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01.04.2021

Published
15.04.2021

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General cargoes
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Customs clearance of goods with trans-HOLDING
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Helpful information

The Ministry of Industry and Trade has formulated the conditions for the introduction of labeling for new goods

New goods will be labeled unless their rise in price due to this exceeds the projected growth in household income in the next six years, and government and business revenues will be higher than the costs of applying mandatory codes

The Ministry of Industry and Trade has developed guidelines for defining new categories of goods for which the government can introduce mandatory labeling. The corresponding document, signed by the Minister of Industry and Trade Denis Manturov, is at the disposal of RBC.

Based on these recommendations, the ministry can prepare proposals for the government to expand the list of goods subject to mandatory labeling. The government, in turn, can instruct the ministry to assess the feasibility of introducing labeling for new product categories - this is given 90 days.

The Ministry of Industry and Trade confirmed that guidelines for labeling new products were approved on February 25, 2021. Representatives of business, industry unions and research institutes participated in their development. The guidelines will become an additional tool that allows the formation of analytical information necessary for the government to make a decision on labeling, the ministry official said, adding that the decision to introduce labeling is made "on the basis of many factors."

Why do we need marking and what is already being labeled

The authorities plan to introduce a system of continuous labeling of goods in Russia by 2024. This is necessary to combat the spread of low-quality products and counterfeit products.

Mandatory labeling in the national system "Honest Mark" has already been introduced for goods from different categories: fur coats, certain types of clothing, shoes, perfumes and perfumes, tobacco products, medicines, cameras, car tires. Mandatory labeling for dairy products and bicycles will be introduced in 2021. Pilot projects are also testing labeling of packaged water, beer and wheelchairs. A special Data Matrix code is applied to the packaging of these products (a two-dimensional barcode made of black and white elements, usually in the form of a square).

The operator of the Chestny Znak system is the Center for the Development of Advanced Technologies (CRPT), a joint project of USM Holdings by Alisher Usmanov, Rostec State Corporation and Elvis-Plus Group of Alexander Galitsky.

The decision to introduce labeling for new products can be made if two conditions are met simultaneously. First, the increase in product prices for consumers after the introduction of mandatory labeling should not exceed the maximum permissible value within six years from the date of its intended introduction. Secondly, the balance of revenues and costs associated with labeling, both for manufacturers and for trading companies, and for the state should be positive.

If the balance of costs and benefits turns out to be positive, and the expected increase in consumer prices does not exceed the maximum level established by the government, the introduction of mandatory labeling is deemed appropriate, confirms the representative of the CRPT.

How price increases for consumers are estimated

The calculation of the marginal forecasted price increase is necessary, because when developing methodological recommendations, their authors, as follows from the document, proceeded from the assumption that the business can fully translate the additional costs associated with the preparation and introduction of mandatory product labeling into the final price for the consumer.

The government can set the price growth limits for a specific product after the introduction of labeling on it, but if this indicator is not set in its instructions, then the maximum price increase will be determined at the level of the growth of real disposable income of the population projected by the Ministry of Economic Development. In other words, as a result of the introduction of labeling, the increase in prices for products on which mandatory bar codes will be applied within six years should be lower than the increase in real disposable income of the population, as indicated in the reference materials available to RBC for the methodology.

According to the latest basic forecast of the socio-economic development of Russia published by the Ministry of Economic Development in September last year, real disposable income of the population will grow by 3% in 2021, by 2.4% in 2022, and by 2.5% in 2023. For subsequent years, the ministry made forecasts three years ago, before the pandemic.

However, in the CRPT, the assumption that manufacturers and sellers will completely transfer the costs due to labeling to selling prices is called radical. In practice, in a competitive environment, the coefficient of transferring labeling costs into prices cannot be so, insists the representative of the system operator.

How do business and government spend on labeling?

The balance of benefits and costs of a business consists of income from increasing sales by replacing illegal products with legal ones and, therefore, increasing profits from sales, as well as from the costs of ensuring labeling, indicated in the guidelines.