Friday, 15 July 2011

Cheap European wine set to get more expensive

Cheap European wine may disappear from Russian shelves after customs raised minimum wine price.

Minimum prices for Italian wines went up 75 per cent and 50 per cent for French wines, prompting importers to question the legality of the decision.

Customs set new minimum price

Excise duties for imported wine in Russia make up 20 per cent of the paid price. But the simple sum is complicated by the issue of “customs value” – whatever Russian Customs decide is the lowest possible value of the wine in its homeland.

Different countries were allocated different customs values, and until now the minimum price for a litre of French wine has been set at $5 (or 5.4 euros per bottle), and $4 for Italian wine (or 2.15 euros per bottle).

Such norms were set by the customs several years ago and were seen by the market as adequate.

But last month the Central Excise Customs reviewed the lowest value levels for European wines, significantly increasing them.

The cheapest French wine now costs 8 euros per bottle, and Italian is 3.7 euros per bottle.

So a bottle of the cheapest French wine that once cost 150-200 rubles ($5-7), will cost at least 300 rubles ($10).

Representatives of import companies say the new value levels are inflated for no apparent reason.

The Wine Importers Association said that at least 40 per cent of European table wines are cheaper than those levels.

The Importers association sent a letter to head of excise customs and asked for explanations, said its president Mikhail Blinov.

“We think customs is acting illegally,” said a manager of one of the large wine importers. “There are no ‘black prices’ in Europe, and we can guarantee that we buy table wines at honest prices, which are a lot lower than what the excise customs set.”

The companies are now estimating how much they would have to raise prices for their cheapest wines. Luding, one of the largest importers, will have to raise prices for Spanish wines by 20 per cent, French by 30 per cent, and Italian by 40 per cent, its financial department employee told the daily.

“Of course the consumer will have to pay for our increasing costs at customs,” the manager said. “Wholesale importers will include the additional costs into the price. Maybe some wines will disappear from the market.”

The plan may not even safeguard Russian vineyards from competition.

“It could be that the cheapest European wines will be substituted by Chilean and Californian wines, as their control level did not rise,” he said, adding that higher tax burden could actually cut the government’s tax income if demand fell.

Cheap wines are the most popular in Russia, every year 106 million decalitres are imported, 31 million in bottles, and 80 per cent of it from Europe.

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