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. Last Updated: 07/27/2016

Customs Permits Hit a Snag

Europe's leading haulers union decided Friday to stop issuing special permits starting Monday to trucks that gave them fast-track customs clearance into Russia.

The permits are issued to more than 60 percent of the trucks that ship goods to Russia, accounting for about $3 billion -- or 10 percent -- of annual trade turnover.

Russian trucking companies said Friday that the decision could destroy their business and threatened to block border roads.

The State Customs Committee said it was working on an emergency regulation that would allow truck operators to go on with their business.

The Geneva-based International Road Transport Union, or IRU, said it would stop issuing the permits to protest Russian customs, which it accuses of turning a blind eye to contraband and then asking non-Russian members to pay for lost duties.

IRU general director Martin Marmy announced the move after talks with customs, the Transportation Ministry and the Association of International Road Carriers, or ASMAP, failed to reach a deal last week.

"It will be a disaster for your economy," Marmy told reporters Friday. "If the TIR system disappears, a lot of companies will go bankrupt."

TIRs, issued under the international Transport Internationaux Routiers Convention, allow reputable trucking companies to obtain special trip permits from the IRU's national members like ASMAP for less than $100. The permits allow truckers to save thousands of dollars they would otherwise have to deposit at all customs posts they pass by.

It also saves hours, if not days, by bypassing customs inspections at the border and clearing cargo at the point of destination.

The system provides TIR holders with cheap insurance -- truck companies pay only 5 cents on every $100 of the value of their cargo.

The core of the dispute is $60 million that Russian customs is demanding that the IRU pay in insurance claims for cargo that did not arrive at its declared destination.

The IRU says the claims are unjustified because customs has refused to fight the flourishing crime that made it possible for the cargo to disappear. As the legal basis for its argument, the IRU is pointing to Article 8.7 of the TIR Convention that Russia signed 20 years ago. The article states that the authorities of the signatory country must do all they can to find persons responsible for breaches of customs laws and make them pay duties.

The IRU says Russian customs is not fulfilling its responsibilities while abusing the IRU guarantee system and claiming too much.

Marmy said Friday that Russian claims account for 75 percent of all payment requests, while claims account for only a quarter of requests in the 53 other member countries.

After the IRU refused to pay, customs filed three lawsuits in Russian arbitration courts several months ago. Court rulings are pending.

More than 1,000 Russian companies are involved in the freight forwarding business, but those most affected by the IRU's decision are considered to be international truck companies that are responsible for more than three-quarters of international trade.

Eight of the largest shippers, including Rosagropromavto and Eurotransservice, signed an open letter to the IRU last week, warning they would block the borders if the TIR system stops.

"All cargo will be reloaded at the border onto our trucks and carried to their destinations within Russia or as transit to other countries," the letter said.

Marmy replied in a statement posted on the web site.

"Due to the inability of your authorities to fight organized crime, the TIR Convention is no longer a transport facilitation instrument in Russia but a tool used systematically by your authorities to protect defrauders and, by using all political means available, to obtain the payment of tax and duties of goods smuggled into your country exclusively from honest businesses that have contracts with the IRU," he said.

"Criminals can work in total impunity [in Russia], but honest fleet operators and the honest partners of the guarantee network are taken to court if they don't automatically pay unjustified claims presented by the customs," he said.

He said Friday that he has received several death threats by telephone and e-mail while in Moscow.

The IRU has prepared a draft resolution to the dispute, but the Russian side is balking at a stipulation for it to drop all payment requests and court proceedings -- which would mean a loss of $60 million for the federal budget.

"Mr. Marmy is directly accusing customs of encouraging smuggling and Russian authorities of protecting organized crime," the State Customs Committee said in a statement Friday. "This is not only a falsification of facts, but also an insult to Russian authorities."

The disputing parties said Friday that they would work to resolve the issue over the weekend. But an industry source said Saturday that it was a no-win situation.

"It looks like we have reached the limit of how far each side is prepared to go," the source said. "The next step is a political decision by someone higher than [State Customs Committee head Mikhail] Vanin. We know that [Prime Minister Mikhail] Kasyanov and President [Vladimir Putin] are aware of the problem. Let us wait until early next week."

Vladimir Meshcheryakov, an adviser to Vanin, said Friday that even though TIRs would be suspended from Monday, those issued earlier would remain valid.

Customs was working on an emergency regulation to help trucking companies this weekend and promised to post updates on its web site,

Meshcheryakov said the measures would include cargo clearance at the border and the replacement of international IRU guarantees with national ones provided by customs-authorized Russian banks.

"These measures will not compensate all the losses truck operators will incur," he said. "The measures are temporary, and they will be designed to function while we negotiate directly with an international insurer. An offer already has been sent to one insurer.

"We are still prepared to negotiate with the IRU on ways out of the crisis," he added.