Three Options to Organize Labelling of Goods Imported to Russia

Registration of goods labelled with Data Matrix codes in the Chestny Znak (Honest Mark) system is being tested in Russia. Labelling of all pharmaceuticals, shoes and cigarettes has become mandatory from July 1, 2020. This will apply to perfumes, eau de toilettes and photo products from October 1, 2020, to tyres – from January 1, to consumer goods – from January 1. Besides, labelling of bottled water and dairy products is being tested now.

Ivan Samusev, TELSTaking into account the new requirements, Ivan Samusev, the Commercial Director of TELS Group, tells about the options for the merchants to import goods to Russia.

It is quite simple for an economic agent to register and receive the codes in the Chestny Znak system – this is mainly about the operations in the information system. Yet the most important and time-consuming stage is the application of the codes to the product. It is important to do everything correctly here, as any mistake is most likely to result in negative consequences or possible losses for the business.

Generally speaking, an importer has three options to ensure the import of labeled products.

OPTION ONE: import the products labelled by the manufacturer

In this case, the importing company has to “persuade” the supplier to organize the labelling of goods in their warehouses before the shipment (this requires additional financial, human and other resources).

But the scheme has the following risks:

  • A manufacturer may refuse to label the goods if the share of exports to the Russian Federation is insignificant or low-margin.
  • Manufacturer's errors in labelling or preparing consignments remains importer’s responsibility even if the manufacturer agrees to label their production.

What are the consequences of an error? Imagine the following situation: the cargo has arrived to the temporary storage warehouse and the error is discovered during customs clearance. The Federal Customs Service cannot release such a cargo for free circulation, and in most cases the importer will not be able to correct the error at the customs warehouse or it will be very difficult. The importer will not be able to take the goods back until the investigation procedure of the administrative case is over, which can take up to 2 months.

And what is next? Returning the cargo to the supplier? Relabelling the goods on your own? Where then? There are many issues with no clear answers and no solution algorithm.

OPTION TWO: the importer organizes the application of the codes at the customs warehouse before customs clearance

This is possible but not at all customs warehouses. For a quality solution, the warehouse should have:

  • A separate area with equipped workplaces. Many small goods have a high value, so to ensure their safety, labelling should be carried out in an isolated area with an organized access control system, video monitoring, etc
  • Well-tuned IT infrastructure (printers, scanners, software).
  • A team of skilled workers.
  • Possibility to regulate the size of the work team depending on the volume of goods and labelling timeframe.

The following restrictions at the customs warehouses may occur:

  • Insufficient number of suitable warehouse areas.
  • Limited possibilities to organize the process properly (concerning the equipment of workplaces, staff training, regulation of the size of work teams, etc.).
  • Problems with the release of goods for free circulation if errors are found.

If importers (cargo owners) want to rely on this option to organize the labelling of goods, they should be ready for the following:

  1. Maintaining customs warehouses implies financial and time expenditures.
  2. The existing customs warehouses require expansion and modernization, which is often complicated by the existing infrastructure ensuring security and access control.
  3. The cost of products will increase after long-term storage at customs warehouses arisen due to noncompliance (misgrading, errors in shipping documents).

OPTION THREE: application of Honest Znak codes by logistics contractors at warehouses outside the Russian Federation

According to preliminary estimates, this is the most convenient option for importers allowing to adapt to changes quickly without a significant loss of time and money.

Logistics contractors are highly motivated to do the task well as in case of a mistake, they will suffer as well. When labelling the goods, they will certainly check the compliance of the declared lists of goods with the real ones and together with the cargo owner they can bring changes to the shipping documents or change the size of shipment. This means that the cargo will arrive at the customs warehouse with the correct documents fully corresponding to the cargo and accurately labelled.

Below are some important criteria that can be used as a kind of checklist to choose a logistics contractor:

  • Real experience in labelling goods with Data Matrix codes.
  • Compliance of operator’s warehouse with the conditions for the storage of goods.
  • Alternative delivery schemes involving warehouses for labelling.
  • Ability to label the required volumes of goods within the required timeframe.
  • Capability for collaborative planning.

The contractor should have enough workers and technical resources to accelerate the labelling processes without significant increase in costs and within the agreed timeframe.

For example, a team of three people for two workplaces labels one truck of shoes per day. If we plan the volume and time of shipments with the customer in advance, we can regulate the number of employees involved to accelerate cargo handling. Obviously, the larger the size of cargo and the more regular the supply of goods are, the more opportunities there are to streamline the process and reduce the labelling costs.