The "Honest Label" CRPT is a system for electronic tagging and tracking of goods information launched by the government of the Russian Federation, officially in operation since 2019. The system uploads product data to the Federal Tax Service and Quality Supervision Department to assist in taxation and product quality regulation.
Tobacco products were among the first goods included in this system. Prior to the introduction of labels, the illegal tobacco market in Russia was rapidly expanding. However, since the implementation of labels, it has been steadily decreasing year by year. By 2022, the illegal market share had decreased by a quarter, falling from 15.6% in 2019 to 11.5% in 2021.
Honest Labels on Products/Image Source: YANDEX
According to the data from the Russian Ministry of Industry and Trade, the effectiveness of market control and product supervision enforcement has significantly improved due to "honest labeling." In the first quarter of 2022, the number of illegal tobacco products seized was 11.1 million packs, a 72.5% increase compared to a year ago. At the same time, the number of legally registered tobacco sales outlets increased by 29%.
Currently, the system has implemented the issuance of electronic tags for tobacco products, certain pharmaceutical products, shoes, clothing, cameras, tires, and perfumes. In the future, electronic tags will be extended to all production fields, from bicycles and household chemicals to pipelines and industrial cables, among other industries.
Starting on December 1st, 2022, all electronic cigarette products will be required to have "honest labeling" and products without proper labeling will be prohibited from being sold on the market.
Currently, the illegal distribution of electronic cigarettes is rampant in the Russian market, and the government regulatory agencies have been lacking effective means to regulate the market. The Ministry of Finance has repeatedly stated that it plans to increase the tax budget for electronic cigarette products by 2023, and tighter regulation is the trend.
The mandatory implementation of "honest labeling" will impact the illegal circulation market. Incomplete statistics indicate that less than half of the electronic cigarette products on the market have been labeled. The budget proposal for regulating electronic cigarettes in the Russian Duma Parliament shows that the legalization of the electronic cigarette market will increase government tax revenue by over 100 billion rubles. Building on their success in regulating the traditional tobacco market, the Russian federal government will continue to push for the mandatory inclusion of electronic cigarette products in "honest labeling.
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