A Billion for a Label

What would you get if you packed a crate of liquor with a box of highly-protected compliance certificates that cost as much as the alcohol? Would it raise the quality of products slated for sale? The business community has been unsuccessfully trying to prove this point in its protests against the government’s plans to introduce hologram-protected copies of compliance certificates. On October 21 lawmakers finally passed a bill of amendments to a number of Ukrainian laws, which makes such copies and holograms simply redundant. If legislators score this small victory, the tax people will only have to check the unique number of the compliance certificate in the invoice.

The business community has welcomed this decision. Most businessmen believe that every retail store would be littered-aside from invoices and countless other trade permits and documents-with heaps of hologram-decorated copies of certificates, which benefit no one but their manufactures. To pay for them, the nation’s businesses would have to cough up several hundred billion hryvnias annually. For the tea company Monomakh alone these hologram-protected certificates at UAH 2.5 apiece would carry an annual price tag of 500,000 to 600,000 hryvnias.

These figures were cited at a news conference in early November. According to Vyacheslav Bykovets, first vice-president of the National Association of Employers, the cost of one such certificate, which was introduced in the tobacco market last summer, is often as high as UAH 7.5. According to Bykovets, once they receive copies of certificates from the central office for UAH 1.86 apiece, regional divisions of the State Consumer Policy Committee raise this price, adjusting it for additional costs of transportation and storage.

The business community is currently in suspense because, to put it figuratively, the ball is in the court of the Ukrainian president, who has fifteen days to either ink or scrap the bill passed by parliament. Businessmen are hoping that in the immediate future they will not have to pay for the unnecessary heap of papers attached to their goods and, most importantly, that they will not have to raise prices to offset these additional costs. After all, if Ukraine continues raising its prices, it will no longer be able to compete in the international and domestic markets. If the president scraps the half-baked idea of certificate copies once and for all, businesses and their customers will save over a billion hryvnias annually.

Corporate Relations Manager of Kraft Foods Ukraine Volodymyr Tkachenko says that his company thinks it’s useless to spend millions of dollars per year to supply 80,000 of its trade outlets across the country with copies of certificates. “We want to invest in our people, in the development of our production capacities, not in the production of fancy holograms,” he added.

Incidentally, not a single customer — unless he was an undercover tax inspector — has ever demanded that the salesclerk produce a copy of the quality certificate, preferring to look for special marks of authenticity on bottles, cans, or packs.

Meanwhile, experts believe that the introduction of copies of certificates would not solve the problem of counterfeit goods anyway. At the same time, the bill that the president is now considering would bring Ukrainian laws closer to the laws of WTO and EU member states. “The passage of this bill would have a positive influence on Ukraine’s international image and investment climate, because the controls in the goods market will match the European practice in this sphere. Saving paper is also important,” Vyacheslav Bykovets is convinced.

Tamara Svirus, vice president of the Union of Entrepreneurs of Small, Medium, and Privatized Enterprises, believes that “while striving to increase the quality of products, [the authorities] often overstep the limit between what is needed to increase the quality of products and what is needed to create conditions for the operation of enterprises that are interested in manufacturing quality products even more than the state.”