The Russian Federation Government, Eurasian Economic Union, and the business community are currently discussing the idea of forgiving companies engaged in foreign trade for errors in customs processing. A number of steps towards implementing the idea have already been taken. The RF State Duma is considering a draft law by the RF Federal Customs Service on amendments to Chapter 16 (for example, art. 16.2) of the Russian Federation Administrative Penal Code (RF APeC), which the State Duma adopted at the first reading on November 18, 2014.

The basic purpose of the draft law is to give participants in foreign trade an exemption from administrative liability, subject to certain conditions, if they independently discover mistakes made in customs declarations after the goods have been released.

The changes to art. 16.2 APeC RF will resolve, at a minimum, one of the major problems for companies – discovering mislabeled and excess goods upon delivery to the company's warehouse. These issues are discovered during practically all customs compliance (“health checks”) by independent consultants.  The member states of the Eurasian Economic Union (EEU) are also advocating forgiveness for companies engaged in foreign trade – but at the level of EEU customs law. Kazakhstan has proposed setting out the right of companies to discover and/or cure violations of customs law or other customs regulations after the release of goods.

In this way, while a major issue for companies engaged in foreign trade has been concerns over employees and contractors ensuring customs compliance in the course of foreign trade operations, the most important issue could now become the potential recovery of overpaid customs payments and accounting for goods which previously could not be entered on the books.

Our practice shows that most problems discovered in the course of customs compliance (“health checks”) are the result of misinterpretation of customs law, which often results in overpayment and failure to take advantage of benefits or exemptions from customs duty or import VAT.

This may give rise to or exacerbate customs risks relating to a company's foreign trade activities failing to comply or fully comply with customs requirements.

A distinguishing characteristic of these customs risks is that the adverse consequences for the company may be realized after a considerable period. The statute of limitations for customs violations is two years. The customs control period (including audits) is three years from the release of goods (this is the period in which the customs authorities have the right to check a company's customs compliance for goods that have already been processed).

Dentons offers companies engaged in foreign trade customs compliance (“health checks”) based on a broad approach to assessing the full range of operations within the company, including detailed analysis of the following key aspects:

  • Determining procedural and/or information gaps capable of giving rise to customs compliance risks
  • Health check for the company's foreign trade operations, including analysis of customs declarations and supporting documentation to determine whether the documentation is correct and operations meet customs law requirements

We carry out in-depth analysis of the company's foreign goods supplies, goods declaration documentation preparation processes, preparation of accompanying documentation (foreign trade agreements, license agreements, agreements with customs representatives and carriers, etc.), the supply structure and organization of the logistics chain, and assess the affect of customs risks on the amount of customs payments and potential fines payable (if violations entailing administrative liability).

The “health check” is used to produce a detailed report for the company describing any customs non-compliance found and providing advice on the necessary adjustments and/or improvements to the company's foreign trade practices.

This company report can at the least be used as support for reporting to head office, for amendments to goods declarations after the release of goods, and for obtaining a refund of overpaid customs payments and the legalization of misdeclared goods.

Customs compliance (“health check”) provides practical benefits not only to companies that largely outsource their foreign trade/logistics activities, but also to companies that have their own in-house foreign trade/logistics departments.

Our experience shows that a customs compliance (“health check”) is especially vital for companies considering any of the following:

  • Business restructuring (switching from onshore supply to offshore, or vice-versa)
  • The possibility of adding the company to the green lists of good-faith importers
  • The possibility of entering the company in the register of authorized economic operators
  • A change of customs representative or place of customs processing 
  • A change in the logistical chain of supply
  • A switch to independent declaration (without using a customs representative)
  • Expansion/reduction in the number of customs specialists employed by the company