Russia — A Market Overview. Country Overview COUNTRY OVERVIEW Largest Country by Area –17,098,242 sq km –1.8 times larger than U.S. –Spans 9 time zones.

Russia — A Market Overview

Country Overview

COUNTRY OVERVIEW

Largest Country by Area

– 17,098,242 sq km

– 1.8 times larger than U.S.

– Spans 9 time zones

Natural Resources and Land Use

– Vast natural resources including oil, natural gas, coal, strategic minerals, rare earth elements and timber

– 7.17% of land is arable (43,460 sq km of land is irrigated [as of 2008[)

Geography

COUNTRY OVERVIEW

9th Largest Country by Population – Nigeria (8th) – Japan (10th) – 138 million inhabitants

Median Age– total: 38.7 years (36.9 years in U.S.)

– male: 35.5 years (35.6 years in U.S.)

– female: 41.9 years (38.2 years in U.S.)

Population Centers– 12 cities over 1 million population– European West: Moscow (11.5 million); St. Petersburg (4.8);

Yekaterinburg (1.4); Nizhniy Novgorod (1.3); Samara (1.2)

– Asian Central: Novosibirsk (1.4); Omsk (1.1); Krasnoyarsk (.9)

– Asian East: Vladivostok (.6); Irkutsk (.6); Khabarovsk (.6); Yakutsk (.2);

Yuzno-Sakhalinsk (.2)

Population Growth Rate– -0.47% (Ranks 222nd out of 230)

Population

COUNTRY OVERVIEW

7th Largest Economy– $2.223 trillion GDP– Germany (6th), UK (8th)

Projected Growth (Source: IMF)

– 4.3% - 2011– 4.1% - 2012

Unemployment Projections (Source: IMF)

– 7.3% - 2011– 7.1% - 2012

GDP Per Capita (Source: CIA World Fact Book)

– $15,900 (2010 est.)

– Highest of BRIC Countries (Brazil, $10,800 – China, $7,600 – India, $3,500)

Economy

COUNTRY OVERVIEW

Positive Trends– Per Capita Growth of 84% by 2015

– (Source: Business Monitor Int.)

– Affluent, urban population strong

base for consumer goods– World Trade Organization Membership

•Fully Membership by 2012•Lower Tariffs

– Average legally binding tariff ceiling» 7.8% after WTO» 10% currently (Source: WTO)

•Trade Policies Subject to Multinational Overview

Economy

COUNTRY OVERVIEW

World Bank 2010 Ease of Doing Business Index

– Rank 123 of 183 (116 in 2009)

– China (79), Brazil (127), India (134)

Transparency International 2010 Corruption Perceptions Index

– Russia 154 of 178

– Brazil (69), China (78), India (87)

Intellectual Property Protections

– Trade Mark and Domain Name Squatters

Governance/Concerns

Music Instrument Market Overview

HS Code “Chapter 92”

MUSIC INSTRUMENT MARKET OVERVIEWGeneral Trends

HS Code “Chapter 92”

Statistics on Russian Imports of Musical Instruments (HS: 92)

2005 2006 2007 2008 2009 2010

World (U.S. Dollars) 16,898,800 34,714,356 54,938,751 86,483,893 56,874,771 74,919,822United States (U.S. Dollars) 803,059 1,249,425 1,113,735 1,542,657 1,266,855 2,081,268 World Change y-o-y 3% 105% 58% 57% -34% 32%U.S. Change y-o-y 230% 56% -11% 39% -18% 64%U.S. Market Share 4.75% 3.60% 2.03% 1.78% 2.23% 2.78%

MUSIC INSTRUMENT MARKET OVERVIEWMarket Share and Growth

HS Code “Chapter 92”

MUSIC INSTRUMENT MARKET OVERVIEWYear to Date August 2011

Russian Imports of Musical Instruments and PartsYear-do-Date August 2011

Rank Partner CountryU.S. Dollars % Share % Change

2011 2011 2011/2010

1 China 28,723,672 52.81 13.12

2 Germany 6,795,720 12.49 116.77

3 Indonesia 6,632,735 12.20 97.78

4 Japan 3,419,894 6.29 41.12

5 Czech Republic 1,825,124 3.36 69.76

6 Taiwan 1,668,711 3.07 57.17

7 United States 1,380,204 2.54 14.50

8 Italy 1,273,687 2.34 71.08

9 Austria 663,437 1.22 259.92

10 Korea South 283,440 0.52 - 37.34

Most robust growth Substantial growth

in 2010 Significant growth in

Parts in 2010

HS Code “Chapter 92”

MUSIC INSTRUMENT MARKET OVERVIEWParts

Statistics on Russian Imports of Parts for Musical Instruments (HS: 9209)

Partner Country 2005 2006 2007 2008 2009 2010

United States 212,294 333,078 605,703 657,320 832,231 1,119,501

Rest of World 1,363,718 2,108,795 3,397,243 4,182,794 3,528,402 5,644,189

World 1,576,012 2,441,873 4,002,946 4,840,114 4,360,633 6,763,690

MUSIC INSTRUMENT MARKET OVERVIEW

Significant Growth

– Parts and Instruments

– Approaching and Possibly Surpassing Pre-Crisis Levels

– Quality Products Appreciated (Germany #2 importer) U.S. Growth Diversifying

– Higher Percentage of Exports for Instruments

– Fast Growth in Non-Parts in 2010 & y-t-d 2011

Summary

Tariffs and Certifications

TARIFFS AND CERTIFICATIONS

Value Added Tax - VAT– 18% uniform rate– 10% rate on certain foodstuffs, pharmaceuticals and children's clothes– Some products, e.g., certain financial services and medical

equipment, are exempt from VAT Import Duties

– 5 – 30%– Applied to CIF (Cost, Insurance + Freight)

Customs Union– Kazakhstan and Belarus– Duty Free Trade

Summary

TARIFFS AND CERTIFICATIONS

Pianos – 15%

Stringed Instruments (guitars, violins) – 5%

Wind Instruments (trumpets, clarinets) – 5%

Percussion Instruments – 5%

Electric Instruments (guitars, synthesizers) – 15%

Parts for Musical Instruments - 5%

Select Import Duties

TARIFFS AND CERTIFICATIONS

Certificate of Conformity

– Applies to Electronic Instruments and Equipment

– GOST R (former name)

– Local Certification Companies

Certifications

Selling in the Russian Market

SELLING IN THE RUSSIAN MARKET

Four Basic Channels

– Agents

– Distributors

– Representative/Branch Office

– Foreign Subsidiaries

Distribution Channels

SELLING IN THE RUSSIAN MARKET

Territory

– Ensure Coverage of Russia’s Vast Territory

Customs

– Choose a Partner with Customs Experience

Logistics

– Many Underdeveloped Logistics Systems

Payment

– Uneven Access to Credit

Intellectual Property

– Take Responsibility

Distribution Challenges

SELLING IN THE RUSSIAN MARKET

Key distributors

– Mir Muziki (http://www.mirm.ru/)

– Muztorg (http://www.muztorg.ru/)

– Muzikalniy Arsenal (http://www.arsenalmusic.ru/)

– Asia Music Trade (http://www.asiamusic.ru/)

Major Distributors

Commercial Service Solutions

COMMERCIAL SERVICE SOLUTIONS

Counseling

– Goal to Increase U.S. Exports

– Provide Answers to Questions

– Find Local Resources Research

– Market Research Reports

– Country Commercial Guide

• www.Export.gov

• http://export.gov/mrktresearch/index.asp

– Customized Research

Counseling and Research

COMMERCIAL SERVICE SOLUTIONS

Gold Key Service– Appointments (typically four per day) with prescreened Russian firms – Background and contact information on potential partners– Customized market briefing with U.S. Commercial Service staff – Available market research on the relevant industry sector – Debriefing with U.S. Commercial staff to discuss results and plan follow-up

action Preliminary Market Assessment

– Conducted Prior to Gold Key– Determines Potential for your Product

Pricing Small/Medium Companies - $700 ($400 – preliminary) Large Company - $2,300 ($1,100)

Buyer Matchmaking

COMMERCIAL SERVICE SOLUTIONS

International Company Profile (ICP)

– Determines Suitability of Overseas Partners

– Factual Report Containing:

• Management details

• Business activities

• Product/service lines

• Financial condition

• Credit-worthiness

• Trading experience

• Market coverage

• Business connections in the target country Pricing

Small/Medium Companies - $600 Large Company - $900

Risk Assessment

COMMERCIAL SERVICE SOLUTIONS

Single Company Promotion (SCP)

– Product Demonstration or Reception

– Private Location

– Assistance With Invitation List

– Delivery of Invitations

– Follow-up

– Catering and Location Assistance

Pricing Based on Time and Actual Costs

Sales/Client Presentations

Contact us today.

Ken Walsh, Commercial Officer

[email protected]

+7-495-728-5369

Oksana Prokofieva, Commercial Specialist

[email protected]

+7-495-728-5405