On January 07th, 2020, the Russian Government completed another stage of implementation of the Track & Trace digital-labeling system called “Chestny ZNAK” (“T&T System”) by determining the labeling timelines and rules for selected products. Further, on the same date, the authorities published an order of accessing the information, on the turnover of the labeled products. These introductions were made together with the transfer of the deadline of the medications labeling and establishing the approximate date for implementing dairy products labeling, in the T&T System. New traceability requirements which must be complied with by all market agents involved in turnover of products are especially important for distributors.
1) The T&T System: overview
The T&T System is a new Russian initiative providing for labeling of selected products with printed codes, or attached tags, that needed to be scanned on each stage of turnover of each product unit, from production to transferring of the product to consumers. According to the Russian authorities, the primary goal of the T&T System is anti-counterfeiting.
The T&T System is operated by the Center for Research in Perspective Technologies (“CRPT”), a public-private entity that also issues the codes for labeling the products by producers/importers. The information on transferring the products to the next market agent is uploaded to the T&T System, allowing tracking of each stage of the turnover of such products. All operations starting from production/import of products and their distribution up until the sale to a final customer (i.e. to a customer purchasing the product for their own use) will be subject to traceability requirements and must be recorded in the T&T System.
Currently, the T&T System applies to the sale of tobacco products, fur coats, footwear and partially to the medications voluntarily, or mandatory, depending on the stage of the labeling project. However, ultimately, the Government is planning to have all the products on the Russian market digitally labeled for track and trace purposes in the future.
2) Distributors and digital labeling
Due to the significance of distributors’ role in the supply chain, requirements of digital labeling affect them directly. Distributors frequently act as importers of products into Russia and must undergo customs procedures and ensure that products are properly labeled before the goods may be released into turnover. Consequently, distributors now must enter into agreements with the CRPT, register in the T&T System and obtain all the necessary equipment and software in order to get access to codes placed onto the products. Otherwise, there is a risk that imported products may be seized by customs authorities in case of failure to comply with mandatory legal requirements.
New labeling requirements are also important to distributors in case the products are originated in Russia. A great number of products goes through distributors on a regular basis and they must scan all the products sending the data to the T&T System. Distributors are often responsible for transportation and storage of products and must act promptly in case some defects related to labeling arise as a result of these activities.
3) Affected products and timelines
Generally, the introduction of digital labeling to products provides for three stages:
(A) registration of a market agent in the T&T System;
(B) prohibition of marketing of non-labeled products;
(C) labeling of remaining inventory imported/produced before the complete prohibition of the marketing of non-labeled products.
Please see below the products concerned, with the indication of the newly adopted timelines for implementing the T&T System.
1- On October 01, 2019, started the mandatory labeling of the medications regarding the treatment of the following diseases: hemophilia, cystic fibrosis, pituitary dwarfism, Gaucher disease, lymphoid, hematopoietic and related tissues diseases, multiple sclerosis, mucopolysaccharidosis, and of organ and/or tissue transplantation individuals.
2- The marketing of the non-labeled products produced/imported into Russia before October 01, 2020, is permitted before this date.
4) Labeling experiments
In addition to the introduction of the new digital labeling rules, the Russian Government decided to extend labeling experiments to new types of products. Based on the results of these experiments, they will adopt decisions on the necessity, feasibility and procedure for labeling of the following products:
(A) dairy products;
Its preliminary decision is that the total ban on the turnover of the non-labeled, dairy products is going to come into force on December 01, 2020. The other products’ labeling is still under consideration.
5) Access to the labeling information
On January 07, 2020, the Russian Government published the order of access to the labeling information uploaded to the T&T System (“Access Order”) as well. The Access Order divides the applicants for such information into four categories with a different scope of rights. For more details, please the table below.
1- The public bodies may request the labeling information only in the framework of their supervision/control powers.
According to the annex to the Access Order, the public information to be made available for all parties includes:
(A) information on the market agents;
(B) information on the products, according to the Russian Classification of Product by Economic Activities, or Eurasian Economic Union (“EAEU”) Customs Code, together with the standard labeling information under the Russian consumer-protection law;
(C) information from the T&T System whether the product under concern was digitally labeled;
(D) information regarding the legal framework of the digital labeling system in Russia;
(E) other information listed in the specific labeling rules for each product.
The information will be provided to the applicant by the CRPT on a non-discriminatory and no-cost basis. At the same time, the Access Order forbids to use the received labeling information in the commercial interests of third parties, unless otherwise provided by law.
6) Our recommendations
By adopting new regulations Russian government has clarified legal status of distributors’ extending their responsibilities regarding mandatory digital labeling. We recommend negotiating and specifying the digital labeling process with the Russian partners in advance to the mandatory implementation.
At the same time, please be reminded that the digital labeling regulations target both Russian persons and branches of foreign companies, and impose the obligation to affix digital codes or tags (if applicable). This means that the non-Russian distributors without presence in Russia do not have direct responsibility to register in the T&T System, label the products or record operations related to distributed products in the T&T System. Though the law defines the persons for whom the digital labeling requirements are mandatory, we recommend indicating the allocation of labeling responsibilities and the technical aspects in contracts between distributors and Russian market agents.
Maria Ostashenko, IDI Country Expert for agency & distribution in Russia