**TRICKS OF THE TRADE:**

**RUSSIA CHANGESTEMPORARY IMPORT RULES**

 

By Yevgeny Schukin & Derek Nowek

 

As of April 1999, Russian customs authorities issued a newregulation limiting exemptions from customs duties and taxes that localaffiliates of foreign firms can claim when temporarily importing office assets,such as equipment and supplies, furniture, and motor vehicles. In the shortrun, some U.S. small- and medium‑size companies with representative offices inRussia may find that the new provisions hinder their business activities.Unfortunately, it is still unclear what is the best way to dispose of officeequipment no longer in use, short of reexport or payment of customs duties. Inthe medium to long term, however, U.S. companies may benefit from more uniformand simplified customs procedures.

 

Since 1994, representative offices of foreign firms, banks,and other organizations had a right to import duty free a limited number ofproducts to be used exclusively for the needs of those offices. As a rule,these items included quality office equipment, computers, furniture, and carsthat, at least for a while, were not available for purchase locally. To beeligible for tax exemptions, these items had to be imported under a temporaryimport regime—that is, for a specific period of time (typically a year or two),after which they had to be either taken out of the country or released for freecirculation upon payment of all import duties and taxes. In practice, however,companies could keep these assets on temporary import status for a longerperiod of time. 

 

In 1996, Russian customs added a regulation on the temporaryimportation of motor vehicles by representative offices that requires a depositof the whole amount of customs duties up front or monthly payments of 3 percentof the total that would be paid if the vehicle were to be customs cleared. Theamount paid under this partial exemption was not refundable when the vehiclewas reexported. Many companies chose to pay the 3 percent of the total.

 

Practical Consequences of Recent Changes

The 1999 regulation repeals the full exemptions for temporaryimportation of goods brought in as of April 1, 1999. Under the new rules,representative offices of foreign firms importing office equipment, furniture,cars, and so forth temporarily must make monthly, nonrefundable payments equalto 3 percent of the amount of taxes and duties that would have been paid if theitems were released for free circulation.

 

The importation period is also being limited to a maximum oftwo years, after which assets will have to be either reexported or declared forfree circulation. Russian customs experts point out that goods imported underthe old customs regime and released for free circulation at the end of theirtemporary import period will be assessed customs duties and taxes based ontheir original customs value. In other words, depreciation of the goods,including cars, will not be taken into account since the estimation could onlycomplicate the process of redeclaration. The new rule also stipulates that thecustoms value of goods will not be recalculated in terms of dollars; if goodswere declared in rubles, duties will apply to the original ruble value. (Notethat ruble devaluation just since August 1998 has been fourfold.)

** **

Companies unable to reexport goods because they were stolenor lost might consider paying the required free circulation customs duties onthe missing items or risk a fine for not notifying customs when the items’customs status changed. 

 

According to customs regulations, the majority of goodsentering Russia today require some sort of certification (safety, quality,conformity). Under the new regulation, when items brought into the countrybefore this certification was required are transferred from the temporaryimport regime to the free circulation regime, customs authorities will onlyrequire an official letter from the representative office pledging that theequipment will not be sold. New assets brought in today, however, will have tobe certified before they can be customs cleared, even if only for temporaryimport.

 

It is important that companies be aware of when theirtemporary importation is coming to an end. Russian customs officials areunlikely to provide prior notification that deadlines are approaching, and companiescould be forced to pay fines if they fail to change the temporary importationstatus of their goods on time. Please note that the temporary import rulechanges apply only to items imported for use by legal entities, rather than byindividuals. 

 

*For more information on complying with newcustoms rules, companies can contact their customs advisor or broker.*

 

*YevgenySchukin represents **BISNIS**in Moscow.*

*Derek Nowek covers transportation for **BISNIS**in Wash., D.C.*

 

Tips for placing goods under the 

temporary import regime in Russia

 

**'****         Getpermission from local customs authorities;**

**'****  Keep in mind that theperiod for temporary import cannot exceed two years;**

**'****Remember that upon theexpiration period of the temporary regime goods that have not beenreturned               must be declared for a different customs regime or  placed in a customs bonded warehouse;and**

**'****  Be aware that certaingoods aren’t eligible for temporary import status.******