Jewelry industry asks for flexible export duties to be abolished

Manufacturers of jewelry are asking the Ministry of Finance to remove them from the flexible export duties introduced on October 1, 2023, including for this category of goods, the size of which depends on the ruble-dollar exchange rate. They believe that additional fees will reduce the competitiveness of Russian jewelry in foreign markets. Market participants, however, admit that the share of jewelry exports outside the EAEU is insignificant. However, even this volume allows especially small companies to maintain business profitability in the face of declining demand for jewelry in the domestic market.

Kommersant obtained a letter from the Guild of Russian Jewelers to the Ministry of Finance with a proposal to exclude jewelry from the list of goods subject to flexible (exchange rate) export duties. The Russian government introduced this type of fee from October 1, 2023 to December 31, 2024 for a wide range of products – from vegetables, fruits, dairy products, fish, live animals to precious metals and stones, as well as ferrous and non-ferrous metals. Duties are established only for exports outside the EAEU; their size is 4–7% at an exchange rate of 80–95 rubles. for a dollar. When the value of the dollar is below 80 rubles. rates are reset to zero.

The Ministry of Finance did not respond to Kommersant’s request. Earlier, the ministry noted that they do not see any risks for investment programs and the operating profitability of companies covered by the flexible duty (see Kommersant Online, September 25).

According to the Federal Customs Service, in 2021, jewelry exports grew by 58% year-on-year, to $144.38 million. There are no official data for 2022, as the service has temporarily suspended their publication. General Director of the Jewelers Association Vadim Serov estimates the volume of exports in 2022 at $115 million.

Executive Director of the Russian Jewelers Guild Vladimir Zboikov says that jewelry exports outside the EAEU countries account for about 1% of total production.

Vadim Serov estimates this figure, including supplies to the EAEU, at 2.4%. “For the budget (receipts from duties on jewelry.— “Kommersant”) is a small income, while the size of this fee will have a negative impact especially on small enterprises,” notes Mr. Zboykov. Such market players have begun to actively develop sales on online platforms, including to foreign countries, he adds.

According to General Director of Infoline-Analytics Mikhail Burmistrov, large players in the jewelry market are also increasing exports. For example, Sokolov supplies its products not only to Kazakhstan, Kyrgyzstan and Belarus, which are members of the EAEU, but also to Uzbekistan, Azerbaijan, and Georgia. The company is also increasing exports to China, where it opened its stores this summer. According to Vadim Serov, the introduction of flexible duties will reduce or completely stop exports outside the EAEU countries due to uncompetitive prices.

The increase in duties leaves exporters with the choice of reducing the profitability of cross-border business or shifting additional costs into prices, agrees Sokolov CEO Nikolai Polyakov. Although, according to him, the introduction of flexible duties will not have a significant impact on the company’s fortunes, since exports in its revenue do not exceed 2%, the innovation will require a revision of the business model of the company’s project in China, foreign franchises and wholesale contracts for foreign counterparties.

An increase in export duties will have a negative impact on the margins of jewelers, Mr. Burmistrov believes. This may also be affected by the current duty of 10–15% on the import of small-cut diamonds, used in the vast majority of jewelry (see Kommersant of August 21).

At the same time, the situation on the domestic Russian market for jewelers is also not developing in the best way. After growth in 2021, at the end of last year, Russians’ demand for jewelry decreased by almost 7%, to 308 billion rubles, Infoline notes, predicting an increase in demand by only 3–5%, to 317–325 billion rubles, by the end of 2023 . This slight increase is due to the rise in price of jewelry, the prices of which increased by 25% in annual terms in September of this year alone.

Alina Savitskaya