Doing Business In Russia

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What are the Challenges?

Finance and Risk Management

As with any country, before you engage in permanent business in Russia or conduct ad hoc case transactions you should consider financial and other risks.

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UK Export Finance (former Export Credits Guarantee Department) www.ukexportfinance.gov.uk the UK's official export credit agency, provides credit insurance for "heavy duty" capital goods, construction and service sectors where exports are generally on long credit terms (two years or more). They offer two basic services to UK exporters:

  • Insuring UK exporters against non-payment risk by their overseas buyers

  • helping overseas buyers to purchase goods and/or services from UK exporters by guaranteeing bank loans to finance those purchases;

  • insuring UK investors in overseas markets against political risks

UK Export Finance's new products were introduced in 2011 to help UK companies, particularly SMEs to export:

  • Bond Support Scheme  - To help exporters raise tender and contract bonds with UK Export Finance risk sharing with banks

  • Working Capital Scheme - Help exporters raise working capital of £1m and above by UK Export Finance risk sharing with the banks

  • Foreign Exchange Credit Support Scheme - Help exporters manage their foreign exchange exposures

More detailed information on available products, including about the criteria for applying the type of cover is available at UK Export Finance's website.

Details of other credit insurers may be obtained from the Association of British Insurers: www.abi.org.uk

 

Legal Advice

As Russian commercial legislation, and tax legislation in particular, contains provisions which can be interpreted in more than one way, they often overlap or conflict. Early advice on tax and legal issues is highly recommended. Furthermore, Russian accounting practices differ from Western standards.

Moscow and St Petersburg have large offices of major Western accounting, legal and consulting firms.

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Competent smaller firms also operate under Russian or Western management. UK Trade & Investment offices in Russia maintain lists of professional local advisers rendering services in:

  • Documentation and procedures, contract and terms of sale

  • Establishing a legal presence, taxation, currency regulations

  • Importing and exporting procedures, customs duties

  • General legal support, arbitration

UK Trade & Investment shall be happy to provide you with the lists of required service providers (off-the-shelf information is provided free of charge).

 

Certification, Standards

According to Russian Law, about 50% of all products to be sold and/or used in the country require mandatory verification of conformity, i.e. they should be approved by relevant Russian authorities in terms of compliance to national standards. Depending on the nature and application scope of the goods you are planning to ship to Russia, you may need to comply with one or more certification requirements.

More detailed information on Certification can be obtained from the Russian Federal Agency on Technical Regulating and Metrology (Rosstandart) - the national standardization body and supervising authority in the field of technical regulation and metrology;

www.gost.ru/wps/portal/pages.en
Moscow
Tel: +7 (495) 236 03 00
Email: info@gost.ru

As often it is not clear what is required until one actually starts the registration process it is highly recommended that UK exporters task their Russian distributors to deal with product registration issues, or hire one of many companies specialising in the product registration and certification.

UK Trade & Investment shall be happy to provide contact details of companies based in the UK and Russia providing assistance to British companies with obtaining necessary certificates. Please contact us in order to get the list of companies (off-the-shelf information is provided free of charge).

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Due Diligence

Before entering any new market it is vitally important to assess risk using proven business intelligence tools and due diligence checks. This will include an analysis which examines the political, economic, social, technological and legislative environment. In Russia, standards of corporate governance, transparency and intellectual property protection are evolving, but are often lower than in US or EU markets. It is equally important to carry out due diligence and check the integrity of the proposed business partner and examine their relationship to the local business environment.

Consider the accuracy of any claims relating to reputation and business performance, and review the company culture with an analysis of the ethics of key executives. In the extreme this could mean uncovering links to organised crime, corruption or money laundering.

UK Trade & Investment will be happy to provide you with contact details of professional local and international advisers offering Due Diligence services. Please contact us in order to get the list of companies (off-the-shelf information is provided free of charge).

 

Bribery and Corruption

There can be problems of bribery and corruption in Russia. Bribery is illegal. It is an offence for a British national or someone who is ordinarily resident in the UK, a body incorporated in the UK or a Scottish partnership, to bribe anywhere in the world.

In addition, a commercial organisation carrying on a business in the UK can be liable for the conduct of a person who is neither a UK national nor resident in the UK or a body incorporated or formed in the UK. In this case it does not matter whether the acts or omissions which form part of the offence take place in the UK or elsewhere.

Corruption is endemic in Russia and badly damages Russia's economic development. Transparency International listed Russia 143 (out of 183) in its annual Corruption Perceptions Index in 2011. Anti-corruption lobby group "Clean Hands" estimate that the level of bribes is as much as half of Russia's GDP.

Visit the Business Anti-Corruption portal page (www.business-anti-corruption.com), which provides advice and guidance about corruption in foreign markets and some basic but effective procedures you can follow to protect your company from it. Please also check www.ukti.gov.uk to get the updated information on key security and political risks which UK businesses may face when operating in Russia.

 

 

Intellectual Property Rights

For companies whose business involves intellectual property, there are issues of piracy and contraband to consider, particularly for goods such as books, CDs, textiles, cosmetics and spare parts. The UK Intellectual Property Office is the government body responsible for the national framework of intellectual property rights in the UK, comprising patent, designs, trademarks and copyright. If you are thinking about trading internationally, then you should consider registering your intellectual property rights abroad. For more details on intellectual property abroad, please visit the UK Intellectual Property Office website at: www.ipo.gov.uk .

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Source - UKTI

 

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