CLS_Import_Substitution 14-01-2015 _E_16-9

1
CLS.RU
© 2015 CAPITAL LEGAL SERVICES INTERNATIONAL, L.L.C.
FINLAND, TAMPERE, MARCH 2014
CLS.RU
Capital Legal Services
Import-substitution in Russia:
risks and opportunities
Dmitry Churin

2
CLS.RU
FINLAND, TAMPERE, MARCH 2014FINLAND, TAMPERE, MARCH 2014
CLS.RU
© 2015 CAPITAL LEGAL SERVICES INTERNATIONAL, L.L.C. 2
Content
• Key points of import substitution policy
• Localization requirements
• Risks of localization for Finnish companies
• Ways to manage risks

3
CLS.RU
CLS.RU
Import-substitution policy
“Only unique equipment and
technologies shall be imported”
(Mr. V. Putin, Presidential Address to the
Federal Assembly, 2014)

4
CLS.RU
CLS.RU
Implementation of import-substitution: measures
State backing of domestic producers
• State loan guarantees
• Special-purpose loans from development funds
• Subsides for financing of industrial infrastructure
• Contracts with “Grandfather clause”
+

5
CLS.RU
CLS.RU
Implementation of import-substitution: measures
Barriers to foreign companies and goods
• Prohibition of state procurement of foreign goods
• machinery goods
• light industry
• medical supplies
• Limiting state procurement of foreign software
-

6
CLS.RU
CLS.RU
Why import-substitution requires foreign participation?
A1. To fulfill “local origin” criteria
A2. To acquire foreign technologies
• while using foreign materials
• if conducting only assembly of imported parts
• with the use of foreign technologies
• for production of science-intensive products locally
• to produce goods for purposes of procurement

7
CLS.RU
CLS.RU
How to take part in import substitution?
• To jointly create company with Russian
Partner (SPV)
• To localize production in Russia
• To license IP and other technology rights to a
Russian partner

8
CLS.RU
CLS.RU
Criteria of Determination of country of origin
Product of
domestic origin
Domestic materials, parts and local assembly
Use of materials
from 3rd countries
Sufficient Domestic
Processing
Processing results in change of at least one
of the first four digits of Commodity
Nomenclature for FEA
Execution of ad valorem share rule
For most
products
Certain products specified in
government list
Certain conditions provided in
Decree
Agreement on Determination of Country of Origin of Goods in
Commonwealth of Independent States dated November 20th, 2009

9
CLS.RU
CLS.RU
Passenger car
Fire-fighting Truck
Item Sufficient Domestic Processing
Processing in which the cost of the materials used must not
exceed 50% of the final product and certain operations
performed (welding body, engine installation etc.)
Ship, vessel, boat
Processing in which all materials used must be classified
(Commodity Nomenclature) differently from the final product
Processing that results in change of at least one of the first
four digits of Commodity Code (Nomenclature)
Criteria of Determination of country of origin: examples
Agreement on Determination of Country of Origin of Goods in
Commonwealth of Independent States dated November 20th, 2009

10
CLS.RU
CLS.RU
Russian Software:
criteria
Foreign Software:
Procurement
permitted if:
• No available software of the necessary class is included in register
of Russian software;
• Software of the needed class is available in the register but does not
meet contractor’s specification.
Restrictions on Foreign Software for State Procurement
Exclusive rights for software owned by:
• Russian commercial organization (direct or indirect foreign
ownership shall be less than 50%)
Less than 30% of yearly software-related revenue shall be paid to:
• foreign organizations and foreigners;
• Russian organizations controlled by foreigners.

11
CLS.RU
CLS.RU
Risks of import substitution
• The SPV along with transferred rights and
assets may fall under the partner’s control
• Disclosure of Know-How, Trade Secrets and
other data or technologies
• Derivative patenting and/or Trade Mark
registration in Russian Federation by a partner

12
CLS.RU
CLS.RU
How to manage risks while taking part in import substitution?
 Detailed review of agreements from Russian
legislation perspective
 Due-diligence of the contracting party
 Establishment of trade secret regime and use
of NDA
 Preventive patenting and TM registration in the
Russian Federation
… and other measures!

13
CLS.RU
CLS.RU
Import-substitution policy
Adverse effect on foreign
businesses
opportunities for investors
and ones ready to localize
or…

14
CLS.RU
CLS.RU
Thank you for your attention!
MSC
SPB
Boutique Office Center “Passage / Italianskaya 17”
17 Italianskaya Street
191186 St. Petersburg, Russia
+7 812 346 7990
FIN
Mannerheimintie 16 A 4
FIN-00100, Helsinki
+358 (0) 20 7346 490
Sadovaya Plaza business center
7 Dolgorukovskaya Street
127006 Moscow, Russia
+7 495 970 1090

CLS_Import_Substitution 14-01-2015 _E_16-9

Recommended

Recommended

More Related Content

Viewers also liked

Viewers also liked (10)

Similar to CLS_Import_Substitution 14-01-2015 _E_16-9

Similar to CLS_Import_Substitution 14-01-2015 _E_16-9 (20)

CLS_Import_Substitution 14-01-2015 _E_16-9