A new Customs Code (the “EAEU Code” or the “Code”) may come into force in 2017 in the Eurasian Economic Union (the “EAEU”).
On 26 December 2016, all EAEU member states except Belarus signed the new Code* which had been approved by the Intergovernmental Council of the EAEU in mid-November. It will replace the current Customs Code of the Customs Union (the “CU Code”). The new document is a result of lengthy negotiations among the member states on key issues of customs regulation. These issues are covered by 20 international agreements, which are fully integrated into the EAEU Code.
To become effective, the Code will have to be signed by Belarus and subsequently ratified by all the EAEU member states.
The EAEU Code’s key provisions
The key changes in the Code relate to the transition to electronic document management, simplification of customs procedures for businesses and uniform application of the Code’s provisions in relation to methods for determining the customs value of goods, as well as the improvement in the approaches to preliminary declaration of goods.
Interestingly, the EAEU Code sets out a new approach to the regulation of the status of the authorised economic operators (“AEOs”), a special category of suppliers who can use simplified procedures for customs operations. Specifically, the Code proposes classifying the AEOs, based on their reputation, into three groups. The amount of privileges enjoyed by an AEO will depend on the group of its allocation. For example, the AEOs, which have been operating for a long time and have never violated the customs legislation, will be allowed to indicate their own warehouses as the delivery address of the imported goods, rather than the location of the customs authority. This will significantly reduce the goods delivery time and provide good faith AEOs with a competitive advantage on the market.
Some provisions of the EAEU Code represent important compromises in favour of businesses. Firstly, it will be possible to defer the payment of customs duties and taxes during customs clearance of goods. Secondly, the preliminary determination of the customs value of goods will be made before their customs clearance. The second novelty will (i) allow taking into account the price of the actual transaction with the goods, rather than the cost of similar supplies by other importers and (ii) reduce the amount of court cases in this respect. At current, such a mechanism for determining the customs value of goods only applies to exchange-traded commodities.
The EAEU Code fills in the existing gap in the regulation of the status of declarants for foreign legal entities. The current CU Code does not provide a direct prohibition for branches and representative offices to act as declarants of goods in an application for temporary importation procedures, re-export or release for domestic consumption. Accordingly, the customs authorities sometimes agreed with the position of foreign companies’ representative offices and branches on the absence of an explicit prohibition and allowed them to declare goods under the customs procedures. The EAEU Code solves the problem by allowing the representative offices and branches of foreign legal entities to declare goods only as part of the procedure of release of goods for their own consumption. This therefore limits the direct use of separate subdivisions of foreign legal entities in customs procedures.
Despite the above progressive changes in the customs legislation, several problematic issues were not addressed in the Code. In particular, it will be difficult to decide whether a transaction can be characterised as being a foreign trade transaction when such transaction is concluded between two residents of the EAEU member states, one of which acts on behalf of a non-resident.
The new Code will significantly simplify the customs procedures for businesses and will raise co-operation among the customs services of the EAEU member states to a higher level due to electronic document management and the implementation of unified rules of customs regulation.
However, customs control will shift from the stage of customs clearance of imported goods to the stage of their release for domestic consumption. This not only means that the time required to perform customs operations will be reduced, but will also require businesses to strengthen the internal monitoring of their customs operations.
* In Russian