Foreign company local branches retain customs status in Russia
Legal update No 650
Continuing the topic of the customs status of foreign company branches in Russia1, Bryan Cave Leighton Paisner (Russia) LLP advises that a new piece of customs legislation has preserved and clarified the right of branch offices to have goods supplied into Russia for subsequent distribution.
Let us recall that the new Customs Code of the Eurasian Economic Union (the UCC) that came into effect on 1 January 2018 confined customs activities by branches of foreign companies to importing and exporting goods for their own use2. Even so, the UCC allows this provision to be modified by the national legislation (clause 3, article 83 of the UCC).
New Federal Law 289-FZ “On Customs Regulation in the Russian Federation and on Amendments to Individual Legislative Acts of the Russian Federation” (the Federal Law) came into effect on 4 September 2018, introducing the following rule (clause 4, article 100 of the Federal Law):
“A foreign legal entity that has a branch registered (accredited) in the Russian Federation may act as the declarant of goods if the foreign entity is authorised to act as the declarant under paragraph 2, sub-clause 2, clause 1, article 83 of the Union Code, and also where the foreign entity moves the goods across the Union customs border not as part of a deal between the foreign entity and a Union member state entity, providing the foreign entity is entitled to own, use and/or dispose of the goods”.
The Federal Law thus extended the rights available to branches as declarants of goods, permitting them imports and exports of goods for commercial purposes rather than only for own use.
Yet a foreign company’s branch may only act as the declarant of commercial consignments subject to certain conditions being met at the time of customs clearance:
the foreign company possesses rights with respect to the goods (any of ownership, use and disposal rights is enough),
the foreign company supplies the goods other than under a contract with a company from Russia or another EAEU member state. This means that the goods must be supplied directly to the Russian branch, which may then sell them on the Russian market. If, however, a foreign company enters into a supply contract with a Russian company, the goods will have to be declared at Customs by the Russian buyer.
The above rule was developed and approved with active involvement by our firm’s Customs Practice.
We have accumulated considerable successful experience of supporting import and export operations by local branches of foreign companies, so we may assert that supply of goods to the Russian and EAEU markets via branches offers a number of benefits compared to limited liability companies (OOO) and other legal entity formats. For instance, supplies to a local branch do not require a foreign trade contract or payments and are not subject to currency control formalities, which speeds up the trade flow substantially.
If you are interested in more detail and other advantages offered by branch offices, please contact Alexander Kirilchenko (email@example.com), Counsel, Head of Customs Dispute Resolution Group at Bryan Cave Leighton Paisner (Russia) LLP.
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