2 MAR 98
FM AMCONSUL VLADIVOSTOK

SUMMARY

1. PCO STEFFENS AND CA KONSTANTINOVA MET WITH CUSTOMS
AUTHORITIES AND PORT AND LOCAL GOVERNMENT OFFICIALS IN THE
PORT CITY OF NAKHODKA ON JANUARY 27 AND 28, 1998. THIS
CABLE, ONE IN A SHORT SERIES ON RUSSIAN FAR EAST (RFE)
CUSTOMS AND SHIPPING, SUMMARIZES RECENT DEVELOPMENTS IN
SHIPPING AND CUSTOMS PROCEDURES IN NAKHODKA. END SUMMARY.

LIST OF MEETINGS

2. ON JANUARY 27 AND 28, 1998, FCS STAFF MET WITH:
- NIKOLAY FEDOROV, THE NEW EXECUTIVE CHAIRMAN OF THE FREE
ECONOMIC ZONE (FEZ) ADMINISTRATIVE COMMITTEE
- SVETLANA VIKHOREVA, DEPUTY CHAIRMAN OF THE FEZ
- VIKTOR GNEZDILOV, MAYOR OF NAKHODKA
- GELIY MYASNIKOV, NAKHODKA COMMERCIAL PORT GENERAL DIRECTOR
- GENNADIY TISHCHENKO, CHIEF OF NAKHODKA CUSTOMS, AND
- KONSTANTIN GONCHAROV, PRESIDENT OF THE NAKHODKA CHAMBER
OF COMMERCE AND INDUSTRY.

NAKHODKA CUSTOMS

3. NAKHODKA CUSTOMS CHIEF TISHCHENKO OBSERVED THAT MOST
NAKHODKA PORT ACTIVITY INVOLVES EXPORT OF RAW MATERIALS OUT
OF THE RFE, RATHER THAN IMPORT OF GOODS INTO THE RFE.
(NOTE: TISHCHENKO'S COMMENT INCLUDED NAKHODKA PORT ONLY, NOT
NEIGHBORING VOSTOCHNIY.) HE CITED NAKHODKA'S LIMITED
ABILITY TO HANDLE CONTAINERS AND TRADITIONS LEFT OVER FROM
THE SOVIET ERA AS THE MAJOR REASONS FOR THIS, YET EXPRESSED
HIS DESIRE TO PROCESS MORE IMPORTS FROM THE U.S.

4. TISHCHENKO STATED THAT, ONCE RUSSIAN FEDERATION CUSTOMS
BROKER RULES ARE IN PLACE, NAKHODKA WILL ENCOURAGE SHIPPERS
TO WORK WITH LOCAL CUSTOMS BROKERS. HE INTRODUCED FCS STAFF
TO THREE NEW MANAGERS OF CUSTOMS BROKERAGES. UNDER THIS
PROGRAM, FOREIGN FIRMS WISHING TO BRING IN GOODS THROUGH
NAKHODKA WOULD PAY A FEE TO A CUSTOMS BROKER DESIGNATED TO
HANDLE THEIR SPECIFIC INDUSTRY. THE CUSTOMS BROKER WOULD
FILL OUT THE APPROPRIATE CUSTOMS FORMS AND FACILITATE RAPID
TRANSIT OF THE CARGO THROUGH CUSTOMS. TISHCHENKO STATED
THAT NAKHODKA WAS STILL AWAITING PASSAGE OF RUSSIAN LAWS
CONCERNING CUSTOMS BROKERS TO BEGIN FULL IMPLEMENTATION OF
THIS PROJECT.

5. COMMENT: UNDER CURRENT RUSSIAN LAW, ONLY COMPANIES
WITH A VALID CUSTOMS DECLARANT LICENSE MAY HELP FOREIGN
FIRMS GET GOODS THROUGH CUSTOMS. U.S. FIRMS NEGOTIATING
WITH RUSSIAN CUSTOMS BROKERS FOR ASSISTANCE IN CUSTOMS
CLEARANCE SHOULD ASK THE FIRMS FOR A COPY OF THEIR DECLARANT
LICENSE. POST RECOMMENDS THAT U.S. COMPANIES EXPORTING INTO
THE RFE MARKET PERFORM APPROPRIATE DUE DILIGENCE ON ALL
POTENTIAL TRADING PARTNERS AND CONTRACTORS, AND, WHENEVER
POSSIBLE, WORK WITH WESTERN SHIPPERS WITH EXPERIENCE IN THE
RFE. POST ALSO RECOMMENDS THAT, IN VIEW OF THE LACK OF
PREDICTABILITY AND TRANSPARENCY IN CURRENT RUSSIAN CUSTOMS
LAWS, U.S. FIRMS MAKE A THOROUGH STUDY OF PORT AND
TRANSPORTATION OPTIONS, BE PREPARED FOR POSSIBLE HIGH COSTS
AND DELAYS, AND BE FLEXIBLE AND ADAPTABLE IN SHIPPING AND
CUSTOMS ARRANGEMENTS.

6. TISHCHENKO SUGGESTED THAT U.S. FIRMS EXPERIENCING
PROBLEMS WITH CUSTOMS PROCEDURES CONTACT NAKHODKA CUSTOMS'
JURIDICAL CONSULTING SERVICE (CONTACT INFORMATION BELOW).
TISHCHENKO ALSO EXPRESSED HIS DESIRE TO HAVE NAKHODKA
CUSTOMS PARTICIPATE IN THE CLEAR PAC PROJECT, AN ELECTRONIC
DATA INTERCHANGE/COMPUTER NETWORK-BASED U.S.-RUSSIAN CUSTOMS
PROGRAM NOW BEING PILOT TESTED AT THE PORT OF VLADIVOSTOK.

NAKHODKA FREE ECONOMIC ZONE (FEZ) UPDATE

7. THE FREE ECONOMIC ZONE WAS ESTABLISHED IN 1990 TO GUIDE
THE DEVELOPMENT OF NAKHODKA. FEZ COVERS A TERRITORY OF
4,579 SQ. KM. - THE CITY OF NAKHODKA AND THE ADJACENT
PARTISANSK DISTRICT. THE FEZ COULD EVENTUALLY TAKE THE FORM
OF FREE CUSTOMS ZONES AND INDUSTRIAL PARKS (COMPLEXES). THE
FEZ ADMINISTRATIVE COMMITTEE IS AN INDEPENDENT LEGAL ENTITY.
THE FEZ BUDGET IS ISOLATED FROM THE OVERALL BUDGET OF
PRIMORSKIY KRAY, AND ALL FISCAL AND OTHER FEDERAL PAYMENTS
OBTAINED FROM LOCAL COMPANIES ARE KEPT BY THE FEZ
ADMINISTRATIVE COMMITTEE. USING THIS MONEY, THE FEZ
ADMINISTRATIVE COMMITTEE IS ABLE TO INVEST AND PROVIDE
GUARANTEES.

LEGAL DEVELOPMENTS CONCERNING THE FEZ

8. A RUSSIAN LAW ON FREE ECONOMIC ZONES -- WHICH DEFINED
CUSTOMS, CURRENCY, PROPERTY RIGHTS, AND OTHER ISSUES -- WAS
VETOED BY PRESIDENT YELTSIN IN 1997. AN AMENDED VERSION OF
THE LAW IS BEING CONSIDERED BY THE RUSSIAN DUMA. THE
PROPOSED LAW WOULD PROVIDE THE FOLLOWING TAX ADVANTAGES:

-- PROFIT TAX HOLIDAYS FOR A FIVE-YEAR PERIOD STARTING
FROM THE DATE OF REGISTRATION OF A COMPANY AS A
PARTICIPANT OF FEZ;

-- A REDUCTION IN TAXABLE PROFITS BY THE AMOUNT RE-INVESTED
IN EXPANSION OR MODERNIZATION OF PRODUCTION
FACILITIES OR FOR SOCIAL SERVICES IN THE FEZ;

-- A 50% REDUCTION IN VALUE-ADDED TAX (VAT) FOR PRODUCTS
MADE IN THE FEZ AND DISTRIBUTED IN RUSSIA;

-- A VAT EXEMPTION FOR TRANSPORTATION SERVICES INCLUDING
LOADING, UNLOADING, CARGO HANDLING, AND STORAGE OF
GOODS WHICH ARRIVE IN FEZ TERRITORY FROM OTHER PARTS OF
RUSSIA AS WELL AS FOR GOODS SHIPPED FROM FEZ TO OTHER
PARTS OF RUSSIA.

FEZ PROJECTS

9. FEZ MANAGEMENT DESCRIBED SEVERAL INDUSTRIAL DEVELOPMENT
PROJECTS:

-- AN INDUSTRIAL PARK IS UNDER DEVELOPMENT TO PROCESS
CARGO PASSING VIA VOSTOCHNIY PORT. INVESTORS ARE
OFFERED PLOTS OF LAND ON LONG-TERM (49-YEAR) LEASES AT
A RATE OF USD 5 PER SQ. METER PER YEAR.

-- A BUSINESS INCUBATOR IN THE INDUSTRIAL PARK WOULD BE A
POTENTIAL SITE FOR SMALL U.S. AND JOINT VENTURE
TRANSPORTATION AND BUSINESS SERVICES FIRMS.

NAKHODKA MERCHANT PORT UPDATE

10. NAKHODKA (WITH VOSTOCHNIY) IS RUSSIA'S PRIMARY PACIFIC
ICE-FREE, ALL-WEATHER PORT. IT RECEIVES CARGO FROM 42
COUNTRIES AROUND THE WORLD, INCLUDING THE USA. NAKHODKA IS
LINKED BY ROAD TO THE MAJOR CITIES OF THE PRIMORIYE AND
KHABAROVSK REGIONS. THE NAKHODKA MERCHANT PORT HAS 22
WHARVES WITH A TOTAL LENGTH OF 3.5 KM. IT HANDLES MORE THAN
6 MILLION TONS OF CARGO A YEAR. MODERN RE-LOADING
FACILITIES ALLOW IT TO HANDLE FERROUS ROLLED PRODUCTS,
NON-FERROUS METALS, GRAIN, CHEMICALS, TIMBER, LOGS, CARS, FOOD
STUFFS, EQUIPMENT, ETC.

THE NAKHODKA TRANSPORTATION ASSOCIATION

11. THE PORT RECENTLY ORGANIZED THE NAKHODKA TRANSPORT
ASSOCIATION TO PROMOTE SHIPPING IN AND OUT OF NAKHODKA.
MEMBERS INCLUDE THE PORT ITSELF, TWO TRADING COMPANIES, TWO
PRIVATE SHIPPING COMPANIES, TWO FUTURE CUSTOMS BROKERAGES,
SEVERAL STEVEDORE COMPANIES, TWO FREIGHT FORWARDERS, A BANK,
AND AN INSURANCE COMPANY.

KEY CONTACTS

12. THE FOLLOWING ARE KEY NAKHODKA CONTACTS:

ADMINISTRATIVE COMMITTEE OF FREE ECONOMIC ZONE
NAKHODKA
9 LUNACHARSKOGO STREET, FL. 2
NAKHODKA, RUSSIA 692900
TEL: (7-42366) 472-30, 790-84, 563-52
FAX: (7-42366) 472-72
INT'L TEL: (7-504-91) 521-64
INT'L FAX: (7-504-91) 521-65
E-MAIL: POSTMASTER@ADCOM.MARINE.SU
CONTACT: NIKOLAY FEDOROV, EXECUTIVE CHAIRMAN

MAYOR'S OFFICE
16 NAKHODKINSKIY AVENUE
NAKHODKA, RUSSIA 692904
TEL: (7-42366) 553-25, 569-16
FAX: (7-42366) 419-38
INT'L FAX: (7-504-91) 521-75
CONTACT: VIKTOR GNEZDILOV, MAYOR

CHAMBER OF COMMERCE AND INDUSTRY
10 NAKHODKINSKIY AVENUE
NAKHODKA, RUSSIA 692900
TEL: (7-42366) 459-14, 418-45
FAX: (7-42366) 459-14
INT'L FAX: (7-504-91) 521-65
E-MAIL: TPP NAKHODKA@ONLINE.NAKHODKA.RU
CONTACT: KONSTANTIN GONCHAROV, PRESIDENT

JSC NAKHODKA MARINE COMMERCIAL PORT
22 PORTOVAYA STREET
NAKHODKA, RUSSIA 692900
TEL: (7-42366) 418-16, 479-68
FAX: (7-42366) 427-08
CONTACT: GELIY MYASNIKOV, GENERAL DIRECTOR

CUSTOMS OF NAKHODKA
SEA STATION
NAKHODKA, RUSSIA 692900
TEL: (7-42366) 454-06
FAX: (7-42366) 568-09
CONTACT: GENNADIY TISHCHENKO, CHIEF

CUSTOMS JURIDICAL SERVICE
1 LENINSKAYA STREET
NAKHODKA, RUSSIA
TEL: (7-42366) 578-21
CONTACT: TATYANA ZHURINA, CHIEF

LIKELY FUTURE NAKHODKA CUSTOMS BROKERS

INTERSNAB
1 PORTOVAYA STREET
NAKHODKA, RUSSIA 692900
TEL: (7-42366) 413-72, 418-64
FAX: (7-42366) 477-45
CONTACT: SERGEY SHIRYAEV, GENERAL DIRECTOR

JSC BROKER PORT
1 PORTOVAYA STREET
NAKHODKA, RUSSIA 692900
TEL: (7-42366) 413-72, 418-64
FAX: (7-42366) 477-45
CONTACT: BORIS YASKEVICH, DIRECTOR

LIMITED LIABILITY "EDINBURG"
NAKHODKA, RUSSIA
TEL: (7-42366) 478-86
CONTACT: SERGEY STURZA, DIRECTOR
COMMENT: INCLUSION OF FIRMS IN THIS CABLE DOES NOT
CONSTITUTE AN OFFICIAL U.S. GOVERNMENT RECOMMENDATION. U.S.
FIRMS SHOULD, AS ALWAYS, PERFORM APPROPRIATE DUE DILIGENCE
AND PROCEED WITH SENSIBLE CAUTION WHEN APPROACHING
TRANSACTIONS IN RUSSIA.

This report is provided courtesy of the Business Information Service for the Newly Independent States (BISNIS)