The jewelry community arranged into a group of public organizations (Russian Jewelers’ Guild, Jewelry Trade Club an others) under the auspices of their profile facilitator, the Ministry of Finance of the Russian Federation, hopes to secure support in solving its front-burner problems under the new President and the renewed Federal Government. The major ones of these problems have been already formulated in the Bill “On Introducing Amendments to the Federal Law ‘On Precious Metals and Gems.’”
In the first place, it deals with changing the jewelry assay and hallmarking procedure. It is assumed that the state monopoly in this field will be reduced to reasonable limits – the Bill cancels the obligatory hallmarking for jewelry items made of precious metals and designated for export, as well as for silver items of up to 3 grams. The situation with light-weight silver is plain as daylight – there is no reason to hallmark these items worth less than 100 roubles. As for export, it should be made clear that the Russian state hallmark is not recognized in any country of the world. In the countries practicing obligatory hallmarking of gold items (as for instance, Great Britain and France) our jewelry items are anyway subject to repeated hallmarking by a special import stamp. Where the hallmarking is not obligatory (for example, in the U.S.A.), the Russian hallmark hinders trade business, in particular due to the discriminating Jackson-Vanik Law (passed vs. the USSR and applicable to Russia until now). Russian export items due to their hallmark cannot be part of “chain” business patterns under the existing division of labour in the world.
In the second place, the proposed motions envisage revised amendments to Articles 20 and 22 of the Federal Law “On Precious Metals and Gems.” These are aimed at preserving the obligatory affinage limit only for precious metals extracted from mineral raw materials and concomitant semi products and waste. Utilization of jewelry production waste will be exclusively the province of its owner, i.e. jewelry waste may be used by the owner’s production facility or transferred for processing to a processing enterprise or an affinage factory on a contract basis to be subsequently used by the owner’s enterprise.
The above Bill is submitted to the State Duma and will possibly be debated by the end of the current year.
Besides, certain problems have not so far been legally formulated and are being heatedly discussed.
Tolling, i.e. processing precious metals into jewelry outside the customs territory of the Russian Federation, arouses the greatest emotional outburst. It is common knowledge that gold is equally priced everywhere. However, the cost of labour force is different. If a businessperson deems it profitable to export precious metal to Turkey or China, he or she will do it. But what happens then? The government permits to export and process Russian gold into jewelry outside its customs area - abroad. This pattern makes it possible for importers to pay gold for imported products. The cost of raw materials is deduced from the tax base. If an importing company would pay “hard” cash for these products, it would have to pay both the customs duty and VAT. This would minimally amount to 20-25% of the value of gold shipped for processing. In other words, the cost of jewelry would eventually have been increased by one fourth. To put it otherwise, the import produced and brought in observing all the regulations would have a price which could be fairly competed by domestic manufacturers. Instead, the Russian market is being filled with cheap imported products, while new jobs are being created in China or Turkey.
Nobody is making any products out of exported gold. It is just recalculated into jewelry items, which are then brought back without paying any duties or taxes, as has been pointed out above, which results in complete destruction of domestic manufacturers.
As an alternative, the Russian Jewelers’ Guild proposes to set the customs duties equal to regular import to diminish the economic attractiveness of tolling. However, the jewelry community has not so far consolidated around this solution.
Another problem is connected with too much red tape around transactions in precious metals and gems designated for production of consumer goods. Currently, 99% of jewelry companies are private owned. As a rule, some jewelry OOO or ZAO is used to buy precious metals from banks and diamonds from private dealers. According to the Civil Code, the jeweler is the owner of what he or she purchased; it may be lost, disposed of or presented. Nevertheless, the Law “On precious metals…” states that finished products must be transported by special transportation means and armed security guards. If some jeweler will start calling an armoured car and tommy gunners every time there is a need to move a small batch of jewelry, what will be the cost? Meanwhile, the Russian law-enforcement authorities have caught the trick of waylaying jewelers somewhere near the Assay Inspectorate. Have you come to hallmark your products by your own car? That’s it, you have violated the law.
Archaic looking is Article 191 of the Criminal Code of the Russian Federation “Illegal Turnover of Precious Metals and Gems.” This legal provision belongs to the time of Stalin when precious metals and gems were considered foreign exchange assets. Our current life points to their absurdity every day. Indeed, if some material value has been stolen, there is no difference whether it is made of gold, diamonds or plastic. There has never been introduced, for instance, such an article as “Illegal Turnover of Mobile Phones” into the Criminal Code of the Russian Federation!
In the “jewelry field,” the industry leaders raise questions of principle related to federal support of domestic manufacturers, development of small business, and abandonment of the raw materials trend pursued by the Russian economy in the segment of precious metals and gems.
Vladimir Teslenko, special report for Rough&Polished
