Digital product marking system will give businesses access to information on logged irregularities

On 26 December 2022 it emerged[1] that the operator of the digital product marking system (CRPT LLC) is preparing to introduce new features to the Chestny Znak ("Honesty Mark") digital marking system that will give businesses access to full and exhaustive information on any logged irregularities in the circulation of products.

Logging of information in the digital product marking and traceability system

Throughout the supply chain, all participants in the circulation of products subject to digital marking submit information to the Chestny Znak system about the product itself, its movements and documents accompanying those movements. This means that, from the moment the system is launched, it records all submitted data and stores that data for subsequent analysis. By analysing and processing accumulated data for individual product groups, it is also possible to obtain information about the accuracy of submitted data.

The digital marking system analyses incoming data on a near real-time basis and records any divergences from typical supply chain and product behaviour.

Examples of such divergences are:

• Deviations from set selling prices for a product
• Repeat sales of a product
• Circulation of a product with improper conformity documents for the product
• Circulation of a product with an improper shelf life
• Circulation of a product with an inappropriate product status
• Transactions involving medicines with an expired shelf life
• Registered violations in disposing of medicines

Since the product monitoring system was launched, federal agencies have been receiving data from the digital marking system and using that data in their monitoring and oversight activities. Now, businesses will also be able to gain access to that data in relation to their own products and transactions.

Why do businesses need this?

Russia is carrying out a reform of the monitoring and oversight activities of its federal agencies with a view to lessening the fiscal and monitoring burden on businesses. The reform includes a range of measures, including the creation and launch of new online services and the development and updating of existing online services both for federal agencies and for legal entities and individuals via the government services portal.

"We need to dispense with routine inspections of businesses that pose no risk of harm. The time is ripe to make another major step forward by refraining on a permanent basis from inspecting any Russian businesses whose activities do not pose high risks of harm", declared Russian President Vladimir Putin at the Saint Petersburg International Economic Forum[2].

"The reform of monitoring and oversight work requires a dynamic approach. Incomprehensible rules need to be rooted out, inspection procedures must be transparent, and businesses must be given proper feedback," said the Deputy Prime Minister and Chief of Government Staff Dmitry Grigorenko.[3]

The planned measures to enhance digital access to information will enable businesses to obtain data from the state information system on potential violations in the circulation of products subject to digital marking and allow them to remedy any irregularities without adverse consequences in the form of administrative proceedings and fines.

The introduction of digitalised means of detecting potential irregularities will help businesses establish a dialogue with monitoring and oversight agencies and reduce the burden on businesses caused by inspections. The prompt detection and rectification of potential violations enhances discipline among good-faith businesses and facilitates communication with the authorities.

Outlook

By 2024 compulsory marking requirements are expected to apply all categories of products except for those covered by alternative traceability mechanisms.

Regulators see the main purposes of compulsory marking as being to reduce the amount of counterfeit products, increase tax and customs revenues and improve control over supply chains.

At the same time, it appears that the state recognises that human error and technical failures may cause companies to experience errors in receiving and transmitting data on goods at various stages of their movement — import, acceptance, sale, write-off, etc. — and is prepared to meet good-faith businesses half-way by enabling them to identify and correct errors independently.

This obviously means that it is important for businesses to be proactive in developing solutions for correcting those errors in terms of both business processes and IT solutions, including using the digital solutions provided by the digital product marking system.