Get the latest updates as we post them — right on your browser

. Last Updated: 07/27/2016

New Alcohol Rule Abruptly Ditched

The federal government has axed at the last moment a regulation that would have added another layer of official labeling to medium and strong alcoholic beverages.

Last Thursday, the government approved a recommendation that had been put forward by then Tax Minister Georgy Boos on May 12. That recommendation called for alcohol products to be excluded from the list of products required by a May 1997 decree to bear a special inventory label as of July 1, 1999.

The new hologram label would have been an addition to the requirements that all alcohol stronger than beer should bear both excise stamps and quality control certification. Boos' May 12 letter had argued that these two existing measures f brought in under a law signed into effect Jan. 7, 1999 f were sufficient.

Alcohol producers and distributors had argued their case on similar grounds.

"These labels do not add anything to control or safety of alcoholic beverages, but will add substantially to their price. In our opinion, if the resolution will be eventually applied, it will result in a further decrease of excise collection and enhance the black market," said a statement issued earlier this year by the Alcoholic Beverages Committee of the Moscow-based European Business Club. The association unites alcohol leaders such as Allied Domecq, Bacardi-Martini and Pernod Ricard.

Domestic producers were quick to praise the government's decision.

"This is a very good decision because this additional label to the excise will not be bringing anything to the state coffers but only boost bureaucracy," said Pavel Shapkin, chief executive of the Association of Alcohol Producers, which includes 12 major Russian enterprises and their branches in the regions.

The decision caused uproar, however, at Spetsznak, a joint stock company that was specifically created several months ago to design and produce the new inventory labels, and it then won a federal tender earlier this year to do so.

Having raised money to produce labels, clinched an agreement with a U.S. firm, HD, for it to make the labels and then bought the equipment to run the labeling scheme, Spetsznak officials slammed the sudden change.

"The government has again showed its inconsistency. Our investors, who provided us with $40 million, will be more than upset. Now we have $30 million worth of equipment stuck at the border and we don't know what to do with it," Spetsznak president Igor Sarkisov said Monday. "We will take Gosstandart to court," he added.

The federal government would not have received any revenue from the labeling program f instead, funds would have been channeled to Gosstandart, the state standards committee, and then back to Spetsznak to finance the continuation of the scheme, Sarkisov said.

He defended the labels as a weapon in the fight against tax evasion and illegal production. "If every bottle had to be sold with the new inventory label, we could have had information about the sale of every single bottle in every Russian region just by pushing a computer button. So if some producer bought a specific amount of seals but paid taxes for only a half that many bottles f we could see this immediately," he said.

Gosstandart officials were not available to comment. A spokesman for Gostorginspektsia refused to comment.