Russia is a member of the Eurasian Economic Community, heir to the CIS, which is a free-trade zone and aims to build a common economic area. It has signed a partnership and cooperation agreement with the European Union which aims to create a common economic area. It generally enjoys most favored nation status (MFN) and benefits from the generalized system of preferences (GSP) in its relations with the United States.
Non Tariff Barriers
The certification of products, a complicated procedure, is a barrier to trade.
The agri-food sector is particularly protected with quotas on certain products and very strict phytosanitary standards.
Exporters often say the heavy and unpredictable Russian Customs procedures are a big obstacle.
Customs Duties and Taxes on Imports
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 7.8% for goods.
Russia implements the Harmonized Customs System. The Customs tariff includes 11 032 tariff lines.
The Customs declaration can be made by the informant of a company that comes under Russian law and sent to the Customs office where this company has previously been registered. A company exporting to Russia can also call in a Customs broker who will take charge of carrying out Customs formalities in its name. Clearance inward, with immediate payment of duties and taxes, is the regime most commonly used by operators exporting to Russia.
The procedures and conditions to import merchandises in Russia have changed 2010 with the entry in force of the Customs Union (CU) between Russia, Belarus and Kazakhstan.
All importation must to present a freight declaration. This declaration shall be accompanied by the following documents: -Contracts -Commercial invoices and packing list -Transport documents -Import licences (if applicable) -Certificates of conformity -Certificates of origin (if applicable) -Sanitary certificates (if applicable)
Foreign good circuling in the Customs Union (CU) (Russia, Kazakhstan Belarus) area are customs cleared at the CU's border. After that, good are free to circulate in the CU area without additional customs controls.
In the case of temporary entry, goods could be full or partially exempt of customs duties and import VAT for a period up to two years.
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.
The consumer is impulsive.
He attaches great importance to brands and the quality of a product, as well as its life span for people with a modest income. The price is often only secondary but Russians are nevertheless attracted to "bargains".
Consumer Profile and Purchasing Power
Russians do not save very much and this is especially due to the bank system's lack of reliability. They often spend more than 80% of their income. The emerging middle class includes 25 million inhabitants and generates 80% of demand in the country. They appreciate the western way of life. Russian customer is educated and sophisticated.
SPROS, The Russian consumer federation. Rospotrebnadzor, The Federal service on customers' rights protection and human well-being surveillance.
The Russian market represents 200 billion USD according to the Federal State Statistics Service and has grown by about 13% per year over the last few years. Nevertheless, according to several research bureaux, the market could in fact easily be higher than 300 billion USD and have grown by 30 to 40% per year in reality. Whereas distribution systems were practically inexistent at the fall of the USSR, the almost total privatization and liberalization of the sector have led to a rapid market transformation. Supermarket chains began to develop in the 1990s and the present structure integrates the components of the western model. There are well organised distribution channels especially in Moscow and St Petersburg. They are developing rapidly in other regions. Geographical coverage is still a big challenge in Russian market.
An essential part of distribution is still carried out by means of stalls and markets. They represent more than half of sales, with 20% for open air markets. Being able to use these channels is often the key to success in Russia.
As regards chains, the market is dominated by supermarkets which represent more than half of sales.
Hypermarkets have appeared recently (opening of the first Auchan in 2002), and are already reaching 10% of total turnover; they have strong potential. They target a relatively well-off clientele.
The share of discount stores is also about 20%, but the market seems to be more saturated.
Finally, local shops represent from 10% to 15% of chain sales.
Even if the rolling stock needs modernizing, the rail network is the most used means of goods transport. It represents 7% of global traffic. There are no motorways and the infrastructure is inadequate for goods transport (19% of all goods traffic). Nevertheless, projects are underway to open up the country towards the West. Russia has 41 large ports of which only 11 are equipped with infrastructures for import-export; the biggest one is St Petersburg (42 million tons). The country is open to the sea on 3 sides: the Baltic sea, the Black sea and the Pacific Ocean. The government has an ambitious modernization project and wants to increase the capacities of port terminals. Domestic air freight is not widespread.
Industry represents about a quarter of the GDP and a sixth of all employment. The trend is towards a drop.
Traditionally the most developed sectors are heavy industry (metallurgy and chemicals) as well as the automobile industry and aeronautics.