- Russian Foreign Trade: Trends and Potential Opportunities for Business. Customs Aspects
- August 14, 2014
- Law Firm: Dentons Canada LLP - Toronto Office
Following the imposition of sanctions by a number of European countries and the United States, the Russian Government is looking to develop and implement alternative means of developing foreign trade. The following options for creating conditions for growth in foreign trade using customs regulation are currently being proposed:
- Export incentives for Russian industrial products
- Suspension of imports of products from certain countries, including CIS member countries
- Application of import customs duties with respect to products imported from certain CIS member countries
- Creation of a free trade zone between the Customs Union and interested countries
- Russian Government prohibition on state and municipal procurements of various kinds of foreign goods
Export incentives for Russian industrial products
The Russian government has declared its main objectives with respect to encouraging exports of Russian industrial products: (1) growing exports by involving companies from Russian regions and small and medium enterprises, and (2) defending the interests of Russian companies abroad, including through WTO (World Trade Organization) mechanisms.
Experts see China, the BRICS countries, and ASEAN countries as the most attractive partners for exports of industrial products.
Notably, significant amendments have already been made to customs law to simplify customs processing procedures for export. A minimal package of documents is now required for customs declaration of goods not subject to export duties, and clearing the processed goods takes no more than four hours. The customs value of such goods is not declared, determined, or confirmed.
Suspension of imports of products from certain countries, including CIS member countries
Rospotrebnadzor and Rosselkhoznadzor have restricted/suspended/banned imports of a number of crops (fruit, tinned fruit and vegetable products) and meat from Moldova due to breaches of consumer rights and safety legislation. Hence, for objective reasons a niche has opened on the fruit and vegetable market.
A similar situation is developing with the restriction/suspension/prohibition of imports of certain Ukrainian products.
To date, import customs duty benefits have applied to products imported from Moldova and Ukraine as part of the CIS free trade agreement (duty-free imports of goods in mutual trade).
Application of import customs duties with respect to products imported from certain CIS countries
The Russian Ministry of Economic Development has initiated a review of the conditions of trade with Moldova after Moldova, a CIS (free trade agreement) member country, signed a European Union Association Agreement.
The Russian Government believes that the partnership with the European Union will require Moldova, at least, to accelerate the introduction of European technical regulations and standards that do not conform to Customs Union industrial, sanitary and phytosanitary legislation. The Russian Government will therefore be initially forced to take action to protect the Russian agricultural market.
One option under consideration for defending the Russian agriculture market is to impose the basic customs duties rates applicable to trade with countries that are not members of the CIS free trade zone on goods from Moldova. Notably, the procedure for applying the basic customs duty rates requires agreement at the level of Customs Union member countries and the presence of material grounds for their imposition.
Russia has already initiated the process of introducing a non-preferential procedure for goods imported from another CIS member country (Ukraine). This initiative was not supported by other member countries of the Customs Union (Kazakhstan and Belarus) for a number of reasons.
Creation of a free trade zone between the Customs Union and interested countries
Since the beginning of 2014, the Customs Union Eurasian Economic Commission has made several statements about the planned signing of a free trade agreement between the Customs Union and countries such as New Zealand, Vietnam, India, Israel, and the European Free Trade Association (EFTA), which includes Spain, Norway, Iceland and Lichtenstein. As yet, no agreements have been signed, but the Russian Government has declared that it is willing to expand the Customs Union and create new free trade zones with individual countries and regional associations, including in Europe.
In the event of the creation of a free trade zone with the Customs Union, the interested state will not only be able import products duty free, but will also be able use the opportunities provided by the Eurasian Economic Union, which the Customs Union will become in 2015. This economic space will significantly reduce the cost of doing business through uniform rules and standards.
So far Turkey has expressed a wish to establish a free trade zone with the Customs Union. The preparatory stage for negotiations on this matter has already begun.
Russian Government prohibition on state and municipal purchases of various kinds of foreign goods
RF Government Resolution No. 656 of July 14, 2014 imposes a ban on the access of certain machine-building goods originating from foreign states to procurements for state and municipal needs. The list of banned goods includes special equipment (bulldozers, excavators, fire engines, etc.), and cars. However, the same machinery and vehicles produced by foreign companies in Russia are not affected by the ban. In this way, the Russian Government plans to provide a stimulus for investment in Russia.