On July 1, 2010, the Customs Code (the “Customs Code”) of the Customs Union of Russia, Kazakhstan, and Belarus (the “Customs Union”) came into force. Prior to the ratification of the Customs Union, the trade relations of the member states were governed by several treaties. The main objective of the Customs Union is the elimination of trade barriers between member states and the unification of customs rules on trade between the member states and the rest of the world.

The territories of the member states now constitute a single customs territory, with internal customs borders having been abolished. Goods released for free circulation within one of the member states are automatically granted the status of being in free circulation throughout the entire Customs Union, although there are some remaining restrictions regarding certain imported goods.

The Customs Code established a Customs Union Commission, which has been entrusted with several distinctive duties, including the maintenance of common registries (in particular, registries for duly authorized agents, customs brokers, customs carriers, duty-free shops, warehouse owners, and preliminary classification decisions). The Customs Union Commission is also responsible for the approval of Customs Union implementation documents, such as instructions for the completion of customs declarations.

The Customs Code introduced uniform import duties on goods imported into the member states of the Customs Union, which are set out in the Common Customs Tariff of the Customs Union. It is contemplated that export duties on goods exported from the member states will also be standardized and will be set out in a unified registry. Any amendments to the unified registry may be made only with the agreement of each of the other member states. Basic principles governing the rates of export duties of the member states had already been set out, and are currently in force, in a trilateral treaty “On Export Customs Duties in Respect of Third-Party Countries” of January 25, 2008.

“Industrially assembled” goods (such as motor vehicles) may only be custom cleared through customs in the state in which the industrial assembly of such goods was performed. Customs tariffs are not charged when such goods are transferred from one member state to another, if certain criteria are met.

The importation of technological equipment for certain investment projects will be exempt from the payment of customs duties. A list of investment projects that qualify for such exemption is expected to be compiled by the Customs Union Commission.

Tariff concessions may be also granted for goods imported into a member sate as a contribution to the charter capital of companies formed within the member state. However, such concessions may be granted only in the manner prescribed by the local legislation of the applicable member state.

The Customs Union introduced substantial changes to the tax regime for commercial transactions carried out among taxpayers of the member states. According to a trilateral treaty adopted in connection with the Customs Code, a taxpayer exporting goods from one member state to another will be able to take advantage of a 0% value added tax rate, together with other tax exemptions and reimbursements, in the exporting member state, provided that all applicable taxes and fees are paid in full in the importing member state. In order to take advantage of this tax benefit, the exporting taxpayer will be required to file various supporting documents evidencing the transaction and the payment of applicable taxes and fees in the importing member state.