Russian Nicotine Industry Expert Committee Meeting 2022

On July 31st, 2022, the Russian Nicotine Products Distribution Expert Committee held a meeting at the State Duma. The meeting was conducted in both online and offline formats, with some participants joining via video conferencing.

During the meeting, Sergei Katasunov, co-chair of the Russian Tobacco Industry Expert Committee, introduced the attendees, which included representatives from the Federal Tax Service, Federal Customs Service, Ministry of Internal Affairs, Ministry of Economic Development, Ministry of Agriculture, Ministry of Finance, Russian Institute of Tobacco and Flax Industry, Small-Scale Trade Association, Imperial Tobacco Production Factory, Philip Morris International, Japan Tobacco, Bulgaria Factory, Tobacco Group, NISKA, Babylon, Tobacco Gifts, and others. The Nicotine Alliance was represented by its chairman, Andrei Loskutov.

The first item on the agenda of the meeting was a discussion on the progress of preparations for legislation that restricts individuals from carrying unmarked, specially taxed nicotine liquids, heated tobacco products, and disposable nicotine products within Russian territory.

The speaker on this topic was Sergei Katasonov, who pointed out that restrictions have been imposed on individuals carrying excess tobacco products. Prior to this, unscrupulous traders often exploited loopholes by transporting goods in bulk as personal consumption. Similar restrictions should be established for products containing nicotine, such as cigarettes. However, there is currently a debate regarding what should be allowed with regard to restrictions.

During the conference, Andrei Gerlezov provided updates on the progress of labelling nicotine-containing products on behalf of the "Honest Label" company. According to their current plan, all unlabelled products will be banned from sale after November 2023. Industry representatives unanimously agreed on the necessity of accelerating the implementation of mandatory electronic labelling.

The second agenda item discussed was the progress of preparations for the development of a law concerning national regulation of tobacco products, nicotine-containing products, and their raw materials. Georgy Golovanov, one of the developers of the law, reported to the committee that the bill had been submitted to the Russian government by the Ministry of Finance. The text has been modified and improved by the Ministry of Economic Development and the Department of Justice, particularly in terms of regulations and methods, with the Department of Justice joining in on the effort. The Ministry of Economic Development has suggested that tobacco licenses should be valid indefinitely. The crucial bill is planned to be submitted to the State Duma by the end of September. Sergei Katasanov also mentioned an important event, which is the forthcoming creation of a new agency called the Russian Alcohol and Tobacco Regulatory Agency, which will be responsible for overseeing the tobacco industry.

The third item on the agenda was the progress in the development of technical regulatory provisions for nicotine-containing products by the Eurasian Economic Union. Naira Vardanian, a leading expert from the Ministry of Economy of the Republic of Armenia, presented the main stages of the regulatory provisions development, which are currently in the stage of public discussion. Given the importance of this document, Sergei Katasinov suggested convening a special expert committee meeting on the issue and conveying the Russian tobacco industry's viewpoint to the regulatory provisions' developers.

The fourth agenda discussed Federal Bill No. 99437-8, which is about amending the Federal Law on Tobacco Product Regulations. It was pointed out that there is a need to precisely define what constitutes chewing tobacco and to limit the amount of nicotine in it to no more than 3.5%.

Currently, the proposal put forward by the federal agency, the Federal Oversight Service Bureau, is under consideration. It is anticipated that there will be dissenting opinions on record. The expert committee has requested the submission of current amendment proposals. In addition, they have decided to send production inquiries to manufacturers of snuff and chewing tobacco.

Despite the current ban on the sale of chewing tobacco in Russia, the unnecessary nature of including this provision in technical regulations has been noted. The industry is currently at the threshold of obtaining manufacturing licenses, making it possible that the ban may be lifted in the future. Furthermore, the production and export of nicotine products such as chewing tobacco have yet to be prohibited.

Igor Moiseyev, chairman of the board of Pogarsky Tobacco and Cigar Factory, has stated that nicotine is the least harmful component in tobacco. Since chewing tobacco is allowed, it would be reasonable to allow smoking again, as the previous ban was not well thought out. In any case, the ban from five years ago cannot affect modern national technology standards.

The fifth agenda concerns the provision of information on tobacco and nicotine-containing products to adult consumers in sales outlets, in order to protect consumers from potential harm caused by the purchase of illegal products. The reporter is Konstantin Reynot, who manages the interaction between Philip Morris Company and government agencies.

Currently, tobacco and nicotine-containing products are banned from promotional advertising, but the Consumer Rights Protection Act requires the provision of complete product information. This creates a conflict: sellers are reluctant to provide product information to consumers to avoid fines. While it is easy to make a choice when purchasing traditional cigarettes, purchasing electronic cigarettes and their liquids is essentially buying an unknown product. The only way is to buy and try.

It is absolutely essential to clearly distinguish between the concepts of advertising and information, and to eliminate any contradictions that may exist, so that consumers can access honest and detailed information about products for sale.

A. Zheliznov delivered a speech on the progress of nicotine product labeling experiments at a tobacco industry control report based on a tagging system. He highlighted that digital tagging promotes market transparency for participants and government agencies alike. Tags can successfully combat counterfeit products and enable distributors to distinguish legal from illegal products. Currently, CRPT has completed the development of personal account systems for the Federal Tax Service and the Federal Customs Service. Zheliznov also noted that the transition from traditional tax stamps to digital tags is planned for 2024.

At the end of the meeting, Sergei Katasunov raised two additional work-related issues. The first concerned the calculation of an economically reasonable tobacco tax rate for nicotine products. The most obvious method would be to compare it to traditional tobacco and determine it based on the current tax on cigarettes. The expert committee is awaiting scientific conclusions from VNIIITI (a data research institute) in the fall to help determine the ratio between traditional tobacco and nicotine products.

The second issue concerns the taxation of e-cigarettes and their liquids. According to tax laws, a single product cannot have two tax codes. Therefore, it is necessary to determine how to properly levy taxes on e-cigarettes that have already been filled with liquid. If taxes should apply to both the device itself and the liquid it contains, appropriate changes to tax laws are required.