Latvia is a member of the United Nations, the Council of Europe, the Organization for Security and Cooperation in Europe, the World Trade Organization, the Council of the Baltic Sea States and the European Bank for Reconstruction and Development. It has contributed to NATO peacekeeping missions and is taking part at the present time in the international missions to Afghanistan and Irak.
Non Tariff Barriers
In accordance with its European Union membership since May, 1st of 2004, Latvia applies the European Union trade policy such as antidumping or anti-subsidy measures. The European Union import regime applies to Latvia especially in the textile products sector. If Latvia adopted the main part of EU regulations on May, 1st of 2004, a transitory period has been granted to the country regarding some EU rules like the freedom of movement for workers or sabotage inside some countries. For further information about each candidate country’s compliance with the rules, please consult the guide to the enlargement of the EU published by the European Commission.
The European Union has a liberal foreign trade policy, few products need import licenses. However, you should make sure that importing a particular produce does not require an import license. There are some restrictions, especially on farm products, following the implementation of the CAP (Common Agricultural Policy): the application of compensations on import and export of farm products, aimed at favoring the development of agriculture within the EU, implies a certain number of control and regulation systems for the goods entering the EU territory.
When being introduced into Latvia, some products must be "CE" marked in respect of the European Directives adopted on the basis of the New Approach, since 1 May 2004.
Customs Duties and Taxes on Imports
No Customs duty is payable for almost all types of non-agricultural goods moving between Latvia and the member countries of FTA, EU, EFTA and Ukraine, if the goods are certified as originating from one of these countries. There is a list of more than 20 types of goods exempt from Customs duty (for example, humanitarian aid, specific donations, etc.).
When goods from inside the community are brought into Latvia, the exporter must obligatorily fill in a Declaration of Exchange of Goods (DEB) or an Intrastat Declaration at the end of the month. The Customs declaration (SAD) remains in force for trade between Latvia and third countries.
When the country of origin of the goods exported to Latvia is not part of the European Union, Customs duties are in accordance with the Common Customs Tariff (CCT) for all the countries in the Union.
The TARIC code (composed of 10 figures) defines the Customs duty rate and the community regulations applicable to products whose origin is in a country outside Europe.
As part of the "SAFE" standards set forth by the World Customs Organization (WCO), the European Union has set up a new system of import controls, the "Import Control System" (ICS), which aims to secure the flow of goods at the time of their entry into the customs territory of the EU. This control system, part of the Community Program eCustoms, has been in effect since January 1, 2011. Since then, operators are required to pass an Entry Summary Declaration (ENS) to the customs of the country of entry, prior to the introduction of goods into the customs territory of the European Union.
Commercial samples and other goods imported during interim periods are usually exempt from Customs duties. Requests for exemption should be addressed to the Latvian Customs Department by the exporter himself.
With a GDP per capita of USD 19,820 (IMF, 2021) and a median age of 44.4 years (CIA World Factbook, 2020 est.), the average Latvian consumer is less wealthy than their neighbours and older than most of their European counterparts (the EU median age was 43.9 years in 2020 - Eurostat). The Latvian population follows similar demographic trends to the rest of the Baltics with a rapidly shrinking (net growth rate -1.1% in 2021 - CIA World Factbook, 2021 est.) and ageing population (people aged 0-24 years comprise 24.32% of the total population - CIA World Factbook, 2020 est.). Latvian consumer has recovered from the financial crisis and is now able to save more money (disposable income rising from EUR 286 in 2010 to EUR 582.82 in 2019 - Central Statistical Bureau of Latvia, latest data available). Nonetheless, the market remains highly divided with Latvia having one of the highest income inequalities in the EU (Gini score of 35.2 points as opposed to the EU average of 30.2 points in 2019 - Eurostat, latest data available).
Price is the most prominent factor in consumer spending, ahead of product quality and store features. More affluent consumers are brand-conscious and willing to pay a higher price to purchase from their favourite brand. Consumers spend an important part of their income on food as well as housing and utilities, nonetheless, their share in total expenditure has been declining in recent years. The share of food in total expenditure fell from 26.2% to 23.3% between 2016 and 2019 whereas housing and utilities accounted for 14.6% in 2019 as opposed to 15.3% in 2016. Spending on recreation as well as hotels, cafes and restaurants increased in the meantime (8.1% as opposed to 7.6% and 5.4% as opposed to 4.8%) (Central Statistical Bureau of Latvia, 2020). Moreover, there is a growing interest in e-commerce as in 2020 65.9% of the total population have ordered any goods or services (Central Statistical Bureau of Latvia) and the country had the highest e-commerce growth among Baltic countries (28.5%) (Eurostat, latest data available).
Latvia has three major ports (Riga, Ventspils, and Liepaja) as well as a major airport in the capital city Riga, which has become a transportation hub. Latvia is well connected via railway, which runs largely east-west, to former countries of the Soviet Union. Rail Baltica, a proposed north-south rail corridor that would link Estonia, Latvia, and Lithuania to the rest of Europe is in the planning phase with an expected completion date of 2025. Riga is the major distribution center for the country. According to Euromonitor International, compared to 2016, total retail trade turnover rose by 4.2 % in 2017. Turnover of retail trade in food products increased by 3.9 %, turnover of retail trade in non-food products, except for retail sale of automotive fuel, grew by 5.1%, whereas turnover of retail sale of automotive fuel – by 2.9 %.
Imported food products, wholesale and retail trade operations are carried out by private wholesalers, specialised in food-processing, but a small part of them is considered as secure and strong enough to start commercial operations. The biggest Latvian companies are Interpego, Prodimex, Imanta, Mono trading house, Interskonto, Laval and Hanzas Uznemums ; they have their own network of small food stores and groceries or they are able to supply a lot of small retail stores characterising this country's commercial background.
Processing industries also import meat, or cattle, directly. Seasonal agriculture and food-processing products are often sold in agricultural markets located in big cities, despite the emergence of small groceries and production stores networks.
The Latvian market is largely dominated by supermarkets and hypermarkets (45% market share), while markets and local shops represent respectively 30% and 25% market share. Major mass merchandisers include:
Latvia has a population of 1.5 million people, and the internet penetration rate in the country is estimated at 76.3%. The share of monthly active smartphone users was estimated to be at 45.7% in 2017 (Statista). Latvia ranks 19th out of the 28 EU Member States in the Digital Economy and Society Index (DESI) 2018 published by the European Commission. Overall, it made good progress over the last years. Nevertheless, according to the report, half of the population has no or low digital skills. Latvians’ use of internet services (e-banking, social media, news, etc.) continues to be above the EU average, but only 55% of people who used the internet in the last year declared that they had shopped online in 2017 (whereas the EU average is 68%). The most popular web search engines in Latvia are Google (95.5%), Bing (1.6%) and Yandex RU (1.3%).
E-commerce sales in Latvia generated a total annual revenue of more than US$ 280 million in 2017, and this amount is expected to increase to US$ 418 million by 2021 (Eurostat). The biggest sectors in online retailing are electronics and fashion, which accounted for US$ 99 million and 79 million, respectively. Other common purchases were tickets for events, household goods, travel and holiday accommodations. However, when it comes to the proportion of turnover generated by online business, Latvia is still behind its neighbours. According to data from Eurostat, in 2017 only 9% of Latvia’s business turnover came from online sales (the rate was 13% for Lithuania and 16% for Estonia). According to Statista, there are currently 890,000 e-commerce users in Latvia, with an additional 40,000 expected to be shopping online by 2022. A report from Gemius shows that in Latvia almost 80% of consumers shop online because they can find better prices on the internet, while 69% of users like the fact they can easily compare offers from different stores (in fact, around 55% of Latvians use price comparison sites before they buy something). 40% of Latvian users mention the long delivery time as one of the drawbacks of shopping online. Also, around 35% of consumers feel they cannot find necessary information about the product they want to buy. 1.6 million people in Latvia are active social network users. Among the main platforms are Facebook (580,000 users in 2016), Twitter, Pinterest and YouTube. There are 420,000 Instagram users in Latvia of which 58% are female and almost 85% are aged 18-44. However, the largest social networking website in Latvia is Draugiem, which has approximately 2.6 million registered users.
Organizing Goods Transport
Main Useful Means of Transport
The strategic geographical situation of Latvia allows the country to trade both with the CIS countries and with Europe. The ports of Ventspils and Liepaja are not frozen during the winter so there can be freer movement of goods than in the other Baltic countries.
40% of Latvia is covered in forests. With time, activities have been diversified, but the timber industry today covers a wide spectrum from raw materials to finished products, via intermediate productions. There are more than 1 000 companies operating in relation with the timber industry in Latvia (industries, businesses, services).
Other important sectors are metallurgy (24% of market shares), plastic and chemical products (7% of market shares) and textile (6% of market shares).
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