Russia considers parallel imports as boomerang against sanctions

The Federal Antimonopoly Service of the Russian Federation proposed to legalize parallel imports - importing goods without establishing a direct agreement with their owners. It is believed that the move will insure businesses against sanctions that may limit supplies of certain goods through authorized distributors. It goes about such goods as, for example, machines, which Russia does not produce. Is it time now in Russia to legalize parallel imports?

Russia is struggling against consequences of sanctions largely by way of sectoral import substitution. The proposed liberalization of parallel imports is a lot better - this boomerang is more sensitive to those, who initiated the sanctions.

The legalization of parallel imports will secure Russia to a certain extent, should foreign governments decide to limit supplies through authorized distributors. Rights holder will not be able to ban importation of goods to Russia, if those goods were lawfully put into circulation. This is stipulated in amendments to the Russian Civil Code prepared by the Federal Antimonopoly Service in June of this year.

In fact, the service has long advocated the legalization of parallel imports, i.e. Russia's transition from national (or regional - in the framework of the Customs Union) to international principle of exhaustion of rights on trademarks. The current movement "in the right direction" in the department may further accelerate this process. In a nutshell, any importer, rather than solely rights holders and their official partners, will be able to sell branded goods in Russia legally.

"We have not used this option yet, because current regulations on trademarks in Part 4 of the Civil Code prohibit this activity directly, - deputy director of the Institute for Industry and Market Analysis, Svetlana Avdasheva said in an interview with Pravda.Ru. - That is, those regulations prohibit importing goods for resale without the consent of right holders, if those goods were purchased from right holders. The subject of parallel imports is a consumer goods topic mainly. It presumably covers consumer goods, rather than equipment and technology. For example, purchasing beer or vodka from an authorized distributor, for example, in the Czech Republic, and then importing those products to Russia is easy to imagine.

"Yet, purchasing equipment, for example, for the development of the Arctic shelf from anyone, other than manufacturers, is usually impossible. Therefore, liberalization of parallel imports as a way of defense against sanctions will have a limited effect."

Historically, Russia restricted parallel imports in an attempt to create an incentive for rights holders to invest in production in Russia. For the time being, it is very difficult to predict anything at this point, added Svetlana Avdasheva.

"The Russian style of work is "start slowly, then drive fast," - Elena Panichkina, deputy head of Russian public organization of small and medium business "Support of Russia" told Pravda.Ru. - Now we can see a lot of Russian products in Russian stores. One should keep in mind the fact that foreign producers, particularly farmers, receive large subsidies both for development and for harvest loss. What we have in Russia pales in comparison.

"Nevertheless, all sanctions, I believe, work to Russia's benefit. Finally, we learn to produce something ourselves. Risks for Russia to be left without machines, for example, is large, but, I think, a way out will be found," the expert said.

Many other experts warn of a possible downside of parallel imports. Should this type of import be legalized, Russia may quickly turn into a purely importing state. For a start, the Federal Antimonopoly Service plans to allow parallel imports of perfumes, cosmetics, auto parts and food products, to clearly estimate economic consequences of the reform. Afterwards, the authorities will see if they can proceed to the goods related to the security of the country (machines, industrial equipment, electronics, aircraft and space industry goods).

It is also planned that the final legal status of parallel imports should enter into full force by 2020.

To crown it all, one should recall the fact that parallel imports is a long-standing worldwide practice that many countries have tried.

Andrei Mikhailov

Read the original in Russian

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Author`s name Dmitry Sudakov