Implementation of the offset programmes will enable to increase the production output and the exports of the Russian high-tech products. This was announced during a Federation Council round table chaired by the first deputy chair of the Committee for the Economic Policy Yuri Fedorov.
An offset agreement involves advancement of offset obligations by the customer to the producer (involving purchase of goods, works, services, investment, organization of production, training etc.).
The round table on the subject of 'Implementing the mechanism of legal regulation of offset agreements made during contracting in various sectors of economy' was attended by the representatives of the Ministry of Finance of Russia, Ministry of Industry and Trade of Russia, Ministry of Economic Development and Trade of Russia, GBU City Agency for Investment Management, the Aluminium Association, the law offices of Egorov, Puginsky, Afanasiev and Partners (EPAM), as well as the representatives of the Russian Railways and the Russian Steel Association.
In accordance with the initiative proposed by the Aluminium Association and based on the world's best practices, the implementation of offset transactions presupposes that as part of government procurement of certain types of imported products (airplanes, vessels, rail cars and equipment) whose total value exceeds 100 mln roubles the supplier accepts additional offset obligations of purchasing Russian goods – semifinished products and ferrous or non-ferrous metals.
Speaking at the event, the co-chair of the Aluminium Association Irina Kazovskaya has stressed the importance of implementing offset agreements for development of the Russian economy. She noted that this initiative would be relevant not only for aluminium but for other industries as well.
'As early as in 2016, the Aluminium Association has come up with an initiative to implement offset agreements in the Russian business practice. The importance of this instrument for Russian economy cannot be overstated: implementing offset agreements will allow to quickly increase tax revenues, create new drivers for substituting imports in machine building, aviation and other industries, and to increase the value of annual product exports to up to 1 bln US dollars. This is why we advocate the introduction of mandatory international-level offset agreements,' said Irina Kazovskaya.
Legal counsel from EPAM law offices Evgeniy Gurchenko in his report reminded that such offset mechanism is being used in 130 countries, by virtue of which these countries increased the exports of their products, developed their industries and the national economies. The speaker emphasized that Russia often participates in offset transactions as a supplier and in this capacity must accept offset obligations to purchase various imported goods – for example, palm oil, cocoa, coffee, etc. The speaker also presented the scheme for implementation of offset agreements. According to this scheme, it will be necessary to introduce changes in the federal laws 'On Contract System in State and Municipal Procurement of Goods, Works and Services' (no. 44-FZ) and 'On the Procurement of Goods, Work and Services by Certain Types of Legal Entities' (no. 223-FZ), while the key function of compiling the list of Russian products for offset purchase will be fulfilled by the Government Commission.
During the round table information was introduced about the initiatives of the Ministry of Industry and Trade of Russia to introduce changes to the Russian legislation regarding the legal regulation of offset agreements. The participants from the Ministry of Finance of Russia, the Ministry of Economic Development and Trade of Russia and from the Russian Railways contributed their proposals on further improving the mechanism for offset agreements.
The recommendations of the Federation Council round table will be sent to the Russian Government for further deliberation and for updating the 2020–2023 Action Plan for stimulating the demand for aluminium industry products to take into account the need for implementation of offset agreements.
BACKGROUND INFORMATION
Special normative regulations covering offset deals exist in many European countries, in particular, in Belgium, Austria, the Netherlands, Switzerland, Sweden and Norway. Similar regulations are in place in India, the UAE and Saudi Arabia.
The Aluminium Association's initiative to implement offset transactions in Russian practice was noted in the 2016–2017 Action Plan to stimulate the demand for aluminium downstream products. This item was then included in the 2018–2023 Action Plan to develop aluminium industry and stimulate the demand for aluminium downstream products, signed by the government in June 2018.
In 2020, an item on implementing the mechanism for offset transactions pertaining to government (municipal) procurement was included in the National Action Plan for facilitating the recovery of employment rate and the income of the population, economic growth and long-term structural changes in economy.