A Decree on the Application of Certain Special Economic Measures to Ensure the Security of the Russian Federation ("Decree") has been published on the official website of the RF President and entered into force on August 6, 2014. The Decree prohibits or restricts for a period of one-year foreign economic activities involving the import into the Russian Federation of certain agricultural products, raw materials and foods if the country of origin has imposed economic sanctions on Russian legal entities and/or individuals, or joined such sanctions.

Pursuant to the Decree, an RF Government Resolution on Measures to Implement the Decree of the President of Russia on the Application of Certain Special Economic Measures to Ensure the Security of the Russian Federation was adopted on August 7, 2014 ("Resolution").

The list of agricultural products, raw materials, and foods originating in the United States, European Union member countries, Canada, Australia, and Norway that are subject to a Russian Federation import ban for one year includes beef (fresh or chilled), beef (frozen), pork (fresh, chilled or frozen), poultry meat and edible by-products (goods item 0105, fresh, chilled or frozen), meat (salted, in brine, dried or smoked), fish and crustaceans, shell fish and other marine invertebrates, milk and dairy products, vegetables (edible roots and tubers), fruit and nuts, sausages and similar meat, meat by-products, and blood products, and ready food products made thereof, including cheese and cottage cheese made with vegetable oils, food products (dairy containing products, vegetable oil products). This list is to be applied strictly in accordance with the TN VED TS codes stated in the Resolution.

In accordance with the Force Majeure Certification Regulations of the Russian Federation Chamber of Commerce (approved by Resolution No. 28-4 of the RF Chamber of Commerce Management Board of 30.09.1994), the imposition of an import ban constitutes force majeure. Force majeure means extraordinary events not dependent on the control or actions of the parties to an economic agreement as a result of which the parties are unable to perform their obligations. Upon such circumstances arising, the contractor is released from liability for failure to perform its obligations (FTS Moscow Department Letter No. 19-12/112985.2 of 04.12.2008).

In accordance with RF SAC Presidium Ruling No. 3352/12 of 21.06.2012, circumstances only legally qualify as force majeure if both the following material characteristics are met:

- extraordinariness – the event is exceptional, outside the bounds of normality, unusual for living conditions, is not an existential risk and cannot be taken into consideration under any circumstances;

- unpreventability.

In light of the above, there is reason to believe that the introduction of this ban may be deemed a force majeure event releasing parties from liability. Neither party to a foreign trade contract will be liable to the other for full or partial default under a contract caused by force majeure, that is, extraordinary and unpreventable under the conditions circumstances outside the control of the parties, including a ban on the export and import of goods.

If necessary, the parties to foreign trade contracts may apply to the RF Chamber of Commerce for a certificate confirming the force majeure circumstances.

Current foreign trade contracts may remain in effect with respect to the supply of goods not affected by bans or restrictions and should be performed.

From a customs law viewpoint, the consequences of an import ban should be distinguished from import restrictions. Goods subject to a Russian import ban arriving in the customs territory of the Customs Union are subject to immediate removal from the customs territory of the Customs Union. No customs processing procedures are performed with respect to such goods. Measures to remove the said goods are generally the responsibility of the carrier (the transportation company performing transportation services) or the owner of the goods.

Although the Decree provides for the application of both import bans and import restrictions, the Resolution only imposes a ban on the goods on the list of products. Clause 2 of the Decree provides that the list of agricultural products, raw materials, and foods may be revised in order to ensure the balance of goods markets and prevent price inflation for agricultural and food products; it is therefore possible that the list of products affected by the import ban may be revised or expanded, and that products subject to import restrictions may be added.

Import restriction means the implementation of measures to control the volume of import of a good. Goods affected by import restrictions may be subject to quotas, import permit requirements, and other measures. If documents to confirm compliance are not presented at the import of restricted goods, the goods must generally be immediately removed from the customs territory of the Customs Union.

If it is not possible to remove the prohibited or restricted goods, or they are not immediately removed, the goods are subject to detention by the customs authorities. Detained goods are placed in temporary warehousing or other places determined by the customs authority. The customs authorities hold restricted goods for 1 (one) month, and perishable goods for 24 (twenty-four) hours. The customs authorities hold goods subject to an import ban for 3 (three) days. The general rule is that upon expiration of the storage period for the detained goods they are returned to whichever of the following persons first applies to the customs authority for the return of the goods for removal (declarer, goods owner, persons in possession of the goods when detained), or the customs authorities sell the uncollected goods.

We assume that the Decree will only apply to goods actually imported into Russia after August 6, 2014. Goods that had already crossed the customs border before August 6, 2014, but which for some reason were not placed under a customs procedure or presented to the customs authorities for customs processing should not be affected by the Decree.

The question of whether the measures Russia has imposed to ban or restrict certain goods comply with Customs Union law remains open, given that any measures affecting the import of goods into the customs territory of the Customs Union must be agreed by the three countries (Russia, Belarus, and Kazakhstan).