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Who Investigates Counterfeit Cosmetics Products?

In our last blog post, we talked about the global problem of counterfeit cosmetics. Today, we’re talking about who investigates counterfeit cosmetics products, starting with how cosmetics are regulated in the United States and the EU.

Regulation of cosmetics products varies greatly from country to country, so our discussion today should not be taken as an overview of what to expect everywhere cosmetics are sold. Enforcement of laws and the actions authorities take to target counterfeits also vary.

What is universal, however, is that the cosmetics industry faces unique challenges with consumer safety, increased consumer demand for transparency, and being targeted by counterfeiters. It’s good to know who investigates counterfeit cosmetics products and what measures you can take to be part of the solution.

Who investigates counterfeit cosmetics products: USA and EU

Counterfeit cosmetics are dangerous because the criminals who make them don’t follow regulations or standards for production. Fakes are often contaminated with “stuff” you really don’t want to think about, let alone put on your face, such as bacteria, animal and human feces, arsenic, and mercury. So, regulators keep an eye on cosmetics.

United States

In the United States, the Food and Drug Administration (FDA) is the governing body for cosmetic regulations. Cosmetics products do not require FDA approval — but they are regulated. The Federal Food, Drug, and Cosmetic Act (FD&C Act) and the Fair Packaging and Labeling Act (FPLA) explain the FDA’s requirements, restrictions, and disciplinary actions regarding cosmetics.

The FDA focuses on preventing adulteration and misbranding, mislabeling, and harmful ingredients or drugs. Adulteration refers to products or product ingredients that are not in line with FDA regulations or that have been contaminated. A misbranded product is “improperly labelled or deceptively packaged,” which could include counterfeit cosmetics products. The FDA prohibits 11 chemicals from being used in cosmetics products.

Additionally, the FDA reserves the authority to request recalls and work with the Department of Justice, Federal Bureau of Investigation (FBI), and Border Customs if any violations are found. It maintains a “Cosmetics Recalls & Alerts” page and has a searchable “Enforcement Report” database of recalled products.

The European Union

Cosmetics products manufactured in and imported to Europe are regulated under the EU Cosmetic Regulation. Like the FDA, the EU regulates ingredients and labeling; generally, however, the regulations are broader and more precisely defined.

For example, more than 1,300 substances (e.g., chemicals, colorants, and preservatives) are banned from cosmetic use, and hundreds more are permitted only under certain conditions. The regulations also mandate Good Manufacturing Practices (GMP), whereas the FDA only suggests GMP as “guidelines for effective self-inspection.”

Furthermore, the EU requires significant product documentation. Every cosmetics company must have a “responsible person” for every product they make. This person is responsible for ensuring products are safe and comply with regulations, and must submit a cosmetics product notification through an online portal before a product can be sold.

The responsible person must also create a product information file that includes the name, description, and nature of the product; description of the manufacturing methods; statement of compliance with regulations and GMP; a product safety report; and data about animal testing, if any. They must also assemble a product safety report that contains product safety information and a product safety assessment.

Do consumers have a role?

Yes, and it begins with vigilance with prices, packaging, and product quality:

      • Prices: If the price is too good to be true or just noticeably cheaper than the last time you bought it, there’s a good chance it’s a fake.
      • Packaging: The printing might look shoddy or the colors might seem off. There might not be a barcode. There might not be packaging at all, and the products might be offered in bulk.
      • Product: If the consistency or texture seem different, it’s likely a fake

In the United States, consumers can “report suspicions concerning the manufacture or sale of counterfeit or pirated goods” to the FBI. For suspected counterfeit cosmetics products seen online, consumers can contact the FBI Internet Fraud Complaint Center. The FBI has also partnered with the National Intellectual Property Rights Coordination Center to create a tip line where consumers can report products they suspect to be fake.

In the EU, consumers are encouraged to contact their local authorities about counterfeit cosmetics products. Depending on the nature of the situation, the authorities might investigate themselves or contact the appropriate investigative body, which could include Europol. The United Kingdom has Action Fraud, an online reporting tool for fraud and cybercrime.

Consumers should also be aware of what brands are doing to combat counterfeits and consumer engagement programs that encourage people to report suspicious products.

Final thoughts

If you really want to drill down into the U.S. and EU regulations, download our “Global Cosmetics Market” white paper today. It also has a section about regulations in Singapore, plus more information about counterfeit cosmetics products.

In “Top Supply Chain Trends of 2021,” we posed some important questions companies should ask themselves as we move toward what is likely to be another challenging year for supply chains. Many of those questions, listed below, fit perfectly with what we talked about today — regulations, counterfeits, brand protection, consumer engagement.

Your supply chain is where all of these concerns converge. Which is why you should schedule a short demo of our solutions. In about 15 minutes, we can show you the basics of our Traceability System and how it transforms your supply chain into a strategic asset that will improve and protect every facet of your business.

 

  • Are you keeping up with supply chain trends?
  • Are there gaps and blind spots in your supply chain?
  • Are counterfeits a problem in your industry?
  • Are you doing everything you can to protect your brand?
  • Are you actively reaching out to your customers to bring them closer to your brand?
  • Are there compliance deadlines on the horizon?
  • Are you certain your current supply chain solutions are truly optimal?
  • Are you using your supply chain as a strategic asset?

Why We Should Worry About Counterfeit Cosmetics

Counterfeit cosmetics have boomed during the pandemic. Not that they’ve ever not been in fashion among the criminal set. But recent research shows a renaissance, a proliferation of often dangerous fakes readily available to more people and through newer channels.

We just published a white paper about the global cosmetics market. It has a section about counterfeit cosmetics, and now we want to keep the conversation going with more information about this global problem. Here we go.

The statistics reveal “a worrying threat”

In “Global Trade in Fakes: A Worrying Threat” (June 2021), the Organisation for Economic Co-operation and Development (OECD) reported that the global value of counterfeits and pirated goods amounted to as much as $464 billion in 2019, or 2.5 percent of world trade.

Worldwide, there were “consistently” more than 130,000 customs seizures of counterfeit and pirated goods annually in 2017, 2018, and 2019. “Overall,” the report continues, “the unified database on customs seizures of IP-infringing goods includes almost half [a] million observations.”

In 2017 and 2018, counterfeit cosmetics and perfumery products accounted for about 4 percent of all customs seizures. That rose to just under 10 percent in 2019 — a considerable jump in a very short time. Furthermore, cosmetics and perfumery products were among the Top 5 products “targeted by counterfeiters” every year from 2011 to 2019. (The others were articles of leather, clothing, footwear, and watches.)

What toll do counterfeit cosmetics take on the industry’s fiscal health? One report shows that annual sales losses from counterfeiting in cosmetics and personal care products sector amounted to 4.7 billion euros, or about $5.3 billion.

Our brand protection series talks more about counterfeits. It’s a real problem that every industry, some more than others, must contend with.

Counterfeit cosmetics in a huge global market

According to a Fortune Business Insights report published in September, the cosmetics market was worth $277.67 billion in 2020. Despite an overall decline in sales during the pandemic, the market is projected to grow to $415.29 billion by 2028.

The market has responded to consumer demand for a wider variety of products, and online shopping has added an ease of access. Online shopping will drive the market and, according to industry watchers, could account for nearly 30 percent of global beauty sales by 2026.

However, the dramatic shift from in-person to online purchasing during the pandemic has emboldened criminals to churn out more and more counterfeit cosmetic products. As OECD put in its “Global Trade in Fakes” report, “Under confinement, consumers turn to online markets to [fulfill] their needs, driving significant growth in the online supply of a wide range of counterfeits.”

Research from the U.S. Department of Homeland Security supports this finding. Its “Combating Trafficking in Counterfeit and Pirated Goods” report (January 2020) noted that “Selling counterfeit and pirated goods through e-commerce platforms and related online third-party marketplaces is a highly profitable venture.”

The threat to businesses and consumers

Counterfeit cosmetic products are a real threat to manufacturers and consumers. The bogus goods mimic the original, undercutting company sales. They bypass quality control processes and regulatory oversight, which means they can contain harmful “ingredients.”

For example, in 2018 authorities in the United Kingdom recovered counterfeit cosmetics that were found to contain mercury and high levels of hydroquinone, a skin-whitening agent. UK Police have also warned consumers about fake products containing “rat droppings, human urine, and arsenic.” Police in Los Angeles found counterfeits with bacteria and animal waste.

With the surge in online orders, shipping has become important to the counterfeit industry. The OECD reported that between 2017 and 2019, 64 percent of global seizures were postal shipments and 13 percent involved express couriers. In the same period, 77 percent of all counterfeits seized by authorities were discovered during the shipping period.

Final thoughts

Counterfeit cosmetics — counterfeit anything — threaten consumer safety and brand reputations.

Your supply chain is your first line of defense. With the right solution for end-to-end traceability, like our rfxcel Traceability System, you can leverage data and lock down your supply chain guard to against counterfeits and help mitigate other risks.

You’ll also be able to meet consumer demand for transparency. You can tell them with certainty that your products are what you say they are. You’ll ensure product safety and protect your brand.

If you have questions, we can help. Take a look at our solutions for brand protection and download our white paper about the global cosmetics market. And contact us today to arrange a short demo of our Traceability System. In about 15 minutes, our supply chain experts can show how our solutions will turn your supply chain into your most valuable strategic asset.

Understanding GS1 Barcodes in the Global Supply Chain

Where would we be without standards? One thing’s certain: Your supply chain would be a lot messier, if not chaotic, if you and your partners didn’t have a “common language” to process and exchange data. Standardized GS1 barcodes are one way we avoid this chaos.

GS1 barcodes keep everybody “on the same page.” They allow companies in virtually every industry to easily record, store, and transfer data. We’ve all seen them, and chances are your organization uses them — maybe even millions or billions of them. But let’s do a quick refresher course as another way to keep us all on the same page.

Why are GS1 barcodes important?

The short answer is, as we said above, standardized GS1 barcodes allow us to maintain order and avoid chaos. Work flows become quicker and more efficient. The GS1 barcodes keep supply chains running by enabling companies to sell, ship, track, reorder, and return products, in most cases by scanning with a handheld device or a camera-based system.

GS1 barcodes also expedite communication, traceability, visibility, and transparency. It’s really all about sharing information quickly in order to know the source of ingredients/components and products, where they’ve been and where they’re going, and when they reach their final destination.

These capabilities not only make supply chains more efficient — they also increase product safety and protect consumers. If there’s a recall, for example, a company can locate its products quickly, make sure shipments are stopped, remove items from stores, and share data with regulators and even consumers.

GS1 barcodes also save money. Administrative costs come down when everybody uses the same standards and has the same expectations. And because GS1 barcodes facilitate digital supply chains, they increase speed and reduce paperwork.

GSI Identification Keys

GS1 standards define a set of unique identification codes, known as identification keys. GS1 says its identification keys “refer unambiguously to a real-world entity,” such as a product, a logistics unit, a physical location, a document, a service relationship, or another entity.

In other words, the ID keys let you quickly and conveniently access information about items in your supply chain and share it with your partners. Only GS1 members can build ID keys, which must include a GS1 company prefix. There are 12 ID keys:

        1. Global Trade Item Number (GTIN): identifies products and services, such as food and clothing
        2. Global Location Number (GLN): identifies parties and locations, such as companies, warehouses, factories, and stores
        3. Serial Shipping Container Code (SSCC): identifies logistics units, such as parcels and palletized products
        4. Global Returnable Asset Identifier (GRAI): identifies returnable assets
        5. Global Individual Asset Identifier (GIAI): identifies assets, such as equipment used in manufacturing and transportation
        6. Global Service Relation Number (GSRN): identifies relationships between service providers and recipients, such as hospital staff and members of brand “loyalty” or rewards programs
        7. Global Document Type Identifier (GDTI): identifies documents, such as shipping paperwork
        8. Global Identification Number for Consignment (GINC): identifies consignments, such as logistics units being transported in a container on a ship or airplane
        9. Global Shipment Identification Number (GSIN): identifies shipments
        10. Global Coupon Number (GCN): identifies coupons
        11. Component/Part Identifier (CPID): identifies components and parts
        12. Global Model Number (GMN): identifies a product’s model number

The GS1 standards also encompass data capture, including definitions of barcode and radio-frequency identification (RFID) data carriers, that allow ID keys and other data to be affixed directly to an object. Data standards also address the hardware to read and produce barcodes (e.g., scanners and printers), and hardware and software to connect the barcodes and RFID tags to business applications.

The different types of GS1 barcodes

All GS1 barcodes are “containers” that can hold different amounts information, such as serial numbers, batch numbers, GTINs, and expiration dates. As the image below from GS1 shows, there are four types, or “families,” of barcodes: EAN/UPC, two-dimensional (2D), DataBar, and one-dimensional (1D).

GS1 barcodes

EAN/UPC family. GS1 says, rightly, that these “are printed on virtually every consumer product in the world.” They are characterized by a series of vertical lines and a horizontal row of numbers, and come in four types: UPC-A, EAN-13, UPC-E, and EAN-8.

These GS1 barcodes are designed to be used at the point of sale and can be read by omnidirectional scanners. None support attributes — they cannot contain product information such as an expiration date, a batch number, or item weight. UPC-A has 12 numbers and supports GTIN-12; EAN-13 has 13 numbers and supports GTIN-13; UPC-E has 12 numbers (the zeros are “suppressed) and supports GTIN-12; and EAN-8 has 8 numbers and supports GTIN-8.

2D barcodes. Like EAN/UPC barcodes, 2D barcodes are ubiquitous. They are incredibly robust, able to hold dense product information and remain legible at greatly reduced sizes or when they’re etched into a surface, such as a plastic bottle cap. There are two kinds of 2D barcodes:

      1. GS1 DataMatrix codes are omnidirectional and support attributes and all GS1 ID keys. They can hold 3,116 numeric or 2,335 alphanumeric characters.
      2. GS1 QR codes are also omnidirectional and support attributes and all GS1 ID keys. They can hold 7,089 numbers or 4,296 alphanumeric characters.

DataBar family. There are seven members in the DataBar family. Generally, they’re divided into two groups: those designed for use at the point of sale (i.e., can be read by omnidirectional scanners) and those that are not.

The first group has four types: omnidirectional, stacked omnidirectional, expanded, and expanded stacked.

      • Omnidirectional and stacked omnidirectional have 14 numbers. They support GTINs and Global Coupon Numbers (GCNs) but do not support attributes.
      • Expanded and expanded stacked have a maximum capacity of 74 numeric and 41 alphabetic characters. They support GTINs and GCNs, but do support attributes.

There are three types of barcodes in the second group: truncated, limited, and stacked. These have 14 numbers and support GTINs, but do not support attributes. They are not designed for use at the point of sale, so they cannot be read by omnidirectional scanners.

1D barcodes. The two types of 1D barcodes — GS1-128 and ITF-14 — are used in retail distribution, healthcare, and logistics. GS1-128 barcodes can carry any GS1 ID key and up to 48 alphanumeric characters, including serial numbers, expiration dates, and other information that helps track products through a supply chain. More than one GS1-128 barcode can be used on a single item. ITF-14 barcodes can hold only GTINs; GS1 says it is suitable for printing on corrugated materials.

Final thoughts

This year was the 50th anniversary of the GTIN. As GS1 said, “It is no exaggeration to say that the development of the GTIN set the stage for global, digitalized commerce.” Indeed, labeling standards and barcode technologies have evolved and advanced since 1971 to the great benefit of businesses and consumers alike.

We have been talking about the advantages of end-to-end traceability in a digital supply chain for a long time. When your products, labeled with powerful identifiers such as 2D DataMatrix codes, move through a digital supply chain powered by our award-winning Traceability System, you can leverage rich, unit-level data for much more than compliance and operational efficiency: You can create genuine, tangible business value. For example:

That’s really just the beginning of what a digital supply chain can do. To learn more, contact us today to see a short demo of our solutions. Our supply chain experts will show you how our Traceability System transforms your supply into your most valuable strategic asset.

Brand Protection Strategy and the Top Supply Chain Threats

We just did two articles about why your supply chain is vital to an effective consumer engagement strategy. Now we want to jump into brand protection strategy and your supply chain.

First, let’s define our terms. Although consumer engagement is a usually a dedicated effort to boost brand recognition and loyalty, it must always be considered part of your brand protection strategy. As we’ll see, getting your customers involved in fighting counterfeits and identifying disreputable sellers and other bad actors is critical. Let’s continue breaking this down.

Why do you need a brand protection strategy?

Do you want to protect your business? Your employees, your bottom line, your reputation, your supply chain, your intellectual property?

Of course you do. Your brand protection strategy is your firewall. It’s how you shield your business from things that can harm it. And many — if not most — of the factors that can harm your brand are directly related to your supply chain. These include counterfeits (also called fakes), diversion, theft, and insufficient traceability.

Top supply chain threats

Let’s take a closer look at the top supply threats your brand protection strategy should address.

Counterfeits and fakes

The joke is that the best way to fight counterfeits is to make products nobody wants to buy.

We know that’s not how it works, though, which is why counterfeits and fakes are the No. 1 brand protection concern. In fact, counterfeits and pirated products accounted for up to 3.3 percent of world trade in 2016.

That statistic comes from a 2019 report by the Organisation for Economic Co-operation and Development (OECD) entitled “Trends in Trade in Counterfeit and Pirated Goods.” The OECD also found that trade in counterfeit and pirated goods was rising steadily despite stagnation in overall trade volumes. Based on 2016 customs seizure data, the value of imported fake goods worldwide was $509 billion, up from $461 billion in 2013.

But there’s a lot more to be concerned about. Counterfeits are of inferior quality and often contain harmful, even deadly, materials/ingredients. The people who make them, including children, often work for long hours in sweatshop conditions. Some may have been trafficked or coerced. Furthermore, it has been established that counterfeits are inextricably linked to organized crime.

The pandemic provided many examples counterfeits making their way into the global supply chain — fake vaccines, fake COVID-19 testing kits, fake masks, fake nitrile gloves. But counterfeiting affects every industry, from food and footwear to cosmetics and computers.

Diversion and theft

When your goods are in transit along your supply chain, you want them to reach their final destination as quickly and safely as possible. This is why diversion is another key consideration for a brand protection strategy.

Diversion is actually a two-pronged problem. Let’s use pharmaceuticals to illustrate. Many drugs must be kept within a certain temperature range or maintained under certain lighting or humidity conditions. Even the slightest delay could spell disaster — ruined products, which means patients might not get medicines on time.

Diversion can also indicate theft. If a truck goes off its prescribed route, bad actors might be hijacking it and your product could end up on unauthorized e-commerce sites (rogue websites) and other grey markets or black markets. If the diversion has compromised the integrity of your product — a drug, for example — people’s lives may be jeopardized.

Insufficient traceability

As we’ve discussed before, supply chain traceability brings tangible value to just about every part of your business, including your brand protection strategy. If you’re not taking traceability seriously, you’re not just opening the door to assaults on your brand; you’re risking problems with regulators, alienating (and losing) customers, and weakening your supply chain.

A recall is among the most damaging events that can happen to a brand, so let’s use it as case study. If you can trace a recalled item, you can better collaborate with trading partners and authorities and help to get the product out of the supply chain and out of stores. With traceability, you’re protecting consumers from a health hazard and safeguarding your brand from bad publicity. And with a transparent approach to engaging with customers about your products, you create a strong brand image that conveys trust, credibility, and reliability.

Traceability also helps fight counterfeits, diversion, and theft. The ability to trace and authenticate every product in your supply chain in real time, 24/7, is foundational to an effective brand protection strategy. We’ll get into those details in Part II of our brand protection series.

Final thoughts

At the end of August, the Office of the United States Trade Representative published a request for comments “that identify online and physical markets to be considered for inclusion in the 2021 Review of Notorious Markets for Counterfeiting and Piracy (Notorious Markets List).”

Counterfeits have also been making headlines in recent weeks:

In this environment, a comprehensive brand protection strategy driven by granular supply chain data is your best defense against bad actors. rfxcel understands this. We can help you leverage your supply chain to combat counterfeits and the other concerns we addressed today. Our brand protection solutions will fortify your brand with data from a digital supply chain. Contact us today to learn more — and read Part II of our brand protection series.

Top Reasons Your Supply Chain Is the Key to an Effective Consumer Engagement Strategy

Welcome to Part II of our series about effective consumer engagement. In Part I, we talked about the benefits of consumer engagement. Today, we’re focusing on your supply chain — and how you can use it for a next-level consumer engagement strategy. Let’s jump right in.

It’s all about data from your supply chain

Your supply chain is a gold mine of information that you can leverage for a robust consumer engagement strategy. The basic building block is serialization, which turns each one of your products into what we call “digital assets.” Each digital asset has a unique digital identity that can be monitored from production all the way to the person who buys it.

With rich, traceable data about every item in your supply chain at your fingertips, you can establish and maintain connections with consumers before, during, and after the sale. (You can also do much, much more, but that’s beyond the scope of what we’re talking about today.)

Four ways supply chain data can supercharge your consumer engagement strategy

1. You’ll share the product information that consumers demand. Consumers demand information. Every product — every digital asset — in your supply chain can be “loaded” with data that consumers can access at the store, at home, at a restaurant, at a sporting event. Anywhere. For example, a quick scan of a 2D Data Matrix code or QR code with a smart phone will reveal every detail you want to share about your product: where and when it was grown or made, its ingredients, the route it took to get to the consumer. This demonstrable provenance using supply chain data builds consumer trust and confidence; it is foundational to consumer engagement.

2. You’ll create compelling customer experiences. Consumers also want experiences. With data from your supply chain and other brand resources (e.g., an app) you can curate experiences such as contests, loyalty programs, games, and unique online content. You can encourage storytelling about your brand. If you’re a winemaker, connect people to a virtual tour of your vineyard. If you sell organic foods, share video recipes online or invite people to see your sustainable operations. If you make cosmetics, link to virtual try-ons. Importantly, you can hyper-personalize and hyper-target every engagement, and even “broadcast” specific information to specific locations or events.

3. You’ll communicate directly with consumers. Your serialized product is a device for one-on-one communication with the person who bought it. When a customer accesses the information from your digital asset, you can connect them to your website, social media, an app, a survey, or other forums where they can start a conversation with your brand. They can ask questions and provide feedback — and you can give answers and reactions. Relationship-building is another cornerstone of an effective consumer engagement strategy, and the products people are literally holding in their hands are the first step of the conversation.

4. You’ll gain valuable insight into your customers. An effective consumer engagement strategy creates a world for your customers. And as they navigate and participate in that world, they share information. Where are they buying your products? What do they like? What don’t they like? What inspires them? What engagement activities resonated the most? This business intelligence can inform every part of your business, from how your supply chain works to creating better consumer engagement strategies.

Final thoughts

The purchase used to be the last part of your supply chain; now it’s the beginning of a new realm of possibilities. Every digital asset is an opportunity to connect your customers to your brand and put your products front and center in their lives.

rfxcel’s Traceability System is an end-to-end supply chain solution that creates the digital assets. It gives you in-depth, real-time insights all the way from production to your final customers. The data you connect to your products will fuel compelling consumer engagement activities that can reach people everywhere you do business.

And now, as part of Antares Vision Group, we can offer even more ways to engage with consumers. Contact us today to find out more.

 

BONUS CONTENT!

Last year, we did a piece called “Supply-Chain Traceability Is Building a New Kind of Consumer Kingdom.” Here’s an excerpt that ties into what we’ve said about an effective consumer engagement strategy:

In fact, consumers are not only thinking deeply about where the things they buy come from and what goes into making them, they are actually becoming a pivotal part of the supply chain itself. What’s more, they’re participating willingly and with gusto, demanding detailed information about the goods they purchase and even expecting to interact with products far beyond the point of sale. Just how far will they go to get what they want? More than 70% of customers say they’re willing to share their data in exchange for a more personalized experience, according to one recent survey.

Read the full article here.

Requirements for Russia’s Textile and Apparel Supply Chain

There’s always something interesting going on with Chestny ZNAK, Russia’s National Track and Trace Digital System. (Well, we think it’s interesting, and chances are you do too if you’re reading this.). Adjustments, pilots beginning and ending, mandatory product labeling going into effect … it’s a treasure trove of track and trace. Such is the case with today’s topic: Russia’s textile and apparel supply chain.

Technically, Chestny ZNAK refers to some facets of the textile and apparel supply chain as “clothing items and light industry goods.” The category includes coats, shirts, blouses, and linens.

Globally, footwear and some items made with fur are certainly part of the textile and apparel supply chain. Chestny ZNAK, however, treats these as separate categories, so we’re not including them in today’s discussion. We’ve written about footwear before — mandatory serialization and other requirements went into effect on July 1, 2020 — and you can learn more about requirements for fur (and all regulated product categories) by downloading our “Overview of Chestny ZNAK Compliance for Key Industries” white paper. It’s fully updated for 2021 and available in both English and Russian.

Okay, let’s get into clothing items and light industry goods in Russia’s textile and apparel supply chain.

Serialization in Russia’s textile and apparel supply chain

A pilot for clothing/light industry products was conducted during the second half of 2019, and mandatory labeling began on January 1, 2021. To date, Chestny ZNAK reports that more than 130,000 textile and apparel supply chain stakeholders have been issued more than 1.4 billion marking codes.

All products must be labeled with a DataMatrix code containing four data points:

  • A 14-digit Global Trade Item Number (GTIN)
  • A 13-digit serial number
  • A 4-digit verification key
  • A 44-digit verification code (i.e., crypto code)

The Center for Research in Perspective Technologies (CRPT), which manages Chestny ZNAK, issues verification keys, crypto codes, and serial numbers. Manufacturers, importers, wholesalers, and retailers, referred to as “economic agents,” can also generate serial numbers.

Before economic agents are issued codes, they must create a “product card” for Russia’s catalogue of marked goods. These must note four product attributes

  • The product name
  • The 4-character EAEU Combined Nomenclature of Foreign Economic Activity (TN VED) code
  • The corresponding GTIN
  • The trademark (if any)

New goods produced in Russia must be marked before leaving the factory. For importation from other Eurasian Economic Union (EAEU) countries (Armenia, Belarus, Kazakhstan, and Kyrgyzstan), codes must be applied before the goods enter Russia’s textile and apparel supply chain. For imports from all other countries, codes must be applied before customs processes begin.

Economic agents must have an encrypted digital signature and equipment to handle codes, including scanners, printers, and point-of-sale cash registers connected to the internet (for retail sales).

These are the broad strokes of compliance for the textile and apparel supply chain. For full details, be sure to download our white paper.

Final thoughts

Russia’s textile and apparel supply chain is large and lucrative. But to participate and succeed, you need to be able to navigate Chestny ZNAK’s strict requirements. To do this, you need the right partner, one that knows the regulations, has a local team, and actually has active in-country implementations.

Right off the bat, we can say that we’re the only official CRPT software or integration partner for clothing items and light industry goods. In fact, we’re the only official CRPT partner for several other industries; we’ve proven that our signature rfxcel Traceability System integrates seamlessly with Chestny ZNAK and meets regulatory requirements for key industries. We were also recently accredited as an IT company by the Ministry of Digital Development, Communications, and Mass Media.

To learn more about our leadership in Russian supply chain compliance, check out these recent blog posts:

If you have questions about the textile and apparel supply chain in Russia — or any other market where you’re doing business or want to do business — contact us today to schedule a demo. See how our powerful software can ensure you’ll remain compliant with textile and apparel supply chain regulations around the world.

 

What Does It Mean to Be a CRPT Partner in Russia’s Supply Chain?

The Center for Research in Perspective Technologies (CRPT) operates Russia’s National Track and Trace Digital System. Known as Chestny ZNAK, the supply chain system was established by Federal Law No. 425-FZ, signed on December 29, 2017. rfxcel has been prepared for these regulations since 2018, and is now an established CRPT partner.

Let’s take a look at what it means to be a CRPT partner, including the benefits it brings to our customers.

What is the CRPT?

The CRPT is a public-private partnership akin to the European Medicines Verification Organization. Its many responsibilities include generating the serial numbers and verification codes (i.e., crypto codes) required by Chestny ZNAK.

Business giant USM is the CRPT’s principal partner, with a 51 percent stake. USM was founded in 2012 and has interests in many of Russia’s key sectors, including metals/mining, telecom, technology, and internet. According to USM, Chestny ZNAK is the country’s first public-private partnership in the IT sector and the first of its kind at the federal level. Private investments totaling more than 200 billion rubles ($2.5 billion) are expected over the next 15 years.

rfxcel as CRPT partner

Last year, rfxcel earned official CRPT partner status in 10 of the 11 industries for which the organization has chosen partners: medications, footwear, tires, light industry, perfumes, dairy, bottled drinking water, bicycles, wheelchairs, and tobacco. Furthermore, we are the only official CRPT partner for several of these industries.

To be named a CRPT partner, a solutions provider must prove it can work with Chestny ZNAK, comply with its strict serialization requirements, and support companies that do business in Russia.

For example, to be named an official integration, software, and tested solution partner for medications, members of our Moscow team met with the CRPT to demonstrate the rfxcel Traceability System, answer technical questions, and share examples of compliance reports. After an internal evaluation, the CRPT notified rfxcel that it had validated its solution and designated the company as an official partner on its website.

What does being a CRPT partner mean for our customers?

The benefits we bring as a CRPT partner are pretty straightforward. First and foremost, we have proven that our signature rfxcel Traceability System integrates seamlessly with Chestny ZNAK and meets regulatory requirements for key industries.

Russian law calls for serialization, aggregation, unit- and batch-level traceability, crypto codes, and electronic reporting and records management. Our rfxcel Serialization Processing and Compliance Management solutions ensure you’ll comply with these mandated labeling and reporting requirements. Plus, our solutions have a Russian-language user interface that makes integration and start-up much quicker.

The other benefit of being a CRPT partner is that we’re trusted. The CRPT knows our solutions, knows our team in Moscow, and knows that we take compliance very seriously. They know our customers include major pharmaceutical and consumer goods brands. They know we’re committed to making the transformation of Russia’s supply chain smooth and effective, and support the mission “to guarantee the authenticity and declared quality of goods being purchased by customers.”

So, when you work with rfxcel in Russia, you’re working with a CRPT partner that is equipped to deliver quick integration and compliance today, tomorrow — always.

Sneak peek: another recent rfxcel accomplishment in Russia

We’ll share more details about this soon, but earlier this month we received accreditation as an IT company from Russia’s Ministry of Digital Development, Communications, and Mass Media. The Ministry develops and implements national policy and legal regulations for a range of industries, from telecommunications to Internet governance.

That’s all we’ll say for now. The official IT company accreditation is another reason why we continue to be the leader in Chestny ZNAK integration, operability, and compliance.

Final thoughts

We are proud of being an official CRPT partner. It’s proof that our software ensures companies in any industry will remain compliant while they do business in Russia.

Contact us today for more information about how we can help you succeed with Chestny ZNAK. And be sure to download our white paper about Russian compliance. Fully updated for 2021, including information about new pilots for beer and beer-based drinks and biologically active food additives , it’s an easy-to-understand guide to Russia’s strict supply chain regulations for every industry.

Russia Chestny ZNAK Track and Trace: A Refresher Course

Russia is in the midst of creating the world’s most ambitious — and strict — supply chain track and trace system. Its National Track and Trace Digital System, known as Chestny ZNAK (and sometimes translated as Honest SIGN or Honest BADGE), is on track to be fully operational in 2024. Chestny ZNAK track and trace requirements are tough, and they’ll cover virtually every type of product you can imagine.

No matter what role you play in the supply chain, you have to understand how the system works and what the regulations mandate. Let’s examine Chestny ZNAK track and trace, from its origins to what it requires.

The origins of Chestny ZNAK track and trace

On December 29, 2017, Russian President Vladimir Putin signed Law No. 425-FZ, officially inaugurating the Chestny ZNAK track and trace system. Its goal is to streamline quality control, protect against counterfeits, and monitor supply and demand and expenditure. The regulations cover 12 product categories: medicines, furs, footwear, bottled drinking water, tires, tobacco, dairy, wheelchairs, bicycles, light industry, perfumes, and photo cameras and flashbulbs.

Chestny ZNAK is run by the Center for Research in Perspective Technologies (CRPT), a public-private partnership akin to the European Medicines Verification Organization. Its principal partner, with a 51 percent stake, is business giant USM, which was founded in 2012 and has interests in many of Russia’s key sectors, including metals/mining, telecom, technology, and internet.

According to USM, Chestny ZNAK is the country’s first public-private partnership in the IT sector and the first of its kind at the federal level. Private investments totaling more than 200 billion rubles ($2.5 billion) are expected over the next 15 years.

What are the requirements?

Chestny ZNAK track and trace regulations are arguably the strictest in the world. Companies that do not comply face fines and other penalties, including “deprivation of liberty” (prison), and can in essence be banned from doing business in Russia.

The requirements vary by industry, and deadlines and labeling requirements have changed, but the fundamentals have remained constant: serialization, aggregation, unit- and batch-level traceability, crypto codes, and electronic reporting and records management.

Products must be marked with 2D Data Matrix codes with an 85-character alphanumeric sequence that contains at least four groups of information: a Global Trade Item Number (GTIN), a serial number, a verification key, and a verification code (i.e., crypto code). Furthermore, the owner of goods must create a Universal Transfer Document (UTD) at the moment of ownership, then transfer it to the CRPT.

The crypto codes are an important part of Chestny ZNAK track and trace. At first, every code had to have 88 characters, but a federal decree in August 2019 that amended the procedure for applying drug labelling codes cut the requirement to 44 characters. The CRPT issues the codes, which only authorized representatives can request/receive. rfxcel is an approved partner of the CRPT; more on that below.

For the pharma sector, it’s prudent to note that Chestny ZNAK track and trace requires over-the-counter (OTC) drugs to be labeled, scanned, and recorded in the system. This is a significant departure from the EU Falsified Medicines Directive (FMD) and the U.S. Drug Supply Chain Security Act (DSCSA).

These are the broad strokes of the Chestny ZNAK track and trace regulations. There are other requirements — such tracking products with Universal Transfer Documents (UTDs), which must be sent to the CRPT when ownership of goods changes — but we won’t get into those here.

How does it work?

Chestny ZNAK track and trace is a five-step process that calls for complete traceability all the way to consumers. Let’s walk through these steps.

First, the CRPT sends the manufacturer, wholesaler, retailer, or importer — referred to as “economic agents” in the regulations — a unique digital code for every product that must be affixed to the packaging. Only a CRPT-authorized representative can request codes. Every product is logged in Chestny ZNAK’s catalogue of marked goods.

In the second “logistics” step, the digital code becomes an immutable “passport” that legitimizes the product at every step of the supply chain. Every transfer of ownership must be recorded.

Next, the product arrives at the location where it will be sold or dispensed. The receiver scans the item, Chestny ZNAK receives a transfer confirmation, and it’s ready for sale.

Fourth, the product is sold or dispensed. The seller is required to have a point-of-sale cash register, a system connected to the internet that typically includes a touchscreen, a scanner to read 2D Data Matrix codes and other codes, a credit card scanner, and a printer. The product is scanned at checkout and the cash register reports to Chestny ZNAK that “the code has left circulation.” If the scanned data doesn’t match what’s in the catalogue of marked goods, the product is counterfeit or otherwise illegitimate and cannot be sold.

In the last step, the consumer takes over and becomes the final supply chain quality control checkpoint. Using the Chestny ZNAK app for smart devices, described as “your main assistant for product quality tracking and counterfeit detection,” a person scans the 2D Data Matrix code on the product and gets instant access to rich information directly from Chestny ZNAK. If a scan reveals a “violation” — meaning the product is counterfeit or not in compliance with marking regulations —  consumers can report it directly to the CRPT. They can also send questions about how the app works and suggestions to improve it

Here, we want to point out that the Chestny ZNAK track and trace app reminds us of our own MobileTraceability app, only for consumer use. Both can show the date, time, and place of production, the expiration date, and details about the product’s journey from the farm or factory to the store. Our MobileTraceability app is a powerful tool for track and trace in any industry. Check out our short video about how it works in the food and beverage supply chain.

Final thoughts

If you follow our blog or read our news, you know rfxcel is the leader in Chestny ZNAK track and trace compliance. That’s a bold statement, but we think we have the facts to back it up:

  • We’re an official integration, software, and tested solution partner with the CRPT. We’ve demonstrated that our solutions, particularly our signature rfxcel Traceability System (rTS) and Compliance Management (rCM), can meet the stringent Chestny ZNAK track and trace requirements and ensure companies stay compliant.
  • rTS works seamlessly with Chestny ZNAK track and trace, including a Russian-language user interface that makes integration and startup much quicker.
  • We’ve prepared for Chestny ZNAK since 2018.
  • We’re one of the few providers with active implementations in Russia.
  • We’ve tripled our workforce in Russia over the last year. Our team in Moscow provides our clients, which include major global consumer goods and pharmaceutical companies, the quickest time to market while fully automating their compliance reporting.

Contact us today learn more about how we can help you with Chestny ZNAK track and trace. No matter how far along you are in your preparations to meet the requirements, you should talk to us — even if you’re already working with another provider. Our powerful software ensures companies in any industry remain compliant with the complex regulations.