|                                                                                                                                                             |  | SHIPPING TO SIBERIA: IT CAN BE DONE                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                   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|**BISNISHome PageSearchBISNISEmbassyReportsCountryReportsIndustryReportsPublicationsSourcesof FinanceLeadsand EventsExchangeRatesState ExportsOtherSources** |  | Decembe 1997/January 1998by Jim WhitmanThe sheer distance of Siberia from the United States deters many American firms from this
important regional market, according to research conducted recently by the American Business
Center-Novosibirsk.  At first glance, it seems that U.S. exporters are at a significant
disadvantage when competing with European companies because of distance.  Shipping to Siberia
is less daunting than it seems, however, for those willing to adapt to the region's special
circumstances.U.S. exporters need to be extremely flexible when shipping goods to Siberia, where goods move
very long distances and seasonal temperatures range between -35 and +35 Celsius.   While most
major Siberian cities are located along the Trans-Siberian Railroad, many smaller settlements are
only accessible during the winter months, when the region's many unpaved roads are frozen. 
Also, because the physical distribution chain is so long, companies are often forced to use
airfreight to ensure timely delivery to important customers.  Finally, short-term sales opportunities
and changing customs requirements require companies to modify their shipping practices
frequently.Ship, Rail, or Road?
An analysis of shipping rates strongly suggests that transporting U.S. products to Siberia is not
prohibitively expensive.   Most of the cost of shipping to Siberia from the United States comes
from the rail portion of the journey, and in some cases service from some U.S. ports may be no
more expensive than from some European locations (see table).  Lower product prices can more
than make up for this differential.Goods destined for Siberia that reach Russia by sea are generally shipped via the Port of St.
Petersburg.  The major Far Eastern ports have developed an unfortunate reputation in Siberia for
lax security and poor service (something they are trying to rectify).  In fact, even though cities like
Krasnoyarsk and Irkutsk are closer to the Far East ports, shipping times from St. Petersburg are
generally shorter.  The Russian Government and various Russian Far East transportation
companies have announced lower tariffs to encourage foreign companies to ship cargo on the
Trans-Siberian Railroad.Rail is by far the most common means of transporting goods to Siberia.  For containerized cargo,
the 20-foot container is the dimension most frequently used in Russia. Very few Siberian cities
have facilities for handling 40-foot containers, although Sea-Land can now receive 40-foot
containers in Novosibirsk.  In general, use of containers is extremely expensive and more difficult
than shipping in ordinary freight cars, since much of the Siberian warehousing infrastructure is
designed to off-load goods directly from freight cars.A number of freight forwarders coordinate reloading and shipping cargo to Siberia.  These firms
lease freight cars from the Russian State Railways and provide conventional freight carriage,
refrigerated service, and open freight cars to all Siberian cities with rail service.   Siberian
Transport, Siberian Express, and Shirl are among the the most highly regarded.  It's hard to get
an accurate figure on shipping times, but exporters should err on the side of caution.  In general,
shipping times by train from Moscow are 4-5 days shorter than from St. Petersburg, since goods
traveling from St. Petersburg travel through Moscow and are delayed in railyards there.Trucking  is seldom used to ship goods to Siberia, although a number of Western and Russian
trucking companies serve the region's major cities.  Service is relatively expensive and the roads
into Siberia are bad.  As a result, trucks carry only a small volume of very high-value products
which are too heavy for airfreight and which would spoil too quickly for rail.Customs, Warehousing
It is often cheaper for a Siberian consumer-products distributor to buy imported goods in
Moscow from an intermediary than to import directly.  For various reasons, effective customs
rates are substantially lower in Moscow than in other cities.  Not surprisingly, Moscow importers
also can make very large purchases and take advantage of volume discounts not available to
smaller regional distributors.The availability of good-quality, secure warehousing is limited in Siberian cities.  With a few
notable exceptions, suitable warehouse space is controlled by local manufacturers with excess
storage capacity.  While these enterprises have warehouse space, they will often try to leverage its
availability to  become a distributor.  Frequently, however, manufacturers with excess warehouse
space are not the best suited to represent American firms.  With persistence it may be possible to
work out a straight commercial lease.  In Novosibirsk, Mashcomplex controls the third-largest
warehousing center in the New Independent States, with more than 25,000 square meters of
heated space and 25,000 square meters of open, unheated storage. Mashcomplex offers complete
distribution services on regular commercial terms.For more information on shipping to
Russia, visit BISNIS Online at www.mac.doc.gov/bisnis/country/ruship.html.Jim Whitman works for SAIC in Vienna, Virginia.This report is provided courtesy of the Business Information Service for the Newly
Independent States (BISNIS)