New Bill Targeting Graft at Customs

A group of State Duma deputies on Friday proposed a major overhaul of the Customs Code aimed at simplifying the Byzantine process of importing goods into the country and stamping out corruption.

Should the legislation be approved in the fall, authorized consignees such as customs carriers, brokers and warehouse owners will be able to clear goods at their own facilities, rather than the murky state customs warehouses.

No provision, however, is made in the draft bill for the creation of a centralized electronic database, which exporters say is sorely needed to speed up clearance and root out corruption.

The amendments, drafted after extensive input from more than 65 companies, will improve customs administration, risk control and the quality of post-auditing procedures, Valery Draganov, the Duma deputy leading the initiative, told reporters after presenting the legislation to the Duma's council on customs and tariffs on Friday, the last day of the Duma's spring session.

"What we intend to do is not just tighten the screws but to make customs clearance of goods as easy as possible and speed up the turnover of goods," Draganov said in a separate e-mailed statement.

The reform should also help boost the economy and increase the amount of customs tariffs collected by the government, said Draganov, a former chief of the Federal Customs Service.

Clearing up corruption in customs clearance has a clear economic benefit. Russia is a net importer of products, bringing in 81 percent of its manufactured consumer goods in 2006, the latest year for which figures are available, according to the World Trade Organization.

"The economic effect for Russia is quite significant. Over 50 percent of the federal budget is generated from customs revenues," said Dmitry Tchelstov, chairman of the customs and transport committee of the Association of European Businesses in Russia.

"The main problem with the current situation ... is that the procedures are quite clear, but they are a little bit complicated on implementation and not very logical from a business perspective," he said.

The problem with current legislation is that its extreme complexity almost seems designed specifically to encourage corruption, said Geritt Spaas, who worked in the Soviet Union and Russia for 18 years as the former owner and operator of Consulate Cargo International, a leading importer.

He recounted with frustration the schemes he said he saw, in which customs officials reduced or avoided duties entirely in exchange for bribes.

"You could have a truck full of video equipment, and they would declare it paper or potatoes or something," he said. "So, instead of $3 million, they would declare $100,000 of value. And so this became a big business."

A call to the Federal Customs Service for comment went unanswered after office hours Friday. The service has acknowledged that corruption is a problem and vowed to root it out.

Vladmir Efremov, a lawyer specializing in customs issues at Baker & McKenzie in Moscow, said the new legislation would help ease corruption, but he expressed regret that it did not address some of his clients' key issues, such as the wild discrepancies in the customs valuation of imported goods.

The key element of the new legislation is the ability of consignees to clear their own goods, said several people familiar with the document. By removing another layer of bureaucracy, importers can mitigate the risks posed by unchecked corruption in the customs service.

"You will not be obligated to collect as many documents as possible, so you will be required to give only the documents that are listed in the Customs Code and in the decrees of the Russian Federal Customs Service," Efremov said. "From this point of view, it will be better."

Spaas was less optimistic. He said the new legislation would not address the problem until there was a true will for change from above to eliminate corruption.

He urged the adoption of an electronic database like those in Europe and the United States as a means of going around corrupt customs officials who are incapable, he said, of changing.

"It's too late," he said. "These guys are used to driving a Mercedes and are used to going on holiday four times a year, and you aren't going to change this."

The Association of European Businesses seconded Spaas' call for a unified electronic database to streamline the customs clearance process and eliminating possible points for corruption.

Previously proposed changes to the Customs Code have languished under committee for years, giving the impression that people in powerful places were opposed to legitimizing the law.

Several high-profile smuggling cases involving the security services have surfaced in the past decade, perhaps most famously a 2000 incident involving the Grand and Tri Kita furniture stores, which were accused of falsifying the weight and purchase price of imports. Family members of former FSB deputy director Yury Zaostrovtsev were linked to the stores, and Duma Deputy Yury Shchekochikhin died under unclear circumstances while investigating the case, among other things.

President Dmitry Medvedev has made the fight against corruption and restoring the rule of law the centerpiece of his young administration.

Although the timing of the legislation coincides with Medvedev's broader push against corruption, one official involved in drafting the legislation denied any connection.

"We could have made the changes earlier. It's just a coincidence that we're making the changes now, when Medvedev is focusing on corruption," Andrei Kutepov, the first deputy head of Gokhran, the state precious metal depository, said at the news conference with Draganov.

The Federal Customs Service and the Economic Development Ministry -- which will be able to weigh in on the amendments -- have been informed about the pending legislation, Draganov said. Negotiations with them may start as early as this week.

The full form of the legislation will not become clear until the fall, when Draganov hopes to put it to the full Duma for approval. Until then, importers will have to wait and see.

"Let's see what Mr. Draganov recommends to do, because at the moment it's not clear what his proposals are," Efremov said. "Let's look at them, and then we'll see whether they solve the problems with customs clearance."

Staff Writer John Wendle contributed to this report.