Duty’s best friends – Kommersant

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Jewelery companies, faced with a reduction in demand for their products during the crisis, are trying to achieve zero import duties on polished diamonds up to 0.3 carats. This, in their opinion, should reduce the cost of jewelry. ALROSA, a large diamond producer, supports the idea, as small stones are not cut within the country due to low profitability. The Ministry of Finance of the Russian Federation has already tried to zero import duties for the entire EAEU for two years, but Armenia, which is developing its production, opposed it. However, the production volumes in the republic do not cover the needs of Russian jewelers, who have to buy such products mainly in India.

Kommersant has obtained a letter from the Association of Jewelers to the Ministry of Finance with a proposal to cancel customs duties on the import of small cut diamonds up to 0.3 carats into Russia. Now the amount of duty for such products is 10-15% of the customs value of goods, and India is its main exporter to Russia, Vadim Serov, General Director of the Association of Jewelers, explains. The Ministry of Finance did not respond to Kommersant’s request.

According to the Association of Jewelers, diamonds up to 0.3 carats are used in 90% of jewelry with precious inserts. At the same time, small diamonds are not cut in Russia due to low profitability, Mr. Serov notes. Added to this is the lack of specialized specialists, says Adamas CEO Dmitry Baranov.

ALROSA, which mines more than 97% of diamonds in the Russian Federation, also indicates that the Russian cutting has historically specialized in larger rough. The company considers it expedient to temporarily zero duties on imports of small polished diamonds.

Back in 2021, the Ministry of Finance of the Russian Federation proposed to the Eurasian Economic Commission to zero for two years the rates for imports into the EAEU, including diamonds less than 0.3 carats. According to Vladimir Zboykov, executive director of the Guild of Jewelers of Russia, then Armenia opposed it, arguing that the republic needs to develop its diamond-cutting enterprises. But, the expert notes, small volumes of diamond production in Armenia do not cover the needs of Russian jewelers.

The share of diamond jewelry in Sokolov’s total sales is 95% in physical terms. The company noticeably uses diamonds smaller than 0.1 carats in its products, says Alina Kolpakova, head of the network’s analytical center. In the assortment of Adamas in the diamond category, the share of products weighing up to 0.3 carats is about 90%.

It is no coincidence that jewelry market players are now trying to resume dialogue with the authorities on zeroing import duties on small diamonds. Jewelry retail has not yet managed to recover from a sharp decline in demand in the spring of 2022. In general, according to the results of 2022, this market decreased by 9%, to 301 billion rubles, Sokolov calculated. Among the reasons, experts previously called the rise in the cost of jewelry due to the increase in the cost of raw materials and metal. According to Rosstat, in June 2023, the average retail prices for jewelry increased by 10% compared to December 2022. Experts also noted that due to rising inflation and the depreciation of the ruble, by the end of 2023, such jewelry will rise in price by another 10-12%.

The abolition of the import duty on small-cut diamonds will allow jewelry market players to reduce costs and increase their competitiveness, including in the foreign market, the Association of Professional Participants in the Precious Metals Market believes. This will also have a positive impact on the dynamics of retail prices within the country, Alina Kolpakova believes. The cost of inserts of small sizes in the price of jewelry is about 15-20%, says Dmitry Baranov. With a reduction in their cost by 10%, according to him, the final prices for jewelry are reduced by 1.5-2%.

Alina Savitskaya, Evgeny Zainullin, Anatoly Kostyrev

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