Matters arising in the process of carrying out international economic activities and ways of their solution
Classification of goods
Classification of goods determines the rate of customs duty and the list of permissive documents which it is necessary to submit to the customs authority (compliance certificates, licenses, etc.). Customs offices often do not accept a declared code and take their own decision on classification. The obligation to determine the FEACN code at the level of all ten characters is imposed on the declarant. This is accounted for both by the intention of the customs house to classify goods with the code to which the highest duty rate corresponds, and the complexity of the classification issues, the absence of a precise, universal reference book which could foresee all cases of classification of the existing goods in all their diversity.
In cases when the customs house takes its own decision on the classification which differs from the code determined by the declarant, as a rule, customs payments are additionally charged. Also proceedings for an administrative offense could be initiated according to part 2 of article 16.2 of the Code of Administrative Offences of the Russian Federation “falsified declaration” (a fine in the amount of half to twice the sum of unpaid customs payments with a possible confiscation of the goods).
To prevent such unfavorable consequences, and to reduce costs when declaring goods, we are ready to provide you with the following services in the sphere of classification of goods:
- obtaining a preliminary classification decision regarding the goods you are importing (exporting). This document allows one in good time, before beginning to deliver the goods, to obtain the official decision of the customs office on the commodity code and to prevent any disputes about the code in the process of or after the customs clearance.
- when importing to Russia large shipments of equipment which due to their volumes are supplied in several shipments within a determined period, not as a single shipment, in certain cases it is advisable before importing the first shipment to obtain a decision on the classification of machines imported as separate components. Such decision allows classification of the entire imported machine as a single item, not as a collection of many elements. Taking into consideration that the duty rate for the equipment is as a rule considerably lower than for the elements of which it is comprised, this decision, apart from excluding debates with the customs office about the code of the goods, allows the costs of paying for the import duties upon declaring to be reduced.
- if the customs authority has already classified your goods by a commodity item unsuitable for you or ungrounded (CU FEACN code), we can provide you with legal assistance in the official appeal against such decision.
Customs cost of goods
As practice shows, the customs cost is the basic problematic point which the majority of participants of international economic activities, and above all importers, encounter. This is accounted for by the risk management system applied by the customs authorities being oriented in the first place at cost indicators. Due to this, when importing these or those goods risk cost profiles are often “triggered”, which entails as a rule a request by the customs office of the additional documents to evidence the declared cost.
Often the customs authorities request superfluous documents which are not stipulated by the valid regulatory acts. Moreover, having received from the declarant all the required documents, the customs authority not infrequently ignores some of them and decides on the adjustment of the customs cost basing on the average price information contained in the departmental databases.
In certain cases the customs authorities unjustifiably demand to include in the structure of the customs cost certain additional charges (license payments and such), unjustifiably prevent the use of the first method of determining the customs cost, etc.
In this connection we are ready to provide the following services to you:
- Consulting on any matters related to determination, confirmation, and adjustment of the customs cost.
- Preparation of an answer to the request of the customs authority to submit additional documents evidencing the customs cost, with the inclusion in the answer the arguments for the case, including references to specific provisions of the valid legislation.
- Preparation of an answer to the request of the customs authority to submit additional documents evidencing the customs cost, to avoid adjustment and other questions on the part of the customs authorities. Within this service we are ready to offer a solution for determining and evidencing the customs cost complying with the unique needs of your business (in particularly, supply of goods between interrelated persons, effecting of license payments, gratuitous deliveries, application of a discount system, and other specificities).
- Appealing against decisions, action, and inaction of the customs authorities in the sphere of customs costs of goods (such as decisions to adjust the customs cost).
Obtaining and analyzing documents required for release of goods
The Russian customs system is considered to be the most top-heavy link of the government machinery. This is evidenced, above all, in a great number of documents with which the process of customs clearance is accompanied. The basic documents submitted for customs clearance includes:
- Permissive documents (licenses, notifications, certificates, etc.)
- Commercial documents (contract, invoice, etc.)
- Transport documents (waybills, TIR carnets, СМR documents and such)
- Bank documents
- Other documents
We are ready to carry out analysis of documents submitted or to be submitted to the customs authority, to give a legal appraisal to the requirements of the customs to submit additional documents and, in consideration of it, to recommend the list of documents necessary and sufficient for the release of goods. Also we are ready to provide services in obtaining licenses, notifications, certificates, and other documents necessary for customs clearance.
A customs treatment is an aggregate of rules in accordance with which a participant of international economic activities has the right to dispose of goods after they are released by the customs authority (i.e. after completion of customs clearance). A participant of international economic activities chooses a customs treatment upon declaration basing on the purposes for moving the goods across the border. Thus, for instance, if you intend to import equipment under a lease contract that provides for the return of the equipment to a foreign partner, you can specify a customs treatment of temporary import. This treatment provides for partial (and in a number of cases, full) exemption from customs payments. Its application, however, restricts your right to dispose of the imported goods (particularly, it is not allowed to assign the goods to another person without permission of the customs authority)
The applicable Russian customs legislation (the same as the legislation of the Customs Union which is under formation) provides for quite a broad list of customs treatments. The right choice of a customs treatment allows bringing customs payments to a minimum, avoiding complexities in the further use of the goods and also in the subsequent completion of the customs treatment (such as, during the re-export of goods imported temporarily).
We have a great practical experience in application of all customs treatments existing in Russia, and are ready not only to provide consultative services at the stage of planning this or that transaction, but also to effect customs clearance of goods in accordance with the customs treatment chosen by you.
Examples from practice:
- An analysis of an international trade transactions and other factors with a view of determining the most optimal customs treatment
- A detailed description of a specific customs treatment: the conditions of placing goods under this treatment, the amounts of duties, document to submit to the customs, advantages and restrictions of this treatment and so on
- A comparative analysis of two and more customs treatments with a view to providing you with a choice of the most suitable option
- Application of the customs treatment of destruction for goods earlier imported to Russia with privileges on duty and tax payments as a contribution to an authorized capital. In some cases the re-export of such goods is an efficient alternative to the treatment of destruction.
- Application of the customs treatment of temporary import export regarding goods for exhibitions, production equipment under rent or leasing contracts, vehicles imported as goods.
- Application of customs treatments reprocessing on the customs territory and reprocessing outside the customs territory, including within projects of “mirror” reprocessing (projects when raw products are exported from Russia in the treatment reprocessing outside the customs territory, imported to a foreign state in the treatment reprocessing on the customs territory, and then the finished products are returned to Russia).
Determining the country of origin of goods
Within consultation in this direction we will highlight the following issues::
- The rules of determining the country of origin of goods applicable:
- within CIS
- within legislation of the Customs Union
- for goods originating from territories of special economic zones
- general rules applicable in the Russian Federation
- Applicability in a specific situation of an agreement on duty-free traffic of goods within the CIS member countries, applicability of preferential treatment in respect of goods originating from developing countries, and recommendations for eliminating obstacles to using these tools detected in course of the analysis
- In which cases it is necessary to obtain and (or) submit to the customs office certificates of origin of goods
- Course of action in obtaining certificates of origin of goods (СТ1, form А)
- Cooperation in obtaining certificates.
- Resumption of preferential treatment in cases when upon customs clearance it was not applied due to various reasons
Exemption from customs duties and VAT when importingе
Not all participants of international economic activities are aware of a wide list of exemptions from customs payments. These exemptions have a legal nature and are provided for both in Russian legislation and in international treaties. Unfortunately, there is no uniform regulatory act that would finally determine the entire list of exemptions and privileges applicable in the customs sphere. Customs authorities not infrequently use this situation to their benefit and do not inform a participant of international economic activities of a way to reduce costs of paying for duties and taxes. Such behavior of customs authorities is accounted for by their seeking to improve statistic indicators of collecting funds into the budget, which is especially clearly manifested under crises conditions, when foreign trade volumes reduced drastically, and also reduced were the amounts of customs payments.
We are ready not only to comment in detail on various ways of securing exemptions from customs payments including the procedure of obtaining a permission from a customs or other authority to use this exemption, the list of documents which have to be submitted in this case, but also practically to secure the obtaining of a permission of the customs to use this or that type of privilege.
Here is just an incomplete list of exemptions from customs payments:
- Duty-free import of goods as a contribution to an authorized capital of an organization
- Exemption from VAT when importing certain types of equipment
- Use of free trade treatment within CIS and the Customs Union under formation
- Duty-free import of automotive components for industrial assembly of road vehicles within the Russian Federation
- Treatment of free customs zone in Kaliningrad region
- Treatment of free zone in industrial production and technology development special economic zones of Russia
Consulting and conducting cases in administrative offenses in customs procedures (violations of customs rules)
As practice shows, in order to initiate administrative offense proceedings, it is often just formal grounds that are sufficient for customs authorities. A case is known when during filling in a customs declaration the declarant erroneously put down one superfluous digit in the certificate of conformity number. In the result the customs office initiated administrative offense proceedings on the grounds of falsified declaration of goods, viz. according to part 3 of article 16.2 of the Code of Administrative Offences of the Russian Federation. The declarant was awarded a fine in the amount of 100,000 rubles.
Within consulting in this direction we are ready to highlight the following issues:
- Analysis of concrete situations for risks of the initiating by the customs office of an administrative offence proceedings (hereinafter referred to as an AO case); recommendations for minimization of these risks
- The course of action for a participant of international economic activities when an AO case is initiated; ways to minimize the administrative fine
- Appealing against customs decisions on imposition of an administrative punishment in an arbitration court
Appealing against decisions of customs authorities (official appeal)
Customs authorities not infrequently take wrong decisions impinging upon interests of participants of international economic activities. This practice is accounted for by a multitude of reasons beginning from seeking to fulfill a plan for collection of funds into the budget and ending with an elementary incompetence of individual officers. As a rule, such decisions purport to adjust the customs cost, change the declared UFEACN code, request to submit superfluous documents for customs clearance etc.
Official appeal of decisions of a customs authority has a number of advantages compared to court appellation proceedings. First, the shorter periods of considering a complaint and taking a decision on it. A higher customs authority must take a decision on a complaint within one month of its furnishing. At the outside, this period can be extended to two months, if the customs authority request additional documents. An arbitration court considers a case within three months, the judge being able to extend this period to six months, if he finds the case especially complicated. Second, the mandatory nature of a decision of a higher customs authority to a lower one, and indisputability of this decision. Whereas the court system has at least three instances (first, appellation, cassation), and many customs authorities have been silently instructed to refer all court decisions taken to their detriment to higher authorities.
Legal examination of foreign trade contracts
A foreign trade contract is a major commercial document containing information on imported or exported goods. It is this document that a customs authority uses in the first place to check and clarify data stated in the customs declaration. Therefore, if no definite provisions are contained in the contract, or there are contradictions in it, the customs authority can acknowledge it unsuitable for the purposes of identifying the goods, confirming the customs cost, applying the first method of determining the customs cost, using the declared customs treatment, etc. Things are complicated by the fact that no specific contents of a foreign trade contract are regulated by any legal acts: this gives rise to various approaches to compilation and execution of the contracts. The approaches of customs authorities not infrequently differ from each other and may not correspond to the approach of a participant of international economic activities.
These points make legal examination of foreign trade contracts an exceptionally important state of planning a foreign trade operation. Our services in this sphere consist of the following:
- General analysis and examination proper of foreign trade contracts and other commercial documents for their compliance with the customs legislation of the Russian Federation, and of the legislation of the Customs Union
- Revealing provisions that can bring about additional questions on the part of customs authorities (particularly questions concerning price components to be included in the customs cost) and, as a consequence, delays in the release of goods
- Recommendations on amending commercial documents in order to minimize the customs cost and (or) the customs payments
- Revealing and removing other risks (particularly, disadvantageous conditions of supply; contract provisions on the basis of which customs authorities can prohibit re-export of defective goods, etc.)
Within this service we are ready to analyze documents (transport, commercial, customs, bank, etc.) hat you have concerning any customs risks. Besides, we will provide clear and detailed recommendations on removing or minimizing such risks..
Customs audit is usually conducted in three basic directions:
- Analysis of documents to be submitted to a customs authority, not yet submitted. At this stage we reveal and appraise risks comprised in the following:
- A refusal of a customs authority to accept documents
- An inquiry by the customs for additional documents to evidence the declared statements, including to check the declared customs cost
- Possible triggering of risk profiles, delays in customs clearance of goods
- Making a person who submitted the documents administratively liable du to submission of false documents and data
- Analysis of documents which should be accounted for and kept by a participant of international economic activities after completion of customs clearance. At this stage risks are evaluated related to submittal of possible claims on the part of the customs in the course of post-control, i.e. check of documents related to customs clearance, after release of goods. In this connection it should be underlined that in accordance with the Customs Code of the Customs Union (effective from 1 July 2010) customs authorities have the right to conduct customs control within 3 years of the release of goods. In practice post control is as a rule conducted in the form of a customs audit. By the results of customs audits customs authorities not infrequently adjust the customs cost, charge additional customs payments and issue requests for their payment.
- Analysis of documents which must be kept by a person acquired imported goods. Customs risks may arise not only with participants of international economic activities but also with persons acquired imported goods from participants of international economic activities or their intermediaries. The legislation imposes on such persons an obligation to verify that goods purchased by them have undergone customs clearance and that customs payments are effected in relation to them. Non fulfillment of this obligation entails administrative liability. Customs authorities are authorized to conduct audits of such persons. We are ready to analyze and help you minimize customs risks that arise (or can arise) with you when you purchase or take on lease imported goods.
Title holders may use a valid mechanism of controlling the import to Russia of goods violating their rights to intellectual property. This mechanism allows control of not only flows of counterfeit goods but also the so-called “parallel” import. To engage the customs in the protection of their rights to intellectual property, a title holder must enter his trade marks (or other items of intellectual property) in the Customs Register of Items of Intellectual Property and then establish interaction with customs and juridical authorities. We provide services in both inclusion of items of intellectual property in the said Customs Register and organizing interaction with customs authorities in controlling flows of goods imported to Russia.
An approved economic operator
Companies included in the register of approved economic operators of the Federal Customs Service of Russia (AEO), have the right to use various special technologies of customs clearance such as:
- Temporary storage of goods on premises, on uncovered sites and other territories of AEO (without acquiring by AEO of the status of a temporary storage warehouse).
- Release of goods prior to submission of a customs declaration.
- Conduct of customs operations related to release of goods which are on premises, uncovered sites and other territories of AEO (including completion of customs transit of goods addressed to AEO upon their import).
- Preliminary customs declaration of goods
- Submission of an incomplete customs declaration
- Submission of a periodic customs declaration
The use of these special simplifications allows reduction of the costs of paying for TSW services due to rejection of the services of storage, as well as the costs of paying for the services of a customs representative due to an enlargement of customs shipments in the course of submission of periodic declarations, speeding up the conduct of customs procedures due to application of state-of-the-art customs technology and, as a consequence, the costs of them to be reduced. Besides, the membership in the AEO register has a considerable reputation effect.
Our company offers both assistance in preparation and reconciliation of documents necessary for including in the AEO register and the services of a customs representative for working with companies already included in the AEO register.