TRICKS OF THE TRADE:
RUSSIA CHANGES TEMPORARY IMPORT RULES
By Yevgeny Schukin & Derek Nowek
As of April 1999, Russian customs authorities issued a new regulation limiting exemptions from customs duties and taxes that local affiliates of foreign firms can claim when temporarily importing office assets, such as equipment and supplies, furniture, and motor vehicles. In the short run, some U.S. small- and medium‑size companies with representative offices in Russia may find that the new provisions hinder their business activities. Unfortunately, it is still unclear what is the best way to dispose of office equipment no longer in use, short of reexport or payment of customs duties. In the medium to long term, however, U.S. companies may benefit from more uniform and simplified customs procedures.
Since 1994, representative offices of foreign firms, banks, and other organizations had a right to import duty free a limited number of products to be used exclusively for the needs of those offices. As a rule, these items included quality office equipment, computers, furniture, and cars that, at least for a while, were not available for purchase locally. To be eligible for tax exemptions, these items had to be imported under a temporary import regime—that is, for a specific period of time (typically a year or two), after which they had to be either taken out of the country or released for free circulation upon payment of all import duties and taxes. In practice, however, companies could keep these assets on temporary import status for a longer period of time.
In 1996, Russian customs added a regulation on the temporary importation of motor vehicles by representative offices that requires a deposit of the whole amount of customs duties up front or monthly payments of 3 percent of the total that would be paid if the vehicle were to be customs cleared. The amount paid under this partial exemption was not refundable when the vehicle was reexported. Many companies chose to pay the 3 percent of the total.
Practical Consequences of Recent Changes
The 1999 regulation repeals the full exemptions for temporary importation of goods brought in as of April 1, 1999. Under the new rules, representative offices of foreign firms importing office equipment, furniture, cars, and so forth temporarily must make monthly, nonrefundable payments equal to 3 percent of the amount of taxes and duties that would have been paid if the items were released for free circulation.
The importation period is also being limited to a maximum of two years, after which assets will have to be either reexported or declared for free circulation. Russian customs experts point out that goods imported under the old customs regime and released for free circulation at the end of their temporary import period will be assessed customs duties and taxes based on their original customs value. In other words, depreciation of the goods, including cars, will not be taken into account since the estimation could only complicate the process of redeclaration. The new rule also stipulates that the customs value of goods will not be recalculated in terms of dollars; if goods were declared in rubles, duties will apply to the original ruble value. (Note that ruble devaluation just since August 1998 has been fourfold.)
Companies unable to reexport goods because they were stolen or lost might consider paying the required free circulation customs duties on the missing items or risk a fine for not notifying customs when the items’ customs status changed.
According to customs regulations, the majority of goods entering Russia today require some sort of certification (safety, quality, conformity). Under the new regulation, when items brought into the country before this certification was required are transferred from the temporary import regime to the free circulation regime, customs authorities will only require an official letter from the representative office pledging that the equipment will not be sold. New assets brought in today, however, will have to be certified before they can be customs cleared, even if only for temporary import.
It is important that companies be aware of when their temporary importation is coming to an end. Russian customs officials are unlikely to provide prior notification that deadlines are approaching, and companies could be forced to pay fines if they fail to change the temporary importation status of their goods on time. Please note that the temporary import rule changes apply only to items imported for use by legal entities, rather than by individuals.
For more information on complying with new customs rules, companies can contact their customs advisor or broker.
Yevgeny Schukin represents BISNIS in Moscow.
Derek Nowek covers transportation for BISNIS in Wash., D.C.
Tips for placing goods under the
temporary import regime in Russia
' Get permission from local customs authorities;
' Keep in mind that the period for temporary import cannot exceed two years;
'Remember that upon the expiration period of the temporary regime goods that have not been returned must be declared for a different customs regime or placed in a customs bonded warehouse; and
' Be aware that certain goods aren’t eligible for temporary import status.