Legal field of private tax on milk

On December 8, 2016, the Cabinet of Ministers approved a Strategy to combat illegal circulation of industrial products in the Russian Federation for the period up to 2020 and the planning period up to 2025. According to the document, within the next five years the country will introduce a system of labeling goods by means of identification and traceability of goods.

The labeling system provides for the obligation of manufacturers and importers to acquire marking codes for each unit of product (the cost of the marking code is 50 kopecks excluding VAT - the decree of the Government of the Russian Federation No. 577 of 08.05.2019) and apply them to the packaging. Traceability of the movement of products is ensured by the fact that all participants in the circulation submit to the labeling system data on the transfer of ownership and taking out products from circulation.

On December 31, 2017, President Vladimir Putin signed Federal law No. 487-FZ of 31.12.2017 "On amendments to article 4 of the Federal law "On the use of cash registers in cash payments and (or) payments using electronic means of payment" and articles 5 and 8 of the Federal law "On the fundamentals of state regulation of trade activities in the Russian Federation". According to this document, the Government has the authority to determine the goods subject to mandatory labeling; in addition, the Cabinet of ministers has the right to approve the rules of mandatory labeling for these goods and its procedure, as well as a list of groups of economic entities in this area.

It is important that the signed document claims - unless otherwise provided by Federal law "On fundamentals of state regulation of trade activities in the Russian Federation" or by the normative legal act of the Government of the Russian Federation adopted in accordance with it - sale, exchange or other introduction of goods into circulation, which violate the requirement of the labeling means of identification, on the territory of the Russian Federation are not allowed.

On February 2, 2018, Kazakhstan there was signed an agreement on the labeling of goods by means of identification in the EurAsEU. This document establishes the procedure for the introduction of labeling on the territory of the EAEU.

On December 25, 2018, the President of the Russian Federation signed a law on the creation of a state information system for monitoring the circulation of goods subject to mandatory labeling by means of identification. The Federal law No. 488-FZ of 25.12.2018 establishes powers of the Government of the Russian Federation to introduce labeling by means of identification for separate goods, and characteristics of the code and means of identification, rules of labeling and features of introduction of labeling, characteristics of the necessary equipment.

In addition, the document states that the Government determines the Operator of the state labeling system. (article 20.1. p. 3).

The executive order of the Cabinet of Ministers No. 2963-R of 28 December 2018 approved the concept of the labeling system, according to which the key objectives for the establishment and functioning of the labelling system are to provide prompt and reliable information about the movement of goods within the economic activities of organizations, which will create the necessary conditions for the reduction of illicit circulation of industrial products and its impact on the development of economy and social sphere of the country, security and protection of life and health of citizens, increase the collection of taxes and customs duties and improve tax discipline, as well as monitoring and control the competitive environment in the commodity markets.

The RF Government executive order No. 620-R of 03.04.2019 "On the operator of the state information system of monitoring over the circulation of goods subject to mandatory labeling means of identification", establishes LLC "The Operator-CATD" the operator of the labeling system.

LLC “OPERATOR-CATD” was defined as the operator of the state information system of monitoring of the circulation of the goods, which are subject to mandatory labeling by means of identification on the basis of part 3 of article 20.1 of the Federal law "On fundamentals of state regulation of trade activity in the Russian Federation".

According to the Government executive order No. 899-R of May 8, 2019, the agreement with the CATD is made for 15 years.  

It should be noted that the public-private partnership with LLC "Operator-CATD" was concluded without a competitive procedure. The lawyers believe that the terms of the partnership "require additional expertise from the FAS of Russia in terms of compliance with the Federal law No. 135-FZ of July 26, 2006 "On protection of competition". The LLC itself is a joint project of USM by Alisher Usmanov ("USM Technologies", 50%), GC "Rostech" (concern "Automatics", 25%) and "Elvis-Plus group" by Alexander Galitsky (25%).

The list of individual goods subject to mandatory labeling by means of identification was approved by the Government on 28 April 2018.

In July 2019, the Government supplemented the list of goods subject to labeling with finished dairy products. (The order of the Government of the Russian Federation No. 792-R of 28.04.2018).

HS codes that fall under the labeling:  

As well as products under the HS codes 2202 99 950 0 and 2202 99 990 0. 

On June 29, 2019, the Government adopted a Resolution “On conducting an experiment on labeling by means of identification of certain types of dairy products on the territory of the Russian Federation"

According to the document, the Ministry of industry and trade and the Ministry of agriculture are instructed to ensure the development of methodological recommendations for the experiment and the schedule of the experiment until August 15, 2019. In fact, the two agencies did not sign the draft recommendations UNTIL MID-NOVEMBER.

According to this document, the term of introduction of mandatory labeling will be determined by the results of the experiment on labeling by means of identification of certain types of dairy products on the territory of the Russian Federation. (Executive order of the Government N 1533-R of July 13, 2019)

Despite this, before the end and analysis of the results of the experiment on November 8, 2019, there was signed the Government executive order on the introduction of mandatory labeling of dairy products since June 1, 2020. At the same time, since December 1, 2020, the circulation of dairy products without labeling is prohibited!

It is worth remembering that on November 1, 2019 the implementation of the traceability system of finished dairy products on the basis of the electronic veterinary certification system (Federal state information system "VetIS", “Mercury” component, under the control of the Rosselkhoznadzor) was completed in Russia. In the framework of the “Mercury” system, the participants of the circulation are obliged to prepare veterinary accompanying documents when carrying out operations with raw materials and finished dairy products (production, movement, transfer of ownership).

The national Union of milk producers has issued an official position, which emphasizes that the system of mandatory labeling is intended only to counteract the circulation of counterfeit products, the share of counterfeit products (produced in violation of intellectual property rights, including trademark) in the dairy market is 0.01%. According to Soyuzmoloko, Federal state information system "VetIS" allows to counteract the circulation of both counterfeit and falsified products (produced in violation of the requirements of technical regulations). Falsification is the main type of illegal products in the dairy market; its share is about 4.5% of the total market. Taking into account the volume of counterfeit goods on the market, the economic effect of the labeling system will be minimal and incomparable with the costs of its implementation.

The labeling system does not control the raw materials, the process of its integration with “Mercury” is in question and the operator has not represented the fact of working out the uninterrupted process of labeling with the electronic veterinary certification system.

The experts of Soyuzmoloko noted a number of legal problems in the introduction of mandatory labeling.

The Russian government has the authority "to approve the list of separate goods subject to mandatory marking means of identification, or criteria for the identification of such goods, the list of groups of economic entities engaged in the marking of individual products by means of identification by the types of activities, rules for labeling goods, subject to mandatory labeling by means of identification, as well as features of labelling of the specific products, subject to mandatory labeling by means of identification", and others. At present, however, the decision on introduction of labelling for a particular product group is not justified, and preliminary discussions with industry associations are not held.

1) The list of selected goods subject to labeling by means of identification is approved by the executive order of the RF Government, the order also approves additions to the List, including dairy products . Thus, the decision on introduction of mandatory labeling, which imposes obligations on market participants to apply identification tools and send information about product circulation to the information system and requires significant costs (has a high degree of regulatory impact) is adopted by the act of the government of the Russian Federation, which is not subject to regulatory impact assessment, public discussion, etc.

2) The issue of setting the time frame for the introduction of mandatory labeling for dairy products was not discussed with industry associations. Thus, industry associations do not have the opportunity to present a position and expert opinion on what the consequences of the decision on the introduction of labeling and the timing of the introduction of labeling will have for market participants and consumers.

3) In accordance with the legal acts of the Russian Federation, the basic principle of the labeling system is "making the decision to introduce mandatory labeling of goods by means of identification in the Russian Federation on the basis of the analysis of the feasibility of its introduction for a specific group of goods". At the same time, the procedure for carrying out the feasibility study, including the timing, and 12 methods of its conduct have not been approved. Thus, the decision to introduce mandatory labeling for dairy products was made in violation of the basic principles established by the Government of the Russian Federation.

4) The rules of the experiment in the labeling of some dairy products by means of identification (the RF Government executive order No. 836 of 29.06.2019) it is established that the purpose of the experiment is the "analysis of the feasibility of introducing mandatory labelling means for identification of individual types of dairy products". However, the approved guidelines do not establish the procedure for conducting such an analysis, and the timing of its implementation is not included in the schedule. It should be noted separately that the legislation of the EAEU also provides for the need to provide justifications for the introduction of labeling by means of identification (when it is introduced throughout the territory of the EAEU). So, you must submit an analysis of the feasibility of introducing labeling (including information about the outcome expected by member state from imposing labeling, indication of main consumers or groups of consumers of such goods), information on the impact of the introduction of labeling on the conditions of doing business (including the available information on the possible costs of legal entities and individual entrepreneurs, the ratio of prices of goods and cost of means of identification), the presence of technological capabilities of the marking of such goods, as well as information on other systems of control over the circulation of goods in force in respect of such goods. 

Full information on the introduction of mandatory labeling by means of identification.

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