Russia to tag fur imports in a bid to fight customs fraud

By Marina Romanova

From April 1st onward, Russia start a pilot project of labelling imported furs and fur coats with RFID marker chips. Pilot project is require all fur products imported to the Russian Federation to carry RFID markers.

Russia became the testing ground for a new order launched by the Eurasian Economic Commission, the governing body of the Eurasian Economic Union of Russia, Belarus and Kazakhstan. The preliminary agreement on the launch was signed by the EEC in September 2015. Kazakhstan already ratified the agreement, Belarusian Parliament is expected to approve the bid on its coming session starting on April 4th.

According to the document, Minsk and Astana will join Russia later this year. Russian EEU allies suffers the same problems with the import of high added-value goods. Thus import and sales of fur products without RFID marker chips will be banned in the Eurasian economic Union from October, 1st 2016.

“The project starts from April 1, six months October 1, there will be a transitional period during which sanctions (for violations) will be absent for a comfortable entry into the process,” Dmitry Grigorenko, Deputy head of Federal Tax Service (FTS) of the Russian Federation said to journalists.

The move was announced in response to the long term concerns around the import of natural fur apparel. According to a number of Russia’s legitimate fur importers and retailers, only 20 percent of the fur garments sold in Russia have been properly cleared with the relevant customs authorities.

The Russian Retail Trade Enterprises Association and the Russian Higher School of Economics 2015 joint research estimated the country’s light industry goods market was worth some US$100 billion. Their figures also indicated that Russian budget is currently losing out on some US$684 million worth of customs duties and taxes.

The RFID tagging project is aim not only to protect entrepreneurs working within the legal field from grey imports, it also determined to prevent fur importers, mostly from PRC, from using sub-par fur, such as formaldehyde dipped fur, which increases the size of the fur skin and allows it to be sold for considerably less money.

RFID tags (Radio Frequency Identification, radio frequency identification of goods) capable of storing data and transmitting them in a contact less manner using radio waves. RFID chips will allow systematizing records about the movement of goods and will provide clear understanding of where and of what specific products are made, Russian press reports.

This will allow for counterfeit items to be easily spotted at every stage of the delivery and distribution. Each chip will carry information on the manufacturers and suppliers and be easily accessible by the relevant monitoring authorities.

It is reported that as much as 20 largest representatives of the fur business, producing and selling clothes, accessories and other products from mink, nutria, fox, rabbit, hare, raccoon, sheepskin, have already expressed their willingness to participate in the pilot project.

“We would definitely benefit from RFID tagging of the imports,” Alyona Orlova, a spokeswoman for fur producer Moskovskaya Mekhovaya Kompaniya, or MMK, said to The Moscow Times. MMK manufactures its clothing in Russia, but uses high-end fur purchased abroad, mostly in Northern Europe. Europe remains by far the biggest fur farming region, producing 60 percent of the world’s supply.

Once traditionally a net fur exporter, Russia moved toward being a net importer since the dramatic decline of the national fur skins and fur gourmet industry after the Soviet Union collapse in 1991. According to some estimations, around 33 percent of the fur coats sold in Russia in 2014 are imported from China, 24 percent from Turkey, 21 percent from Greece and 13 percent from Italy.

According to some calculations, before the current economic decline Russians use to spent some US$3 billion per annum on fur garments with only 5 percent of this total relating to locally-produced items.

Historically, in its enormous Northern and Eastern stretches, the geographical space of Russia was shaped by the fur trade. Hunger for the fur, which became to be natural source of the Russia’s revenue for the centuries to come, has driven the Russian colonisation of Siberia alone. From the 17th through the second half of the 19th century, Russia was the world’s largest supplier of fur.

“To a certain extent, the superb collections of the Hermitage were financed from the revenue that came from Siberian pelts”, Alexander Etkind, prominent Russian culture historian, writes in his book “Barrels of fur: Natural resources and the state in the long history of Russia”. Even in the end of 19th century, the fur tribute composed more than ten percent of the Russian Empire Cabinet income.

Among other furs farmed and hunted worldwide, Russian sable remain the most precious type of natural fur. Prices for the full-length Barguzin sable fur coat (Barguzin sable is the most valuable sort of sable from Buryat Republic of Russia) can cost around $100,000 or 6,767,450.00 rubles.