Jun 17, 2010: Round-Table “Customs Union: What, When & How?”

• Andrew Somers, President, American Chamber of Commerce in Russia;
• Maria Chernobrovkina, Executive Director, AmCham St. Petersburg Chapter;
• Yuri Kovalev, AmCham St. Petersburg’s Customs & Transportation Committee Co-Chair

Guest speakers, Joint Dept. for Analysis and Regulation of External Economic Activities, RF Ministry of Economic Development:

• Alexey E. Likhachev, Director, and
• Andrey V. Tochin, Deputy Director

In attendance: members of AmCham, St. Petersburg Chamber of Commerce & Industry; North-West Russia’s Association of Customs Brokers

Maria Chernobrovkina started the round-table by greeting the attendees and giving the floor to Andrew Somers who thanked AmCham St. Petersburg Customs & Transportation Committee members for their active involvement, introduced the guests, expressing AmCham’s appreciation of their continuous support of the Chamber’s efforts.

Alexey Likhachev started with a brief on the latest developments in the customs regulations area. According to him, the Federal Customs Service (FCS) had developed a draft law on customs regulations that raised numerous concerns and complaints from both businesses and the Ministry of Economic Development (MED). In cooperation with business associations, including AmCham, the Ministry did an enormous job of reworking the draft that was submitted to the State Duma late last week. It is planned to be reviewed by the Parliament within the Spring Session (in June-July). Yet, the MED’s draft can face some opposition, undergo certain changes during the three readings and even be delayed, which means that chances are there will be no legislation in place by July 1 — the start date of the Customs Union. Taking into account the very hard negotiations with Belarus and many exemptions from the unified customs regime advocated by Kazakhstan, the Customs Union will be launched in a “manual” mode anyway, supposedly with certain missing regulations being temporarily replaced with ad hoc government orders for the transition period. Rounding up his brief introductory speech, Likhachev was sorry to admit that he was unable to answer most of AmCham members’ questions on the Customs Union procedures, as there are none in place yet. At the moment, there is no doubt that there will be a transition period for at least fortnight, if not a month.

Likhachev also admitted that the draft law on customs regulations was not free of drawbacks, and welcomed AmCham’s suggestions and comments that could be included during the second reading.

Yuri Kovalev asked if there was any certainty about numerous regulatory acts that have to be in place to implement the Customs Union, whereas any such act requires normally 90 days from signing it to come into force. Likhachev was sorry to admit the problem which is inevitable, but suggested that during the transition period, the Russian customs would use the active Russian acts applicable within the framework of the new policies. Answering Yuri’s another question on the launch date of the splitted accounts for taxes and duties, Likhachev said they are expected by August 1.

Responding to a request to clarify the situation with the exemptions advocated by Kazakhstan, Andrey Tochin explained that there are over 400 positions that Kazakhstan asked to exclude from the unified customs space for a period of several years (i.e. to preserve their national duties which are lower than those in the Union). Thus, as certain customs procedures at the Russian-Kazakh border will be preserved, those exemptions will be subject to additional duties if imported to Kazakhstan and then decided to be moved over to Russia. The duties can be paid by either counterpart — Kazakh exporter or Russian importer.

A very active and vivid discussion between a majority of attendees and the guests raised from the issue of the FCS’s concept of moving customs clearance procedures toward the national borders. Likhachev assured that MED is on the business side, and is still looking forward to seeing any detailed suggestions from FCS on how to implement the concept. Until that, he was afraid the Ministry simply can’t agree with it. Yet, the concept itself can be not that bad — the attendees tend to agree — but FCS’s recent actions (which have in fact very little in common with the concept) have virtually collapsed customs clearance in Moscow and St. Petersburg. Likhachev thanked AmCham for its active involvement and prompt notifications of the issues members face both at the border and inland customs. He asked the attendees if they could approve the concept itself, imagining as though all the necessary infrastructure were already created at the border. AmCham members responded that there is another problem closely connected with the concept — absence of any remote (electronic) declaration process makes it necessary to bring every piece of paper in person to the customs post and requires several trips back and forth. If those posts are located only at the borders, hundreds of miles away from importers, it will be virtually impossible to pass any customs clearance. Additionally, if a company faces a high risk profile, its import is subject to inspection, which no company would like to be carried out in absence of its representatives. AmCham members unanimously agreed that the concept should be first thoroughly considered, then all the necessary infrastructure should be created at the border, and only then the concept should start being implemented.

Likhachev was surprised to find out that businesses in fact opposed the concept, while FCS assured that it had been agreed upon with the business community. Yet, he said the concept appeared to be decided upon in principle and would be implemented anyway, but promised to do everything MED could to make sure it was implemented properly.

Following the issue of e-declaration, Tochin added that MED had recently insisted on FCS’s implementing it within a fixed period, suggestively by Jan.1, 2011. The attendees doubted the date was realistic, as e-declaration requires many other developments in the e-documentation (certificates, bank transfer orders, etc. that are presently admitted in paper only). Maria followed saying that the customs authorities lack technologies and infrastructure for e-declaration or even sometimes implement obsolete one, and gave a couple of examples to illustrate. Yet, Tochin insisted that it was vital to persuade FCS to implement at least the very e-declaration before everything else is in place, as otherwise it would never happen.

Likhachev agreed, adding that something of the kind happens with the small business support. The existing requirements virtually ban small businesses from impex activities, which is a sincere position of the customs authorities. MED disagrees and tries to simplify the rules and lower the barriers. That work goes hard and slowly, but at least it goes.

By the end of the meeting, Likhachev thanked AmCham for the event and its contributions, and repeated his welcome to members’ suggestions on the draft law. Talking about the Customs Union, he agreed that the situation is going to be difficult, and urged AmCham members to check MED’s Web-resources for updates. Among those, there will be a special Website, www.ved.gov.ru (expected to go online on June 25) — an information resource designed specifically for importers and exporters.