Remote release In August 2014, the RF Ministry of Economic Development held an expert consultation on the Federal Customs Service (FCS) of Russia Decree No. 317 on Approval of the List of Customs Authorities Performing Customs Operations and Customs Control with Respect to Goods in Accordance with the FCS Russia Decree No. 845 of April 22, 2011 of February 18, 2010 (“remote release”). The meeting resulted in a decision to put together argumentation for either the cancellation or amendment of the corresponding legislation. “Remote release” involves the placement of goods in the temporary warehouse of an “external” customs authority at the place the customs border is crossed, while the documents are filed and the goods processed at an “internal” customs authority (for instance, at the place of registration of the importer). The internal customs authority conducts the document verification procedure, while other customs control measures (such as customs inspections) are performed by the external customs authority. Electronic communications between the customs authorities involved in the customs processing are used to reach a joint decision on the release of the goods. In this way, the company makes the customs declaration for the goods through the internal customs authority while the goods are physically at the external customs authority. Despite the obvious benefits of this procedure, there are a number of nuances that impede or prevent use of the remote release procedure. One such nuance is the approval by the FCS Russia of “ties” between internal and external customs authorities. For example, an importer may file documents for customs processing at Obninsky Customs Post, Kaluga Customs (the internal customs authority), and import goods only through Aleksandrovsky Customs Post, Bryansk Customs (the external customs authority). The business community considers the introduction of these ties to be an attempt to force participants in foreign economic activities into supply chains and logistical structures, as well as to restrict the right of companies to choose customs authorities on the basis of their business interests. This was the reason for the meeting held by the RF Ministry of Economic Development, which is an example of the authorities listening to the business community. dentons.com 3Complex of intellectual property rights and the customs value of goods On December 16, 2014, the Judicial Panel for Economic Disputes of the RF Supreme Court (“SC”) handed down two rulings in the Oriflame1 and Mary Kay2 cases. Although the subject of the appeals in both cases were similar (complex of intellectual property rights, the SC only returned one case (Oriflame) for retrial. The appeal in Mary Kay was denied. In both the above cases, the disputes concerned complex of intellectual property rights and the need to include royalties and other payments in the customs value of imported goods. A complex of rights may include rights to use a trade name, know-how, patents and other intellectual property, and not include the right to use a trademark. Disputes arise concerning the need to include royalties for the use of a complex of rights in the customs value of imported goods, the method of inclusion, and the ability to split royalties into “goods” and “nongoods” components. Attempts to split the right to use trademarks and trade names have so far not been successful companies in current judicial practice (Oriflame), neither have attempts to not include royalties for the right to promote sales by use of a trademark in the customs value (Mary Kay). Despite the positive SC decision in the Oriflame case, courts have no doubt that that royalties for the use of a trade name must be included in the customs value of goods. 1 RF Supreme Court Ruling of December 16, 2014 No. 305-KG14-78 2 RF Supreme Court Ruling of December 16, 2014 No. 305-ES14-1441 4 dentons.comInformation exchange between customs and business The Procedure for Use of the Consolidated Automatic Information System of the Customs Authorities for use in customs declarations and the release of goods in electronic form (FCS Russia Decree No. 1761 of September 17, 2013) entered into force on November 12, 2014. The implementation of this procedure has involved a significant modernization of the customs authorities’ software. In particular, the FCS Russia has substantially improved the functional capabilities of the declarer’s archive. Participants in foreign economic activities can now submit electronic documents to the customs authorities once electronically; irrespective of the place the goods are declared. The declarer’s archive enables electronic information exchange during customs declaration, and release of goods, and after the release of goods. The customs authorities can access the electronic archive at all stages of customs processing, rather than asking the declarer. dentons.com 5Customs transit through Russia in embargo conditions On August 7, 2014, the RF Government introduced an embargo (import ban) on certain groups of goods (Resolution No. 778 on Measures to Implement RF Presidential Decree No. 560 on the Application of Certain Special Economic Measures to Ensure the Security of the RF of August 6, 2014, of August 7, 2014). The FCS Russia has therefore been instructed to ensure control of agricultural products, cheeses and foodstuffs originating from the United States, EU, Canada, Australia, and Norway. The measures applicable by customs authorities when importing such goods include refusing the release of goods, verification of the country of origin, and customs inspections. Customs transit through Russia of such goods (for example, to Central Asia) is also prohibited. There is an exception for transit to Kazakhstan (under an agreement reached between Kazakhstan and Russia in mid-August 2014). 6 dentons.comAuthorized economic operator Amendments were made to the Federal Law on Customs Regulation in the RF (as amended by Federal Law No. 115-FZ on Amendments to the Federal Law on Customs Regulation in the Russian Federation with Respect to Improving the Institute of Authorized Economic Operator of May 5, 2014) in 2014. Preferential status may be assigned to a wide range of persons, namely producers, importers, exporters, customs representatives (brokers), customs carriers, intermediaries, distributors and other persons in one way or another involved in foreign economic activities. Upon acquiring authorized economic operator status (AEO), a company enjoys, among other aspects, the simplified procedures for the following: • processing and completing delivery of goods to the AEO warehouse; • temporary storage of foreign goods at the AEO warehouse; • release of goods before filing of a customs declaration, and others. The most attractive simplified procedure is the ability to deliver imported goods to the AEO’s warehouse, without going through the internal customs authority. This procedure essentially means that when importing goods for delivery to the AEO’s address, the carrier places the goods under the customs transit customs procedure at the border customs as usual, however, the carrier may deliver the goods immediately to the AEO’s warehouse or other territory without first delivering the goods to the internal customs authority for completion of the customs transit customs procedure. After unloading the goods at the AEO’s warehouse, the carrier files the required documents with the internal customs authority, and the customs transit customs procedure is then complete. The AEO also acquires additional benefits: no application of general risk profiles to imported products (and as a result a reduction in the frequency of customs inspections); reputation as a good-faith participant in foreign economic activities, and others. dentons.com 7Special economic zone in Crimea and Sevastopol Federal Law No. 377-FZ on the Development of the Crimean Federal District and the Free Economic Zone on the Territories of the Republic of Crimea and City of Federal Significance Sevastopol of November 29, 2014 was officially published on December 1, 2014. The Federal Law entered into force on January 1, 2015. A free (special) economic zone is a part of the country’s territory subject to special procedures for entrepreneurial activities, and which grants customs and value added tax preferences as part of the free customs zone procedure. According to estimates, the tax burden for entrepreneurs in the free economic zone will be approximately 30% lower than that in other Russian regions due to the customs and tax preferences. The minimum investment threshold has been lowered for entrepreneurs wishing to become residents of the special economic zone. Capital investments in the first three years from conclusion of an agreement on the conditions of activities in the free economic zone must be at least 3 million rubles for small and medium enterprises, and at least 30 million rubles for other entities. 8 dentons.comAmendments to the RF APeC An FCS Russia draft law on amendments to Chapter 16 and certain articles in that chapter (for example, art. 16.2) of the Russian Federation Administrative Penal Code has been adopted by the RF State Duma at least in first reading (November 18, 2014). The declarer or customs representative, subject to compliance with certain conditions, is released from administrative liability in the event that they independently discover errors made during customs declaration after the release of the goods. Companies may enjoy this benefit if at the date preceding the registration date of the application for amendment of the customs declaration the following conditions have all been met: • The customs authority has not discovered administrative violations in accordance with legislation on administrative violations, the subject of which is the goods indicated in the application; • The Customs authority has not notified the company of customs controls after the release of the goods, if such notification is required by customs law, or has not begun such conducting such controls without notification if such notification is not required; • The company has no debts with respect to payment of customs duties, taxes, and later payment interest, not paid upon expiration of the terms established for payment of customs payments. The amendments to article 16.2 RF APeC resolve at least one of big problems for companies – discovering mislabeled or excess goods at delivery to the company’s warehouse. dentons.com 9Customs Code of the Eurasian Economic Union The draft Customs Code of the EEU was prepared in December 2014. In early 2015 the draft is to undergo internal state agreement. The RF Ministry of Economic Development will gather comments, criticisms and proposals on the text from Russian state authorities and the business community. The main objective of the new Code is to reduce the number of referenced articles in the current Customs Code of the Customs Union. However, in the course of the work a range of new provisions and new terms (such as “foreign trade transaction”) were introduced into the draft Customs Code of the EEU. The Customs Code of the EEU is expected to enter into force from January 1, 2016.