Extension of duty on flour: Georgia balances tariffs on imported goods to support local farmers.

Analysts believe that the introduction of a duty on wheat imports has successfully balanced fluctuating tariffs and created competitive conditions for mills.

The government of Georgia has extended the temporary duty on the import of flour, barley, and bran from Russia until March 1, 2025.

In the summer of 2023, Georgia imposed a temporary duty on the import of flour, barley, and bran to support local farmers who faced problems selling their harvest due to low demand. Initially, the duty was supposed to be in effect until November 1, 2023. However, its term was extended twice - first until March 1, 2025, and then until September 1, 2024.

The Association of Grain and Flour Producers of Georgia supported the extension of the duty, considering it effectively balances fluctuating tariffs on imported wheat and creates competition among mills.

This extension of the duty will facilitate long-term prospects, including for farmers who store wheat and want to ensure stable supplies to mills after September.

According to the government decree, the import of wheat flour exceeding 200 kilograms is taxed at 0.2 lari per kilogram. In October 2023, this tax was increased by 25% to 0.25 lari per kilogram. As for the import of barley and bran exceeding 200 kilograms, a tax of 0.1 lari per kilogram is levied on them.

Georgia annually consumes approximately 800 thousand tons of flour, with about 78% of this volume being imported from Russia, which is the largest supplier, including of grain.

With the increase in Russia's export duty on wheat and, consequently, the increase in the volume of flour imports, on which no export duty was levied, all mills in Georgia had to close in the first quarter of 2023, as was the case in 2021. As a result, barns were filled with wheat, and farmers had nowhere to put their harvest.

Georgia's flour industry faced difficulties in the summer of 2021 after Russia introduced a floating duty mechanism on grain exports. Therefore, by increasing flour imports from the Russian Federation several times, Georgia reduced wheat imports by more than 30% in 2022. As a result, almost all mills in the country had to close.

Mills began to re-import wheat and increase production only towards the end of 2022 when the export duty rate on wheat became floating.

Subsequently, mills faced a second crisis in March 2023 due to increased flour imports and a rise in Russia's export duty on wheat.