Rights of Foreign Company Local Branches Squeezed by Draft Russian Customs Law

18.09.2017

Goltsblat BLP advises that a set of new customs legislation is slated to come into force on 1 January 2018, including: the new EEU1 Customs Code(already enacted and published on the EEC webpage) and the new Federal Law “On Customs Regulation in the Russian Federation” (currently offered for public discussion on the federal website of draft regulatory acts).

These regulations revolutionise the customs regulatory framework for foreign company branches importing and exporting goods commercially.

Branches are currently allowed to do this by Clause 2, Article 186 of the Customs Union Customs Code, as entities entitled to dispose of goods outside the scope of a deal involving a Customs Union state legal entity.

The new EEU Customs Code 2 puts branches on a par with representative offices and allows them to import and export only for their own needs, unless the national legislation of the relevant EEU member state provides otherwise.

The draft federal law “On Customs Regulation in the Russian Federation” establishes additional instances when branch offices of oil companies only may be involved in declaring goods:

where the initially declared customs procedure is changed to release for domestic consumption or destruction, if the foreign company branch has applied to the goods the customs warehouse, temporary import (admission) or a special customs procedure by virtue of para. 4, Sub-clause 2, Clause 1, Article 83 of the Code;

where the branch moves the goods across the Union customs border not as part of a deal between a foreign company and a member state legal entity, if the branch office is entitled to possess and use the goods and moves them to ensure the functioning (operation or use) of and survival on artificial islands, rigs or other structures located within internal sea waters and the territorial sea of the Russian Federation, as well as on artificial islands, rigs or other structures under the jurisdiction of the Russian Federation in compliance with the legislation of the Russian Federation and international law rules;

if the branch office is entitled to possess and use the goods and operates a new offshore hydrocarbon deposit in compliance with the Russian Federation tax legislation.

This means that, from 1 January 2018, providing the draft federal law remains unchanged, branch offices of all foreign companies (other than oil sector) will be unable to perform customs declaration of goods they import or export commercially.

Goltsblat BLP, jointly with the Association of European Businesses in Russia, has suggested to the developers of the new federal law that the right of foreign company branches be preserved to declare goods they import/export for commercial purposes. We have requested that the following wording be added to Article 102 of the draft federal law to this end:

A foreign company branch office registered in the Russian Federation may act as the declarant when the relevant foreign company is entitled to declare goods in compliance with Article 83 of the Union Code and in the following instances: 4. where the branch moves the goods across the Union customs border not as part of a deal to which a Russian legal entity is a party.

If you agree with us, you can give your support by posting this on the federal website of draft regulatory acts, “Your suggestions” section.

Please note that comments and suggestions will not be accepted after 18 September 2017.

For a file containing a suggestion that can be attached on the portal, go here.

With any questions on the above, please contact Alexander Kirilchenko, Head of Customs Dispute Resolution Group, at +7 495 287 44 44 or by e-mail alexander.kirilchenko@gblplaw.com.

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