The government introduces export duties linked to the ruble exchange rate

The government is introducing flexible export duties on a wide range of goods linked to the ruble exchange rate, the Cabinet of Ministers said in a statement. The measure will take effect from October 1 until the end of 2024.

The duty will be 4% of the customs value of the goods at an average rate of 80 to 85 rubles/$, 4.5% at a rate of 85-90 rubles/$, 5.5% at a rate of 90-95 rubles/$ . The maximum rate – 7% – will be set for exporters at an exchange rate of more than 95 rubles/$. For fertilizers, the duty will be up to 10% depending on the ruble exchange rate.

“The measure is temporary and aimed at protecting the domestic market,” the government press release noted. Regulation is applied in order to maintain a rational ratio between the export of goods and domestic consumption, the Cabinet explains. The decision taken will help protect the domestic market from unjustified price increases.

According to the document, duties will apply to a wide range of goods, including products from the mining sector, ferrous and non-ferrous metallurgy, precious metals, coal and fertilizers. Excluded from coverage are goods for which duties have already been established by separate government regulations – oil, gas and petroleum products, grain crops, sunflower oil and sunflower meal.

Also excluded are product groups with HS codes 02 (meat and edible meat by-products), 11 (flour and cereals), 30 (pharmaceutical products), 44 (wood and wood products), 49 (books, newspapers and other printed products), 61-65 (clothing, textiles, shoes), 84-85 (machinery, equipment), 86-89 (land and rail transport, aircraft, ships and boats), 93 (weapons and ammunition), 94-96 (various industrial goods). Exceptions are also introduced for certain product items.

The duty rates will be posted by the Ministry of Economy on the official website, the document says. They will be applied starting from the 1st day of the calendar month following the day they are posted on the website, and until the next rates of export customs duties begin to be applied.

The amount of the duty will be set on the basis of the arithmetic average exchange rate of the dollar to the ruble, established by the Central Bank. The monitoring period is from the 26th day of the month preceding the month of monitoring. Thus, the rate of export customs duties for October 2023 is calculated for the monitoring period from August 26 and posted on the website no later than September 27.

Since the beginning of 2023, the value of the dollar and euro against the ruble has increased by almost 40%. On September 21, the dollar was traded on the Moscow Exchange at the rate of 95.91 rubles. (-0.24 rub.), euro – 101.85 rub. (-1.18 rub.). According to the updated forecast of the Ministry of Economic Development (the document was submitted to the government), in 2023 the average annual exchange rate is expected to be 85.2 rubles/$, in 2024 – 90.1 rubles/$.

The measure taken is based on a logic that is largely similar to that used in permanently operating damper mechanisms for grain and sunflower oil, which have shown their effectiveness, notes Liliya Shchur-Trukhanovich, director of the department for development and regulation of foreign economic activity of the Ministry of Economic Development (her words are quoted by the press -service of the ministry). “They were launched at a time when high world prices put pressure on the domestic market and were one of the pro-inflationary factors. The flexible duty rate helped smooth out this impact while maintaining export profitability,” she notes.

Now, due to the decline in external prices in recent months, for example, for butter, there is a zero duty for Russian exporters. In this case, the measure softens the impact of the exchange rate on the trade balance and creates the preconditions for expanding supply in the domestic market, Shchur-Trukhanovich points out. This, in turn, will have a restraining effect on prices for many goods for Russian consumers.

Excluded from export duties are goods that have a high share of imported components in their cost, purchased for foreign currency, as well as highly processed products, which stimulates domestic processing and production in general, the Ministry of Economic Development explains. In addition, the measure will not affect Russian manufacturers of pharmaceuticals, household chemicals, light industry, perfumes and cosmetics, which are now actively entering new export markets.

The measures taken by the government are anti-inflationary and in the future may turn out to be quite effective, says Dmitry Belousov, deputy director of the Center for International Relations. When the ruble is devalued, exporters automatically receive income that is associated only with changes in external conditions; this is exchange rate rent in its purest form, the expert says.

At the same time, exporters have a powerful incentive to raise domestic prices to bring them into line with export parity. “In this case, the state’s task is to ensure that the equivalent in rubles from exports does not grow much, which is where the duty arises,” explains Belousov. In his opinion, the monetary measures taken earlier by the Central Bank to slow down the rate of inflation are ineffective.

An increase in export duties will lead to a decrease in the revenue of exporters and, following it, prices for export goods within the country, and will also generate additional budget revenues, says Alexander Isakov, chief economist for Russia at Bloomberg Economics. According to him, by the end of the year such an increase could bring an additional $1-1.5 billion (from 90 to 140 billion rubles) to the budget, he believes.