Tea Importers Lobby Raising of Duties...

The Russian association of tea and coffee producers (Roschaykofe) sent proposals regarding raising of euro-component of customs duties on import of tea bags to the Antimonopoly Ministry, State Customs Committee, Finance Ministry, Economic Development and Trade Ministry and Agriculture Ministry. If these proposals are accepted, retail prices of imported tea bags will grow by 10-15%. This growth will deal a blow to sales of foreign tea companies, majority of which do not have their own packaging facilities in Russia.

Production and sale of tea bags is one of the fastest growing segments of Russian tea market. According to Roschaykofe, over the last three years consumption of tea bags grew tenfold, and the share of tea bags market grew from 5% to 25%. Investments in organization of packaging facilities exceeded $80 million. The Russian companies Orimi Trade, Russian Product, May and Grand made the biggest investments. The British-Dutch Unilever was the only foreign corporation that opened its own packaging facility.

The essence of proposals of Roschaykofe reflecting opinion of majority of Russian tea producers is that the specific part of the import duty on tea bags should be raised from 0.4 euros per kilo to 1 euro per kilo. Thus Russian importers are going to protect their investments in organization of packaging facilities.

So far this policy did not have any result. According to Director of Orimi Trade Sergei Kasyanenko, "production costs of tea bags are high enough, and availability of one's own packaging facilities does not provide a significant advantage over an imported product." Raising of the euro-component of the customs duty will lead to growth in prices of imported tea bags and reduction of their consumption by 10% on average. According to Director of Sapsan company (distributor of Dilmah and Lipton) Oleg Smulyansky, losses of companies will be especially sensitive in the cheap segment of the market. Russian manufacturers will be able to fill this niche easily through increase of capacity of their own production facilities. According to Smulyansky, foreign companies "have only one way out left, that is to follow example of Unilever and to organize their own production facilities in Russia."

The final decision on raising of the euro-component of the import duty is up to the governmental commission for protective measures in foreign trade and customs and tariff policy chaired by Deputy Prime Minister Alexei Kudrin. A source in the government reports that this will happen in four to six weeks.

Kommersant