Wine sellers furious over sudden change in customs legislation

Wine merchants in Russia could lose $400 million in 1Q 2010, after the customs service changed their import duties, driving up business costs by as much as 30%.

 This comes after Russia set up a customs union with Kazakhstan and Belarus, with the countries saying they are just harmonizing regulations.

However, businesses say they are suffering, with Maksim Kashirin, a Russian wine importer, blaming the government for a complete inadequacy:

“The government is losing money! So, I don’t understand what the reason is for losing money from import payments, from profit taxes, from VAT from the sales. What is the reason behind that? Stupidity?”

Maksim Kashirin adds that Russia’s Federal Customs Service changed regulations at the very end of December, which came as a surprise for those who found their wine and spirits blocked at the Russian border shortly after the start of 2010.

According to the rules of the newly created customs union, importers now require a license, that is essentially a piece of paper which takes weeks to be issued, for each truckload of imported wine. Kashirin says this has practically ruined his business.

“The business is stopped. We can’t sell wine that we have on stock, we can’t import anything, the orders are almost cancelled. We can get penalties from the clients, we can have claims from the producers.”

The Federal Customs Service, in its turn, says businessmen only have themselves to blame, with Pyotr Baklakov from the Trade Restrictions Department of the Federal Customs Service saying they had well warned Russia’s businesses of the coming customs changes in advance.

“Businesses didn’t pay much attention to the integration processes over the past year. The Federal Customs Service notified businesses at various seminars and conferences that, starting from January 1, 2010, there will be new customs regulations.”

The official claims have made Russia’s wine importers furious and Maksim Kashirin insists the decision was absolutely out of the blue.

“It’s a 100% lie! We spoke with the people, we have a contact in the ministry which is responsible for the license department – nobody knew about it. We expected the preliminary affairs that people will explain to us, the government will announce, there is a new thing, we will go to certain things to reach there. But the Customs Union just took the decision all of a sudden – it’s a disaster!”

Wine importers are asking for a 6 month transition period to adjust to the new rules.

The Federal Customs Service says that this week the government is expected to relax the licensing regime with a general license, but not to cancel it. It is not just an issue for drinkers, as other importers of goods as diverse as electronic gadgets and vitamins have experienced similar problems.

Pyotr Baklakov promises to pay more attention to organizational processes and says not much will be changed in customs regulation.

“We will be more effective in letting business know about any new initiatives. However, there won’t be any drastic changes in regulation.”

The new Economic Community has also brought problems for oil exporters, as Russia and Belarus cannot agree on export duties.

However, experts say these are teething problems and businesses will eventually benefit from the Customs Union, which governments say will boost Russia’s GDP by 15%, or $400 billion, over the next five years.