The issue of labeling and traceability of goods was considered during the government session chaired by Prime Minister Askar Mamin. Kazakhstan, within the framework of the EAEU integration processes, has introduced mandatory labeling of a number of products. Minister of Trade and Integration Bakhyt Sultanov and Chair of the Board of JSC Kazakhtelecom Kuanyshbek Yessekeyev reported on the main directions of work on the introduction of the system of labeling and traceability of goods in the country.
One of the main directions of Eurasian integration is the implementation of a coordinated policy in the field of ensuring free and legal circulation of goods, balanced trade and fair competition, Bakhyt Sultanov noted in his speech.
In 2019, the Republic of Kazakhstan ratified the Agreement on the labeling of goods with identification means on the territory of the Eurasian Economic Union.
As part of the implementation of the norms of the Agreement, Kazakhstan joined the key decisions of the Eurasian Economic Commission on the labeling of fur products, shoes, perfumes, tires and tires. Through an open three-stage tender, a single operator of labeling and traceability of goods was determined.
According to the minister, to date, following the implementation of two-year pilot projects in our country, mandatory labeling of products made from natural fur has been introduced since March 1, 2019, and tobacco products — since Oct. 1, 2020.
Mandatory labeling of fur products made it possible to identify violators of tax legislation, taxpayers who understated income in order to apply the maximum threshold value for a special tax regime for preferential taxation. As a result, the number of entities operating on the basis of a patent has decreased 13 times.
As Sultanov noted, compared to the previous year, in 2018 the number of importers who filed a declaration for goods increased by 30%, the growth of customs duties and import taxes increased by 40%. The growth of receipts from domestic taxes on this activity increased by 1.5 times.
“If you look at the experience of other countries, the Russian Federation has shown the effect of ‘whitening’ of the market in a number of product categories,” said Sultanov.
If earlier the volume of the Russian footwear market was estimated at 330 million pairs of shoes, then after the introduction of the marking it turned out that this forecast was significantly underestimated.
As a result, more than 2 billion codes for marking shoes have already been issued in the system of the Russian operator and the growth continues.
Over the past period, the labeling of tobacco has made it possible to identify 30% more tobacco manufacturers on the market, and the turnover of substandard drugs has decreased by 2.5 times.
“According to international practice, labeling of goods is one of the most effective tools aimed at reducing the shadow turnover of goods,” the minister noted.
In his opinion, the experience of other countries demonstrates the positive effects of the introduction of labeling. For example, in Brazil and Turkey, tax collection in the segment of alcoholic and non-alcoholic beverages increased by 20% and 142%, respectively.
In the European Union, the digital traceability system has reduced the turnover of contraband products by 30% in 5 years.
In the United States of America, drug labeling has accelerated the recall process from 3 days to 10 seconds.
“In the commodity groups of 6 industries, for which the introduction of labeling is envisaged in the Republic of Kazakhstan, the volume of the shadow market, according to expert examinations, reaches up to 63%,” Sultanov stated.
It is assumed that with the introduction of the labeling of these commodity groups, the volume of legal trade turnover will amount to 337 billion tenge, and budget revenues of 58 billion tenge.
According to the minister, the introduction of labeling and traceability of the aforementioned goods will undoubtedly have a positive effect on the economy of our country.
For example, it will stimulate the development of fair competition and increase the share of the legal market and production volume up to 30-50%.
The cost and prices of the current value of goods will be reduced by 5-10%. In addition, due to new jobs, it is expected to provide employment for 2-3 thousand people.
The effectiveness of the integrated system for combating illegal trade in goods will increase.
According to the Ministry of Finance, since 2016, to date, counterfeit goods have been identified through control and supervision in the amount of more than 30 billion tenge.
“Therefore, we can say that instead of costly verification measures, an effective system of cleaning the market will be introduced. It is expected that the introduction of an integrated system of labeling and traceability of goods will have a cumulative effect on the budget within 5 years in the amount of 2.6 trillion tenge,’' said Sultanov.
According to the minister, the labeling and traceability of goods ensures the prevention of the circulation of goods that have a negative impact on the health of the population, the leveling of conditions for business, guarantees the quality of goods and economic security, and also increases tax revenues to the budget.
The system will ensure the construction of a state program that provides specific goals for business development. The state will receive additional revenues and ensure their return in the form of support within the framework of the program of industrial and innovative development of the Republic of Kazakhstan.
The ministry is faced with the task of analyzing product groups to supplement the list of goods subject to labeling and work on integrating information systems of state bodies, as well as member countries of the Eurasian Economic Union.
Sultanov proposed to define measures of state support for the acquisition of marking and identification equipment, as well as localization of their production and packaging materials through the Economy of Simple Things. And the minister proposed to assign control over the circulation and traceability of marked goods to the fiscal authorities.
Chair of the Board of Kazakhtelecom JSC Kuanyshbek Yessekeyev, in turn, noted that if from Oct. 1, 2020, mandatory labeling of tobacco products (cigarettes) was introduced, then the remaining types of tobacco products (cigars, cigarillos, sticks, etc.) will be marked from April 1, 2021.
According to Yessekeyev, since the introduction of mandatory labeling of cigarettes (from Oct 1, 2020), 1,000 participants in the turnover have been registered in the information system for labeling and traceability of goods, and 283 million codes have been issued, including 146 million codes. Today, 99.9% of excisable tobacco products are labeled.
In addition, to date, the Single Operator is actively working to provide proposals for equipping retail outlets with 2D scanners to ensure the sale of labeled goods.
More than 34,000 sold since Jan. 1, 2020. Two scanners or 42% of 80,000 outlets are ready for the circulation of labeled cigarettes.
The retirement of brand codes will be made through the Fiscal Data Operator of the KKM.
The sale of the remains of unmarked tobacco products is provided for during the year until Oct. 1, 2021.
Also, to date, the Single Operator, together with authorized state bodies, is conducting pilot projects in four product groups:
- alcoholic beverages — the pilot project was launched on June 1, 2019. As part of the pilot project, the entire chain has been tested, from applying a code to withdrawing goods from circulation. The planned date for the introduction of mandatory labeling for alcoholic beverages is April 1, 2021.
- footwear — the pilot project started on July 30, 2019. The process of applying the code has been tested in the framework of the pilot project The planned date for the introduction of mandatory labeling is July 1, 2021.
- medicines — the pilot project started on Sep. 9, 2019. By the end of 2020, testing will be carried out at SK Pharmacy LLP using labeling technology. The planned date for the introduction of mandatory labeling of medicines is Jan. 1, 2022.
- dairy products — a pilot project was launched on Oct. 1, 2020. Currently, the marking of exports in the Russian Federation is being prepared. The planned date for the introduction of mandatory labeling is Jan. 1, 2022.
In the Law of the Republic of Kazakhstan "On the Regulation of Trading Activities" and in PPRK 672 of Sep. 10, the Government defines the requirements and obligations of the operator.
In this connection, Kazakhtelecom JSC focuses on the key aspects of the Operator:
1) Generation of codes for marking goods for business.
2) Providing traceability to the state.
3) Interaction with the integrated system of the EEC and operators of the EAEU countries
4) Providing a digital passport of goods for market participants (National catalog).
5) Development of a free mobile application Naqty Sauda, for the possibility of accepting and withdrawing marked goods from circulation, for participants who do not have the opportunity to purchase a 2D scanner.
6) Development of a free mobile application Naqty Onim as a public control tool.
7) Creation of a round-the-clock contact center to service users of IS MPT.
“The introduction of a product labeling system brings benefits to the state economy, business and society. Among its main advantages, one can single out a decrease in the shadow market by 50% until 2025, which will lead to additional budget revenues by 2025 in the amount of 58.4 billion tenge, according to our calculations,” said Yessekeyev.
Digital labeling will enable businesses to increase productivity, improve logistics schemes, increase market share and ultimately increase revenue.
So, the increase in revenue of legal business until 2025, according to Yessekeyev, will amount to 336.5 billion tenge.
In addition, the introduction of the labeling system also presupposes obtaining an effect for the economy as a whole, in the form of creating an ecosystem for the IT market, developing services for packaging manufacturers, as well as expanding the market for equipment manufacturers.
