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Customs Clearance Process in Russia



June 2007



INTERNATIONAL COPYRIGHT, U.S. & FOREIGN COMMERCIAL SERVICE AND U.S. DEPARTMENT OF STATE, 2007. ALL RIGHTS RESERVED FOR USE OUTSIDE OF THE UNITED STATES.

NOTE: This report should be used for general reference purpose only. As customs-related legislation and regulations are constantly changing, it is advised that exporters consult with customs officials from the country of importation to obtain accurate and current information that would pertain to their specific transaction.



a) 1. I. GENERAL MARKET INFORMATION



Trade Statistics



According to RussiaÌs Federal Customs Service and State Customs Committee, the countryÌs foreign trade turnover in 2006 increased 29.1% compared to 2005 to $439 billion. Export volume grew by more than 25% up to $302 billion and imports increased 39.3% to $137.5 billion. Foreign trade with other countries of the Newly Independent States (NIS) accounted for less than 14.7% of all trade, while the share of other foreign countries was 85.3%.



Export growth rates began decreasing in the last quarter of 2006, according to Russian officials. This trend continued into 2007; export growth during the first three months of 2007 was roughly 5.8%, compared to 41% in the corresponding period of 2006.



Since the market collapse in 1998, the volume of Russian imports has been steadily increasing. In early 2007, import growth continued to increase due to greater investment activity, which increased the share of investment products in imports. According to customs statistics, from January to April 2007, imports from non-NIS countries were $43.3 billion, an increase of 55.2% over 2006. In April 2007 alone, imports of machine-building products grew 71.6%, food products and raw materials for the production of food products grew by 51%, chemicals grew by 25.5%, and apparel and footwear grew by 93.7%.



For many years, the United States has been one of RussiaÌs main trade partners. In 2006, the volume of U.S.-Russia trade grew 27.5% to $24.5 billion ($19.2 billion in 2005). Russian exports to the U.S. increased 29.5% to $ 19.8 billion (15.3 billion in 2005); imports from the U.S. grew 19.7% to $4.7 billion. The U.S. represents approximately 4% of RussiaÌs overall foreign trade, while RussiaÌs share in the U.S. trade turnover is a minor 0.8% (26th among U.S. trading partners based on volume of trade turnover). Russia mainly imports machine-building products and vehicles Ò over $ 2.5 billion in 2006 (53.8% of RussiaÌs overall imports from the United States) and $880 million in food products (primarily poultry) in 2006 (18.7% of imports from the U.S.).



Customs Environment



The new Russian customs code (effective January 2004) provides for more complete and detailed regulation of goods and vehicles crossing RussiaÌs customs borders than earlier versions of the code. It brings RussiaÌs customs legislation in line with other Russian legislation (e.g., taxes, foreign trade) and international law. Below are some of the positive changes enacted by the new customs code:


* The code itself became the law of direct action, and the number of customs by-laws was reduced from almost 4,000 to about one hundred.
* The documents required for customs clearance were strictly defined, which streamlined customs clearance procedures.
* The timeframe for customs processing was reduced from 10 to 3 days.
* The importer can now choose the customs house at which to perform clearance. It can be either the customs house at the border crossing or at the cargo's destination.
* The new code allows advanced customs clearance prior to the shipment's arrival at its destination. Electronic variants of declarations and other documents can be submitted to customs immediately after shipment or during transportation under customs supervision in Russia. This simplifies the unloading process and eliminates the need to place the goods in a bonded warehouse.
* Total customs control of the declared goods is replaced by the selective for select conscientious foreign trade participants, other privileges can also be granted.



Aiming to ÏwhitenÓ imports, Russian customs officials have moved to strengthen customs control while simplifying customs procedures. For example, since cutting import duties on technological equipment, there has been a significant decrease in ÏgrayÓ imports. Since April 2006, nearly 630 categories of equipment have been brought into Russia with zero duty rates. As a result, import of machinery and equipment grew faster than any other products category.



b) 2. II. CUSTOMS CLEARANCE

Custom Clearance Procedure



The following are the acting parties in the customs clearance process: exporter, importer (consignee), customs officials, and customs broker. Most shipping agencies have a customs broker license and are contracted to determine transportation cost, provide transportation service, and clear customs as soon as a seller and a buyer sign a contract. The following documents are required primarily from the exporter:



1. A copy of the commercial contract with specifications and appendices (if any), which must contain:
* The sellerÌs and buyerÌs contact information (consigneeÌs address if itÌs different from the buyerÌs one);
* The price and total value of the contract;
* The terms and period of delivery;
* A description of the goods, including quantity.



2. The original transport waybill (CМR), which must contain:

? The consignorÌs and consigneeÌs names. The terms of delivery must be the same as in the contract;

? The address and license number of the customs warehouse in the ÏDelivery AddressÓ field;

? The place of discharge if it is different from the delivery address;

? The Russian customs code.



3. The original commercial invoice for each lot of goods, which must contain:

? The invoice and contract numbers and dates;

? The names of the seller and buyer. The terms of delivery must be the same as in the contract;

? A description of the lot, including quantity;

? The price for each position and the total value of the invoice;

? The net and gross weight for each position, which must correspond with specifications;

? Any information on marking.



4. A packing list which must contain:

? The net and gross weight for each position, which must correspond with specifications;

? The names and quantity of pieces and the kind of packaging;

? Any information on marking.



5. Certificates of quality, safety, and insurance.



6. Pictures, booklets, brochures, and blueprints of goods.



The following documents are required primarily from the consignee:



1. Power of Attorney. This is an authorization letter from the consignee to the specific employee who will be responsible for customs clearance (the person who will sign and stamp the customs declaration);



2. The Russian passport and labor book (or an employment contract with the consignee) of the employee;



3. The consigneeÌs company charter and registration documents;



4. Bank references, including information less than a month old on existing accounts, a certificate from the tax office with INN number (must be less than 3 months old), and a certificate from the Russian statistics office with OKPO code;



5. The contract between the shipper and the consignee.



6. A certificate of import transaction. This is a statement made by the consignee on import shipments certified by the importerÌs bank.



7. Transportation documents (CMR or railway waybill);



8. TIR-Carnet;



9. The commercial invoice (description of goods with cost for each item), packing list with weight, pieces and type of packing, and the invoice for transportation to the Russian border, if it is not included in the price mentioned in the commercial invoice;



10. A payment receipt or order for the goods made out to the shipper or seller (if prepaid terms of the contract) and receipt of payment to the Russian customs authorities for duties;



11. A safety certificate or certificate of conformity from Gosstandard of Russia if required for the goods being imported;



12. Any additional documents required for each item (customs code) on the commercial invoice.



IMPORTANT NOTE. There are some seemingly significant peculiarities in the customs clearance process in Russia that can cause delays. For example, if the goods are packaged on palettes, one should avoid indicating ÏpalettesÓ in the customs documents. Otherwise, the palettes themselves will be subject to customs clearance and will require a quality certificate. Another example is promotional material. Some exporters include such material (pens, hats, etc.) with exported goods. If this is done, the promotional material will also be subject to customs clearance. To avoid this, all promotional material should be sent by express mail.



Some shipping agencies operate a Ïgreen lightÓ practice. They give the green light (go ahead to ship) to the exporter only after all documents have been prepared and the consignee is ready to pick up the goods as soon as they arrive in Russia. If these preparations are not made, there may be extra handling and storage charges or the goods may be returned to the exporter.



To expedite the customs clearance process, goods can be declared at customs before their actual arrival. This cuts costs related to temporary storage in customs warehouses. To encourage importers and exporters to clear customs quickly, storage costs at customs warehouses increase sharply starting on the 11th day after the goods arrive.



There are some peculiarities particular to airfreight shipments. Every single piece of cargo in an airfreight shipment must be properly labeled with the following information:



a. Airline name or logo;

b. MAWB and HAWB numbers;

c. Departure airport Ò 3-letter IATA code;

d. Destination airport Ò 3-letter IATA code;

e. Transit airport Ò 3-letter IATA code;

f. Total pieces of cargo;

g. Total weight of the shipment, as mentioned on MAWB (gross).



Unlabeled cargo will be considered unclaimed and will be sent back to the shipper within 60 days by the carrier. The carrier will invoice the shipper for the storage costs for the whole period.

The following original documentation should be sent directly with the cargo in an attached envelope. Be sure to mention the following on the MAWB: ÏAttached to AWB 1 (one) envelope with documentsÓ.

? HAWB;

? Invoice;

? Packaging list;

? Price list (may be required);

? Certificates of origin;

? Quality certificates.

For all air shipments to Russia, alerts must be sent at least 24 working hours prior to arrival of the shipment. The alert should include the following information:

? MAWB number and HAWB number;

? Name of the most recent carrier of the goods;

? Dispatch flight number, date, and airport (3-letter IATA code);

? Delivery flight number, date, and airport (3-letter IATA code);

? Number of pieces and description of HAWB;

? Weight and dimension of each item in the shipment;

? Shipper of HAWB;

? Consignee of HAWB (including the name of the company, the individual signing for the goods, and telephone numbers, including city codes, for that individual);

? Additional services needed at final destination;

? Scanned copy of MAWB and HAWB;

? Scanned copies of all of the original documentation mentioned in the list above.

Abbreviations used in the text:

CMR Ò Cargo Movement Requirement

TIR-Carnet - A road transit document which allows container, and in some cases bulk, cargo to move from outside Russia to a final destination in Russia.

MAWB Ò Master Air Way Bill

HAWB Ò House Air Way Bill

IATA Ò International Air Transportation Association



Customs Regimes



Note: this section is designed to provide a good understanding of the most commonly used regimes, such as free circulation, ATA Carnet, customs warehouse, free trade zone (or SEZ), etc.



Importers must choose a customs regime under which to import their goods into Russia. They are free to choose any regime listed below and can change to another regime at any time.



Article 155 of the Russian customs code creates four groups of customs regimes:



1. Basic customs regimes:

? Free circulation (release for domestic consumption);

? Export;

? International customs transit.



2. Economic customs regimes:

? Internal processing;

? Processing for domestic consumption;

? Outward processing;

? Temporary importation;

? Bonded (customs) warehouse;



3. Completing customs regimes:

? Re-import;

? Re-export;

? Destruction;

? Rejection in favor of the state.



4. Special customs regimes:

? Temporary exportation;

? Duty-free trade;

? Movement of stores;

? Other special customs regimes.



In the context of this article, only the customs regimes and procedures related to importing into Russia are reviewed; the details and specific procedures of other regimes can be viewed at http://www.customs.ru/tk_en/PART_II_CUSTOMS_PROCEDURES.htm or http://www.tamognia.ru/customs_code.



a) Free Circulation (release of imported goods for domestic consumption)



This regime is used for imported goods into Russia that are to remain within the country. To use this regime, importers must observe all import requirements (prohibitions, licensing, certification, etc.) and customs duties and taxes must be paid in full. Following import and payment of duties, the goods are free to circulate within Russia.



b) International Customs Transit



This regime defines the customs procedures used for foreign goods traversing Russia to a third country. The transit is performed under customs control. Goods transiting across Russia are exempt from customs duties and taxes and import restrictions and prohibitions. The Russian customs authorities handle all issues (permission, timing, etc.) regarding international customs transit.



c) Internal processing (processing inside the customs territory of Russia)



Under this regime, imported goods, except those prohibited from import, are processed (i.e., modified, assembled, adapted to other goods, etc.) in Russia within a time period not exceeding two years for eventual export from Russia. Goods imported for internal processing are exempt from customs duties and taxes, though customs fees still apply. Importers must also apply to the customs authorities beforehand for permissions and licenses to import under this regime. The final exported good is not subject to export custom duties, though may be subject to Russian export restrictions and may require permission to be exported.



d) Processing for domestic consumption



This is similar to the previous regime, except that the imported goods must be processed within one year of import and the final products are released for free circulation in Russia. Goods imported under this regime are subject to all restrictions and prohibitions on imports. The initial goods are exempt from customs duties and taxes, but the final products are subject to payment of all applicable duties and taxes.



e) Outward processing



Under this regime, goods are exported from Russia for processing outside of the country. The goods have two years to be processed, and the final product is then imported into Russia. Goods exported under this regime are not subject to any economic restrictions or prohibitions stipulated by Russian law. They are completely exempt from export duties, but must pay domestic taxes, including VAT. The final imported products are partially (see the Article 207 of the customs code at http://www.customs.ru/tk_en/index.html) or fully (in the case of warranty repairs of exported goods) exempt from customs duties and taxes. Like the other processing regimes mentioned here, the permission of the customs authorities is required to use this regime.



f) Temporary Import



This regime allows for the use of imported goods in Russia for a certain period of time (usually not exceeding 2 years). Goods imported under this regime receiv a full or partial exemption from customs duties and taxes and are not subject to any economic restrictions or prohibitions. This regime is usually applied to the following types of goods: reusable packaging and containers; servicing and assembly tools; samples; business, cultural and scientific exhibits; and goods imported for tests or expert analysis. The temporarily imported goods should be preserved in their original state, except for changes caused by natural depreciation. The government determines the categories of temporarily imported goods fully exempt from customs duties and taxes. They generally include containers and other multiple-use packaging, items related to international cultural and scientific collaboration, and goods for humanitarian aid. Other categories of goods are subject to partial exemption from customs duties and taxes (VAT). For each month, even incomplete, that the goods are in Russia, they are charged fees equivalent to 3 percent of the payments that would apply if the goods were released for free circulation. The payments can be made periodically or when first placing the goods under the temporary import regime. The customs authorities have the right to require a pledge from the importer that the temporarily imported goods will be re-exported (e.g., a bank guarantee for the customs duties and taxes that would be applied if the goods were instead released for free circulation).



g) ATA Carnet



ATA Carnet is an international customs document that replaces the customs declaration for the short-term, duty-free exportation of goods with their following re-importation. Using ATA Carnet quickens and simplifies the customs procedures. The ATA Carnet system was developed by the World Customs Organization in the 1960s according to international customs conventions. National chambers of commerce usually act as the issuers and guarantors for ATA Carnets. The ATA Carnet system has functioned in Russia since 2000. ATA Carnet is commonly used for the temporary export of commercial samples, tools, measuring equipment, and certain other categories of goods. It is often associated with international exhibition activities. For goods temporarily imported to Russia from the U.S. using the ATA Carnet procedure, the customs clearance process is reduced to the presentation of this document to the customs office. No customs duties, bails, or banking guarantees need to be paid, because the ATA Carnet itself serves as an international guarantee.


h) Bonded (Customs) Warehouse



Under the customs warehouse regime, any goods imported into Russia (except those commodities whose import and export are prohibited or restricted) are stored in specially allocated rooms or territories in the custody of customs authorities. No customs duties and taxes need to be paid on such goods, and economic restrictions are not applied. The Russian customs code allows for two types of customs warehouses: open (suitable for the storage of any kinds of goods and accessible by anybody) and closed (intended for the storage of goods belonging to the warehouse owner). Goods previously subjected to other customs procedures can be placed under this regime in order, for example, to deter payment of customs duties and taxes. This regime can be beneficial for goods already delivered to Russia but for which a customer has not yet been identified. The period of stay for goods under this regime is limited to three years, though this may be extended by request at the customs office.



i) Re-import



Re-import constitutes the customs procedure under which goods previously exported from Russia are imported back within a prescribed period of time. Such merchandise is not subject to payment of import customs duties and taxes or to economic restrictions. Examples of the practical application of this regime include instances of the return of merchandise not accepted by a foreign customer due to its lack of conformity with the terms of the deal or the re-importation of unsold remainders of merchandise exported to a foreign intermediary. The following conditions determine whether goods can be placed under this regime:



? the merchandise should be declared for re-import within 3 years from the date of its export (this term can be extended with regard to equipment used in construction, industrial production, the extraction of mineral resources, and similar types of goods);

? the merchandise should be in free circulation in Russia at the moment of exportation, or should be the final product of the processing of foreign goods;

? the goods should remain in the same state and condition, except for changes or natural wear due to normal utilization;

? all import duties, taxes, and other payments due for redemption to the state budget must be made.



Import duties and taxes, interest, domestic taxes, subsidies, and other charges should be reimbursed to the federal budget if they were not charged or if they were refunded when the merchandise was exported from Russia. If the merchandise is re-imported within a six-month period, previously paid export duties are reimbursed.



j) Re-export



Under this regime, goods imported into Russia are re-exported without payment of export customs duties and taxes. The duties and taxes paid when the merchandise was imported are reimbursed. This regime is commonly applied to the return of defective goods, if goods did not conform to the terms of the contract, or if import prohibitions were violated. The goods being re-exported must have only been in Russia for six months since being released for free circulation, should not be used or repaired, and should be identifiable.



k) Duty-free trade



Duty-free trade is a customs procedure for foreign goods imported to Russia to be sold at retail stores to individuals leaving Russia in special duty-free shops located at border crossings. Retail trade in such shops is carried out under the control of Russian customs. Retail sales at such locations are not subject to payment of duties or taxes, and are not subject to the application of any economic restrictions and prohibitions (except for prohibited goods). After goods are placed in duty-free shops, customs duties and taxes previously paid for their import are reimbursed if their export from Russia is done in compliance with the customs code. In addition, goods placed under this regime are exempt from domestic taxes. Only a Russian legal entity can own a duty-free shop, and only this entity can declare the goods as placed for duty-free trade.



l) Free Customs Zone and Free Warehouse



Free customs zone and free warehouse are in fact two independent customs regimes, regulated by several corresponding laws: the federal laws "On Special Economic Zone in the Magadan Region", "On Special Economic Zones in Russia", "On the Special Economic Zone in the Kaliningrad Region", and the government's decision "On Additional Measures to Attract Investments for Development of the Domestic Car Industry".



The free customs zone regime is for foreign goods that are placed and utilized within the borders of special economic zones without paying import customs duties and taxes. The goods imported under the free customs zone regime are also not subject to economic restrictions and import prohibitions. In addition to a reduction in taxes, the special economic zones also have special procedures for importing and exporting goods. Residents of such a zone should regularly report to the customs authorities regarding goods purchased, sold, stored, produced, and processed inside the special economic zone. In addition, once a year residents should inform the customs authorities about goods they intend to import. This list of imports is approved by the customs only once a quarter, and goods not mentioned in the approved application cannot be imported into the zone. The imported goods can remain within the borders of a special economic zone as long as the zone exists. Removal of the imported goods from the zone or their transfer from a resident to a non-resident organization inside the zone means cessation of the free customs zone regime and the previously imported goods in this case are subject to taxation.



Under free warehouse regime, foreign goods are imported to Russia to the location of a specific free warehouse. This regime is used only for the production of cars and motor transport components. Provided that imported goods correspond to the cost and quantitative restrictions, they are exempt from import customs payments.



Importers are required to complete a Russian customs freight declaration for every imported item. A declaration must be supported by the following documents: contracts, commercial documents (such as commercial invoices and packing lists), transport documents, import licenses (if applicable), certificates of conformity and/or safety (see "Product Standards" below), certificates of origin (if applicable), and documents confirming the legitimacy of the declarants, brokers, or importers. Exporters are required to complete an export declaration and, if necessary, present an appropriate export license at customs. In addition, currency control regulations require the issuance of a "passport" for both exports and imports to ensure that hard currency earnings are repatriated to Russia. The regulations also ensure that transfers of hard currency payments for imports are for goods actually received and properly valued.



m) Free Customs Zones/Warehouses/Special Economic Zones

There are a limited number of free customs zones and warehouses designed to encourage investment in specific areas. Free customs zones and free warehouses are located in customs areas (airports, seaports, railway and truck terminals) and selected automobile factories. The Kaliningrad Special Economic Zone (SEZ) provides advantages to foreign exporters and investors. Almost all goods imported into the SEZ are exempt from import customs duties. Further, when imported goods are processed there with value added of at least 30% and then shipped to other parts of Russia they are exempt from import duties and quotas. In November 2005, the Russian Government announced that they awarded six regions the right to establish Special Economic Zones (SEZ). The winners for establishing technological innovation zones were Zelenograd (a residential neighborhood of Moscow; microelectronics), Dubna, located in the Moscow Region (nuclear physics), St. Petersburg (information technologies and instrument making) and Tomsk (new materials). Industrial SEZs will also be established in the Lipetsk Region (household equipment and possibly furniture) and in Yelabuga located in the Republic of Tatarstan (aircraft components and chemical goods). The Russian Government has indicated that they will allocate roughly eight billion rubles from the federal budget to develop these zones in 2006 with additional funds being allocated, as appropriate, from regional budgets.



Customs Documentation



The complete list of documents required for shipping depends on the mode of transportation, the type of goods, the final destination, and other conditions. If a particular document cannot be submitted along with the customs cargo declaration, a declarant can appeal to the customs authorities to submit the necessary document later. An extension can be granted for no more than 45 days after the customs cargo declaration is submitted. A declarant needs to prepare two sets of documentation, one of which should include all the original documents, whenever possible. The following list provides a brief description of documents commonly required for shipping to Russia.



1. The customs cargo declaration (CCD) is a uniform customs document that is filed by a customs broker or a customs declarant and is submitted in written form (electronic form is acceptable in certain cases) to customs officials. The CCD typically contains the following information: declared customs regime, information on the customs broker/declarant, information on the imported goods (description, HS codes, country of origin, customs value, etc), calculated customs payments, terms of the economic transaction, and other pertinent information. The CCD should be submitted within 15 days of the delivery of the goods to the country or of the date of completion of internal customs transit if the goods are declared at a place different from the point of entry. Exceptions to this general rule can be found in articles 150, 286 and 293 in the customs code. The CCD can also be filed for foreign goods before their arrival in Russia or before the completion of internal customs transit (the goods should arrive within 15 days after the CCD is submitted).



2. Documents confirming the legitimacy of a declarant or customs broker:

? Identification;

? Employment contract with the importerÌs or customs brokerÌs organization;

? Power of attorney entrusting importerÌs or customs brokerÌs employee to receive the goods;

? Contract between a customs broker and an importer.



3. Documents confirming importerÌs legitimacy, which include certified copies of:

? Company charter;

? Certificate of the companyÌs registration with the relevant state entity;

? Certificate of the companyÌs registration with the tax inspectorate;

? Certificate giving the importerÌs status as a representative office of a foreign company;

? Certification of the companyÌs registration with the state statistics committee (Goskomstat);

? Foreign economic activity participant card (kartochka uchastnika ved).



4. Original contract and a copy of the contract in Russian, which should contain the terms and conditions of the transaction, details on the exporter and the importer (such as a company name, legal address, etc.), and other pertinent details.



5. Commercial documents are required to confirm the terms of the contract. They typically include:

? Commercial invoice - the original plus one copy of the invoice are required for customs clearance. Whenever possible, the commercial invoice should be translated into Russian. The commercial invoice provides details on the consignor and the consignee, the price for each item, the total shipment value, the terms of payments, the invoice number, the contract number, the importer license number, and other details essential for completion of the transaction. The terms specified in the invoice should correspond to the ones in the contract.

? The packing list should provide a detailed summary of the shipment, the gross and net weights and dimensions of the shipment, and the number of packages. This document is frequently used by Russian customs to check against other documents for inconsistencies. If possible, the packing list should be translated into Russian.



6. Passports sdelki (Transaction passport) is issued by the importerÌs bank and used as a means of currency control in Russia. A transaction passport should accompany every contract. Customs requires an original and a certified copy of the transaction passport.



7. Payment documents confirming that duties were paid to the customsÌ account in advance.


8. Transportation documents stating the contract and the terms of the delivery. Originals and a copy are required. It is not necessary to translate the transportation documents. Depending on the mode of transportation, these documents can be:

? Marine bill of lading;

? Air waybill;

? Railway bill;

? CMR (for automotive mode of transportation).

9. Documents confirming the declared customs value of goods. The specific list of documents required depends on the method used to determine the customs value, but can include:

? Contract;

? Commercial invoice;

? Transaction passport;

? Documents from the bank confirming payment for the imported goods;





10. Certificates

Many products imported for sale into the Russian Federation are required to have a certificate of conformity issued by the Federal Agency for Technical Regulations. The agency currently tests and certifies products according to Russian government standards rather than other widely accepted international standards (e.g., the ISO-9000). The Federal Agency for Technical Regulations and its authorized agents are the chief sources for certification in Russia. However, other agencies are involved in the certification of certain products, including the Ministry of Agriculture (food products), the Ministry of Health (medical devices and pharmaceuticals), the State Communications Committee (telecommunications equipment and services), the State Mining and Industrial Inspectorate Gosgortechnadzor (equipment for mining, oil and gas industries), and others. Russia participates in the following international certification systems:

? The International Electro-Technical Commission (IEC) system for tests of electrical equipment for conformity to safety standards;

? System of certification of passenger cars, trucks, buses, and other transport vehicles (UN EEC);

? System of certification of handguns and ammunition;

? System of certification of electronic articles (IEC);

? International system of certification of metrology equipment and instruments;

? Agreement on mutual recognition of tests of imported aircraft and certification of airplane elements;

? UN International Navigation Organization (Navigation Safety Convention).



As of January 1, 2006 the Federal Register of Gosstandart of Russia had listed 18 systems of mandatory certification and 249 systems of voluntary certification. The list of accredited certification authorities and test laboratories are published on the website of the Federal Agency for Technical Regulations and Metrology http://www.gost.ru/ (in Russian).



Customs will not release a product without an appropriate certificate. The following list briefly describes the main types of certificates required for importing merchandise into Russia. As a rule, the original and a copy of any certificate are required for the customs clearance process. If the original cannot be presented, a notarized copy is needed to meet customs requirements.



A certificate of origin is a document confirming the origin of the goods. A certificate of origin is required in the following cases:

? if imported goods claim a preferential tariff regime (this condition is not relevant to U.S. goods, as a rule);

? if information about the origin of the goods seems unreliable to customs officials;

? if quantitative limits apply to the goods being imported from a specific country (e.g., quotas on US meat require a certificate of origin for imported US meat).

Thus, a certificate of origin for US goods is not obligatory, yet can be desirable to speed the customs clearance process and help assess customs duties levied on a product. Certificates of origin are issued by the chamber of commerce of the exporterÌs country.



The country of origin is defined as the country in which the goods were either completely manufactured or subject to significant processing. Goods considered completely manufactured in a given country are: mineral resources, animals (born and raised in the country), products obtained as the result of hunting or fishing, etc. If two or more countries took part in the manufacturing process, the country of origin is considered the country where the most recent manufacturing operation that meets the sufficient processing criteria (customs code) was completed.



Criteria used to determine processing sufficiency:

? change in any of the first four digits of the goodÌs classification code according to the Commodity Classification for Foreign Economic Activity;

? completion of certain production or technological operations that make the country where they occurred the country of origin;

? change in the value of the good such that the percentage of used material or value added reaches the fixed share in the price of the end product (the ad valorem share rule).



Certificate of Conformity (CoC) is a document confirming that a product conforms to Russian quality and safety standards. In Russia, inspection for CoC is performed by organizations accredited by the Federal Committee for Standardization, Metrology and Certification (Gosstandar). Gosstandart issues GOST R certificates that can certify either each shipment delivered to Russia by an importer or an entire line of an exporterÌs particular product. Thus, both importers and manufacturers can apply and receive a CoC. The term of validity of a CoC depends on the contract, type of product certified, results of tests, etc., but cannot exceed 3 years. The main product categories subject to mandatory certification are:

? live animals and animal products;

? vegetable products;

? transportation vehicles and equipment;

? machines and equipment;

? wood and wood-related products;

? polymeric and plastic materials and related products;

? chemicals and chemical-related products;

? textile and apparel;

? food products;

? leather and fur products;

? mineral products.

A complete list of all the products that require a certificate of origin can be found here.



CoC is not required for:

? used products/items;

? spare parts for a piece of certified equipment if copies of the equipmentÌs CoC are attached;

? samples to be used for testing and certification purposes;

? goods imported by individuals not for use in manufacturing or for sale/distribution within the territory of the Russian Federation (Gosstandard of Russia).



In the U.S., an international testing organization, SGS, performs inspections and issues CoCs that are recognized by Gosstandart. SGS certificates are accepted by Russian customs and make it unnecessary to apply for a GOST R certificate. Copies of the SGS certificate are acceptable if the copy is accompanied by the original seals of the U.S. company holding the original certificate.

Many products exported to Russia require additional certification from other organizations before the GOST R certificate can be issued. The most common certificates (permits) needed to support the CoC are briefly described below.

Veterinary Certificate

A veterinary certificate is required for live animals and animal products, which can be grouped as follows:

? household pets;

? livestock;

? meat and meat products;

? live fish and seafood;

? eggs, honey, and other similar animal products;

? pharmaceuticals used in veterinary medicine;

? selected seeds and crops;

? unprocessed animal hides.

The exporter receives a veterinary certificate in the exporting country. Imported goods and animals are then inspected at customs by authorized agents of the State Veterinary Control. Upon inspection, an agent issues a veterinary conclusion (veterinarnoe svidetelstvo), which allows the items to be released in Russia. A veterinary conclusion is given for each shipment.


Phytosanitary Certificate

A phytosanitary certificate is required for all vegetable products to confirm that imported goods are free from pests and plant diseases. Specifically, the certificate is required for:

? Vegetables;

? Fruits (fresh and dried);

? Grain crops;

? Flour;

? Tea and coffee beans;

? Nuts, beans, and seeds;

? Plants and plant parts;

? Fertilizers;

? Selected wood products and construction materials.



A phytosanitary certificate is issued by the Plant Inspection Center of the exporting country. Upon arrival, goods are inspected by authorized agents of the State Service on the Quarantine of Plants. If satisfied with the inspection, the agents will issue a quarantine certificate, which allows for the release of the goods into Russia.



Sanitary-epidemiological conclusion (also referred as hygienic conclusion)

A hygienic conclusion is a document that is issued for a certain category of products before a CoC can be issued. A hygienic conclusion is issued to an importer by Gossanepidnadzor (State Sanitary and Epidemic Supervision) of the Ministry of Health based on the results of conducted tests. Natural or processed food products, goods for children, cosmetics and perfume, and items that come in contact with food or human skin require a mandatory hygienic conclusion. A complete list of products can be found here. The term of the certificateÌs validity depends on the type of product certified, test results, etc., but cannot exceed 5 years (Gosstandard of Russia).



A quality certificate is a document confirming the quality of imported grain and grain-related products in accordance with Russian legislation and standards. This document is issued by the State Grain Inspection (Hlebnaya Inspectsia) or its territorial establishments and is based on test results.

Certificate of Fire Safety

Certification of products in the field of fire safety acknowledges conformity of the products to state fire safety standards. The certificate of fire safety is an obligatory component of the GOST R certificate of conformity. The following product groups require certification:

? substances and materials used in construction or household;

? building materials;

? means of fire protection and fire safety;

? electronic and electromechanical products;

? heat-generating products.

A complete list of products in Russian can be found here.

A Gosgortechnadzor permit (GGTN) ensures the safety of all potentially hazardous industrial equipment, such as equipment used in the oil and gas, chemical and petrochemical, mining, metallurgical, hydro technical, and other industries.

11. Additional Documents/Permits Ò Additional documents are required for shipments of products such as tobacco, alcohol, firearms, hazardous materials, oversized equipment, etc. These documents may be required by the U.S. government as well as by the government of the Russian Federation.


12. A list of all the documents submitted to customs.
Transaction Terms - Buyer/Seller Responsibilities



The most commonly used terms are EXW (Ex Works), FOB (Free On Board), and CIP (Carriage and Insurance Paid to).



a) EXW - Ex Works (... named place)

Ex works means that the seller delivers when he places the goods at the disposal of the buyer either at the seller's premises or at another named place (i.e., works, factory, warehouse). The goods are not cleared for export and are not loaded onto any collecting vehicle.

This transaction term represents the minimum obligation for the seller. The buyer bears all costs and risks involved in taking the goods from the seller's premises. However, if the parties wish for the seller to be responsible for loading the goods on departure and to bear the risks and costs of loading, this should be made clear by adding explicit wording to this effect in the sale contract. This term should not be used when the buyer cannot carry out the export formalities directly or indirectly. In such circumstances, the FCA term should be used, provided the seller agrees that he will load the goods at his cost and risk.



b) FOB - Free On Board (... named port of shipment)

Free On Board means that the seller delivers as soon as the goods pass over the ship's rail at the named port of shipment. This means that the buyer bears all costs and risks of loss or damage to the goods from that point. The FOB term requires the seller to clear the goods for export. This term can be used only for sea or inland waterway transport. If the parties do not intend to deliver the goods by ship, the FCA term should be used.



c) CIP -- Carriage and Insurance Paid To (... named place of destination)

Carriage and Insurance Paid To means that the seller delivers the goods to the carrier but must in addition pay any necessary carriage costs to bring the goods to the destination. This means that the buyer bears all risks and any additional costs occurring after the goods have been delivered. However, in CIP the seller also has to obtain insurance against the buyer's risk of loss or damage to the goods during carriage. Consequently, the seller contracts for insurance and pays the insurance premium. The buyer should note that, under the CIP term, the seller is required to obtain only minimal insurance coverage. If the buyer wants greater coverage, he either needs to reach an agreement on this with the seller or to purchase his own additional insurance. The ÏcarrierÓ is any person who, in a carriage contract, performs or procures transport by rail, road, air, sea, inland waterway, or a combination of these. If subsequent carriers are used for carriage to the destination, the risk passes when the goods have been delivered to the first carrier.

The CIP term requires the seller to clear the goods for export. This term may be used irrespective of the mode of transport, including multimodal transport.



Customs payments

On January 1, 2007 new Russian customs tariffs were put into force, defined by Government Order # 718, issued November 27, 2006.



Detailed information can be found on the official Russian customs site

http://www.customs.ru/en/legislation/tariff



The full text of 2007 customs tariffs in Russian can be downloaded from

www.tks/files/other/tnved.zip



A detailed description, in English, of the Russian harmonized commodity and coding system is available at: http://www.alta.ru/main_en.htm



The customs code includes many regulations, the basic and most important of which are as follows:



* New forms for customs, transit, and customs fees declarations (Order No. 724 of Federal Customs Service dated August 3, 2006 ÏOn Approval of a New Form of Freight Customs and Transit DeclarationsÓ) were introduced. It is now possible to use a unified set of the above forms instead of separate forms for transit and declaration procedures. Changes were also made to the order used to fill in the columns for prices and descriptions of goods.



* The customs fees paid by legal entities and those paid by individuals on imports of certain vehicles were brought to the same level. This includes special vehicles used for freight transportation, vehicles used for special purposes (excluding those for passengers and freight transportation), and vehicles used for industrial purposes.



* All advance payments, customs fees, and deposits to customs authorities should be made only in Russian rubles. This new rule suspends regulations, which gave a choice in the currency used for customs payment.



The Governmental order of the Russian Federation from May, 26th, 2007 N 321 " About modification in the Custom duties of the Russian Federation " according to which since July, 1st, 2007 zero rates of the import customs duties operating(working) on June, 30th, 2007 more than on 600 names of the process equipment, mechanical devices are established(installed) on a constant basis, equipments has come into force. The establishment on a termless basis of zero rates of import duties(taxes) on the process equipment creates favorable conditions for updating by the Russian enterprises of the fixed capital. Also since July, 1st, 2007 on a constant basis rates of the import customs duties applied at the moment on separate kinds of cheeses, footwear and its(her) details, ore, slag, ferrous metals, products from Germany, means of ground transport will operate(work).



Government Order No. 321 of May, 26th, 2007 "On modification of the custom duties of the Russian Federation", which came into force on July, 1st, 2007, reduced to zero the customs duty rates on imports of more than 600 types of mechanical devices. This change was made to make it easier for Russian enterprises to update their capital stock. In addition, since July 1st, 2007 constant import customs duty rates were applied to cheese, footwear and apparel, ore, slag, ferrous metals, products from Germany, and means of ground transportation.



According to a report of the U.S.-Russia Business Council (http://www.usrbc.org/pics/File/WTO_monthly/WTOJune2007.pdf), the average weighted customs tariff in Russia for May 2007 was 11.7 %. The tariff for agricultural products was 18.6% and 10% for industrial products. In May 2007, German Gref (Minister of Economy) forecasted that the average weighted customs tariff rate would be 11% in 2008, 10.3 % in 2009 and 9.9 % in 2010.



In a November 2006 agreement with the U.S., it was specified that Russia would cut tariffs on a broad range of manufactured goods by an average of 8%.



The Office of the U.S. Trade Representative (http://www.ustr.gov/assets/Document_Library/Reports_Publications/2007/2007_NTE_Report/asset_upload_file455_10977.pdf) provides information about trends in customs issues, taxes, and tariffs.



a) Commodity Classification



The list of commodities processed at Russian customs offices is organized into a harmonized system (HS) similar to other international systems, including that of the United States. The harmonized system of the Russian Federation consists of 21 sections, which break down into 97 chapters, divided subsequently into four-character headings, six-character subheadings, and 10-character commodity positions. An American exporter familiar with the U.S. harmonized commodity description and coding system will have little problem identifying a code in the Russian HS system.



b) Customs Valuation



The main aspects of the customs clearance process for export-import transactions are described in the Russian customs code. The full text of the Russian customs code, effective January 1, 2004, can be found here http://www.customs.ru/tk_en/).



The customs code of the Russian Federation defines customs payments as Ïcustoms duties, taxes, commissions, fees for licenses, and other payments charged by the customs bodies of the Russian Federation in a prescribed order.Ó The customs code includes a list of payments charged by customs bodies when commodities and vehicles are transferred across a customs border and in other legally defined cases.



Customs payments include:



* Customs/import duties;
* Excise taxes/duties;
* Value added tax (VAT);
* Customs processing fees.



The customs processing fees include:



* Commissions for the issue and renewal of licenses by customs bodies;
* Commissions for the issue and renewal of certificates from a customs clearance expert;
* Customs clearance fees;
* Storage fees;
* Transportation and related fees;
* Consulting and information support fees;
* Fees for the approval of a preliminary decision (commodity HS Code classification).



c) Customs Import Duties



There are three methods used to assess customs duty:



* Ad valorem duties are calculated as a percentage of the customs value of the commodity;
* Specific duties are calculated on the basis of weight, volume, and quantity of the commodity;
* Compound duties are a combination of ad valorem and specific duties.



The most common duties are ad valorem and compound duties, with specific duties often used to define the minimum duty rate under a compound category.



Below is an example of a compound duty:





HS code 201 0201 10 000 1





Commodity Meat of bovine animals, fresh or chilled

Meat of bovine animals, carcasses, fresh or chilled



Compound duty 15%, but minimum 0.2ƒ per a kilogram



Note: According to the Governmental order of the Russian Federation from May, 26th, 2007 N 321 "About modification in the Custom duties of the Russian Federation" has come into force. According to it since July, 1st, 2007 zero rates of the import customs duties will be active on more than on 600 names of the process equipment and mechanical devices. The establishment on a termless basis of zero rates of import duties on the process equipment creates favorable conditions for re-equipment of Russian enterprises. Also since July, 1st, 2007 rates of the import customs duties applied at the moment on separate kinds of cheeses, footwear and its details, ore, slag, ferrous metals, products made from germanium, ground transportation units will operate on a constant basis.



The list provided in Appendix 1 provides brief comments on the types of duties charged on commodities under each chapter of the harmonized system of the Russian Federation.



d) Excise Taxes (Duties)



The following information on excise duties is based on order No. 1347 of the State Customs Committee of November 27, 2003, with additions, effective January 1, 2005. The full text of the order can be found here http://mvf.klerk.ru/spr/spr18.htm.



The amount of the excise duty is calculated by the customs officer according to instructions included in Order #1347. Excise duties are added to the import duties (ad valorem, specific, and compound) described above.



Advance payments in the form of excise marks on alcohol and tobacco products, which are subject to excise duties, are deducted from the total sum of import and excise duties.



Currently, there are a number of categories of commodities that are subject to excise duties. Order #1127 included jewelry as an excise deductible category, so it makes sense to double check the current customs taxation status of jewelry items before importing them to Russia.



Excise taxes on tobacco products and beer are expected to rise in the near future.



Ethyl alcohol made from all kinds of raw materials, including crude alcohol, is charged an excise tax of 21.50 rubles per liter of anhydrous ethyl alcohol. Cognac is excluded from this tax.



The excise taxes levied on alcohol products are as follows:

* Wines (except natural non-traditional wines, champagne, and sparkling wines) - 112 rubles per liter of anhydrous ethyl alcohol contained in the excised goods;
* Champagne and sparkling wines Ò 10.50 rubles per liter;
* Natural wines (except non-traditional, non-fortified wines) Ò 2.20 rubles per liter;
* Alcohol products with ethyl alcohol volume over 25% (except wines) - 135 rubles per liter of anhydrous ethyl alcohol contained in the excised goods
* Alcohol products with ethyl alcohol volume from 9% to 25% (except wines) Ò 100 rubles per liter of anhydrous ethyl alcohol contained in the excised goods
* Alcohol products with ethyl alcohol volume below 9% (except wines) - 70 rubles per liter of anhydrous ethyl alcohol contained in the excised goods



Beer

* Beer with standard volumetric alcoholic content below 0.5% - no excise tax;
* Beer with standard volumetric alcoholic content from 0.5% to 8.6% - 1.91 rubles per liter
* Beer with standard volumetric alcoholic content over 8.6% - 6.85 rubles per liter



Tobacco products



* Cigars Ò 16.35 rubles per cigar;
* Cigarillos - 200 rubles per 1000;
* Filtered cigarettes - 78 rubles per 1000 plus 5%
* Unfiltered cigarettes - 35 rubles per 1000 plus 5%
* Pipe tobacco Ò 676 rubles per kilogram
* All other tobacco, except that used as raw materials for tobacco production - 277 rubles per kilogram



Automobiles and motorcycles

* Automobiles with motor power below 67.5 kilowatts (90 horsepower) Ò no excise tax
* Automobiles with motor power from 67.5 kilowatts (90 horsepower) to 112.5 kilowatt (150 horsepower) Ò 16.50 rubles per 0.75 kilowatt (1 horsepower);
* Motorcycles with motor power over 112.5 kilowatts (150 horsepower) - 167 rubles per 0.75 kilowatt (1 horsepower)



Motor gasoline

* Motor gasoline with an octane number of 80 or below Ò 2,657 rubles per metric ton
* Motor gasoline with an octane number over 80 Ò 3,362 rubles per metric ton



Diesel fuel

* Diesel fuel Ò 1,080 rubles per metric ton



Motor oil

* Motor oil for diesel and/or carburetor (injector) motors Ò 2,951 rubles per metric ton



Straight-run gasoline - 2,657 rubles per metric ton



e) Value Added Tax (VAT)



VAT is described in order No. 131 of the State Customs Committee of February 7, 2001 and amendments to that order.



Currently, there are two VAT customs rates Ò 10% and 18%. There are also several categories of commodities exempted from VAT.



10% VAT is charged on all goods listed in article 164 of the tax code. This includes goods in the following product categories:



* Food products;
* Children goods;
* Press periodicals and educational books;



Commodities charged with 10% VAT are defined by the federal government and are classified by the State Customs Committee according to the Russian harmonized system.



All other categories of goods imported into Russia are subject to 18% VAT.



The VAT is charged on the sum of the following: (a) commodity landed cost (a.k.a. customs value), (b) import duty, and (c) excise tax (if applicable). When a commodity is exempt from import and/or excise duties, these amounts are not included in the VAT calculation.



There are 11 categories of commodities exempted from VAT:



1. Urgently required medical equipment such as:

* Prosthetic and orthopedic devices, including raw and semi-finished materials for their production;
* Technical tools and machinery, including motor transport used solely for rehabilitation and the transportation of ill or injured individuals;
* Glasses, lenses, and glass frames (except sunglasses and their frames), as well as raw materials and sets for their production.

2. Materials and substances for immunobiological preparations used for diagnostics, prevention, and treatment of infectious diseases;

3. Items of art donated to Russian institutions, that have been qualified as belonging to the cultural heritage of the Russian Federation;

4. Press media for state and municipal libraries and museums, as well as works of cinematographic art, shipped by specialized state institutions under international non-commercial exchange programs;

5. Products manufactured by Russian organizations on land located in foreign states but utilized by the Russian Federation under international agreements;

6. Technical equipment and its spare parts and components imported as a contribution to the charter capital of an organization;

7. Crude natural diamonds (Russian HS Code 7102 10 000 0, 7102 21 000 0, 7102 31 000 0);

8. Commodities designated for official and personal use by foreign diplomatic missions and organizations of a similar status and their staff, including family members;

9. Currency of the Russian Federation, foreign currency and banknotes (except collectible items), and stock (shares, bonds, bills, certificates, etc.);

10. Products of the sea that were fished and/or processed by fishing enterprises of the Russian Federation.

11. Goods shipped to the Russian Federation may be exempted from VAT if they are used for production activities under a shared production agreement in compliance with the project documentation.


f) Customs processing fees and other payments



Different from customs and excise duties and VAT, customs processing fees are charged for a range of activities performed during the customs clearance procedure. These include:



* Commissions for issuing or renewing licenses by the customs bodies;
* Commissions for issuing or renewing a certificate of a customs clearance expert;
* Customs clearance fees;
* Storage fees;
* Fees for transportation and transportation-related procedures incurred during the customs clearance process;
* Consulting and information support fees;
* Fees for the approval of a preliminary decision (such as to identify the HS Code of a commodity)



Customs processing fees are charged before or along with the submission of a customs declaration and must be paid immediately; payment cannot be deferred. Additional payment is charged if customs clearance is performed outside the designated area and outside of normal business hours. Any additional payments are charged at 100% of the corresponding customs processing fee.



When charging processing fees, customs always defines whether a commodity is commercial or non-commercial.



Commodities imported to Russia for non-commercial purposes are charged with a customs clearance fee equal to 0.1% of the commodityÌs customs value, denominated in rubles.



Commodities imported to Russia for commercial purposes are charged with a two-part customs clearance fee, which equals:

1. 0.1% of the commodityÌs customs value, denominated in rubles;
2. 0.05% of the commodityÌs customs value, denominated in foreign currency.



According to the tax code, the State Customs Committee has the authority to decrease customs clearance fees, to exempt goods from customs processing fees, and to change the currency used for fees.



Before shipping a commodity to Russia, it is important to check whether the recipient is certified and registered with the customs office as a foreign trade participant. A sample order regarding customs clearance and customs control is specified by order No. 203 of the State Customs Committee dated April 4, 1996. According to the order, a foreign trade participant should:

1. be registered at the customs office;
2. submit a notice about the arrival of an imported commodity;
3. deposit the commodity at a bonded intermediate warehouse;
4. submit shipping documents and a brief customs declaration to the customs office; and
5. submit a customs freight declaration with a complete package of attached documents.

These activities may be carried out by a certified local broker.



After submission of a freight customs declaration, a customs officer begins the customs clearance procedure, which consists of five major stages:

1. Acceptance, registration, and control of customs declarations;
2. Quality control of commodity code identifications;
3. Currency control and commodity valuation control;
4. Customs payment control; and
5. Examination and release of the commodity from the warehouse.



For more details on customs processing fees, please follow the link below to a list of tariffs rates from the Web site of a local broker in Moscow (http://www.gtk-s.ru/price.html):



Assistance in customs proceeding (priced in US$, including 18% VAT):



* Customs proceedings for transit of import commodity (per lot of cargo): $190.00
* Customs proceedings for export commodity, aviation (per lot of cargo) $57.00 to $888.00 (Depends on the price of the goods)
* Customs proceedings for expor