16 Aug 2017
RFID-Tagging Set to be Compulsory for Russian Footwear from 2018
Mandatory tagging designed to counter widespread illicit import and smuggling in country's shoe sector.
All footwear sold in Russia from 2018 onwards will have to be RFID-tagged. RFID (or radio frequency identification) tags contain the complete history of any item, including its point of origin, manufacturer, import details and destination retailer. Their mandatory use represents a move by the Russian government to stamp down on the sale of smuggled or semi-illegally imported footwear.
This is not an entirely new development within the Russian market. As of April 2016, it has been compulsory for any fur coat sold within the country to carry an RFID tag. This has extended to both the wholesale and retail distribution of such items and has seen a similar practice adopted by all members of the Eurasian Economic Union (Armenia, Belarus, Kazakhstan, Kyrgyzstan and Russia itself).
According to the Russian Ministry of Industry and Trade, the body that oversaw the introduction of RFID technology into the fur sector, the initiative has been a huge success. Not only did it legalise the fur industry across the country, it also allowed the true scale of the sector to become apparent for the first time. While, according to data supplied by the industry itself, some 400,000 coats are sold annually in the country, the number of RFID tags ordered for use by furriers and traders in 2016 topped six million.
In all likelihood, the tags used in the footwear sector will be somewhat different from those used in the fur industry. At a cost of US$0.7 per tag, this is an insignificant amount in the fur sector where unit prices are notoriously high. It does, however, become much more of burden in the footwear market, where the unit price of certain items – such as bargain-basement summer sandals – can be as low as $3-5.
Overall, the majority of the larger companies in the Russian footwear sector – including Kari, Zenden, Obuv Rossii, Ralf Ringer and Econika – have welcomed this new initiative, believing it will result in a level playing field for all retailers. They have, however, expressed concerns over the additional costs they are likely to incur, particularly with regard to upgrading their IT systems and recruiting additional staff.
One likely consequence of this impending legislation is that many retailers will look to sell off any untagged stock over the autumn, wary of incurring financial penalties the following year. In the case of the fur-coat sector, two major price drops hit the market across the country in the run-up to RFID-tagging becoming compulsory.
In terms of the footwear sector, it is currently proposed that the RFID requirement will be mandatory for all such products, regardless of cost. Some industry players, however, have argued that it might be fairer to solely impose it on higher-value leather footwear. The consensus among the major players, though, is that this would leave a loophole that less scrupulous retailers, importers and distributors might look to exploit.
In line with the practice adopted with regard to the fur industry, any Hong Kong footwear suppliers and OEM/ODM manufacturers will need to bear in mind that all such exports to Russia will now have to be pre-tagged prior to their arrival in the country. This will require Russian importers to procure the required tags and either send them to the manufacturer directly or to designate a location for the tagging to be completed before their import to a Eurasian Economic Union member state.
Leonid Orlov, Moscow Consultant