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Electronics Production | May 19, 2008

Foxconn faces high excise duty on components in Russia

The new Foxconn factory in St. Petersburg, Russia will have to deal will unusually large excise duties. Experts predict an offset to any economic gains achieved from domestic production. Expensive imported components are likely to increase prices for the factory's finished goods.
"Lower distribution costs within the country appear to be the only economic gain from this project," said Alexander Malyarevsky, editor of Computer Bild magazine. "If the partners use the factory as a strategic base to supply the CIS and the Baltic states, they might save costs on transport and logistics," he said.

Pyotr Yakovlev, deputy editor of computer newsmagazine Chip, stated that the foreign companies will be deterred from investing in Russia, as excise duties on imported components are higher than on finished goods. HP and Foxconn may have to bring in foreign scientists and workers. And this despite the fact that HP's R&D Centre already employs a number of Russian scientists and technicians.

"Putting a higher tax on imported components is absurd and a threat to projects like this," the St. Petersburg Governor Ms Matviyenko said. "It is incomprehensible that excise duties on component parts are far greater than those on finished products." The Russian Times reports Ms Matviyenko as saying that domestic suppliers of electronics components have lobbied hard to keep the current law in place, arguing that it is needed to stimulate domestic production.

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