against the 62 centavos per pack offer of Swiss firm SICPA Product Security SA. Philip Morris Philippines president Chris Nelson yesterday said they are ready to demonstrate their CODENTIFY system and are just awaiting formal invitation from government. "We are extremely pleased that the government has rejected SICPA and we stand ready to offer our CODENTIFY system," Nelson said. He said the unique bar code system that would be printed on cigarette packs would enable government to track and trace the products' movement. Nelson said CODENTIFY is much cheaper, secure and easier technology to adopt and would not require a scanner, which is every expensive. "It creates unique codes per pack. The only cost is printing and ink," he said. He said Philip Morris could offer the technology at a cost equivalent to only a fraction of what SICPA is asking. "Let's just say it less than 10 centavos (per pack)," he said. "So the pass-on cost is not an issue." Nelson said the system is currently being used in Germany and Portugal. He said end-users could even use text messaging to verify the bar-code and determine if a particular cigarette shipment is genuine or not and tell where and when it was produced. Nelson said their system has the approval of all industry players. "All agree that this is the right system and, therefore, this is an industry proposal not only of Philip Morris," he said. The Philip Morris executive said it is up to government to determine whether the offer should be considered a solicited or an unsolicited proposal. He added the CODENTIFY system is the "friendly solution" to the whole industry's opposition to SICPA's unproven and expensive stamp-tax technology. Nelson said Philip Morris plans to tap a third party contractor that would administer and monitor the CODENTIFY system to allay fears of conflict of interest. With its recent "marriage" to Fortune Tobacco, Philip Morris now controls more than 90 percent of the cigarette market. "The industry will pay the third party as administrator," Nelson said. Nelson nevertheless said the government must first formally terminate its negotiations with SICPA before they could move in to demonstrate their technology. The Bureau of Internal Revenue (BIR), the supposed contracting agent, has dumped the proposal of SICPA for being expensive and not suited to the needs of the government. New BIR chief Kim Jacinto-Henares earlier said the government will talk to other technology providers, including Philip Morris. Henares said the search for a better but cheaper technology would continue as government braces for a record-breaking deficit this year of P325 billion. "But to use SICPA is no longer needed since it is not the 'right' technology. We would use stamp or bar code but not necessarily the SICPA technology," she said. The new revenue chief nevertheless said the unfavorable ruling of the Department of Justice (DOJ) would have to be appealed since it practically threw a monkey wrench into the agency's prerogative to adopt measures aimed at raising revenues and curbing smuggling. "The DOJ ruling barring the BIR from pursuing the SICPA proposal has to be appealed because it also effectively prevents government from collecting fees," Henares said. She said the basis for the justice opinion is wrong. SICPA offered a technology-driven but expensive track-and-trace excise system touted to generate up to P70 billion a year in additional revenues from alcohol and cigarette manufacturers. Enditem