Customs Union: New Investment Opportunities and Points to Note in Administration

Wilhelmina Shavshina
Legal Director, Head of Foreign Trade Regulatory
DLA Piper

The Customs Union is notable for a number of additional tariff privileges and new opportunities accordingly. They are as follows:

Firstly, the import duty exemption for technological equipment, its components and spare parts, stores and other materials within the framework of the investment project implementation.

There are several prerequisites for the abovementioned privileges being applied: They are provided with regard to stores and other materials unless they are produced by member states of the Customs Union or if they are produced, but do not correspond to the technical characteristics of the project. The Commission of the Customs Union, besides drawing up and updating a list of investment projects, also determines the order of target application control.

Secondly, there is an import duty exemption for automotive components applied for the industrial assembly of other kinds of transport (buses, vans, trucks, auto cranes), besides cars.

The prerequisite for this preferential regime application is the relevant confirmation by the authorized body of the corresponding member state of the Customs Union. Currently, such confirmation is issued by the Trade and Industry Ministry on the basis of an Industrial Assembly Agreement signed with the Economic Development Ministry. According to the opinion of the Economic Development Ministry, the government should request the authorized bodies to elaborate on the procedure and the criteria for the application of the privilege concerned.

Conditions for the application of the preferential treatment scheme to other types of transport, assembled within the framework of industrial assembly in the member states of the Customs Union, should be devised under a separate decision by the Commission of the Customs Union.

Thirdly, the import duty exemption for the import of cars and other types of transport assembled in Russia under an industrial assembly scheme to the member states of the Customs Union is also permitted.

The conditions for obtaining the tariff concession are as follows: to achieve “localization”; to have the minimum production volume; to carry out mandatory processing operations; to execute an Industrial Assembly Agreement; and to be on the register adopted by the Commission of the Customs Union.

Thus the new legal regulations will enable one to perform the duty free import of technological equipment, their components and spare parts, stores and materials within the framework of an investment project; to apply the concession in respect to other types of transport (buses, vans, trucks and auto cranes) and to fulfill the “localization” requirements using components produced in Belarus and Kazakhstan.

For business the most advantageous feature in the customs administration sphere is the new institution of an authorized economic operator. The Customs Code of the Customs Union enables companies the opportunity to obtain the status (meaning the status of being an authorized economic operator) that allows them to apply particular customs simplifications. The status is granted by means of giving out a certificate about entering the company into a special register that is maintained by each member state of the Customs Union.

The advantage of obtaining such a status is obvious. Economic operators will be entitled to temporarily store and clear the goods imported on their own territory and sites; to release the goods before filing a declaration with an interest-free deferment of payment for a period from 10 to 40 days; and to deliver the cargo under a transit scheme without providing any security for customs payments.

There are several conditions for obtaining the status. First, company taxes and customs payments should be not less than one million euros ($1.2 million). It should be noted that for firms carrying out production activity in Russia the amount of security has been cut to 150,000 euros. The company should have been carrying out foreign trade activity for not less than a year. In addition, the company must not have any outstanding debts and arrears in respect to customs payments. Additionally, over the past 12 months, the company should not have incurred administrative liability for any customs related violations. The company should also have a recording system that meets the requirements of the customs authorities.

For Russian firms that have used similar customs simplifications under the customs legislation of the Russian Federation, a transitional period (to the end of 2010) has been set. During this period they will be able to enjoy the simplifications without obtaining the status of an economic operator.