Criteria for classifying industrial products as having no analogues made in Russia

11.08.2015

Legal update No 529

Goltsblat BLP advises that Russian Government Resolution No. 719, dated 17 July 2015, was officially published on 21 July 2015. The Resolution "On the Criteria for Classifying Industrial Products as Having No Analogues Manufactured in the Russian Federation" (hereinafter the "Resolution") comes into effect on 01 October 2015.

The Resolution is instrumental in full-scale application of Federal Law No. 488-FZ, dated 31 December 2014, "On the Industrial Policy of the Russian Federation" (hereinafter the "Industrial Policy Law"). This Law provides a variety of domestic industrial production incentives, such as subsidies, support for export of industrial products manufactured in Russia and priority admission of Russian-made products to state and municipal procurements.

The Resolution follows up on the provisions of the Industrial Policy Law, which introduced the concept of industrial products having no analogues manufactured in Russia. Pursuant to the Law, such products must meet the criteria established by the Russian Government and cannot be replaced by products manufactured on Russian territory with similar technical and performance characteristics enabling them to perform the same functions and be commercially interchangeable.

The Resolution sets forth two criteria for classifying products as having no domestic analogues:

  1. The products are not manufactured in Russia, as confirmed in the manner prescribed by the Russian Ministry of Industry and Trade.
  2. The products’ parameters relating to their functional purpose or the list of functions, field of application and quality specifications must differ from those of industrial products manufactured in Russia. The Russian Ministry of Industry and Trade has been charged with drafting the procedure for comparing these parameters.

The Resolution also lists cases when industrial products are deemed to have been manufactured in Russia.

In particular, industrial products are recognised as having been manufactured domestically if they meet the requirements set out in an Appendix to the Resolution. The current version of this Appendix covers requirements in relation to the following industrial product groups:

  • machine-tool industry;
  • automotive industry;
  • special engineering;
  • photonics and lighting engineering;
  • power engineering, electrical engineering and the cable industry;
  • heavy machine-building.

It should be noted that the initial draft of the Resolution contained requirements in relation to a larger number of industrial product groups, so it is not unlikely that this list might be extended.

With reference to specific types of industrial product, the Resolution sets various criteria for classifying them as made in Russia, including: performance of certain product manufacture operations, compliance with the ad valorem share rule in relation to foreign-made components, adequate design and technical documentation rights for a legal entity tax resident in an EEU state to produce, revamp and develop relevant products, etc.

In order to get industrial products not covered by the Appendix to the Resolution recognised as having been manufactured in Russia, guidance should be sought from the Agreement on the Country of Origin Rules in the Commonwealth of Independent States, dated 20 November 2009.

The Resolution’s lack of any procedure for confirming domestic manufacture of industrial products should be taken into account. This aspect will obviously be covered by regulations to be issued by the Russian Ministry of Industry and Trade.

There is one more point worth highlighting. According to the Resolution, in order to establish that industrial products are not manufactured in Russia, special investment contracts must be taken into account. This prompts the assumption that products manufactured under special investment contracts will be also deemed to have been made in Russia. Such contracts are provided for in the Industrial Policy Law. Investment contracts require investors either to set up or to revamp and/or develop industrial production within Russia, on its continental shelf or in its exclusive economic zone. Special investment contract rules and boilerplate are approved by Russian Government Resolution No. 708, dated 16 July 2015.

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