Calculation compliance costs of mandatory jewellery marking in Russia (after extended SCM modell)

Calculation compliance costs of mandatory jewellery marking in Russia (after extended SCM modell)

1. Calculation of costs for
jewelry marking
(extended SCM)
February 2021

2. Regulation
The substance of the proposed
regulation (high degree of
regulatory impact):
qTheState Integrated Information
Systemin the Field of Control over
the Circulation of Precious Metals,
Precious Stones and Products from
them (SIIS) is being created;
qThe Federal Assay Office puts a
laser mark on the surface of each
piece of jewelry;
qMarket Participants:
qRegister in the SIIS;
qmake a mark (a laser code
from the product is applied to
a paper tag);
qEnter information on the
receipt and sale of jewelry into
the SIIS.
Regulatory legal act
Decree of the Government of the Russian
Federation “On some issues of control
over the circulation of precious metals,
precious stones and products made from
them at all stages of this circulation ...”
adopted on February 26, 2021 No. 270
Responsible ministry: Ministry of
Finance of Russia
Regulatory Impact Assessment
Opinion: Negative
Implementation time:
July 01, 2021, subsequently
rescheduled to March 01, 2024 (for
new products) and September 1,
2024 (for leftover ones).2

3. The regulatory
objectives
•According to the Ministry of Finance, the
introduction of the marking system will have a positive impact on the transparency of both
the jewelry market itself and the process of
state control of the jewelry industry.
•The summary report on the regulation draft
(https://regulation.gov.ru/p/105349) indicated
that the marking would contribute to the
achievement of the following main goals:
•Fighting illegal
jewelrydistribution
•Minimizing
inspections and
increasing the
efficiency of state
control
•Aggregation of
statistical and
analytical market
information
•Protecting the
interests of jewelry
market consumers
3

4. Calculations
submitted by business
•Calculations of the possible costs of the jewelry market participants in case ofthe implementation of marking have been sent just before the meeting of the Subcommission on the "regulatory guillotine" on February 3, 2021.
Сategoryof costs QuantityPrice per pieceSum
6. Organization of a workplace (technical equipment) for the SIIS maintenance (one-
time, without an optical reader)12600 entitiesх 110 thousand rub1.390 million rub
7. Optical barcode readers from a metal surface (one-time)4000 entitiesх 70 thousand rub.
х 3 pcs840 million rub
9. Regular costs for the maintenance of the workplace (technical equipment) servicing
the SIIS for two years12600 entities х 2 yearsх 13 thousand rub330 million rub
1.Payroll costs for an employee maintaining the system for 2 years of the SIIS phased
implementation (payroll + social contributions)
12600 entities х 1 person x
24 months
25 thousand rub. х
1.39.830 million rub
2. Education and training of personnel for the SIIS maintenance.12600 entitiesх 15 thousand rub190 million rub
5. “Freezing” of stock balances in the subdivisions of the Federal Assay Office (1 month
term, commercial lending rate 11%)
60 million pcs х 2 /grams
х 0.11/12
х 3 thousand
rub/gram3.300 million rub
4. Delivery of stock balances to the subdivisions of the Federal Assay Office (in 2 stages,
round trip) 12600 entitiesх 15 thousand rub х
2 х 2750 million rub
10. Losses of precious metals when burning a mark 60 million pcs х 0.0008
gramsх 3 thousand rub140 million rub
3. Photographing of products60 million pcsх 25 rub1.500 million rub
8. Costs for tags (3 rub/piece) and cartridges (1 ruble/piece) for printing barcodes 60 million pcsХ 3 rub180 million rub
TOTAL:
for 2 years allotted for the
phased implementation of
SIIS
19.980 million rub

5. Examples of standard
cost calculation:
Labor costs
24
times
Frequency
(in months)
9.828
billion rub
Industry costs on
a 2-year horizon
0.410 billion
rub
Industry costs per month
160 hours
per month
The number of working hours per month
203.13
rub/ hour
Hourly wage rate
1. Payroll costs for an employee maintaining the system for 2 years of SIIS phased
implementation (payroll + social contributions)
12600
The number of entities
0.410 billion
rub
Industry costs per month
Possibilities of applying the extended standard cost
model (SCM)
5

6. Examples of standard
cost calculation:
Costs of service fees
from external providers
1 time
Сost
frequency
2.445
billion rub
Industry costs on a
2-year horizon
2.445 billion rub
Industry costs per one-time execution
1 pcs
The number of courses required
203.13 rub/
hour
The cost of one course
2. Education and training of personnel for the SIIS maintenance.
12 600
The number of entities
0.189 billion rub
Industry costs per one-time execution
25 rub
The cost of photographing one product
60 million pcs
The number of products
3. Photographing of products
1.5 billion rub
Industry costs per one-time execution
4 pcs
The number of deliveries
15 000 rub
The cost of one delivery
4. Delivery of stock balances to the subdivisions of the Federal Assay Office (in 2 stages, round
trip)
12 600
The number of entities
0.756 billion rub
Industry costs per one-time execution
6

7. Examples of standard
cost calculation:
Associated costs
1
time
Сost
frequency
3.300
billion rub
Industry costs on.
a 2-year horizon
3.300 billion
rub
Industry costs per one-time execution
2 grams
The number of grams
3 000
rub
Freezing cost per gram
5. “Freezing” of stock balances in the subdivisions of the Federal Assay Office (1
month term, commercial lending rate 11%)
60
million
The number of entities
3.300 billion
rub
Industry costs per one-time execution
0.11 /
12
Monthly lending rate
7

8. Examples of standard
cost calculation:
Associated costs
1 time
Сost
frequency
2.406
billion rub
Industry costs on a
2-year horizon
2.406 billion
rub
Industry costs per one-time execution
1 pcs
Equipment quantity
110 000 rub
Equipment cost
6. Organization of a workplace (technical equipment) for the SIIS maintenance (one-time,
without an optical reader)
12 600
The number of entities
1.386 billion
rub
Industry costs per one-time execution
3 rub
Стоимость одной бирки для изделия
60 million
The number of products
8. Costs for tags (3 rub/piece) and cartridges (1 ruble/piece) for printing barcodes
0.180 billion
rub
Industry costs per one-time execution
3 pcs
Equipment quantity
70 000 rub
The cost of one delivery
7. Optical barcode readers from a metal surface
4 000
The number of entities
0.840 billion
rub
Industry costs per one-time execution
8

9. Examples of standard
cost calculation:
Costs of service fees
from external providers
2
times
Сost
frequency
0.368
billion rub
Industry costs on a
2-year horizon
0.164 billion
rub
Industry costs per one-time execution
1 pcs
The number of paid services
13 000 rub
The cost of providing one service
9. Regular costs for the maintenance of the workplace (technical equipment) servicing the SIIS
for two years
12 600
The number of entities
0.164 billion
rub
Industry costs per one-time execution
9

10. Examples of
losses (waste)
calculation
1
time
Сost
frequency
0.140
billion rub.
Industry costs on a
2-year horizon
0.140 billion
rub
Industry costs per one-time execution
0.0008 grams
The number of grams
3 000 rub
Price per gram
10. Losses of precious metals when burning a mark
60 million
Number of products
0.140 billion
rub
Industry costs per one-time execution
10

11. The most significant mandatory
requirements
Total costs and losses (waste)
over the period of jewelry
marking introduction (2 years)
1. Payroll costs for an employee
maintaining the system for 2
years of the SIIS phased
implementation (payroll + social
contributions)
5. “Freezing” of stock balances in
the subdivisions of the Federal
Assay Office (1 month term,
commercial lending rate 11%)
3. Photographing of products
9,828
billion rub
5,500
billion rub
3,000
billion rub
COSTS + LOSSES (WASTE)
ON A TWO-YEARS HORIZON
STANDARD
COSTS
17.206 billion rub
DIRECT
COSTS
2.774 billion rub
LOSSES
(WASTE)
0.140 billion rub
19.980
billion rub
AVERAGE COSTS + LOSSES
(WASTE) for one year
~ 4.15 % of the annual turnover
9.990
billion rub
The industry annual
turnover (2020) ~ 240
billion rub
11