Import regulations and customs duties
Most of the goods can be freely imported into Russia, although there is a licensing system for some products such as pesticides, weapons, self-defence items, explosives, jewels and precious substances and electric material which represent about 3% of the total imported goods. These licenses are issued by the Ministry of External Economic Relations and controlled by the State Customs Committee.
The importers have to fill in a "customs freight declaration statement" of which 54 paragraphs are written in Russian. Certificates of origin and conformity certificates have to be presented to the customs.
Concerning the import of ethyl alcohol and vodka, all taxes must be paid beforehand so as to avoid fraud during transportation. Moreover, a number of measures are taken by the Russian Authorities to try to limit fraud in the field of goods transport.
Russia applies the Harmonised Customs System. The customs duty is calculated Ad valorem on the CIF value of the goods. The duties and taxes are imposed by the State Customs Committee.
There is one single external tariff called "general tariff", from 5% to 30% with a current 14% average.
Customs duties are an essential element of the Russian commercial policy, that's which the rates often change. Furthermore, Russia is not yet a member of the WTO (negotiation in process) and that explains these frequent variations.
Russia signed a customs unions agreement with Byelorussia, Kazakhstan and Kyrgyzstan (still not effective), as well as a co-operation treaty with the EU (but there is no customs union yet.
Some excise duties are imposed with a rate varying from 20% to 570% (luxuries, alcohol, cigarettes, motorcars).
Since the beginning of the 1990's, Russia started a liberalisation process that has led to a sustained growth of its GDP. GDP rose from 345.6 billion dollars in 2002 to 582 billion dollars in 2004. One can see in Russia the emergence of a middle class comprised of salaried people working in large Russian or foreign companies, whose consumption behaviour is similar to that of Europeans. Thus, there is a growing demand for quality products even though the purchasing power of Russians continues to be lower than that of Europeans (it has risen, on average, to 220 dollars per month). In 2004, Russian retail trade was worth 156 billion euros, a growth of 40% over 2003.
The Business to Consumer (B to C) market
Up until the collapse of the Soviet Union, a formal distribution structure was almost non-existent in the country. Distribution was set up district-wise where one would inevitably find various small merchants of food and household products, all part of a general departmental store. The consumer had only a very limited choice of products. The current structure integrates the components of the western model with the development of supermarket chains, aimed primarily at the wealthier classes of society.
Large sized stores first appeared in Russia with the opening of the 1st hypermarket called Ramstore in 1997. The Auchan group opened its 1st hypermarket in Russia in 2002.
In 2004, the total volume of the retail market was worth 200 billion dollars, of which 45.5% was for food products. The biggest food distribution chains in Russia in 2004 were:
- Metro (wholesale business) with a turnover of 1.28 billion dollars.
- Pyaterochka (discount stores) with a turnover of 1.1 billion dollars.
- Magnit with a turnover of 995 billion dollars.
- Prekrestok with turnover of 760 million dollars.
- Auchan with turnover of 620 million dollars and 6 retail outlets.
Russians prefer to consume more and save less mainly due to lack of reliability on the banking system. Their disposable income has risen to 80% of their total income.
The Business to Business (B to B) market
The inflow of Foreign Direct Investment (FDI) into the country is growing fast: it rose from 3.4 billion dollars in 2002 to 11.7 billion dollars in 2004. For the past few months, it seems that Russian authorities want to attract more foreign investments. Though the business environment is improving in Russia it still continues to be constraining and unstable, especially at the judicial and fiscal levels. In order to set up in the Russian market, it is imperative to have a local partner.
The pharmaceutical and telecommunications sectors offer great opportunities to foreign investors. The food-processing sector also offers high growth potential especially in those provinces where there are no distribution networks.
Franchising as a method of establishment is fast developing. Today, it is one of the most efficient forms of investment for rapidly opening a large number of retail outlets.
Transportation of goods
The country has a road network of 934,000 km of roads, of which only 6.1 % is tarred. There are 584,000 km of so-called public roads, 46,000 km of federal roads and 450,000 km of regional roads. According to the estimates of the Russian Ministry of Transport
, 25% of the federal roads are in a satisfactory state, but 38% are in a state of advanced degradation. Highways are almost non-existent and the infrastructure is inadequate for the transportation of goods (19% of the total traffic of goods).
Some plans to improve the road infrastructure are in progress, thanks to the help of the World Bank
and of the partner countries (Finland, the United States, Germany) for the construction of highways connecting Russia to Western Europe: The plan of a Berlin-Varsovie-Moscou or a Helsinki-Moscou highways (southward) is being prepared in order to favour the opening of the country to the outside world and to bring capital in the country.
The Russian rail network stands third in the world for the transportation of goods.
The rail network extends over 86,700 km and Russia represents 7% of the world's rail traffic. Even though the rolling stock needs modernisation, the rail network is the frequently used means of goods transport (78% of the total freight in 1999). The construction of a high-speed connection between Moscow and Saint Petersburg is currently in project stage thanks to the loan granted by the BERD
in 1996 and to the Occidental technology.
The Russian Union has 41 big ports, of which only 11 are equipped with import-export infrastructure facilities. There are the ports of Saint Petersburg
, and Kaliningrad
on the Baltic Sea, the ports of Novorosiysk and Sochi
on the Black Sea and the ports of Vladivostok,
Magadan and Petropavlosk on the Pacific Ocean.
In 1999, 133 million tons of freight were transported through the ports of the country, of which 28.2 million was through Saint Petersburg.
The main objective of the government is to modernise the maritime structure of the country and increase the accommodation facilities of the ports for international transactions. The government is planning to build a multimodal maritime complex in the bay of luga, the Ust-Luga Seaport", which would add up a 30 million tons of freight a year.
Aeroflot-Russian International Airlines
was partially privatised in 1992 but the state still holds 51 % of the share. It covers 150 destinations to 93 countries and transported 90.000 tons of goods in 1996. Transaero is the other airline serving the whole world.
The crisis in air transportation is due to the obsolescence of almost the entire fleet of their planes and to the lack of capital invested on these companies.
The main airports are Moscow
, Saint Petersburg
, Kazan, Yakutsk
The certification of products can be obtained in Russia or by a foreign organisation recognised by Russian authorities. The institutions of standardisation and certification in Russia are the State Committee of Standardisation (Gosstandart) and the State Committee of Health control and Epidemiology (Goskomsanepidnadzor).
The imported products have to comply with some sanitary and safety requirements, established by the Law of Protection of the rights of the Consumer (Law n 2 300 - 1 of the 7 / 2 / 92).
Patents and brands
The Russian federal institution for the protection of intellectual property is the Russian Patent and Trademark Office.
Russia signed the agreement of Paris regarding the protection of industrial property and the agreement which establishes the World Intellectual property Organization (WIPO). In terms of patents, it ratified the Patents Co-operation Treaty (PCT).
With regards to the international Registration of trademarks, it signed the Madrid Agreement. Also, it signed the agreements of Nice concerning the classification of goods and services.
Given the risks of hacking in Russia, it is imperative to sign up the register of trademark in order to ensure the protection (caution: legal prosecutions in the country are very slow).
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