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Customs Procedures

Import Procedures

Importers are required to complete a Russian customs freight declaration for every item imported. A declaration must be supported by the following documents (when applicable): contracts, commercial documents such as commercial invoices and packing lists, transport documents, import licenses, technical regulation of technical safety certificates, certificates of origin, sanitary certificates, import permission and licenses (e.g. for products containing encryption technology), and documents confirming legitimacy of declarants/brokers/importers. All customs import declarations are submitted electronically. The website of Russia’s Federal Customs Service contains the link to the portal for electronic declarations.

The Eurasian Economic Union (EAEU) maintains a unified list of goods to which import and export limitations and prohibitions apply, in order to monitor and control movement of goods classified as sensitive by the member states or by the international community. In Russia, import licenses are issued by the Ministry of Industry and Trade in accordance with the unified licencing rules of the EAEU.

Customs payments generally include: import/export customs duties, taxes, and customs processing fees. Some goods may also require payment of utilisation fees (e.g. wheeled vehicles), or the new ecological fee, introduced on 1 January 2015.

In addition, currency control regulations require issuance of a transaction passport for both exports and imports to ensure that hard currency earnings are repatriated to Russia. The regulations also ensure that transfers of hard currency payments for imports are for goods actually received and properly valued.

Specific Import Procedures

There is a licencing system for certain specific products (pesticides, jewellery and precious materials, electrical material, etc.), which represent about 3% of all the goods imported. These licenses are issued by the Ministry of Economic Development and controlled by the State Customs Committee.

Importing Samples

Commercial samples are exempt of customs duties and import TVA for a period up to two years if they are used only for promotional proposes. Biological samples and samples of medicines must be accompanied by specific certificates.

Customs Duties and Taxes on Imports

Customs threshold (from which tariffs are required)

Shipments with a CIF value of under RUB 5,000 enter without duty or tax.

Average Customs Duty (Excluding Agricultural Products)

Since its official entry to the WTO on 22 August 2012, Russia has committed to implement all the provisions of the WTO, including an average tariff of 6.1% for goods. For more information, see Russia's WTO tariff profile.

Products Having a Higher Customs Tariff

Finished products (15%), foodstuffs (20%), agricultural products.

Preferential Rates

The rates displayed in the Customs tariff are applied to countries which benefit from the Most Favored Nation clause (MFN), i.e. the majority of third countries, including those of the EU.
Russia has a free trade agreement with the CIS countries and Serbia. In addition, a common economic area with Belarus and Kazakhstan within the framework of the Eurasian economic community has been created.

Customs Classification

Russia implements the Harmonised Customs System.

Method of Calculation of Duties

85 % of tariff lines are taxed on an ad valorem basis. Russian regulations provide for methods of determining Customs value, generally the CIF standard in conformity with the rules of the WTO.
The rest uses a combined system: the tariff applied is the maximum between the ad valorem tariff and a specific tariff, often fixed.

Method of Payment of Customs Duties

Duties and taxes are collected by the State Customs Committee.
Customs also collects fees for carrying out Customs formalities.
Payment is made in cash when making the Customs declaration. Clearing Customs is only authorized with a certificate proving payment has been made.

Import Taxes (Excluding Consumer Taxes)

In addition to Customs duties, import excise taxes may be applied for limited categories of products, such as luxury goods, alcohol and tobacco products, cars, diesel and motor oil, and other petroleum products. Import excise taxes range from 20% to 570%.

Labeling and Packaging Rules

Packaging

There are no specific rules: the packaging must be whole and sealed but it must be able to be opened by Customs officers.

Languages Permitted on Packaging and Labeling

Product labeling must obligatorily be in Russian. The other official languages of certain federal subjects or ethnic minorities are optional.

Unit of Measurement

Russia uses the metric system. See the "Russian Classification of Units of Measurement" Act

Mark of Origin "Made In"

Obligatory

Labeling Requirements

Generally the name of the product and the producer.

For foodstuffs, add the weight or volume, the ingredients, the nutritional values, storage conditions and expiry date, type of product, legal address of the producer (it is possible in Latin letters), food contents, instruction for semi finished goods or children foodstuffs, warning information about any restriction and side effect, terms and conditions of use.
For non-food products, the characteristics, instructions for use, country of origin and name of manufacturer, main characteristics for effective and safe use of product.

Labels shall be displayed in Russian language.

Specific Regulations

None

Distribution Network

E-commerce

Internet access

Russia with its 144.3 million inhabitants is the most populated country in Europe, ahead of Germany (81.4 million) and Turkey (80.8 million). The Internet penetration rate rose to 76.4% in 2017 (Internet World Stats), which is not far from the European average (80.2%). With its 109.5 million internet users, Russia is also by far the largest internet market in Europe (16.6% of total users in Europe). Smartphone penetration rate was reported at 54.7% in 2017 (Newzoo Global Mobile Market Report), which is slightly behind the global average (63% - Zenith Media estimates). Russia is one of the few countries in the world where Google is not the most popular search engine, as the locally-built Yandex.ru continues to benefit from huge popularity. The share of Yandex.ru was forecast at 54.01% while Google and Mail.ru had 42.72% and 2.17% respectively (Statcounter).

E-commerce market

E-commerce in Russia has been growing steadily in recent years, and recorded a 17% growth in 2017. However, it remains smaller than most online markets in western Europe, given that it is worth US$ 33.5 billion, as opposed to US$ 67.9 billion in Germany and US$ 93 billion in France (E-commerce Wiki). In terms of GDP, e-commerce was forecast to have reached 1.39% of total economic activity and 2.8% of retail sales in 2017. Russian e-commerce is expected to grow at a slower rate in the upcoming years, at around 10% on average, as the economy has only modestly recovered from recession. Growth is fuelled to a large extent by cross-border trade, which accounted for nearly one-third of the total e-commerce market and grew by 37% in 2017, while the domestic e-commerce market grew only 6%. Over 80 million Russians used smartphones in 2017, and this figure is expected to rise to over 93 million by 2021, which should boost Russian e-commerce. The share of mobile in retail e-commerce stood at 22% according to latest available data (Criteo), a figure comparable to that of the United States (25%). Chinese-owned Aliexpress is by far the most visited e-commerce site in Russia - with over 22 million accesses in 2017 - while the local Wildberries has the highest number of orders within the country, and was accessed almost 7 million times that year.

Social media

Unlike most European countries, local social media networks benefit from huge popularity in Russia. While YouTube is among the most popular social media networks (with over 39 million users), VKontakte, Moi Mir (provided by Mail.ru) and Odnoklassiki continue to dominate the market. Vkontakte is Russia’s largest social network, with 41.1 million Russians in 2017, and is particularly popular among those under 34 years old, as 80% of all users belong to that age group. Moi Mir, a social networking site that is an extension of the email provider Mail.ru, is quickly gaining popularity and had an average of 25 million monthly users in 2017. Odnoklassiki is the third most popular network in Russia, and had around 27 million users, with a big part of them aged between 25 and 34. Twitter is fairly popular, with about 7.7 million visitors a month. Facebook and Instagram are not as popular as in most western countries. Facebook had 21.7 million users in 2017, and Instagram accounted for 16 million users. Furthermore, blogging is quite popular in Russia with LiveJournal hosting a large population of internet users. However, this network had to modify its terms of use in April 2017, making the website subject to Russian law, which forbids blogs attracting more than 3000 visitors to publish "extremist materials". This decision caused a backlash among its users as it was considered to be an attempt to censor free speech. LiveJournal has lost several users in response to the censorship, but the platform still attracts about 15.2 million monthly users. LinkedIn has also been banned in the country since November 2016, as it was found in breach of a new data retention law which requires the user data of Russian citizens to be stored on servers based in Russia (an obligation with which LinkedIn refused to comply). Moreover, almost 70% of all social media visits come from mobile devices, and the most active social media users live in big cities. As of August 2018, the most popular social media platforms by market share in Russia were YouTube (22.87%), Facebook (20.99%), VKontakte (19.41%), Twitter (13.04%), Instagram (11.4%) and Pinterest (6.39%).

Direct Selling

Evolution of the Sector

The World Federation of Direct Selling Associations, Russia 2016 direct retail sales amounted to USD 2,172 million, an 11.1% increase compared to 2015. The industry also has 5,148,803 independent representatives.

Euromonitor International argues that despite high penetration, there is still direct selling growth potential in Russia driven by weak consumer purchasing power; an increasing number of active representatives; growing interest in health, beauty, and personal care; and niche products. Beauty and personal care products are the most popular items in this sector.

Avon leads the direct selling industry in Rusia, although it lost market share to double-digit growth company  Faberlic OAO. The industry is regulated by the Russian Direct Selling Association, which in turn is affiliated to the World Federation of Direct Selling Associations and the European Direct Selling Association.

Commercial Intermediaries

Trading Companies

 

• Type of Organization

It is generally a question of import/export companies, specialized in one type of product.

These companies are useful for penetrating the retail market at a lower cost. In fact, without setting up on the spot it is difficult to access the market. This is mainly due to the relative underdevelopment of buying groups. In Russia, distributors work with products from different companies. Usually they not offer promoting services unless the supplier provides promoting material.

• Main Actors

The market is very segmented. We can name : Novoexport (cross category), Prommashimport (machine-tools), Prodintorg, Vneshintorg (foodstuffs), Rusimport (wine), Dina International (medicines), Elektromedoburovanie (medical equipment).

Wholesalers

 

• Type of Organization

The sector is made up of relatively small companies specialized in one type of product and larger companies offering especially logistic and storage services. Generally, wholesalers carry out import business.

• Main Actors

Metro, Stock-Planet (clothes), TC-Belcom (chemicals), Exima (food), Morozilnik (household appliances), Mebel-Russi (furniture)
The import/export companies mentioned above also act as wholesalers.

Useful Resources

Catalog of wholesalers
REMExport.com
U.S Commercial Service - Guide to commerce

Using a Commercial Agent

The Advantages

Allows you to start up business locally at reduced cost and to extend your business later.
Allows you to widen your business to another geographical area if your company is already established in the country.

Where to Be Vigilant

Because of the size of the country, it is not usual to depend on only one agent, but rather on a distribution network.
Counterfeit invoices and other irregularities are sometimes reported. Generally speaking, finding a trustworthy partner is not easy and you need to keep up a certain level of supervision.
The notion of a commercial agent is not often found in Russian business culture.

Elements of Motivation

Exclusive rights, a fixed term contract, sales objectives.
You must ensure active follow-up. Your physical presence and the development of personal relations are often useful.

The Average Amount of Commission

Generally from 5 to 10%. More if the market is limited (equipment) and less if the volumes are large (raw materials).

Breach of Contract

The company has the right to terminate a contract at any moment. It will then have to compensate the agent for any losses.
If no term has been specified in the contract, the agent may terminate it by giving a month's notice.

Finding a Commercial Agent

E-ligne Agency
Alibaba

Setting Up a Commercial Unit

The Advantages

Allows you to have direct contact with consumers and the control of the distribution chain.
Can be useful if a company wants to find growth opportunities or establish its presence in the medium or long term.

Where to Be Vigilant

Interpretation of the laws varies according to the region. It is advisable to call in a legal consultant when carrying out registration formalities.

Different Possible Forms of Settlement

 

• A Representative Office

A representative office must be approved and registered with the Ministry of Justice. It allows you to employ up to 5 foreigners and to send out business invitations.
Opening a representative office is a complex legal process that provides little opportunity. It is better to build a OOO (LLC) which is cheaper, simpler to implement and offers more possibilities.

Accreditation fees for representative office are as follow:
Accreditation with Russian Chamber of Commerce an Industry: RR 3,000 plus USD 1,500 for a year, USD 2,500 for two years or USD 3,500 for three years.
Accreditation with the State Registration Chamber: RR 35,000 for a year, RR 65,000 for two years and RR 85,000 for three years. For more information, please visit the State Registration chamber website.

• A Branch Office

A branch office is not considered to be totally independent. It cannot conduct commercial business, but it can negotiate, prospect, supervise the distribution network and give the parent company commercial support.

It is advisable to register with the Ministry in charge. All branches must register with the State Registration Chamber. The registration fees are as follow: RR 135,000 for one year, RR 140,000 for two, RR 155,000 for three and RR195, 000 for five years. After accreditation, branches must register with local Chamber of Commerce.

• A Company

A company must register with the Chamber of Commerce and Industry and with the Russia - Income Tax. That takes considerably more time.
It can be a joint-venture or a subsidiary belonging 100% to a foreign company.

Franchising

Evolution of the Sector

Franchising as a business model only came to Russia once formal franchise legislation was adopted in 1994. As of today, in Russia there are about 1450 franchise brands and more than 50,000 franchisees. The turnover of the franchise market in Russia occupies a significant share in the country’s GDP, the estimated market volume is $350-500 million. Retail trade constitutes 57% of all active franchisers, followed by services at 25%, and fast food at 16%. According to data from the Russian Franchising Association, 65% of all franchise concepts are established domestically, and 35% are foreign of which 12% are American.

Franchising is regulated in Chapter 54 of the Civil Code. Although Russian law allows parties to an international franchise agreement to choose another national law as the law governing the franchise agreement, certain provisions of the Civil Code are considered mandatory by Russian courts, such as the obligation to register the trademark license with Rospatent and the franchisor's liability to the franchisee's customers for defective products and services.

For a franchising agreement to be valid, it has to be executed in written form. The grant of the right to use the intellectual property under a franchise agreement shall be registered with the Federal Service for Intellectual Property, Patents and Trademarks (Rospatent). Absent such registration, the intellectual property rights are considered not granted by a franchisor to a franchisee. Prior to the execution of a franchise agreement, any trademarks to be licensed must already be registered with Rospatent or the World International Property Organization (WIPO), with Russia designated as a designated country.

Some Big Franchises

Baskin-Robbins, ice creams
Bagatelle, gifts
Hirsh (in Russian), real estate

For Further Information

Russian Association for Franchise Growth

Finding Assistance

Export Trading Companies

Prodmashimport, machine-tools
Rusimport, wine and spirits
Portal for Russian foreign trade

Recommended Resource

Russia Trade Portal