Russia, Belarus and Kazakhstan move forward with Customs Union

The governments of Russia, Belarus and Kazakhstan have announced an accelerated path towards the formation of a Customs Union. Viewed in part as a response to the economic crisis, the Customs Union aims to stimulate trade and investment by further integrating the economic block.

The international trade implications are significant. A Customs Union is a free trade area that also establishes a common external tariff and other trade policies with non-member countries. The three countries already enjoy preferential trade via the Commonwealth of Independent States (CIS) free trade area, which includes Russia, Azerbaijan, Armenia, Georgia (retired from the CIS from August 18, 2009), Kirghizia, Moldavia, Tajikistan, Turkmenia, Uzbekistan, Ukraine, Belarus and Kazakhstan. As a Customs Union, Russia, Belarus and Kazakhstan have harmonized customs laws and regulations pursuant to a common customs code, establish a common external tariff and enjoy duty-free trade with each other.

Summing up the information available to-date, the Customs Union has been developing within the following main stages:

  • The introduction of a common external tariff and system of non-tariff regulation and adoption of base standards in the area of technical regulation – 1 January 2010
  • The enactment of a unified Customs Code – 1 July 2010
  • The formation of a unified customs territory whereby customs borders are moved to the outer bounds of the Customs Union – 1 January 2011
  • The creation of Common Economic Area (i.e. free movement of workforce, currency etc.) – 1 January 2012

What remains unclear is how Russia's World Trade Organization (WTO) accession will be realized in practice. Each country is at a different stage in the WTO accession process and there is some speculation that the three countries will pursue joining the WTO as a Customs Union or individually with simultaneous accession of the three countries.

For business, the formation of the Customs Union will reshape how trade is conducted with the regional bloc. While the open market will bring new investment opportunities, the development of new rules and regulations and a common external tariff will impact supply chains that do business with the three countries. It is essential that companies closely monitor the developments as they unfold and continually assess the implications on their business.

At present, a unique opportunity exists for business to express their views and interests in the development of the new agreements. The governments and their ministries are actively engaged in dialogue with the business community and a variety of commercial and industrial associations for determinations such as the common external tariff and customs duty rates for specific categories of goods.