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BISNIS Home | BISNIS Bulletin Home | 
March/April 2006
The Russian Certification System:
Myths and Reality
by Tatiana Apatovskaya
The Russian certification system can be problematic to navigate but it is not impossible. The difficulties are often overstated and can usually be overcome by good information, preparation, and expert assistance. Here are the four main myths and the corresponding reality.
1. There is no predictability.
The certification procedure might be complex, but it is nonetheless predictable. However, the initial quotation or duration could unexpectedly change if the task initially described by the exporter is not sufficiently precise. For example, the procedure may be costlier or take longer than expected if the product description given to the certification body does not include all technical specifications and so additional testing must be conducted or additional documents obtained. Another example would be when an exporter originally wanted to certify one shipment, and later decides to certify several consecutive shipments.
As a rule, the timeline can be estimated. Usually, state authorities are obliged to give an answer to an external inquiry within one month. The certification process itself can take from a few hours up to several months. Its duration depends on the following factors:
- The type of certificate being sought (e.g., the verification process for a three-year Certificate of Conformity for serial production normally takes longer than a certificate valid for just one shipment);
- The need for testing, and the number and complexity of the tests;
- The number of certificates that must be obtained prior to the targeted permissive document—e.g., to obtain a RosTekhNadzor (formerly GosGorTekhNadzor) Permit to Use it might be necessary to provisionally undergo fire safety, hygienic, explosion-proof, metrological and GOST-R conformity certification;
- The company’s ability to quickly collect supporting documents needed during the certification process;
- Time spent on translation of required documents into Russian;
- The company’s previous experience with Russian certification (i.e., obtaining the permissive document for the very first time commonly lasts longer than the subsequent similar application.
[continued below]
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BISNIS is the U.S. Government's primary market information center for U.S. companies exploring business opportunities in Eurasia. A part of the U.S. Commercial Service, BISNIS disseminates information electronically and through consultations by its staff of trade specialists. Questions or comments? Call 202-482-4655 or toll free 800-872-8723, or email bisnis@ita.doc.gov. |
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As a result, it is possible to speed up the process by means of manipulating the above-mentioned factors.
2. Corruption is pervasive.
Corruption exists. However, the best way to avoid it is by not working through small intermediaries. Usually, large players who are well established in the market and value their reputation do not take or give bribes, and there are legal ways to achieve certification objectives in Russia.
3. It's prohibitively expensive.
The cost is very much dependent on such factors as the complexity of the product, the complexity of the manufacturing process, and the type of permissive document being sought. The expenses for Russian certification will usually consist of the following elements:
- Cost of samples selected for destructive tests;
- Expenses of the packing, storage, freight handling and transportation of samples to the testing laboratory;
- Cost of product tests in accredited laboratory;
- Audit expenses, including travel costs;
- Translation services;
- Labor expenses of the certification body (man-days/daily rate) for processing of the inquiry, verification of documents, issuance of certificate; and
- Overhead expenses.
A company may be offered a discount in case it wishes to obtain a relatively large number of certificates or if it is applying for the same service repeatedly. Such cost reduction is due to decreasing overhead, number of required samples, and number of tests.
Often, the high price of certification results from an overly long chain of market intermediaries. If you work directly with the certification body accredited by Rostekhregulirovaniye (the former Gosstandart) and not through numerous consultants, the costs will be minimized.
Also, like an unscrupulous dentist who may tell you that your teeth need treatment although there are no cavities present, some certification bodies would tell the exporter that he definitely needs a certificate of conformity, even if his product is not on the mandatory list, just for the sake of earning money. However, this is easy to check, since this list, regularly updated, is available to the public and the procedure is quite clear.
Some verification procedures are in fact expensive in Russia. For example, microbiological tests or registration of food additives, but in the United States and Europe analogous tests are even more costly.
To make certification cost-effective, we recommend correlating the type of certificate with anticipated volume of exports and range of exported goods. Thus, if an exporter is planning to regularly ship goods to Russia, and the range is quite wide, it might be wiser to opt for a serial certificate valid for a few years. Although it will require higher single payment versus shipment certification, in the long-term such a scheme can save both time and money. In fact, a whole product line will have to be sampled and tested in the framework of a shipment certification, whereas only a limited number of samples will be tested for serial certification since the production audit will certify conformity of the rest.
4. It's excessively bureaucratic.
Many procedures in the Russian certification system were copied from the West (especially the EU), and manufacturers face similar requirements for operation in their local market. On the other hand, it is true that for some products, there are additional requirements for verifying the safety of products in Russia. This is due in part to specific Russian climatic conditions and in part to the historical background (many Russian standards have not been reviewed since Soviet times). For example, in Russia, testing of toys includes verification of formaldehyde and phenol content, although this is not checked in the EU; transformers have to be tested at -40°C temperature, i.e., in twice as cold conditions as in Europe; steel pipes might be subject to 100 percent testing as opposed to 10-20 percent sampling in Europe.
Nevertheless, the availability of an international certificate might facilitate the procedure of obtaining the appropriate Russian approvals. For example, in case the equipment is certified according to ATEX, UL, FM, or CSA, the verification process to obtain Russian explosion-proof certificate can be limited to document review without any additional laboratory testing.
Tatiana Apatovskaya is marketing manager for SGS Russian/CIS Certification (www.sgs.com), a service division of the SGS Group, which has offices and affiliates in about 140 countries. The core activity of SGS Russian/CIS Certification is to help companies to obtain certificates and other permissive documents required by local regulations and/or local customers to import goods into Russia and other CIS countries.
For a list of U.S.-based companies providing certification services for exports to Eurasian countries, visit BISNIS online at http://bisnis.doc.gov/bisnis/bisdoc/0603CertifProviderList.htm
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DO’s and DON’Ts of Product Certification in Russia
Do
provide exhaustive information about the product to be certified. Spend enough time defining jointly with your certification body the product code according to the Russian classification, which is important to specify the applicable Russian safety requirements.
Do
ask for a quotation for certification services well in advance of signing the contract and negotiating the contract price in order to be able to include the costs in the price to be paid by the customer. If your company intends to take part in a tender for a project in Russia, plan ahead and ask for a preliminary quotation for certification from a professional body so as to include the correct cost in the bid.
Do
raise issues related to certification expenses when negotiating sales contracts with Russian partners in order to determine which party will bear the costs, procedures, and responsibilities. In some cases, exporter and importer alike are able to carry out certification and obtain proper permissive documents. Exporters should bear in mind that in case the certificate is issued under the name of the importer, the latter will become their exclusive distributor in the Russian market during the whole validity term of the certificate. Therefore, those exporters who wish to keep control over their Russian marketing strategy and preserve their independence from any local partner should take care of their products’ certification themselves.
Do
ask for references from the relevant Russian certification body. It is important to have a qualified and trustworthy certification agent.
Don’t
employ illegal schemes or try to circumvent the mandatory requirements of your export market.
Don’t
opt for offers of cheap solutions for getting a certificate—using a fake or invalid certification can affect your future business in Russia. For example, be on guard if a certification agent offers to include a wide range of products in one certificate, especially if the products are not quite homogeneous (like knitted wear and underwear). Our experience shows that the customs authorities will stop a whole shipment because of an illegal certificate.
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View from the Bishkek Amcham
The BISNIS Bulletin interviewed David Larson, executive director of the American Chamber of Commerce in Bishkek (www.amcham.kg), about the business climate and opportunities in the Kyrgyz Republic.
How has the Bishkek Amcham shaped up since its first meeting in January 2005?
The first AmCham meeting was held in January 2005, but two months later the Kyrgyz Republic underwent a revolution and the AmCham was shelved. In July 2005, I was a teaching an entrepreneurship class at the American University in Bishkek when the U.S. Embassy approached me about working at the AmCham, which had about six paying members at the time. Now we have a respectable office, five employees (three of them volunteers), and 46 members. And to the best of my knowledge, we are still the poorest CIS country currently hosting an AmCham.
Our stated purpose is to foster an environment that respects transparent wealth creation. While we would like to spend more time delivering business services to our members, most of our energy goes into resolving individual commercial disputes with the Kyrgyz government.
How has the business environment changed since the Tulip Revolution?
The revolution has had both positive and negative effects on the business environment in the Kyrgyz Republic. First, the government under the new president is more accountable to the people. He clearly remembers last year’s revolution, and knows that the people of this country have less patience for corruption than they did before. We feel that the president recognizes the need to make greater strides to work with the international business community and to attract more foreign investment than did his predecessor.
Unfortunately, foreign investors also remember last year’s revolution and many are concerned about political instability in the country. That said, I think it’s important to remember that the revolution was an internal matter between the citizens of the Kyrgyz Republic and their government. American investments were not in any way looked at as specific targets.
Another indirect effect of the revolution is that, for better or worse, it put the Kyrgyz Republic on the map. Such a small, isolated country is easy to overlook, but when its citizens stand up and demand a change in governance like they did last March, I think the western world hears that and can relate to that desire.
What are the most promising opportunities for U.S. companies in the Kyrgyz Republic?
In the mining community they have a saying: “There’s no such thing as an unemployed geologist in the Kyrgyz Republic.” Despite the revolution, investment in the mining sector increased by 17 percent in 2005. That’s because, as any geologist in this country will tell you, the Tien Shen mountain range remains the last great, unexplored gold belt in the world.
Besides being visually stunning and attracting thousands of tourists annually, this tremendous mountain range also has the snowmelt to create an estimated potential of 55,000 GWh/year of hydropower. Currently, only 3 GWh/year of that potential is being used. And with ready markets in bordering China and South Asia, the export potential is there too.
As Kazakhstan’s oil boom continues and the country’s wealth grows, this northern neighbor will demand ever greater quantities of Kyrgyz agricultural and dairy products. Food processing companies in the Kyrgyz Republic who are taking advantage of low labor costs and duty free access to all CIS countries are seeing the greatest benefits from this.
Looking domestically, some of the country’s best opportunities are in the residential and commercial real estate markets. Housing prices have risen 100 percent in the last 18 months. Mortgage lending and construction are on the cusp of a tremendous boom.
In Kyrgyzstan, “American” is a synonym for good. There is tremendous demand for all things American. Whoever figures out how to import Ziploc bags and Oreo cookies here is going to do very well. These types of low-cost consumer goods meet with spectacular demand, which is why my office has had several recent meetings with major U.S. exporters looking to tap this market.
On a larger scale, the government is currently planning to privatize 78 percent of state-owned telecom provider KyrgyzTelecom. We expect that the bidding process for this state jewel will go mostly unnoticed in the West and someone is going to get a really great deal. For more information on opportunities here, and for additional help investing in the Kyrgyz Republic please check out our website at www.amcham.kg.
What are the major impediments for foreign companies doing business there and main changes needed to improve the business climate?
The Kyrgyz Republic is still a tricky place to do business. Most Western investors find it best to enter the market with the help of a local partner. For this reason, we will soon add a feature to our website that will allow Westerners to find a local partner and vice versa.
As far as the regulatory environment goes, unpredictability in the legal system is the complaint I hear most often from my members. Sometimes contracts are not honored the way they might be in the West. Other times, court decisions might seem arbitrary.
The truth is that most problems I hear about involve low-level corruption. Whether you’re dealing with customs officers, judges, tax inspectors, or university teachers, the paying of small “gifts” is a common practice in many post-Soviet countries. However, it is not something that foreigners have to give in to. In fact, one of the features of our website I’m most proud of is a program called, “Corruption Catcher,” which allows people to fight against acts of low-level corruption.
Of course, the best way to improve the business environment is to enact legislation making it simpler for businesses to operate. For example, by presidential decree, the Kyrgyz government is currently undergoing a process of streamlining the number of agencies that are allowed to carry out individual business inspections. That’s a start, and in the future we hope to see similar decrees that streamline licensing, allow land ownership rights to foreign investors, reform pledge law, permit visa-free entry for Westerners, and adopt a clear law on normative acts.
For more information on the Kyrgyz Republic, visit BISNIS online at www.bisnis.doc.gov/kyrgyzstan. |
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BISNIS Hosts
Kyrgyz Ambassador to the United States
BISNIS hosted the Ambassador of the Kyrgyz Republic, the Honorable Zamira Sydykova, on March 14, 2006, to discuss the business and political climate in the Kyrgyz Republic. Dan Harris, the U.S. Commercial Service’s Deputy Assistant Secretary for International Operations, introduced the Ambassador. In addition, Roland Clarke, Chief Economist |
for Kyrgyzstan at the World Bank, gave his perspective on the progress of reforms in the country and next steps that the government should take.
More than 25 representatives from private companies, multilateral institutions, and the press attended the briefing. At the end of the presentation, Ambassador Sydykova participated in a 30-minute question and answer session addressing challenging issues such as corruption, incentives for foreign investors, and economic reform.
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Ambassador Zamira Sydykova |
The Kyrgyz Republic is a key strategic ally of the United States. Kyrgyzstan is the only WTO member in Central Asia, and the Manas airbase outside the capital city Bishkek is a hub for military activities related to Afghanistan, as well as an entry point for U.S. companies expanding into the Kyrgyz market.
To visit the website of the Kyrgyz Embassy, click here.
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U.S. Technical Assistance to the Kyrgyz Republic
During U.S. Department of Commerce (DOC) Secretary Carlos Gutierrez’s August 2005 trip to the Kyrgyz Republic, Prime Minister Felix Kulov requested assistance to help modernize the country’s business environment to make it more attractive to potential foreign investors. The U.S. Government has decided to grant the Prime Minister’s request by providing a “Business Advisor” in the form of a retired Chief Executive Officer from a large U.S. corporation, who would volunteer his time to serve as a non-resident advisor. Funding for this project is provided by the State Department. DOC’s Commercial Law Development Program (CLDP) will manage the program in close coordination with the International Trade Administration’s Office of Russia, Ukraine, and Eurasia. The Commerce Business Advisor will work in coordination with a Resident Economic Growth Advisor that is being operated through the Treasury Department’s Office of Technical Assistance.
Secretary Gutierrez has personally selected Mr. Richard J. “Dick” Stegemeier, former CEO of UNOCAL, to serve as Business Advisor. Mr. Stegemeier’s objectives will be the following: (1) To assist the Kyrgyz government in developing 2-3 viable commercial projects in niche sectors that could provide a source for trade or potential foreign investment. (2) To provide practical advice from a U.S. company perspective on how to improve the business environment and the conditions for trade and investment. (3) To assist the U.S. government, particularly, the Commerce Department and Embassy Bishkek, in designing initiatives and activities that will support U.S. commercial interests in the Kyrgyz Republic, including a trade and investment event in the United States highlighting business opportunities in the Kyrgyz Republic. |
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Organizer: Eventica
www.eventica.co.uk/events/ref/2006
4th Annual Financial Markets Conference:
Portfolio and Direct Investment in Russia and Ukraine
May 4, 2006
Boston, Mass.
Organizer: U.S. Russian Chamber of Commerce of New England
www.usrccne.org
2006 World Trade Day Conference
May 11, 2006
St. Louis, Mo.
Organizers: Missouri District Export Council and the Saint Louis Regional International Partnership
www.modec.org
World Russian Forum
May 16-18, 2006
Washington, DC
Organizer: American University in Moscow and Kontinent USA Media
www.russiahouse.org/wrf
Annual American Business Breakfast at EBRD Meeting
May 22, 2006
London, UK
U.S. participants in the 2006 EBRD Business Forum will have an opportunity to meet up with EBRD bankers in the Annual American Business Breakfast. This breakfast is organized by the Advocacy Center, U.S. Commercial Liaison Office to the EBRD and by the Office of the U.S. Executive Director. Key speakers will include Acting First Vice President and Vice President Finance Steven Kaempfer and U.S. Executive Director Mark Sullivan, as well as senior Department of Treasury Officials/Head of U.S. Delegation. At this breakfast, U.S. firms will have an opportunity to learn about U.S. participation in EBRD activities and hear from and interact with senior EBRD officials and members of the official U.S. delegation.
Reservations are on a first come basis, please RSVP to:
Gurjit Bassi at Gurjit.Bassi@mail.doc.gov.
2nd Annual Ukrainian Investment Summit
May 22–24, 2006
London, UK
Organizer: Adam Smith Conferences
www.adamsmithconferences.com
Emerging Markets Private Equity Conference 2006
May 29-30, 2006
Moscow, Russia
Organizers: International Council of Institutional Investors, Pacific Corporate Group, Russian Chamber of Commerce and Industry, and Breeze Ventures
www.empec.org
Ohio-Eurasia Innovation and Investment Forum
June 6-8, 2006
Cleveland, Ohio
Organizers: Ohio Department of Development (ODOD), 5iTech, LLC, U.S. Civilian Research & Development Foundation (CRDF), Russian Foundation for Assistance for Small Innovative Enterprises (FASIE) and Ukrainian VC firm TECHINVEST
www.innovationforums.org
2nd Annual Event
Central Asia Trade & Export Finance Forum 2006
June 6-7, 2006
Almaty, Kazakhstan
Organizer: Exporta Publishing and Events Ltd.
www.exportagroup.com
Electricity Beyond Borders:
A Central Asia Power Sector Forum
June 12-14, 2006
Istanbul, Turkey
Sponsored by: U.S. Trade and Development Agency
The Forum will highlight project opportunities and policy issues that surround power development in Central Asia, including the transmission of power from the power-surplus countries of Kazakhstan, Tajikistan, and the Kyrgyz Republic to the power-deficit countries of Afghanistan and Pakistan. Delegates from each of the countries will participate in the Forum.
www.trademeetings.com
Ukrainian FMCG and Retail Forum
June 14–16, 2006
Kyiv, Ukraine
Organizer: Adam Smith Conferences
www.adamsmithconferences.com
Emerging Technologies and Entrepreneurship Conference
June 15-16, 2006
Moscow, Russia
Organizer: RUSSEE
The ETEC(R) 2006 is a forum for sharing best technology entrepreneurship and commercialization practices, high caliber successful technology entrepreneurs providing advice to their peers, strengthening the Russia/CIS, Silicon Valley/Rt 128 connection, and showcasing the breadth of emerging technologies, a sneak preview of success in 3-5
years.
www.etecr.ru
Interop Moscow
June 21-23, 2006
Moscow, Russia
Organizer: MediaLive International
A conference plus expo, Interop Moscow will give Russian technology business buyers the ability to hear from worldwide technology leaders, learn about new technology products, and source vendors to buy from. Key education themes include mobility and wireless technologies, security, open source, VoIP, and data management.
www.interop.ru
Business Opportunities in Russia Seminar
June 22, 2006
Harrisburg, Penn.
Organizer: Mid-Atlantic - Russia Business Council
www.ma-rbc.org |
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STCU-NATO Conference: From Science to Business
October 11-12, 2006 •
Kiev, Ukraine
The continuing excellence of scientific research in Ukraine and other Eurasian countries is well known, and joint research projects can strengthen your company’s competitiveness, but often it is difficult to identify promising contacts and research partners.
The Science and Technology Center of Ukraine’s (STCU) two-day international conference, co-sponsored by North Atlantic Treaty Organization (NATO), can help. The conference will introduce technology partnership opportunities to Western companies, investors, and collaborators in the fields of:
- Medical Instrumentation and Biomedical Technologies,
- New Materials and Nanotechnologies,
- Aerospace,
- Renewable Energy and Conservation, and
- Nuclear Energy and Safety.
More than a dozen leading institutes from Ukraine and other Eurasian countries will make short technical presentations. On the margins of the conference, technology posters will be displayed, and researchers will be available continuously for matchmaking meetings and informal discussions. U.S. and other western participants will be able to set up and conduct matchmaking discussions with leading scientists and institutes. Institute visits can also be arranged.
STCU is an intergovernmental organization dedicated to redirecting former weapons scientists toward sustainable civilian employment. The United States, whose participation in STCU is managed by the U.S. Department of State, has helped set up this organization as part of its non-proliferation strategy.
Working via STCU, a U.S. company’s project will be administered by experienced staff. Payments to the scientists are provided tax-free, while customs duties are eliminated for transfer of equipment and materials to the institutes. STCU provides experienced project management, maintains financial controls and auditing services, and provides guidance on the protection of proprietary information and intellectual property. The most important benefit of working with the STCU is access to some of the world’s greatest scientists. Visit www.stcu.int for more information.
Success Stories from U.S.-SCTU Joint R&D Projects
Sigor Corporation (www.sigor.us) has developed techniques to dramatically increase oil, gas, and irrigation well yields compared to existing acid or hydro fracturing treatments.
General Electric (www.ge.com) has developed techniques to deposit specialized refractory materials, alloys, ceramics, and composites for high temperature components in gas turbines.
Veeco Instruments (www.veeco.com) has developed vacuum arc sources of carbon plasma with graphite cathodes and magneto-electric filters for cleansing plasma of macro-particles of graphite for protective, wear-resistant, and decorative machine building coatings.
The organizers welcome company matchmaking requests. For matchmaking sessions and other information on the conference please contact Aija Straumanis at (202) 736-7694 or straumanisa@state.gov. For registration to the conference please contact Tatiana Teryakhina at tatiana.teryakhina@STCU.int. For technology information, contact Vic Korsun at (215) 635-4234 or vickorsun@msn.com.
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USDA Credit Guarantees for Agricultural Commodities Exports
The U.S. Department of Agriculture (USDA) made available $200 million in credit guarantees for sales of U.S. agricultural commodities to Armenia, Azerbaijan, Kazakhstan, Russia, and Ukraine under the Commodity Credit Corporation's Export Credit Guarantee Program (GSM-102) for fiscal year 2006. As of March 7, 2006, the Eurasia Region program has been responsible for $109.5 million in agricultural exports to the region, and $90.5 million remains to be used.
The GSM-102 program helps ensure that credit is available to finance commercial exports of U.S. agricultural products to developing countries, while providing competitive credit terms in these countries. Under this program, the Commodity Credit Corporation (CCC) reduces the financial risk to lenders by guaranteeing payments due from approved foreign banks to exporters or financial institutions in the United States.
Exporters may apply for credit guarantees on a first-come, first-served basis. These guarantees are to cover sales of all commodities to Armenia, Azerbaijan, Kazakhstan, and Ukraine and all commodities excluding poultry meat and processed poultry meat products to Russia. The latest commodity list is available at www.fas.usda.gov/excredits/gsmcommodities.html.
The list of approved foreign banks under the Eurasia Region program (11 banks from Ukraine and Kazakhstan plus 25 banks from the Russian Federation) can be found at www.fas.usda.gov/excredits/foreignbanks.html#EURASIA%20REGION and
www.fas.usda.gov/excredits/foreignbanks.html#RUSSIA.
Major U.S. bank participants under the Eurasia region are: CoBank, Colo.; Banco Bilbao Vizcaya Argentaria (BBVA), N.Y. Branch; The Bank of New York, N.Y.; Deutsche Bank, N.Y. Branch; and Rabobank Nederland, N.Y. Branch. Other U.S. banks that are approved and can be used as Assignees are listed at www.fas.usda.gov/excredits/USbanks.html.
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BISNIS is the U.S. government's primary market information center for U.S. companies
exploring business opportunities in Eurasia.
A part of the Department of Commerce's U.S. Commercial Service, BISNIS disseminates information electronically and through consultations with its staff of trade specialists.
For more information, call: 202-482-4655 or email: bisnis@ita.doc.gov.
To call BISNIS toll-free, dial 1-800-USA-TRADE (872-8723), press 2 and then press 8
or visit www.bisnis.doc.gov (English) www.bisnis-eurasia.org (Russian)
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Director Tanya Shuster
tanya_shuster@ita.doc.gov
Deputy Director Philip de Leon
philip_de_leon@ita.doc.gov
Managing Editor Ellen House
ellen_house@ita.doc.gov
Contributors
Tatiana Apatovskaya, Ellen House, David Larson, Danica Starks
Articles by non-U.S. government employees express the views of the authors and
should not be construed as a statement of U.S. government policy.
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