In a special order: the authorities are ready to reduce import duties on goods after the lifting of sanctions

The Ministry of Industry and Trade is ready to reduce duties on foreign consumer goods if unfriendly countries lift sanctions against our exporters. The ministry told Izvestia about this. However, in general, decisions will be made individually for each brand. At the same time, the State Duma, on the contrary, proposed to sharply increase import duties on products of departed brands in case of their return. Experts called disconnection from the SWIFT payment system one of the main foreign restrictions for our companies. They also noted that our market was developing under the conditions of sanctions and it was important to maintain the results achieved.

Reduction of duties in response to lifting of sanctions

The Ministry of Industry and Trade has begun working on a set of rules that will apply to foreign companies if they return to the Russian Federation, a source in the department told Izvestia. He clarified that so far officials are only discussing ideas for this document. As the ministry told the editorial board, "the issue of the conditions for the return of departed brands to Russia must be considered individually in each case."

For example, the issue of lifting duties on goods from unfriendly countries "will depend primarily on the lifting of sanctions against our exporters," the Ministry of Industry and Trade emphasized.

—But, of course, we must proceed from creating additional preferences for those domestic companies that, against the background of the departure of individual brands, were able to quickly establish production and provide our retail with the necessary products," the ministry stressed.

Currently, the EAEU has various duties on consumer goods, for example, since the end of 2022, increased fees have been applied for cosmetics and household chemicals from unfriendly countries, the ministry recalled. Their size is 35%, they were introduced "as a response to sanctions against our country, but they have also shown their effectiveness in terms of supporting our manufacturers."

The main sanctions that have become painful for domestic exporters are financial and technological ones, Georgy Ostapkovich, director of the HSE Center for Economic Research and Economic Development, told Izvestia. For example, this is the disconnection of companies and banks from settlements using the SWIFT international financial system, which was convenient for foreign trade settlements. Of course, the Russian Federation promptly created a domestic alternative, but its use is still fraught with certain difficulties, he noted. Another step taken by foreign partners became painful when access to technologies and innovations was restricted, the main suppliers of which were the EU countries and USA.

— And here we can manage on our own, but it will be it's long and expensive, and at this time the whole world will not stand still. Of course, it is important for our exporters to return to a foreign payment system and technological solutions," the expert noted. — At the same time, we must remember that during the absence of foreign brands, our market has somehow developed, and it is important to maintain the results achieved, but, let's say, creating barriers to trade is not so effective for consumers, because competition always leads to lower prices.

So far, foreign companies have not openly stated their desire to return to the Russian market. However, in mid-February, the Spanish holding company Inditex (brands Zara, Bershka, Pull&Bear) began to have "intimate conversations" about returning to the Russian Federation. The company contacted the Union of Shopping Malls. The same organization sent letters to other international companies inviting them back. The reaction of the authorities was harsh. The Ministry of Industry and Trade insisted that no one had driven major foreign brands from Russia, and they were not particularly expected to return. After that, the Union of Shopping Centers proposed that when returning, foreign brands would have to make a five—year deposit of 1 million euros each, the money would be used in case of a repeat of the situation with sudden withdrawal.

Later, First Deputy Prime Minister Denis Manturov outlined his position, saying that the authorities prioritize domestic producers and partners from the EAEU. This issue quickly reached the highest level — the president of the country Vladimir Putin noted that domestic enterprises should retain their preferences, and the conditions for the return of foreign brands have yet to be worked out.

Scenarios for the return of foreign brands to Russia

The State Duma has also started working on acceptable scenarios for the return of foreign brands to Russia. For example, Dmitry Gusev, deputy chairman of the Fair Russia faction, proposed reviewing duties on imports of foreign consumer products, according to his letters to the Ministry of Economic Development, the Ministry of Industry and Trade and the Ministry of Agriculture (Izvestia has it).

Fees should be raised from a minimum of 5-10% to 30-50% for specific foreign suppliers, he told the editorial board. Such standards should apply to light industry goods — these are products of the mass segment of fashion retail, carbonated drinks, confectionery, as well as some agricultural goods, such as cheese. Moreover, the Russian Federation already has decent alternatives to these products, the parliamentarian is sure. The deputy stressed that he was already discussing this initiative with the Ministry of Economic Development, as this agency determines the amount of duties in Russia.

Currently, duties of 10% apply to foreign light industry products, 8% to sugary drinks, about 20% to confectionery, and up to 25% to food products, depending on the name.

— A few years ago, Western brands left the country in a hurry, and now they are evaluating their possible return to Russia. In such a situation, our task is to preserve the results we have achieved, to protect domestic brands that have now gained a good pace of development and have taken their place on the store shelf. Therefore, we propose to strictly filter the flow of imported products to the Russian Federation, not to give it a share in the domestic market so easily," Dmitry Gusev said. — If brands want to work with us on more economically advantageous terms in the future, then we offer them localization of production, and the main owner of such plants should be Russians, they should have a share of 51%.

The Ministry of Economic Development did not respond to the editorial request. The Ministry of Agriculture said that "the Russian market is fully provided with products of domestic production, as well as through supplies from friendly" countries.

Which is better for the consumer

The proposal to increase duties for foreign companies is aimed at protecting domestic goods, manufacturers from Rusprodsoyuz believe. The companies have done a tremendous job during the withdrawal of foreign players from the market: they quickly found an alternative to imported ingredients, packaging, equipment and other logistical resources; increased production many times; introduced new brands and products to the market that meet customer needs.

The practice of protective duties is widespread both in Russia and in many developed countries, their main purpose is to support domestic manufacturers who are unable to compete with foreign brands due to cost differences, Alexey Koitov, co—chairman of the Consumer Union of the Russian Federation, told Izvestia. This is important in segments where foreign companies, due to the large volume of their products and the location of their production facilities in countries with cheap labor, achieve a cost level that is not achievable for any national company, he added.

— Thus, the state supports domestic producers who, in addition to direct taxes sales of goods bring income to the budget through other indirect taxes, such as property taxes, and many others. Plus, a domestic business provides jobs, and in the end it is "more useful" for its country than a manufacturer of imported goods, he explained.

On the other hand, the most important thing for consumers is the price of goods with relatively equal quality, the expert added. If domestic producers cannot provide a sufficiently low cost of goods in certain product groups, much less provide a sufficient number of them, then the appearance of similar foreign goods at lower prices is good for the consumer, he is sure. However, as the expert emphasized, such a situation is acceptable exactly as long as the foreign brand complies with Russian legislation, including in the field of consumer protection.

The installation of protective barriers should be balanced and "hit the target" that it is aimed at, Kirill Baranov, adviser to the corporate practice of A2 law firm, told Izvestia. It is important to avoid additional obstacles for our entrepreneurs and consumers. The share of imports in manufactured products and goods sold is still high. Russian businesses often import foreign goods, and the increase in duties will negatively affect their activities, he noted. After all, they are sold in Russia, and our entrepreneurs pay taxes to the budget, in these conditions it is important not to harm themselves. Although, of course, the conditions of return should be influenced by the conditions of departure of companies.