The rules for localising seed production in Russia are coming into force
The Rules came into force on 1 September 2023 and will remain in force until 1 September 2029.
There are a number of important new developments that should be taken into account, first of all, by seed producers that are legal entities with foreign investments.
1. Localising seed production in Russia means a set of measures being carried out, including obtaining a variety and/or a hybrid of an agricultural plant and/or growing seeds, including their preparation for sowing, sowing, care, harvesting, processing, growing seedlings, young plants and digging up agricultural plants.
2. Foreign seed producers will be able to work in Russia only in the format of a joint venture (JV), in which at least 51% must be owned by a Russian partner that has no direct or indirect participants who are foreign legal entities or individuals. Foreign market players will be prohibited from working (selling products) through 100% Russian subsidiaries without localising production. In addition, the entire production process of seeds must be carried our together with Russian scientific and educational institutions[2].
3. All the production cycle – from selection until seed production – must be performed in Russia.
4. The criteria for localising production are:
a) when varieties are obtained:
- at least 2 land plots in Russia with ownership title (or other title) that are located in different regions of admission;
- a nursery with ownership title (or other title) to it in Russia;
- the full production cycle being performed in Russia;
- the availability of equipment and all necessary facilities for carrying out the full production cycle in Russia.
b) when seeds are grown:
- growing varieties of plants from original seeds produced in Russia;
- a land plot with ownership title (or other title) to it in Russia;
- production areas for growing seeds.
5. Before 1 March 2024 companies must submit a plan for localising seed production in Russia to the federal state information system in the area of the seed industry. The form of the plan will be approved by the Russian Ministry of Agriculture and it is not available at this stage.
6. Before 1 July 2024 the Ministry of Agriculture must approve localisation plans that are submitted.
Pepeliaev Group's Comment
It should be assumed that the absence of an approved localisation plan by 1 July 2024 will lead to difficulties in conducting activities in Russia.
Nevertheless, at this stage it is difficult to predict what specific measures will be applied to ensure that seed producers actively and timely comply with localisation requirements. Such measures will probably be developed and put into effect later.
In addition to the Rules, starting form 1 September 2023 Federal Law No. 454-FZ “On the seed industry” dated 30 December 2021 (the Seed Industry Law) came into force.
A part of the provisions of chapter 3 of the Seed Industry Law (“Information, information resources and information systems in the area of the seed industry and agricultural plants”) will comes into force in a year – from 1 September 2024. It can be assumed that the information base (registers) with the help of which companies will have their activities monitored will be developed by September 2024.
Pepeliaev Group's Comment
Neither the Rules nor the Seed Industry Law states what the consequences may be in case of a violation of the Rules. In this regard, we cannot rule out amendments to other legislation and regulations, including the Russian Code of Administrative Offences.
What to think about and what to do
The producers of seeds of agricultural plants are advised to start planning changes in their activities and structure for the purposes of fulfilling localisation requirements for the subsequent preparation of a plan for localising seed production.
It should be noted that the implementation of a localisation plan may require transactions with membership interests / shares of Russian legal entities to be carried out, as well as with real estate. As a rule, these are tasks that require significant time in the current conditions, including for the purposes of having such transactions approved, in applicable cases, by the subcommittee of the Governmental Commission for the Control of Foreign Investments[3].
Help from your adviser
Pepeliaev Group’s lawyers have vast experience in advising to companies in agricultural industry on various matters surrounding their business activity and are ready to assist you with handling issues that may arise in connection with the new regulation in the area of localising seed production.Translated by the Translation Department of Pepeliaev Group.
[1] Resolution No. 754 of the Russian Government “On approving the Rules for localising the production of seeds of agricultural plants in the Russian Federation” dated 16 May 2023 (the Rules).
[2] Clause 2 of the Rules.
[3] The Russian President’s Decree No. 81 “On additional temporary economic measures to ensure the financial stability of the Russian Federation” dated 1 March 2022; the Russian President’s Decree No. 618 “On a special procedure for specific types of transactions (operations) to be carried out (performed) between certain parties” dated 8 September 2022, etc.