One of the most interesting aspects of the new industrial policy in Russia is the gradual substitution of imports with local production. Besides the notion that it involves certain limitations in the sphere of state procurement, it brings a certain expectation of benefits for those who intend to localize production processes on the Russian territory.
RESTRICTIONS AND BANS
As a WTO member, Russia can only apply restrictions and limitations in relation to imported goods in the sphere of governmental procurement for governmental needs. Further restrictions would contradict WTO nondiscrimination principles. Therefore current restrictions and limitations only apply to the state/municipal procurement of non-Russian goods in such areas as:
■ all types of goods intended for state defence and security;
■ certain industrial products (transport vehicles and heavy machines);
■ textiles and light industry products;
■ software; and
■ medical products and drugs.
As a general rule, a state/municipal purchaser is not allowed to buy non-Russian products outlined above, unless the absence of similar Russian products (substitutes) is evidenced by the Russian Ministry of Industry and Trade in accordance with the applicable procedure. A special rule applies with respect to medical products and drugs: if at least two offers of Russian products are filed for a public tender, all offers of foreign products must be rejected.
These restrictions and limitations do not apply to purchases by state-owned organizations, although sometimes they voluntarily set a priority for goods of Russian origin, even in the absence of sufficient legal grounds granted by the Russian Government. The above restrictions apply in addition to the import ban on certain food products originating from countries which implemented economic sanctions against Russia.
The import substitution should be viewed as the expected result of the new industrial policy, rather than as a tool based on bans, restrictions and limitations. Russia has recently introduced a wide range of encouraging measures, which include subsidies and tax benefits for local manufacturers. Investors may obtain them based on a so-called special investment contract (“SIC”) that can be signed between an investor (a foreign company is possible), a Russian industrial enterprise and the Russian Federation and/or regional/municipal authorities.
The minimum amount of investment required to enter into a SIC is RUB 750 million (approximately EUR 10 million); however investments previously made by the investor in the industrial enterprise are counted. The term of a SIC can be up to 10 years. Products manufactured under the SIC may immediately have the status of ‘produced in Russia’ even if the sufficient processing criteria can only be reached at a later stage of the gradual localization schedule agreed by the parties of the SIC. The other two options which open doors to subsidies and tax benefits are (i) membership in an accredited industrial park or (ii) the rent or purchase of industrial infrastructure in an accredited industrial cluster.
WHICH PRODUCTS ARE CONSIDERED TO BE ‘PRODUCED IN RUSSIA’?
In July 2015 the Russian Government established new criteria to determine whether a product can be viewed as ‘produced in Russia’. They are different from applicable rules for determining the country of origin generally used for customs purposes. These criteria have been set differently for various categories of products. Most of them include (i) the requirement to transfer intellectual property rights to a local manufacturer in a scope sufficient to produce products on the Russian territory and (ii) a list of manufacturing operations which must be performed in Russia.
Time will show how the new regulatory framework will help Russia to develop local production, although at this point it is clear that now there is a good incentive for global manufacturers with an interest in the Russian market.