BORDER CROSSING AND CUSTOMSHANDLING IN NETWORK PRODUCTION

ZAO TRAFO – RTL OY SITUATION

ZAO Trafo and RTL Oy form an integral international concern.

The concern has produced in Russia 15 years and supplies its products all around the world, Scandinavia, EU, and China

ZAO Trafo has 200 people who produce electronic components and electric machines in Vyborg

RTL Oy supplies Trafo with materials and distributes the ready products to customers all around the world

EXPORT OF ELECTRIC COMPONENTS

EXPORT OF ELECTRIC MACHINE UNITS

EXPORT OF WELDING MACHINES

EU AND RU CUSTOMS PROCEDURES

The 15 years of transborder network production operation has allowed to compare EU customs procedures in Finalnd with RU customs procedures in Vyborg

LAW AND TARIFКОДЕКС И ТН-ВЕД The customs Codex is not a difference.

Both EU and RU codexes are based on Kyoto international agreements and very similar

The EU customs Tarif and RU ”ТН ВЕД” are not different, they are practically identical

EU and RU Customs duty (Пошлина) is not a difference. EU and RU customs both accept the customs procedure of Processing (таможенной режим переработка)

So where is the difference ??

STATUTES, ORDERS, LETTERS, ORAL INFOПОСТАНОВЛЕНИЯ, ПРИКАЗЫ, ПИСЬМА, УСТНЫЕ ИНСТРУКЦИЙ

Fast - goods moves

Simple and low cost

Promote export

Give adequate fiscal control

Slow – goods stands

Complicated, high cost

Prevent export

Do not give adequate fiscal control

EU Customs procedures RU Customs procedures

THE POSITION OF THE GOODS INSPECTION AMONG THE 4 – 5 CUSTOMS OPERATIONS (INSPECTION, ECONOMY, REGIMES, IDENTIFICATION, ETC.) HAS A DRAMATIC EFFECT ON THE

SPEED OF CUSTOMS HANDLING.SLOW CUSTOMS HANDLING IN RUSSIA MAKES PARTICIPATION IN INTERNATIONAL

PRODUCTION NETWORKING DIFFICULT FOR RUSSIAN COMPANIES

First customs operation is receiving the declaration and inspecting goods.

Second customs operation is releasing the good for free movement

Document handling operations are performed within 2 weeks after permitting free movement.

Goods stands still during the first operation 10 – 30 minutes

First operations (3-4 customs departments) are document handling

Last operations are customs inspections and release of goods

All operations have to be completed and signed before release.

Goods stands still during all operations 1 – 10 days

EU Customs proceduresOrder of procedures

RU Customs proceduresOrder of procedures

THE NUMBER OF DOCUMENTS REQUIRED WITH EACH CUSTOMS DECLARATION AFFECTS THE OPERATIONAL COST OF BOTH THE CUSTOMS AUTHORITY AND THE ENTERPRISES AND GENERATES SEVERE COST AND TIME DELAYS.THIS REDUCES THE INTERNATIONAL COMPETITIVENESS OF RUSSIAN COMPANIES.

Export documents typically 8 pages, Customs Declaration, pro-forma-invoice, CMR, TIR

Import documents typically 16 pages, Customs Declaration, commercial invoice, CMR, TIR, earlier export documents

Non-variable information is not repetively presented at every import/export occasion

Export declaration typically 100? Pages

Import declaration typically 100? Pages

Non-variable information is repetively presented at every import/export occasion

EU Customs procedures, Declarations

RU Customs procedures, Declarations

GOODS IS DECLARED BASED ITS TARIF POSITION (EU) AND TNVED POSITION RUSSIA. EU CUSTOMS LIMITS IDENTIFICATION TO THE TARIF POSITION DESCRIPTION. IN THE TOLLING REGIME RUSSIAN CUSTOMS EXTENDS IDENTIFICATION REQUIREMENTS WITHOUT ANY LIMIT OUTSIDE OF TNVED. DESCRITION BEYOND THE TNVED DETALISATION USES TIME AND RESOURCES OF CUSTOMS AND COMPANIES WITHOUT BRINGING ANY BENEFIT TO THE STATE. INTERNATIONAL COMPETITIVENESS OF RUSSIAN COMPANIES IS REDUCED.

Goods identification: EU-customs requirements limited to the 10 position TARIF description

True price: EU requires true (stock value) price at border passing time

Tolling licence: prices of materials and products are not defined in tolling licence due to the above true price requirement.

Risk analysis: price risk analysed against true declared price

Goods Identification: RU- customs requirements not limited to the 10 position TNVED description and unlimited, not defined in writing.

Fictive price: RU-customs requires the licenced price to be declared at the border passing

Tolling licence: prices of products and materials defined in the tolling license due to the above fictive price requirement

Risk analysis: price risk analysed against the fictive price required in declaration

EU Customs procedures, Identification, tolling

RU Customs procedures, Identification, tolling

THE TOLLING CUSTOMS PROCEDURE REQUIRES A CONTINOUS ”BALANCE TABLE” TO BE KEPT IN ORDER TO MONITOR IMPORTS, EXPORTS AND QUOTA. EU-CUSTOMS SETS QUOTA ONLY FOR MATERIALS AND WELCOMES EXCESS IN THE EXPORT. RU-CUSTOMS SETS SEPARATE QUOTAS FOR MATERIALS AND PRODUCTS AND PUNISHES EXCESS IN THE EXPORT DIRECTION. USE OF REPLACING RUSSIAN MATERIALS IS PREVENTED.

Quota: Licence quota is set only for materials The products volume is a function of product structures and material flow.

Balance: any excess in the export direction, without separate prior permission, is welcomed. Within quota limits.

Product structures, recipies: Companies are supposed to use estimated product structures for licence applications and actually resulting structures for declaration and balance control. 100% coincidence is not expected.

Quota: Licence quota is set separately for materials and also for each separate product

Balance: any excess in the export direction withour prior permission is punished, even if within quota limits.

Product structures, recipies: Companies are supposed to use estimated product structures for licence applications and also later for declaration and balance control. 100% coincidence is required.

EU Customs procedures, Balance and quota

RU Customs procedures, Balance and quota

TOLLING LICENCES ARE GRANTED FOR LONG PERIODS, TYPICALLY 1 – 3 YEARS. CHANGES AND ADDITIONS ARE EXPECTED. IN EU-CUSTOMS PROCEDURES MOST CHANGES REQUIRE INFORMATION ONLY AFTER FACT AND SOME REQUIRE PERMISSION. WITH RU-CUSTOMS ANY LICNECE CHANGE REQUIRES THE FULL APPLICATION PROCEDURE. THE COMPLEXITY OF RU-CUSTOMS PROCEDURES PREVENTS FOREIGN PARTICIPATION IN THE DEVELOPMENT OF RUSSIAN INDUSTRY BY FOREIGN SME COMPANIES.

Small changes: Minor changes like addition of products require information to customs only after the fact.

Major changes: Larger changes like addition of new materials and quota changes require customs permission. Only the new variable licence information is supplied to the Customs

Small changes: Any change requires the full licence application procedure, outside expert opinions, Customs permission and equal handling time.

Major changes: Magnitude makes no difference. A full licence application is required each time. Some changes like quota additions are not permitted at all during the licence duration.

EU Customs procedures, Licence changes, additions

RU Customs procedures, Licence changes, additions