The Government of the Russian Federation, as well as expert circles, are actively discussing an initiative related to the legalization of parallel import of goods in Russia. This scheme implies the emergence of benefits both for businesses that supply products to the Russian Federation, and for end users. However, the prospects for legislative resolution of parallel imports find opponents. With what it can be connected?
The essence of parallel imports
The legalization of parallel imports in Russia, judging by media reports that appeared in May 2015, will affect the import of medical equipment, drugs, and auto parts into the country. The Government of the Russian Federation is developing a list of goods that may be imported into Russia under the appropriate scheme.
What is parallel import? This term means a scheme for importing goods into the Russian Federation, an alternative to the one that exists since 2002, in which the trademark owner controls the circulation of goods and may prohibit their import into the country. If a product is imported into the state that is not legally owned by its developer, or permission is not issued for its sale, this is a counterfeit. At the moment, the import of goods into the Russian Federation within the framework of the scheme in question is prohibited - the provisions of the Civil Code of the Russian Federation say that the copyright holder must give consent to the import of goods within the framework of the mechanism in question. Parallel imports suggest that resale of the respective goods by one state to another in the order of export will not be considered a violation of the law.
The consumer gets the opportunity to purchase the product in some cases at more fair prices than when supplied by an official distributor. Let's consider this aspect in more detail.
The benefits of parallel imports for consumers
The need to legally authorize the parallel import of medicines, medical equipment, and spare parts, experts say, is due to the fact that the corresponding types of goods are among those that find extremely stable demand among Russians. The argument of the government is also that manufacturers of the relevant goods should not supply their products to the Russian Federation at high prices as a monopolist. The cost of products sold should be the same as when sold in other countries.
According to analysts, parallel imports will help to avoid a situation where the prices of official distributors can be several times higher than the offers formed by independent importers of goods. Thus, the government wants first of all to reduce the cost of products imported into Russia for the final consumer. This indicates the desire of the authorities to provide citizens with access to cheaper goods, which have a fairly high social significance.
So, inexpensive auto parts will only be welcomed by car enthusiasts, as well as service centers that serve vehicles. Access to medicines at a reduced price will also be a very positive social trend for those citizens who need high-quality and effective drugs.
The legalization of parallel imports in Russia should become, according to authorities, one of the anti-crisis measures.Businesses from the Russian Federation will be able to purchase the necessary products within the framework of the corresponding scheme in third countries, in which they can cost significantly less, and then ship them to Russia.
Points for and against
Allowing parallel imports is an initiative that has both supporters and opponents in Russia. According to media reports, even at the government level, when discussing the corresponding draft, opinions were divided.
Arguments of supporters of allowing parallel imports in the Russian Federation come down to the fact that dealers, for example, if we are talking about the auto parts market, do not have the right to purchase goods from legal entities that are not associated with importers. At the same time, third-party suppliers may well offer products much cheaper. This may lead to a decrease in the selling price of goods for the final consumer by about 30-60%, analysts say. Within the framework of such a scheme, not only parallel import of auto parts, but also the widest range of other retail goods can be realized.
In turn, the mechanism in question may also be beneficial for authorized dealers. The fact is that they will have the opportunity to become suppliers not only for car owners who turn to service centers for warranty, but also for those car owners who repair vehicles on their own. Such citizens would welcome the opportunity to buy cheap parts. Thus, the initiative under consideration can, on the one hand, be beneficial for businesses - in terms of expanding sales markets, on the other hand - it will almost certainly find support among citizens who will see lower prices for imported goods.
However, many brands are opposed to the parallel import law being passed in Russia. For example, players in the pharmaceutical market believe that this initiative could be a factor in the appearance of falsified drugs on the market. There are counterarguments to this point of view. So, in Europe, parallel imports are allowed - and this does not lead to an increase in the turnover rate of counterfeit products.
Do not support the implementation of this initiative as well as businesses that conduct activities in the field of sales of household appliances and electronics. The fact is that the corresponding scheme of commodity exchange can become a factor, as market participants believe, the transfer of production to third countries. As a result, capital outflows may begin in the national economy, accompanied by a decrease in tax collection. At the same time, the Russian Federation is still considering, as we noted above, the parallel import of medicines, medical equipment and auto parts - so far there is no question regarding electronics. And therefore, according to experts, players in the corresponding market segment have nothing to worry about.
Additional measures
Along with the legalization of parallel imports, the Russian authorities are considering the possibility of introducing additional measures aimed at strengthening the security of the national economy in the process of international cooperation in foreign trade. For example, the FAS offers a number of initiatives related to protection against counterfeit products - such as the formation of customs posts for special purposes, increased control by the Federal Customs Service, and the creation of infrastructure with which the consumer can verify the goods for authenticity.
FAS also invites foreign manufacturers to continue further localization of the release of goods, including the production of spare parts and consumables. With the implementation of such a scheme and a sufficient volume of production, the import of relevant products from abroad can not be allowed by law.
Initiative History
The initiative we are considering - the law on parallel imports in Russia - has been featured on government agendas since 2014.The Federal Antimonopoly Service then drafted a bill that proposed to exclude an article from the provisions of the Civil Code of the Russian Federation, according to which import of goods protected by a trademark into the Russian Federation is allowed only if the copyright holder approved their import into the Russian Federation. Thus, a business importing relevant products into Russia would have the opportunity to purchase it from any supplier abroad without the consent of the brand owner.
Initially, it was assumed that the relevant amendments would enter into force in 2010, while the government would determine the specific types and types of goods for which deliveries in parallel import could be implemented earlier. The corresponding bill allowing parallel imports in Russia was submitted for public examination, which was completed in October 2014. The decision on the document, however, was not taken.
Benefits of Parallel Import
Let us consider in more detail what specific advantages the considered scheme of importing goods into Russia may have, which is calculated to be introduced at the legislative level. So, the main advantage that characterizes parallel imports is branded products, most likely, will be sold in Russia at a reduced price. The main factor determining this economic effect is increased competition between official suppliers acting on behalf of the copyright holder and businesses in the status of independent importers. Also, parallel imports of auto parts, medical equipment, drugs and other types of products will allow for the exchange of goods more dynamically. The goods necessary for Russians will be imported into the country faster.
Disadvantages of parallel imports
There are disadvantages in the import scheme under consideration. First of all, it should be noted that many copyright holders may lose the incentive to invest in production localized in Russia. In addition, according to some experts, the corresponding scheme of commodity circulation may become a factor in increasing the share of shadow turnover of products, as a result - there will be a reduction in tax revenues.
In some cases, production in the Russian Federation in which the brand invested may be unprofitable, and this will adversely affect the functioning of the company's business model. There are counterarguments regarding this point of view. For example, some analysts believe that the cost of production of many goods in the Russian Federation is one of the most profitable in Europe. And therefore, it is unlikely that the import of products by unofficial suppliers will determine the need to reduce prices for products manufactured locally by the brand, especially if it will lead to a decrease in sales.
The position of pharmaceutical corporations
It will be interesting to get acquainted with how pharmaceutical corporations assess the prospects for parallel imports, based on a letter published in the media addressed to businesses to the Prime Minister of the Russian Federation. This document contains a request - to prevent the parallel import of drugs. According to pharmacists, there are no economic calculations that would justify the positive impact on the market of an appropriate exchange scheme.
At the same time, according to businesses, the introduction of the import mechanism in question can lead to significant risks for the market, primarily in terms of creating conditions for the activation of suppliers of counterfeit, low-quality products. As a result, the attractiveness of the pharmaceutical segment to investors may decrease.
Parallel import, legalization of it in the Russian Federation can also become a significant problem for Russian businesses that have already invested in production located in the Russian Federation.It is known, for example, that one of the leaders in the pharmaceutical industry, AstraZeneca, has invested more than $ 230 million in factories operating in Russia. If medicines begin to be imported into the Russian Federation in the order of parallel imports, as the top managers of this corporation believe, then sales of drugs produced at local facilities can decrease significantly.
Expert Ratings
We will study the opinions of experts regarding the prospects for the legalization of parallel imports in Russia. Thus, analysts believe that the economic effect of adjusting current restrictions on the import of goods under the scheme under consideration is associated with the actual share of specific products in the total volume of imports into the Russian Federation. The larger the corresponding indicator, the higher will be the economic effect of legislative amendments.
Experts have calculated that the number of goods that are imported into the Russian Federation most actively is just auto parts. The second largest import segment in Russia is the import of pharmaceutical products. A very significant share of medical equipment, as well as household chemicals. In turn, electronics is far from the leader in the ranking of imported goods. Thus, parallel import of spare parts and pharmaceutical goods, based on the logic of experts, will be able to have a significant impact on the Russian economy. It is expected to be positive, at least in terms of reducing the selling price of goods for the final consumer.
Current experience of parallel imports in the Russian Federation
It should be noted that, despite the fact that parallel imports to the Russian Federation have not yet been fully legally permitted, legal relations that are very close to it are already being built in Russia. True, their intensity is not too noticeable. Unofficial importers import medical equipment, tools, clothes, shoes into the Russian Federation. According to analysts, it is difficult to make an unambiguous conclusion regarding the prospects for lowering prices for imported goods for end consumers. If only because those unofficial importers who already import products without the consent of the copyright holders put up a price tag that is not much lower than what is fixed by official suppliers. In some cases, retail prices are even higher.
International experience in introducing parallel imports
Importing goods in parallel import order is a fairly common occurrence in foreign markets. What is the practical experience of communication between foreign companies within the framework of the corresponding exchange scheme? Researchers believe that the price reduction that arises after amendments to the regulatory legislation averages around 2-5%. For the Russian Federation, analysts predict the upper value.
If prices for imported products change, then practically all economic agents that operate in the national economy adapt to this. If the import of goods becomes cheaper or more expensive, then the actions of consumers and economic agents will depend on the established practice of their activities, on habits, priorities or preferences. For example, the parallel import of medical devices, spare parts or medical equipment may be accompanied by a shift in the attention of consumers and businesses to cheaper products than before the relevant amendments to the legislation. As a result, prices are reduced for both intermediate goods and those intended for the final consumer.
This trend can be accompanied by several effects. Firstly, the intensity of consumption at the household level may increase. Of course, provided that the current income of citizens remains at the same level or increases. Secondly, in the economy, a process of redistribution of factors affecting production can be observed.In order to analyze the possible consequences that accompany changes in the commercial communications environment that have arisen as a result of adjustments to import prices, effective modeling approaches should be used, experts say.
This methodology involves taking into account various economic relations between different commercial agents that operate in the economic system. Among the most effective tools that can be used in this case is a calculation model of economic equilibrium. Moreover, as experts say, the characteristics of the economic environment may be multidirectional, as a result of which interpretation of the results will be difficult. An increase or decrease in the prices of certain goods will not always indicate a fundamental economic trend.
Summary
So, while the ban on parallel imports has been established in the Russian Federation, the legal import of goods into the country is possible only by official importers affiliated with the copyright holder. In many Western countries, it was decided to abandon this practice. The abolition of parallel imports, apparently, is not on the agenda of Western governments.
The considered scheme of commodity circulation, first of all, allows to increase the level of competition in the market between official suppliers and those subjects of commercial activities that operate independently of them. As a result, there is a high probability of lower selling prices for the end consumer. The list of parallel imports, if allowed in Russia, will include those positions that occupy a large share in the total volume of imported products in the Russian Federation - auto parts, medical equipment, medicines. These types of goods belong to those that have great social significance for Russia. Therefore, lower prices for them are likely to become one of the factors in stabilizing the crisis situation in the economy, when the selling price for many types of products (primarily imported) is growing significantly.
However, parallel imports, in spite of the noted advantages, including in terms of their social role, can affect the economy in a number of scenarios. Thus, permission to import goods from unofficial importers can predetermine the appearance of low quality goods on the market. In addition, it may be unprofitable for brands that localize production in Russia to sell products manufactured in the Russian Federation. Those investments that are made in factories operating locally may not pay off.
One way or another, the problem of parallel imports is discussed in Russia at the highest government level and with the involvement of competent experts. It is possible that the corresponding initiative will be implemented in the Russian Federation in the form that will suit the suppliers, and at the same time, be able to fulfill a positive role in solving social problems. Many experts are extremely positive regarding the assessment of the fact that the initiative to resolve parallel imports in the Russian Federation comes exactly from government structures. This means that the authorities are interested in reducing the costs of citizens in terms of purchasing imported goods.
