Lithuania is member of the European Union since 2004 and has close ties with nearby Baltic and Eastern European countries. It is well integrated in the international trade system and is party to a number of agreements.
Non Tariff Barriers
In accordance with its European Union membership since 1 May 2004, Lithuania applies the European Union trade policy such as antidumping or anti-subsidy measures. The European Union import regime applies to Lithuania. If Lithuania has adopted the main part of EU regulations on 1 May 2004, a transitory period has been granted to the country regarding some EU rules like freedom of movement for workers or cabotage inside some countries. While the European Union has a rather liberal foreign trade policy, some products need import licences. There are some restrictions, especially on farm products, following the implementation of the CAP (Common Agricultural Policy): the application of compensations on the import and export of farm products, aimed at favouring the development of agriculture within the EU, implies a certain number of control and regulation systems for goods entering EU territory. When being introduced into Lithuania, some products (mainly those having a link with safety) must be 'CE' marked in respect to the European Directives adopted on the basis of the New Approach and the Global Approach.
Customs Duties and Taxes on Imports
As a member of the EU, Lithuania does not apply customs duties on operations carried out within the EEA. The Common Customs Tariff of the EU applies to goods originating outside the area. Lithuania tariffs can be found on the website of the Integrated Tariff of the Republic of Lithuania (LITAR), which provides information on EU tariff measures in addition to national taxes and import/export restrictions and prohibitions.
The duties for non-European countries are relatively low, especially for manufactured goods (4.2% on average for the general rate); however, textile, clothing items (high duties and quota system) and food-processing industry sectors (average duties of 17.3% and numerous tariff quotas, PAC) still face protective measures.
The combined Nomenclature of the European Community (EC) integrates the HS nomenclature and has supplementary eight figure subdivisions and its own legal notes created for community purposes.
As a member of the European Union, Lithuania applies EU Customs Code. When introducing goods into Lithuania, exporters shall fill in a Declaration of Exchange of Goods or Intrastat declaration. When the country of origin of the goods exported to Lithuania is not part of the European Union, customs duties are calculated Ad valorem on the CIF value of the goods, in accordance with the Common Customs Tariff (CCT).
As part of the 'SAFE' standards set forth by the World Customs Organisation (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 Programme eCustoms, has been in effect since 1 January 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.
A new system, the Union Customs Code (UCC), entered into force in October 2013 as part of customs modernisation reform.
Goods transiting Lithuania are not subject to duties. It is possible to obtain a temporary duty exemption for items such as commercial samples and for goods intended for public displays at exhibitions or trade fairs.
With a GDP per capita of USD 22,240 (IMF, 2021) and a median age of 44.5 years (CIA World Factbook, 2020 est.), the average Lithuanian consumer is around the same age as consumers in other Baltic states and has a wealth status comparable to theirs (lower than Estonia, higher than Latvia) (World Bank). Lithuanian population is rapidly shrinking (-1.04% net growth rate coupled with a net migration rate of -4.75 migrants/1,000 population - CIA World Factbook, 2021 est.) and the share of the young population in the age structure is relatively low (people aged 0-24 years account for 25.49% of the total population - CIA World Factbook, 2020 est.).
The Lithuanian consumer is still price-sensitive despite a steady GDP growth as the purchasing power is not as high as in most European Union countries. The consumer market is also characterised by considerable income inequality as Lithuania has a Gini index score of 35.4 points (one of the highest in the EU - EU average standing at 30.2 points) (Eurostat, 2019 latest data available).
The market for consumer products in Lithuania is fragmented. Consumer preferences differ according to income, age and social group. More affluent consumers consider brand name and quality to be important selling points, with price an indicator of quality. In general, the Lithuanian consumer considers foreign goods to be a synonym of high quality. Lithuania’s growing economy has led to an increase in consumer confidence and household spending. Consumers have also become more interested in new health trends and gourmet food along with other discretionary items, and expect better customer service. As a sign of economic improvement, there has been a considerable drop in price promotion campaigns.
Today, the retail and wholesale trade represents 18,2% of the total economic activity in Lithuania, according to the ministry of Economy. The Lithuanian retail market is dominated by large hypermarkets with Maxima Stores holding 50% of the market share. Next 40% of the retail market is shared by IKI, Norfa, RIMI and PRISMA, principally. Independent retail stores hold about 10% of the market share. The entry of the Lidl discount chain in summer of 2016 is likely to greatly influence the shape of the Lithuanian market. Over the next few years Lithuania is expected to continue to achieve solid economic growth.
A majority of product distribution and sales is currently carried out by private distribution networks. Since the country's independence, a large number of private specialised stores (do it yourself, ready-to-wear...) were created. Concerning distribution networks, there are generally import companies that possess their own store or have obtained exclusivity for foreign brand distribution. These companies hold simultaneously the function of importers, wholesalers, distributors and retailers. There are a few large stores, such as Univermag. It is the same for franchised stores. The cash and carry format has gained popularity quickly, as small, traditional retailers appreciate the wide selection of products sold at competitive prices. Indeed, most of the major chains in the cash and carry channel target small, traditional retailers, HRI outlets, and institutions.
Supermarkets are nearly inexistent in Lithuania and are restricted to the food sector, where various shop chains (Economia, IKI...) share the market. These companies hold supermarkets with a surface exceeding 1,000 m² and are located in the country's main cities. Most of the products are imported and the prices offered, especially for fruits and vegetables, are not very competitive with the prices of the local market that remain very popular for the local population. The entry of the Lidl discount chain in summer of 2016 is likely to change the current market structure. Lidl plans about 80 perspective locations for future development.
Large-scale retail is without doubt one of the most thriving sectors in Lithuania and major brands in the industry are owned by national companies. The sector is closely linked to land-use planning as supermarkets must first and foremost be easily accessible for their customers who choose where to shop largely based on the accessibility. Since the declaration of independence and accession to the European Union, foreign companies have sought to enter the Lithuanian market and develop large shopping centres and brand names. Major retailers include:
Lithuania is home to almost 3 million people and has an internet penetration rate of 77.2%. The share of monthly active mobile internet users was estimated at 58.5% in 2017 (Statista). Lithuania ranks 13th out of the 28 EU Member States in the Digital Economy and Society Index (DESI) 2018 published by the European Commission. Lithuania performed particularly well in terms of connectivity and the integration of digital technology. Lithuanians are very active online in using new services over mobile, e.g. payment instruments, mobile e-signature, car parking, banking services, etc. When dividing internet users by age groups, 97% of 16-24 year olds, 90% of 25-34 year-olds and 86% of 35-44 year-olds log on daily. People within the 45-54 year-olds group and over 55s show a 78% and 70% daily penetration rate, respectively. The most popular web search engines in Lithuania are Google (95.8%), Bing (2 %) and Yandex RU (1.2%).
According to a report by PPro, the Lithuanian e-commerce market value is estimated to be worth US$ 500 million and is growing at an annual rate of 12.2%. There are currently 1.41 million e-shoppers in Lithuania, with this number expected to increase to 1.85 million by 2022 (Statista). It is estimated that 18% of Lithuanian small businesses sell their products and services online and almost 10% use e-commerce platforms to sell abroad. On the other hand, foreign online stores already have a 36% share in the country. The average Lithuanian e-shopper spends US$ 393 a year online, with entertainment, electronic goods and clothing as the main categories. 33% of Lithuanians make an online purchase at least once a year. According to a survey by the Lithuanian postal service, the most common reason for Lithuanians not to shop online is the desire to examine the goods personally before buying. According to the Digital Economy and Society Index (DESI) 2018, although the number of internet users who buy online is still well below the EU average, there has been a 5 % increase and Lithuania gained two positions in the ranking compared to the previous year. About 70% of Lithuanian e-shoppers say home delivery is one of their top reasons to shop online, whereas when it comes to drawbacks of online shopping, 36% of Lithuanian mention the long delivery time (Gemius). Lithuanians pay for 48% of online purchases by using online bank transfers. 23% are paid for using a payment card, 14% with cash, 7% using an e-wallet, and 7% with various other payment methods (PPay). In 2017, 54% of all individuals used social networks in Lithuania. Facebook is the most used social network, with around 1 million users, followed by YouTube, Pinterest and Twitter. There are 420,000 Instagram users in Lithuania, of which 80% are aged 18-44.
Organizing Goods Transport
Main Useful Means of Transport
Lithuania has the best roads of the region. Transport of goods by road is efficient and can be done in all directions. The EU recognized Lithuania as a prime transport center in the region and the EU's transportation Commission designated the two routes running through Lithuania, the North-South highway and the rail route connecting Scandinavia with Central Europe as well as the East-West route linking the huge Eastern markets with the rest of Europe as being the ten most important in Europe.
Competitive sectors of industry include ICT (the market is growing faster than the European average and is quite attractive ; it received 15% of all the FDI in the country), Biotech, lasers (important know-how and production), machinery and electrical equipment, metal processing and transport, plastics, furniture, wood processing and paper industry, textile and apparel.
All of these industries are among the most attractive of the country, and foreign investment is developed in these areas.
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