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Russia's Fur RFID Tags Set for Geographic and Sector Expansion

Success of high-tech marker system has led to a surge in declared fur garment and headwear imports.

Photo: The number of import-declared fur hats for sale in Russia doubled following the introduction of RFID chips. (Shutterstock.com)
The number of import-declared fur hats for sale in Russia doubled following the introduction of RFID chips.
Photo: The number of import-declared fur hats for sale in Russia doubled following the introduction of RFID chips. (Shutterstock.com)
The number of import-declared fur hats for sale in Russia doubled following the introduction of RFID chips.

One year into the use of RFID marker chips to track and identify fur garments within Russia and neigbouring Belarus, the initiative has been hailed as a great success. As a consequence, the scheme is now likely to be extended to cover the movement of fur products within the other three member states of the Eurasian Economic Union – Armenia, Kyrgyzstan and Kazakhstan.

Beginning in January last year, all new fur garments circulating within Russia and Belarus came fitted with an irremovable RFID (Radio Frequency Identification) chip, an initiative designed to cut back on the wide-spread practice of illicitly importing such items in order to avoid paying the requisite duty. Such was the success of the scheme that the declared volume of imported fur items surged in both countries.

In terms of garments, the total number of declared items rose from 107,000 in 2016 to 176,000 in 2017. In the case of headwear, the increase was even more dramatic, with the number of such items declared rising from 121,000 to 346,000. Taken together, this amounted to a 65% growth in the number of declared items across the two countries and the two categories.

Inevitably, this has led to the overall value ascribed to the fur trade in these two markets being substantially upgraded. On the logistics side, given that locally-produced items are also tagged, it has demonstrated that the system is entirely suited to keeping track of some four million individual units, with its ultimate capacity assumed to be far, far higher.

As a result of this success, the system was extended to Kazakhstan in December last year, with Armenia set to be similarly enrolled before the end of this month. Under the terms of an agreement signed by all EEU members, Kyrgyzstan is obliged to sign up to the system by 1 July this year.

In addition to the geographic expansion of the initiative, the Eurasian Economic Commission, the EEU's executive, is also looking to extend the use of RFID technology into other product sectors. At the same time, plans are afoot to expand its geographic reach still further, with the system ultimately seen as covering a range of product categories across a footprint that stretches from Central Asia to the EU border, and from the Baltics to the Russian Far East.

Russia's Ministry for Industry and Trade has confirmed that plans are in place to extend the RFID system to clothing, leather footwear and a number of other consumer-goods categories before the end of 2019. The overall thinking seems to be that the system is best suited to those high-value and high-added-value goods that are currently beyond the remit of the traditional excise-duty system, which has tended to focus on jewellery, cars, spirits, tobacco products and perfumes. In the case of consumer electronics items and household electric appliances, however, the current customs declaration number-based system is likely to remain in place.

Any Hong Kong-based manufacturer or distributor focusing on one of the sectors likely to fall within the remit of the extended RFID regime is advised to view the existing arrangements vis-à-vis the fur trade as the likely model for any future implementation. One key aspect to bear in mind is that it's essential that any required labelling takes place prior to the goods in question entering the jurisdiction of the EEU. Essentially, this means the RFID tagging must either be actioned at the initial production facility or while the goods are transiting through a non-EEU nation.

In the latter instance, Latvia and Lithuania, two of the Baltic states, are the most commonly accessed conduits, with both countries having in place a series of bonded warehouses specifically set up to service the Russian and Belarusian markets. As an alternative, some importers have opted to transit via Finland, although this option is generally regarded as financially preclusive when compared to the two Baltic republics.

Leonid Orlov, Moscow Consultant

Content provided by Picture: HKTDC Research
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