Coding scares lawmakers

14 deputies from the CPRF (Communist Party of the Russian Federation) and Spravedlivaya Rossiya sent a letter to Dmitry Medvedev, where they expressed doubts about the need for coding (labeling by Data Matrix codes) of consumer goods, reports "Kommersant". Deputies are concerned about the transfer of costs to the consumers, deterioration of the situation for exporters, and an increased burden on business. The legislators also sent appeals to the Ministry of Economic Development, the Ministry of Trade and Industry and the FAS (Federal Anti-monopoly Service). They asked for an explanation for the need for coding of the target product groups.

Representatives of the departments explain that the introduction of coding will increase the transparency of the market, help to get rid of shadow economy, reduce costs. And they emphasize that the introduction of coding was discussed at meetings in the governmental departments, that further escalation of the system will also be discussed with relevant regulators.

Market stakeholders are not so unanimous in their assessments. Thus, some mineral water manufacturers (which the Federal Tax Service of Russia proposed coding to prevent tax evasion) note that the share of "problem water" in the market does not exceed 1%. Others disagree with them, they acknowledge that there is counterfeiting, and coding will help to tackle it. However, market stakeholders are unanimous that before making a decision, it is necessary to calculate the possible financial burden, to create a system of subsidies for the purchase of equipment.

Milk producers claim that they have not encountered fakes at all, while they estimate the additional burden on the industry at 45 billion rubles in the first year following the introduction of the coding. Their opponents in the industry believe that in the long term, coding, on the contrary, will bring benefits –the passage of goods can be traced along the entire supply chain, collection of information from buyers, etc. The fears of representatives of dairy products are reinforced by a double control system, because milk also falls under the "Mercury" electronic veterinary certification system.

Pharmacists support the idea of coding, but they are concerned in regards to its implementation, noting that the system still has unresolved issues. It is believed that the introduction of transition periods for various of types of goods will allow smooth restructuring of the business processes and implementing the system after the pilot project.

Importers are wary of coding because of the specifics of their processes. Imported goods coming to Russia must be coded before customs clearance. Foreign suppliers are not always ready to establish their own coding, especially if Russia's share in their exports is not significant. Even in they consent, it is hardly possible to depend on the quality of work and responsibility of such "coders". It turns out that the importer, through a logistics intermediary, must put coding on the goods either in a consolidated warehouse abroad, or independently, by transferring the goods from its temporary storage warehouse overseen by a special customs warehouse regime. And if the logistic company does not have such a possibility, then a stalemate situation arises.

"We understand the strategic importance and welcome the introduction of product coding," comments Ramil Suleymanov, Managing Director of the logistics group of companies Art Delivery, which is engaged in the import of clothing and footwear. – "However, what is worrying is the implementation of the project. The fact is that currently the legislation does not specify clear instructions on how to carry out coding in certain complex cases. For example, how and where, within a reasonable time for business and without errors, should coding be done for imported cargoes of clothing and footwear, where each cargo is collected from hundreds of suppliers and includes 20-40 thousand products of different articles and brands for Russian customers of merchandise? Even with full printing automation, the physical labelling of codes on 20-40 thousand different consolidated cargo products would consume a lot of time and would significantly slow down the delivery period, not to mention the additional costs of 0.5-0.6 Euro per product, for which consumers would have to pay. This burden will be borne by business companies.

These are complex issues in law. It is necessary to deeply analyze business processes and take into account the specifics of the industry when scaling coding. After all, an honest business should continue to work normally and develop in new conditions, and not experience an increased burden. To do this, it is necessary that the regulatory authorities listen not only to the regulator's specialists, but also to the participants, because it is within the industry that there is an understanding of the problems and a solution to this issue," concludes Suleimanov.