Member Article

The Russian Federation, the Kazakhstan Republic and the Belarus Republic (hereinafter also referred to as the “Member States”) have formed Customs Union in accordance with the Treaty on Creation of Unified Customs Territory and Formation of Customs Union (Dushanbe, October 6, 2007). The purposes of Customs Union establishment are maintenance of free circulation of commodities in the process of mutual trade and maintenance of favorable trade conditions with regards to trading with the third states, development of economic integration of the Member States, deregulation of trade and customs limitations and barriers existing in the sphere of mutual trade activities.

Under Customs Union the Member States understand the form of trade and economics integration that envisages unified customs territory where custom duties and economic barriers are not applied (excluding safeguard, antidumping and countervailing measures) with regards to mutual trade in commodities originating from unified customs territory and also originating from the third states and released for free circulation on the unified customs territory. Upon that, the Member States apply unified customs tariff and other unified measures with regard to regulation of trade in commodities with the third states.

It is necessary to mention that unified customs territory of the Member States of Customs Union has not been formed yet. Decision with regard to unification of customs territories of Member States in unified customs territory and with regard to completion of Customs Union formation will be taken by the supreme body of Customs Union (currently the supreme bodies are the Interstate Boards at the level of the heads of the states and the heads of the governments) after completion of different events envisaged by the Treaty on Creation of Unified Customs Territory and Formation of Customs Union.

Although some aspects with regard to activities of Customs Union are still being elaborated (thus, in particular, the text of the Customs Code of Customs Union is still being worked on), the Member States have concluded several international treaties with regard to non-tariff measures and also safeguard, countervailing and antidumping measures.

In particular, the Member States established the Unified List of Commodities That are Subject to Prohibitions and Limitations with Regard to Importation or Exportation by the Member States During Trade with the Third States (the Decision of Interstate Board of the Eurasian Economics Union No. 19 as of November 27, 2009 and the Decision of the Customs Union Committee No. 132 as of November, 27 2009). The prohibitions and limitations with regards to the commodities included in the Unified List are applied since January 1, 2010. In particular, in the Unified List such commodities as natural grape wines, several medicaments, several radioelectronic devices, several primary goods that contain precious metals are included. Since 1 January 2010 importation of goods included in the Unified List is to be effected in compliance with permits and licenses issued in accordance with Treaty of the Governments of the Members of Eurasian Economics Union as of June 9, 2009 On the Rules with Regard to Licensing in the Sphere of External Trade in Commodities.

With relation to non-tariff measures the Member States concluded Treaty as of January 25, 2008 On Unified Measures of Non-tariff Regulation with Regards to the Third States (hereinafter – the Non-tariff Treaty). The Non-tariff Treaty entered into force on January 1, 2010 in accordance with the Decision of Interstate Board of Eurasian Economics Union No. 19 as of November 27, 2009. It is necessary to mention that this Treaty does not apply to relationships between the Member States with regard to export control matters, technical regulations, usage of sanitary, veterinary and phytosanitary requirements and measures. This Treaty does not apply to safeguard, antidumping and countervailing measures. The Treaty envisages the following non-tariff measures:

(A)                Quantitative limitations. It is established that in exceptional cases it is possible to establish prohibitions and temporary limitations with regard to export of commodities in order to prevent or minimize critical deficiency of product commodities and other important commodities on internal market, and also limitations with regard to import of agricultural commodities or aquatic biological recourses.

(B)                Provision of exclusive right with regard to export and (or) import of several commodities. It is established that foreign trade activity may be limited by provision of exclusive right with regard to export and (or) import of several commodities. Upon that, exclusive right with regard to export and (or) import of several commodities is carried out in accordance with license.

(C)                Licensing of external trade in commodities.

(D)                Supervision under export and (or) import of several commodities. It is established that supervision under export and (or) import of several commodities is carried out by the means of issuance of licenses for export and (or) import of commodities.

(E)                Measures that affect external trade in commodities and that are initiated on the basis of national interests.

Non-tariff Treaty establishes that decisions on application of non-tariff measures in relation to importation of commodities on the unified customs territory and (or) exportation from the unified customs territory are adopted by the body of the Customs Union acting on a permanent basis – the Customs Union Committee.

With relation to safeguard, antidumping and countervailing measures the Customs Union has adopted Treaty as of January 25, 2008 On Application of Safeguard, Antidumping and Countervailing Measures with Regards to the Third States.

According to the provisions of the Treaty as of January 25, 2008 a safeguard measure may be applied to commodities if, based on the results of the investigation completed by the authorized body, it was established that the import of the good into the unified customs territory of the Member States had been done in such increased quantities and on such terms that it inflicted serious losses to an industry of the Member States or created the threat of inflicting serious losses to an industry.

In its turn, an antidumping measure may be applied to commodities being a dumping import item if, according to the results of the investigation completed by the body in charge of investigations it has been established that the import of such goods into the unified customs territory of the Member States is inflicting material losses to an industry of the Member States, posing a threat of infliction of material losses to an industry of the Member States or significantly slowing down the creation of an industry of the Member States.

Finally, a compensatory measure may be applied to imported commodities in the production, export or transportation of which a specific subsidy of a foreign state has been used if, according to the results of an investigation completed by the body in charge of investigations, it has been established that the importation of the goods into the unified customs territory of the Member States is causing material losses to an industry of the Member States, a threat of infliction of material losses on an industry of the Member States or a significant slow-down in the creation of an industry of the Member States.

Although there is a special international Treaty with regards to safeguard, antidumping and countervailing measures, the mechanism of application of these measures is still not clear. As it is established in the Decision of Customs Union Committee (Eurasian Economics Union) No. 19 as of November 27, 2009 On Unified Non-tariff Regulation of the Customs Union of the Russian Federation, the Kazakhstan Republic and the Belarus Republic, the prohibitions and limitations that concern trade in commodities with the third states and that are established in order to perform obligations concerning application of safeguard, antidumping, countervailing and response measures, provision of investigations, are to be applied in the Russian Federation, Belarus and Kazakhstan in accordance with national legislation. Therefore, on the current step of Customs Union development the matters with regards to application of safeguard, antidumping and countervailing measures still remain in the competence of national jurisdictions.

The functioning of Unified Customs Union of Russia, Belarus and Kazakhstan presumes adoption of different normative acts that are coming into force step by step. The first step that commenced on January 1, 2010 is the introduction of unified customs and non-tariff regulations.^[1] Therefore, at the present time only the mechanism of non-tariff measures application is established and is being applied by the Member States (licensing of importation and exportation of several commodities, etc.). And at the present time implementation of provisions with regard to the trade limitations and investigations has not been initiated yet.

In addition it is necessary to mention that development of normative regulation in the sphere of Customs Union activities shows that Customs Union is a completely established and practicably functioning participant on the international economic arena. The differential characteristics of Customs Union are the status of states union, sovereignty and possibility to establish international treaties that are obligatory on the unified customs territory. It is possible to predict that the activities of Customs Union will not be limited only by establishing non-tariff measures.

* * *

We hope the information above is helpful for you.

For more information on ALRUD Tax practice please visit our Web-site

or contact directly the Head of Tax practice, Senior Partner Maxim Alekseyev [email protected].

Kind regards,

ALRUD Law Firm

 

Please note: This is a Newsletter and should not be considered as a ground for making any decision regarding a particular issue. All the information for this Newsletter was taken from the open sources.

---

[1] http://www.minprom.gov.ru/activity/foreigntrade/appearance/0