Problems relating to Trade and Investment on Russia

9. Restrictive export/import trade, duty, and customs clearance
Issue	Issue details	Requests	Reference

(1) High Import Duty	- Tariffs on watches are based on both ad valorem and fixed amount. -- Wristwatches (housed in precious metal case): EUR 6.00 or 15.7%-17.3%, whichever is higher. -- Wristwatches (housed in cases other than in precious metal): EUR 4.00 or 10%, whichever is higher. - Import duty is high on clocks. - The high import duty rate on cosmetics (compared with EU particularly) suppresses a profitable operation of MFS (a member firm's subsidiary) - In some countries, zero duty applies to single function projectors (an ITA product), while high duty rates apply to mufti-function projectors. - Relative to other countries, import duties are much higher in Russia. - Import duties are high across the board. While the Russian Government (GOR) has acceded to WTO and openly announced reduction in customs duties, the precise schedule to reach the final goal remains in the dark.	- It is requested that GOR: -- repeals minimum import duty rates, and -- unitises all import duty rates into Ad Valorem percentages. - It is requested that GOR repels or reduces the tariff rate. - It is requested that GOR works toward repeal of the import duty levy. - It is requested that GOJ: -- approaches GOR for problem solving, -- obtains confirmation on the latest information concerning expansion of ITA, and -- provides on continual basis information on future movements of GOR. - It is requested that foreign considers reducing import duties to adequate levels.
	(Info) - The following is a web site of private information source (in Russian). (http://www.tks.ru/db/tnved/tree)
	(Action) - "The Customs Code" of the customs union of Russia, Belarus and Kazakhstan that provides for the uniform regulations and procedures of the 3-countries as part of the customs union established by the 3-countries, and "The Federal Law On Customs Regulation in the Russian Federation" FL No. 311-FZ On Customs Regulation in the Russian Federation of 27 November 2010 (became effective by the end of 2010): these two stipulate the basic principles for foreign trade, while customs union's regulations, Russian federal customs service (former state customs commission) Legislation and Tax Laws prescribe import transactions.
	(Improvement) - In August 2012, Russia formally acceded to WTO.

(2) Abrupt Changes in Duty Rates

- Changes are frequent in the import tariff rates in order to accommodate the needs of the national budget, or by the lobbying activities of certain industries, etc. Request for increase in tariff abruptly shows up for products, which are not manufactured domestically in Russia, in contravention of the international rules.

- Despite the Russian's accession to WTO in 2012, its raise of customs tariffs on television receivers and refrigerators is in contravention of the WTO agreement, requiring special attention.

- Tax Laws

(3) The End of Import Duty Preferential Measures

- The so-called Proposition 566 requires application for a contract with the Ministry of Economic Development (MED) by 28 February 2011. Therefore, since that deadline, MED has accepted no further application, terminating the preferential measures.

- It is requested that MED resumes acceptance of application for contract.

(4) Violations in Concessionary Rate(s) on Import Duty	- Russia is under obligations to observe its international undertakings, including observance of the (Concessionary) import duty rates upon its accession to WTO. However, GOR levies import duty exceeding the concessionary rate(s) on combined freezer/refrigerators for home use. - Since accession to WTO, GOR seems to take internationally unacceptable change in tariff rates, setting aside the question of possible WTO violation: A) Refrigerators: 20% or EURO0.24/L, making effective rate in excess of 20%. B) Television Receivers: GOR intends to raise the 10% going rate to 16% (although not in WTO violation, as 16.7% was the tariff rate declared upon GOR's accession to WTO). - The nebulous change in tariff rates since GOR's accession to WTO impairs predictability in business operation, such as sporadic tariff raise on equipment not satisfying GLONASS requirements. (Kazakstan's opposition has resolved this problem at the Tripartite Customs Union). Although within CTR, there has been a move toward raise of the tariff rate after GOR's accession to WTO. While it is a matter of no consequence to Samsung, Lucky Goldstar, Philips, etc. that manufacture television receivers in Russia, Japanese manufacturers without manufacturing facility in Russia face a severe disadvantage on tariff, making prices of their products less competitive.	- The GOR's Measures described in the left column are inconsistent with the WTO Agreement (Article 2 of GATT). - It is requested that GOR shows to the extent allowable, the Road Map for the future projection/plan, instead of making sporadic stop and go changes, such as not raising the tariff rates even within CTR.	- Common Customs Tariff of the Customs Union, 16 July 2012
	(Info) - Russian import duty on "Combined Refrigerator-Freezers for Home Use" (1) Combined refrigerator-freezers exceeding 340L in cubage (HS code 8418.10.200.1) -- WTO concessionary rate ("WCR") = 18.3% -- Russian rate = [WCR] or [EUR0.16 x cubage (L)], whichever is larger -- Conflict with WCR arises when import price x 18.3% is less than EUR0.16 x cubage (L) (2) Combined refrigerator-freezers, 340L or less in cubage (HS code 8418.10. 800.1) -- WTO concessionary rate ("WCR") = larger of 18.0% or EUR0.198 x (L), however, with 18.0% cap, whichever is larger -- Russian rate = larger of [WCR] or [EUR0.198 x cubage (L)], (without 18.0% cap) , whichever is larger -- Conflict with WCR arises when import price x 18.0% is less than EUR0.198 x cubage (L) - GOR has adopted the common tariff under the Tripartite Customs Union (TUC) between Belarus, Kazakhstan and Russia and levies customs duty under the common customs tariff of the customs union, promulgated by the Eurasian economic commission. - Common customs tariff of the customs union is enacted by the Eurasian economic commission: (http://www.eurasiancommission.org/ru/act/trade/catr/ett/Documents/ett84%2001.01.2014.pdf)

(5) Inadequate HS Code Classification

- On imported hydraulic shovel, no distinction is made between new and used products. (Such distinction is made in the case of Japan.)

- It is requested that GOR makes distinction at all costs in its customs statistics between the new and used vehicles, although it may take coordination with its customs system. In the growing severity of competition, it is imperative to keep abreast of the import / export status of each country. (Including the distinction between new and old vehicles, it is requested that GOR harmonises its HS code with Japan and the rest of the countries.)

- Customs Tariff Schedules

(6) Inefficient and Nebulous Customs Clearance Procedures	- A Firm selling products via its Subsidiary in EU to a Russian distributor faces difficulty in the local import customs clearance on installation jigs, spare parts, and optional items by its Russian distributor. - Relative to import of high-purity alumina, MFS tried to get the goods cleared through the customs at the import duty in accordance with the HS-Code, attaching analysis report by the third party institute, MSDS (Material Safety Data Sheet), etc. However, the Russian customs authorities (RCA) enforced its own sample analysis, stating the time schedule: 3-months for analysis and 1 year for completing the procedures. In the end, RCA accepted member firm's original submission. However, to this date, there has been no refund of the import duty. With the change of the customs staff, the entire procedures must go back to square one. It interferes with the MFS's global business development. - Samples, catalogues, etc. sent from Japan to Russian local purchasers must go through difficulty with varying requirements each time. It takes much longer time than the estimated time for customs clearance, or in the worst case, they get returned to Japan, marked: "No entry permitted".	- It is requested that GOR streamlines and expedites import customs clearance. - It is requested that GOR takes steps to accept: -- analysis report by the third party institute of exporting countries, -- measures taken under MSDS, and expedite the procedures. - It is requested that GOR streamlines the import customs clearance process that is commonly shared throughout.	- Customs Act
	(Info) - Please refer to the following web site of Russian Federation Customs Service at: (http://eng.customs.ru/).

(7) Nebulous Customs Valuation

- The customs at Nakhodka and Vladivostok insist that prices for the steel products imported by a Japanese firm and declared on the invoices are too cheap, demanding explanation and production of a huge volume of additional documents, as well as temporary posting in bond of extra amount of import duty calculated in accordance with the prices alleged by them to be adequate. Such cases have frequently occurred recently, despite the fact that the Japanese firm purchased those products at the going market prices.
- From time to time, Russian customs unilaterally levies customs duties based on the dutiable value determined at its sole discretion. In order to avoid this treatment, Member Firm's Subsidiary (MFS) has submitted twice a year to the custom's authority a vast amount of materials, expending much time and human resources on their preparation. Further, it this happens, it takes huge materials and time to request return of materials, and sometimes return can be denied in certain cases, which just incurs additional expenses. MFS is exposed to the risk of going into unnecessary work and incurrence of additional expenses.
- MFS purchase price list is on file at customs. Where a product is imported at the special price lower than the normal price, frequently customs require submission of contract with manufacturer, and explanatory letters. During this time, the goods stay at customs. Sometimes MFS is told the customs do not make clearance without amending value on the documents. It is necessary to make upward price adjustment at times to get the goods cleared through the customs.
- Import duty is levied on the import price. It follows then that when import price is reduced, it should be recalculated based on the reduced price. However, in practical implementation, the same import duty based on the pre-reduction price remains payable. While it is possible to receive duty refund for the substantive overpayment of import duty after negotiation with the customs authorities, in the case where reductions are simultaneously made both on the import price and the retail price, the refund procedures are quite complex to the extreme, and time consuming (for more than half a year) from the filing date of application to receipt of refund.
- Due to some Russian importers' rampant customs duty evasion by undervaluation for high priced foods, especially fishery products, legitimate importers deprived of price competitiveness are no longer able to run a viable business.
Russian customs authorities (RCA), seeming to be aware of the rampant undervaluation practices, have taken a comprehensive measure based on its own evaluation of the unit prices of all imports. It equally affects the reduction of unit prices by the legitimate business operation through their own genuine business efforts.
Moreover, it seems RCA has extended import restrictions to the operation through the offshore settlement company. However, it alienates the business of the third parties in good faith via the triangular settlement of transactions. It is quite possible (although without proof) RCA is turning a blind eye. For expecting something in return.

- It is requested that the RFG authorities:
-- makes customs clearance adequately based upon the import customs clearance documents, and
-- approves the customs clearance of the imported goods.
- It is requested that Government of Russia (GOR) aims at attaining the full transparency in customs clearance procedures, unaffected either by whim and fancy of the customs personnel or customs budget issues, etc.
- It is requested that GOR takes steps to:
-- expedite examination,
-- enhance efficiency, and
-- assure transparency in customs clearance procedures at the special price.
- It is requested that GOR takes steps to calculate import duty based on the import price of the product at each point of import.
- It is an idea to shift the customs duty levy from ad valorem to per specific duty.

- Customs Act
- Article 68 of the Customs Code of the Customs Union

(8) Existence of Products Prohibited from Customs Clearance

- Food products in general and medical supplies in general are prohibited. Limited only to customs at Sankt Peterburg, customs clearance is prohibited on air-freighted personal computers and equipment.

- Customs Act

(9) Import Quota

- GOR and 5 Ukrainian steel pipe mills reached agreement in January 2005 setting forth the import quota of 395,000 tons for the year 2005, with annual quota increase by 2% in 2006 and onward.

- It is requested that GOR repeals the quota system.

(10) Raise in Import Duty

- Effective as from 14 February 2009, GOR has raised the following tariffs rates for a temporary 9-months period:
-- Wire rods, steel bars, stainless steel plates (increased by 10%, or 15% in total)
-- Cast iron pipe, seamless steel pipe, welded steel pipe (increased by 5%, or 20% in total)
On 12 December 2009, GOR extended by 9-months the levy of the raised tariff rates (excluding the 4-items of stainless steel pipe for which tariff reduction was announced on 28 September 2009).

- RFG Customs Decree No. 273 of 31 March 2009

(11) Customs Union

- Accompanying the establishment of the Tripartite Customs Union (TCU = Russia, Kazakhstan and Belarus), the change on product safety regulations and enactment of environment related regulations have increased the burdens upon member firms from having to comply with the requirement for description in the Russian, Kazakhstan languages, etc., which are different from the international norm, EU Regulations, etc.
- The acquisition process for licences and approvals of the Customs Union differs individually among the 3-countries so that applicant must prepare individually different materials for each country. In addition, applicant must file customs clearance application in certain cases individually for each country as the 3-countries conduct different customs check individually.

- It is requested that TCU do its best to make the regulations compliant to international norm in order not to increase unnecessary burden to the industry.
- It is requested that GOR takes steps to:
-- construct a common acquisition procedure for licences and approvals, and
-- make transparent the details of check and inspection upon customs clearance.

- Tripartite Customs Union
- TCU Technical Standard 020/2011, 004/2011

(12) Difficult Customs Clearance for Import from Germany

- Unless a firm in Japan establishes a subsidiary or a branch office locally in Russia, it is next to impossible to make direct sales from its German subsidiary to Russia, Belarus, and Ukraine, due to the complex customs clearance procedures.

- It is requested that GOR delineates the rules and regulations governing the basis for direct sales and transport of products to the territories mentioned in the left column.

- The Russian legislation on Customs Clearance

(13) Introduction of Export Tax

- Introduction of Export Tax at ease:
Eg. 1: 10% on Tungsten for one-year from December 2012
=> Tax levy remains unrepealed.
Eg. 2: Grains (Wheat) from 1 February 2015

- Introduction of export tax at ease leads to the loss of confidence in GOR in the market. It is requested that GOR reconsiders its improvement.

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