The Impact of Applying the Common Customs Tariff on Armenian Exports of Tobacco Products

The presented study addresses the problems of application of the Common Customs Tariff (CCT) of the Eurasian Economic Union (EAEU) on unmanufactured tobacco, tobacco refuse, and cigarette paper, and its impact on cigarette exports.

Aim. The study aims to determine a possible strategy that can be used by Armenian cigarette exporters in the context of transition to the CCT rates for unmanufactured tobacco, tobacco refuse, and cigarette paper, and how it will impact cigarette exports.

Tasks. The authors analyze changes in import customs duty rates and the import structure of unmanufactured tobacco, tobacco refuse, and cigarette paper (by country of origin) and indicators of cigarette exports (by market); substantiate the need to ensure operational efficiency to remain competitive in the target markets for exported cigarettes.

Methods. This study uses general scientific methods of cognition, including analytical and methodological approaches and elements of forecasting. The authors also use the analytical method to analyze the list of goods from developing or least developed countries that are entitled to tariff preferences when imported into the EAEU customs territory, the list of developing and least developed countries that are beneficiaries of the preferential system of the EEU, the EEU import customs duty rates on unmanufactured tobacco, tobacco refuse, and cigarette paper, statistics on the imports of these production resources by country of origin, and indicators of cigarette exports to the major destinations in 2014-2018 published by UN Comtrade Statistics. It is established that application of the EAEU’s CCT rates can impact cigarette exports, and the possible strategy that can be used by Armenian exporters to enhance the competitiveness of exported goods is determined.

Results. In case unmanufactured tobacco is imported from developing countries, such as India, Brazil, and others, a 3.75% import duty rate will be applied instead of the 5% CCT rate. Switching to imports from Zimbabwe, Bangladesh, and Malawi without implementing new efficient business processes to compete in export markets could be an option that exporters would resort to. However, imports from developing countries will not decline sharply in the medium term. Armenia used to import cigarette paper mainly from Western Europe, China, and Russia, which encourages Armenian exporters to focus on operational efficiency. Iraq and Syria being the two main export destinations for Armenian cigarettes, their further exports to these countries will be sensitive to price increases.

Conclusion. Increased customs duty rates on unmanufactured tobacco, tobacco refuse, and cigarette paper will have a negative impact and lead to an increase in prices on imported production resources used in the production of cigarettes for export. However, this impact will be insignificant. Due to the structure of cigarette exports, regardless of the country of origin of the imported resources, exporters should focus on ensuring operational efficiency to remain competitive in the major markets for exported products.

Practical application of results. The results of this study can be of interest to the Ministry of Economy of the Republic of Armenia and Business Armenia and can be used to produce a strategy for the development of cigarette production in Armenia and to facilitate exports.

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