EASTERN EUROPE. In a potentially game-changing industry development, Arrivals duty free looks set to come into force in Russia, Armenia, Belarus, Kazakhstan and Kyrgyzstan. The new channel could begin trading by late 2017 once a new Customs Code between the countries – which make up the Eurasian Economic Union – is ratified by each state.
The EEU members have set a deadline of 28 October this year to finalise and sign the Customs Code.
A spokesperson for the Eurasian Duty Free Association (EADF) told The Moodie Davitt Report: “After the new Customs Code is signed, up to six months will be required for its ratification by national Parliaments. After ratification it will require three to five months for harmonisation of the new norms with the national legislation of EEU state members.
“The new Customs Code allows duty free stores on arrival as well as duty free sales to intra-EEU passengers in international airports of all member states.”
Asked what the likely timing of the first store openings might be, based on the legislative timetable, EADF said: “If the inter-governmental procedures as well as legislative procedures at national level go as planned, then the Arrivals duty free stores could be opened by the end of 2017.”
The association confirmed that interest was high among EADF members and partner airports in developing the new channel of business.
Arrivals duty free sales could reach 20% of those in Departures, based on performance in other markets, it said.
EADF outlined the scale of the opportunity, noting that there are 73 international airports in Russia, though only 40 have duty free shops. Among the other EEU states, Kazakhstan has eight international airports, Belarus seven, Kyrgyzstan six and Armenia two – but in each of these countries only a single airport has duty free operations.
Commenting further on the opportunity, the EADF spokesperson said: “The offer in Arrivals duty free will likely be focused on the core assortment: tobacco, liquor, perfumes & cosmetics and food.
“Duty free purchasing remains a hugely compelling activity for Russian travellers. We think that travellers’ purchasing habits will not change on departure but will be favourable on arrival as the traveller will benefit from the following:
*No more heavy hand luggage to be carried on board, therefore the elimination of extra payment for hand luggage when travelling low-cost;
*The traveller is secured from glass bottle breakage through [the journey];
*No more problems with duty free purchases [being taken] onboard – there is a threat of a legislative ban on bringing duty free alcohol onboard;
*The traveller is secured [against] additional aviation security measures such as the transportation of liquids, sprays and gels.
EADF also noted some of the challenges in introducing a new channel of trading.
The spokesperson said: “The main challenges [will be] at the very start since all new procedures will need time to be developed and adjusted with national legislation among all EEU members.
“Preparing new commercial areas for duty free on arrival becomes the most urgent task, requiring new approaches to the organisation of the arrival areas, baggage claim areas and zones of Customs control. This will [affect] Customs procedures, border services, tax services and retailers.
“Generally we see this working in the same way as Departures shops, adding value for the economies of the EEU countries.”
*The Eurasian Economic Union came into force on 1 January 2015 as a trading bloc linking Russia, Belarus, Kazakhstan, Armenia and Kyrgyzstan. The EEU states have a combined population of around 183 million.
