DHL, FedEx suspend shipments to Russian consumers, cross-border sales to continue

UPS, another courier, has also revealed plans to stop shipments to Russian consumers. As a result, several dozen foreign internet stores have been affected. The initiative follows the recent changes in Russian customs clearance practices imposed in two Moscow airports since the beginning of January – changes which have crippled their efficiency.

While not new, certain documentation requirements now affecting efficiency adversely had been imposed only selectively in the past, in cases where the customs officer suspected that an individual parcel was improperly valued. Based on the experience of Interstice Consulting, the requirements had had an impact on about 5% of the parcels passing through the clearance process.

Other customs points have not been affected so far, as confirmed by Sergey Podkin of Boxberry, a Russian shipment provider. Podkin’s company, along with CDEK, Pony Express and SPSR, continues operating international shipments via these or other customs points.

Also, cross-border sales operator Dostami.ru (formerly Bay.ru), which has its own delivery system to Russia, has zero disruption, CEO Aaron Block has told EWDN. The Russian Post system and its express delivery subsidiary EMS also confirmed that their operations are not affected either. These organizations, which benefit from the less demanding customs requirements of the Universal Postal Union, ship more than 95% of e-commerce parcels to Russia, a study by East-West Digital News reveals.

However, changes in customs duty exemption rules might seriously affect cross-border sales. Currently, Russian internet users enjoy tax-free shopping from foreign stores as long as their purchases do not exceed a value of EUR 1,000 or a weight of 31 kg per person and per month. Above this limit, purchases are subject to a 30% tax.

Combined with the Russian government’s concern about losing tax revenues, active lobbying from domestic retailers is likely to put an end to this generous tax exemption regime.

Among the fiercest opponents of “duty-free e-commerce” have been Enter.ru and KupiVIP.ru, two members of AKIT, an industry association created in 2012. (KupiVIP, however, has recently launched its own cross-border offers.)

AKIT and the other lobbyists seem to be close to their goal, with the government openly considering lowering the tax exemption level to EUR 150 or 200. Changing the rules, however, requires the agreement of the other member states of the Customs Union, which includes Russia, Belorussia, Kazakhstan and Armenia.

Such measures would certainly not kill cross-border sales, since the average order value is below this level in many product categories. While cheap parcels from Chinese retailers would remain practically unaffected, shipping from Western retailers in the fashion segment, for instance, would likely suffer.

The effect on Russia’s tax revenues and on the domestic e-commerce market – whose volume reached USD 16 billion in 2013 – remains unpredictable. Russians buy from foreign e-commerce stores not only because of price differences (which are partially offset by shipping fees), but also to access goods that are unavailable on the local market.

This article first appeared in East-West Digital News, the international online resource on Russian digital industries.

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