21
Mon, Sep
41 New Articles

Russia Remains Set on Import Substitution for State-Procured Goods

Russia Remains Set on Import Substitution for State-Procured Goods

Russia
Tools
Typography
  • Smaller Small Medium Big Bigger
  • Default Helvetica Segoe Georgia Times

The existing ban on the state procurement of foreign industrial goods has been generalised under a Russian Government Decree* which came into force on 1 May 2020.

For certain groups of goods to be admitted for public procurement in Russia, the Decree establishes additional requirements over and above the confirmation that these goods have been produced in or originate from Russia or a Eurasian Economic Union member state.

Import substitution policy: new restrictions

In general, the Decree, although of a technical nature, is a logical step in the consistent implementation of the import substitution strategy. It is meant to encourage manufacturers to localise production in Russia. At the same time, as practice shows, in many cases, state purchasers have recourse to exceptions for procuring foreign goods despite the existing bans.

So, the Decree contains an extensive list of 125 types of goods to which restrictions apply. This ranges from clothes and shoes to telecommunications equipment and helicopters. Moreover, since 1 July 2020, the Decree also applies to automotive products and vehicles (e.g. cars and trucks).

A series of exceptions in the Decree provides state purchasers with room to manoeuvre. In particular, this ban does not apply to the purchase of industrial goods which are not produced in Russia. Nor does it apply to the purchase of one single good worth less than RUB 100,000 (EUR 1,231) or a set of goods with an aggregate total value of less than RUB 1m (EUR 12,310).

Finally, the ban on the purchase of foreign-made industrial goods does not apply when it is necessary to ensure the interaction of products with goods that the purchaser already uses (i.e. when the goods to be purchased are incompatible with goods bearing other trademarks), and when purchasing spare parts and consumables for machinery and equipment.

Determination of the country of origin of imported goods

To be authorised to take part in tenders for state or municipal procurement, a supplier must confirm that the goods originated or were produced in Russia or a Eurasian Economic Union member state. The relevant certificate and the confirmation that the goods are included in the Register of Industrial Products of the Russian Ministry of Industry and Trade will act as confirmation of the country of origin of the goods.

For some types of goods, further requirements are provided. In addition to confirming the production country and the country of origin of the goods, it is necessary to use components, raw materials or services that originate from Russia or a Eurasian Economic Union member state. For example, such requirements are provided for the production of certain types of automotive products, some types of products in the special engineering industry, as well as compressors and refrigeration equipment.

In practice, confirming the country of origin of a product can often be complicated (e.g. for goods containing components manufactured in different countries or when the production processes of a single product take place in several countries). In such cases, it is necessary to resort to a comprehensive analysis, which establishes the degree to which a given good was processed in a particular country and the effect of foreign components on its final production cost.

*in Russian

By Maxim Boulba, Partner, Hayk Safaryan, Partner, Maria Ermolaeva, Associate, and Anna Osmakova, Associate, CMS Russia

CMS at a Glance

Founded in 1999, CMS is a full-service top 10 international law firm, based on the number of lawyers (Am Law 2018 Global 100). With 70+ offices in 40+ countries across the world, employing over 4,800 lawyers, CMS has longstanding expertise both at advising in its local jurisdictions and across borders. CMS acts for a large number of Fortune 500 companies and the FT European 500 and for the majority of the DAX 30. Revenues totalled EUR 1.36bn in 2018.

In Russia, CMS has been supporting its clients since 1992. The Moscow office offers a full range of legal and tax services across 21 practice and sector groups. Over 50 lawyers qualified in Russian, English, French and German law advise international clients on all matters relating to doing business in Russia and CEE, and support Russian companies doing business in Europe and other countries.

Firm's website.