Foreign Manufacturers In Russia May Need To Comply With Digital Source Of Overseas Origin Requirements

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  • Proposals drafted by Ministry of Economic Development could come into effect from September 1
  • Russian regulator moves to prevent influx of counterfeit goods as EAEU-China Free Trade Agreement moves a step closer

Russia’s Ministry of Economic Development (MED) intends launching a new system of control over foreign factories that manufacture consumer products which are then sold in Russia. It does not affect manufacturers in Russia from EAEU nations.

The impact however is expected to be significant as this will affect every second imported product sold in the country. The MED wants to ensure whether the Russian side has carried out all the necessary checks on these components. From September 1, the MED wants importers to digitally identify their overseas production sites, including their geographic coordinates, which will allow them to be found using GLONASS signals. The system will automatically check whether the production has passed all the stages of required checks.

Two government decrees are ready, which will legalize the digital system for identifying places for the production of products from factories outside the EAEU that manufacture consumer goods subject to certification or declaration in Russia.

If enacted, it will oblige companies to inform the MED of the production identifier when enterprises register documents on compliance with mandatory requirements for goods. This may be the global location number GLN (Global Location Number) or the geographical coordinates of foreign plants and factories, which can be determined using GLONASS signals. This will allow the MED to control whether the foreign production indicated at a specific address has passed all the necessary verification procedures on the Russian side.

GLONASS is a Russian space-based satellite navigation system operating as part of a radionavigation-satellite service. It provides an alternative to GPS and is the second navigational system in operation with global coverage and of comparable precision.

The MED technical regulations suggest that goods sold in Russia must be authenticated by a declaration or a certificate of conformity. This means either that the applicant manufacturer or representative goes to the laboratory and tests the goods, after which he accepts a document of conformity. Alternatively, the product is evaluated by the experts of the certification organization (they are approved by the Federal Accreditation Agency) who travel to the production site and run an inspection test. The MED will accumulate all declarations and certificates in a single register.

A digital system for identifying production sites will assist. This will make it possible to track whether an analysis of a specific production was carried out, whether the procedure for evaluating products was violated, said the MED, making it easy for the regulatory authorities to determine the production: its various data are known, up to the manufacturer’s TIN.

Such a system will be relevant for new documents that are entered into the register. The circulation of products according to already registered declarations and certificates will continue unchanged.

“Part of the reasoning behind the introduction of such a system may well be the future agreement being negotiated between the EAEU and China” says Chris Devonshire-Ellis of Dezan Shira & Associates “A free trade deal has been signed, but tariff reduction negotiations are still underway. But when agreed, a significant increase in Chinese components and products into Russia will occur. This system is designed to act as a barrier to counterfeit Chinese products entering the Russian market.”

The MED as regulator believes that the provision of such data will help in the fight against counterfeiting in other categories. There will be some adjustments to make, as often brands do not produce their goods at their own factories. Instead, they use businesses on a contract basis. As a result, it may turn out that in a particular place of production, products of various brands are produced, therefore, the same place of production appears in several certificates of conformity.

Obtaining generally accepted geographical coordinates should not incur financial costs for business, Antonina Tsitsulina, head of the Association of Children’s Goods Industry Enterprises (AIDT), told Izvestia.

Specifying geographic coordinates is now common practice and there are no risks for companies, although knowledge of the productions origins does not guarantee that safe goods are manufactured there. This can only be determined in the laboratory. But production inspection costs may increase – which the product distributor will have to pay for – with those ultimately being passed onto the consumer.

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Russia Briefing is written by Dezan Shira & Associates. The firm has 28 offices throughout Eurasia, including China, Russia, India, and the ASEAN nations, assisting foreign investors into the Eurasian region. Please contact Maria Kotova at russia@dezshira.com for Russian investment advisory or assistance with market intelligence, legal, tax and compliance issues throughout Asia.

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