The Government of the Russian Federation has ratified a track & trace marking experiment for beer to run from 1 April 2021 to 31 August 2022. The government executive order in question has been published on the official web portal for legal information.
The central idea of the project is to protect the rights of consumers.
The project's parameters, technical specifics and timelines are yet to be finalised with industry players, regulators, retailers, the operator of the Chestny Znak track & trace system and other stakeholders.
A similar experiment must be conducted for every product group proposed for digital marking. The purpose of the experiment is to test the business processes and yield optimal solutions that would be satisfactory to the manufacturers and other parties in the distribution chain.
Which beer-based beverages are subject to digital marking as of 2020?
All beer, beer-based beverages and low-alcohol beverages that are not liable to federal special or excise marking (brewed beverages) fall under the alcoholic beverage category targeted by the experiment on the digital marking of alcoholic beverages. The government's decision is motivated by alarming statistics on the quantities of counterfeit products in circulation on the Russian market.
How does digital marking work in production?
The producers of beer, beer-based and low-alcohol beverages build their catalogues of markable products in their user accounts on the TT GIS (Track & Trace Government Information System). They order unique ID codes for each SKU (or, in some cases, for a group of SKUs) and then apply a DataMatrix code on each product package. Now the product is ready to go into circulation and may be delivered for sale to wholesale dealers or retail outlets.
How does digital marking work in retail?
The track & trace system covers all parties in the distribution chain involved in the circulation of brewed beverages. Retail points of sale are also covered. POS are subject to a different set of rules designed to ensure that the sale of marked products is entirely legitimate.
When accepting a packaged product, the retailer is to scan the code and send it into the Chestny ZNAK track & trace system. This informs the state that the product has arrived at the point of sale. When a digitally marked brewed product is sold to a consumer, the checkout clerk is to scan the digital marking code. The state will be informed of the instance of scanning and its result via the online cash register and the fiscal data operator.
Digital marking is a powerful weapon against counterfeit products. It erects a firm barrier against ill-intentioned players as the TT GIS is based on the principle of closed-cycle product circulation from the moment of production to the moment the cash receipt is issued. Digital marking will not materially reflect on the final product price while giving consumers full assurance of the quality and legitimacy of the beer, beer-based or low-alcohol products they purchase in a shop.
What size company is eligible to take part in the experiment? Is there a minimum number of SKUs required to join the pilot project?
There are no limits on company size or the number of SKUs required to join the experiment; however, it is advisable to use several different package form factors and one or more production lines.
How do participants benefit from the experiment?
The experiment envisages the direct engagement of goods circulation participants, including the manufacturers. Participation in the experiment and in the actions of the working group is voluntary.
When a manufacturing enterprise and its officers join the experiment, they will be expected to perform some practical work at their enterprises. Representatives of the goods circulation participants are also expected to attend working group meetings on the Operator's platform to discuss and coordinate the experiment's regulatory framework and the implementation process for the digital marking of brewed beverages. Participation in the experiments offers a range of benefits:
• trialling of the track & trace technology (at the experimental stage) free of charge
• access to the expertise built up in other product groups which already use digital marking
• free marking codes while the experiment is on
• participants can take their time to sort out the business processes with the assistance of the Operator's experts
It is also important to note that the participant gets involved in brainstorming the regulatory framework and may contribute their comments and ideas.
The Operator assigns the enterprise a designated project manager, technical leader and business process specialist whose task is to make sure the experiment is run successfully at the enterprise they oversee.
The following types of practical work are usually required to prepare the enterprise for a successful implementation of digital marking:
• Figure out the finer points of the business processes that underlie digital marking
• Finalise the choice of the technology partner that will deliver and install the marking and integration systems
• Define the methods of marking code application
• Formulate the final technical solution most suitable for the given production line(s)
• Procure the delivery, testing and start-up of the equipment
• Have the equipment integrated with the Enterprise Management Information and Process Control Systems (ERP systems)
• Have the enterprise's stock-keeping systems adapted to the nuances of handling digitally marked products
• Have the enterprise's incumbent business processes adapted to the new requirements underlying the digital marking technology
• Train core personnel to work with digital marking
• Make sure the vendor's key counterparties are likewise adequately prepared to work with digital marking
• At the end of the experiment, the enterprise and its specialist staff will have gained hands-on experience working with digital marking, a tried and true marking solution for the lines covered by the experiment, a tailor-made TT GIS integration solution and streamlined interfaces with technology partners.
Digital marking will benefit all parties to the process. Consumers will be able to independently verify the quality and legitimacy of the product they purchase, and producers will have the assurance that their products cannot be counterfeited and sold illegally under their name. Unfair competition will be eradicated, and the supply chain will become adequately transparent. However, there are certain rules that have to be followed to make the change possible. The experiment will help to elicit any issues and will ease the manufacturers' transition to the new conditions.
We have already started accepting applications from those wishing to join the voluntary experiment on the digital marking of brewed beverages. We suggest that you act without delay and join the experiment now.
Registered participants will have the opportunity to contribute to the work of the project's expert bodies and working groups; they will get their own user accounts, enjoy access to technical documentation and receive CRPT support in the custom setting of the processes for applying codes on products and other business processes, as well as any marking information they need.
To join the working group and sign up for the experiment, send your Letter of Consent to Nikolai Gladkov, Head of the Beer and Beer-Based Beverages Product Group, at beer@crpt.ru. The letter should be on your corporate letterhead, naming the officer to be responsible for marking and specifying their contact details.
The unified Digital Track & Trace System will allow businesses to improve productivity, streamline their logistical processes, gain a greater market share and ultimately maximize earnings:
In December 2017, the President of Russia, Vladimir Putin, endorsed the government’s vision of a national digital track & trace system for goods to be in place by 2024. The project is being implemented as a public/private partnership without reliance on the federal budget. The government has appointed the Center of Research in Perspective Technologies (CRPT) to operate the system.
The Digital Track & Trace System employs a digital code technology based on the DataMatrix standard, which stores information about each product unit, and on cryptographic protection technology that makes it impossible to falsify a code. A unique code is applied on each product unit at production or importation (for some product groups).
Electronic Document Management ensures that each marked product unit remains traceable at all times.
In order to monitor the disposal of marked goods from circulation, a system is in place to share information that conveys any instance of the disposal of a product and its code via the fiscal data operators.
This approach ensures a complete traceability of goods, from the production line to checkout, thus eliminating the possibility of introduction of unmarked goods into a circulation cycle.
The use of digital technology also provides an opportunity to expand public monitoring mechanisms through the use of the Chestny Znak mobile app. With this app, a consumer gets to check product’s legitimacy and specifications and may direct any complaint to the regulatory or supervisory authority.
The feasible methods of applying and reading the marking codes at production will be determined based on the results of production site surveys carried out by systems integrators in conjunction with representatives of the Operators and manufacturers. In the more challenging cases, individual package form factors may have to be submitted for extra laboratory testing to determine how to apply marking codes of the required quality to a specific form factor, as well as to validate the quality of application during reading.
A small surface sized approximately 13 mm by 13 mm is sufficient for the application of the code to the label or the cap. The exact size and place of application can only be determined through experimental work at the enterprise.
A label printer, applicators (where labelling is required) and machine vision where the digital marks are applied at the manufacturing site. Only machine vision is required when marking codes are printed on a label by a printer. More details about the equipment, its deployment locations and process integration will arise from the findings of the production site survey.
Small businesses and microbusinesses may be able to do this via their user accounts. But if this option is inconvenient, an update or upgrade of their existing stock accounting system will be necessary to integrate it with the track & trace system account. Large and medium-sized businesses are strongly recommended to implement integration with their stock accounting and warehouse automation systems as this would greatly simplify interoperation with the GIS/TT.
After the introduction of mandatory marking, unmarked goods will be barred from crossing the customs border into the Russian Federation. Do marking codes have to be applied to imported goods at the manufacturing site or at the customs warehouse?
The cost of the track & trace service for marked goods (generation and provision of a code/storage of information on marking code transfers between legal entities per product unit) was approved by Executive Order of the Russian Government No. 577 of 8 May 2019 and amounts to a flat RUB 0.50 per product unit, excluding VAT, over a period of 15 years.
The marking codes are issued free of charge for the duration of the experiment. After the experiment, as of the official start date for digital marking, the amount will be charged every time the details of a product’s entry into civil circulation are submitted.
Market participants bear the cost of the risk of loss resulting from goods write-offs/defects regardless of whether the goods are marked or not. The risk is unrelated to the operator’s service of providing marking codes. Marking codes retain their traceability even when up to 50% of their surface is damaged. Greater damage may indicate damage to the product packaging, rendering it non-compliant with health and safety regulations. As the physical printing and application of the marking codes are not included in the services provided by the operator, incorrect application or mutilation of a code cannot be attributed to the risks of the operator.
The purpose of the experiment is to successfully test the entire flow of marked goods from manufacturing sites or import to their disposal at checkouts.
The experiment consists of the following key steps:
There are no limits on company size or the number of SKUs required to join the experiment; however, it is advisable to use several different package form factors and one or more production lines.
Deputy Chair of the State Duma Committee on Security and Prevention of Corruption
"Digital marking of alcoholic beverages would discourage corrupt practices and safeguard citizens health. At this juncture, it is important to streamline the industry so that consumers can be assured that all our products are marked and everything is under control, while Rospotrebnadzor and other watchdog agencies get to expand their influence to control all products."
Director of Centre for National Policy-Making on Alcoholic Beverages
"Today, even the major brewers admit that things are not alright on the beer market—there are too many counterfeit and illegal products out there. In our estimate, up to fifty per cent of products are illicit."
Deputy Chair of State Duma Committee on Economic Policy, Manufacturing, Innovative Development and Enterprise
"Digital marking clearly has numerous benefits. It brings the segments still plagued by high illegal circulation out of the shadows. This is beneficial both to honest businesses and to the state due to the expanded legal tax base. Meanwhile, consumers benefit from a safer shopping environment offering high quality marked merchandise."