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Analysis: 2015 To End At Least 15% Down In Rus-S.A. Fruit Trade Due To Customs Labelling Requirement Featured

25 November 2015

Fruit is the biggest segment of trade between South Africa (RSA) and Russia. Trade between the two countries began in the 90s and 2000s, during which time fruit accounted for 60 percent of the trade turnover. As trade of other commodities increased of , the share of fruit of SA exports dropped to 30-35% of the turnover, remaining a substantial part of trade relations between the two countries, according to Mikhail Fateev, head of the Food and Agriculture Sector of Russia-RSA Business Council, whose analysis of the situation is contained here in this article. 

In South Africa, the Russian market provides jobs for agricultural workers, whose wages are among the lowest in the country. In Russia,South African citrus fruits have become some of the most affordable fruits for Russia’s low income population, pensioners, widows and children. It must be noted that fruit from South Africa does not compete with fruit produced in Russia because of the geographical position of the two countries situated on opposite ends of the globe. Which means that harvest seasons compliment instead of compete with each other. Another characteristic that makes South African citrus competitive is that it cannot be substituted by local production,due to Russia's climate conditions. Because of these reasons and the high quality of South African fruit, perhaps the best available in the international markets, they have become the most advanced and leading item in trade relations between our countries.

During Russia's difficult economic situation in 2014, when ruble suffered an unexpected and severe devaluation simultaneously when Western financial sanctions deprived SA exporters and Russian importers access to credit insurance, strong relations between the South African fruit industry and the Russian fruit import business survived the storms and the trade volume in the fruit sector was not substantially affected. The decisions of of our countries leaders, Mr. Jacob Zuma and Mr. Vladimir Putin were of high importance when it came to increasing food exports including fruit from South Africa to Russia, as declared in official communique as the result of an official visit made by President Zuma to Moscow in August 2014.

Relations between the two countries were not without its challenges. Shortly after, it was a big shock to South African fruit producers to face a new set of requirements enforced by Russian Customs in compliance with the EAC (EuroAsian Economic Commission) which then began to look specifically at labeled products entering Russia starting from February 15, 2015.

It was hard for the South African fruit industry in general and impossible for many enterprises to adhere to these requirements. First of all because of the technologically that was involved. In South Africa, fruits are packed in cartons and mounted on pallets in a way that would permit perishable items to withstand long sea voyage. As perishable items,after the packing the fruits, they are immediately delivered to port in cold storage where they receive distribution instructions: some will be loaded by this exporter to that importer in that country, another batch will be exported to another address of another consignee.

There is neither place nor facilities for pallets to be destroyed for affixing any labels on cartons there. It is technologically not possible. It doesn’t mean that the information about the produce, exporter, importer and all that is required by EAC label is ignored. No, it is all available in English and in an electronic format on cartons, pallets and in shipping documents. However, the absence of a sticker on each carton is used to justify refusing the items for entry of the consignment into Russia. It must be also noted that there are not so many people in South Africa who know Russian, especially among farmers and pack house workers. The demand for writing the sticker in Russian introduces extra problems for the producer. Mistakes in spelling are common, while the Russian customs will not forgive even the slightest mistakes. Incidentally, in 20 years of exports to Russia with a record high rate of growth, no language problem has been raised. All shipping documents: Bill of Lading, Certificate of Origin, Phytosanitary Certificate, invoices – all are in English according to international standards and have been recognized in Russia.

Especially insurmountable is that the stickers became a requirement for small and medium sector producers. While big farms having long term contracts with big Russian importers are able to program packing and affix stickers while packing, small and medium size producers work on spot market and decision on sending their fruits to this or that market is taken at a last minute before loading.

How they can affix EAC labels on each carton? Stickers in Russian are also expensive, about USD 0.50 each. The extra cost for them becomes another reason for changing Russian market for other more welcoming international markets. Thus small and medium sector enterprises are being washed out from the Russian market. It’s the most deplorable development because such enterprises represent at large the black empowerment sector in South African fruit industry. Obviously the political content of introduction of the EAC stickers for trade with South Africa has been overlooked.

As a result of the above technical barrier caused by the required stickers the year of 2015 ends with at least a 15 percent decrease of fruit trade between South Africa and Russia. Decisions of the two presidents to increase the supply of fruits from South Africa to Russia are still going unfilled not fulfilled. Ties between South African fruit producers and exporters and their Russian partners – importers of fruits were put to stress due to mutual losses around the stickers. Consumer prices for SA fruits in Russia grew up (3-4 Rubles per kg) to cover the sticker innovation.

During the course of the 13th session of Inter-govenmental Russia-RSA Committee on Trade and Economic Cooperation, there was arequest made jointly by the South African Fruit Industry and the Russia-RSA Business Council to consider the above problem and advise Eurasian Economic Commission to look into adjusting their technical regulations for labeling. There were also negotiating with South African fruit industry (FPEF) the model to develop the political end of to increasing fruit supplies from South Africa to Russia aswasdeclared by President of Russian Federation Vladimir Putin and South African President Jacob Zuma in August 2014.

Head of Food & Agriculture Sector of Russia-RSA Business Council


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