Customs Union of Russia, Belarus and Kazakhstan

Key changes since 1 July 2010

A significant milestone for the Customs Union of Russia, Belarus and Kazakhstan was reached on 1 July 2010 (6 July 2010 for Belarus) as the Customs Code of the Customs Union went into effect and established a unified customs territory. The Customs Code generally provides for:

  • Common customs procedures
  • Common rules for goods declaration
  • Common rules for customs duty determination and collection
  • Common rules for customs clearing and customs control

However, the envisioned lifting of customs controls on internal borders and harmonized rules for regulating trade have not yet come to fruition. Rather, for now, the effective date of the Customs Code perhaps more accurately symbolizes the start of a transition period, during which traders must deal with temporary exceptions to unified customs territory, lack of clarification on the application of the new customs laws and confusion as harmonized technical regulations may take years to roll out. Companies doing business in and with the Customs Union should prepare for a bumpy ride.

Temporary exceptions from the unified customs territory

The Customs Union Commission has established certain temporary exceptions to the free movement of goods between member states. For trade between Belarus and Kazakhstan, customs controls temporarily remain for:

  • Goods of which one of the member states applies anti-dumping, compensatory and special (i.e., preferential) duty rates
  • Vehicles imported into a member state when acquired by individuals of another member state for personal use (at present time, this exception is supposed to remain until 1 January 2013)
  • Goods subject to export duties in one of the member states, which are exported from this member-state to another member-state in respect of which such export duties are applicable

The exception procedure implies that the goods mentioned above are subject to customs clearance (e.g. customs declaration should be submitted) on transportation from one member-state to another. With respect to Kazakhstan, in addition to the above, the exceptions procedure also applies to goods for which customs duties are established in Kazakhstan at rates lower than the unified customs rates of the Customs Union. This exception applies to a large number of items (409 in total) and is supposed to be applicable until 1 January 2015.

Status as «goods of the Customs Union»

Only goods that qualify as «goods of the Customs Union» can freely move within the unified customs territory. Pursuant to Article 4 of the Customs Code, goods acquire such status in the following instances:

  1. The goods have been fully produced in the territory of the Customs Union.
  2. The goods have been released for domestic consumption with the payment of customs duties at the Unified Customs Rates of the Customs Union.
  3. The goods have been produced in the territory of the Customs Union from goods fully produced or released for domestic consumption.

Consequently, the principle for determining the status of the goods for customs purposes prevails in trade relations between member states of the Customs Union. Previously, under the CIS (Commonwealth of Independent States) free trade agreement, preferential trade was based on the country of origin of the goods, and this was how trade was conducted among Russia, Belarus and Kazakhstan. Now, it is important that the customs authorities establish the status as «goods of the Customs Union». Goods of the Customs Union may move freely within the unified customs territory, whereas restrictions are imposed on other goods.

Goods that do not hold status as «goods of the Customs Union»

Goods which do not meet the criteria for goods of the Customs Union, or for which no documents were presented to show that they originate from a member state or that they were released for domestic consumption in the territory of the Customs Union, are to undergo customs clearance procedures with the (additional) payment of customs duties and the submission of the relevant documents. Despite the unified customs territory, customs clearance is still undertaken only by the customs authorities of the member-state where the importer resides. This rule is to be applicable during transitional period the time limits of which have not been established yet.

VAT collection

The procedure for collecting VAT remains almost unchanged. For trade between member states, VAT will be refunded to the seller of goods in one country (exporter), while the purchaser in the other country (importer) will pay VAT to the tax authorities of its country. VAT rates have not changed, remaining at 18% in Russia, 20% in Belarus and 12% in Kazakhstan. It is unlikely that these rates will be unified in the foreseeable future.