NCE RK managed to defend the position of the project in a pilot mode, and only on the fur goods

Deputy Chairman of the Management Board of the National Chamber of Entrepreneurs of Kazakhstan "Atameken" Dana Zhunusova told the essence of the issue of labeling of fur products and why it is necessary to extend the deadline for implementation of the pilot project.

- Dana Beysenovna, the Agreement on labeling shall enter into force on 12^th of August of the current year. Please tell us the background of the issue.

- Let's start with the fact that the decision on the labeling system in the Union was adopted by the heads of the EAEU states in October 2014. Decision was preceded by a long and heated debate about how to introduce a uniform system of labeling goods and on what group of products to extend the new requirements.

It's no secret that initially was considered the proposal on the labeling of light industry products. Recall, the National Chamber of Entrepreneurs of Kazakhstan "Atameken" has repeatedly opposed the introduction of a total marking products. With the support of the Government of RK, NCE managed to defend the position of the project in pilot mode, and only for the fur products.

I must say that in all areas, it was stated that the main purpose of labeling is to combat the smuggling of goods on the territory of the EAEU. According to the Eurasian Economic Commission, labeling helps to solve fiscal problems, questions of industry support and legitimate trade and the fight against counterfeiting.

However, these statements are highly controversial. But to say this with certainty, we can only by the results of the pilot project. By the decision of the Heads of the States of the Union, further consideration of the establishment and functioning of the labeling of light industry products should take place in view of the launch of the pilot project.

- Why fur products have been chosen as a pilot?

- Given that from the first days of discussion of labeling, we talked solely about light industry products, the business community suggested to conduct a pilot project for products of the higher price category in order to avoid a significant increase in commodity prices.

In this light, the optimal group of products are fur products, the cost of which can allow yourself to dissolve in the cost of control characters without increasing the final prices to consumers.

Agreement applies on 7 HS codes. These are garments made of mink, nutria, fox, rabbit or hare, raccoon and sheepskin. The list of goods does not include gloves, mittens, hats, or parts thereof.

- What is the essence of labeling?

- In recent days, there are a lot of questions and comments on the labeling in the media and social networks, the majority of which do not correspond to reality and put our entrepreneurs in astray.

For this reason please note that the requirement for labeling fur applies only to business activities related to the production, acquisition and sale of fur products. It does not apply to purchase of fur coats by individuals. But the labeling of fur products during import, manufacture and sale / resale is mandatory for legal entities and individual entrepreneurs.

Labeling, in other words, is the identification of the goods, i.e. an indication of its origin and main characteristics. The pilot project involves the creation of an information labeling system that will contain all the information about the fur products, which are in commerce, i.e., traded on the territory of the Republic of Kazakhstan.

Since the beginning of the functioning of such a system in Kazakhstan, our entrepreneurs will need to create an account, place orders to control the signs and to keep a record of fur products in the labeling system. The essence of accounting is that during the movement of goods, it is necessary to input appropriate information on the sale / resale of fur coats, and of course, at import \from third countries and from the countries of the Union and manufacture of (sewing) fur. In addition, entrepreneurs will have to transmit the list of approved labeling information in the system during cross-border trade, trade commission, labeling of the remnants of the goods at retail.

Also we would like to draw the attention of entrepreneurs that the Agreement rules govern responsibility in the national legislation of the countries of the Union for non-fulfillment or improper fulfillment of the requirements established by the Agreement on the labeling. Thus, in the case of export of unmarked fur products in other Member States of EAEU, domestic entrepreneurs will be held accountable in accordance with the legislation of the country into which the goods were imported without control characters.

Due to these circumstances, as well as different levels of infrastructure readiness for the introduction of labeling in the Union, NCE has prepared a request to the Eurasian Economic Commission for clarification of the order of the cross-border trade to the full readiness of information systems in every state.

For the convenience of business, we placed on the website of NCE under the section EAEU all available information on the implementation of the pilot project, including the acts approved by the supranational Union.

- What will change in the fur trade upon entry into force of the Agreement?

- NCE believes that the main challenge of the project is the application of RFID - Radio Frequency Identification (RFID). Control characters that should be applied for each coat, must necessarily contain electronic tags, or, as they are called chips.

RFID-tags – are modern information technology, but in Kazakhstan there is no widespread use of such labels, and a major deterrent to widespread use of RFID is the cost of a single label and the need to purchase specialized equipment for reading the tags.

Returning to the pilot project, it should be noted that the application of the reference mark on the coat is not possible without making the list of information about the product in the labeling information system.

Currently in Kazakhstan, despite the willingness of the business, not as information labeling system and appropriate legal framework for the implementation of the project.

Thus, since 12 August of the current year and before the start of the information system and the legislative definition of all the participants of the pilot project and order of its implementation, domestic entrepreneurs will be in a legal vacuum. On the one hand regulatory authorities on the basis of a ratified agreement have the right to request the presence of the control characters on the fur coats, and on the other hand, until now no proper infrastructure for the start of the project was created.

However, work on the adoption of necessary laws and the creation of an information system has already begun, and soon will be completed. But for clarity, NCE has appealed for assistance to the State Revenue Committee, to get the official explanation that prior to the adoption of the necessary national laws and to start of the information system, the rules of the Agreement do not apply to turnover of fur products in Kazakhstan.

Once the Information System of labeling will start functioning in Kazakhstan, the entrepreneur will need to register and to start working in the system.

- What is the role of NCE in a pilot project?

- NCE RK "Atameken" in order to protect the interests of domestic entrepreneurs takes a direct part in the pilot project on introduction of labeling. We have repeatedly talked about the complexity of the project in terms of technical implementation and the requirements that apply to entrepreneurs.

In this regard, the Chamber on its part ensured development and approval of the optimal business process of labeling of fur products by the involved state bodies and organizations.

Everyone knows that the labeling system will be based on the standards of the World Association of GS1. Association GS1 Kazakhstan exists in the country for 19 years. To use the standards of the Association, which holds a monopoly position, it is imperative to join the Association and to pay the entrance and membership fees.

And in this area a significant achievement of the Chamber is the reduction of the membership dues for the Association GS1 Kazakhstan, which was made possible thanks to the joint negotiations of the leadership of the Chamber and the Association. Currently, for entrepreneurs participating in the pilot project, was canceled the entry fee to the Association and the annual membership fee is reduced by half.

In addition, NCE offered cost-cutting mechanism for entrepreneurs, eliminating the need to perform not relevant core business functions associated with the entry in the telltale sign of a special commodity code. We expressed a position on the need to attract commercial entities that will provide services to personalize the control characters – it is record of special GTIN codes in memory of RFID-tags.

The complexity and multi-stage procedures related to obtaining control characters with embedded RFID-tagged, thanks to the proposed approach, is reduced to a few "clicks" in personal account within the information system.

The proposal of the Chamber to minimize the time and additional costs for customs clearance of goods is also important. At the suggestion of NCE RK, during import of fur goods, they will be placed under conditional release and entrepreneurs will have thirty days to make adjustments in the customs declaration stating the reference numbers, which were obtained upon labeling.

What does it give to our entrepreneurs? Through this mechanism, during import of fur products from third countries, customs clearance takes place and goods move to the warehouse of the entrepreneur. The entrepreneur within 30 calendar days must obtain and put on the product control signs. As a result, the entrepreneur receives a savings of time and money due to lack of need for the customs warehouse and the passage of related administrative procedures.

Large-scale awareness campaign is conducted among entrepreneurs on ongoing basis. An important role is played by our regional chambers, which on the basis of the data of the central apparatus of NCE notify businessmen about the project.

- What will happen next?

- Of course, different levels of readiness for implementation of the project in the countries of the Union will eventually have an impact on the results of the labeling. In fact, today there are still a lot of open and unresolved questions, both within the framework of national law and within the framework of interagency cooperation of the authorized bodies of EAEU on labeling.

NCE as a business representative in the dialogue with government authorities clearly understands that such a situation may distort the results of the introduction of labeling.

In our opinion, such an important issue requires careful analysis and assessment of the level of influence of the introduction of new requirements for doing business in the Union conditions. And the most important thing in this process is to hear the evaluation of the pilot project from the immediate perpetrators - our entrepreneurs.

That is why we consider it necessary to consider the extension of the pilot project on labeling of fur products until the end of 2017, by that time we will conduct a comprehensive analysis and evaluation of the project. We have sent an official letter to the Government of Kazakhstan on the revision of the terms of the pilot project and look forward to the support and positive solution of the issue.