The Act fixes fundamentals of organization of customs agencies’ operations, their functions and responsibilities, locations, operating hours, and responsibilities. The document also fixes main principles of moving of goods in the course of their importation in RF and exportation out of the country, transit across RF under customs control, rules of identification of their country of origin, the procedure of application of customs procedures in the conditions of the Customs Union. The Act also establishes requirements to customs transport operators, repre RUSSIAN ECONOMY IN trends and outlooks sentatives, TSW owners, duty-free stores, and other organizations. The Act also provides for a centralized procedure of payment of customs duties and taxes. To this end, the payer should enter in the respective agreement with Russia’s FCS. In this case, the amount of customs duties and taxes payable over the year should account for between Rb. 50 and 100 bln.
The Act also introduces measures aimed at implementation of key tasks on modernization of Russia’s economy and support of hi-tech and innovational production. To this effect, it is proposed to simplify procedures under export of hi-tech equipment and import of assembly parts used for its manufacturing. The Act also determines a simplified procedure of international exchange with research and commercial samples, importation of spare parts for maintenance and repair of foreign vehicles.
A major aspect of a specific concern of businesses is minimization of time costs associated with completion of customs operations under the temporary storage of goods, their declaring at the customs, and release of goods. Under customs regulation this can be ensured by means of simplification (reduction in the number of reference provisions) of legal provisions that contain requirements to entities that move goods. In other words, this can be done by regulating critical for business problems right at the level of a federal Act and developing straight and understandable normative dictates. So, the Customs Union should provide for establishment of such a customs control system, which should be efficient for the state and to a minimal extent burdensome for businesses.
Statistics evidence that Russian customs authorities demand far greater a number of documents from participants in foreign economic activities than their peers in the Union member states. For instance, import operations require filling out 22 clearance documents, while export ones – up to 30 documents (according to the RF ministry of Economic Development). By contrast, Kazakh and Belarus customs authorities in such cases request between 4 and documents. The Russian customs strives to reduce the volume of the documents to 14 ones, but it will still be too much a hurdle, nonetheless.
With the Customs Union in place, Russian customs authorities have faced rivals in the other Union member states: should such challenges as delays in the exercise of customs clearance procedures and problems with an excessive amount of necessary paperwork be not replaced by a customer-friendly approach, it will be no sweat for importers and exporters to switch to the same services in Belarus and Kazakhstan.
Now that an agreement on application of the procedure of collection and allocation of import customs duties came into effect on 1 September 2010, the duties in question are channeled to special accounts in each state and automatically allocated between the three state budgets. They first are accrued onto a single account and subsequently are allocated between the said budgets in accordance with pre-set ratio, under which RF is entitled for 87.97% of the overall amount of customs duties, Belarus – 4.7%, Kazakhstan – 7.33%. According to the Commission of the Customs Union, the first month of implementation of the Agreement (September 2010) resulted in Russia collecting USD 2.05 bln. in customs duties, Belarus – USD 109.4 mln., and Kazakhstan – USD 170. 9 mln.
The Federal Treasury’s statistics of execution of the RF budget evidence that having insisted on its variant of splitting the duties, Russia, as a minimum, has not lost any revenues:
prior to the implementation of the new mechanism, in July 2010, Russia had collected Rb. bln. in import customs duties, while in August 2010 – Rb. 55 bln. Meanwhile, the September “split” revenues accounted for Rb. 63 bln. The increase in collection could be ascribed to seasonality. Since October 2010 FCS has started singling out split import customs duties out of Section 4.
The Real Sector of the Economy their overall volume and in that month they amounted to Rb. 60 bln. In any case, the amount of import duties is smaller (in 2010 – 4-fold) than export duties that form the major revenue item for FCS, with their amount depending on current prices of Urals.
In compliance with art. 3 of the RF Act “On customs tariff”, in 2010, the RF Government developed and adopted 12 resolutions to approve export duty rates on crude and oil products.
The export customs duty rate on crude and petroleum derivatives produced from bituminous rock exported from Russia to beyond the borders of the Union member states was changed every month in 2010 on the basis monitoring of prices for crude Urals. The prices were subject to monitoring between the 15th day of each calendar month and the 14th day of the next calendar month (Table 6).
Table Export Duty Rates on Crude and Oil Products in 2010 г. (USD/T) Oil Oil products light black 1 January 267.0 192.2 103.1 February 270.7 194.7 104.1 March 253.7 183.2 98.1 April 268.9 193.5 104.1 May 284.0 203.7 109.1 June 292.1 209.1 112.1 July 248.8 179.9 96.1 August 263.8 190.0 102.1 September 273.5 196.5 105.1 October 266.5 191.8 103.1 November 290.6 208.1 112.1 December 303.8 217.0 116.Source: resolutions of the RF Government.
In accordance with the package of agreements on formation of the Common Economic Space signed in December 2010, Russia bound itself to supply exempted from export duty oil to Belarus since 1 January 2011. Meanwhile, Minsk committed itself to refund 100% of export duty on petroleum derivatives produced from the Russian oil, should they be exported to beyond the borders of the Customs Union, while export duties on Belarus’s own oil (some 1.mln. tons) will be collected to the country’s budget.
The bilateral agreement on carbohydrates does not concern the oil Belarus can procure from Venezuela and other third countries. Duties on oil products made from such oil will also be collected to Belarus’s budget. Such a scheme will be in place for three years until the moment the three nations develop another mechanism of splitting export customs duties.
As concerns the size of the export duty on oil products Belarus will be transferring to Russia’s budget in 2011, it will make up 67% of the duty on crude for light oil products and 46.7% - for black ones, ie. matching the new formula of calculation of export duty on oil products implemented since February 2011 in compliance with RF Government’s Resolution of 27 December 2010 № 1155. In 2012, the duty on light oil products will account for 64% of the crude duty, while that on black ones – 52.9%. Since 2013 both duties will become even and make up 60% of the oil duty each.
On the level of bilateral agreements Russia and Kazakhstan also agreed, within the framework of the Customs Union, not to change until 2015 the current regime of collection of export duties on oil Russia supplies to Kazakhstan. Presently Russian oil supplies to Kazakhstan have been exempt from export duty.
RUSSIAN ECONOMY IN trends and outlooks On 5 November 2010 the Federal Act “On Russia’s joining the International Convention on the Simplification and Harmonization of Customs Procedures of 18 May 1973 as revised in the Protocol on introducing amendments to the International Convention on the Simplification and Harmonization of Customs Procedures of 26 June 1999” was signed.
The International Convention on the Simplification and Harmonization of Customs Procedures (the Kyoto Convention) was adopted on 18 May 1973 in the city of Kyoto and implemented on 25 September 1974. On 26 June 1999, the session of the World Customs Organization approved the revised Convention whose ultimate objective is promoting global trade by simplifying and harmonizing customs rules and procedures. The revised version came into effect in February 2006.
The Convention obligates the signatories to employ uniform international standards in their customs authorities’ operations, simplified and automated customs procedures. As well, it provides for the transition to the use of electronic documents and establishment of an electronic one-stop-shop system. Joining this international treaty constitutes a necessary step in the process of accession to WTO.
As a reminder, Russia, Belarus and Kazakhstan put on hold their negotiations on joining WTO in the frame of respective working groups in the summer of 2009, when they decided to establish the Customs Union and hold negotiations together. The decision was subsequently revised and the then would-be Union states agreed they could conduct negotiations on their own, but proceeding from the common stance.
The multilateral consultations held in Geneva on 25 May 2010 resulted in the Working Group on Russia’s accession to WTO ruling to renew the negotiations. In late 2010, Russia significantly intensified its efforts in that direction and succeeded in completing negotiations with the US and EU.
The Russian delegation and members of the Working Group on Russia’s accession to WTO have to find compromises with regard to the level of agricultural subsidies, the regime of access to Russia’s meat market, state-owned trade enterprises’ operations, the amount of export duties (on timber in particular), transparency of the national law, among other things.
The Russian side keeps amending the draft Report of the Working Group due to the establishment of the Customs Union between Belarus, Kazakhstan and Russian Federation.
The first block of renewed sections was discussed at the multilateral meeting on 21 September 2010, the second one – on 25 October, and the third one – on 8 December 2010. The general reaction of the WG members was positive. A number of WTO member states put some questions, and the Russian side made clarifications in writing and in the course of bilateral meetings.
On 26 October 2010, Russia held multilateral consultations on agriculture with the4 parties concerned. At the consultations, the Russian side presented revised calculation templates on the state support of the agrarian sector in 2007-08.
In addition to the WG Report, an inseparable part of the Protocol on Russia’s accession to WTO shall become consolidated lists of obligations on granting access to the domestic markets for goods and services. The work on development of the consolidated list of access to the market for goods is still in progress, while the consolidated list with regard to access to the market for services was sent out to the WG members in October 2010. In the event of any discrepancies with regard to any obligation enumerated therein, the Russian side will be compelled to hold additional consultations and negotiations with the WTO member states concerned.
The Real Sector of the Economy The negotiations on meat import quotas are the toughest challenge, for some WTO member states are keen to retain conditions agreed upon back in 2006. Since then Russia has invested heavily in development of its meat complex and now its domestic producers demand to fence them from import, while the importing countries insist on keeping their quotas unchanged.
Russia is going to hold negotiations on meat supplies with 10-15 WTO member states, including the US. This process should take several months to complete. The Russian negotiators’ ultimate task is “to agree on such conditions of importation of meat in the country, which would allow to implement development and investment plans”.
What Russia offers seems to be tighter than the 2003-05 conditions (at the time, the Government restricted meat imports).
In 2011, the government is going to substantially slash the poultry import quotas, which are supposed to account for 350,000 t. instead of the earlier planned 600,000 t. The decisions should affect primarily the US suppliers’ interests. Their 2010 quota was 600,000 t. out of a total of 780,000 t., but the actual volume of the US poultry import made up just 300,000 t.
The fall should be ascribed to the US poultry failing to meet the new Russian sanitary- hygienic standards.
The import quota on pork for 2010 and 2011 was set at the level of 472,100 ton, while for 2012 – 425,000 ton. The annual quota on refrigerated beef for 2010-12 accounts for 30,ton, while the one on deep-frozen beef – 530,000 ton.
With its Resolution of 29 December 2010 №1190 the RF Government retained the duty on round timber unchanged – that is, 25% of its customs value, but no less that Euro 15/c.m. The duties on Russian timber supplies to Finland until recently have been a major obstacle to Russia’s accession to WTO, as the EU has been demanding for their lowering since 2004. But as the country’s accession to WTO was delayed, Russia took a course towards bolstering the national word-working sector. In February, the RF Government decided to launch a gradual increase of export duties on unprocessed timber. The duties were raised up to 20% of the value of a shipment since 1 July 2007 and subsequently – up to 25% effective since 1 April 2008. It was envisaged to further increase export duties on round timber up to the protective level of 80% since 1 January 2009; however, under the EU pressure and because the domestic woodworking sector was not ready yet, in 2008 Russia imposed a moratorium on increases of the duties and froze them at the level of 25% of the customs value. The moratorium was set to expire on 1 January 2011, after which the duties might have hit 80%. However, at the RussiaEU summit in the early December 2010 the parties agreed to extend the moratorium and to lower duties upon Russia joining WTO. That said, the Russian side does not waive its right to raise the duty rates since 2012, should the nation fail to join WTO.
Russia has chances to join the Organization in 2011, after nearly 17 years of negotiations.
Usually, it takes a nation five to seven years to complete negotiations and the accession procedure.
As a reminder, WTO currently unites 153 states, whose overall proportion in the global trade accounts for 95%.
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