Business

Ban On Parallel Imports Lifted As Russia Seeks To Mitigate Sanctions’ Impact

With many global brands and retailers rushing to exit Russia, the Russian government has given the go-ahead to restoring unauthorised imports. In response to the extreme sanctions imposed by many western nations, the Russian government has rescinded its ban on parallel imports. This has given the go‑ahead for unauthorised agents and distributors to resume clandestinely sourcing a variety of brands and licensed goods and offering them for sale within Russia on an unofficial basis. The move follows many of the global brands that have been active in Russia over the past 20 years – including IKEA, H&M, the Inditex Group, Pepsi and Coca-Cola – either pulling out of the market or putting their operations on indefinite hold. Russia initially banned the practice of parallel importing in 2006. At the time, this was intended to bolster moves by multinational corporations and brands to invest in the country either through establishing domestic distribution networks or local production facilities. While the initiative gave rise to an enhanced number of automotive and electronics manufacturing hubs, the majority of textiles, footwear, household goods and toys bought by Russian consumers continued to be imported. It also triggered ongoing complaints from local vendors and consumers that many multinationals sold their branded goods at a higher markup within Russia than within many neighbouring countries. It was also observed that the inventory on offer tended to be smaller and the goods themselves of an inferior quality. Under the terms of the parallel importing ban, all exporters of branded products had to present a brand‑licensing agreement to Russian customs officials in order for them to be cleared to cross the Russian border. This meant that any Russian retailer or wholesaler trading in, say, Adidas sports footwear or Levi’s jeans had to be an authorised agent and strictly comply with pricing policy and promotional costs mandated by the brand owner. Now, with the original free‑for‑all restored, any Russian importer can source merchandise abroad, ship it to Russia, clear customs and sell to consumers without any oversight from the brand owner. It is expected that this deregulation will see the more formal logistics approach abandoned as many SMEs and small traders switch to the less‑conventional practices that flourished prior to 1998, the year of the Russian Financial Crisis. Most notably, this is expected to see the return of the shuttle traders, itinerant, entrepreneurial middlemen known to flit between retailers in many of the largest Russian cities and the wholesale markets of Istanbul, Dubai, Beijing and Mumbai. Inevitably, this new generation of parallel importers will make use of covert third‑party arrangements to transport their merchandise and as discreet proxies for making payments. With air traffic to Russia currently severely disrupted, many traders are expected to channel their goods via Kazakhstan or Armenia. As they are, along with Russia itself, members of the Eurasian Economic Union, this will negate any problems with import taxes or statutory paperwork.