Georgia has extended the term of the duty on import of flour

Georgia consumes about 800 thousand tons of flour per year, most of which comes from Russia

The term of validity of the Georgian government’s resolution on introducing a temporary duty on flour imports has been extended until September 1, 2024, according to a government resolution on the website of the country’s Legislative Herald.

In order to support Georgian farmers who had problems with selling their grain harvest due to lack of demand for it, imports of more than 200 kilograms of wheat flour were taxed at the rate of GEL 0.2 per kilogram from June 12 to November 1, 2023. In October, the deadline was extended until March 1, 2024, and the duty was increased by 25%.

The government named the purpose of introducing the duty as increasing the competitiveness of Georgian wheat and promoting its realization on the local market. The government made such a decision on the condition that the sector would not allow the price of bread to rise.

Georgia consumes about 800 thousand tons of flour during a year. Most of the wheat flour consumed (about 78%) comes from Russia, which is the largest supplier, including grain.

Tough times

With the increase in export duty on wheat from Russia and the resulting increase in imports of flour for which no export duty was levied, all mills in Georgia suspended production in the first quarter of 2023, as they did in 2021. As a result, barns were overflowing with wheat, and farmers simply had nowhere to put their harvest.

Tough times for Georgian flour millers came in the summer of 2021 after Russia introduced a mechanism of floating duty on grain exports. Therefore, Georgia increased its flour imports from Russia several times and, accordingly, reduced its wheat imports by more than 30% in 2022. As a result, almost all mills in the country stopped working.

Mills started importing wheat again and increased production only by the end of 2022, when the floating export duty rate on wheat decreased.

The mills faced a second production crisis in March 2023 due to the increase in flour imports and the increase in the export duty on wheat from Russia.

Therefore, as a result of consultations of the Government of Georgia with millers, Georgian wheat producers and bread producers, a temporary tax on flour imports was introduced from June 12, 2023. The purpose of the temporary tax was to restore equal tax regimes for flour and wheat on the Georgian market, thus ensuring the operation of the flour milling industry.

The introduction of the temporary duty helped to restore conditions of equal competition between flour imports and wheat imports. As a result, mills resumed operations.

Tags: Flour, imports, Georgia, restrictions