World Trade Organization | RESTRICTED |
WT/ACC/RUS/70 17 November 2011 | |
(11-5946) | |
Working Party on the Accession of the Russian Federation |
REPORT OF THE WORKING PARTY ON THE
ACCESSION OF THE RUSSIAN FEDERATION
TO THE WORLD TRADE ORGANIZATION
TABLE OF CONTENTS
1. The Government of the Russian Federation applied for accession to the General Agreement on Tariffs and Trade (GATT 1947) in June 1993 (see document: L/7243 of 14 June 1993). At its meeting on 16-17 June 1993 the GATT Council of Representatives established a Working Party (see Minutes of Meeting of GATT Council, document: C/M/264 of 14 July 1993), to examine the application of the Government of the Russian Federation to accede to the GATT 1947 under Article XXXIII of the General Agreement. Following the entry into force of the WTO Agreement on 1 January 1995, and in pursuance of the decision adopted by the WTO General Council on 31 January 1995, the GATT 1947 Working Party was transformed into a WTO Accession Working Party under Article XII of the Marrakesh Agreement Establishing the WTO. The terms of reference and the membership of the Working Party are reproduced in document WT/ACC/RUS/1/Rev.30.
2. The Working Party met on 17-19 July 1995, 4-6 December 1995, 30-31 May 1996, 15 October 1996, 15 April 1997, 22-23 July 1997, 9-11 December 1997, 29 July 1998, 16-17 December 1998, and 25 May 2000 under the Chairmanship of H.E. Mr. W. Rossier (Switzerland), on 18 December 2000, 26-27 June 2001, 23-24 January 2002, 25 April 2002, 20 June 2002, 18 December 2002, 30 January 2003, 6 March 2003, 10 April 2003, 10 July 2003 and 30 October 2003, under the Chairmanship of H.E. Mr. K. Bryn (Norway), and on 5 February 2004, 2 April 2004, 16 July 2004, 23 March 2006 and 10 November 2011 under the Chairmanship of H.E. Mr. S. Jóhannesson (Iceland).
Documentation Provided
3. The Working Party had before it, to serve as a basis for its discussions, a Memorandum on the Foreign Trade Regime of the Russian Federation (L/7410), supplements to the Memorandum on the regime in the areas of Trade-Related Investment Measures (WT/ACC/RUS/5), Trade in Services (WT/ACC/RUS/6), Trade-Related Aspects of Intellectual Property Rights (WT/ACC/RUS/7), as well as questions submitted by Members of the Working Party on the foreign trade regime of the Russian Federation together with replies thereto and other information provided by the Russian authorities listed in documents WT/ACC/RUS/2; WT/ACC/RUS/4 and Addendum 1; WT/ACC/RUS/9 and Addenda 1, 2 and 3; WT/ACC/RUS/11/Rev.15; WT/ACC/RUS/13 and Addendum 1; WT/ACC/RUS/14; WT/ACC/RUS/17 and Addendum 1; WT/ACC/RUS/23 and Addendum 1; WT/ACC/RUS/25; WT/ACC/RUS/30 and Addendum 1; WT/ACC/RUS/38 and WT/ACC/RUS/46 and legislative texts and other documentation listed in Annex 1. From March 2006 to 10 November 2011, the Working Party on the Accession of the Russian Federation functioned informally. In this period, working documentation was circulated informally under the JOB document symbol. The complete list of these JOB numbered documents is contained in Annex 5.
Introductory Statements
4. The representative of the Russian Federation recalled that his Government had been an observer to GATT 1947 since January 1992 when the Russian Federation continued the former USSR observer status. In this capacity, the Russian Federation had witnessed the successful conclusion of the Uruguay Round and followed its implementation.
5. In this context, he noted that his Government was confronted with a number of important tasks in the social, institutional, macroeconomic and investment fields. In particular, the Russian Federation had to overcome the decline in the standards of living of its population resulting from the economic and financial crisis of 1998. This could be achieved only through policies aimed at stimulating growth in the GDP of the country by improving economic productivity, and expanding sources of investments. In the view of his Government, this would also require the maintenance of a set of policies which could adequately develop competitive domestic markets for goods, services and capitals and enhance the role of smaller and medium size enterprises. Accordingly, since requesting accession to the GATT and afterwards to the WTO, the Russian Federation had undertaken an unprecedented process of reform of its economy, progressively adopting laws and regulations consistent with WTO multilateral rules and disciplines. This process was primarily aimed at establishing the conditions for a dynamic market economy in the Russian Federation based on a stable and predictable legislative framework capable of sustaining long term economic growth and ensuring improvements in the standards of living and welfare of the Russian population as well as in the modernization of the production capacity of the Russian Federation, and its international competitiveness. The Government of the Russian Federation had set a clear list of programmes, policies and priorities that had, as their central goal, rendering the Russian Federation a better, more competitive and rewarding place in which to work and do business. It was clear that the growing interdependence of national economies, global integration of markets and linkage between trade flows and investment, required the Russian Federation to adjust its trade, financial and investment legislation to WTO rules and disciplines.
6. Members of the Working Party welcomed the application for accession to the WTO of the Russian Federation and underscored the importance of a rapid integration of the Russian Federation into the multilateral trading system, both for the benefit of the Russian Federation and the world trading system as a whole. To this end, Members considered that the enactment of relevant legislation, consistent with WTO requirements, and of provisions for its implementation was essential to the accession of the Russian Federation to the WTO, in order to ensure that the Russian Federation could be an effective participant in the WTO from the first day of its membership. Members of the Working Party equally stressed the need for completing the negotiations on commercially viable terms which should be mutually beneficial to the Russian Federation and WTO Members.
7. The Working Party reviewed the economic policies and foreign trade regime of the Russian Federation and the terms of a Protocol of Accession to the WTO. The views expressed by Members of the Working Party on the various aspects of the foreign trade regime of the Russian Federation, and on the terms and conditions of the accession of the Russian Federation to the WTO are summarized below in paragraphs 8 to 1449.
ECONOMY, ECONOMIC POLICIES AND FOREIGN TRADE
- Fiscal and Monetary Policies
8. The representative of the Russian Federation said that current economic policies in the Russian Federation were aimed, inter alia, at "de-bureaucratization" of the economy, including elimination of unnecessary and burdensome administrative barriers, improvement of competition and investment attractiveness of the country, as well as at the achievement of its fiscal and monetary stability. The monetary policy of the Russian Federation was intended, in particular, to achieve a balanced monetary system, free of unnecessary restrictions and constraints for domestic and foreign economic operators, and to create favourable preconditions for sustainable long-term economic development. This objective was being achieved by reducing inflation to the projected level, as the fundamental monetary policy target, and implementing a policy of managed floating exchange rate of the national currency. All these activities were accompanied by measures to liberalize foreign exchange regulations.
9. Pursuant to the legislation of the Russian Federation, the Central Bank of the Russian Federation (Bank of Russia or CBR) was responsible for developing and conducting a uniform monetary and credit policy in co-operation with the Government of the Russian Federation. The status, purposes, functions, and powers of the Bank of Russia were regulated by Federal Law No. 86-FZ of 10 July 2002 "On the Central Bank of the Russian Federation (Bank of Russia)" (as last amended on 25 November 2009). Decisions on the issues of monetary and credit policy were taken by the Board of Directors and the Monetary and Credit Policy Committee of the Bank of Russia. In addition, the consideration of a number of topics related to the activities of the Bank of Russia was included in the competence of the National Banking Council, particularly, the examination of the draft "Monetary Policy Guidelines" for the next calendar year. The representatives of the Government of the Russian Federation were Members of the National Banking Council and they participated in meetings of the Board of Directors of the Bank of Russia with a right of advisory vote. The Chairman of the Bank of Russia, or one of his deputies, on his behalf, participated in meetings of the Government of the Russian Federation. Pursuant to legislation of the Russian Federation, the Bank of Russia and the Government of the Russian Federation were required to inform each other about intended actions of national importance; they coordinated their policy and held regular consultations. For matters related to the issuance of Government notes and the repayment of debt of the Russian Federation, the Bank of Russia consulted the Ministry of Finance.
10. In response to a Member who noted that in its conduct of monetary policy the CBR continued to rely unduly on management of the exchange rate and foreign reserves and on depository operations rather than on more standard monetary instruments, such as refinancing and interest rate management, the representative of the Russian Federation said that the CBR used all available monetary instruments and methods apart from those mentioned by some Members. To achieve the monetary policy objectives and to respond more quickly and effectively to any changes in money and credit, including inter-bank interest rates fluctuations, the CBR actively used market instruments, combining operations of medium and long-term sterilisation of temporarily free funds, with operations to provide, when necessary, liquidity to banks which helped the CBR to maintain balanced and relatively stable conditions on the money market. The application of instruments and methods of monetary regulation was based on the combination of regular market-based auctions and operations with standing facilities. Monetary instruments and methods were adjusted depending on the economic situation, in compliance with the legal framework. In accordance with Federal Law No. 86-FZ of 10 July 2002, the principal instruments and methods of the monetary policy of the CBR were the following:
- interest rates on the operations of the CBR;
- ratios of the required reserves deposited with the CBR (the reserve requirements);
- open market operations;
- refinancing of credit institutions;
- currency interventions;
- the issue of bonds on its own behalf; and
- setting targets for money supply growth.
11. Taking into consideration the predictable situation of liquidity in the banking sector, the CBR was seeking to use an optimum set of instruments for providing and absorbing liquidity and for enhancing their availability to the credit organizations throughout all regions of the Russian Federation. To absorb free banking liquidity, the CBR held regular deposit auctions to attract funds from credit institutions for four weeks and three months. To absorb free funds of credit organizations for a longer period, the CBR held auctions on issuing its own bonds for a term of seven months and six month put options. For the purpose of absorbing excess liquidity, the CBR also used outright sales of government bonds from its portfolio at market yields without an obligation of reverse re-purchase.
12. In addition to using market instruments to sterilize liquidity, the CBR preserved permanent access windows for credit institutions to place their free funds on deposit with the CBR. The CBR conducted deposit operations on standard terms and conditions at a fixed interest rate through the Reuters Dealing System and MICEX (Moscow Interbank Currency Exchange) System of electronic lot trading (SELT). Interest rate policy of the Bank of Russia was aimed at narrowing the spread of interest rates on its operations in the monetary market. The upper limit of interest rate was being progressively lowered as inflation was slowing down. To reduce the high level of excess banking sector liquidity, the Bank of Russia took steps to control money supply growth by more actively using sterilisation instruments. At times, banks were in need of additional liquidity. Under these circumstances, the CBR provided funds to credit institutions on a market basis through direct repo and Lombard auctions for two weeks. In addition, the CBR extended to banks intra-day overnight settlement loans and Lombard loans at fixed interest rate for seven days, backed by federal government and local government securities, bonds issued by corporate entities, residents of the Russian Federation, mortgage bonds, CBR obligations (OBR) and obligations of international financial organizations. Credit institutions also had the opportunity to receive liquidity through foreign exchange swaps arranged with the CBR. An important monetary policy instrument used by the CBR was currency interventions (foreign exchange outright sales and purchases) in the exchange and over-the-counter segment of the domestic foreign exchange market. To manage their own liquidity, credit institutions actively used averaging of required reserves.
13. Under the Federal Law No. 86-FZ of 10 July 2002, the CBR was required to annually submit to the State Duma draft "Guidelines for the Common State Monetary Policy for the coming year" no later than 26 August, and the same but approved document, no later than 1 December. He added that pursuant to The Monetary Policy Guidelines for 2010 the ultimate aim of the monetary policy implemented by the CBR was the reduction of inflation. The CBR had developed a monetary programme with the objective to monitor monetary indicators on their compliance with the projected inflation level. The Monetary Policy Guidelines for 2010 could be found on the website of the CBR (www.cbr.ru).
14. Turning to the question of budgetary policy, the representative of the Russian Federation noted that, by its Order No. 38-R of 19 January 2006, the Government of the Russian Federation adopted the Medium-term Program of Economic and Social Development of the Russian Federation (2006-2008), which established key directions of activities of the Government of the Russian Federation for that period, aimed at ensuring the realization of strategic goals such as the enhancing of well-being of population and the reduction of poverty on the basis of dynamic and sound economic growth and improved competitiveness. According to the aforementioned document, during that period, the Government of the Russian Federation would carry out well-balanced budgetary policy, maintain substantial international reserves, as well as ensure the formation of the Stabilization Fund of the Russian Federation. The document also acknowledged the need for the implementation of measures of conservative budgetary and monetary policy. It was noted that, in the mid-term period reduction of the positive balance of the current accounts of balance of payments was expected.
15. With regard to the fiscal policy of the Russian Federation, he noted that the main Federal bodies responsible for defining and conducting the fiscal policy of the Russian Federation were the Ministry of Economic Development of the Russian Federation (MED) and the Ministry of Finance of the Russian Federation. The Federal Tax Service was under the jurisdiction of the Ministry of Finance of the Russian Federation. Pursuant to the Resolution of the Government of the Russian Federation No. 506 of 30 September 2004 (as last amended on 15 June 2010), the Federal Tax Service was the federal executive body in charge of overseeing the proper implementation of legislation related to taxes and fees (monitoring of proper calculation, fullness and timeliness of obligatory payments to the relevant budget; of manufacturing and turnover of ethyl alcohol, alcohol and tobacco products; and observance of monetary legislation within the competence of the tax bodies). In its activities, the Federal Tax Service of the Russian Federation was guided by the Constitution of the Russian Federation, Customs Code of the Russian Federation (Federal Law No. 61-FZ of 28 May 2003, as last amended on 28 July 2008), Tax Code of the Russian Federation (as last amended on 30 July 2010), Federal constitutional laws, Federal laws, Acts of the President of the Russian Federation and the Government of the Russian Federation, international agreements of the Russian Federation, normative acts of the Ministry of Finance of the Russian Federation and the Statute of the Federal Tax Service approved by the Resolution of the Government of the Russian Federation No. 506 of 30 September 2004 (as last amended on 15 June 2010).
16. He added that the current forms of taxation in the Russian Federation were established by the Tax Code of the Russian Federation. That Code distinguished between federal taxes, regional taxes, and local taxes. He noted that Federal taxes comprised: the value-added tax; excise tax; royalty tax for use of natural resources and extraction of minerals; profit tax imposed on legal persons; income tax imposed on natural persons; State duties; fees for the use of fauna objects and objects of water bio-resources; and, water use tax. Pursuant to the Tax Code, regional taxes comprised: the property tax imposed on organizations; transport tax; and, gambling tax. Local taxes and fees comprised: the land tax; and, property tax imposed on individuals.
17. In 2009, the activity of the CBR was aimed mostly at minimizing the negative effect of the world economic crisis on the Russian economy. The crisis had led to the sharp drop of the GDP (7.9 per cent in 2009), considerable devaluation of the national currency and significant capital outflow (US$57 billion in 2009). The CBR managed to suppress the devaluation of the ruble through the large-scale currency interventions and interest rates policy. Stability of the banking sector was supported by the measures aimed at increasing its capitalization and liquidity, as well as readjusting the credit institutions facing financial difficulties. In 2010, as the critical phase of the crisis was coming to the end and the Russian economy was recovering, the use of special anti-crisis measures was being reduced. The reduction of CBR interventions and increase of the ruble exchange rate flexibility were expected to contribute to increasing the role of the interest rate policy of the CBR. Based on the experience gained during the crisis period, the CBR was going to strengthen financial stability including, inter alia, through improving the requirements with respect to risk management of the credit organizations.
- Foreign Exchange and Payments System
18. The representative of the Russian Federation recalled that his country had been a Member of the International Monetary Fund (IMF), since 1992. The national currency, the ruble (RUB, equal to 100 Kopeks), was convertible to foreign currencies on the basis of current market rates.
19. Members of the Working Party noted their concerns in relation to certain foreign exchange control and regulatory measures in force, including restrictions on foreign exchange retention, restrictions on the rights of residents to acquire and hold foreign exchange and to have accounts in foreign banks, pre-payment requirements for imports, and the 1 per cent tax levied on the purchase of foreign currency by natural persons. They requested information on the nature of the requirements in place, their legal basis, their purpose and WTO justification, the circumstances that led to their introduction and whether these circumstances still existed, and the plans of the Russian Federation to eliminate restrictions which were still in place.
20. In response, the representative of the Russian Federation stated that the CBR exercised control over timely and full transfer of export earnings to the country and over making payments for goods imported to the territory of the Russian Federation under pre-payment terms. The CBR also exercised control to enable the detection of fictitious foreign exchange operations by residents in off-shore zones. Enhanced requirements in respect of establishing correspondent relations and forming reserves were imposed on operations performed by authorised banks with resident banks registered in off-shore zones. The requirements differed depending on the group and the off-shore zone they related to. Relevant requirements and the classification of off-shore zones were defined in the Instructions of the CBR No. 1317-y of 7 August 2003 "On the Procedure for Establishing Correspondent Relations Between Authorised Banks and Non-Resident Banks Registered in the States and in the Territories Granting Preferential Taxation Treatment and (or) not Envisaging Disclosure and Provision of Information in Performing Financial Operations (in Off-Shore Zones)" (as last amended on 8 February 2010) and No. 1584-y of 22 June 2005 "On Establishing and the Amount of the Reserve for Operations Performed by Crediting Organizations with Residents of
Off-Shore Zones".
21. The representative of the Russian Federation further explained some of the main characteristics of the new currency regulation enacted by Federal Law No. 173-FZ of 10 December 2003 "On Currency Regulation and Currency Control" (Federal Law No. 173-FZ).
22. Federal Law No. 173-FZ, which had entered into force on 18 June 2004 (as last amended on 22 July 2008), aimed at the implementation of the single State currency policy and stability of the currency of the Russian Federation, while at the same time ensuring the progressive liberalization of the foreign exchange legislation of the Russian Federation. One of the main features of the regulation had been a shift from the previous principle "everything is forbidden except what is permitted by law" to "everything is permitted except what is forbidden by law". This trend had been reflected in Articles 7 and 8 of Federal Law No. 173-FZ, which had established a closed list of currency operations pertaining to capital movement subject to special regulation. Outside this list, all currency transactions had been conducted without restrictions. At the same time, Federal Law No. 173-FZ had provided for a clear and balanced distribution of powers between the Government of the Russian Federation and the CBR in the field of regulation of currency transactions pertaining to capital movement. Pursuant to Article 7 (which had been in force until 1 July 2006) of Federal Law No. 173-FZ, the Government of the Russian Federation had been responsible for regulating currency transactions pertaining to capital movement connected with foreign trade operations. The joint competence of the Government of the Russian Federation and the Bank of Russia had covered transactions connected with the purchase by residents of share fractions, deposits, shares in legal entities' property (authorised or ownership capital, share fund of cooperative society) from non-residents or with entering deposits under simple partnership contracts signed with non-residents. The powers of the CBR in the sphere of regulation of currency transactions pertaining to capital movement had been extended to operations related to granting and raising of credits and loans; operations with securities denominated in Russian or foreign currency (including related payments, transfers and performance of obligations), and operations of credit organizations. Article 8 of Federal Law No. 173-FZ had been in force until 1 January 2007.
23. Federal Law No. 173-FZ had also established an exhaustive set of instruments which could have been used by the Government of the Russian Federation and the Central Bank to regulate currency transactions pertaining to capital movement: (a) temporary reservation of a part of the currency transaction amount; and, (b) requirement to use special bank accounts in authorised banks.
24. The representative of the Russian Federation further stated that currency transactions pertaining to capital movement listed in Articles 7 and 8 of Federal Law No. 173-FZ had been subject to restrictions only for the purpose of preventing substantial reductions in gold and foreign currency reserves; addressing sharp fluctuations of exchange rate of currency of the Russian Federation, as well as for maintaining the stability of balance of payments (Article 6 of Federal Law No. 173-FZ).
25. He further noted that Federal Law No. 173-FZ had introduced a "negative list" approach: if the procedures for currency transactions and for using bank accounts (including the requirement of special bank accounts) were not established by the State bodies for currency regulation (the Government of the Russian Federation and the Bank of Russia) within the scope of this Federal Law, currency transactions could be carried out, accounts could be opened and transactions through the accounts could be carried out without restrictions.
26. Federal Law No. 173-FZ had also stipulated that State bodies for currency regulation were not to introduce more than one reservation requirement with respect to each particular type of currency transactions simultaneously. The CBR established the procedures for the reservation and return of the reservation amount. The amount of reservation was required to be deposited in Russian currency. Residents and non-residents calculated the amount of the reservation themselves. The reservation amount for a foreign currency transaction was calculated at the official CBR rate as of the date the amount of the reservation was entered. Early return of the total or part of the reservation amount had been authorised in cases stipulated by Federal Law No. 173-FZ. Interest had not been charged for the amounts of reservation deposited in accounts of authorised banks or the CBR. According to Federal Law No. 173-FZ, reservation requirements and use of special bank accounts had been in force until 1 January 2007.
27. The representative of the Russian Federation further explained that, pursuant to Article 7 (which ceased to be effective as of 1 July 2006) of Federal Law No. 173-FZ, the Government of the Russian Federation could use the above-mentioned instruments to regulate currency transactions pertaining to capital movement connected with foreign trade operations in the following situations: (i) delayed payment for exported goods, specified in Sections XVI, XVII and XIX of the Commodity Nomenclature for Foreign Economic Activity for the period exceeding three years (HS Codes 84-89, 93); (ii) delayed payment for the period above five years for building and construction works performed by residents outside the territory of the Russian Federation and also for delivered goods necessary for performance of these works; (iii) delayed payment (due from a non-resident to a resident) for more than 180 calendar days in connection with realization of foreign trade activity; (iv) granting commercial credits by residents to non-residents for more than a 180 calendar day period as an advance payment regarding the realization of foreign trade activity; (v) granting commercial credits by residents to non-residents for a period exceeding three years in the form of advance payment for import of goods, specified in Sections XVI, XVII and XIX of the Commodity Nomenclature for Foreign Economic Activity. In these situations the Government of the Russian Federation had the authority to introduce a temporary reservation requirement of 50 per cent of the currency transaction amount, with such measure in effect for a maximum of two years. In the situations designated in paragraphs 3 and 4 of Article 7 of Federal Law No. 173-FZ (iii and iv respectively in the above list of situations), the currency reservation requirement would not apply, if the payment was guaranteed by an irrevocable letter of credit covered for the account of payer; a bank guarantee issued by a bank situated outside the territory of the Russian Federation, given for the benefit of the resident; an insurance contract; or, a bill drawn by a non-resident for the benefit of the resident and guaranteed by a bank outside the territory of the Russian Federation. In 2005, the Government of the Russian Federation had partially exercised its powers in the field of regulation of currency transactions pertaining to capital movement between residents and non-residents, having established reservation requirements with respect to currency transactions by residents mentioned in paragraphs 4 and 7 of Article 7 of Federal Law No. 173-FZ. It had issued the following acts to that effect:
- Resolution of the Government of the Russian Federation No. 204 of 11 April 2005 "On the Procedure for Making Settlements and Transfers in Acquisition of Stakes, Deposits, Shares in Property (Authorised or Share Capital, Share Fund of Cooperative) of Legal Entities by Residents from Non-Residents, in Entering Contributions by Residents Under Contracts of Simple Partnership with Non-Residents"; and
- Resolution of the Government of the Russian Federation No. 302 of 16 May 2005 "On the Procedure for Making Settlements and Transfers Between Residents and Non-Residents When Granting of Commercial Credits by Residents to Non-Residents for the Term Longer than 180 Calendar Days as an Advance Payment Regarding Realization of Foreign Trade Activity".
In view of the absence of economic preconditions for further maintenance of the reservation requirements as an instrument of regulation of capital currency transactions, the above-mentioned normative acts of the Government of the Russian Federation had been deemed null and void, effective from 1 July 2006.
28. In response to further questions, the representative of the Russian Federation stated that the CBR had introduced five different categories of special accounts to be used by residents and non-residents while carrying out currency transactions. These related to granting and raising credits and loans and operations with securities denominated in Russian or foreign currency (including related payments, transfers and performance of obligations). Transfers and write-offs from these accounts had been subject to a different temporary reservation rate (varying from 3 per cent of the total transaction amount for 365 calendar days to 50 per cent for 15 calendar days) depending on the category of special account. The procedures for using special accounts and reservation requirements had been set up by normative acts of the CBR (Instructions No. 116-i of 7 June 2004, No. 114-i of 1 June 2004, Directive No. 1465-u of 29 June 2004). These requirements had entered into force on 1 August 2004. By its Directives No. 1540-u of 29 December 2004 and No. 1674-u of 29 March 2006, the CBR further reduced currency reservation rates. The representative of the Russian Federation noted that the prevalent macroeconomic situation in the Russian Federation characterized by a high level of currency reserves, absence of sharp fluctuations of an exchange rate of national currency, and stability of the balance of payments had created an opportunity for cancellation of restrictions stipulated by Federal Law No. 173-FZ (reservation requirements and requirements for using special bank accounts). Norms of Federal Law No. 173-FZ that had enabled the Government of the Russian Federation and the Bank of Russia to introduce reservation requirements had been in force until 1 July 2006. Thereupon, the Bank of Russia had issued the Directive No. 1689-u of 29 May 2006 "On Invalidation of Some Normative Acts of the Bank of Russia" according to which all normative acts of the Bank of Russia pertaining to reservation requirements had been deemed null and void from 1 July 2006. Norms of Federal Law No. 173-FZ regarding the requirement to use special bank accounts had been in force until 1 January 2007 with the view to ensure the smooth transition from the system of special accounts to the use of traditional accounts and to lessen the attendant burden on the authorised banks and their clients. To that effect, by its Directive No. 1688-u of 29 May 2006 "On Cancellation of the Requirement to Use Special Bank Accounts for Some Types of Currency Transactions and on Invalidation of Some Normative Acts of the Bank Of Russia", the Bank of Russia had allowed residents and non-residents to use during the transitional period between 1 July 2006 and 1 January 2007 both types of accounts (special and traditional). Starting from 1 January 2007, all normative acts of the Bank of Russia pertaining to the use of special bank accounts had been deemed null and void (paragraph 3 of the Directive No. 1688-u of 29 May 2006).
29. He added that pursuant to Article 21 (which had been in force until 1 July 2006) of Federal Law No. 173-FZ, residents had been bound to sell a part of their foreign currency earnings at a rate not exceeding 30 per cent of the amount on the internal currency market. The mandatory surrender requirement had been in force until 1 January 2007. The mandatory surrender requirement set by the CBR had been 25 per cent in 2003 (CBR Directive No. 1304-u of 9 July 2003) and had been lowered to 10 per cent in 2004 in an effort to further liberalize foreign exchange (CBR Directive No. 1520-u of 26 November 2004). The CBR had established the list of foreign currencies subject to obligatory sale through the internal currency market of the Russian Federation. Foreign currency revenues not subject to mandatory surrender requirements (established by paragraph 3 of Article 21 which had been valid until 1 January 2007) had included:
- the amount of foreign currency received by the Government of the Russian Federation, federal executive bodies authorised by the latter, by the CBR from transactions and deals being carried out by them (or on their behalf and/or at their expense) within the scope of their competence;
- the amount of foreign currency derived by authorised banks from bank transactions and other bargains with non-residents;
- residents' foreign currency earnings within the limits of the amount necessary to fulfil their obligations under credit and loan contracts signed with non-resident entities acting on behalf of foreign governments as well as with residents of OECD or Financial Action Task Force (FATF) country members for a period exceeding two years; and
- the amount of foreign currency derived from transactions involving the transfer by residents of external emissive securities (rights to external emissive securities).
30. Some Members noted that there had been three specific restrictions on the use of foreign exchange that had had a negative impact upon imports and had engaged WTO obligations. As the application of these restrictions had not been specifically approved by the IMF, these Members asked the Russian Federation to eliminate them by the date of its accession to the WTO and to enter a commitment not to have recourse to these measures after accession:
1. The 1 per cent tax that had been levied on the purchase of cash foreign currency operated as a de facto additional charge upon imports and had been inconsistent with the provision of Article III on non-discrimination, Article VIII on charges covering the cost of services rendered, and the requirements of Article XI of the GATT 1994, as well as Article 4 of the WTO Agreement on Agriculture, which envisaged elimination of unjustifiable restrictions to export.
2. The provision that purchase of foreign currency for making advance payments for imports required opening a deposit in the currency of the Russian Federation, as well as all formalities fees and requirements which were to be observed pursuant to the provision, tied up capital of importers that could be used to purchase additional imports. It was inconsistent with the non-discrimination provisions of Article III as well as the provisions of Article XI of the GATT 1994 and Article 4 of the WTO Agreement on Agriculture. They had been discriminatory also in respect of imports from more distant countries, and, thus, had not complied with the provisions of Article I of the GATT 1994. For these reasons, several Members urged the Russian Federation to consider the use of other methods to avoid illicit capital outflow.
3. The mandatory requirement to transfer 25 per cent of the currency earnings to the domestic currency that had applied to exporters of the production from the Russian Federation effectively increased import transaction costs, and had not complied with the requirement of Article XI of the GATT 1994 on the elimination of unjustifiable export restrictions. Furthermore, due to the fact that that requirement hindered the use of the currency earnings for subsequent entry, it had been also inconsistent with non-discrimination requirements of Article 3 of the WTO Agreement on Agriculture. Some Members further noted that the discussed requirement had been especially burdensome for smaller importers and could, thus, make trade payments more difficult.
31. In addition, Members noted in response to the statement by the representative of the Russian Federation that such measures had been necessary to ensure accumulation of foreign currency reserves, that these measures had been no longer needed. The foreign exchange reserves of the Russian Federation had been at record high levels, equivalent to 50 per cent of external debt and more than six months of import cover. Finally, the balance of payments position of the Russian Federation had improved dramatically since these controls had been imposed in 1998 during the financial crisis.
32. In response to comments by Members, the representative of the Russian Federation stated that the 1 per cent tax levied on the amount of foreign currency in cash purchased by natural persons (not applicable to juridical persons) established by Federal Law No. 120-FZ of 21 July 1997 "On the Tax Levied on Purchase of Foreign Currency Notes and Payment Documents in Foreign Currency" (with subsequent amendments) had been abolished on 1 January 2003 by Federal Law No. 193-FZ of 31 December 2002. As for the prior import deposit requirement, introduced by the CBR Directive No. 1223-u of 17 December 2002, it had been eliminated pursuant to the CBR Directive No. 1394-u of 18 March 2004 and had ceased to exist on 18 April 2004. Concerning the mandatory surrender requirement stipulated by Article 21 of the Law that had authorised the Bank of Russia to establish a maximum 30 per cent rate of obligatory sale of the amount of currency proceeds of residents through the internal currency market, this provision of the Law had ceased to exist on 1 January 2007. Already in 2006, the Bank of Russia had lowered surrender requirements down to zero per cent (Directive of the Bank of Russia No. 1676-u of 29 March 2006 "On Introducing Amendments to the Instruction of the Bank of Russia No. 111-u of 30 March 2004 'On the Mandatory Sale of a Portion of Currency Proceeds on the Domestic Currency Market of the Russian Federation'"). As for concerns expressed earlier by some Members in relation to restrictions on the rights of residents to acquire and hold foreign exchange and to have accounts in foreign banks, the representative of the Russian Federation noted that these concerns had been addressed, since under the current foreign exchange legislation, there were no restrictions on the rights of residents to acquire and hold foreign exchange. The opening of accounts in foreign and national currency by residents and non-residents, on the territory of the Russian Federation, was carried out without any restrictions. As to the accounts of residents in the banks located outside the territory of the Russian Federation, starting from 1 January 2007, they were opened freely in any country, with the subsequent notification to the Federal Tax Service by the holder.
33. Replying to a Member who enquired about the requirement for Russian residents to obtain an advance approval from the Ministry of Finance of the Russian Federation to convert rubles into foreign currency to make related payments of more than US$10,000 to a non-resident under a services contract, the representative of the Russian Federation noted that this measure, which had been introduced by the CBR Directive No. 721-u of 30 December 1999, had been abolished on 11 April 2004 pursuant to the CBR Directive No. 1388-u of 26 February 2004.
34. The representative of the Russian Federation confirmed that if the Russian Federation introduced restrictions on foreign exchange or payments such restrictions would be applied in conformity with WTO requirements. The Working Party took note of these commitments.
- Investment Regime
35. The representative of the Russian Federation stated that the current policy of his Government in this area was directed to creation of conditions to promote the expansion of domestic and foreign investments, and also to the formation of transparent and stable rules in the conduct of economic activities. He added that the MED of the Russian Federation was the authority responsible for formulating and implementing the investment policy of the Russian Federation.
36. The basic legal provisions relating to the activities of investors were set-forth in the Constitution of the Russian Federation adopted on 12 December 1993; the Civil Code Part One No. 51-FZ of 30 November 1994 and Part Two No. 14-FZ of 26 January 1996 (as last amended on 27 July 2010); relevant international treaties to which the Russian Federation was a party, and a number of other legislative acts: Federal Law No. 39-FZ of 25 February 1999 "Оn Investment Activity in the Russian Federation Pursued in the Form of Capital Investments" (as last amended on 23 July 2010), Federal Law No. 160-FZ of 9 July 1999 "On Foreign Investments in the Russian Federation" (as last amended on 29 April 2008), Federal Law No. 164-FZ of 8 December 2003 "On the Fundamentals of the State Regulation of Foreign Trade Activity" (as last amended on 2 February 2006), which provided guarantees for the protection of investors' rights and interests, and Federal Law No. 57-FZ of 29 April 2008 "On the Order of Investing by Foreign Persons in Companies Having Strategic Importance for the Ensuring of the Defence of the Country and the Security of the State".
37. In response to questions by some Members of the Working Party, he added that, in his view, the Land Code of the Russian Federation (Federal Law No. 136-FZ of 25 October 2001, as last amended on 22 July 2010), together with a number of legislative acts on "de-bureaucratization" (Federal Law No. 128-FZ of 8 August 2001 "On Licensing of Specific Types of Activity" (as last amended on 27 July 2010), Federal Law No. 129-FZ of 8 August 2001 "On State Registration of Juridical Persons and Individual Entrepreneurs" (as last amended on 27 July 2010), Federal Law No. 294-FZ of 26 December 2008 "On the Protection of Legal Entities' and Individual Entrepreneurs' Rights in the Case of Exercise of State Control (Supervision) and Municipal Control") and the Tax Code of the Russian Federation had significantly contributed to the formation of a favourable investment climate and facilitated the investment activity of Russian and foreign companies in the Russian market.
38. In response to further questions by some Members of the Working Party concerning conditions for attraction of foreign investors, the representative of the Russian Federation stated that Article 4.1 of Federal Law No. 160-FZ of 9 July 1999 ensured a legal basis for provision of national treatment for foreign investors' activity.
39. He further noted that, in accordance with the Federal Law No. 160-FZ of 9 July 1999, the property of a foreign investor or a commercial legal entity with foreign investment could not be subject to forced seizure, including nationalization, or requisition, except for the cases and reasons determined by a Federal law or international treaty of the Russian Federation. If nationalization of property took place, Article 8 of this Law provided that the value of the nationalized property would be reimbursed to a foreign investor. Foreign investors had the right to freely use the revenues and profits (which had been obtained from the investment made in the Russian Federation) in the territory of the Russian Federation for any purpose, including re-investment, as long as such use did not contradict the legislation of the Russian Federation. A foreign investor could acquire stocks and other securities of Russian commercial organizations and State securities, in accordance with the respective legislation. In some cases, investments and re-investments by foreign investors could be limited or prohibited under the Russian legislation, including in cases mentioned in paragraphs 47 and 49 of this Report.
40. One Member asked what compensation would be available to foreign investors in case of seizure and/or expropriation. The representative of the Russian Federation explained that the details concerning compensation available to foreign investors were provided for in the respective bilateral Agreements for the Promotion and Reciprocal Protection of the Investments referred to in paragraph 45 of this Report.
41. The representative of the Russian Federation further informed Members of the Working Party that foreign investors, other than those investing in non-commercial organizations, could transfer abroad unhampered their profits and other sums of money in foreign currency lawfully gained in connection with previously made investments. He noted that this right to transfer funds abroad did not affect any obligations a foreign investor may have under the relevant legislation of the Russian Federation, including tax legislation, criminal legislation, and legislation on bankruptcy. He also explained that non-commercial organizations could not, by definition, have profit-making as their principal goal, and that such organizations included those described in paragraph 1361 of this Report.
42. He also noted that, in accordance with tax and customs legislation of the Russian Federation, foreign investors could be granted certain privileges. Tax privileges, according to Article 150 of the Tax Code, comprised exemption from taxation of technology equipment and parts and spare parts for such equipment, imported into the customs territory of the Russian Federation, as a contribution to the assessed capital of companies. As to customs privileges, they were listed in the Government Resolution No. 883 of 23 July 1996 "On Import Duty and Value Added Tax Exemptions for Goods Imported by Foreign Investors as Contributions to Charter (Pooled) Capital of Enterprises with Foreign Investments" as following:
- Products imported to the customs territory of the Russian Federation as contribution to the assessed capital were free from customs duties under the condition that the products were: not excisable; related to the main productive funds; and, imported within the period defined by the constituent documents for assessed capital foundation.
43. In addition, the possibility of granting other customs and tax privileges to foreign investors performing priority investment projects (more than RUB 100 million) was provided for by Federal Law No. 160-FZ of 9 July 1999. The representative of the Russian Federation also explained that the Russian Federation was pursuing the establishment of special economic zones (SEZs) which were aimed primarily at fostering high technology industries; expanding sources of investments; and, promoting the development of tourism and transportation infrastructure. He noted that the Section of the Report "On Special Economic Zones" (starting at paragraph 1091) provided additional information on the establishment and operation of SEZs in the Russian Federation.
44. In response to further questions, the representative of the Russian Federation said, that some investment privileges had been granted in the field of the car and aircraft industries (those in the sector of aircraft had been abolished) which were described in the Section "Trade-Related Investment Measures" (TRIMs) (see paragraphs 1072 through 1087).
45. In response to other questions, the representative of the Russian Federation added that the Russian Federation accorded protection of foreign investment through international treaties. In particular, up to October 2010 the Russian Federation was a Party to 70 bilateral investment treaties (BITs) (49 of them were in force). In respect of investors and their investments, BITs contained, inter alia, provisions on national treatment and MFN treatment with exemptions; guarantees in case of expropriation and rules for compensation of losses; and, on free transfer of revenues and profits and dispute settlement procedures.
46. The representative of the Russian Federation added that a wide range of investment projects was open to foreign investors. Information on investment projects was widely available, inter alia, from the Chamber of Commerce of the Russian Federation and the Russian Union of Entrepreneurs and Industrialists (Employers). To obtain detailed information concerning investment projects in the Russian Federation, foreign investors could also make an inquiry to the Federal body of executive power responsible for investment policy (currently, the MED of the Russian Federation), regional bodies of executive power, and also trade representations of the Russian Federation abroad, providing information on the possible fields and scope of investment activity and other terms of possible investment projects.
47. In response to concerns of some Members of the Working Party related to restrictions for foreign investors, the representative of the Russian Federation replied that Article 4.2 of Federal Law No. 160-FZ of 9 July 1999 provided that restrictions of activity of foreign investors could be established only by federal laws and only to the extent, it would be necessary, to achieve the purposes of defending the bases of the constitutional order, moral, health, rights and legal interests of other persons and ensuring the defence and the security of the State. These provisions of Article 4 of the Federal Law No. 160-FZ of 9 July 1999 were in line with Article 55 of the Constitution of the Russian Federation and Article 1 of the Civil Code of the Russian Federation, which could also serve as a legal basis for establishment of restrictions of activity of all investors, both Russian and foreign. Security-related restrictions were applied, inter alia, by virtue of the Law of the Russian Federation No. 3297-1 of 14 July 1992 "On a Closed Administrative-Territorial Area" (as last amended on 27 December 2009), which set-forth certain restrictions including restrictions on entrepreneurial and economic activities; Article 15.3 of the Land Code of the Russian Federation which provided that foreign natural persons and foreign legal entities could not own land within the border territories designated by the President of the Russian Federation pursuant to the federal legislation on State Border of the Russian Federation and in other specially defined territories of the Russian Federation in accordance with Federal laws.
48. Some Members of the Working Party asked about the rules governing investments in sectors considered of strategic importance in the Russian Federation. They requested information about the nature of possible restrictions and the procedures for their implementation. Some Members expressed concerns about the lack of clarity of specific provisions pertaining to investments in the energy sectors and underlined the need to have clear and transparent rules providing stability and clarity.
49. In response, the representative of the Russian Federation explained that the Federal Law No. 57-FZ of 29 April 2008 "On the Order of Investing by Foreign Persons in Companies Having Strategic Importance for the Ensuring of the Defence of the Country and the Security of the State" established the general framework for regulation of foreign persons' participation in the capital of enterprises engaged in activities having strategic importance for national defence and security. This Federal Law covered 42 sectors. The screening procedures, intended to review transactions that may threaten the national security of the Russian Federation and thus not be approved, were applied when a foreign person intended to acquire control over such an enterprise. The thresholds when such control was considered to exist were established at the level of 50 per cent of participation in the capital of such a strategic enterprise or 10 per cent in case an enterprise was engaged in the use of land plots of federal importance. In cases where the intended participation in the capital of such an enterprise was by a foreign State, the thresholds for initiation of a screening review were reduced to 25 per cent and 5 per cent, respectively. The representative of the Russian Federation also explained that to implement this Federal Law, the Government of the Russian Federation had adopted Resolution No. 510 of 6 July 2008 "On the Governmental Commission on the Control of Foreign Investments in the Russian Federation". The Governmental Commission established by this Resolution decided whether a foreign investor shall be granted an authorization for the transaction to be accomplished. By the end of 2009, the Governmental Commission had considered more than 30 applications. Two refusals had been made so far. In accordance with Article 11 of the said Federal Law, the denial of approval by the Commission might be appealed in the Supreme Arbitration Court of the Russian Federation.
50. Subsequently, on 28 April 2008, the Law of the Russian Federation No. 2395-1 of 21 February 1992 "On Subsoil" was amended making foreign investments in the capital of the legal persons, engaged in activities within the subsoil land plots of federal importance, subject to the procedures of authorization established under Federal Law No. 57-FZ.
51. Some Members expressed concern about the potential conflicts between decisions taken as a result of the screening procedure, described above, and the commitments of the Russian Federation under the GATS. These Members asked how the Russian Federation would avoid such conflicts.
52. In response, the representative of the Russian Federation explained that, as followed from Article 15.4 of the Constitution of the Russian Federation, in case of conflict between the provisions of Federal Law No. 57-FZ of 29 April 2008 "On the Order of Investing by Foreign Persons in Companies Having Strategic Importance for the Ensuring of the Defence of the Country and the Security of the State" and the obligations under an international agreement of the Russian Federation, such as the GATS, the obligations under an international agreement would apply. The representative of the Russian Federation further explained that all legal acts taken pursuant to Federal Law No. 57-FZ, including decisions resulting from the screening process, must be in compliance with this Law and, as described above, with the international obligations of the Russian Federation.
53. The representative of the Russian Federation further explained that this Federal Law regulated issues connected with foreign investors or a group of persons including foreigners making investments in the form of purchasing stocks (shares) constituting the charter capital of companies having strategic importance for ensuring the defence of the country and the security of the State, as well as with making transactions resulting in foreign investors or a group of persons including foreigners establishing control over such companies. However, according to Article 2.6 of Federal Law No. 57-FZ, the Law did not apply to such issues if they were connected with making foreign investments and were covered by duly ratified international agreements with participation of the Russian Federation. The issues connected with making foreign investments in the sphere of technical military cooperation of the Russian Federation with foreign States were regulated in accordance with the legislation of the Russian Federation on technical military cooperation.
54. In reply to the questions of some Members of the Working Party, the representative of the Russian Federation added that, in accordance with the provisions of the Law of the Russian Federation No. 4730-1 of 1 April 1993 "On State Border of the Russian Federation" (as last amended on 31 May 2010), the boundary territories were defined within border zones and/or within wards adjacent to them. The border zones were, as a rule, established within the territory of 5 kilometres (within a ward, city) adjacent to the State Border on land, to the sea coast of the Russian Federation, to the Russian banks of the border rivers, lakes and other basins and within the territories of the islands of these basins.
55. Noting that "as a rule", border zones were established within 5 kilometres adjacent to a border, a Member asked if there were any exceptions to this "rule" for determining border zones. In response, the representative of the Russian Federation explained that the bounds of each border zone were established by the Orders of the Federal Security Service of the Russian Federation No. 75-85 of 2 March 2006, No. 149-157 of 14 April 2006, No. 237-250 of 2 June 2006, No. 275-286 of 16 June 2006, No. 193 of 17 April 2007, No. 273 of 27 May 2007, No. 355 of 10 July 2007, and No. 473 of 20 September 2007.
56. In response to the questions of some Members of the Working Party related to rights of foreigners concerning possession of land, the representative of the Russian Federation stated that the Land Code of the Russian Federation (Federal Law No. 136-FZ of 25 October 2001) stipulated conditions of use, purchase and sale of land and provided that foreign nationals and foreign legal entities could acquire property rights and leasehold over land, with the exception of cases established by the land legislation of the Russian Federation (mentioned in paragraph 47 of this Report).
57. In response to further questions, the representative of the Russian Federation noted that, in accordance with Article 35 of the Land Code, owners of buildings, constructions and/or facilities located on a land plot owned by another person or the State, could benefit from a pre-emptive right of purchase or lease in respect of such land plot, unless the Decrees or Resolutions of the President of the Russian Federation prohibited the purchase or lease of those lands. This rule was applied regardless of national identity.
58. Concerning commercial transactions in agricultural land, the representative of the Russian Federation noted that Federal Law No. 101-FZ of 24 July 2002 "On Commercial Transactions in Agricultural Land" (as last amended on 8 May 2009) permitted leasehold by foreign natural persons, foreign legal entities and legal entities with foreign participation exceeding 50 per cent for a period of up to 49 years. He added that, after the end of the 49-year period of the lease of land for agricultural purpose, the lessee could make a new contract for another term. While the contract for a new term was made on standard basis, the lessee had a right of priority in making a contract for a new term.
- Privatization and Enterprises that are State-Owned or –Controlled, Enterprises with Special or Exclusive Privileges
59. The representative of the Russian Federation informed Members of the Working Party that, since 1993, privatization had been carried out as provided for in legislation on privatization of State and Municipal Property. He also informed Members of the Working Party that the basics of the regulation of privatization in the Russian Federation were established by the Civil Code of the Russian Federation and Federal Law No. 178-FZ of 21 December 2001 "On Privatization of State and Municipal Property" (as last amended on 22 November 2010). Other legal acts, relative to the regulation of privatization, included, inter alia, the following:
- Article 217 of the Civil Code of the Russian Federation;
- The Budget Code of the Russian Federation - Federal Law No. 145-FZ of 31 July 1998;
- Federal Law No. 160-FZ of 9 July 1999 "On Foreign Investment in the Russian Federation" (as last amended on 29 April 2008); and
- The Conception of Management of State Property and Privatization in the Russian Federation (approved by Government Resolution No. 1024 of 9 September 1999, as last amended on 29 November 2000).
60. The representative of the Russian Federation explained that, in accordance with the Federal Law No. 178-FZ of 21 December 2001, "privatization of state and municipal property" was a form of alienation of property owned by the Russian Federation (hereinafter: referred to as "federal property"), the regions of the Russian Federation, or municipal entities to natural and/or juridical persons that required payment to the owner of the property being privatized.
61. Some Members of the Working Party expressed concerns regarding the transparency of the privatization process in the Russian Federation, as well as concerns regarding restrictions related to privatization and, specifically, restrictions on foreign participation in privatization provided for in the legislation of the Russian Federation. In response to the questions from Members, the representative of the Russian Federation informed Members that privatization of State and Municipal Property was based on the principles of transparency and predictability of privatization procedures. He further added that privatization for each year was carried out on the basis of a plan. The Government of the Russian Federation annually endorsed the forecast of Federal Property Privatization Plan (Programme) for a respective year. The Forecast Plan (Programme) contained a list of Federal State unitary enterprises, federally-owned shares of open joint-stock companies, and other federal property to be privatized in that year. The programmes of privatization as well as decisions on the conditions of privatization (as long as they were approved by the normative acts of the relevant executive authorities) were subject to publication in the sources of official information1.
62. Regarding the prohibitions and restrictions on the privatization process, the representative of the Russian Federation stated, that according to the Federal Law No. 178-FZ of 21 December 2011, some property could not be privatized, because it could be owned only by the State or municipal Governments and federal laws stipulated that some property and objects could not be subject to any form of transaction. Property and objects which could not be privatized consisted, among other things, of mineral wealth, forest fund, water resources, air space, resources of the continental shelf, territorial waters and sea economic zones of the Russian Federation, budgetary and non-budgetary funds, currency and other reserves, objects of historic and cultural heritage of federal value, property passed over to State unitary enterprises (SUEs) and state institutions involved in the turnover of narcotics and psychotropic substances, nuclear stations and enterprises producing special nuclear and radio-nuclear materials, nuclear weapons, as well as property of the enterprises performing scientific research and development works in the above-mentioned areas, and property permanently used to provide social services, including orphanages. The alienation of these types of property to any natural and/or juridical persons was prohibited.
63. In response to the specific questions of some Members in regard to joint-stock companies (JSCs) and enterprises of strategic significance, the representative of the Russian Federation clarified, that shares of "strategic" JSCs and "strategic" enterprises could be offered for privatization and be included in the plan (programme) of privatization by decision of the President (i.e., a Presidential Decree based on a proposal initiated by the Government).
64. "Strategic" enterprises and JSCs were defined as follows:
- Federal State unitary enterprises manufacturing products (performing works, providing services) of strategic importance for ensuring the defensive capability and security of the State, protecting the morals, health, rights and lawful interests of citizens of the Russian Federation (strategic enterprises); and
- Public joint-stock companies whose shares were in federal ownership and the participation of the Russian Federation in the management thereof ensured the strategic interests of the State, the defensive capability and security of the State, protection of the morals, health, rights and lawful interests of citizens of the Russian Federation (strategic JSCs).
65. The current list of strategic enterprises was established by Presidential Decree No. 1009 of 4 August 2004 (as last amended on 26 June 2010). The amended list contained 231 strategic enterprises and 212 JSCs. In response to a question from a Member, the representative of the Russian Federation explained that the specific percentage of state-ownership of shares in a public joint-stock company was not stipulated and currently the percentage of state-ownership varied from 100 per cent to 34 per cent. The representative of the Russian Federation further informed Members that, in accordance with Article 5 of the Federal Law No. 178-FZ of 21 December 2001, the participation of some categories of persons (Russian as well as foreign) could be restricted by other Federal laws for the purposes of defending the constitutional order, morals, health, the rights and legal interests of other persons, and ensuring the defence and security of the State. These provisions were in line with Article 55 of the Constitution of the Russian Federation and Article 1 of the Civil Code of the Russian Federation which could also serve as a legal framework for establishing restrictions on ownership by Russian as well as foreign persons. Thus, the Law of the Russian Federation
No. 3297-1 of 14 July 1992 "On a Closed Administrative-Territorial Area" (as last amended on 23 December 2003) stipulated that only citizens of the Russian Federation permanently residing in the territory of Closed Administrative-Territorial Area and juridical persons located and registered in that territory, could participate in the privatization of the State or Municipal Property located on that territory and engage in transactions with it. These rules were set with a view to providing a special regime of safe functioning and keeping State secrets in the territory of such areas.
66. In response to further questions of some Members of the Working Party with regard to restrictions on foreign participation in privatization of land, the representative of the Russian Federation added that there were no specific conditions for foreign investors set-out in the legislation on privatization, concerning participation in the privatization programme other than those that applied to domestic investors. Furthermore, Federal Law No. 178-FZ of 21 December 2001 established equality of rights of all customers in the process of privatization. However, certain limitations on foreign ownership were provided for by Russian legislation regulating different areas of economic relations. Such limitations were required to be observed in the process of privatization. The representative of the Russian Federation gave the example of the Land Code of the Russian Federation, providing that foreign citizens, persons without any citizenship, and foreign juridical persons could not own land plots when such land plots were situated in border territories, the list of which was set by the President of the Russian Federation in accordance with the federal legislation on State border of the Russian Federation. Additional information on this issue was discussed in the Section "Investment Regime" of this Report.
67. Some Members of the Working Party requested information on progress achieved in the privatization process and the percentage of trade accounted for by State-owned firms. These Members noted that, in many situations, a shareholding of as low as 25 per cent could amount to effective control, and, accordingly, requested information on the economic activity of companies with 25 per cent or greater Government shareholding. Some Members requested updated information on the current privatization programmes of the Government of the Russian Federation. Responding to this request, the representative of the Russian Federation informed Members that the Privatization Plan (Programme) for the current period was established by the "Forecast Plan (Programme) for Federal Property Privatization and the main directions of the Federal Property Privatization for 2011 and 2013" which had been approved by the Order of the Government of the Russian Federation No. 2102-r of 27 November 2010. This Programme was available on the website of the Government of the Russian Federation (www.gov.ru). The Programme contained a list of 809 JSCs belonging to the Russian Federation for which shares were put up for sale in 2011-2013 as well as 114 Federal State unitary enterprises, planned to be privatized in 2011-2013. It was planned, in particular, to put up for sale 7.58 per cent minus one share of Sberbank, 100 per cent of the United Grain Company (by 2012) and 50 per cent minus one share of Rosagroleasing (but no sooner than in 2013).
68. The representative of the Russian Federation further informed Members that a total of 1,863 enterprises had been privatized between 2005 and 2009 (see Table 1). He also provided additional information concerning privatization by sectors, reflected in Table 2. Regarding recent years, the representative of the Russian Federation provided information contained in Table 3, Table 4 and Table 5. As a result of the privatization process, the number of Federal State unitary enterprises came to 3,765 on 1 January 2009, and the number of JSCs with the participation of the Russian Federation came to 3,337 by the same date. Among these JSCs, 1,858 had 100 per cent of their shares owned by the Russian Federation; 200 JSCs had from 50 to 100 per cent of their shares owned by the Russian Federation; 510 had from 25 to 50 per cent Russian Federation ownership; and 769 JSCs had less than 25 per cent of their shares owned by the Russian Federation.
69. The possibility of the State to use a special right was provided for in Federal Law No. 178-FZ of 21 December 2001. A decision to use/stop using this special right ("golden share") might be adopted by the Government of the Russian Federation or bodies of the Russian regions when the property complexes of unitary enterprises were privatized or when a decision was made to exclude a JSC from the list of strategic JSCs, irrespective of the number of shares owned by the State. When the decision to use the "golden share" had been taken, the Government of the Russian Federation or the bodies of the Russian regions appointed the respective representatives to the board of directors (supervisory board) of a JSC in question. Such representatives had the right to attend the general meeting of shareholders the same as the representatives of ordinary shareholder, with a right of veto when the general meeting voted on the following decisions:
- Amending the statute of the joint-stock company or endorsing the statute of the public JSC in a new wording;
- Re-organizing the open JSC;
- Liquidating the open JSC, appointing a liquidation commission and endorsing interim and final liquidation balance sheets;
- Altering the amount of authorised capital of the open JSC; or
- Accomplishing large-scale transactions and transactions in the accomplishment of which there was an interest (as specified in the Federal Law "On Joint-Stock Companies").
70. As regards the general mechanism of participation of the Russian Federation in the management of State-owned shares of the JSCs, the representative of the Russian Federation informed Members that it continued to be through representatives of the State participating in the managerial bodies of the JSCs. The rules for managing shares of JSCs owned by the State were stipulated by the Resolution of the Government of the Russian Federation No. 738 of 3 December 2004 "On the Management of Federal Owned Shares of Joint-Stock Companies and the Use of the Special Right for Participation of the Russian Federation in Management of Open Joint-Stock Companies (Golden Share)" (as last amended on 1 December 2009).
71. Members of the Working Party invited the Russian Federation to enter into a commitment to report on developments in its programme of privatization as long as the Privatization Programme was in existence and on other issues related to any ongoing economic reforms relevant to its obligations under the WTO.
72. The representative of the Russian Federation confirmed the readiness of the Russian Federation to ensure the transparency of its ongoing Privatization Programme. He stated that his Government would provide annual reports to WTO Members (along the lines of the information provided to the Working Party) on developments in its programme of privatization as long as the Privatization Programme was in existence. The Working Party took note of this commitment.
- (b) Enterprises that are State-Owned or -Controlled, Enterprises with Special or Exclusive Privileges
73. In response to the concerns of some Members of the Working Party about the possibility of the Government to control and influence the activity of State-invested JSCs, the representative of the Russian Federation answered that the legislation of the Russian Federation did not provide for the possibility of the Government (State) exercising special control or special management of the activity of those companies, where the Russian Federation or municipal authority-owned shares. As a general rule, when a State or municipal authority held shares of the JSC, it worked as an ordinary shareholder and enjoyed the rights and took the liabilities under the standard rules for shareholders stipulated by the Civil Code of the Russian Federation and Federal Law No. 208-FZ of 26 December 1995 "On Joint-Stock Companies" (as amended on 27 December 2009). Thus, except as explained in paragraph 69 of this Report, State or municipal authorities participated in the management and activity of the JSC along with other shareholders under the same rules irrespective of the share of stock in State ownership.
74. Responding to the questions of some Members, the representative of the Russian Federation also clarified the issue of SUEs and the mechanism of their management by the State. He said that the legal status and activity rules of SUEs were provided by the Civil Code of the Russian Federation and Federal Law No. 161-FZ of 14 November 2002 "On State and Municipal Unitary Enterprises" (as last amended on 1 December 2007). He added that a SUE was a commercial organization, not endowed with the right of ownership to the property, allotted to it by the property owner. These Laws provided that the property of the SUE must be owned by the Russian Federation, a Russian region or a municipality. In its commercial activity, a SUE was acting in the same way as other commercial organizations, except for transactions aimed at the disposition of the property of the SUE (sales, lease, transfer as bond security, giving of credits, etc.), where the approval of the property owner was required by law. This special requirement resulted exclusively from the need to preserve property of the owner (the State, the municipality) and constituted the difference between a SUE and other types of legal persons. In respect to unitary enterprises, the State had the same rights and obligations as an ordinary corporate founder, being subject to common rules of the civil legislation, which did not accord any special rights or possibility of control or rights to manage the activity of unitary enterprises to the state/municipal entity. SUEs existed and acted alongside other forms of legal persons, on the basis of principles and rules common to all commercial organizations, stipulated in civil legislation, and self-organized their activities.
75. Summarizing the information on the possibility of State control over the activities of SUEs and State-invested JSCs, the representative of the Russian Federation stated that governmental influence and guidance of the decisions and activities of SUEs as well as state-invested JSCs was strictly defined by the legislation of the Russian Federation as indicated above. The Constitution of the Russian Federation guaranteed the equality of all forms of property (i.e., private, State, or municipal) thus ensuring that the principle of non-discrimination would be observed regarding the companies and enterprises of different forms of property rights. It also prevented enterprises from activity aimed at monopolization and unfair competition, thus giving a sound guarantee that State enterprises and State-invested JSCs would not act in a manner to distort the competitive environment. He further noted that according to Article 50 of the Civil Code of the Russian Federation, Russian juridical persons were divided into commercial and non-commercial organizations. Commercial organizations were those aimed at deriving profits as the main goal of their activity and that SUEs and state-invested JSCs were one of the forms of commercial organizations alongside with other types of commercial organizations with this goal. The status of the SUEs and state-invested JSCs as commercial organizations pre-defined the freedom of their own market behaviour which was implemented through the respective operational decisions and conclusion of commercial transactions of any kind in accordance with customary business practice and legislation in force.
76. In addition, the representative of the Russian Federation presented statistical data
(see Table 6), in his view, demonstrating that the actual participation of State enterprises in the economy, as well as in international trade was relatively small. The proportion attributed to the State enterprises had been declining steadily over the previous years and this trend was expected to continue. In industrial and agricultural production, the share accounted for by State enterprises amounted to approximately 10 per cent, while the share of exports and imports was negligible. Responding to a question of a Member, the representative of the Russian Federation explained that State participation in the gas production sector was higher than in other sectors. In 2009, Gazprom, which was 51 per cent owned by the State, had an 84 per cent share of the total gas production in the Russian Federation. Due to its exclusive right to export gas, Gazprom had a 100 per cent share of gas exports from the Russian Federation.
77. Some Members requested further information on the role of marketing enterprises such as Exportkhleb, Prodintorg, and Roskhleboprodukt in agricultural trade, and a description of the legislation that had specifically ended the special rights and privileges that these organizations had traditionally received as monopoly trade or marketing entities. These Members also asked for further information on the extent to which the agricultural trade of the Russian Federation was still conducted through inter-governmental agreements between the Russian Federation and other countries, especially CIS countries, and on whether any government-to-government barter arrangements were still in place.
78. The representative of the Russian Federation noted that some enterprises (Roschleboproduct and Roscontract) had been granted exclusive and special rights in 1993 and 1994 in the context of bilateral barter trade with some CIS countries performed under the framework of special inter-governmental agreements for those calendar years. Such exclusive rights had expired completely on 31 December 1995 when the agreements expired and had never been resumed. The Government of the Russian Federation had not concluded any bilateral barter trade agreement with Governments of other countries, including CIS countries.
79. Regarding the concerns of some Members in respect of the special export regime for wheat exported to Ukraine, the representative of the Russian Federation stated that a special Inter-governmental Agreement on export supplies of wheat to Ukraine from August to October 2003 had been concluded in August 2003 in view of adverse weather conditions in Ukraine in 2003. This Agreement did not concern barter trade. Under this Agreement, the SUE "Federal Agency on the Foods Market Regulation" (FFMA) had been authorised to supply wheat on terms and in quantities provided for by the Agreement. However, this authority of FFMA had expired upon termination of the supply periods, as defined in the Agreement.
80. A Member was concerned that FFMA appeared to operate the grain intervention system of the Russian Federation and maintained grain reserves, exclusively and at the behest of the Government, using State funds, which would appear to be an exclusive right that had a noticeable impact on prices. In response, the representative of the Russian Federation noted that under Government Resolution No. 1224 of 26 September 1997 "On the Foundation of the State Unitary Enterprise - the Federal Agency for Food Market Regulation by the Ministry of Agriculture and Food of the Russian Federation" (as last amended on 15 June 1998), the FFMA had replaced the Federal Food Corporation with a modified institutional and legal framework. A full list of activities of the FFMA was contained in Government Resolution No. 1224. Pursuant to this Resolution, the Agency was a commercial organization established in order to meet social needs and earn a profit. Its main activities included, in particular:
- Monitoring the current state of the agricultural, raw materials, and foodstuffs market, creating a system providing informational support to market entities, analysing and forecasting the situation on the market;
- Boosting competition in purchase and sale of agricultural products, raw materials, and foodstuffs;
- Organizing and carrying out purchase and sale-related intervention in order to promote stability on the market of agricultural products, raw materials, and foodstuffs;
- Ensuring guarantees in carrying out operations with agricultural products, raw materials and foodstuffs; and
- Performing the functions of the state purchaser on establishing the operative reserve of the Government of the Russian Federation and performing deliveries to polluted territories.
81. Organizing and carrying out purchase and sale-related intervention in order to promote stability on the market of agricultural products, raw materials, and foodstuffs were regulated by Government Resolution No. 580 of 3 August 2001 "On Approving the Rules of Exercising State Purchase and Sale Intervention for the Regulation of the Market of Agricultural Products, Raw Materials, and Foodstuffs" (as amended by Government Resolutions No. 500 of 28 September 2004, No. 431 of 15 July 2005 and No. 157 of 23 March 2006). According to this Resolution, State purchases of agricultural products, raw materials, and foodstuffs (hereafter: referred to as agricultural products) were carried out for building of the Federal Food Intervention Fund. Purchases and sales of agricultural products to/from this fund were aimed at regulation of agricultural products markets. The reserves of the intervention fund had been recognised as Federal property. Purchase and sales interventions were to be carried out by a State agent selected on competitive basis by the agricultural sector regulator of the Russian Federation. The agent acted for a commission fee. The interventions themselves were carried out through a commodity exchange auction. FFMA was approved as an agent for carrying out purchase and sales interventions in 2001, 2002 and 2005, by Government Order No. 1501-r of 13 November 2001, by Government Resolution No. 756 of 11 October 2002, and by the Order of the Ministry of Agriculture No. 80 of 14 May 2005, respectively. According to Order of the Territorial Administration of the Federal Agency for State Property Management in Moscow No. 1345 of 28 December 2006, FFMA2 was privatized and acted as a Joint-Stock Company Agency for the Food Market Regulation. In 2008, the Ministry of Agriculture of the Russian Federation selected FFMA on a tender basis as an agent for grain interventions, in accordance with Government Resolution No. 580 of 3 August 2001.
82. The Open Joint-Stock Company Agency for the Food Market Regulation, which was 100 per cent owned by the State, was renamed the "United Grain Company", in accordance with Presidential Decree No. 290 of 20 March 2009. Some federally-owned shares of the companies were transferred as a contribution to the authorised capital of the United Grain Company in order to cover the emission of additional shares. While the State currently owned 100 per cent of shares of the United Grain Company, there was a plan to privatize the United Grain Company by 2012. In 2009, grain interventions were executed by the United Grain Company on a tender basis. In addition to engaging in grain interventions, the mission of the United Grain Company was to increase grain elevator capacity, increase domestic grain trade and exports, and to develop the transport and port infrastructure of the grain market of the Russian Federation. The representative of the Russian Federation explained that United Grain Company continued to act as an agent for state purchase and merchandise interventions for a commission, as stipulated in Government Resolution No. 580 of 3 August 2001 "On Approving the Rules of Exercising State Purchase and Sale Intervention for the Regulation of the Market of Agricultural Products, Raw Materials, and Foodstuffs". He further explained that all the purchase and merchandise interventions were carried out through a commodity exchange. A participant had to confirm its sphere of activity (as "grain producer" to take part in purchase interventions and as "livestock breeder", "producer of forage for livestock", "flour-and-cereals industry company" or "livestock breeder and plant grower (composite agriculture)" to take part in merchandise interventions. A participant also had to go through an accreditation process, involving payment of an accreditation fee, making a guarantee deposit and providing the documents specified in the Bidding Procedure established in accordance with Government Resolution No. 580 of 3 August 2001 "On Approving the Rules of Exercising State Purchase and Sale Intervention for the Regulation of the Market of Agricultural Products, Raw Materials, and Foodstuffs".
83. Several Members requested further information regarding a Government resolution that imposed licensing requirements on procurement, processing, storing, and marketing of grain and grain products for State needs, as well as on production of most grain products (bread, flour, etc.), and clarification of the purpose of these licenses and on whether both foreign and domestic companies were subject to them. Concerning reports that 150 bankrupt grain facilities (mills, storage facilities, etc.) had reverted to State control, some Members requested clarification on how this process was being implemented and what role the Government would play in the operation and management decisions of these facilities.
84. In reply, the representative of the Russian Federation stated that Government Resolution No. 414 of 13 June 2002 "On Approval of the Regulation of Licensing of the Storage of Grain and Products Received as a Result of its Processing" approved the provision on licensing of storage of grain and products received as a result of its processing. Government Resolution No. 414 had also invalidated former Government Resolution No. 43 of 22 January 2001 "On Licensing of Purchase, Remaking, Storage and Realizing of Grain and Products Received as a Result of its Subsequent Processing which is meant for State Needs on Production of Bread, Macaroni, Flour, Groats and Other Grain Foods". He added that statements on the reversion of 150 bankrupt grain facilities to State control were unfounded. Government Resolution No. 414 was abolished on 14 December 2006, and thus, licensing of storage of grain and products received as a result of its processing was abolished as well.
85. With regard to granting an exclusive right to import or export goods, the representative of the Russian Federation explained that, pursuant to Article 4 of the Agreement On Common Measures of Non-Tariff Regulation in Respect of Third Countries of 25 January 2008, the Customs Union Commission (CU Commission), on proposal by a member, decided on the designation of certain goods to be subject to exclusive imports/exports right. Foreign trade in such goods was subject to import or export licensing and customs clearance of such goods was provided on the basis of an exclusive licence, which was issued by the competent authority of the CU Party (in the Russian Federation, the Ministry of Industry and Trade of the Russian Federation (MIT)). Exports of natural gas from the territory of the Russian Federation were subject to an exclusive right enjoyed by Gazprom Group, pursuant to Federal Law No. 117-FZ of 18 July 2006 "On Export of Gas".
86. In response to a question from some Members, the representative of the Russian Federation explained that while the CU Commission designated the goods subject to the measure in question, the national authorities established the specific enterprise that was granted the exclusive right, as well as rules for its operation within its territory. He said that under Article 26 of Federal Law No. 164-FZ of 8 December 2003 "On the Fundamentals of the State Regulation of the Foreign Trade Activity", an exclusive right to export and/or import certain types of goods could be granted to some organizations. The list of organizations (as well as types of goods) to which such rights should be granted should be determined by Federal laws.
87. Pursuant to Article 26 of Federal Law No. 164-FZ of 8 December 2003, enterprises which had been granted exclusive or special rights or privileges to export and/or import certain types of goods were required in their purchases or sales, involving either imports or exports, to act on the basis of the principle of non-discrimination and in accordance with commercial considerations. Non-compliance with the provisions of Article 26 or the Agreement on Common Measures of Non-Tariff Regulation in Respect of Third Countries of 25 January 2008, could be considered as an abuse of dominant position or as act of unfair competition and therefore would be subject to proceedings in accordance with the Code on Administrative Offences of the Russian Federation and Federal Law No. 135-FZ of 26 July 2006 "On Protection of Competition".
88. The representative of the Russian Federation explained that his authorities considered that only the enterprises of the Gazprom Group (natural gas) were enterprises having special or exclusive privileges with respect to export. The mentioned enterprises, while making their purchases and sales involving exports or imports, acted consistently with the principle of non-discrimination and, in particular, they were guided by in these purchases and sales solely by commercial considerations. The representative of the Russian Federation confirmed that Gazprom will be notified as an STE in accordance with Article XVII of the GATT 1994. The exclusive right of Almazyuvelir Export Foreign Trade Association (for operations in raw materials containing platinum and platinum group metals) had been abolished in accordance with the Resolution of the Government of the Russian Federation No. 268 of 30 March 2009. Detailed information on these enterprises was contained in document WT/ACC/RUS/18 and Corr.1.
89. Some Members raised questions concerning "unitary" enterprises and their role in export and/or import of goods. In response the representative of the Russian Federation stated that, by definition, "unitary" enterprises operated as commercial enterprises. Addressing specific concerns of some Members about the way in which enterprises involved in export/import of ethyl spirits might be exercising their exclusive rights, the representative of the Russian Federation explained as follows. According to Article 9 of Federal Law No. 171-FZ of 22 November 1995 "On State Regulation of Producing and Turnover of Ethyl Spirit, Alcoholic and Spirit Containing Production" (as last amended on 5 April 2010), only unitary enterprises or JSCs where the State possessed no less than 51 per cent of the shares were entitled to export and import ethyl spirit if they had appropriate licenses for carrying out such activity. However, this provision of the Federal Law had been abolished by an amendment of 21 July 2005.
90. Some Members were particularly concerned that the pricing practices followed by Gazprom (majority State-owned, with 50.002 per cent share controlled by the State), could not be regarded as being based on commercial considerations. Specifically, sales for export were subject to controls in relation to quantity and price, and the sale of gas for domestic industrial consumption was at a price level considerably below that applied for exports, which were linked to the prevailing world market price. Artificially low domestic energy prices could also lead to indirect subsidization of downstream industries and to exports of value-added intermediate and finished goods at prices below their normal value. In this context, those Members noted that the cost of producing natural gas for Gazprom was significantly higher than the regulated domestic price. In light of these facts, those Members requested an explanation as to how Gazprom was selling on the domestic market "solely in accordance with commercial considerations", as required by Article XVII:1(b) of the GATT 1994. Those Members noted that Gazprom, or its subsidiaries, also appeared to be a participant in the fertilizer industry.
91. Some Members of the Working Party noted that the implication that the regulated price for gas was determined in accordance with supply and demand or that Gazprom determined the levels of internal calculated prices did not appear to be borne out by the facts. These Members asked for a description of the domestic pricing of Gazprom and delivery of natural gas, based on historical usage and how firms dealt with shortfalls of State-allocated natural gas at the regulated price. In addition to the significant trade distortion which the pricing practices of Gazprom could cause, these Members were concerned that current prices to domestic industrial customers could take place at rates that did not ensure "adequate remuneration", as provided for in Article 14(d) of the WTO Agreement on Subsidies and Countervailing Measures and thus would confer a benefit to domestic industrial users. Accordingly, in the absence of further information, it was difficult to understand the assertion that Gazprom operated on the basis of commercial considerations. More generally, Members observed that this situation gave rise to questions as regards its compatibility with WTO requirements, not only in relation to Article XVII, but also in relation to Articles XI and XVI of the GATT 1994 and the WTO Agreement on Subsidies and Countervailing Measures. These Members invited the Russian Federation to provide further information on the operation of Gazprom and its subsidiaries, particularly as regards the manner in which prices were set for natural gas, and how those pricing structures were consistent with the suggestion that those enterprises operated under commercial considerations.
92. In response, the representative of the Russian Federation stated that the export price for gas was not regulated by the Government; the prices for deliveries of gas for exports were those negotiated between supplier and buyer. Contrary to the price of exported gas, the price of gas sold to domestic industrial consumers was regulated, except for gas purchased at its source; gas for new industrial customers; any increased quantity of gas supplied by Gazprom to its existing customers, and for gas from producers other than Gazprom which was unregulated. Those producers (other than Gazprom) held a share of around 20 per cent in the volume of gas transported through the pipeline system of Gazprom, which was the only system of pipelines for long-distance transportation of gas in the Russian Federation. Unregulated prices were estimated to be generally 30 per cent higher than the regulated price.
93. Additional relevant information on regulated prices of gas for internal consumption (including methodology of price-setting, principles and statistical data) was provided in the Section "Pricing Policies" of this Report.
94. Some Members requested clarification of the current role of Alrosa in the activities of diamond production and export, its rights to export diamonds to the world market or sell its products domestically, as well as whether other companies enjoyed the same rights as Alrosa, and if so, what rights and on what basis. Members also asked whether Alrosa and other selected companies enjoyed rights to import polished diamonds on favourable terms, on the condition that those diamonds originated from their own production of raw diamonds. In response, the representative of the Russian Federation said that Presidential Decree No. 1373 of 30 November 2002 "On the Endorsement of Regulation on Imports in and Exports from the Russian Federation of Raw Natural Diamonds and Cut Diamonds" (which had entered into force on 6 February 2003 and amended on 10 March 2009) had abolished Presidential Decree No. 740 and thereby all exclusive rights of Alrosa. This Decree was the basic regulation of export and import of raw natural diamonds and cut diamonds. In accordance with the procedure established by said Decree:
- Exportation of natural diamonds (both cut and raw) with the exception of unique natural diamonds, diamonds recovered from multi-crystal diamond coated tools, waste from any type of diamonds processing, diamond concentrate, diamond dust and diamond powders, was carried out by any natural diamonds mining enterprises3 on the basis of export licenses without quantitative restrictions.
- Exportation of diamonds recovered from multi-crystal diamond coated tools, waste from any type of diamonds processing, diamonds concentrate, diamonds dust and diamonds powders could be carried out by natural diamonds mining enterprises; the SUE "Almazyuvelirexport" Foreign Trade Association under contracts with the owners of natural diamonds; enterprises producing brilliants; and, enterprises producing products and articles from natural diamonds. No export licence was needed.
- Exportation of brilliants could be carried out by enterprises producing brilliants (with respect to their own products); organizations engaged in the wholesale of precious stones (organizations registered with the bodies of federal assay supervision which engaged, in accordance with the objectives stated in their corporate charters, in purchases of diamonds and their wholesale to other participants in the market); the SUE "Almazyuvelirexport" Foreign Trade Association. No export licence was needed.
95. Consequently, since November 2002, neither the JSC "Almazy Rossii - Sakha"(Alrosa), nor any other exporter of natural diamonds and/or brilliants enjoyed any exclusive rights or privileges with regard to the exportation of brilliants and diamonds. Regarding import of polished diamonds, Decree No. 1373 of 30 November 2002 provided that the conditions of import were equal for all participants in foreign trade activity, i.e., without quantitative restrictions or requirement of a licence.
96. Asked about the State-invested airline Aeroflot, the representative of the Russian Federation informed Members that while the State owned 51 per cent of the shares of Aeroflot, it did not enjoy any special or exclusive rights in the exercise of which Aeroflot might influence through its purchases or sales the level or direction of imports or exports.
97. Some Members of the Working Party requested additional information on the actions of the Russian Federation to restructure and consolidate its domestic aviation industry. These Members noted that the Russian Federation held an 81.75 per cent share in the authorised capital of the United Aircraft-Construction Corporation. In response, the representative of the Russian Federation referred Members to the information set-out in paragraph 1196 of the Section "Trade in Civil Aircraft" of this Report.
98. Members of the Working Party stated that they expected the Russian Federation to ensure that the practices of State-owned, State-controlled enterprises and enterprises enjoying special or exclusive privileges would be brought into line with relevant WTO requirements as from the date of accession. These Members asked for confirmation that, upon accession, purchases and sales by such enterprises, whether State-owned, State-invested or enjoying any special or exclusive privileges, would be based solely on commercial considerations, without any Government influence or application of discriminatory measures.
99. The representative of the Russian Federation confirmed that the Russian Federation had State-owned and State-controlled enterprises that operated in the commercial sphere. The Russian Federation also had enterprises with exclusive or special privileges with regard to conducting commercial activity. He further confirmed that from the date of accession of the Russian Federation to the WTO, such enterprises, when engaged in commercial activity, would make purchases, which were not intended for governmental use, and sales in international trade in a manner consistent with applicable provisions of the WTO Agreement. He confirmed in particular, that such enterprises would make such purchases and sales in accordance with commercial considerations, including price, quality, availability, marketability, and transportation, and would afford enterprises of other WTO Members adequate opportunity in conformity with customary business practice, to compete for participation in such purchases or sales. He also confirmed that within the scope of the services commitments of the Russian Federation, including the limitations, set-out in its Schedule of Specific Commitments on Services, the rights and obligations of the Russian Federation under the GATS, and the regulatory measures of the Russian Federation covered by the WTO Agreement, including pricing regulations, and without prejudice to such commitments, rights, obligations, and measures that are consistent with these commitments, rights and obligations, the Russian Federation would ensure that such enterprises would act in accordance with the provisions set-out in this paragraph. He also confirmed that, upon accession, the Russian Federation would notify enterprises falling within the scope of the Understanding on Article XVII of the GATT 1994. The Working Party took note of these commitments.
- Pricing Policies
100. The representative of the Russian Federation explained that, although prices in most sectors of the Russian economy were now determined freely by market forces, in certain sectors, prices were regulated by the State. Presidential Decree No. 221 of 28 February 1995 "On Measures to Streamline the State Regulation of Prices (Tariff)" (as last amended on 8 April 2003) and Government Resolution No. 239 of 7 March 1995 "On Measures to Streamline the State Regulation of Prices (Tariffs)" (as last amended on 29 October 2010) established the main principles of State price (tariffs) regulation in the domestic market of the Russian Federation. Price regulation was implemented by the Government of the Russian Federation, Federal authorities and Sub-Federal bodies of executive power for the goods and services listed in Table 7, Table 8 and Table 9. Normative legal acts issued by Federal executive bodies concerning State regulation of prices for goods and services were subject to official publication, and all resolutions by the Government of the Russian Federation, concerning State regulation of prices and tariffs, including with respect to natural monopolies, were published in "Rossiiskaya Gazeta".
101. Members of the Working Party sought clarifications on the mechanisms for determining State-controlled prices and their relation to market and international prices and whether such prices, when charged by State-owned or State-controlled enterprises, were in accordance with commercial considerations. The representative of the Russian Federation replied that the Federal Service for Tariffs, being the main Federal authority empowered to exercise State price regulation, developed detailed principles (methods) for price regulation in different sectors, such as electric power and heat power, oil and gas transportation through main pipelines, etc. All authorities engaged in regulating prices were required to use these principles (methods) for establishing prices. These principles (methods) took into account the following elements in determining prices: (i) the cost effectiveness of the production of the sector, including the production (marketing) expenses; (ii) taxes and other payments; (iii) the cost of fixed production assets; (iv) the demand for investment for reproduction purposes; (v) depreciation charges; (vi) estimated profits; (vii) remoteness of different consumer groups to the production site; and (viii) adequacy of quality. Compliance with decisions of the Federal Service for Tariffs was obligatory for all operators. Regarding State-owned and State-controlled enterprises, the representative of the Russian Federation referred to Presidential Decree No. 221 requiring that prices (tariffs) regulated by the State must be applied in the domestic market of the Russian Federation by all enterprises and organizations, ensuring therefore, that State-owned or State-controlled enterprises were subject to common rules in this regard.
102. A Member requested further clarification of whether the Government of the Russian Federation was fixing the minimum price level of vodka, liquor products and other alcohol, stronger than 28 per cent volume. That Member also asked the Russian Federation to explain how this practice could be in compliance with the Agreement on the Implementation of Article VII of the GATT 1994.
103. In response, the representative of the Russian Federation said that the minimum prices for vodka, liquor products and other alcohol stronger than 28 per cent volume related only to the internal sale at the retail level of domestically-produced and imported products, and had not been applied in a discriminatory manner between domestically-produced and imported products. This measure had been introduced in order to protect Russian consumers from sales of low quality counterfeited alcoholic products at distressed prices. He confirmed that this measure had no bearing on the customs valuation of the imported product. He noted that Order No. 29n of 20 April 2010 "On Establishing and Introducing of the Minimum Price for the Liquor Products and other Alcohol Stronger than 28 per cent volume (excluding Vodka) for Retail Sale since 1 June 2010" had been issued by the Federal Service of the Russian Federation for alcohol market regulation and was the current basis for regulating prices of these goods.
104. In reply to a question from a Member of the Working Party, the representative of the Russian Federation explained that government purchases of agricultural products were undertaken at pre-announced administered prices in order to provide market price support to domestic producers. These purchases were only for rye and milling wheat (in 2001, 2002, 2003 and 2005); for rye, wheat, corn and barley in 2008; and for wheat, rye and barley in 2009. He confirmed that no price regulations were applied that could prevent imports of any like product mentioned in this paragraph from being supplied at a price below that of the domestic product.
105. In response to a question from a Member of the Working Party, the representative of the Russian Federation stated that the reference price for raw cane sugar at the New York Commodity Exchange was used to calculate the rate of import duty and did not represent a reference price for the pricing of raw cane sugar in the market of the Russian Federation.
106. Regarding price controls applied at the sub-regional level, some Members of the Working Party enquired about the legal basis and scope of authority to apply price controls at this level, and whether these measures were actually reviewed by the Federal authorities.
107. In response, the representative of the Russian Federation said that regional governments were authorised to regulate prices (tariff) for some goods and services, upon agreement with the Federal Government. Government Resolution No. 239, referred to above, defined whether price regulation fell within the jurisdiction of regional or Federal Governments. Respective information regarding the jurisdiction of regional governments over price regulation was provided in Table 8 and Table 9. In addition, according to Presidential Decree No. 221, the Government of the Russian Federation was required to coordinate the activity of the regional governmental bodies in State price (tariff) regulation.
108. In response to a question from a Member of the Working Party, the representative of the Russian Federation further clarified that Sub-Federal executive bodies, currently, did not have any powers to regulate prices, including imposing mark-up restrictions, for any agricultural product and, accordingly, did not maintain or apply such regulations.
109. In response to a specific question of one Member of the Working Party concerning the "Programme for Federal Budget Compensation of 30 per cent for Mineral Fertilizer and Chemical Plant Protection Product Costs", the representative of the Russian Federation explained that, according to that Programme, ceiling prices were only in effect during the year 2001 and that the Ministry of Agriculture and Sub-Federal bodies applied mark-up restrictions on, and fixed service charges, relating to the sale of mineral fertilizers and chemical plant protection products supplied to agricultural producers under this programme. No programmes of this kind had been adopted or maintained since then.
110. Some Members sought additional information on the announcement of the Russian Federation of efforts to unify its domestic and foreign operating tariffs for railways, as well as a status report on developments. Noting that the Russian Federation had indicated that discriminatory pricing for transportation on railway freight could be eliminated by 1 March 2002, some Members asked the Russian Federation if this measure had been implemented as planned. These Members expected the Russian Federation to treat all import and export cargoes, as well as cargoes in transit, on the same basis as domestically-produced goods, in line with the national treatment requirements of Article III, as well as the requirements of Articles V and XI of the GATT 1994 and to make a commitment to this effect in the Working Party Report.
111. Some Members of the Working Party also stated that the Russian Federation should specify how and when it proposed to complete the elimination of the current discrimination vis-à-vis export, import and transit cargoes. Those Members also expressed concerns that differential rates continued to be charged for rail transportation of cargoes for export by land border crossings.
112. In response, the representative of the Russian Federation explained that his authorities were prepared to introduce the same pricing scheme on tariffs for import cargoes as for domestic products. He added that, in August 2001, the first stage of unification for railway freight tariffs had been implemented with the transition to payment for import and export cargoes shipped through Russian ports, based on tariffs in Price List No. 10-01 by the Federal Energy Commission. These measures eliminated the existing differentiation in pricing for import cargoes shipped through Russian ports and domestically transported cargoes. Competent Federal authorities were preparing the second stage of this tariff unification, which would extend tariffs in Price List No. 10-01 to import cargoes shipped through border land checkpoints of the Russian Federation. He also stated that, in his view, there was no inconsistency between Article XI of the GATT 1994 and the existing system of higher tariffs for railway transportation of exported goods.
113. As far as railway tariffs for cargoes in transit were concerned, he was of the view that the issue of transit was adequately dealt with in Article V of the GATT 1994.
114. He further added that one of the goals of structural reform of the railway sector was a gradual transition to market-based pricing in competitive sectors, economic sectors where several juridical persons competed under equal conditions. Responding to questions from Members of the Working Party regarding the next stage of tariff unification, the representative of the Russian Federation said that, currently, the levelling of tariffs was being implemented through the gradual increase of tariffs fixed in Price List No. 10-01, up to the value of tariffs for transportation of import cargoes shipped through border land checkpoints of the Russian Federation. Two steps of such increase had been undertaken in 2005, by 5.4 and 12.8 per cent. The increase had been 27.9 per cent in 2006; 12.8 per cent in 2007; and, 10.9 per cent in 2008. By the end of 2009, around 87 per cent (by volume) of railway traffic (other than traffic in transit) for all types of cargoes was subject to equalized tariffs. In 2010, the equalization of tariffs continued with respect to goods, such as ferrous metals and ores, chemical industry products, grain, and fertilizers. In response to a question from a Member, the representative of the Russian Federation clarified that the Orders of the Federal Service for Tariffs No. 338-T/3 and No. 386-T/1 of 7 December 2010 "On Amending Price List No. 10-01 Tariffs on Cargo Transportation and Infrastructure Services Provided by the Russian Railways" provided for further equalization of railway tariffs, including tariffs for transportation of chemicals, metals, and energy products.
115. Having considered the discussion in the Working Party, in particular as to the applicability of Articles III and XI of the GATT 1994, the representative of the Russian Federation confirmed that products imported into, and products destined for exportation or sold for export from the territory of the Russian Federation would, no later than 1 July 2013, be accorded treatment no less favourable with regard to the application of all rail transportation charges (including basic charges, surcharges and rebates) than like, directly competing or substitutable products transported between domestic locations, and no less favourable treatment depending on whether the imported or exported products enter or exit the territory of the Russian Federation by land or through a port or depending on their origin or destination. The representative of the Russian Federation further confirmed that, over the period between the accession of the Russian Federation to the WTO and 1 July 2013, the Russian Federation would gradually reduce the existing differences between, on the one hand, rail transportation charges applicable to products imported into, and products destined for exportation or sold for export from, the territory of the Russian Federation and, on the other hand, rail transportation charges applicable to like, directly competing or substitutable products transported between domestic locations, as well as the existing differences in rail transportation charges for imported and exported products depending on whether they enter or exit the territory of the Russian Federation by land or through a port or depending on their origin or destination. These commitments would not prevent the application of differential internal transportation charges, which are based exclusively on the economic operation of the means of transport and not on the national origin of the product. The Working Party took note of these commitments.
116. The representative of the Russian Federation confirmed that railway transportation charges on traffic in transit would be in conformity with the provisions of Article V of the GATT 1994 and other relevant provisions of the WTO Agreement. The Working Party took note of this commitment.
117. The representative of the Russian Federation confirmed that regulated railway tariffs for transit of goods and changes to them would be published before their entry into force. The Working Party took note of this commitment.
118. In response to questions from some Members concerning electricity prices, the representative of the Russian Federation noted that such prices were regulated in a similar way as gas prices, pursuant to Federal Law No. 41-FZ of 14 April 1995 "On State Regulation of Tariffs on Electric and Thermal Power in the Russian Federation" (as last amended on 27 July 2010), prices for electrical energy provided by regional electrical power-plants to the regional market were fixed both for industrial consumers and households. He added that the setting of prices of electricity supplied to industrial consumers was being reformed (although, like for gas, electricity prices charged to individual households would remain fixed for reasons of social protection). The concept of the reform aimed at de-monopolization and development of competition in the energy sector had been approved by Government Regulation No. 526 of 11 July 2001 "On Reforming the Electricity Sector in the Russian Federation" (as amended on 1 February 2005).
119. As a result of the reform, it was planned to create in the Russian Federation a competitive electricity energy market through two groups of measures. The first one was aimed at unbundling transportation, dispatching management companies and those engaged in generation, sale and technical maintenance. The part of the latter companies were subject to privatization programmes, while another part, such as companies engaged in transportation and dispatching management activities, remained under governmental control (both in terms of ownership and in terms of price control). The second type of measures was performed with the view to decrease governmental involvement in price control, in respect of those areas of the electricity energy sector where relevant market regulations were applied. This goal had been reached with the launch, in 2003, of the deregulated electricity market. The representative of the Russian Federation informed Members that the amount of electricity sold on the deregulated market, by the end of 2010, had increased to around 80 per cent of electricity sold on the market of the Russian Federation. Conditions of sale of electricity at regulated prices were provided for in Resolution of the Government of the Russian Federation No. 109 of 26 February 2004 "On Establishment of the Price in Respect of Electrical and Heat Energy" and Order of the Federal Service for Tariffs (FST) No. 199-e/6 of 15 September 2006 "On Approval of the Methodological Procedures for Calculation of the Tariffs for Electrical Energy and Power Under Sales Contracts at Regulated Tariffs (Prices) on Wholesale Market". Energy companies and industrial consumers, which could include steel and fertilizer producers, bought such electricity sold at unregulated price.
120. Some Members of the Working Party asked whether gas liquids and condensate, e.g. those used for petrochemical feed stocks, were also included in the list of items under price control. These Members expressed strong concerns about the trade distortions caused by State controls on the pricing of energy for domestic consumption (whether in the form of gas, oil or electricity). The effect of these controls was to depress prices for domestic industrial users, which could lead to a very wide differential between the price paid by domestic industrial users and the price paid by export customers, as well as the world market price. Other Members noted that the price for natural gas was below the full cost of production, including a reasonable profit, and was therefore inconsistent with commercial considerations. Referring to natural gas, these Members considered that the fact that industrial producers of the Russian Federation did not have to pay the full market price for their energy inputs, including gas, especially, in energy-intensive industries and in industries that used gas as an input (rather than an energy source) constituted an unfair competitive advantage. This situation had implications for the ability of imported goods to compete on the market of the Russian Federation and could lead to a displacement of Member products from third country markets. In addition, exports of "downstream" intermediate or finished goods of the Russian Federation, particularly, of products that were energy-intensive, such as fertilizers or metals, could take place at prices below their normal value or at subsidized prices, leading to the possibility of facing anti-dumping or countervailing actions in export markets.
121. The same Members recognised that this was an area where the Russian Federation had begun a process of regulatory reform, which could not be achieved overnight. They understood that the Russian Federation could wish to maintain controls on the price of energy sold for domestic household consumption. Those Members also stressed that increases in the price of natural gas could lead to a return of the non-payment problem. Members considered that the opportunity of WTO accession should be taken to tackle the negative impact of dual pricing in favour of manufacturing industry, at its source. They considered that the regulatory reform in the energy sector would also benefit the wider economy of the Russian Federation by allowing for a more rational resource allocation and stimulating greater investment and competitiveness.
122. Members of the Working Party noted that discussions in the Working Party had served to clarify the pricing of gas. However, these Members remained concerned that the regulated price for gas used by industrial consumers was not fixed at a level that permitted a gas supplier a full and proper recovery of all costs and an amount for profit. According to certain studies of the costs required for production and sustainability of the production of natural gas, domestic regulated prices did not cover the full long-run marginal cost of producing natural gas of Gazprom. They requested a confirmation from the Russian Federation that gas suppliers would act on the basis of commercial considerations, based on full recovery of costs and a reasonable profit.
123. In response to the questions from Members, the representative of the Russian Federation stated that underground resources within the territory of the Russian Federation, including subsoil domain and mineral resources contained therein, energy and other resources, were the property of the State. The Russian Federation exercised its sovereign rights over the resources. He added that the current practice of regulation of energy and natural gas prices in the Russian Federation was not different from similar practices of many WTO Members, who continued to regulate energy prices. Similar to the practice of other countries, energy and natural gas price regulation in the Russian Federation was aimed at prevention of abuse of monopoly position and protection of consumers' interests from monopoly price increases. In response to a question from a Member concerning the amount of gas sold on the deregulated market by the end of 2010, the representative of the Russian Federation explained that such data was not available.
124. Responding to concerns expressed by some Members, the representative of the Russian Federation explained that, in his view, the existing pricing system did not create an unfair competitive advantage, nor a countervailable "specific subsidy" in terms of the WTO Agreement on Subsidies and Countervailing Measures, as this mechanism did not grant any benefit to any enterprise or group of enterprises, or industry or groups thereof or specific sectors since it was equally applied to all sectors. This principle was unambiguously provided for by the legislation of the Russian Federation. In particular, operators engaged in providing services under conditions of natural monopolies were obliged, in accordance with Article 8 of Federal Law No. 147-FZ of 17 August 1995 "On Natural Monopolies" (as last amended on 25 December 2008), to provide services subject to price regulation in accordance with that Law, on non-discriminatory conditions according to the requirements of anti-monopoly legislation. Legal acts establishing the methodology of energy and natural gas price-setting, namely, Resolution of the Government of the Russian Federation No. 1021 of 29 December 2000 "On the State Regulation of Gas Prices and Gas Transportation Services Tariffs on the Territory of the Russian Federation" (as last amended on 23 July 2009) (natural gas) and Order of the FST No. 20-e/2 of 6 August 2004 (as last amended on 31 December 2009), (electric energy), were applied equally throughout the whole territory of the Russian Federation (including remote locations). These Acts did not provide for any industry-specific exceptions, exemptions, discounts or preferences. The representative of the Russian Federation also noted that the methodology for the calculation of gas prices was officially published and transparent. Responding to a specific statement of one Member about the possibility to export "downstream" intermediate or finished goods at subsidized prices, the representative of the Russian Federation raised his objection. In his view, such kind of statement by a Member was misleading since it suggested that the Russian Federation applied export subsidies, which was not the case in respect to any industrial products.
125. In response to a question from a Member regarding the Order of the Federal Energy Commission No. 12/1 of 24 March 1999 "On Granting a 50 per cent Reduction of Prices of Gas to Enterprises which Produce Chemical Fertilizers, Chemical Protection for Plants and Raw Materials for Production thereof, in 1999", the representative of the Russian Federation clarified that it had only been in effect during the year 1999 and that there were no other legal provisions that provided for similar price reductions for any other industries. He further added that Gazprom had an ownership interest in certain Russian fertilizer companies. The regulated price paid by the fertilizer companies, in which Gazprom had an ownership interest, was the same as the price paid by other industrial consumers which purchased similar quantities of gas in like circumstances.
126. Elaborating on the issue of internal price of natural gas, the representative of the Russian Federation stated that the basic principle of price-setting was to ensure economically viable production and recovery of costs, including, inter alia, the cost of production, overheads, financing charges, transportation, maintenance and upgrade of extraction and distribution infrastructure, investment in the exploration and development of new fields done or planned, and reasonable profits.
127. In relation to concerns from Members about the disparity between the price of gas sold to industrial consumers in the Russian Federation and the world price of gas, the representative of the Russian Federation stated that gas export prices were not regulated and were established on the basis of supply and demand in the importing country. He was of the view that there was no "world market price" for gas, and noted that for gas shipped to Europe, costs of shipment and transport reflected a substantial part of the landed price. The representative of the Russian Federation reiterated that the price of gas for internal consumption by industrial consumers in the Russian Federation was fixed at an average level of US$80 per thousand cubic meters (in 2010) that secured recovery of estimated costs (around US$64 per thousand cubic meters in 2010) and an amount for profit.
128. The representative of the Russian Federation explained that his Government was guided by the Energy Strategy of the Russian Federation for the period up to the year 2030, which provided for an increase in natural gas prices. He noted that during the last nine years, the gas price had increased from US$19.3 (in 2001) up to US$80 (in 2010). The final price for gas could differ depending on the region, since the transportation arm had an impact on the final price levels.
129. Some Members noted that the Government of the Russian Federation had issued Resolution No. 333 of 28 May 2007 "On Improving State Regulation of Gas Prices". These Members requested additional information on the Resolution and the intentions of the Russian Government for implementing this Resolution.
130. In response, the representative of the Russian Federation explained that his Government intended to modify State regulation of gas prices and develop market pricing principles for the domestic gas market, with the objective of benefiting the economy of the Russian Federation. In the Resolution of the Government of the Russian Federation No. 333 of 28 May 2007, the Government of the Russian Federation directed the Federal executive body, responsible for State regulation of prices, to develop a formula which ensured equal return on gas supplies to the international and domestic markets. This formula was used to inform participants in the gas market of the price that would have been applied to gas produced by Gazprom and its affiliates, if the formula had been in effect. The relevant government bodies would submit proposals as to the advisability of implementing State regulation of gas transportation tariffs instead of State regulation of wholesale gas prices and application of the formula to determine wholesale prices for the gas produced by Gazprom and its affiliates under contracts to all consumers (other than the population, i.e., individual households).
131. Members welcomed the steps taken by the Russian Federation towards modifying the regulation of gas prices in the Russian Federation. Such action, in their view, would be beneficial to Gazprom and ensure a stable supply of gas to the domestic and international markets. They encouraged the Russian Federation to move forward in accordance with the Resolution of the Government of the Russian Federation No. 333 of 28 May 2007 to improve the State regulation of gas prices as soon as possible.
132. In response to the concerns expressed, the representative of the Russian Federation stated that upon accession, producers/distributors of natural gas in the Russian Federation would operate, within the relevant regulatory framework, on the basis of normal commercial considerations, based on recovery of costs and profit. He confirmed that the policy of his Government was to ensure, upon accession, that these economic operators, in respect of their supplies to industrial users, would recover their costs (including the cost of production, overheads, financing charges, transportation, maintenance and upgrade of extraction and distribution infrastructure, investment in the exploration and development of new fields) and would be able to make a profit, in the ordinary course of their business. He added that his Government would continue to regulate price supplies to households and other non-commercial users, based on considerations of domestic social policy. The Working Party took note of these commitments.
133. The representative of the Russian Federation confirmed that, from the date of accession, the Russian Federation would apply price controls on products and services contained in Table 7,
Table 8 and Table 9 and any similar measures that would be introduced or re-introduced in the future, in a manner consistent with the WTO Agreement. He further confirmed that price control measures on goods would take account of the interests of exporting Members, as provided for in Article III:9 of the GATT 1994. Price control measures would not be used for purposes of affording protection to domestic production of goods, or to impair the service commitments of the Russian Federation. The representative of the Russian Federation also confirmed that the lists of goods and services subject to State price controls in Table 7, Table 8 and Table 9 were comprehensive, and that, from the date of accession, the Russian Federation would publish in the Rossiiyskaya Gazeta notice of any changes in the coverage of goods or services that were subject to price controls. The Working Party took note of these commitments.
- Competition Policy
134. The representative of the Russian Federation stated that his authorities attached great importance to competition policy, and had closely followed the activities of the WTO Working Group on the Interaction between Trade and Competition Policy. The basic goal of competition policy in the Russian Federation was to create a favourable climate for enterprises, and the facilitation of competition and efficient functioning of the markets by preventing, restraining and eliminating monopolistic and anti-competitive practices among economic operators.
135. Legislative framework for realization of competition policy and prevention of anti-competitive practices was set-out in the Federal Law No. 135-FZ of 26 July 2006 "On Protection of Competition" (as last amended on 5 April 2010), the Civil Code of the Russian Federation, the Code on Administrative Offences of the Russian Federation and the Criminal Code of the Russian Federation, which established civil, administrative and criminal liability for infringement of the anti-monopoly legislation.
136. In response to requests from Members of the Working Party for further information, the representative of the Russian Federation stated that any anti-competitive market structure and unfair business practices, including infringement of intellectual property rights, that impeded competition, were subject to this anti-monopoly legislation. In his view, Russian legislation already in force contained all necessary elements for State supervision and control over arrangements and practices of economic operators that adversely affected competition, abuse of dominant position on the market by economic operators and led to economic concentration. In response to the request of some Members of the Working Party, he provided information on the relationship between anti-competitive behaviour and infringement of intellectual property rights in the Section "Trade-Related Intellectual Property Regime" (see paragraphs 1261 and 1289).
137. He further added that the Federal Anti-Monopoly Service (FAS) was the Federal body authorised to carry out the State policy on facilitating development of commodity markets and competition, control over execution of antitrust legislation, as well as prevention and suppression of monopolistic activity, undue competition and other activities restricting competition. The main functions of the FAS were to introduce legislative initiatives in the field of anti-monopoly activity and to investigate and ensure compliance with legislation in the sphere of competition in the commodity markets, defence of competition in the financial services market, activities of subjects of natural monopolies, and advertising. The FAS also reviewed anti-monopoly aspects of establishment and mergers, share transactions and acquisitions. According to the provisions of anti-monopoly legislation and, in order to perform the above-mentioned functions, the FAS could initiate and conduct administrative cases, take decisions and issue prescriptions to participants of business activities that were obligatory for such participants. The action by the FAS could be triggered upon initiative of the FAS or by requests of State bodies or legal and natural persons. He noted that, under Article 71(g) of the Constitution of the Russian Federation, regional authorities did not have jurisdiction over competition policy.
138. He further noted that the Federal Law No. 135-FZ of 26 July 2006 "On Protection of Competition" concerned the barring of monopoly activity and unfair competition, as well as anti-competitive behaviour, by Federal Executive bodies and governmental bodies of the subjects of the Russian Federation. Violation of the anti-monopoly legislation by officials of the Federal Executive bodies, the Executive bodies of the subjects of the Russian Federation, local governments, and other bodies and organizations, vested with functions of the above-mentioned bodies under the legislation, as well as by natural persons, including individual entrepreneurs, could lead to civil, administrative or criminal liability.
139. In response to questions from Members of the Working Party, he added that Federal Law No. 135-FZ of 26 July 2006 covered also the relations connected with protection of competition and prevention of monopolistic activity and unfair competition, and in which foreign legal persons were participating. In this respect, this Law provided for the similar application of the regulations to Russian and foreign legal persons.
140. In order to eliminate unfair competition, the FAS provided extensive protection of rights to all participants of commodity markets. Most cases of unfair competition uncovered by FAS of the Russian Federation and its regional divisions related to infringement of intellectual property rights and, in particular, to the illegal use of trademarks. Detailed information on the implementation of anti-monopoly legislation and administrative and judicial cases was available on the official website of the anti-monopoly body: www.fas.gov.ru.
141. He added that online information about decisions of the Government in any field, including competition, could be found on the official website of the Government of the Russian Federation (www.government.ru). Information on decisions of the FAS was available on the FAS website (www.fas.gov.ru). Decisions of the Government and FAS, which were issued as normative legal acts, applicable throughout the Russian Federation, were published in official periodicals (see the Section "Transparency" of this Report).
FRAMEWORK FOR MAKING AND ENFORCING POLICIES
- Powers of executive, legislative and judicial branches of government
142. The representative of the Russian Federation stated that, in accordance with its Constitution, State power in the Russian Federation was exercised by the President of the Russian Federation, the Federal Assembly (the Council of the Federation and the State Duma), the Government of the Russian Federation, and the Courts of the Russian Federation. The competence of each body of power was defined in Chapters 4, 5, 6, and 7 of the Constitution of the Russian Federation, respectively. In response to further questions from Members of the Working Party, he noted that judicial, legislative, and executive power was exercised independently.
143. A system of federal executive bodies had been established by Presidential Decree No. 314 of 9 March 2004 "On the System and Structure of the Federal Executive Bodies" (as last amended on 12 May 2008) in pursuance of ongoing administrative reform. The System introduced Federal ministries, Federal services, and Federal agencies as Federal executive bodies with different spheres of competence. Federal ministries were responsible for determining State policy, preparing legislation in related fields, and coordinating and controlling the activity of Federal services and Federal agencies under their authority. Federal services exercised control and supervision in related fields of activity, performed special functions related to national defence, State security, defence of the State borders of the Russian Federation, fight against crime, and, public safety. Federal agencies rendered State services managing State-owned property, as well as law-enforcement, except functions related to control and supervision.
144. The judicial system of the Russian Federation was regulated by Federal Constitutional Laws No. 1-FKZ of 31 December 1996 "On Judicial System of the Russian Federation" (as last amended on 27 December 2009), No. 1-FKZ of 21 July 1994 "On Constitutional Court of the Russian Federation" (as last amended on 28 December 2010), and No. 1-FKZ of 28 April 1995 "On Courts of Arbitration in the Russian Federation" (as last amended on 30 April 2010). Judicial power was exclusively exercised by courts, manned by judges, juries, and arbitrators duly appointed under constitutional, civil, administrative and criminal court procedures. In accordance with the Federal Constitutional Law "On Judicial System of the Russian Federation", the domestic court system in the Russian Federation consisted of the Constitutional Court of the Russian Federation, Federal Courts of General Jurisdiction, Federal Arbitration Courts and relevant courts in the subjects of the Russian Federation. Judgments, rulings, orders, summons and other lawful communications issued by the courts were binding upon persons, entities or governmental authorities throughout the whole territory of the Russian Federation. Justice was equal for all. Courts were not to favour any agency, person or other complainant based on nationality, sex, race, language, political convictions or any other grounds unless otherwise established by Federal law. Failure to comply with a Russian court judgment, or any other act of contempt of a Russian court, was a breach of Federal law. The rules of civil procedure in Federal courts of general jurisdiction were set-out in the Civil Procedure Code of the Russian Federation No. 138-FZ of 14 November 2002 (as last amended on 6 April 2011). Procedures for the settlement of disputes by arbitration courts were set-out in the Arbitration Procedure Code of the Russian Federation No. 95-FZ of 24 July 2002 (as last amended on 6 April 2011). The representative of the Russian Federation further noted that the State fees for claims or other statements or complaints submitted to the courts of general jurisdiction or to arbitration courts were established in Chapter 25.3 of the Tax Code of the Russian Federation (Federal Law No. 117-FZ of 5 August 2000, as last amended on 7 March 2011). He also added that, in accordance with Law of the Russian Federation No. 2202-1 of 17 January 1992 "On the Public Prosecutor's Office of the Russian Federation" (as last amended on 7 February 2011), the Office of the Public Prosecutor was a single Federal system of authorities responsible for ensuring overall observance of the Constitution of the Russian Federation and all legal acts by federal and regional governments. The representative of the Russian Federation explained that the general authority of the High Courts (the Supreme Court of the Russian Federation and the High Arbitration Court of the Russian Federation) to give guidance to the Courts of the Russian Federation on applying domestic laws was stipulated in the Constitution of the Russian Federation (Articles 126-127). High Courts had the authority to issue guiding resolutions on the interpretation and application of the legislation, and that such resolutions had binding force in respect to all lower courts of their respective judicial branch. He further noted that such resolutions could be adopted only by plenary sessions of the Supreme Court or the High Arbitration Court, or by a joint plenary session of those high courts, in contrast to individual judgments pronounced by judicial benches (collegiums) of those High Courts. Responding to questions from Members, he explained that the binding force of the Plenum resolutions of the High Arbitration Court was provided for in Article 13(2) of the Federal Constitutional Law No. 1-FKZ of 12 April 1995 "On Arbitration Courts", whereas the similar status of the Supreme Court plenary resolutions was established by the Constitutional Law No. 1-FKZ of 31 December 1996 "On Judicial System of the Russian Federation" (as last amended on 27 December 2009) (Article 19). He further explained that the plenary resolutions normally either interpreted an important legislative act or provided guidelines for the decisions of the courts in a specific field of law. He noted that judges were to apply interpretations of the plenary resolutions in all cases involving the subject matter of such resolutions.
145. The President of the Russian Federation was the Head of State. He determined the guidelines of domestic and foreign policies of the State. Pending resolution of a matter by the appropriate court, the President had the right to suspend the operation of acts of the bodies of executive power of the "subjects"4 of the Russian Federation, if the President believed they were not in compliance with the Constitution of the Russian Federation, Federal laws, and international commitments of the Russian Federation. In response to a question from a Member, the representative of the Russian Federation explained that this authority related only to the bodies of executive power of the subjects of the Russian Federation and not to bodies of executive power of the Federal Government.
146. Executive power in the Russian Federation was exercised by the Government of the Russian Federation. The Government ensured the implementation, in the Russian Federation, of a single trade, financial, credit and monetary policy, including the implementation of foreign policy, and the implementation of measures required to ensure the rule of law.
147. The Federal Assembly (the Parliament of the Russian Federation) constituted the legislative authority in the Russian Federation. It consisted of two chambers - the Council of the Federation and the State Duma. The Council of the Federation included two representatives from each subject of the Russian Federation: one from the legislative and one from executive body of State power. The composition of the Council of the Federation was also determined by Federal Law No. 113-FZ of 5 August 2000 "On the Order of Formation of the Council of the Federation of Federal Assembly of the Russian Federation" (as last amended on 15 November 2010). The State Duma consisted of 450 deputies elected for a term of four years. The composition of the State Duma was determined by Federal Law No. 51-FZ of 18 May 2005 "On Election of Deputies to the State Duma of Federal Assembly of the Russian Federation" (as last amended on 23 February 2011). Both chambers were involved, inter alia, in the adoption of the Federal laws on Federal budget, Federal taxes and duties, financial, currency, credit, customs regulation and monetary issues, and ratification and denunciation of international treaties and agreements of the Russian Federation.
148. The right of legislative initiative with regard to domestic legislation was vested with the President of the Russian Federation, the Members of the Council of the Federation, the Deputies of the State Duma, the Government of the Russian Federation, and the legislative bodies of the subjects of the Russian Federation. The right of legislative initiative was also vested, in matters under their competence, with the Constitutional Court of the Russian Federation, the Supreme Court of the Russian Federation, and the High Arbitration Court of the Russian Federation.
149. The representative of the Russian Federation further added that the domestic legal system of the Russian Federation comprised Federal legal acts and legal acts of the subjects of the Russian Federation. The Federal legal system of the Russian Federation consisted of the following hierarchy of normative provisions: (i) the Constitution; (ii) Federal constitutional laws; (iii) Federal laws; (iv) decrees and resolutions of the President of the Russian Federation and resolutions and orders of the Government of the Russian Federation; and (v) acts of Federal executive authorities.5 Normative legal acts of Federal executive authorities (i.e., acts whose binding effect extended to all of the territory of the Russian Federation) included resolutions, orders, rules, instructions, regulations and decisions. Recommendations, letters, telegrams, and teletype messages sent by authorities were not normative legal acts (Order No. 88 of the Ministry of Justice of 4 May 2007). Such acts had a recommendatory character only and were intended for use within the relevant executive body. The legal system of the subjects of the Russian Federation consisted of their respective constitutions (in the case of Republics), or charters (in the case of other subjects of the Russian Federation); laws and other legal acts. The Constitution of the Russian Federation had overriding power and was applicable throughout the entire territory of the Russian Federation. All Federal legal acts and legal acts of the subjects of the Russian Federation were required to be in conformity with the Constitution. Federal constitutional laws regulated matters directly provided for under the Constitution of the Russian Federation. Federal laws, inter alia, regulated areas of joint competence of the Russian Federation and its subjects.
150. He further noted that Presidential decrees and resolutions did not prevent the Federal Assembly from enacting a law covering the same subject matter. If a conflict existed between a law and any other normative legal act, including a Presidential decree or resolution, the law would prevail. Government resolutions and orders (subsidiary legislation) were issued pursuant to and in furtherance of the Constitution, Federal constitutional laws, Federal laws and Presidential decrees and resolutions. The requirement for such resolutions and orders were, as a general rule, provided for in the relevant enabling law, decree or resolution. Those legislative acts were also binding throughout the entire territory of the Russian Federation and might be appealed in court. Acts of Federal Executive Authorities were issued on the basis of and in furtherance of federal laws, presidential decrees and resolutions, and Government resolutions and orders. Those acts needed to be in compliance with the relevant enabling provisions. They had an auxiliary and detailing function.
151. The representative of the Russian Federation further explained that, in accordance with Article 15.4 of the Constitution of the Russian Federation, international treaties of the Russian Federation formed an integral part of the legal system of the Russian Federation. He stated that international treaties contracted by the Russian Federation were concluded on behalf of the Russian Federation (interstate treaties), on behalf of the Government of the Russian Federation (inter-governmental treaties), or on behalf of the federal bodies of executive power (treaties of inter-ministerial nature), in accordance with Articles 12 and 13 of Federal Law No. 101-FZ of 15 July 1995 "On International Treaties of the Russian Federation". Once a treaty entered into force, through ratification or otherwise, it was binding and enforceable throughout the entire territory of the Russian Federation. While an international treaty did not prevail over the Constitution of the Russian Federation or Federal constitutional laws, in accordance with Article 15 of the Constitution, in the event of a conflict, international treaties prevailed over domestic Federal laws adopted prior to or after entry into force of the treaty. He explained that once the Russian Federation ratified its Protocol of Accession, which included the WTO Agreement and other commitments undertaken by the Russian Federation as part of the terms of accession to the WTO, it became an integral part of the legal system of the Russian Federation. The judicial authorities of the Russian Federation would interpret and apply its provisions. Thus, international treaties of the Russian Federation, in respect of which consent of the Russian Federation to be bound by such treaty had been expressed in the form of a Federal law (as would be the case with the Protocol of Accession of the Russian Federation), had priority in application over both prior and subsequent Federal laws, as well as all subordinate regulatory acts (Decrees and Regulations of the President, Resolutions and Regulations of the Government, acts of Federal Executive bodies). If the court of highest resort determined that a domestic provision, other than the Constitution or a Federal constitutional law, was inconsistent with an international treaty of the Russian Federation, such provision was deemed not applicable and enforceable. No further action to nullify the provision was required, and the body responsible for the issuance of such provision would have an obligation to launch procedures to bring it into conformity with that international treaty.
152. According to Article 30 of Federal Law No. 101-FZ of 15 July 1995 "On International Treaties of the Russian Federation" (as last amended on 1 December 2007), such treaties were subject to publication: interstate or inter-governmental treaties were published in "Sobraniye Zakonodatelstva Rossijskoj Federatsii" and treaties of inter-ministerial nature were published in the official editions of the respective government bodies.
153. The representative of the Russian Federation stated that, in accordance with Government Resolutions No. 437 of 5 June 2008 (as last amended on 6 April 2011) and No. 438 of 5 June 2008 (as last amended on 24 March 2011), the Ministry of Economic Development (the MED) of the Russian Federation and the Ministry of Industry and Trade (the MIT) of the Russian Federation were the Federal executive bodies responsible for State regulation of foreign trade.
- Framework of the Customs Union among the Russian Federation, the Republic of Kazakhstan and the Republic of Belarus
- (a) Legal Framework Establishing the Customs Union
154. The representative of the Russian Federation informed Members that, in 2007, the Russian Federation, the Republic of Belarus (Belarus), and the Republic of Kazakhstan (Kazakhstan) had concluded the Treaty on the Establishment of the Common Customs Territory and the Formation of the Customs Union of 6 October 2007 (hereinafter: Treaty on the Formation of the CU). With the objective of forming a Customs Union, the Russian Federation, Belarus, and Kazakhstan had concluded a number of international treaties and, pursuant to the Protocol on Rules on Entry into Force of International Treaties aimed at the Formation of the Legal Basis of the Customs Union, Withdrawal from them, and Accession to them of 6 October 2007 (hereinafter: Protocol of 6 October 2007), the EurAsEC Interstate Council (the Supreme Body of the Customs Union) determined the list of international agreements constituting the legal basis of the Customs Union within the EurAsEC. This list of international agreements was set-out in Interstate Council Decision No. 14 of 27 November 2009, and these agreements and others subsequently agreed by the Russian Federation, Belarus, and Kazakhstan through the end of 2009, constituted the legal basis for a Customs Union, and formed a single undertaking, i.e., withdrawal from any of these agreements automatically resulted in withdrawal from all of these agreements. The representative of the Russian Federation explained that these Agreements laid out a framework for progressively increasing economic cooperation among entities of the CU Parties, starting with plans for the unification of foreign trade, customs policies, and trade remedies; and initiating cooperation between the financial and banking systems; cooperation in social and humanitarian areas; and cooperation in the field of legal regulation. Additional agreements could be added to the single undertaking upon decision of the Interstate Council (see Table 10 for the current list of agreements constituting a single undertaking). On 27 November 2009, the EurAsEC Interstate Council approved the Common External Tariff (CET) of the Custom Union, as well as the Treaty on the Customs Union Customs Code. On 1 January 2010, a Customs Union (CU) between the Russian Federation, Belarus, and Kazakhstan became operational. The CET and a number of basic agreements and protocols on tariff and non-tariff regulation also came into force on 1 January 2010. The CU Customs Code entered into force in the Russian Federation and Kazakhstan on 1 July 2010 and for Belarus on 6 July 2010. He noted that the CU Parties were still engaged in concluding new treaties and agreements within the framework of the CU (hereinafter: CU Treaties or CU Agreements) and were implementing them through an ongoing process of regional integration.
155. The representative of the Russian Federation explained that the Treaty on the Formation of the CU required CU Parties to establish unified regulation of foreign trade activities in line with their obligations arising from CU Treaties and through harmonization of standards and rules envisaged by bilateral agreements on the unified regulation of foreign trade activities. The Treaty on the Formation of a Customs Union also specified that the CU Parties' unified regulation of foreign trade activity and coordinated decision making on the simultaneous introduction of changes or amendments to such regulation would include the following areas:
- tariffs on foreign trade;
- non-tariff measures for trade with third countries;
- unified customs regulation and customs procedures; and
- establishment of a unified regime for trade with third countries.
This Treaty and other international agreements forming the legal basis for the CU established the principles and timing for achieving the objective of unified regulation of foreign trade activities.
156. Members requested that the Russian Federation provide more information on the hierarchy of legislative acts in the Russian Federation, in particular taking into account CU Agreements, CU Commission Decisions, and other CU legal acts.
157. The representative of the Russian Federation explained that CU Agreements, once they entered into force, were international treaties of the Russian Federation, and, with the exception of the Constitution of the Russian Federation and Federal constitutional laws, would prevail, in the event of a conflict, over the provisions of Federal laws and other normative legal acts in the Russian Federation. With regard to CU Commission Decisions, he explained that the status of such Decisions in the legal system of the Russian Federation corresponded to that which the Decision would have had, if it had been adopted by the Federal Executive Body responsible for regulating the subject matter at the moment when the CU Commission was delegated the relevant authority. Thus, the place of a CU Decision in the domestic legal hierarchy of the Russian Federation could differ, depending on the Federal body previously competent to take the relevant decision. He further explained that CU regulations, rules and other measures were adopted pursuant to a CU Commission Decision and, thus, the same method for determining the status of the measure in the domestic legal hierarchy of the Russian Federation applied. Finally, he explained that the authority of the President, described in paragraph 145, also applied to acts of the subjects of the Russian Federation that were not in compliance with CU Agreements, CU Commission Decisions, and other CU legal acts.
- (b) Customs Union Structure and Competency in the Area of Trade
158. The representative of the Russian Federation explained that the following bodies were responsible for the implementation of the CU Agreements and further development of the CU:
- the Interstate Council of EurAsEC, which had two boards: the Board of Heads of States and the Board of Heads of Governments. Sessions of the Board of Heads of States were to be held not less than once a year; sessions of the Board of Heads of Governments were to be held not less than twice a year;
- the EurAsEC Court;
- the CU Commission; and
- the Secretariat of the CU Commission.
- (c) The Interstate Council of EurAsEC
159. The representative of the Russian Federation explained that the Interstate Council of EurAsEC was the supreme Body of the CU and performed the following functions:
- defined the strategy and objectives of formation and further development of the CU and took decisions on its realization;
- decided on issues of common interest to the EurAsEC Member States, and CU Parties;
- defined the list of international treaties comprising the legal framework of the CU, i.e., those included in Table 10;
- took decisions on entry into force of the CU agreements forming the legal basis of the CU;
- decided issues related to integration of the customs territories of the EurAsEC Member States into a single customs territory in accordance with Article 2 of the Treaty on the Formation of the CU;
- approved the structure of the CU Commission;
- appointed the Chairman of the CU Commission;
- approved the rules of procedure of the CU Commission;
- approved the budget of the CU Commission and considered the report on its fulfilment;
- reconsidered decisions of the CU Commission where one of the CU Parties objected to the decision, upon request of this Party;
- reconsidered decisions of the CU Commission at the request of one or more CU Parties;
- considered, upon request, proposals to the CU Commission which failed to collect the number of votes necessary to adopt them;
- nominated candidates to the Court of the EurAsEC for the hearing of the cases concerning CU issues to the Inter-Parliamentary Assembly of the EurAsEC; and
- gave recommendations to and requested information from the Inter-Parliamentarian Assembly of the EurAsEC and the Court of the EurAsEC on CU issues.
160. Members welcomed the information regarding the competency of the Interstate Council and noted that the Interstate Council had the authority to define the list of international treaties that might comprise the legal basis of the CU. In that regard, some Members requested information on the criteria used to define which treaties would be included on this list. In response, the representative of the Russian Federation explained that the Interstate Council determined the list of international treaties comprising the legal basis of the CU, which consisted of two parts: Part 1 - those international treaties effective within the framework of the EurAsEC; and Part 2 - those international treaties aimed at the completion of the formation of the legal basis of the CU. The second list constituted the single undertaking of each CU Party. He noted that neither of these lists were exhaustive and that agreements could be added to both of these lists. There were no special criteria for identifying the treaties to be included in these lists.
161. Members also noted that the Interstate Council was authorised to give recommendations to the EurAsEC Court and requested information on the nature of those recommendations. The representative of the Russian Federation explained that, in accordance with Article 5 of the Statute of the Court, the Interstate Council presented the judges nominated to serve on the Court to the Interparliamentary Assembly of the EurAsEC which formally appointed them. This was the only type of recommendation that the Interstate Council was authorised to provide to or regarding the EurAsEC Court.
- (d) The EurAsEC Court
162. The representative of the Russian Federation informed Members that, on 5 July 2010, the Interstate Council of EurAsEC adopted Resolution No. 502 adopting the Statute of the Court of the EurAsEC (hereafter: EurAsEC Court). In addition to establishing the EurAsEC Court, the Statute of the Court established the competency of the Court and procedures to be applied in the context of the Customs Union. He explained that pursuant to Article 13 of the Statute, the Court was authorised to:
- ensure uniform application of the EurAsEC Treaty and other treaties in force within the framework of the EurAsEC, including CU Agreements and decisions taken by the EurAsEC bodies, including the CU bodies;
- consider disputes of an economic nature, i.e., non-political, arising between the Parties on the implementation of decisions of the bodies of the EurAsEC, and treaty provisions in force in the framework of the EurAsEC; and
- interpret provisions of international treaties in force within the framework of the EurAsEC, and the decisions of the EurAsEC bodies.
In connection with the formation of the Customs Union, the EurAsEC Court:
(a) considered cases on compliance of acts of the bodies of the CU with the international treaties constituting the legal basis of the CU;
(b) examined cases on challenging the decisions, actions (inaction) of CU bodies;
(c) interpreted the international treaties that made up the legal basis of the CU, and the acts adopted by the CU Interstate Council and CU Commission;
(d) resolved disputes between the CU Commission and CU Parties, as well as between CU Parties on fulfilment of their commitments, taken within the framework of the Customs Union; and
(e) considered other disputes, as provided in international agreements constituting the framework of the EurAsEC and the CU.
The representative of the Russian Federation explained that in the cases specified in
sub-paragraphs (a), (b) and (d) above, the Court could not consider the case, unless the matter had been submitted to the CU Commission previously. However, if the CU Commission did not act on the matter within two months, the case could then be referred to the Court. The Court was required to issue its decision within 90 calendar days after receipt of the case. If a case involved a CU Decision, that decision continued to operate during the case.
163. The representative of the Russian Federation underlined that the competence of the EurAsEC Court was defined solely by the provisions of Article 13 of the Statute of the Court. The EurAsEC Court did not have jurisdiction to opine directly on the WTO obligations of a Party and the Court could not rule on compliance with such obligations. He also noted that the competence of the Court could be enlarged or limited only if it was prescribed directly by an international agreement constituting part of the legal framework of the CU (see paragraph 154). The Treaty on the Functioning of the Customs Union in the Framework of the Multilateral Trading System (hereafter: Treaty on the Multilateral System) was such a Treaty. Under this Treaty, from the date of accession of any CU Party to the WTO, the provisions of the WTO Agreement, as set-out in its Protocol of Accession, including the commitments undertaken by that CU Party as part of the terms of its accession to the WTO, which related to matters that the Parties had authorised CU Bodies to regulate in the framework of the CU, as well as to the legal relationships regulated by the international treaties constituting the legal framework of the CU, became an integral part of the legal framework of the CU. As such, these provisions were part of the single undertaking and were CU Agreements that were part of the single undertaking for each CU Party (see paragraph 185). Since, this Treaty was part of the legal framework of the CU, an infringement by a CU Party or a CU Body of such rights and obligations under the Treaty to the extent that they were a part of the legal framework of the CU could be challenged by a CU Party, or the CU Commission before the EurAsEC Court in accordance with the Statute of the Court. In addition, economic operators could assert breaches of the provisions of the above-mentioned Treaty in the EurAsEC Court (see paragraph 186).
164. The representative of the Russian Federation noted that the Statute establishing the EurAsEC Court also authorised the Court to issue advisory opinions on the application of the international treaties of the EurAsEC and the CU, as well as decisions of their respective Bodies. Such opinions were issued at the request of the Parties, or the bodies of EurAsEC or the CU, or the highest judicial authorities of the Parties, and were in the nature of a recommendation.
165. With regard to who could apply to have the Court hear a case, the representative of the Russian Federation explained that with regard to cases involving the CU, cases could be brought before the Court based on an application submitted by:
- a Party to the Customs Union;
- bodies of the Customs Union; and
- economic operators.
Further, on 9 December 2010, EurAsEC Member States signed the Treaty on Judicial Recourse to the EurAsEC Court of the Economic Operators on Disputes within the Framework of the CU and Peculiarities of the Judicial Procedure on Them, approved by the Decision of the Interstate Council of EurAsEC No. 534 of 9 December 2010 (hereinafter: Treaty on Judicial Recourse). This Treaty was being applied provisionally and would formally go into effect once three EurAsEC Members had ratified it. Under the Treaty on Judicial Recourse, economic operators of CU Parties and of third countries were able to bring actions to the EurAsEC Court to:
- challenge the acts of the CU Commission, i.e., decisions of the CU Commission, which were binding and affected the rights and lawful interests of economic operators in the field of entrepreneurial and other economic activities, or the individual provisions of such acts; and
- challenge the actions (inaction) of the CU Commission.
The grounds to challenge acts of the CU Commission, or their individual provisions, or any action (inaction) of the CU Commission were their non-compliance with international treaties concluded within the framework of the CU, which resulted in the violation of the rights and lawful interests of economic operators in the field of entrepreneurial and other economic activities, provided for by those international treaties. He further explained that the EurAsEC Court would not consider applications to bring an action, if the decision of the Court on a previously considered case regarding the same subject and based on the same grounds was in effect. He further explained that a decision of the Court could be reviewed due to newly-discovered circumstances.
166. The representative of the Russian Federation further explained that, in the Treaty on Judicial Recourse the EurAsEC, Member States had created an appeals chamber within the EurAsEC Court. A party to the case had the right to appeal the decision of a panel of judges to the Appeals Chamber of the Court. The Appeals Chamber consisted of judges of the Court from the CU Parties, which had not participated in the panel that had taken the decision that was being appealed. The decision of the Appeals Chamber was the final decision in the case and could not be appealed.
167. The representative of the Russian Federation stated that with regard to disputes of an economic nature arising between the Parties on the implementation of decisions of EurAsEC bodies, treaty provisions in force in the framework of the EurAsEC, and cases in connection with the CU, the decisions of the Court were binding on the Parties to the dispute. The decision of a panel of judges, if not appealed, entered into force 15 days after the date of its pronouncement. Decisions of the Appeals Chamber were effective on the date of pronouncement. In accordance with Article 20.2 of the Statute of the Court, its decisions were to be implemented within the time-frame specified by the Court. If the decision of the Court was not implemented within the time-frame specified by the Court, any CU Party to the case could apply to the Interstate Council of EurAsEC (Heads of State) for a decision on implementation. In cases involving an economic operator where the CU Commission failed to implement the decision of the EurAsEC Court, the economic operator had the right to file an application to the Court on introduction of measures on the execution of said decision. The Court was obliged, within 15 days from receipt of the application from the economic operator, to address the Interstate Council at the level of Heads of Governments with a request to take a decision on the issue.
168. Members thanked the representative of the Russian Federation for the information on the EurAsEC Court and requested additional information on the operation of this Court. Members asked whether the EurAsEC Court had the authority to provide compensation to the economic operators, if the Court found that certain CU acts violated CU or WTO rules. In response, the representative of the Russian Federation explained that, under paragraph 4 of Article 11 of the Treaty on Judicial Recourse, the EurAsEC Court did not consider claims for damages. As to the competence of the EurAsEC Court on the matters relating with the WTO, see paragraph 170.
169. Members noted that the highest judicial authorities of a CU Party had the right to refer certain issues falling under the legal framework of the CU to the EurAsEC Court for interpretation. Members asked whether these interpretations would bind the national legal authorities or would they be recommendations to the national court. These Members also asked if economic operators or WTO Members would have a right to request that the EurAsEC Court issue an interpretation of CU Agreements and CU Commission acts including on their compatibility with the WTO commitments of the Russian Federation. In response, the representative of the Russian Federation noted that Article 20.1 of the Statute of the Court stipulated that rulings on issues covered by paragraphs 2 and 4 of Article 13 of the Statute were binding on the Parties to the dispute. Paragraph 4 covered interpretation of the international treaties comprising the legal basis of the CU and of decisions of its bodies. With regard to the rights of economic operators and WTO Members, he noted that Article 3 of the Treaty on Judicial Recourse established a procedure under which the highest judicial authority of a CU Party could apply to the EurAsEC Court for an opinion regarding the implementation of international treaties concluded within the framework of the CU and the acts of the CU Commission affecting the rights and lawful interests of economic operators, if these issues significantly affected in substance the consideration of the case. The national judicial authorities were required to apply for an opinion, if the decision of the national court could not be appealed, and provided that the issues on which an opinion was requested significantly affected in substance the consideration of the case, and the Court had not previously delivered opinions on similar issues. Under the existing regulation of the CU the economic operators or WTO Members did not have a right to request that the EurAsEC Court issue an interpretation of CU Agreements and CU Commission acts including on their compatibility with the WTO commitments of the Russian Federation. As to the competence of the EurAsEC Court on the matters relating with the WTO, see paragraphs 162 and 163.
170. Members noted that Article 26 of the Statute of the EurAsEC Court provided for issuance of advisory opinions and asked whether such opinions could relate to the consistency of CU Agreements or CU Commission Decisions with the WTO Agreement and related commitments. The representative of the Russian Federation explained that, in accordance with Article 26 of the Statute of the EurAsEC Court, the national Supreme Court of a CU Party could ask the EurAsEC Court to provide an advisory opinion in respect of implementation of CU legal acts. Subsequently, the national Supreme Court could reflect this opinion in a Resolution of the Plenum which would be taken into account by lower national courts. The representative of the Russian Federation noted that such opinions of the EurAsEC Court could relate to the consistency of CU Agreements or CU Commission decisions with the WTO Agreement and related commitments of each Party of the CU as it was prescribed in the Treaty on the Functioning of the Customs Union in the Framework of the Multilateral Trading System (see also paragraph 163 on the matters relating with the WTO).
171. The representative of the Russian Federation stated that the Decision of the Interstate Council of EurAsEC at the level of Heads of State No. 16 of 27 November 2009 established the Experts Council of the Supreme Body of the CU and also adopted regulations on the operation of the Experts Council. The Interstate Council Decision No. 69 of 9 December 2010 appointed the members of the Experts Council. Economic operators could apply to the Experts Council for an opinion on whether a CU Commission Decision complied with an international treaty that was part of the legal framework of the CU. If the Experts Council accepted an application, a Conciliation Commission was formed to examine the issue and to provide an opinion to the CU Commission on whether the CU Commission Decision conformed with the legal basis of the CU and, if the CU Decision did not conform, recommendations on revising the CU Decision. The CU Commission was required to inform the Interstate Council (Board of Heads of Government) of the opinion of the Experts Council and the results of the consideration by the CU Commission of that opinion.
- (e) The Customs Union Commission
172. The representative of the Russian Federation explained that the CU Commission was the permanent regulatory Body of the CU. The CU Commission performed the following functions:
- implemented decisions taken by the supreme body of the CU;
- monitored the implementation of the international treaties forming the CU (see Table 10 and Table 11);
- worked out recommendations for the supreme body of the CU on issues of development and functioning of the CU (jointly with national governments);
- ensured, within its competence, the implementation of international treaties constituting the legal basis of the CU (see Table 10);
- provided assistance to CU Parties in dispute settlements within the CU before the appeal was sent to the Court of the EurAsEC;
- interacted, within its competence, with the State authorities of the CU Parties; and
- performed the functions of the depositary of the international treaties forming the CU.
The rules of procedure and terms of reference for the functions of the CU Commission in certain spheres of activity were determined by separate international agreements between the CU Parties. He explained that the CU Commission consisted of representatives of the Governments of the CU Parties, each of them operating on the basis of the mandate issued by their respective Government. Currently, Deputy Prime Ministers represented the Governments of the CU Parties in the CU Commission. As of 1 January 2010, the representative of the Russian Federation held the Chairmanship of the Commission for a two-year term. The post of Chair of the Commission was subject to rotation on the basis of a Decision of the Interstate Council of EurAsEC.
- (f) The Secretariat of the Customs Union Commission
173. The Agreement on the Secretariat of the CU Commission authorised the Secretariat of the CU Commission to:
- prepare draft decisions of the Interstate Council of the CU;
- prepare informational materials and draft recommendations for these bodies;
- monitor the implementation by the CU Parties of CU agreements and implementation of decisions taken by the Interstate Council of the CU, as well as by the CU Commission;
- monitor and analyse trade legislation of the CU Parties;
- prepare drafts of CU agreements and other documents required to develop the CU;
- cooperate with the executive bodies of the CU Parties; and
- publish the decisions taken by the Interstate Council of the CU, as well as the CU Commission in the official journal.
174. Some Members noted that the Secretariat of the CU Commission (CU Secretariat) was authorised to monitor and analyse trade legislation of the CU Parties. These Members asked whether this analysis would include compliance with the WTO obligations of a CU Party. The representative of the Russian Federation stated that, after its accession to the WTO, the commitments of the Russian Federation would be part of its legal framework of the Russian Federation and, thus, the Secretariat of the CU Commission was authorised to monitor and analyse trade legislation with regard to its compliance with these commitments.
- (g) Decision Making within the Customs Union Bodies
175. In accordance with Article 7 of the Treaty on the Commission of the Customs Union of 6 October 2007, the decisions of the CU Commission were binding on CU Parties. The representative of the Russian Federation explained that, if pursuant to a CU agreement, the CU Commission was the competent authority to impose certain trade measures, a CU Commission decision was required for these measures to be imposed. A decision of the Interstate Council of the EurAsEC determined the timing of the transfer of powers from the national level to the CU Commission. In accordance with the Decision of the Interstate Council of EurAsEC No. 15 of 27 November 2009, all CU Commission Decisions that had binding effect under Article 7 of the Treaty on the Commission of the CU were directly applicable in the CU Parties. He recalled that CU Commission Decisions had the corresponding legal effect of acts adopted (issued) by those state bodies or officials of the CU Party that were competent to regulate the relevant issue at the time that the relevant power was transferred from the domestic regulators of the CU Party to the CU Commission. Thus, if a CU Commission Decision related to a matter that would have been dealt with by a ministry under the national law of a CU Party, the CU Decision would have the status of a Ministerial action in the national law of that CU Party. Similarly, if a CU Commission Decision related to a matter previously subject to a Government Resolution, the CU Commission Decision would have that status under the national law of the CU Party. CU Parties were to ensure the implementation of CU Commission Decisions within their respective territories.
176. CU Commission decisions were normally taken by a qualified (two-thirds) majority of votes. The CU Commission could also take decisions by consensus when the international treaties comprising the legal basis of the CU provided for a decision by consensus. Currently, the CU Parties had the following share of votes: Russian Federation - 57 per cent; Kazakhstan - 21.5 per cent; and Belarus - 21.5 per cent. If a proposal under consideration by the CU Commission failed to obtain the required number of votes, a CU Party or the CU Commission could refer the matter to the Interstate Council for decision. If a CU Party disagreed with an adopted decision of the CU Commission, the Interstate Council (Board of Heads of State) would reconsider the decision upon written request of that CU Party and take a final decision by consensus. Any CU Party had the right to seek reconsideration of a CU Decision by the Interstate Council. The CU Commission could also issue recommendations of non-obligatory nature.
- (h) Areas of Customs Union Commission Competency
177. The representative of the Russian Federation explained that the international agreements comprising the legal basis for the CU stipulated those areas in which the CU Commission would assume competence from the CU Parties. CU Agreements themselves normally specified whether the normative provisions set-out in the agreement applied directly in each CU Party, including the Russian Federation. The CU Parties were continuing to negotiate and conclude international agreements, the EurAsEC Interstate Council continued to adopt required decisions on timing for entry into force of these agreements and the CU Parties continued their work on adopting necessary national laws and other normative legal acts to implement the CU treaties and decisions of the CU Bodies. He further explained that any provisions of the agreements concluded earlier by the CU Parties and resolutions of governing bodies that did not conflict with the Agreement on the Establishment of the EurAsEC continued to be in force. At some time, the Interstate Council would take a decision, as called for in the Treaty on the Formation of the CU on the Establishment of the Common Customs Territory and the Completion of the Formation of the Customs Union.
178. The representative of the Russian Federation informed Members that further information on the respective competency of CU Bodies and the national authorities of CU Parties, as well as the legal basis for the CU Bodies and CU Parties on specific WTO-related issues was set-out in the relevant sections of this Working Party Report. He noted that the Russian Federation had undertaken commitments in those sections that ensured that the WTO obligations of the Russian Federation would be fully implemented, including in those areas where the CU Bodies had competency.
- (i) Transparency
179. The representative of the Russian Federation explained that proposals for the introduction, amendment, or elimination of a CU measure were prepared by the interested CU Party in accordance with its national legislation. This CU Party consulted with interested stakeholders on the proposal as provided for in its applicable national legislation. He also informed Members that such proposals by another CU Party, once submitted to the Russian Federation for consideration, would be promptly made subject to public consultations in the same way as proposals prepared by the Russian Federation. In accordance with Article 12 of the Agreement on Introduction and Implementation of Measures Concerning Trade in Goods in the Common Customs Territory in Respect of Third Countries of 9 June 2009, organizations or individual entrepreneurs of a CU Party might also provide their comments within the procedure of the development of draft CU decision on introduction, implementation, and abolishment of non-tariff measure, concerning trade in goods with third countries. Furthermore, in cases when an international treaty of a CU Party with a third country provided for consultations, organizations and entrepreneurs of such a country could present their views to that CU Party with regard to the proposal consistent with the procedure stipulated by the provisions of the relevant international treaty.
180. The representative of the Russian Federation explained that the date when a Decision of the CU Commission was published on the CU website was the basis for determining the date of entry into force of that decision. Specifically, Decisions of the CU Commission, which were obligatory, rather than recommendations, entered into force not earlier than 30 days after the date of publication on the CU website. He explained that, additionally, CU Parties were to ensure the publication of all CU Commission decisions in their respective dedicated national official journals, as well as in the СU official journal, stating the date of entry into force of a decision, which was determined based on the date of its publication on the CU website. In the Russian Federation, decisions of the CU Commission were posted on the website www.tsouz.ru within two working days from the date of their adoption.
181. Members expressed concerns regarding transparency, and also noted that it appeared that neither CU Agreements, nor CU Commission Decisions, including those promulgating CU Regulations and other acts, provided WTO Members and interested persons of WTO Members with the right to consult with and provide views directly to CU Bodies. This deficiency raised concerns about whether CU Agreements and procedures complied with WTO requirements. These Members requested that the Russian Federation explain how it intended to implement its commitments under paragraphs 1426 and 1427 in cases where a CU Body was responsible for proposing or adopting CU legal acts, including CU decisions, or other measures.
182. With regard to concerns raised by Members about transparency and access to CU Bodies, the representative of the Russian Federation informed Members that nothing precluded WTO Members from providing comments directly to the CU Commission and other CU Bodies. He noted that the Russian Federation invited views from Members on proposals that it was presenting to the CU Commission and other CU Bodies.
183. The representative of the Russian Federation confirmed that CU Commission Decision No. 308 of 18 June 2010 "Decision-Making at the Commission of the Customs Union", would be amended to establish and put into effect a mechanism for publication of proposed CU legal acts covered under paragraph 1426 before their adoption and to provide a reasonable period of time for Members and interested persons to provide comments to the competent CU Body. Such a Body would be authorised to take these comments into account in its consideration of such proposed legal act. Moreover, pursuant to this mechanism, no CU legal act covered under paragraph 1427 would become effective prior to publication as provided for in the applicable provisions of the WTO Agreement. The Working Party took note of these commitments.
- (j) Implementation of WTO Commitments under the Customs Union Regime
184. Based on information provided by the representative of the Russian Federation and Members' consideration of CU Agreements and other documentation that the Russian Federation had made available to the Working Party, Members raised a number of questions and concerns about provisions of CU Agreements and issues where it appeared that CU Bodies had or shared competency with CU Party national authorities. Members questioned how the Russian Federation would ensure that it could implement and comply with WTO provisions on those issues where CU Bodies were the competent authorities. Members also requested additional information regarding the status of the WTO Agreement within the CU legal system. They asked for confirmation that the WTO Agreement would be an international treaty for the CU and part of the single undertaking for all CU Parties. Members also sought assurances that in case of a conflict, the WTO Agreement would always prevail over provisions of CU Agreements and CU Commission Decisions and other measures adopted by CU Bodies, including those in effect prior to the date of the accession of the Russian Federation to the WTO. Members also requested information on how the Russian Federation would ensure that future CU international treaties and CU Commission Decisions would comply with the WTO obligations of the Russian Federation.
185. The representative of the Russian Federation explained that the CU Parties had concluded a Treaty on the Functioning of the Customs Union in The Framework of the Multilateral Trading System of 19 May 2011 (Treaty on the Multilateral System) which had been ratified by all CU Parties as of 8 November 2011. This interstate CU Treaty entered into force in accordance with the provisions of the Protocol on the Rules of Entry into Force of International Treaties Comprising the Legal Basis of the Customs Union. According to the Treaty on the Multilateral System, from the date of accession of any CU Party to the WTO, the provisions of the WTO Agreement, as set-out in its Protocol of Accession, including the commitments undertaken by that CU Party, as part of the terms of its accession to the WTO, which related to matters that the Parties had authorised CU Bodies to regulate in the framework of the CU, as well as to the legal relationships regulated by the international treaties constituting the legal framework of the CU, became an integral part of the legal framework of the CU. As such, these provisions were part of the single undertaking and were CU Agreements that were part of the single undertaking for each CU Party. Under this Treaty, CU Parties were obligated when making an international treaty in the framework of the CU to ensure that the CU agreement was consistent with the WTO commitments of each CU Party. Similarly, when CU Bodies adopted and applied CU acts, those acts had to comply with those commitments. The representative of the Russian Federation further explained that the rights and obligations of the Parties resulting from the WTO Agreement, as they were set-out in the Protocol of Accession of each Party, including the commitments undertaken by each Party as part of the terms of its accession to the WTO and that became a part of the legal framework of the CU could not be subject to abrogation or limitation by decision of CU Bodies, including the EurAsEC Court or by an international treaty of the Parties. When another CU Party became a WTO Member, the rights and obligations of that Party under the WTO Agreement also became an integral part of the legal framework of the CU. He explained that WTO provisions which regulated the creation and functioning of the CU also applied. He noted that a CU Party that was not a WTO Member could deviate from provisions of the WTO Agreement in certain cases. When that Party became a WTO Member, however, any deviation from the WTO Agreement would be allowed only as specifically provided for in the terms of accession to the WTO of that Party. Finally, the CU Parties were required to adopt measures to adjust the CU legal framework and decisions of CU Bodies to comply with the WTO Agreement as set-out in the Protocol of Accession of each Party. Until those measures were adopted, other CU treaties and decisions of CU Bodies would apply only to the extent that they complied with the WTO Agreement. Thus, the rights and obligations of a CU Party under the WTO Agreement would override prior and future CU Agreements and Decisions of CU Bodies.
186. The representative of the Russian Federation explained that the Treaty on the Multilateral System was a CU treaty and part of the domestic legal framework of each CU Party. As such, the national courts would apply the provisions of the Treaty. He also confirmed that the Treaty on the Multilateral System, established obligations on CU Parties and CU Bodies regarding the commitments undertaken by each Party as part of the terms of its accession to the WTO and that became part of the legal framework of the Customs Union. Thus, an infringement of such rights and obligations by a CU Party or a CU Body could be challenged by a CU Party, or CU Commission before the EurAsEC Court. In addition, economic operators could assert breaches of the provisions of the Treaty on the Multilateral System in the EurAsEC Court, as provided for in Article 13 of the Statute of the Court and in the Treaty on Judicial Recourse.
187. Members also expressed concern regarding CU Commission competency, since it did not appear that CU Parties had granted any CU Body the authority to negotiate or conclude agreements notwithstanding provisions of CU Agreements that called for a common CU document, e.g., veterinary certificates. In some cases, requirements were in place that traders from Members could not meet because of the absence of common documents or standards.
188. The representative of the Russian Federation responded that Decisions of the CU Commission were being developed that would establish procedures for implementing CU requirements, including those requiring coordination of negotiations between CU Parties and third countries. These procedures would be adopted and applied so that they did not operate to restrict trade and would comply with WTO requirements.
- Government entities responsible for making and implementing policies affecting foreign trade; Right of Appeal
189. Members noted that a right of appeal to an independent tribunal or judicial review should be provided to all (economic operators) entities, engaged in economic activity with the Russian Federation and that various WTO Agreements explicitly required that a right of appeal be provided. These Members sought a commitment that a right of appeal would be provided, whether the Russian Federation or a CU Body was the competent authority. Members raised several questions regarding the scope of authority of the EurAsEC Court, how this Court would function, and its role with regard to the domestic judicial system of the Russian Federation and implementation of the international obligations of the Russian Federation. As a threshold matter, Members sought confirmation that the WTO Agreement would be considered to be a Treaty of the EurAsEC and that the obligations of a CU Party under the WTO Agreement would always prevail over those in CU Agreements and CU Commission Decisions now in effect, as well as those agreements and decisions adopted after the accession of the Russian Federation to the WTO. Members also requested information on how the EurAsEC Court and the national courts of the Russian Federation would interact.
190. Members asked whether the supreme judicial bodies of the Russian Federation were required to take EurAsEC opinions and interpretations into account in the domestic judicial system of the Russian Federation and whether these bodies would issue guidance to the lower courts in all cases where the EurAsEC Court interpreted CU Treaties and CU Commission Acts. Members also requested information on how the appeal process would operate when national authorities were responsible for some aspects of a measure, e.g., conducting a trade remedy investigation, and a CU Body was responsible for taking the decision on whether to apply the measure. If issues covered by CU provisions were appealable in national courts, could such issues be appealed to the EurAsEC Court as well, and if not in first instance, then after exhaustion of national court appeals.
191. The representative of the Russian Federation informed Members that the EurAsEC Court and the national judicial system of the Russian Federation were independent. The Treaty on Judicial Recourse and the Statute of the Court provided that the highest judicial authority of the Russian Federation was authorised to apply to the EurAsEC Court for an opinion on interpretation of certain international treaties through procedures described in paragraph 169. The EurAsEC Court, however, did not serve as an appeals court from the national judicial system. The representative of the Russian Federation noted that, in accordance with the Statute of the EurAsEC Court, the national Supreme Court of a CU Party could ask the EurAsEC Court to provide an advisory opinion in respect of implementation of CU legal acts. Subsequently, the national Supreme Court could reflect this opinion in a Resolution of the Plenum which would be taken into account by all lower national courts.
192. Members also requested information on the availability of administrative appeals, in the Russian Federation. Those Members also requested that the Russian Federation ensure that the central Government would monitor and take active steps to ensure that measures taken by sub-central authorities or other subjects of the Russian Federation, such as WTO-inconsistent legislation, actions or non-uniform application, would be brought into conformity with the obligations of the Russian Federation under the WTO Agreement promptly, particularly when such measures were notified to the Federal Government by a WTO Member or other interested party.
193. In response, the representative of the Russian Federation noted that, pursuant to Article 46 of the Constitution of the Russian Federation, decisions and actions (or inactions) of bodies of State authority and local governments, public associations and officials might be appealed to the national court with appropriate jurisdiction. In case of appeals against administrative action or inaction, at the discretion of the appellant, an appeal could also be addressed to either the Government or a Government agency overseeing the administrative body responsible for the decision (Article 33 of the Constitution of the Russian Federation). He also added that the person aggrieved by the decision could decide whether to pursue an administrative review or court procedures. In case of judicial procedure, appeals of a decision of a lower court were also possible. He further added that the legislation of the Russian Federation provided the opportunity to use administrative procedures before appealing to a court. The right of appeal to judicial and administrative procedures, in case of violation of civil rights of natural and legal persons, was also foreseen by Article 11 of the Civil Code. Article 18 of Federal Law No. 164-FZ "On the Fundamentals of State Regulation of Foreign Trade" also provided the right of any participant in foreign trade to appeal to a court or administrative procedure (in cases foreseen by the legislation) against a decision, action (or inaction) of a State authority (or its officer), if, in his view, his rights or legal interests had been violated by such decision, action (or inaction).
194. Further, the representative of the Russian Federation noted that Federal Law No. 59-FZ of 2 May 2006 "On the Procedure for Consideration of Appeals of Citizens" established the general procedure for dealing with appeals and complaints brought by persons (Russian and foreign persons) to the bodies of State authorities and local governments concerning the realization or violation of their rights and legal interests, violations of laws or other normative legislative acts or decision, action (or inaction) of State or local authorities or officials. The Federal Law did not restrain the right to appeal of persons on behalf of associations and entities. According to this Federal Law, the appeal or complaint should be addressed to a concrete authority or an official and made in written form signed by the applicant. The appeal or complaint was to be registered upon receipt by the authority within three days. From the moment the appeal was registered, the authority had 30 days (fixed term) to address the applicant with reasoned answer in written form and/or to take actions aimed at the restoration or defence of the violated rights and legal interests of the person. The control of observance of these procedures was carried out by bodies of State authorities, local governments and officials, responsible for analysing the incoming appeals and complaints and taking measures to prevent and eliminate the cause of violation of rights and legal interests of persons. The Federal Law provided the right of persons (applicants) to complain about decisions taken in consequence of the appeal or about any action (or inaction) in connection with the consideration of the appeal in administrative and/or judicial manner. In case of violation of rights and legal interests by decisions or actions (or inactions) of bodies of State authorities, local governments and officials, the person had the right to compensation of losses and moral damage. The Federal Law also stipulated the responsibility of State officials for violating the provisions of this Law. He added that the procedure provided by the Federal Law was free of charge.
195. In response to requests for additional information on the types of appeal mechanism available and the standing of an aggrieved party, the representative of the Russian Federation stated that Section 3 of the Federal Law on Customs Regulation, No. 311-FZ of 27 November 2010 (hereinafter: Law No. 311-FZ), included detailed provisions on the right of appeal on customs-related matters. Article 36 provided that any person could lodge an appeal against any resolution, action or in action, if such resolution, action or in action, violated, in the opinion of such person, his rights, freedoms or legal interests, or created any obstacles for implementation of such rights, or legal interests or illegally imposed any obligation on him. The right of appeal could not be waived.
196. The procedure for appeals in respect of decisions, action (inaction) of the customs authorities and their officers was set-out in Section 3 of Law No. 311-FZ applied to any decisions, action (inaction) of the customs authorities and their officers, unless a special procedure was provided. Under Article 38 of Law No. 311-FZ, appeals were to be lodged with the superior customs authority directly, or through the customs authority whose decision, action (inaction) was appealed against. Appeals against decisions or actions (inactions) of Federal executive bodies, competent for customs-related matters, were to be lodged with that Federal executive body. Appeals could be lodged to a court simultaneously or consecutively to an administrative procedure. They could be lodged within three months from the date the appellant knew or should have known of a violation of the appellant's rights, freedoms or legal interests, the creation of obstacles for implementation of such rights, freedoms or interests, or the illegal imposition of any obligation on the appellant; or from the date the term expired for the customs authority to adopt a resolution or take an action. Article 40 provided for the extension of the time for submitting appeals.
197. Article 49 of Law No. 311-FZ provided a simplified procedure for bringing an administrative appeal of decisions or actions (inactions) taken by a customs officer at a customs checkpoint concerning shipment of goods through the border, which did not exceed RUB 1.5 million in value and (or) one vehicle. This involved an oral claim to a superior customs officer. Such appeals were dealt with by immediate ruling. The simplified appeal procedure did not preclude the appellant lodging an appeal via the standard procedure.
198. Administrative appeal procedures were similar to those envisaged by Law No. 311-FZ, except they would be taken under the Code of Administrative Offences. Appeals could be lodged within ten days after receipt of a copy of the decision appealed against and were required to be processed within ten days from the date of lodging the appeal. Pursuant to Article 37 of Law No. 311-FZ, the appeal mechanism provided for in that Law did not apply to decisions in respect of the Code of Administrative Offences No. 195-FZ of 30 December 2001 (as last amended on 14 July 2008). Appeal decisions issued by the customs authority could be appealed against to the superior customs authority or court, or arbitration court.
199. In response to further questions, the representative of the Russian Federation stated that the procedure for appealing against decisions of tax bodies and actions or inaction of their officers was regulated by the Tax Code of the Russian Federation. Decisions issued by tax bodies, as well as actions and inaction by their officers, could be appealed to a supervising officer or a court, either simultaneously or consecutively. An appeal was required to be determined within one month from the date of lodging the appeal. The tax body was required to take a decision within one month, and the decision on the appeal was required to be notified to the person lodging the appeal within three days after the decision was taken.
200. As regards appeals and complaints in the sphere of technical regulations (including SPS issues), the representative of the Russian Federation explained that, under the CU, there was a common system of Technical Regulations, including on SPS matters, and thus the EurAsEC Court had jurisdiction over appeals covered by the relevant CU Agreements, CU Commission Decisions, including those promulgating CU Regulations and other CU measures. With regard to decisions, actions or inaction of the authorised bodies of the Russian Federation related to technical regulation, including SPS issues, he explained that legal measures were in place to allow appeals to be made via the independent judicial system against any decisions of the relevant authorities of the Russian Federation (and non-governmental bodies delegated to take such decisions) and to ensure corrective action was taken, in accordance with decision by the Court, when a complaint was justified. The relevant authorities were authorised to establish their own procedures for filing a complaint or requesting an appeal in the area of certification and conformity assessment. These procedures reflected common principles of dealing with appeals and complaints brought to the authorities of executive power of the Russian Federation by natural or legal persons (e.g., the requirement to address the applicant with a reasoned answer and in written form within a fixed term (normally 30 days); control of addressing the appeal by superior authority and the Government, etc.). He noted that, pursuant to Federal Law No. 184-FZ of 27 December 2002 "On Technical Regulation" (as last amended on 28 September 2010), non-acceptance by the authorities of a voluntary certification could be appealed via judicial procedure. With regard to mandatory conformity certification, an applicant could lodge a complaint with the accreditation authorities against unlawful actions of certification authorities and accredited testing laboratories (centres).
201. Further, regarding appeals and complaints in the field of intellectual property rights, the representative of the Russian Federation stated that the legislation of the Russian Federation provided for the enforcement of intellectual property rights through judicial and administrative procedures. In particular, in accordance with the Civil Code of the Russian Federation, commercial secrets, copyright and related rights were protected by court. As for the other intellectual property rights, the Civil Code of the Russian Federation provided the opportunity to appeal to a court, as well as to the Patent Disputes Chamber of Rospatent. The procedure for lodging objections and applications to the Chamber and the procedure for their consideration were determined by Order of Rospatent No. 56 of 22 April 2003 "On the Rules of Filing Objections and Applications and the Consideration thereof by the Patent Disputes Chamber" (as last amended on 11 December 2003). Decisions of the Patent Dispute Chamber could be appealed in court in accordance with the legislation of the Russian Federation. More detailed information on this issue was contained in the Section "Trade-Related Intellectual Property Regime".
202. In response to questions concerning fees for appeal procedures, the representative of the Russian Federation stated that judicial procedure of appeal was subject to State duties set-out in Chapter 25.3 of the Tax Code of the Russian Federation. Appeal in administrative procedure, generally, was free of charge, with few exceptions. For example, administrative procedure of appeal in the field of intellectual property rights was subject to a duty, in accordance with the Civil Code of the Russian Federation. He further explained that judicial appeal fees were applied in connection with exercise of judicial power by courts. Administrative procedures' fees were applied in connection with exercise of executive power by Governmental bodies.
- Division of authority between central and sub-central governments
203. The representative of the Russian Federation stated that the Constitution of the Russian Federation provided an exhaustive list of matters to which the Russian Federation had an exclusive competence (Article 71) and a list containing matters subject to the joint competence of the Russian Federation and its subjects (Article 72). Those matters not contained in these lists were regarded as the ones to which the subjects had competence. The laws and other normative legal acts by the subjects of the Russian Federation adopted outside the competence of the Russian Federation or of the joint competence of the Russian Federation and the subjects of the Russian Federation must not contradict the Federal laws. Within the joint competence of the Russian Federation and its subjects, in case of a conflict between a Federal law and any normative legal act issued by a subject of the Russian Federation, the Federal law would prevail.
204. Members of the Working Party sought confirmation concerning the uniform application of WTO provisions throughout the territory of the Russian Federation, as well as by sub-central entities. These Members also sought further information on whether there were any areas relating to matters under WTO provisions where sub-federal entities might have exclusive competence. Those Members also requested further clarification on whether the authorities of the Russian Federation would be required to submit the approved Protocol Package to sub-central entities for their approval in the ratification process.
205. The representative of the Russian Federation further noted that, according to Article 3 of Federal Law No. 164-FZ of 8 December 2003 "On the Fundamentals of State Regulation of Foreign Trade Activity" (as last amended on 8 December 2010), foreign trade in the Russian Federation was regulated by the Constitution of the Russian Federation, Federal laws and other legal acts of the Russian Federation and by the international Treaties to which the Russian Federation was a party. He also added that Chapter II of this Law established competence of the Federal and Regional authorities in foreign trade. Article 6 of said Law provided for, inter alia, the competence of the Russian Federation to form the concept and strategy of the development of foreign trade relations and the basic principles of the foreign trade policy; to ensure the economic security and protection of the economic sovereignty and economic interests of the Russian Federation, as well as the economic interests of the subjects of the Russian Federation and of Russian natural and juridical persons; and to conclude international Treaties in the field of foreign economic relations.
206. He further noted that, if an international treaty of the Russian Federation affected issues falling within the competence of the subjects of the Russian Federation, such a treaty was to be elaborated in co-ordination with relevant bodies of the interested subjects of the Russian Federation. This provision was contained in Federal Law No. 101-FZ of 15 July 1995 "On International Treaties of the Russian Federation". As regards international treaties of the Russian Federation affecting issues falling within the joint competence of the Russian Federation and the subjects of the Russian Federation, the Law established that Federal bodies of executive power were to send the main provisions or the draft of a treaty to the State power bodies of the interested subject of the Russian Federation. Proposals received from the subjects were considered in the course of preparation of the draft of the international treaty.
207. The representative of the Russian Federation recalled that Federal Law No. 4-FZ of 4 January 1999 "On Co-ordination of International and Foreign Economic Ties of the Subjects of the Russian Federation" provided the subjects of the Russian Federation, inter alia, with the right to negotiate and conclude Agreements with their partners on international and foreign economic ties. Such Agreements could not contradict the Federal legislation and the international commitments of the Russian Federation. The Law made it compulsory for the subjects to notify the appropriate Federal authorities before entering into negotiations, and set-forth a procedure for prior approval of the draft agreed text of the Agreement by the appropriate Federal authorities. The Agreements concluded by the subjects of the Russian Federation were not considered international treaties.
208. One Member expressed its doubts regarding measures that the Russian Federation had maintained since 2008 with regard to trade with this Member. In this Member's view, these measures were inconsistent with various provisions of the WTO Agreement, including the transparency provisions of Article X of the GATT 1994, the requirement to administer trade "in a uniform, impartial and reasonable manner" set-out in Article X:3 of the GATT 1994, and the requirement for uniform application of measures set-out in Article XXIV:1 of the GATT 1994. Further, this Member noted that Article I of the GATT 1994 required that "any advantage, favour, privilege or immunity granted by" the Russian Federation to any product originating in or destined for that Member's territory be accorded immediately and unconditionally to products imported from or exported to all other WTO Members. In this Member's view, the Russian Federation had maintained measures that were inconsistent with the obligations that Russia would assume as a WTO Member. This Member, therefore, requested that the Russian Federation eliminate these measures and comply with WTO requirements.
209. The representative of the Russian Federation took note of this Member's concerns. He stated that in his view measures in trade with that Member were applied in conformity with the bilateral free trade agreement and were in line with its domestic legislation and with the WTO Agreement. That representative further referred that Member to the obligations that the Russian Federation would comply with from the date of the accession of the Russian Federation to the WTO, including those commitments referred to in paragraphs 1426, 1427 and 1428 relating to transparency and paragraph 214 related to uniform application of the Russian Federation's trade regime. The representative of the Russian Federation confirmed that in the future the Russian Federation would have the WTO Agreement as the legal basis of its trade with this Member in such a manner to ensure full consistency with WTO rules, including Articles I, X, and XXIV of the GATT 1994, and to respect its specific WTO obligations and commitments. The Working Party took note of this commitment.
210. The representative of the Russian Federation further explained that on 9 November 2011 the Russian Federation had concluded an agreement with this Member establishing a mechanism of customs administration and monitoring of all trade in goods that enters or exits specific pre-defined trade corridors. The mechanism consists of (a) an electronic data exchange system; and, (b) an international monitoring system. One Member confirmed that the agreement reached with the Government of the Russian Federation established a satisfactory system to address his concern inter alia through the assistance and participation of the neutral third party to facilitate the operation of the agreement. These statements were noted by the Working Party.
211. Members of the Working Party expressed concerns in relation to non-WTO consistent actions of certain regional governments, often in the face of relevant Federal legislation. In addition, Members of the Working Party requested clarification of the ability of the central government to take the initiative and responsibility for overruling or removing WTO-inconsistent measures taken by subjects of the Russian Federation. Some Members of the Working Party requested a specific commitment from the Russian Federation that international treaties would be strictly observed throughout its territory.
212. In response, the representative of the Russian Federation noted that a special mechanism had been established to monitor and ensure that the legislation and practice of the subjects of the Russian Federation complied with Federal laws. On 6 October 1999, Federal Law No. 184-FZ "On General Principles of the Organization of the Legislative (Representative) and Executive Authorities of State Power of the Subjects of the Russian Federation" (as last amended on 28 December 2010) had been enacted. The Office of the Public Prosecutor administered the Law. Following a complaint regarding the action or policy of a subject of the Russian Federation, the Public Prosecutor could seek an order or declaration from the Supreme Court of the Russian Federation or an appropriate body of the concerned subject invalidating the legislation or practice complained of, on the basis that the legislation or practice was inconsistent with respective Federal legislation or international treaties of the Russian Federation. In accordance with Article 253 of the Civil Procedure Code of the Russian Federation, when the court (including the Supreme Court) determined that the legal act subject to a dispute or part thereof contradicted a Federal law or other legal act that has higher legal force, the disputed legal act was considered invalid in whole or in part from the date of its adoption, unless otherwise specified by the court in its decision. Presidential Decree No. 849 of 13 May 2000 "On the Authorised Representative of the President of the Russian Federation in a Federal District" (as last amended on 7 September 2010) empowered a Presidential representative in a Federal district to propose the suspension of acts of executive authorities of the subjects of the Russian Federation that contravened the Constitution, Federal laws or international commitments of the Russian Federation. Similarly, Presidential Decree No. 1486 of 10 August 2000 "On Supplementary Measures to Provide Integrity of Legal Treatment in the Russian Federation" (as last amended on 18 January 2010) created a Federal registry of the legal acts of the subjects of the Russian Federation. All legal acts enacted by the subjects of the Russian Federation were notified to the Federal Ministry of Justice of the Russian Federation within seven days of enactment for scrutiny and review. If the legislation was found to be inconsistent with Federal laws or with international commitments of the Russian Federation, including the obligations of the Russian Federation under the WTO Agreement and CU Agreements, the Legislative Department of the Ministry of Justice could draft a presidential decree suspending the operation of the legislation, or seek an order from the Constitutional Court of the Russian Federation together with proposals for reconciling or rectifying the conflict. Acts or parts thereof determined by the Court to contravene the Constitution became invalid as from the date of their adoption.
213. He further noted that, in accordance with the Constitution of the Russian Federation, the Constitution itself and Federal laws had supremacy over the whole territory of the Russian Federation. The bodies of State authority, the bodies of local governments, officials, private persons and their associations were required to observe the Constitution of the Russian Federation and its laws. Federal Law No. 101-FZ of 15 July 1995 "On International Treaties of the Russian Federation" contained rules ensuring the execution of the international treaties of the Russian Federation by the President and the Government of the Russian Federation, Federal Executive bodies, and bodies of State authority of the relevant subjects of the Russian Federation.
214. The representative of the Russian Federation confirmed that the provisions of the WTO Agreement would be applied uniformly throughout the territory of the Russian Federation, including in regions engaging in frontier traffic, special economic zones and other areas where special regimes for tariffs, taxes and regulations could be established. He added that, in order to ensure compliance with provisions of the WTO Agreement any individual or entity could bring to the attention of the authorities of the Government of the Russian Federation or competent CU Body cases of non-application or non-uniform application of provisions of the WTO Agreement in the Russian Federation. Such cases would be referred promptly to the responsible authorities without requiring the affected party to petition through the courts, and when non-application or non-uniform application actually existed, the authorities of the Government of the Russian Federation or a competent CU Body would act promptly to address the situation, consistent with the laws and international obligations of the Russian Federation. The individual or entity notifying the authorities of the Government of the Russian Federation or a competent CU Body would be informed promptly in writing of any decision and action taken. The Working Party took note of these commitments.
215. The representative of the Russian Federation also confirmed that with respect to matters subject to the WTO Agreement, his authorities would provide the right for independent review in conformity with WTO obligations, including but not restricted to, Article X:3(b) of the GATT 1994, and relevant provisions of the WTO Agreement on Trade-Related Aspects of Intellectual Property Rights (TRIPS) and the General Agreement on Trade in Services. The Working Party took note of these commitments.
POLICIES AFFECTING TRADE IN GOODS
- Registration requirements for import/export operations
216. The representative of the Russian Federation noted that, generally, neither the CU Agreements, CU Commission Decisions, nor the national legislation of the Russian Federation restricted the right of any Russian enterprise to import goods into or export goods from the Russian Federation, however, exceptions could be provided for in CU Agreements and Decisions and the Federal laws of the Russian Federation. He noted that the State monopoly on foreign trade had been eliminated by Presidential Decree No. 213 of 15 November 1991 "On Liberalization of Foreign Economic Activity on the Territory of the Russian Soviet Federal Socialist Republic" (as amended on 27 October 1992). This principle was further embodied in Article 1 of the Civil Code and Article 8 of the Constitution.
217. The representative of the Russian Federation explained that, from 1 January 2010, the principal requirements for importing goods into and exporting goods from the Russian Federation were found in the Customs Code of the Customs Union of Russia, Belarus and Kazakhstan (hereafter: "CU Customs Code"), the Agreement on Common Measures of Non-tariff Regulation in Respect of Third Countries, signed on 25 January 2008 (hereafter: "CU Agreement on Non-Tariff Regulation"), the Agreement on the Introduction and Application of Measures Concerning Foreign Trade in Goods on the Common Customs Territory in Respect of Third Countries, signed on 9 June 2009 (hereafter: "CU Agreement on Measures Concerning Foreign Trade"), and the Agreement on Licensing in the Area of Foreign Merchandise Trade of 9 July 2009 (hereafter: "CU Licensing Agreement"). The procedure for the importation of specific products, such as products with cryptographic capabilities, precious stones and precious metals, and medicines and pharmaceutical ingredients, were set-out in CU Commission Regulations. Specific Sections in this Working Party Report relating to the import and export regimes of the Russian Federation, provided descriptions of the provisions of these CU Agreements, CU Commission Decisions, and other CU legal documents, including requirements for non-automatic import or export licenses and/or automatic licenses (permits). The representative of the Russian Federation explained that, pursuant to these CU Agreements, Decisions, and Regulations, the authorised body of each CU Party was responsible for issuing non-automatic import and export licenses and/or automatic licenses (permits), as well as activity licenses. The representative of the Russian Federation further explained that Federal Law No. 164-FZ of 8 December 2003 "On the Fundamentals of the State Regulation of the Foreign Trade Activity" (as last amended on 2 February 2006), Federal Law No. 311-FZ of 27 November 2010 "On Customs Regulation" and Federal Law No. 128-FZ of 8 August 2001 "On Licensing of Specific Types of Activity" (as last amended on 28 September 2010) addressed the general requirements for engaging in import/export operations in the Russian Federation.
218. The representative of the Russian Federation explained that, according to Article 10 of Federal Law No. 164-FZ, any Russian or foreign person could be engaged in carrying out foreign trade activity (import and export). The right to carry out foreign trade activity could be restricted only in circumstances specified under international agreements, including CU Agreements, CU Commission Decisions, or Federal legislation. Export and import operations, as such, did not require an activity licence. On the other hand, an activity licence to engage in production or distribution of certain products (such as alcohol, pharmaceuticals, and goods with encryption technology) was required to obtain a licence to import these products. (Detailed information concerning export/import operations for alcoholic beverages, pharmaceuticals, goods with encryption technology, and precious stones and metals was provided in paragraphs 231 through 268 and 275).
219. Several Members noted that laws and regulations relating to the right to trade in goods, "registration requirements" or "activity licensing" must not be more burdensome than necessary and, thus, restrict imports in violation of the general prohibition on quantitative restrictions under Article XI:1 of the GATT 1994, nor should they discriminate against imported goods in violation of the provisions of Article III:4 of the GATT 1994. Furthermore, fees and charges levied on the right to import must be limited to the cost of services rendered as under Article VIII:1(a) and Article VIII:4(c) of the GATT 1994, and internal taxes or other internal charges on the right to trade in imported goods must not lead to discrimination in favour of like domestic products as required by Article III:2 of the GATT 1994.
220. In response to requests for further information on registration requirements for engaging in economic activity (that included import and export operations), the representative of the Russian Federation explained that requirements for registration as a legal person/individual entrepreneur were strictly a matter of the national legislation of a CU Party and this situation was not expected to change. In the Russian Federation, registration of legal persons and natural persons, as individual entrepreneurs, was governed by Article 51 of the Civil Code and Federal Law No. 129-FZ of 8 August 2001 "On State Registration of Juridical Persons and Individual Entrepreneurs" (as last amended on 27 July 2010). Registration was carried out by the Federal Tax Service. Refusal of State Registration was governed by Article 23 of Federal Law No. 129-FZ and could be appealed in a
Court. He explained that registration enabled legal persons/individual entrepreneurs to engage in economic activity, including foreign trade activity (import and export). The legislation of the Russian Federation did not contain any restrictions or discrimination against foreign founders of legal persons. In response to a specific question of one Member, the representative of the Russian Federation clarified that, even though some specific requirements for registration of legal persons with foreign founders were formally different from requirements for registration of legal persons with founders being Russian persons (e.g., with respect to the type of documents to be provided by an applicant), such requirements did not constitute actual discrimination against such legal persons with foreign founders.
221. To register, legal persons were required to submit the following documents, listed in Article 12 of Federal Law No. 129-FZ:
- an application based on the form established by Government Resolution No. 439 of 19 June 2002 (as last amended on 9 March 2010);
- the decision whereby the legal person had been formed, in the form of minutes, Agreement or any other document in compliance with the legislation of the Russian Federation;
- the constitutive documents of the legal person (originals or notarized copies);
- for foreign legal persons, an extract from the register of legal persons of the country of origin or another equally effective proof of the legal status of a foreign legal entity being a founder; and
- a certificate of payment of State duty in the amount of RUB 4,000.
Under Federal Law No. 129-FZ, registration of a natural person as an individual entrepreneur required the following documents:
- an application based on the form approved by the Government of the Russian Federation;
- for citizens of the Russian Federation, a copy of the identification document of the natural person (i.e. passport - Presidential Decree No. 232 of 13 March 1997);
- for foreign and stateless persons, a copy of the document established by Federal Law or recognised under an international Agreement of the Russian Federation as the identification document (identification documents were listed in Article 10 of Federal Law No. 115-FZ of 25 July 2002 "On the Legal Position of Foreign Citizens in the Russian Federation" (as last amended on 4 December 2007);
- a document confirming the right to reside in the Russian Federation; and
- a document confirming the payment of a RUB 800 registration charge.
Pursuant to Article 9 of the Law, no document, other than those listed in the Law (as indicated above) - could be requested for registration.
222. Some Members expressed concern that the requirement of the Russian Federation for enterprises to have a location in the Russian Federation, established in accordance with the legislation of the Russian Federation, and natural persons to have the right to reside in the Russian Federation in order to register as a Russian enterprise or individual entrepreneur, was overly burdensome in the case where the enterprise or individual entrepreneur sought only the right to declare the import or export of goods and, thus, restricted imports or exports.
223. In response, the representative of the Russian Federation stated that the requirement to be registered in the Russian Federation, in accordance with established conditions, was necessary to ensure proper implementation of customs legislation, including its provisions on conditional release of goods into the territory of the Russian Federation and post-control that permitted accelerated customs procedures at the entry and destination customs checkpoints.
224. The representative of the Russian Federation further added that these documents were to be submitted to the registration body directly or could be sent by mail with a list of enclosures. The application presented to the registering body required the notarized signature of an authorised person (the applicant). The date of submission of the documents for State Registration was considered to be the date when they were received by the registration body. A receipt note was to be issued to the applicant to confirm that the documents had been received from him. The note was to be issued on the day the documents were received by the registration body. In any case, including cases in which the registration body received documents sent by mail, a receipt note was to be sent the next (working) day following the date of receipt of the documents by the registration body, at the postal address indicated by the applicant. The registration body ensured the recording and storing of all documents submitted for registration purposes.
225. Registration was to be carried out within five working days after the date the documents were received by the registration body. The representative of the Russian Federation also added that, according to Article 23 of Federal Law No. 129-FZ of 8 August 2001 (as last amended on 27 July 2010), registration might be refused only in the following cases:
- failure to submit the documents required for registration purposes;
- submitting of documents to an improper registration body;
- in case the legal entity was in the process of liquidation;
- failure to notarize documents, when it was required;
- when the application of the State Registration was signed by an unauthorised person;
- withdrawal of all members of a limited liability company from that company; or
- inconsistency of the name of the legal entity with Federal laws.
A decision to refuse to grant registration was to be carried out in not later than five working days and to be forwarded to the applicant, with a delivery notice. This action or inaction, within the required time, could be appealed to the agency or through the National Court.
226. In response to a question from a Member, the representative of the Russian Federation explained that an "Authorised Economic Operator" was a legal entity of a CU Party that met certain conditions, set-forth in Article 39 of the CU Customs Code, including providing a guarantee for the payment of customs duties and taxes, a history of engaging in foreign economic activity, the absence of unfulfilled obligations or debts to the customs authority, the absence of administrative offences in the year prior to the application date, the availability of sufficient record-keeping procedures, and compliance with other relevant requirements of the CU Party under which the entity was established. On the specific issue of the absence of administrative offences in the prior year, he noted that the status of an "Authorised Economic Operator" could not be refused on the basis of minor administrative offences. According to Article 41 of the CU Customs Code and Article 86 of Law No. 311-FZ, an Authorised Economic Operator enjoyed simplified and expedited customs procedures, including those concerning goods in transit. Authorised economic operator status and access to simplified procedures applied in the territory of the CU Party which granted that status. The representative of the Russian Federation also explained that the CU Commission could decide that certain products could not be subject to the simplified procedures set-out in Article 41 of the CU Customs Code, however, the CU Commission had not taken such a decision to date.
227. In response to further questions from Members, the representative of the Russian Federation stated that the Government, in respect of measures affecting trade in goods with other WTO Members, would continue its policy of maintaining an expeditious process for registering legal entities and individual entrepreneurs and applying transparent and predictable requirements that were not burdensome to satisfy. He added that the Russian Federation would not apply registration requirements to limit the possibility for legal persons or individual entrepreneurs (foreign or domestic) to engage in importing and exporting, and that once registered in the Russian Federation, a legal person or individual entrepreneur could import or export products as described in this Report. The representative of the Russian Federation confirmed that the Russian Federation would not make the procedures or overall requirements to register as a legal person or individual entrepreneur more burdensome than necessary, would not discriminate between foreign and domestic applicants in approving requests for registration and would also comply with other applicable provisions of the WTO Agreement. The Working Party took note of these commitments.
228. In order to ensure transparency in registration, in accordance with Article 4 of Federal Law No. 129-FZ, the Federal Tax Service of the Russian Federation was responsible for supervising the State Register, which contained information on the establishment, reorganization and liquidation of legal persons and other respective data. According to Article 6 of the above Law, this information was available to any interested person upon request under the conditions established by the Law. This information was also posted on the website of the Federal Tax Service (www.nalog.ru) and updated on a monthly basis.
229. Noting that the Ministry of Agriculture and the Federal Customs Service of the Russian Federation had in the past made efforts to limit the number of both importing and exporting firms engaged in international trade of certain products, some Members requested an explanation of the reasons for these limitations and the legal basis upon which they might be taken for both domestic and foreign firms importing or exporting.
230. In response, the representative of the Russian Federation noted that there were no limitations on the number of either importing or exporting firms engaged in international trade in the Russian Federation and there were no plans to introduce such limitations in future.
- (a) Alcoholic beverages
231. Some Members expressed concern over the restrictive consequences of the current activity licensing system for the sale of alcoholic beverages. They requested information on the intention of the Russian Federation to introduce new legislation in this area. Noting that the fees charged for the right to import alcoholic beverages greatly exceeded those charged for domestic distribution or export, these Members felt that more detail was also required on this and on any other activity licensing fees associated with importation. In particular, these Members sought information on any plans for establishment of a State monopoly on alcoholic beverages.
232. The representative of the Russian Federation stated that Federal Law No. 171-FZ of 22 November 1995 "On State Regulation of Producing and Turnover of Ethyl Alcohol, Alcoholic and Alcohol-Containing Products" (as last amended on 5 April 2010) established the legal basis for production and turnover of ethyl alcohol, alcoholic products (wine, alcoholic beverages, ethyl drinkable alcohol) and alcohol-containing products (alcohol-containing edible and non-edible products). He added that, previously, according to this Law, a specific requirement of licensing of export/import activity with those goods had existed. However, this requirement had been abolished upon the entry into force of Federal Law No. 102-FZ of 21 July 2005, amending Federal Law No. 171-FZ.
233. A Member asked the Russian Federation to specify the requirements to obtain an activity licence related to alcohol. It expressed a concern that certain requirements updated in December 2010, such as, technical conditions for storage of alcohol, warehouse requirements (safety rules, anti-fire structures, humidity conditions and temperature, etc.), applied by the Federal Service for the Regulation of Alcohol (FSR) some of which differed from one type of alcohol product to another, were difficult to meet, and were applied in an inconsistent manner. This Member noted that these requirements were over-burdensome and could constitute a discriminatory and/or unjustifiable restriction on trade under the WTO Agreement.
234. In response, the representative of the Russian Federation explained that these updated requirements were designed to create adequate conditions for storage and distribution of alcohol and alcoholic products, ensuring the quality and safety of the products and the safety of persons engaged in operation of warehouses. In his view, these requirements were not overly burdensome and were applied on a non-discriminatory basis.
235. Some Members noted that the Russian Federation continued to require an activity licence to engage in producing or distributing alcoholic beverages and ethyl alcohol in order to obtain a licence to import these products. This requirement limited the companies that could import to those engaged in producing or distributing alcoholic beverages and ethyl alcohol in the Russian Federation. Furthermore, a requirement to obtain both the import licence, which could only be issued if an operator had obtained an activity licence, and the activity licence itself led to a cumbersome double licensing situation for foreign operators putting them at a disadvantage as compared to domestic producers. One Member urged the Russian Federation to eliminate this double licensing requirement, and noted that any such requirements, if maintained, would have to comply with the WTO Agreement.
236. The representative of the Russian Federation answered that the elimination of the specific activity licence for imports and exports, mentioned in paragraph 232, already simplified the licensing procedures in the area of trade in alcoholic products. This change led to a system whereby activity licenses were required only for doing business, i.e., producing, distributing and storing alcoholic beverages and ethyl alcohol (the product coverage of the activity licensing system was listed in Table 12), such licenses were valid for no more than five years and whereby while no specific activity licence would be needed for import/export activities, an activity licence for producing, distributing and storing alcoholic beverages and ethyl alcohol was necessary to obtain a licence to import or to export these products. He confirmed that the licensing system did not have any turnover requirement. Conditions and requirements to be fulfilled by legal persons and individual entrepreneurs to get an activity licence to engage in producing, distributing and storing covered alcohol products were stipulated in Federal Law No. 171-FZ of 22 November 1995 (as last amended on 5 April 2010). Pursuant to Resolution No. 154 of 24 February 2009, activity licenses were issued by the FSR and were required to be issued within 30 days after submission of the complete set of documents. Under the draft FSR Administrative Regulation, operators were allowed to apply for a renewal of their existing activity licence not earlier than 60 days before the date of its expiration. In accordance with Federal Law No. 171-FZ, the FSR was required to conclude its consideration of the application for renewal of an activity licence within 15 calendar days from the date of receipt of the application and to issue and notify the applicant in writing of its decision within three calendar days after the FSR concluded its considerations. In response to a question from some Members, the representative of the Russian Federation explained that if, for whatever reason, the activity licence expired while the renewal application was pending, the FSR would require a new application, but would not charge a new fee. However, the goods stored under the terms of the expired activity licence would become illegal from the date of expiration of the licence and subject to seizure.
237. Some Members expressed serious concerns that applicants for activity licence renewal that had complied with all the legal requirements, but nevertheless had not been granted a renewal, were subject to penalties including seizure of their goods, and did not have effective legal recourse and that these measures as applied were open to abuse and unreasonably restricted access to the market.
238. In response, the representative of the Russian Federation stated that, in his view, the current procedure for the renewal of an activity licence did not constitute a restriction on trade, nor was the renewal process overly burdensome. The FSR could refuse to issue a licence only on the basis of the criteria set-out in paragraph 9 of Article 19 of Federal Law No. 171-FZ and could not refuse to issue or renew a licence on the basis of minor documentation errors. An applicant was not subject to any penalties upon the expiration of the activity licence. If the applicant fulfilled the requirements for an activity licence and acted in accordance with other relevant provisions of the legislation of the Russian Federation, the applicant would be granted an activity licence and actions and/or inaction by the FSR could be challenged in Court.
239. In response to a question from a Member the representative of the Russian Federation explained that in cases where an existing activity licence expired, but an application for renewal was pending, an import licence issued to the same operator would remain valid until the end of its term albeit not operational until the issuance of the renewed activity licence. In such cases, the operator would not be required to seek a new import licence if the previously issued import licence had not expired. That is, the import licence would not be automatically considered null and void upon the expiration of the related activity licence.
240. One Member asked for confirmation that the period for which an activity licence was issued or renewed would not be restricted on the grounds that the applicant did not hold a lease on its storage facilities for the full duration of the requested period.
241. In response, the representative of the Russian Federation explained that Federal Law No. 171-FZ stipulated the exhaustive list of documents which were required for the application for an activity licence. In accordance with Article 19.17 of the Federal Law the activity licence can be renewed for the period requested by the applicant, but not more than five years. Neither Federal Law No. 171-FZ, nor other legal acts contained the requirement for the applicant to provide a lease contract on storage facilities valid within the term of validity of an activity licence. He further confirmed that the FSR would only undertake actions in conformity with the Federal Law.
242. One Member emphasized that the Russian Federation should ensure full national treatment in respect of all laws, regulations and requirements concerning internal sale, offering for sale, purchase, transportation, distribution or use of imported alcoholic beverages and ethyl alcohol.
243. In response to a question from a Member, the representative of the Russian Federation confirmed that the non-automatic import licensing requirements were explained in the Section "Quantitative Import Restrictions, including Prohibitions and Quotas and Import Licensing Systems" of this Report and repeated that, from the date of the accession of the Russian Federation to the WTO, non-automatic import licensing for alcoholic beverages would be eliminated and replaced by an automatic licensing procedure whereby licenses would be issued upon submission of the appropriate and complete documentation.
244. The representative of the Russian Federation explained that, taking into account the specificity of the alcohol market, i.e., potential danger of low-quality alcohol products for the health of people, the Government of the Russian Federation imposed the following requirements to alcohol products, which were applied in a non-discriminatory manner towards domestic and foreign-made products:
- marking of alcoholic products containing more than 9 per cent specific volume of ethyl alcohol by excise stamps, which were available for foreign exporters;
- registering of ethyl alcohol, alcoholic products and alcohol-containing products in the Unified Federal Automatic Information System; and
- mandatory labelling of every unit of alcoholic beverages with a warning inscription about the negative effect of alcohol for the health.
245. Some Members noted the electronic system for the control of alcoholic products, the Unified Federal Automatic Information System (UFAIS), which was linked to the mandatory use of excise duty stamps, had caused problems when the system was introduced and disrupted trade. While noting that these initial problems had been rectified, Members expressed continuing concerns about the excessive reporting requirements which obliged importers to produce detailed reports about the use of every single excise duty stamp. Members noted that this mandatory requirement was very burdensome and questioned the need for it. Members also expressed concern that domestic producers were not subject to the same requirements. In response, the representative of the Russian Federation stated that as of 8 January 2009, according to Government Resolution No. 522 of 25 August 2006 (as last amended on 9 March 2010), importers and domestic producers had the same reporting requirements related to stamps for alcoholic beverages. Furthermore, Members requested a confirmation that the excise stamps issued under an activity licence would continue to remain valid also, if that licence was renewed. Members also asked about the intention of the authorities of the Russian Federation to introduce a new excise duty stamp which would need to be applied in addition to the stamp introduced already ("second stamp").
246. Some Members also asked about mandatory guarantees required for imported products in accordance with Order No. 663 of the Federal Customs Service, dated 13 April 2009. They expressed concern about the fixed guarantee levels set-out in this document which were in many cases excessive compared to the actual customs payments due. They also raised concerns about the reimbursement periods of these excessive payments, which were often very lengthy and caused significant economic losses to the operators. Further, some Members asked about the requirement for a second guarantee concerning the delivery of goods.
247. In response to the question of some Members about the basic guarantee required for imported products, the representative of the Russian Federation confirmed that the requirements regarding basic guarantees were established by Order No. 663 of the Federal Customs Service. Pursuant to the Order, the fixed amount of basic guarantees was set in accordance with Article 88.4 of the CU Customs Code. Pursuant to Article 88.1, the amount of guarantee of customs payment was calculated on the basis of the sums of the customs duties and taxes payable in the CU Party where the goods were to be released for domestic consumption or export. If the goods entered the Russian Federation under customs transit to another CU Party, the amount of the guarantee of payment was determined on the basis of the amount of the customs duties and taxes payable in the CU Party in which the goods would be released or from which they would be exported, but the guarantee amount would be no less than the customs duties and taxes that would be paid if the goods were released in or exported from any other CU Party. Where the sum of payable customs duties and taxes could not be exactly calculated due to the non-provision to the customs body of exact information on the nature of the goods, their name, quantity, country of origin and customs value at the time the guarantee payment was assessed, the amount of the guarantee of payment was to be set on the basis of the highest rates of customs duties and taxes, the value of goods and/or their natural physical characteristics (quantity, weight, volume and other characteristics) which could be assessed on the basis of available data.
248. Further, he confirmed that Governmental Resolution No. 699 of 24 October 2007 "On Amending Governmental Resolution No. 866 of 31 December 2005" had abolished the double bank guarantee on imported alcohol products. He confirmed that, concerning guarantees and deposits for imports of alcoholic products, no additional documents, such as "transit guarantee certificates" or other requirements, were necessary for the importation of alcoholic products. As regards some concern from Members on the limitation of the number of banks that could provide guarantees to importers and on the cap on the value of guarantees that could have been provided by banks, the representative of the Russian Federation explained that these provisions were imposed to secure customs payments and interest payable at the clearance of goods for free circulation and they were not aimed at indirect protection of domestic products. He added that both foreign and domestic producers could provide guarantees issued by only those banks which had been included in the list of banks-participants of the system of insured accounts and that there was no discrimination on the basis of origin of an operator in issuing the guarantees by these listed banks. He added that, pursuant to Article 62 of Federal Law No. 86-FZ of 10 July 2002 "On the Central Bank of the Russian Federation" (as last amended on 26 April 2007), the Bank of Russia could set special standards for banks in order to ensure stability of credit organizations. The maximum level of risks for each borrower was limited by one of these standards.
249. In reply to the question about the UFAIS system, the representative of the Russian Federation stated that the UFAIS system had been introduced by amendments to Federal Law No. 171-FZ with the aim of establishing better control upon the alcoholic products which were distributed in the territory of the Russian Federation and preventing the introduction of counterfeit products into the market. This informational system contained information provided by the enterprises performing production and distribution of ethyl alcohol, alcoholic products and alcohol-containing products. According to the rules of the functioning of the system, established by Resolution of the Government of the Russian Federation No. 522 of 25 August 2006 (as last amended on 9 March 2010), the information about the products subject to import and about the company which would distribute the products in the territory of the Russian Federation (taxpayer identification number, information about the activity licence and, if appropriate, on the import licence), was provided to the customs authorities in electronic form. In response to a question from a Member concerning the impact of the creation of the Customs Union on the UFAIS system, the representative explained that the excise duty stamps and the UFAIS system were specific to the Russian Federation, and that alcoholic products from Kazakhstan and Belarus were treated as imports for the purpose of the UFAIS system.
250. In response to a question from a Member, the representative of the Russian Federation explained that excise stamps already issued under an activity licence would remain valid and could continue to be used if that activity licence was renewed.
251. The representative of the Russian Federation underlined that there were currently no plans to introduce additional requirements concerning a second excise duty stamp and if such a requirement were introduced, it would be non-discriminatory and otherwise consistent with WTO requirements. He further confirmed that any excise stamp requirement would be applied consistent with the WTO Agreement. He also added that the Russian Federation would apply the requirements regarding the guarantees in a manner consistent with the WTO Agreement, including by ensuring that the guarantees would not significantly exceed the actual payments due. The Working Party took note of these commitments.
252. In response to the question of some Members about the regulation of import to the Russian Federation of denaturized substances and denaturized alcohol-containing products, the representative of the Russian Federation said that, since 1 July 2007, the production and sale of such products (including import) was limited to those which were specified in the list established by Government Resolution No. 401 of 25 June 2007 (as last amended on 31 October 2009) implementing Federal Law No. 171-FZ of 22 November 1995 that had entered into force on 9 December 1995 (as amended on 29 December 2006).
253. In response to the question of some Members concerning State monopoly on alcohol, he informed that Federal Law No. 171-FZ of 22 November 1995 "On State Regulation of Producing and Turnover of Ethyl Alcohol, Alcoholic and Alcohol-Containing Products" (as amended on 1 December 2007) envisaged the possibility of establishing a State monopoly for manufacture and (or) turnover of ethyl alcohol, alcoholic products and alcohol-containing products in the territory of the Russian Federation. Similarly, the CU Agreement on Non-Tariff Regulation envisioned the possibility of an exclusive licence to import certain products to be granted by the CU Commission. However, neither the establishment of a State monopoly nor the grant of an exclusive import licence was anticipated at this time.
254. The representative of the Russian Federation noted that licensing fees were provided for in the Tax Code of the Russian Federation (see Table 12). The Code was designed to provide a unified licensing fee rate for the right of production, storage and sale of alcoholic products. The representative of the Russian Federation further stated that discriminatory fees on imported products in relation to licensing procedures had been eliminated.
- (b) Pharmaceuticals
255. Some Members requested additional information concerning the future elimination of activity licensing requirements as a condition for importation in the area of pharmaceuticals and sought clarifications regarding the steps taken by the authorities of the Russian Federation to bring existing practices into consistency with WTO requirements.
256. The representative of the Russian Federation said that in order to protect human and animal life and health, the right to import pharmaceuticals, including veterinary drugs, was granted to the following Russian entities, including foreign-invested enterprises, registered as a Russian legal person, in accordance with Federal Law No. 61-FZ of 12 April 2010 "On the Circulation of Medicines":
- enterprises manufacturing pharmaceuticals, which imported pharmaceutical products for their own manufacturing of pharmaceuticals;
- wholesale enterprises of pharmaceuticals;
- research and development institutes and laboratories, which carried out development research and quality control, effectiveness, and safety of pharmaceuticals;
- foreign developers and foreign producers of pharmaceuticals for clinical trials, State Registration of pharmaceuticals, inclusion of pharmaceutical substances in the State registry of pharmaceuticals and quality control of them under the permission of the authorised body; and
- medical organizations for the provision of medical assistance to certain patients.
257. Pursuant to Federal Law No. 128-FZ of 8 August 2001 "On Licensing of Specific Types of Activities" (as last amended on 28 September 2010), the activity licensing in respect of pharmaceuticals, including veterinary drugs, was maintained because of potential damage of such activity to human or animal life and health. Licenses for the production or distribution of these goods were issued for a period of five years. In accordance with Article 15 of Federal Law No. 128-FZ, a fee of RUB 2,600 was charged for the issuing of each activity licence for pharmaceutical activity, e.g., production of pharmaceuticals, including veterinary drugs, and for activities in distribution of pharmaceutical products for medical purposes.
258. Some Members of the Working Party requested the Russian Federation to confirm that the ability to request an activity licence for trade in pharmaceuticals was reserved for Russian Federation firms and to explain what that meant in practice for foreign-owned firms in the Russian Federation, foreign exporting firms not established in the Russian Federation, and domestic or foreign individual entrepreneurs seeking to export pharmaceuticals to the Russian Federation. They asked the Russian Federation to confirm that activity licenses would be made available to all registered companies (domestic or foreign). They noted that this would not prevent the Russian Federation from operating State-trading enterprises or applying controls on imports and exports for example for purposes of human health, as long as these were applied in a manner consistent with relevant WTO obligations.
259. In response, the representative of the Russian Federation recalled that foreign legal persons intending to import pharmaceuticals, including veterinary drugs, into the territory of the Russian Federation were required to register as a legal person of the Russian Federation to hold a licence to engage in the relevant type of pharmaceutical activity (production, distribution) in the territory of the Russian Federation, pursuant to the provisions of Federal Law No. 128-FZ and to acquire import licenses from the Ministry of Industry and Trade.
260. Members continued to express concerns regarding these requirements. An importer had to obtain an activity licence to engage in production or distribution of pharmaceuticals in the Russian Federation as a condition for receiving an import licence. The criteria applied to obtain these activity licenses did not relate to importation and requiring an importer of pharmaceuticals to meet the requirements to produce or wholesale pharmaceuticals in the Russian Federation could limit imports of these goods.
261. The representative of the Russian Federation stated that, under Article 48 of Federal Law No. 61-FZ of 12 April 2010 "On the Circulation of Medicines", domestic and foreign natural persons were not permitted to import pharmaceuticals, including veterinary drugs, to the Russian Federation. Some Members of the Working Party requested information on whether natural persons were permitted to manufacture pharmaceuticals in the Russian Federation. Those Members noted that the fee for each importation was burdensome, delayed imports and unnecessarily added to the expenses of importation, and appeared to be a revenue measure. In response, the representative of the Russian Federation explained that under Federal Law No. 128-FZ of 8 August 2001 "On Licensing of Specific Types of Activities" (as last amended on 30 September 2010) and according to Government Resolution No. 684 of 3 September 2010 "On Regulations on Licensing of the Manufacturing of Pharmaceuticals" the manufacturing of pharmaceuticals in the Russian Federation could not be carried out by natural persons. Regarding importation of pharmaceuticals, he noted that legal persons with foreign participation (including fully foreign-owned legal persons) enjoyed the same rights as other Russian legal persons in the Russian Federation and could obtain the required activity licence under the same conditions.
262. The representative of the Russian Federation confirmed that activity licenses were made available to all companies registered in the Russian Federation as legal entities (including those with foreign participation and those entirely owned by foreigners), which satisfied government regulatory criteria. He further noted that the Rules of Import and Export of Medicines Registered in the Russian Federation (approved by Government Resolution No. 438 of 16 July 2005 "On the Procedure for Importation and Exportation of Medicines for Medical Purposes"), Federal Law No. 61-FZ of 12 April 2010 "On the Circulation of Medicines", as well as the CU Agreements listed in paragraph 217, CU Commission Decision No. 132, and, more specifically, by the Regulations on the Order of Entry into the Customs Territory of the Customs Union of Medicines and Pharmaceutical Ingredients, defined the procedure for importation/exportation of medicines and pharmaceutical substances registered in the Russian Federation. The representative of the Russian Federation also recalled the information contained in the Section on "Quantitative Import Restrictions, including Prohibitions and Quotas and Import Licensing Systems" regarding acquisition of licenses for the importation of pharmaceuticals.
- (c) Goods with Encryption Technology
263. Some Members noted that the Russian Federation also required an activity licence to engage in production or distribution of certain goods with encryption technology. Moreover, the Russian Federation required that applicants for a licence to import certain goods with encryption technology also had an activity licence to distribute or produce goods with encryption technology (see paragraphs 471 to 487 of the Section "Quantitative Import Restrictions, Including Prohibitions and Quotas, and Import Licensing Systems"). These Members expressed their continued concern that the requirement to have an activity licence as a condition for obtaining an import licence was an unjustifiable restriction on imports.
264. In response, the representative of the Russian Federation recalled the sensitivity of the goods that were subject to the import licensing requirement and noted that many WTO Members regulated trade in goods with encryption technology. He noted, however, that pursuant to Government Resolution No. 957 "Approving Regulations on Licensing of Specific Types of Activities Related to Encryption (Cryptographic) Products" of 29 December 2007, certain goods containing encryption technology were exempt from the activity licensing requirements contained in those regulations. He further noted that, pursuant to the CU Regulations on the Order of Entry into the Customs Territory of the Customs Union and removal of the Customs Territory of the Customs Union of Encryption (Cryptographic) Means, of 1 December 2009, and as described in paragraphs 471 to 487 of the Section "Quantitative Import Restrictions, Including Prohibitions and Quotas, and Import Licensing Systems" of this Report, many goods containing encryption technology no longer required an import licence.
- (d) Precious stones and metals
265. The representative of the Russian Federation noted that, as of 1 January 2010, the procedures for the import and export of precious stones and metals were set-forth in the CU Regulations "On the Order of Entry into the Customs Territory of the Customs Union within the Eurasian Economic Community and the Export from the Customs Territory of the Customs Union within the Eurasian Economic Community Precious Metals, Precious Stones and Commodities Containing Precious Metals" ("Precious Stones and Metals Regulations"), adopted by the CU Commission Decision No. 132 on 27 November 2009. Pursuant to these Regulations, those products listed in sections 2.9 and 2.10 of the Common List attached to Decision No. 132 (see Table 28) were subject to licensing requirements. Pursuant to paragraph 14 of the Precious Stones and Metals Regulations, an activity licence to carry out operations with precious metals or stones was required in order to export precious metals and stones (excluding diamonds) from the CU; similarly, under paragraph 24 of the Precious Stones and Metals Regulations, the export for processing of precious metals and gemstones could be carried out only by legal persons or individual entrepreneurs who hold an activity licence. The representative of the Russian Federation further noted, however, that Federal Law No. 128-FZ of 8 August 2001 "On Licensing of Specific Types of Activities" (as last amended on 28 September 2010) had abolished the activity licensing requirement for trade of precious metals, precious stones, and jewellery containing precious metals and precious stones, although an activity licence was required to obtain a licence to export.
266. Further the representative of the Russian Federation noted that according to Presidential Decree No. 742 of 21 June 2001 "On the Procedure of Importation into and Exportation from the Russian Federation of Precious Metals and Precious Stones" (as amended on 11 January 2007), there were no statutory licensing or quantitative requirements for imports of precious stones and metals to the territory of the Russian Federation. Moreover, precious stones and metals had been removed from the list of currency valuables, pursuant to Federal Law No. 173-FZ of 10 December 2003 "On Currency Regulation and Currency Control" (as last amended on 22 July 2008), excluding data on extraction, transfer, and consumption of precious stones and metals from the list of State Secret Data, in accordance with Federal Law No. 153-FZ of 11 November 2003 "On Amending Article 5 of the Federal Law of the Russian Federation On State Secrets" and Presidential Decree No. 243 of 3 March 2005 "On Amendments to the List of State Secret Data, Approved by Decree of the President of the Russian Federation No. 1203 of 30 November 1995". These amendments simplified the procedure for performing transactions with precious stones and metals, made these transactions more transparent and removed a number of restrictions in the turnover of precious metals and precious stones, such as restricted rights of legal entities with respect to ownership and disposal of this category of goods. In addition, Presidential Decree No. 1137 of 20 September 2010 "On the Adoption of the Regulation on Import to the Russian Federation from the Countries not party to the Customs Union of the EurAsEC and Export from the Russian Federation to such Countries of Precious Metals, Stones, and Raw Materials Containing Precious Metals" abolished quantitative export restrictions for platinum and platinum group metals and raw diamonds; allowed exports of ferrous metals materials containing precious metals and removed the ban for export of scrap and wastes; and permitted the future liberalization of international trade involving these goods, waste of precious metals, ores and concentrates of precious metals, and unprocessed precious metals. These amendments were also aimed at abolishing quantitative restrictions for export of natural diamonds for mining subjects and diamonds of 10.8 carats and more, if these natural diamonds were obtained by foreign persons from mining subjects at the auctions carried out in accordance with the legislation of the Russian Federation. Decree No. 1137 of 20 September 2010 also provided that the exportation from the Russian Federation under the customs regime of export of natural diamonds (except for unique natural diamonds and the natural diamonds of the form "board" and "drilling" regardless of their sizes and degrees of processing, sieve diamonds of "-3+2" classes and lower classes), refined platinum and metals of platinum group in the form of bullions, plates, powder and granules, and also nuggets of the precious metals, the raw precious metals, ores and concentrates of precious metals, the raw goods containing precious metals, scrap and waste products of precious metals could be carried out without quantitative restrictions on the basis of export licences, as provided for in the sections 2.9 and 2.10 of the Common List attached to Decision No. 132 (see Table 28) which were issued by the Ministry of Industry and Trade of the Russian Federation.
267. Some Members requested further clarification on whether the Russian Federation maintained any restrictions or requirements other than tariffs on the importation of precious metals and stones, notably whether imports of these products were also restricted by import licensing, or whether it was necessary to import them through customs checkpoints designated for declaration of such goods as was the case with diamond exports. These Members also expressed concerns in relation to export requirements for precious stones and metals.
268. In response, the representative of the Russian Federation stated that imports of precious stones and precious metals and products containing precious stones and precious metals were subject to customs tariff only. He added that imports of precious metals, precious stones and jewellery must be carried out through custom checkpoints designated for declaration of such goods (Presidential Decree No. 1137). These designated customs checkpoints were properly equipped with specialists qualified in the area of precious metals and precious stones. These checkpoints were part of the customs system of the Russian Federation. He also added that mentioned procedures were in accordance with the International Convention on the Simplification and Harmonization of Customs Procedures (Kyoto 2000), in particular, with its Specific Annex A, Chapter 1, according to which national legislation specified the places at which such goods might be introduced into the Customs territory.
- (e) Other licensing requirements
269. Some Members expressed concerns in relation to licensing requirements governing access to oil and gas pipelines or other distribution networks for export products which could operate in a manner so as to restrict the volume of oil and gas exported from the Russian Federation, and could be inconsistent with the requirements of Article XI of the GATT 1994. They requested the Russian Federation to provide further information on the operation of these regimes, including on the regime for export licensing of energy products.
270. Concerning questions on licensing related to import or export of electricity and import of natural gas, the representative of the Russian Federation stated that there were no export/import licenses requirements for these products.
271. He added that Federal Law No. 117-FZ of 18 July 2006 "On Export of Gas" had established the exclusive right to export natural gas from the Russian Federation to the organization being the owner of the unified gas supply system and its branch companies. He noted that the information of the gas export licensing regime was contained in the Section "Export Licensing Procedures" of this Report.
272. He added that according to Federal Law No. 128-FZ of 8 August 2001 "On Licensing of Specific Types of Activity" (as last amended on 28 September 2010), there were no licensing requirements for the following types of activity:
- the operation of oil and gas production facilities;
- the sale of oil, gas and oil/gas processing products;
- the processing of oil, gas and oil/gas processing products thereof;
- the transportation of oil, gas and oil/gas processing products;
- the storage of oil, gas and oil/gas processing products; and
- the activity of operating gas networks.
273. The representative of the Russian Federation recalled his earlier statements on registration requirements, and further stated that such requirements for export contracts had been originally introduced by Government Resolution No. 758 of 1 July 1994 "On Measures to Improve the State Regulation of Export of Goods and Services" (as last amended on 8 December 2010), and had been repealed by Government Resolution No. 300 of 21 March 1996 "On Recognizing as Invalidated Certain Decisions of the Government of the Russian Federation on the Issue of Registering Contracts in the Export of Commodities". Registration of import contracts had never been required in the Russian Federation, and the Russian Federation did not maintain any special mandatory registry of import or export contracts. He also confirmed that his authorities had no plans to introduce such registration in any form in future. He further stated that the subjects of the Russian Federation were not permitted to impose requirements on legal or natural persons that might affect their rights to engage in importation or exportation of goods.
274. Some Members of the Working Party stated that the Russian Federation should undertake the following commitments in this area: the Russian Federation would guarantee that no restrictions would be maintained on the right to trade in goods except as would be consistent with WTO provisions and that all laws and regulations relating to trading rights in the Russian Federation, whether adopted by the Russian Federation or the competent bodies of the CU, and would be applied in a manner consistent with relevant WTO obligations. Specifically, the Russian Federation should confirm that no restrictions would be maintained on the rights of individuals and enterprises, including those with foreign participation, to import and export goods into the customs territory of the Russian Federation except as would be consistent with provisions of the WTO Agreement. Nor would individuals and firms be restricted in their ability to import and export based on their registered scope of business. The criteria for registration and enrolment in the State Register of legal persons would be generally applicable and published in the Official Gazette, along with any further changes. Without prejudice to other relevant provisions of the WTO Agreement, the Russian Federation should ensure that any laws and regulations relating to the right to trade in goods would not restrict imports of goods in violation of the general prohibition on quantitative restrictions under Article XI:1 of the GATT 1994, nor should they discriminate against imported goods in violation of the provisions of Article III:4 of the GATT 1994. Any associated fees, taxes and charges should also be limited to the approximate cost of services rendered and their application should not lead to discrimination in favour of like domestic products. In particular, Members requested that in respect of imports of alcohol, pharmaceuticals, and goods with encryption capability, the Russian Federation eliminate the requirement to obtain an import licence and/or an activity licence as a pre-condition for import or export.
275. The representative of the Russian Federation confirmed that, from the date of accession, the application of all laws, regulations and other measures affecting importation or exportation of goods, whether by the Russian Federation or the competent bodies of the CU, would be in conformity with relevant provisions of the WTO Agreement, including the Agreement on Import Licensing Procedures and Articles I, III, VIII, and XI of the GATT 1994. Addressing the concerns of some Members about the current regulation of importation of alcohol, pharmaceuticals and products with encryption technology, which required issuance of an import licence and/or activity licence as a pre-condition for importation, as set-out in paragraphs 473, 476 to 481, he confirmed that, upon its accession to the WTO, the Russian Federation would ensure that the person who had the right, according to CU Agreements, CU Commission Decisions or Russian legislation, to declare the imported goods would be permitted to pay relevant customs duties, fees and charges in connection with importation of alcohol, pharmaceuticals or products with encryption technology without presenting an import and/or activity license(s) to the customs authorities, and that these goods would be permitted to be withdrawn from the territory of the customs checkpoint for the purpose of free circulation in the territory of the Russian Federation by the holder of the respective import and/or activity licenses. The Working Party took note of these commitments.
1. Import Regulations
- Customs Regulations and Procedures
276. The representative of the Russian Federation recalled that the Russian Federation had been an active participant at the World Customs Organization (WCO), even before gaining full Membership on 8 July 1993. The Russian Federation had also joined the International Convention on the Harmonized Commodity Description and Coding System on 1 January 1997, as well as the Customs Cooperation Council, the ATA Carnet, and the Nairobi and Istanbul Conventions. His Government had also joined the International Convention on the Simplification and Harmonization of Customs Procedures (Revised Kyoto Convention, 1999).
277. Members asked the Russian Federation to provide a description of the customs regime in effect in the Russian Federation, including Customs Union legal acts, together with copies of all relevant implementing instruments in a WTO working language.
278. The Representative of the Russian Federation noted that, as of 1 July 2010, CU Agreements, CU Decisions and other CU legal documents, in particular the CU Customs Code, as amended by the Protocol on the Amendment, and Addition of the Treaty on the Customs Code of the Customs Union of 27 November 2009, signed on 16 April 2010, had provided the legal framework for the customs regime of the Russian Federation and other CU Parties. Pursuant to these CU legal acts, customs regulation was also provided by the domestic legislation of CU Parties. In the Russian Federation, this domestic legislation was Federal Law No. 311-FZ of 27 November 2010 "On Customs Regulation". These legal acts had replaced the Law of the Russian Federation No. 5003-1 of 21 May 1993 "On Customs Tariff" (as last amended on 3 December 2007) and Federal Law No. 61-FZ of 28 May 2003 "Customs Code of the Russian Federation", which had entered into force on 1 January 2004, as the legal basis for the customs regime of the Russian Federation. He further explained that Article 357.10 of the Customs Code of the Russian Federation and provisions of the Law on Customs Tariff continued to be in effect to the extent that they did not conflict with the CU Customs Code or Federal Law No. 311-FZ. The representative of the Russian Federation explained that the CU Customs Code was based on generally accepted international rules, including the Revised Kyoto Convention. The CU Customs Code was the principal legal document that governed customs administration and customs procedures, including the rights and responsibilities of national customs authorities, importers, and exporters. It contained detailed provisions related to customs control, operations, payments, and various types of customs "procedures" (e.g., release for domestic use, export, re-importation and re-exportation, inward and outward processing, temporary importation or exportation, use of customs warehouses, duty free trade/shops, destruction of goods and rejection in favour of the State). The CU Customs Code also established the right of appeal against customs decisions and addressed WTO rules and disciplines on the protection of intellectual property rights at the border, customs valuation, customs fees, special economic zones, trade in transit, and rules of origin. He noted that additional provisions on these issues were found in other CU Agreements and Decisions (as outlined in the specific Sections of this Report covering these issues). Further details relating to customs issues were set-out in Federal Law No. 311-FZ, notably concerning specific rules for the application of customs procedures in the Russian Federation which were not fully covered in the CU Customs Code.
279. In response to a question from some Members, the representative of the Russian Federation noted that the customs bodies in the Russian Federation constituted a single Federal system and that their functions were established and authorised by the provisions of the CU Customs Code, Federal Law No. 311-FZ and provisions of previous domestic laws that remained in effect. He noted that, in accordance with Government Decision No. 459 of 26 July 2006 "On the Federal Customs Service" (as last amended on 15 June 2010), the Federal Customs Service (FCS) was the authorised Federal executive body, which carried out the functions of: elaboration of State policy and the implementation of legal regulation (including CU Decisions); control and supervision in the sphere of the customs system; as well as the functions of a currency control agent and special functions of fighting smuggling and other crimes and administrative offences. The activity of the FCS was directly subordinated to the Government of the Russian Federation.
280. He added that pursuant to Article 4 of Federal Law No. 311-FZ, the Government of the Russian Federation and its executive bodies (e.g., the FCS) could issue, within the limits of their respective competence and in cases clearly defined by the CU Customs Code and related legal acts as well as legal acts of the Russian Federation, normative legal acts pertaining to customs matters. The President could also issue a decree on these matters. The representative of the Russian Federation explained that FCS orders covered procedural issues concerning the activities of customs authorities and the majority of these orders were of an administrative or procedural nature. Other CU legal acts and national laws and measures that directly regulated foreign trade in goods were referred to in other relevant Sections of this Report, including "Registration Requirements for Import/Export Operations", "Other Customs Formalities", and "Customs Valuation". The main functions of the FCS were set-out in the Regulation "On the Federal Customs Service", which had been approved by Government Decision No. 459 of 26 July 2006 "On the Federal Customs Service" (as last amended on 15 June 2010).
281. The CU Customs Code and Federal Law No. 311-FZ also contained a number of provisions giving the Customs authorities of the Russian Federation the power to issue normative legal acts pertaining to the form of documents to be used in customs affairs, procedures for inter-departmental co-operation, co-operation with foreign customs authorities, customs statistics, as well as other matters not related to the imposition of any obligation on participants in foreign trade activities or the definition of their rights. The Customs authorities did not have any power to establish customs administration principles, conditions of customs control or any regulation regarding a question of principle. He added that the vast majority of provisions of the CU Customs Code and other CU Agreements and Decisions relating to customs issues were of direct application, removing the element of FCS discretion from many customs operations.
282. The CU Customs Code established the right of appeal with regard to customs issues in Article 9. Articles 36-49 of Federal Law No. 311-FZ, contained detailed provisions on the right of appeal, so as to ensure compliance of national customs administrations and their officers with requirements in their decision-making, including action or inaction. Right of appeal could be exercised through lodging a complaint with the hierarchal superior customs administrations and/or through judicial procedures (for further details, see the Section "Framework for Making and Enforcing Policies" of this Report). To ensure transparency, Article 51 of Federal Law No. 311-FZ also required relevant authorities to publish legal acts of customs regulations in the official publications.
283. Pursuant to Article 181 of the CU Customs Code, a customs declaration had to be presented at the time of presentation of the goods to Customs authorities at the point of destination in the customs territory of the Russian Federation, i.e., when placed under one of the customs procedures, other than the customs procedure of customs transit, specified in Article 202, or at the day of completion of customs transit procedure, if imported goods were not declared at the point of destination. According to Article 193 of the CU Customs Code, if the goods were not produced to the customs authority, which had registered the customs declaration, or to the other customs authority specified by the customs legislation of the member state within 30 calendar days from the day following the day of its registration or if the prohibitions and restrictions were introduced since then, the customs authority shall refuse to release such goods. Goods placed under the transit procedure were declared in accordance with Article 182 of the CU Customs Code. The representative of the Russian Federation added that Articles 38 to 41 of the CU Customs Code and Articles 85 to 96 of Federal Law No. 311-FZ provided for special simplified customs formalities for "Authorised Economic Operators," i.e., persons who met the requirements listed in Article 39 and Article 87, respectively, including:
- provision of guarantee for the payment of customs duties and taxes (amount varies);
- performance of foreign economic activities for at least one year;
- absence of tax arrears or unfulfilled obligation to pay customs payments, interest, or penalties; absence of repeated (two or more) customs administrative offences during the previous year;
- absence of a record of conviction for economic criminal offenses by the chief officers and employees conducting customs operations under the simplified procedures;
- use of an accounting system in their commercial documents for the foreign trade activity that enabled customs authorities to compare the information contained in such documents with the information presented to customs authorities in the process of customs clearance; and
- if the authorised economic operator exercises temporary storage of goods, compliance with the requirements for this status found in Article 89 of Federal Law No. 311-FZ.
284. A Member expressed concern that the procedures for registration of importers for the special simplified customs formalities referred to in paragraph 283 were quite cumbersome and that it would take several months to obtain authorization for such registration. The Member requested the Russian Federation to make a commitment to simplify the above procedures and to shorten the period required for issuing the above authorization. In response, the representative of the Russian Federation noted that the Russian Federation would continue its policy for the development of the procedures of special simplified customs formalities with respect to bona fide participants of foreign economic trade in the framework of the requirements established by Article 39 of the CU Customs Code and Article 88 of Federal Law No. 311-FZ with a view to increasing the effectiveness of the procedures of special simplified customs formalities.
285. The representative of the Russian Federation further explained that the CU Customs Code also provided for the maximum period that goods could be kept in temporary (bonded) storage. According to Chapter 25 of the CU Customs Code and Section 23 of Federal Law No. 311-FZ, goods under customs registration could be placed in temporary storage warehouses, prior to their release by the customs authorities. Temporary storage warehouses were owned by Russian legal persons, possessing operable storage facilities that could be used for ensuring the safety of goods, provided that the warehouse owner could present financial guarantees, and was ready to assume responsibility for the goods in favour of the owner. Customs authorities could also operate such storage facilities. In some cases, goods could also be temporarily stored in the warehouse of the importer (Articles 200 and 201 of Federal Law No. 311-FZ). Temporary storage of goods was limited to two months from the date following the date of registration by the customs authorities, a period that could be extended for a maximum of two more months, if customs clearance had not been concluded. According to Article 170 of the CU Customs Code, the CU Commission was authorised to determine a shorter term of storage for particular categories of goods. Items in the process of international postal exchange and luggage from passenger aircrafts that had not been collected could be held in temporary storage for up to six months. Upon expiration of the temporary storage period, the goods, that had not been placed under the customs procedure, were detained and subject to seizure for sale or destruction, as provided for in Chapter 2 of the CU Customs Code. Nevertheless, the sum resulting from the sale of the goods would be kept for three months after the sale, during which it could be returned to the owner, upon request and after deduction of the customs charges, taxes and other expenses pertaining to the storage and sale of the goods. The representative of the Russian Federation referred Members to the Section "Regulation of Trade in Transit" of this Report for information on customs escort.
286. He further stated that Article 70 of the CU Customs Code set-out a list of customs payments (import duty, export duty, value added and excise taxes, customs fees and, as necessary, safeguard, anti-dumping and countervailing duties on imported goods). Article 186 of the CU Customs Code specified those persons who could be responsible for declaration of goods and payment of customs payments, and the legal grounds for exemption of persons or products from such payments was found in Article 80 and 81 (for further information on tariff exemptions, see the Section "Tariff Exemptions"; and on customs fees, see the Section "Fees and Charges for Services Rendered" of this Report). The CU Customs Code also authorised deferment of payments and making payments in instalments. Articles 132 to 136 of Federal Law No. 311-FZ of 27 November 2010 "On Customs Regulation" stipulated the grounds for deferment of payments and provided a list of circumstances in which they were permitted. Articles 89 to 90 of the CU Customs Code set-out the mechanism for remission of overpaid or over-recovered customs payments from the customs authorities, supplemented by Articles 147 to 149 of Federal Law No. 311-FZ. The customs authority was required to inform the payer of the overpaid or over-recovered customs payments within one month of the detection of the overpayment or over-recovery. Articles 91 to 93 of the CU Customs Code provided for the recovery of unpaid customs payments to the customs authorities, and Articles 150 to 160 of Federal Law No. 311-FZ detailed the procedures to be used. Chapter 28 of the CU Customs Code also specified the procedures and time-frames for releasing goods (Articles 195 to 201). Pursuant to Article 196 of the CU Customs Code, the customs authority had to take a decision on release of the goods not later than one working day from the date of registration of the customs declaration, unless specifically provided for elsewhere in the CU Customs Code, e.g., as provided for in Article 331, concerning intellectual property protection. According to Article 186.2 of the CU Customs Code, in case of a preliminary customs declaration, a decision on the release of the goods was required to take one working day from the date of presentation of the goods to the customs authority registering the declaration.
287. The representative of the Russian Federation also noted that if, when examining a customs declaration and any other documents or data, customs authorities discovered any signs suggesting that the information stated by the declarant might contain fictitious details influencing the amount of dutiable payments or that the declared information had not been properly evidenced, customs authorities could conduct an additional examination to accurately determine the necessary payments. If the examination could not be conducted within the time limits provided for the release of goods from customs control, the goods could be released upon presentation of a guarantee for the duty payments in the amount of the customs payments that might be additionally charged as a result of additional examination (Article 69 of the CU Customs Code).
288. The declarant, when securing a customs payment, had the right to use any kind of security envisaged by the CU Customs Code (Article 86), provided that the customs authority recognised, depending on the circumstances of each particular case, the reliability of the security used. In such case, the declarant was advised in writing of the amount required. Article 196 further provided that the goods must be released no later than one day following the date of registration of the customs declaration. Article 220 of Federal Law No. 311-FZ stated that this term could be prolonged until a security for customs payment was provided. Article 85 of the CU Customs Code provided for cases in which the security for customs payment was required and Article 86 specified the methods of providing a security for customs payment. The declarant could choose which method to use. These methods included: (i) a personal guarantee, including a surety bond; (ii) a payment in cash at the desk of the cashier or transfer of funds to the account of the customs office at the Federal Treasury (cash deposit); (iii) a bank guarantee; or (iv) a mortgage of goods and other property. Each method was described in detail in Articles 140 to 146 of Federal Law No. 311-FZ (further information on the implementation of Article 13 of the Agreement on the Implementation of Article VII of the GATT 1994 was provided in the Section "Customs Regulations and Procedures" of this Report).
289. Some Members expressed concern that the one-day time period for examining and clearing goods allowed under Article 196 was subject to exceptions provided by the CU Customs Code and Federal Law No. 311-FZ, stating that this could unnecessarily hold up goods in clearance. In response, the representative of the Russian Federation explained that even before the maximum time period had been reduced from three business days (under Federal Law No. 61 of 28 May 2003 "Customs Code of the Russian Federation") to only one day, as provided for by the CU Customs Code, over 90 per cent of goods were cleared within one day or less.
290. Some Members expressed concerns regarding possible inconsistencies in the application of customs laws and regulations by regional customs authorities and stressed the need to ensure uniform and transparent implementation of customs regulations throughout the entire territory of the Russian Federation. Many Members also sought a clarification of Customs Order No. 25 of 15 January 2001 "On the Checkpoints for Entry into the Territory of the Russian Federation of Certain Categories of Goods" and other related orders of the SCC, which limited the number of customs land checkpoints for goods imported from 14 countries, including a number of ASEAN countries. Noting that a number of these 14 countries were WTO Members, these Members requested: (i) confirmation from the Russian Federation that this particular order and other related orders had been repealed; and (ii) a commitment that they would not be re-introduced in the future.
291. In response, the representative of the Russian Federation said that the uniform application of customs procedures was required by Article 7 of Federal Law No. 311-FZ, which provided for the uniform application of customs legislation by all customs bodies in the territory of the Russian Federation. Concerning the authority to limit the numbers of customs checkpoints for goods, pursuant to Article 190 of the CU Customs Code, Articles 10.4 and 205 of Federal Law No. 311-FZ, the customs authorities could designate customs checkpoints for declaration of imports and exports, respectively. He added that Customs Order No. 25 of 15 January 2001 had been abolished by Customs Order No. 517 of 24 May 2002 "On the Invalidation of Certain Legal Acts of the State Customs Committee of Russia". Further information on the designation of certain customs checkpoints for importation and exportation of goods was provided in the Section "Other Customs Formalities" of this Report and in Table 13 and Table 14.
292. He also noted that the Government had the right to carry out the analysis of acts and decisions of customs bodies and abolish them in case they were inconsistent with the requirements of the international treaties of the Russian Federation, including WTO obligations, CU Agreements, other CU legal acts, national legislation and other normative acts of the Russian Federation. He also added that any normative legal act regarding customs affairs could be declared void through a judicial procedure (he referred to the Sub-Section "Right of Appeal" of the Section "Framework for Making and Enforcing Policies" of this Report). The representative of the Russian Federation also explained that, pursuant to Article 104 of the CU Customs Code, Article 25 of Federal Law No. 311-FZ provided that the State would reimburse the losses incurred by persons as a result of damage caused by illegal resolutions, actions (omissions) of officials and other employees of customs authorities within the framework of fulfilment of office or labour duties by them, e.g., the untimely adoption, entry into force, and/or publication of a legal act whose adoption was stipulated by the normative legal acts of the Russian Federation or as a result of inaccurate information circulated by Customs authorities under the procedure set-out by the Federal legislation.
293. Members asked the Russian Federation to provide information on how the FCS and its regional offices published and/or made their rulings and other information available to importers and exporters. They noted that the FCS had sometimes issued administrative orders or taken decisions which were directly relevant for traders without making their contents known to traders or without publishing them. They asked the Russian Federation to explain how the customs reform would ensure that all legal acts were published and how all other decisions and information relevant to traders would be made publicly available. Members also sought a confirmation that relevant Customs Decisions, e.g. Orders and Letters, and decisions of local customs authorities that traders and other interested parties needed to be able to review and understand, would be made available promptly and at reasonable cost.
294. In response, the representative of the Russian Federation stated that, pursuant to Article 10 of the CU Customs Code, CU Agreements and other CU legal acts relating to customs issues would be available free of charge and published in its official and other printed publications, as well as through television, radio, information technology, and through other means. Furthermore, all FCS legal acts were to be made public, according to Article 51 of Federal Law No. 311-FZ. The CU Commission, as well as the customs authorities of the CU Parties, were required to ensure free access to information on their official websites on CU legal acts related to customs issues. The customs authorities were also obliged to consult with interested persons on customs matters, and, upon written request of such interested persons, to provide information in written form as soon as possible, but not later than the date fixed in the legislation of the CU Parties. For the Russian Federation, Article 8 of Federal Law No. 311-FZ provided that normative legal acts pertaining to customs had to be formulated in such a way, that a clear understanding by every person of his/her rights and obligations would be ensured. Furthermore, Article 51 also required customs authorities to provide access to draft legal acts, as well as to amendments and supplements to normative legal acts, in the area of customs, to the extent that it did not impede effectiveness of customs control. In addition, Article 15 of Federal Law No. 164-FZ of 8 December 2003 "On the Fundamental Principles of State Regulation of Foreign Trade Activity" provided the possibility of holding consultations and other procedures, aimed at ensuring transparency when carrying out the normative legal regulation of foreign trade activity. In particular, the above-mentioned procedures were to be carried out when preparing a draft normative legal act dealing with the right to conduct foreign trade activity. In a limited number of cases, authorities could avoid consultations, if such consultations would entail a delay in the adoption of a normative legal act of the Russian Federation affecting the right to conduct foreign trade activity which might inflict substantial damage to the interests of the Russian Federation.
295. The representative of the Russian Federation explained that normative legal acts of the FCS (e.g., acts with a binding effect throughout the territory of the Russian Federation) regulated customs procedures and customs requirements, customs rules, and the formats of customs documents. In response to concerns from Members with respect to unpublished documents, such as determinations of the FCS and its regional offices or "secret orders", the representative of the Russian Federation stated that the only time this occurred was in the case of certain legal acts destined for internal use of customs authorities. These acts could only pertain to customs officers' activities in relation to goods imported to or exported from the territory of the Russian Federation illegally, or to internal security of the FCS. In accordance with Article 8.4 of Federal Law No. 311-FZ, such acts could not contradict rules set by laws, presidential or governmental acts, or orders of Federal Executive bodies, nor provide any additional obligations for participants in foreign trade activities. These acts were also meant to ensure the proper implementation of customs legislation. Issued in the form of orders, briefings, letters, telegrams, teletype letters, these acts were not considered as normative legal acts, but as acts, which could only have a recommendatory character and be used internally for the sole purpose of a State body. In particular, "customs letters" containing recommended import valuations were sent to customs posts, to assist officials in assessing the value of certain imports. Such recommendations were not mandatory, were not published and were not intended to be used as substitutes for the transaction value. The representative of the Russian Federation also noted that, pursuant to Government Decision No. 1009 of 13 August 1997 "On the Approval of the Rules for Preparing the Normative Legal Acts of the Federal Bodies of the Executive Power and their State Registration" (as last amended on 15 May 2010), a Federal Executive authority was prohibited from issuing normative legal acts in the form of letters. Further information on the operation of the risk management system and on the nature and scope of risk profiles were given in the Section "Customs Valuation" of this Report.
296. In response to further questions from Members of the Working Party concerning "secret orders", the representative of the Russian Federation added that the procedure for publication and making effective regulatory legal acts of Federal Executive Authorities was governed, in particular, by Presidential Decree No. 763 of 23 May 1996 "On the Procedure for the Publication and the Entry into Force of the Acts of the President of the Russian Federation, the Government of the Russian Federation and the Normative Legal Acts of the Federal Executive Bodies"; Government Decision No. 1009 of 13 August 1997 "On the Approval of the Rules for Preparing the Normative Legal Acts of the Federal Bodies of the Executive Power and their State Registration"; and Order No. 88 of 4 May 2007 "On the Approval of Explanations on the Application of Rules for Preparing the Normative Legal Acts of Federal Executive Power Bodies and on their State Registration" of the Ministry of Justice of the Russian Federation.
297. In regard to normative legal acts of the FCS, such acts were subject to mandatory publication pursuant to Article 15.3 of the Constitution of the Russian Federation with the exception of acts or parts thereof constituting State secrets. An exhaustive list of such information had been approved by the Law of the Russian Federation No. 5485-1 of 21 July 1993 "On State Secrets". The official organs for publication were Rossiiskaya Gazeta and the Bulletin of Regulatory Acts of Federal Bodies published by Yuridicheskaya Literatura publishing house of the Administration of the President, issued monthly since 1998. Normative legal acts of the FCS subject to State Registration with the Ministry of Justice became enforceable only after they had been registered and officially published.
298. The FCS, in addition to official government publication, was required to publish all of its normative legal acts in its own official publications, the Customs Bulletin and Customs Gazette, as provided in Article 51 of Federal Law No. 311-FZ. He added that the FCS had its own internet website where the necessary information related to its activity, adopted normative legal acts and comments formulated on these texts were available (www.customs.ru). The FCS also published the explanatory documents. Legal information reference systems were also easily accessible on the internet. Further information on legal requirements for the publication of legal acts was given in paragraphs 1408 to 1428 of the Section on "Transparency" of this Report.
299. The representative of the Russian Federation further stated that, as provided for in Article 52 of Federal Law No. 311-FZ, customs authorities were responsible for providing advisory services to all interested persons with regard to customs issues such as classification and valuation and other issues within their competence. Such services were to be delivered as quickly as possible, and no later than one month from the date of receipt of the enquiry.
300. A Member invited the Russian Federation to make available an English-language version of its customs website (www.customs.ru) as a means of facilitating access to information on the customs system of the Russian Federation to Members. In response, the representative of the Russian Federation informed Members that documents in English could be found on http://eng.customs.ru/.
301. In response to a question from a Member concerning the possibility for a foreign entity to import goods into the Russian Federation, the representative of the Russian Federation noted that Chapter 27 of the CU Customs Code (in particular, Articles 186 to 194) specified the rights and obligations of persons, including foreign persons not registered as a Russian juridical entity or individual entrepreneur, to import goods, into the Russian Federation and perform all necessary customs procedures, including payment of customs duties and charges. Additional provisions were contained in Article 210 of Federal Law No. 311-FZ. Further discussions on this issue could be found in the Section "Registration requirements for import/export operations" of this Report. He also stated that a foreign person, importing goods into the Russian Federation, could also place the goods under the regime of a bonded warehouse. In that case, customs duties were to be paid at the moment of releasing the goods to free circulation in the territory of the Russian Federation by the person who would pick up the goods and take the legal responsibility for them.
302. The representative of the Russian Federation confirmed that no law, regulation, or administrative rulings of general application, including customs measures, giving effect to the Agreement on Implementation of Article VII of the GATT 1994 (Customs Valuation Agreement), would be enforced before it was published. The Working Party took note of these commitments.
303. The representative of the Russian Federation explained that from 1 January 2010, the legal basis for the customs tariff of the Russian Federation was the Agreement on Common Customs and Tariff Regulation of 25 January 2008 between the Governments of the Republic of Belarus, the Republic of Kazakhstan and the Russian Federation (hereafter: Agreement on Customs Regulation), as elaborated in the Common External Tariff of the CU (CET), and approved in Decision No. 18 of 27 November 2009 "On the Common Customs Tariff Regulation of the Customs Union of the Republic of Belarus, Republic of Kazakhstan and the Russian Federation" of the Interstate Council of the EurAsEC (hereafter: Decision No. 18). Pursuant to CU Commission Decision No. 130 of 27 November 2009 "On Common Customs and Tariff Regulation of the Customs Union between the Republic of Belarus, Republic of Kazakhstan and the Russian Federation" (hereafter: Decision No. 130), tariff rates were set by the CU Commission. Furthermore, the rules for common CU tariff preferences to developing and least-developed countries were elaborated in the Protocol on the Provision of Tariff Preferences of 12 December 2008 (hereafter: Protocol on Tariff Preferences).
304. According to the Agreement on Customs Regulation, the CU Commission could issue decisions determining CET tariff rates. These CU Commission decisions were based on the results of negotiations among the CU Parties. As from 1 January 2010, the CU Parties had no authority to change import customs duty rates unilaterally. The representative of the Russian Federation further explained that all exemptions from the CET for each CU Party were provided for in the unified list of tariff exemptions as described in Sections "Tariff Exemptions" and "Trade-related Investment Measures (TRIMs)" of this Report.
305. The representative of the Russian Federation explained that tariff decisions would normally be taken by the CU Commission by a two thirds qualified majority of votes, except for sensitive products (the 5,012 specified tariff lines included in Table 15) on which consensus was required. Consensus might also be required in other cases specified in the agreements comprising the legal basis of the CU. He added that within the Russian Federation, the Government Commission for Economic Development and Integration was responsible for establishing the position of the Russian Federation on customs and tariff policies, including the development of proposals to the other CU Parties to set or change import duty rates for consideration at the meetings of the CU Commission as provided for in Article 4 of the Agreement on Customs Regulation.
306. The representative of the Russian Federation further explained that the Federal Customs Service of the Russian Federation was not authorised to change import tariff levels, or introduce a specific method of calculation thereof, by other means (such as recommendations, letters, "instructive letters", telegrams, or teletype messages) than as set-out in the CU Customs Code, the CU Agreement on Customs Valuation, the CU Agreement on Common Rules of Origin of Goods, relevant CU Commission decisions, and international agreements to which the Russian Federation was a party and the normative legal acts of the Russian Federation concerning customs and tariff matters.
307. The representative of the Russian Federation informed Members that the CET was based on the 2007 Harmonized Commodity Description and Coding System (HS) of the World Customs Organization (WCO). This System had originally been introduced in the Russian Federation on 1 January 2007 by Government Resolution No. 718 to replace the HS 2002 System previously used. In 2007-2009, the commodity nomenclature of the Russian Federation had been further modified beyond the HS 2007 6-digit level. The present CET Code nomenclature differed from the system of the Russian Federation introduced on 1 January 2007.
308. Some Members requested that the consolidated results of the tariff negotiations with Members be converted from HS 1996 to the tariff nomenclature applicable in the Russian Federation at the time of its accession to the WTO. They also requested that concordance tables for each change of the tariff nomenclature from HS 1996 to the latest nomenclature being applied by the Russian Federation (i.e., HS 1996 to HS 2002 to HS 2007 to the CET Code nomenclature) be provided to Members for information and to permit verification of the accuracy of the conversion of the results of bilateral tariff negotiations into the final consolidated Schedule of Concessions and Commitments on Goods of the Russian Federation.
309. In response, the representative of the Russian Federation said that the Russian Federation would ensure that Members were provided with the information necessary to verify commitments in the nomenclature it applied on the date of accession.
310. The representative of the Russian Federation noted that currently the CET consisted of 11,170 tariff lines. A significant majority of tariff lines (9,208) were subject to ad valorem duties and 216 tariff lines were subject to specific duties. The ad valorem rates and ad valorem equivalents of combined and specific rates ranged from 0 to 30 per cent, except for:
- live swine (ex HS 0103);
- beef, pork and poultry imported in excess of certain amounts (out-of-quota meat) (ex HS 0201, 0202, 0203 and 0207);
- caviar (HS 1604 30 100);
- sugar (HS 1701 11, 1701 12, 1701 91, 1701 99);
- beer and ethyl alcohol (HS 2203, 2207, 2208 90 910 0, 2208 90 990 0);
- used truck tractors older than five years (HS 8701 20 901 3);
- used buses older than five years (ex HS 8702 10 192 1, 8702 10 199 1, 8702 90 192 1, 8702 90 199 1);
- used passenger motor cars (ex HS 8703);
- used trucks older than five years (ex HS 8704); and
- furniture with a cost lower than €1.8 per 1 kg (HS 9403 50 000 1, 9403 60 100 1, 9403 60 900 1).
Examples of tariff items that were subject to specific rates were apples, chocolate, beer, and strong alcoholic beverages.
311. The representative of the Russian Federation explained that the remaining 1,746 tariff items in the CET were subject to combined duties. He explained that combined (mixed) duties were expressed in terms of alternative rates, one as an ad valorem rate and the other as a specific rate that served as a minimum rate of duty, e.g., 5 per cent, but no less than €1 per kilogram. Either the ad valorem duty rate or the specific duty rate was applied depending exclusively on the customs value of the good. Combined tariff rates were applied to: live swine, meat, certain species of fish, fermented or acidified milk and cream, whey, butter and cheeses, bird's eggs, flowers, tomatoes, cucumbers, bananas, citrus fruits, coffee and tea, rice, malt and starches, preserved vegetables, plant oils, sausages and other preparations of meat, juices, tea and coffee extracts, yeasts, food preparations not elsewhere specified (ex HS 2106), waters and ethyl alcohol, preparations used in animal feeding, cigars and cigarettes, sodium sulphides, resorcinol and its salts, maleic anhydride, bleaches and soap, dextrin and modified starches, plastics and articles thereof, tyres of rubber, leather and fur articles, articles of paper and paperboard, nonwovens, carpets and textile floor coverings, coated fabrics, textiles, footwear, headgear, artificial flowers, ceramic products, imitation jewellery, aluminium and articles thereof, tin and articles thereof, apparels, home electronics, cars, watches and furniture.
312. In response to comments of some Members that, combined (mixed) and specific rates should be replaced by ad valorem duties upon the accession of the Russian Federation, in order to increase transparency and reduce distortions in trade, the representative of the Russian Federation noted that the CET ensured a similar effective rate for the ad valorem and specific alternatives of combined rates. He also informed Members that the combined (mixed) rates were subject to bilateral tariff negotiations and their results would be reflected in the Schedule of Concessions and Commitments for Goods of the Russian Federation.
313. As a result of these negotiations, the representative of the Russian Federation confirmed that for goods subject to a combined duty (for example, in the form of 5 per cent, but not less than 2 €/kg), it would be ensured, whether by the Russian Federation or the competent bodies of the CU, that the ad valorem equivalent of the specific duty rate for each tariff line, calculated based on the average customs value, would be no higher than the alternative ad valorem duty rate for that tariff line in the Schedule of the Russian Federation in accordance with the following provisions:
- On an annual basis, it would be determined, whether by the Russian Federation or by the competent bodies of the CU, whether it was necessary to reduce the applied specific duty rate to ensure that it was no higher than the applied ad valorem duty rate;
- This calculation would be done two months before the end of each calendar year, beginning in the first calendar year after the date of the accession of the Russian Federation;
- Data for the calculations would be from a three-year period, determined by taking trade data from a recent five-year representative period and excluding data for years with the highest and lowest trade for that period;
- Data on trade with countries or territories with which the Russian Federation had a Customs Union or free trade agreement would be excluded from the calculation; and
- Data would be drawn from the Official Customs Statistics of the Russian Federation notified to the WTO Integrated Database (IDB) unless such data was unavailable. In such case, IDB and COMTRADE data would be used.
The Russian Federation would inform Members of the results of these calculations on a tariff line basis and, if the results showed that it was necessary to reduce the specific duty rate alternative, this reduction would be made and would go into effect automatically, beginning on 1 January of the year following the calculation. In no case would the applied duty (whether expressed in ad valorem or specific terms and whether determined by the Russian Federation or the competent bodies of the CU) exceed the bound rate of the combined duty. If, after reductions based on the annual re-calculation and changed circumstances, the specific duty rate alternative became significantly lower than ad valorem alternative rate of duty, the Russian Federation reserved the right to modify permanently the form of the duty to a purely ad valorem duty, at a level that complied with the binding for the relevant tariff line. The Working Party took note of these commitments.
314. According to Article 1 of the Agreement on Customs Regulation, the main objectives and purposes of the CET were: (i) to rationalise the structure of the import of goods to the common customs area of the Parties; (ii) to maintain a rational proportion of imported and exported goods on the territory of the common customs area of the Parties; (iii) to create conditions for progressive changes in the structure of manufacturing and consumption of goods in the CU; (iv) to protect the economy of the CU from unfavourable influence from foreign competition; and (v) to provide conditions for effective integration of the CU into the world economy.
315. Some Members expressed concerns that the aforementioned objectives (ii), (iii) and (iv) could be used to introduce WTO incompatible import or export tariff restrictions which could discriminate against foreign goods and asked for an explanation. The representative of the Russian Federation explained that, in his view, most countries used tariffs to secure favourable conditions for the development of their domestic industry and agriculture by establishing higher duty rates on goods that were sensitive to competition with imported goods and that duties could be used to maintain a positive trade balance as well as a balanced trade structure, meaning that a positive trade balance could be secured not only through export of raw materials and semi-finished products. He confirmed that only WTO compatible tariff measures would be used by the Russian Federation and the competent CU bodies from the date of the accession of the Russian Federation to the WTO.
316. Some Members expressed concerns that paragraphs 2 and 7 of CU Commission Decision No. 130 could allow the application of import duties in a discriminatory manner, either vis-à-vis third countries or in relation to certain imports exempted from duties for investment projects. The representative of the Russian Federation confirmed that all import tariffs were applied by the Russian Federation in a non-discriminatory manner vis-à-vis third countries on the basis of trade and cooperation agreements, except if otherwise provided for under regional trade agreements or the CU Generalised System of Trade Preferences. Exemptions from the CET within the framework of investment projects were described in Sections "Tariff Exemptions" and "Trade-related Investment Measures (TRIMs)" of this Report, as appropriate.
317. The representative of the Russian Federation informed Members that in accordance with the Agreement on Customs Regulation and the Protocol on Tariff Preferences, the Russian Federation applied the common CU Scheme of Tariff Preferences for developing and least-developed countries (CU GSP Scheme), which was based on the GSP scheme in force in the Russian Federation before 1 January 2010. Lists of developing countries beneficiaries of the CU GSP Scheme (Table 16), least-developed countries beneficiaries of the CU GSP Scheme (Table 17) and goods originating and imported from developing and least-developed countries subject to the CU GSP Scheme (Table 18) were established by Decision No. 18 and adopted by Decision No. 130. Under the CU GSP Scheme, the import duties applicable to products eligible for tariff preferences and originating from developing countries were at the level of 75 per cent of the MFN duty rates and from least-developed countries at the level of zero per cent.
318. In response to a question by one Member, the representative of the Russian Federation explained that tariff preferences for goods originating from developing or least-developed countries that were subject to the CU GSP Scheme would be granted if the goods were purchased in that country from a resident of the country. Such goods had to be delivered directly or in transit through third countries to the territory of the CU, without them being put into free circulation in those third countries in case of transit. As provided for in the Annex to the CU Agreement on Rules for Determining the Origin of Goods from Developing and Least Developed Countries of 12 December 2008, goods were also considered purchased in the country of origin if they were purchased at an exhibition or fair.
319. In response to requests from Members, the representative of the Russian Federation confirmed that, upon its accession to the WTO, the GSP Scheme for developing and least-developed countries would be applied, whether by the Russian Federation or by the competent bodies of the CU, in conformity with the relevant provisions of the WTO Agreement. The Working Party took note of this commitment.
320. In response to a question of a Member regarding extension of "Duty-free and Quota-free" provisions as a part of the commitment made to Least-developed countries at the WTO 6th Ministerial Conference, that took place in Hong Kong in 2005, the representative of the Russian Federation stated that this Declaration would be implemented, whether by the Russian Federation or by the competent bodies of the CU, from the date of the accession of the Russian Federation to the WTO.
321. In response to questions concerning the functioning of world-price contingent tariffs for imported raw cane sugar, a system that had been introduced by Resolution No. 720 of 29 November 2003 "Regarding Tariff Regulation of Import of Raw Sugar and White Sugar in 2004" and that had entered into force on 1 January 2004 and that was now applied pursuant to CU Commission Decision No. 131 of 27 November 2009 "Concerning Tariff Regulation of Sugar Import to the Territory of the Customs Union within the Eurasian Economic Community", the representative of the Russian Federation said that the Russian Federation was both a sugar-producing and a sugar-importing country. Beet sugar production was important from an agricultural and social point of view. The world-price contingent tariff system aimed at maintaining the profitability of the beet sugar industry of the Russian Federation. A minimum profitability of 10 to 12 per cent was considered necessary to ensure the development of this sector. Taking into account the average cost of production of white beet sugar in the Russian Federation (US$420 per tonne), the variations of cane sugar world prices (between US$100 and US$300 per tonne), the customs duty applied to imported cane sugar was set at between US$140 and US$270 per tonne. Every month, the Ministry of Economic Development of the Russian Federation monitored the evolution of the raw cane sugar world prices and calculated the average price for the two previous months. The customs duty was established on the basis of the data presented to the Ministry as of the first day of the month following the receipt of the data. This procedure was transparent, predictable and automatic.
322. Some Members noted that the system of world price-contingent rates of import duty for raw cane sugar of HS sub-heading 1701.11 that had replaced the tariff rate quota on 1 January 2004 was a measure of a kind required to be eliminated in the Uruguay Round and was prohibited under Article 4 of the WTO Agreement on Agriculture. These Members called for its elimination prior to the date of accession. These Members also noted that, from 1 January 2004, the Russian Federation specified in its customs tariff schedule a series of tariff lines at the 10-digit level for raw cane sugar. The 10-digit tariff lines established different import duties according to the average monthly price in US dollars on the New York Commodity and Raw Materials Exchange. The Members noted that such a system would provide the means for the continuous and automatic adjustment of the import tariff on raw cane sugar of the Russian Federation, thereby impeding the transmission of world prices to the domestic market and preventing opportunities for competition in the market of the Russian Federation. Certain Members reserved their position in relation to this system of tariffs which they considered incompatible with Russia's WTO obligations. These Members expressly reserved the right to pursue this issue pursuant to the WTO Agreement including the General Agreement on Tariffs and Trade and the Understanding on Rules and Procedures Governing the Settlement of Disputes.
323. The representative of the Russian Federation stated that, in his view, the Russian Federation's sugar regime was in compliance with the WTO Agreement and noted that price-based duty rates were widely used by WTO Members. He also informed Members that the Russian Federation confirmed its intention to consider the reform of its tariff regime for sugar in 2012, with a view to its further liberalisation in conformity with the WTO Agreement. The Working Party took note of this commitment.
324. In response to requests from Members, the representative of the Russian Federation confirmed that the Russian Federation would submit its Information Technology Agreement (ITA) Schedule to the ITA Committee for verification, in accordance with ITA procedures, in order to enable the Russian Federation to join the ITA when it became a WTO Member. The Working Party took note of this commitment.
325. The Russian Federation undertook bilateral market access negotiations on goods with Members of the Working Party. The results of these negotiations were contained in the Schedule of Concessions and Commitments on Goods and form Annex I to the Protocol of Accession.
- Tariff Exemptions
326. The representative of the Russian Federation noted that from 1 January 2010, the legal basis for granting tariff exemptions on goods imported into the CU could be found in the Agreement on Common Customs and Tariff Regulation of 25 January 2008 between the Governments of the Republic of Belarus, the Republic of Kazakhstan and the Russian Federation (hereafter: Agreement on Customs Regulation). Articles 5 and 6 of this Agreement provided a framework for a unified CU list of tariff exemptions. Article 8 authorised the CU Commission to establish the unified lists. More specific provisions regarding the CU unified list of tariff exempted goods and the implementation of the Agreement on Customs Regulation in this area were elaborated in the Inter-governmental Council Decision No. 18 of 27 November 2009 "On Common Customs Tariff Regulation of the Customs Union of the Republic of Belarus, Republic of Kazakhstan and the Russian Federation" (hereafter: Decision No. 18) and the CU Commission Decision No. 130 of 27 November 2009 "On Common Customs and Tariff Regulation of the Customs Union between the Republic of Belarus, Republic of Kazakhstan and the Russian Federation" (hereafter: Decision No. 130). The Agreement and Decisions also provided for other exemptions or reductions from the Common External Tariff (CET) rates, e.g., tariff concessions for investment purposes (further described in Section "Trade-related Investment Measures (TRIMs)" of this Report), tariff preferences for developing and least-developed countries (further described in Section "Ordinary Customs Duties"), tariff rate quotas (further described in Section "Tariff Quotas"), and special limited derogations for individual CU Parties from the CET as elaborated in the Protocol on Conditions and Procedure for Use in Exceptional Cases of the Rates of Import Customs Duties other than Common Customs Tariff Rates of 12 December 2008 (hereafter: Protocol on Exceptions from the CET).
327. The representative of the Russian Federation said that prior to 1 January 2010, Articles 34 and 35 of the Law of the Russian Federation No. 5003-1 of 21 May 1993 "On Customs Tariff" (as last amended on 28 June 2009) provided the Government the authority to grant tariff exemptions and established the list of categories of goods which were not subject to customs tariffs. These authorities were transferred to the CU Commission on 1 January 2010. He added that appropriate amendments to the Customs Tariff Law and the Federal Law "On Foreign Trade Regulation" of the Russian Federation to confirm these were being developed. Resolutions of the Government formerly issued in accordance with the provisions of the Customs Tariff Law also had provided for some tariff exemptions. These legal instruments either were in the process of being terminated or amended in accordance with CU Decisions. The corresponding draft legislation was being developed by the Federal Customs Service of the Russian Federation.
328. The representative of the Russian Federation added that Article 6 of the Agreement on Customs Regulation provided for the unified list of CU-wide exemptions from the customs tariff rates for the following categories of goods: (i) means of transport of international shipments of freight, baggage and passengers, and goods that maintain them; (ii) products of fishing operations owned or leased by entities and individuals of the CU Parties; (iii) goods imported for official or personal use by third countries' diplomats; (iv) currency and securities in accordance with the Parties' national legislation; (v) goods imported as humanitarian or disaster aid; (vi) goods imported as assistance (including technical assistance) and charity from third countries and international organizations; (vii) goods covered by import customs regimes which call for such duty exemption; (viii) goods imported by individuals for their own use, in accordance with customs regulation legislation; and (ix) goods subject to government expropriation by the CU Parties as provided for in their legislation.
329. In response to concerns from Members regarding MFN treatment in respect of space equipment, the representative of the Russian Federation stated that Federal Law No. 191-FZ of 10 November 2006 "On Amending Article 35 of the Law of the Russian Federation on the Customs Tariff and Article 150 of Part Two of the Tax Code of the Russian Federation" had introduced duty free access for space equipment on an MFN basis. He further noted that, after 1 January 2010, Article 5 of the Agreement on Customs Regulation provided that goods imported within the framework of international cooperation of the CU Parties, including the Russian Federation, in the field of research and exploration of space, and also within the agreements regarding services in spacecraft launch and the goods imported for research and use in the exploration of space and spacecraft launch could be exempted from tariffs. The specific list of above-mentioned goods to be exempted was approved by CU Commission Decision No. 727 of 22 June 2011.
330. Responding to questions from Members, the representative of the Russian Federation stated that, in accordance with Article 5 of the Agreement Customs Regulation, tariff exemptions (or lower duties) also could be established for goods imported as a contribution to the charter capital of an investment approved by national legislation.
331. The representative of the Russian Federation informed Members that the CU Parties could amend the provisions of the Agreement on Customs Regulation through separate Protocols to the Agreement. The CU Commission was authorised by this Agreement and Decision No. 18 to operate the CET, including the authority to add or remove goods from this list of exemptions by a two thirds vote upon request of a CU Party or on its own initiative. A consensus vote was required, if a CU Commission Decision would modify the unified list of exemptions concerning "sensitive products" defined by the CU Parties, or where consensus was specifically required in accordance with provisions of a separate CU legal act.
332. The representative of the Russian Federation noted that Article 6 of the Agreement on Customs Regulation also provided that goods could be exempted from the customs duty within the framework of customs regimes provided for in relevant customs legislation e.g., the CU Customs Code. Article 80 of the CU Customs Code listed the situations when customs duties need not be paid, which reflected circumstances faced by customs officials in the course of customs processing. These circumstances included: (i) when it was provided for in accordance with the legislation of the CU Parties (e.g., CU Commission Decision No. 130 or the Federal Law "On Customs Regulation") or the provisions of the CU Customs Code; (ii) when customs duties had already been paid or when the amount owed was less than €2; (iii) when goods were exempted from customs duties during the period of validity of such an exemption and when fulfilling the conditions, under which such exemption was granted; (iv) when goods were placed under customs procedures (regimes) not providing for such payment; (v) when the total customs value of goods, imported by one person on one invoice did not exceed €200; (vi) when goods had been destroyed or irretrievably lost as a consequence of an accident, force majeure, or as the result of natural deterioration under normal transportation and storage prior to their release; (vii) when goods had been converted into property of a CU Party in accordance with its national legislation; and (viii) when goods were not released.
333. In response to a question from a Member, the representative of the Russian Federation informed Members that in accordance with Article 2 of the Protocol on Exceptions from the CET, the CU Commission could decide that a lower or higher duty rate than the CET would be applied by one of the CU Parties, if one of the following exceptional circumstances existed: (i) such a measure was a necessary condition for the development of industries of that CU Party; (ii) the CU Party concerned faced an acute shortage of goods; (iii) such a measure was necessary to address the socially relevant needs of the population of the concerned CU Party; or (iv) to address the needs of production, which depended largely on traditional imports from third countries and could not be implemented through the production of this or similar goods in the CU. Article 4 of this Protocol provided that the CU Commission Decisions, in these cases, were adopted by consensus and that a different tariff rate by one CU Party could be applied for no longer than six months, unless extended, following the relevant procedures foreseen in the Protocol. The list of all tariff exemptions granted under the Protocol on Exceptions from the CET and currently applied by the individual CU Parties was included in Table 19.
334. Some Members noted that certain tariff exemptions granted currently or in the past for investment purposes (automobiles and Production Sharing Agreements (PSA) projects) or to promote domestic industry (aircraft) continued to be of concern. These Members sought a commitment from the Russian Federation to use its authority to grant such exemptions in conformity with WTO provisions. A Member noted, in particular, that the future WTO obligations of the Russian Federation required the Russian Federation to provide MFN treatment and to waive the import duties applied to certain imports of space equipment, and also required the Russian Federation to confirm that discriminatory tariff exemptions for aircrafts had been terminated.
335. The representative of the Russian Federation replied that further information on the tariff exemptions granted currently or in the past by the Russian Federation for investment purposes were discussed in the Sections on "Trade-related Investment Measures (TRIMs)" and "Industrial policy, including subsidy policies" of this Report. Goods imported to be used in work and operations specified in Product Sharing Agreements were exempted from the import tariff, pursuant to Point 9 of Article No. 346.35 of the Tax Code of the Russian Federation which remained in effect until the CU Commission issued a Decision in respect of goods imported under PSAs. Tariff exemptions for aircraft had been terminated in the Russian Federation, but were being considered on a temporary basis in the context of requests by certain CU Parties for imports of certain large commercial aircraft. These tariff exemptions had not yet been approved or implemented.
336. The representative of the Russian Federation informed Members that the Russian Federation, at this time, did not utilize any other tariff exemptions than those described in this and other relevant Sections of this Report.
337. The representative of the Russian Federation confirmed that no later than from the date of accession any tariff exemption for space equipment would be provided on an MFN basis. The Working Party took note of this commitment.
- Tariff Quotas
338. Some Members expressed concerns regarding the decision of the Russian Federation, in 2002, to have recourse to tariff rate quotas (TRQs), particularly on products that were previously subject to tariffs only. These Members considered that the introduction of TRQs had been a step backward from the trade liberalization that should be expected by acceding to the WTO and that, in their view, a tariff-only regime would be preferable as it would allow for the market to select suppliers that provided the best combination of price, quality, and stable offer of goods. They requested a description of the current and prospective legal authority for introducing TRQs and determining the rules for allocating quota shares among importers as well as any related licensing procedures in the Russian Federation and in the CU. Members noted that any method of allocating quotas or licenses must be consistent with WTO provisions, notably Articles I, II, VIII, X, XI, and XIII of the GATT 1994, the Agreement on Import Licensing Procedures and Article 4 of the Agreement on Agriculture. Several Members also stressed that the Russian Federation had to ensure that any TRQs would preserve existing levels of trade, provide annual growth and would be limited in time. In any case, full details of tariff quota administration measures should be provided in order to assess their conformity with WTO provisions.
339. The representative of the Russian Federation stated that, pursuant to the provisions of Article 8 of the Agreement on Common System of Customs Regulation of 25 January 2008, the CU Commission was the competent authority to introduce TRQs and to determine the rules for allocation of in-quota volumes. The Agreement on Conditions and Mechanism of Implementation of Tariff Rate Quotas (hereafter: TRQ Agreement) was signed by the CU Parties on 12 December 2008, and entered into force on 1 January 2010.
340. Article 2 of the TRQ Agreement set-out the legal basis for establishing TRQs within the CU. Both the allocation of quotas among the CU Parties and the method of quota allocation among importers within the CU were subject to approval by the CU Commission. The TRQ Agreement specifically provided that the method of allocation of shares in the quota among importers must be non-discriminatory. Article 5 of the TRQ Agreement set-out the general non-discrimination principle in allocation of TRQs amongst importers based on their form of ownership, place of registration or position in the market. In the Russian Federation, TRQ allocations could be distributed amongst foreign-owned as well as Russian-owned firms established as Russian legal entities, as well as natural persons registered as individual entrepreneurs. If the CU Commission decided to establish a TRQ, the Decision would stipulate the period of its implementation. In cases when country-specific TRQs (CSTRQs) were allocated, the Commission would inform all interested countries about the volume of their respective CSTRQs. The CU Commission published information on the global volume of the TRQ and the period of its implementation, in- and out-of-quota rates, and its allocation among exporting countries. The allocation of CSTRQs was based on results of consultations with major suppliers, i.e., those supplying at least 10 per cent of imports, or on trade statistics for a previous representative period, which was normally three years. The Law of the Russian Federation No. 5003-1 of 21 May 1993 "On Customs Tariff" (as last amended on 8 December 2010), which established the general legal framework for the establishment and administration of TRQs at the national level, was in force, but the relevant provisions of the CU agreements prevailed in case of contradiction (according to Article 38 of that Law).
341. The representative of the Russian Federation further explained that each year the CU Commission established the list of goods subject to TRQs, the volume of TRQs, and whether CU Bodies or national bodies acting under national law would be responsible for the administration of TRQs. The respective list of such goods for the year 2011 and TRQ volumes were established by CU Commission Decision No. 505 of 18 November 2010. These TRQs covered pork, poultry and bovine meat (see Table 39). By that Decision, the CU Commission also determined that, in the year 2011, the TRQs in the CU Parties would be administered by the Governments of the CU Parties in accordance with national legislation. In the Russian Federation the rules on administration of TRQs for the year 2011 were set-out in Government Resolution No. 1111 of 24 December 2010, implementing CU Commission Decision No. 505 in the Russian Federation.
342. The representative of the Russian Federation further informed Members that customs clearance of goods subject to TRQs was carried out on the basis of a licence issued by the competent authority in the relevant CU Party. The licence would be issued on the basis of an application submitted by an importer who had been allocated a share of the in-quota volume.
343. In response to a question from a Member, the representative of the Russian Federation explained that necessity to establish TRQs on imports of beef, pork and poultry was caused by the need to create favourable conditions for the development of respective domestic industries which substantially suffered from increased imports. He noted that a two-level (in-quota and out-of quota) tariff had been applied to imports of beef (HS 0201 and HS 0202) and pork (HS 0203) since April 2003. From 1 January 2006, the safeguard quota on poultry was converted into a TRQ. TRQs provided an opportunity to import a certain quantity of frozen, fresh and chilled beef, pork and poultry per year at a lower duty. In response to a question from a Member, the representative of the Russian Federation noted that, currently there was no intention of the CU Parties to establish CU-wide TRQs in place of current national TRQs.
344. Concerning the TRQ for sugar, he noted that this TRQ had been applied in the Russian Federation from 2001 to 2003 to imports of raw sugar originating from GSP beneficiaries. He added that the TRQ on raw sugar had been eliminated pursuant to Government Resolution No. 720 of 29 November 2003. Currently, raw sugar imports were subject to import tariffs only.
345. A Member of the Working Party said that it considered the elimination of the preferential tariff rate quota on raw cane sugar mentioned in paragraph 344 on 31 December 2003 to be a positive step given that this measure had represented an increase in the level of import restriction on previous levels. This Member, however, considered that a backward step had been taken on 1 January 2004 by the replacement of the tariff quota not with a single rate of import duty but a world-price contingent import tariff, which was a measure of a kind required to be eliminated in the Uruguay Round and prohibited under Article 4.2 of the WTO Agreement on Agriculture.
346. In response, the representative of the Russian Federation stated that this kind of duty did not differ from ordinary customs duties, and, thus was subject to bilateral tariff negotiations. He added that such types of rates were widely used by WTO Members. He referred Members to paragraph 321 of the Section "Ordinary Customs Duties" of this Report for further details.
347. Regarding the TRQs on beef, pork and poultry, the representative of the Russian Federation informed Members that the quantities allowed for importation under the TRQ regime in 2011, as established by the CU Commission Decision No. 505, were reproduced in Table 40. Imports in excess of these amounts were subject to a higher duty. The distribution of quotas within TRQs on beef, pork and poultry was based on the historical shares of main suppliers of the Russian Federation. He noted that high-quality beef had been excluded from the TRQ regime pursuant to Government Resolutions.
348. Pursuant to Government Resolution No. 1111 of 24 December 2010, the Ministry of Economic Development of the Russian Federation was the body responsible for the distribution of in-quota volumes within the TRQs. The Ministry of Industry and Trade (the MIT) of the Russian Federation was the body responsible for issuing non-automatic licenses for imports under TRQs.
349. Regarding the previously existing practice of distributing the TRQs by auctioning, some Members requested a clarification of whether the Russian Federation or the CU intended to use auctioning of TRQs in the future. If so, these Members requested a confirmation that there would be no legal requirements to participate in TRQ auctions that could favour local production, such as requirements to enter into contracts to purchase domestic products or requirements to provide domestic producers with inputs. Several Members stated that, to the extent that any auction charges associated with the allocation of TRQs exceeded the tariff bindings of the Russian Federation, they would be inconsistent with the obligations of the Russian Federation under Article II of the GATT 1994. In addition, auctioning fees were inconsistent with Article 4.2 of the Agreement on Agriculture, as they increased the effective price of importation to the equivalent price of imports at the out-of-quota rate and could, therefore, be considered a "similar border measure", as referred to in Article 4.2 of the Agreement. The existence of minimum auction prices would also violate Article 4.2 of the Agreement on Agriculture as they would serve as a minimum import price by placing a floor under the auction price. They also noted that allocation of quotas without regard to Articles XI and XIII of the GATT 1994 would violate WTO provisions. These Members sought a commitment from the Russian Federation that any fees, charges or revenues collected from auctioning TRQ volumes would not exceed the bound rate of duty established for the product concerned. Some Members also maintained that the auctioning method for distributing TRQs was not fully consistent with the GATT 1994 and discriminated against those Members that did not provide export subsidies.
350. In response, the representative of the Russian Federation noted, that since 2006, the auctioning method of distributing part of the TRQs volumes had not been used and that the entirety of the volume of products subject to TRQs was distributed between importers in accordance with their historical shares in imports. A new entrant had to import the meat under the out-of-quota duty rate to be included later in the list of historical importers.
351. The representative of the Russian Federation confirmed that TRQs applied in the Russian Federation, whether by the competent CU Body or authorities of the Russian Federation, would not be allocated through auctioning. The Working Party took note of this commitment.
352. Some Members expressed concern that implementation by the Russian Federation of the different price or quality-based definitions for High Quality Beef (HQB) set-out in Russia's Schedule of Concessions and Commitments on Goods could lead to discrimination between like products. Those Members stressed that the Russian Federation should ensure that application of the HQB definitions set-out in the relevant section of the Schedule of Concessions and Commitments of the Russian Federation on Goods did not discriminate against like products imported from any Member. In response, the representative of the Russian Federation confirmed that it did not intend to apply the definitions of HQB to discriminate against imports of like products. Furthermore, the Russian Federation confirmed that its customs service would be in a position to verify the quality and value of products claiming to be classified as HQB in accordance with the definitions included in the relevant section of the Schedule of Concessions and Commitments of the Russian Federation on Goods and would ensure that like products imported from any Member were accorded treatment no less favourable than that accorded to like products imported from any other Member, as provided in the GATT 1994. The Working Party took note of this commitment.
353. The representative of the Russian Federation informed Members that the Russian Federation will develop a national definition of High Quality Beef within 18 months of the date of accession of the Russian Federation to the WTO. In response to requests for assurances from some Members, the representative of the Russian Federation confirmed that the Russian Federation would give positive consideration to recognizing High Quality Beef of other Members as falling under such national definition, provided it met the criteria of the national definition, and, thus, would accord to such High Quality Beef of other Members treatment no less favourable than that accorded to like products originating in any other Member. The Working Party took note of these commitments.
354. Noting that the Law of the Russian Federation No. 5003-1 of 21 May 1993 "On Customs Tariff" prohibited access under TRQs from being granted to products originating from MFN suppliers, some Members requested confirmation of whether the Russian Federation also intended to provide legal authorisation for using TRQs to regulate general imports or if this would be limited to GSP imports. These Members required a more precise understanding of the methods of allocation and other aspects of the system that the Russian Federation intended to adopt in this field. In addition, some Members also requested that the Russian Federation enact amendments to the Tax Code to ensure MFN access to the system of TRQs.
355. In response, the representative of the Russian Federation informed Members that provisions of Article 36.1 of the Law of the Russian Federation No. 5003-1 of 21 May 1993, and Article 2 of the CU Agreement of 12 December 2008, neither prohibited access under TRQs being granted to products originating from MFN suppliers, nor limited use of TRQs to GSP imports.
356. Recalling discussions in the Section "Import Licensing" of this Report, Members of the Working Party requested the Russian Federation to provide additional information on current import licensing requirements for imports of poultry, beef, and pork.
357. In response, the representative of the Russian Federation stated that, in accordance with Government Resolution No. 1111, an entity that had imported products covered under the TRQ during the previous year had the right to receive an in-quota allocation under the TRQ for the next year, based on the percentage of imports of such entity in the previous year. Upon receipt of an application from an entity with a TRQ allocation, the MIT would issue a licence for importation of beef, pork and poultry within the allocated volumes. The licenses for importation of such products in 2011 were issued from 27 December 2010 until 31 December 2011, and were valid from 1 January until 31 December. An application for an import licence would be processed within five days. He confirmed that import licenses were not transferable, but noted that unused import licenses would be reallocated. Importers that had received a share of the quota based on historical trade shares could apply for a licence by 1 August for TRQs on beef, pork and poultry. Applications submitted after that date would not be accepted. Importers would receive a licence after submission of an application for the licence, a copy of a certificate confirming that the applicant was registered by a regional tax authority as a tax-payer and a copy of an import contract. Import licenses would be issued for particular volume of products. A fee of RUB 2,600 was charged for each licence. This fee was not reimbursed in the event the importer did not use the licence. In response, some Members of the Working Party stated that the system described did not work well in practice, and made it extremely difficult to actually export poultry, beef, and pork to the Russian Federation. These Members believed that use of historical suppliers was particularly problematic as many had been one-time shippers and no longer were participants in the market. The TRQ regime of the Russian Federation had created quota reserves for certain Members, reduced pre-TRQ access for other Members and eliminated equal opportunities to all Members to supply their products and was, therefore, a clear departure from the MFN principle. They noted that, under the previous regime, many importers received quota allocations so small that they were not economically viable (in some instances, importers were given quota allocations as low as 10 kilograms). They also noted that no mechanism for re-allocation of unused licenses had been developed in advance of the introduction of this system, and it did not appear that full utilization of the quotas and tariff rate quotas, which already contemplated reduced imports, would be possible. These Members enquired about how the Russian Federation kept track of how much of the quota allocations had actually been used and how the Russian Federation provided information on a weekly basis on actual quota fill during the quota period. Some Members also noted that suppliers situated geographically distant from the Russian Federation experienced additional difficulties due to shipping time.
358. Some Members expressed concern that the TRQ regime that the Russian Federation applied under the CU, did not appear to allocate any in-quota volume to new entrants. It appeared that an importer newly entering the market had to import at the over-quota rate which acted to limit the quantity of imports. Thus, in subsequent years, this importer would qualify only for a small in-quota allocation, since allocations were based on imports over the previous year. In their view, this did not provide sufficient flexibility in the market.
359. The representative of the Russian Federation replied that, in 2003, when the TRQ had been introduced, distribution of quotas had been based on the historical shares of main suppliers of the Russian Federation for the respective products in the years 1999 to 2001, which were the years immediately preceding the year when the decision to introduce the TRQs for beef and pork and special safeguard quotas for poultry had been taken (2002), and for which information was available. He confirmed that the supplying Members were invited to consult with his Government about country-specific allocation of quotas. Some of these consultations had been successfully concluded and their results had been implemented. The representative of the Russian Federation noted also that the Russian Federation took note of the concerns of the Working Party Members and amended the TRQ administration mechanism in a timely manner. In his view, now it worked effectively and allowed for the full utilization of quotas and TRQs (see Table 40).
360. Members also noted that the Veterinary Service of the Ministry of Agriculture required that importers obtain an import permit, in addition to veterinary and sanitary certification requirements (and now the import licence), to be able to import beef, pork, and poultry into the Russian Federation. Those Members considered that those import permits were also subject to the disciplines of the WTO Agreement on Import Licensing Procedures. Members noted that, in January 2003, the Veterinary Service abruptly cancelled existing import permits for beef, pork, and poultry and established a new system for issuing import permits. Members noted that no information had been published or provided to Working Party participants on the new requirements for obtaining import permits.
361. In response, the representative of the Russian Federation stated that veterinary permits were granted to all importers who had at their disposal technical possibilities necessary to guarantee the safety of products in conformity with veterinary standards. The same procedure (veterinary permits) was maintained for Russian operators in case of inter-regional trade. He added that this procedure was applied not only to goods under TRQs, but also to other goods subject to veterinary control, and that it was described in the Section "Sanitary and Phytosanitary Measures" of this Report.
362. Noting that the TRQ system of the Russian Federation appeared to violate several provisions of the GATT 1994, including Articles I, XI and XIII, some Members sought a commitment from the Russian Federation that it would terminate the TRQs on meat products and replace them by a single tariff applied on an MFN basis for all Members.
363. The representative of the Russian Federation informed Members that the parameters and mechanism of allocation of TRQs were the subject of bilateral market access negotiations and their results would be duly reflected in the Schedule of Concessions and Commitments on Goods of the Russian Federation. In response to a question from a Member, the representative of the Russian Federation explained that the TRQ mechanism set-out in Section I-B of Part I of the Schedule of Concessions and Commitments on Goods of the Russian Federation contained the following parameters for TRQs on beef, pork and poultry: in-quota tariff rates, out-of-quota tariff-rates, quantities eligible for the in-quota tariff rates and country-specific allocations of those eligible quantities. The representative of the Russian Federation confirmed that, in implementing TRQs, the Russian Federation would apply WTO-consistent procedures that provide for allocations to new importers. These procedures would operate in a predictable, transparent and timely manner.
364. The representative of the Russian Federation confirmed that:
1. If on 1 September of each quota year 30 per cent or more of a country-specific allocation of a tariff rate quota for meat had not been either contracted or imported, any unused quantity would be re-allocated on 15 September of the same quota year provided that:
(i) the Russian Federation had consulted with the Member holding a country-specific TRQ for meat and they had agreed whether the conditions of paragraph 1 had been established, prior to any such re-allocation; such mandatory consultations were to be held between 1-10 September of the quota year in question. In the course of the consultations requested by the Russian Federation, the Member holding a country-specific TRQ allocation could only object to re-allocation if it could demonstrate that at least 70 per cent of its allocation had been contracted or already imported. The outcome of such consultations would be made publicly available by the Russian Federation by 12 September of the quota year in question;
(ii) the Russian Federation's request for consultations had been substantiated by the Russian Federation supplying 15 days in advance of the consultations full information on the volume of meat covered by licences delivered (licences based on existing contracts) and imports in order to fully justify its request for the consultations; and
(iii) the re-allocated quantity would be made available to all WTO Members, including the Member with the original country-specific TRQ allocation and other Member country-specific TRQ allocation holders, provided the latter had filled their allocation.
2. During such consultations the effects of any sanitary or phytosanitary (SPS) measure on commercial transactions would be examined.
3. Should the expectation of the Russian Federation be that there would be a need for re-allocating a country-specific TRQ, the Russian Federation would provide full information on the volume of meat covered by licences delivered (licences based on existing contracts) and imports to the concerned Member holding a country-specific TRQ allocation by 30 June of the quota year in question. Such information would also be provided by the Russian Federation at any other time, upon such Member's written request. Within the period from 30 June to 31 August, such information would also be provided, upon request, by the Russian Federation to WTO Member suppliers of products subject to the relevant country-specific TRQ.
4. By 15 July of the quota year the Russian Federation would make the information of its intention to consider launching consultations with a Member holding a country-specific TRQ allocation publicly available.
5. In exceptional circumstances where a major shortfall in filling an "Other countries" TRQ was expected, the Russian Federation could launch consultations. Such consultations would be held to consider whether as of 15 September in any quota year a country-specific TRQ holder, provided it had filled its own allocation, could also have access to the "Other countries" TRQ in question. Consultations would be held with the five largest suppliers to the Russian Federation under the "Other countries" TRQ over the last five years. Any other eligible supplier to the "Other countries" TRQ which had expressed an interest could also join the consultations. By 15 July and in any case at least 15 days before the actual consultations, the Russian Federation would make publicly available notice of its intention to consider launching such consultations. This public information would include the factual basis and supporting documents necessary for these consultations. The outcome of such consultations would be made available to the WTO Members by the Russian Federation within two days of the conclusion of any consultations held on the basis of this provision.
6. A decision to re-allocate a TRQ could only apply within the quota year in which the decision was taken.
7. No meat tariff quotas listed in Section I-B of the Russian Federation's Schedule of Concessions and Commitments on Goods would be reallocated except in accordance with these requirements.
The Working Party took note of these commitments.
365. Members and the Russian Federation agreed that the particular arrangements described in paragraph 364 above were without prejudice to the WTO rights and obligations of Members (and the Russian Federation after its accession) holding country-specific allocations in respect of TRQs which were not subject to those arrangements.
366. The representative of the Russian Federation confirmed that from the date of accession of the Russian Federation to the WTO, import TRQs applied in the Russian Federation would be administered, whether by the competent Bodies of the CU or by authorities of the Russian Federation, in a manner that is consistent with the GATT 1994 and other relevant WTO Agreements, including the Agreement on Import Licensing Procedures and the Agreement on Agriculture. The Working Party took note of this commitment.
- Other Duties and Charges
367. The representative of the Russian Federation stated that, from 1 January 2010, duties on imports were applied in accordance with the Agreement on Common Measures of Tariff and Customs Regulation of 25 January 2008, the Interstate Council Decision No. 18 of 27 November 2009 "On Common Customs Tariff Regulation of the Customs Union," and CU Commission Decision No. 130 of 27 November 2009 "On Common Customs Tariff Regulation of the Customs Union." These provisions empowered the CU Commission to establish and change the customs tariffs of the CU Parties, including the Russian Federation, as described in Section "Ordinary Customs Duties" of this Report. No other duties and charges were authorised. Therefore, he confirmed that the Russian Federation did not apply any duties and charges of any kind within the meaning of Article II:1(b) of the GATT 1994.
368. Noting this statement, several Members asked the Russian Federation to bind at zero all such Other Duties and Charges (ODCs) in its Schedule of Concessions and Commitments on Goods and to undertake a commitment that it would not apply such measures except in conformity with WTO obligations.
369. The representative of the Russian Federation recalled that the Russian Federation had bound all tariffs in its Schedule of Concessions and Commitments annexed to the GATT 1994 (reproduced in Annex 1 to the Protocol of Accession of the Russian Federation). He confirmed that the Russian Federation would from the date of accession to the WTO not apply other duties and charges within the meaning of Article II:1(b) of the GATT 1994 and had bound such other duties and charges at zero in relation to all goods. These bindings were recorded in the Schedule of Concessions and Commitments of the Russian Federation annexed to the GATT 1994. The Working Party took note of this commitment.
- Fees and Charges for Services Rendered
370. Several Members asked for a description of the currently applied regime of customs fees, introduced in accordance with the provisions of the Customs Code of the Russian Federation, Federal Law No. 61-FZ of 28 May 2003 (as last amended on 27 November 2010), which had entered into force on 1 January 2004. Noting that, under the previous system, fees charged for customs clearance had been calculated on an ad valorem basis, these Members questioned how the fee structure of the current system related to the cost of services rendered and stressed their expectation that the Russian Federation must comply with the relevant obligations provided for in the GATT 1994. They also sought information on the regime of customs fees that would apply under the CU Customs Code and the national legislation of the Russian Federation implementing the CU Customs Code.
371. The representative of the Russian Federation stated that, pursuant to Article 30 of Federal Law No. 164-FZ of 8 December 2003 "On the Fundamentals of State Regulation of Foreign Trade Activity" (as last amended on 27 December 2009), all payments collected on exports and imports of goods which were neither customs duties nor other taxes were not to exceed the approximate cost of services rendered nor be a means of protection of goods of Russian Federation origin or of taxation for fiscal purposes. Revenues generated by these fees were remitted to the general revenues of the State budget.
372. He further noted that, before the adoption of the Customs Code of the Russian Federation, there were six types of fees and charges for services rendered levied in relation to importation or exportation: (i) customs clearance fees; (ii) fees for storage; (iii) fees for customs escort; (iv) fees for consultations; (v) fees for adopting a preliminary decision by the customs official; and (vi) fees for the participation in customs auctions. These fees and charges were replaced under the Customs Code that came into effect on 1 January 2004. The representative of the Russian Federation explained that Article 72 of the CU Customs Code left the authority for the application of customs fees to the CU Parties. From 1 January 2011, Article 130 of the Federal Law "On Customs Regulation" would establish the customs fee regime of the Russian Federation within the framework of the Customs Union. Until then, the provisions of Federal Law No. 61-FZ of 28 May 2003 "Customs Code of the Russian Federation" (as last amended on 6 December 2007) and Federal Law No. 164-FZ of 8 December 2003 "On the Fundamental Principles of State Regulation of Foreign Trade Activity" (as last amended on 27 December 2009), to the extent that they did not conflict with the CU Agreement on Customs Regulation and the CU Customs Code, continued to apply. The customs fees that were currently charged and those that came into effect on 1 January 2011 were as follows and as described in paragraphs 373 and 374 below.
373. Chapter 33.1 of the Customs Code of the Russian Federation provided for three types of fees, i.e.:
(i) customs clearance;
(ii) customs escort of goods; and
(iii) storage of goods in government customs warehouses.
Article 123 of the Federal Law "On Customs Regulation" provided for the same three types of fees, but described as follows, i.e.:
(iv) customs fees for execution of actions associated with release of goods (hereinafter referred to as "customs duties for customs operations");
(v) customs fees for customs escort; and
(vi) customs fees for storage in governmental warehouses.
374. Article 357.10 of Federal Law No. 61-FZ of 28 May 2003 "Customs Code of the Russian Federation" (as last amended on 6 December 2007) and Article 130 of the Federal Law "On Customs Regulation" established the rates of those fees for customs escort and storage of goods in government warehouses and provided that the amount of customs fees for customs clearance (for customs operations) must be limited to the approximate value of services of customs authorities and must not exceed RUB 100,0006 per customs declaration and that rates of customs clearance fees were established by the Government.
375. In response to specific questions of some Members about the requirements and procedures of customs escort, the provisions regulating storage of goods under customs control, and the relevant fees, the representative of the Russian Federation replied that these requirements and procedures were described in paragraphs 1153 to 1156 of the Section "Regulation of Trade in Transit" of this Report. Customs escort could be provided as a mandatory service for certain specific goods in transit through the territory of the Russian Federation and all other goods in transit to their declared destination in the Russian Federation after entering the customs territory of the CU through one of the other CU Parties. The purpose of such escort was to ensure that the same goods arrived at the final customs point in one of the CU Parties or exited the customs territory of the CU on their way to their final destination in a third country. Article 130 of the Federal Law "On Customs Regulation" set fees for such customs escort based on the length of journey escorted for each motor transport vehicle and each unit of railway rolling stock. A flat fee was charged for escort of each sea, river or air vessel. If the storage of imported or exported goods, prior to customs clearance was required, government customs warehouses were available to importers and exporters for storage of their goods, including cases when their storage at other, privately owned warehouses was not permitted. Customs fees for storage at the warehouse for temporary storage or at the customs warehouse of the customs authorities varied based on the weight of the goods stored per day in storage, and increased if the storage space were specially arranged and equipped for storage of certain types of goods. The rates for relevant fees were listed in Table 20.
376. In response to further comments by some Members, the representative of the Russian Federation explained that detailed information on import licensing fees was provided in paragraphs 445 and 460 of the Section "Quantitative Import Restrictions, including Prohibitions and Quotas and Import Licensing Systems" of this Report.
377. As for the first category of fees, "customs clearance fees" or "fees for customs operations", the representative of the Russian Federation stated that Government Resolution No. 863 of 28 December 2004 "On the Rates of the Customs Fees for the Customs Clearance of Goods" (as last amended on 20 December 2010) had been adopted in order to implement the provisions of Federal Law No. 61-FZ of 28 May 2003 "Customs Code of the Russian Federation" (as last amended on 6 December 2007). This Government Resolution established flat rates of fees for eight categories of customs declarations, some of which depended on the value of goods declared in a single declaration. The fees authorised in Article 130 of the Federal Law "On Customs Regulation" would be established after its enactment and implementation. The rates of fees were listed in Table 20. He added that this scale provided for rates not exceeding RUB 7,500 (which corresponded approximately to US$240). This represented approximately 85 per cent of customs declarations in 2009, as reported by the customs statistics. The fees for small consignments of goods, i.e., where the customs declaration, list goods up to RUB 200,000 or approximately to US$6,500 in declared value, were collected at a minimum rate of RUB 500 (approximately US$15). The maximum rate, provided for both by the Customs Code of the Russian Federation and in the Federal Law "On Customs Regulation" was RUB 100,000 per customs declaration, or approximately US$3,200. Under the current regime, this amount was levied only for customs clearance of consignments of goods where the customs declaration lists goods, exceeding RUB 30,000,000 (or US$1,000,000) in declared value. Such consignments were normally exceptionally large and required additional attention in the customs clearance process. Customs clearance fees were applied at equal rates to imports and exports from all origins and destinations. In Government Resolution No. 863 of 28 December 2004 "On the Rates of the Customs Fees for the Customs Clearance of Goods" (as last amended on 20 December 2010), special minimal rates (RUB 250-500 per customs declaration) were provided for the customs clearance of some other particular categories of goods:
- goods, transported by railway transport under the customs regime of international customs transit;
- securities in foreign currency, which were brought into the customs territory of the Russian Federation;
- goods for personal, home and family needs not related to the entrepreneurial activity, except for passenger cars classified in commodity positions of HS Codes 8702 and 8703; and
- for customs registration of a customs declaration repeated for the same products under the same customs regime; as listed in Table 20.
He added that customs clearance of certain categories of goods was exempted from customs fees as established by the provisions of Article 357.9 of the Customs Code and in Article 131 of the Federal Law "On Customs Regulation".
378. One Member asked whether the customs clearance fees were applied only to merchandise trade (e.g., not to travellers or goods entering the Russian Federation as personal items) for the service rendered by the customs service of import and export processing of the Russian Federation. In response, the representative of the Russian Federation recalled that the customs clearance fees were levied only when a written customs declaration was required to be presented (those cases were established in the Customs Code and in the Federal Law "On Customs Regulation") and, correspondingly, customs authorities were required to provide a service. Thus, customs fees for the customs clearance were not levied in those cases when an exemption from the payment of the customs fees for the customs clearance was provided for (see the provisions of Article 357.9 of the Customs Code and Article 131 of the Federal Law "On Customs Regulation") and/or a declaration in written form was not required for the goods. These provisions, inter alia, covered most cases when the goods were transferred by physical persons for personal, familial, household, or any other needs unrelated to pursuits of entrepreneurial activities. If customs clearance of such goods required a written declaration, and they did not fall under the list of exemptions, a flat fee in amount of RUB 250 was to be paid (see Table 20).
379. One Member asked about the rates of fees applied to the customs clearance of goods shipped by postal services or express delivery services. In response, the representative of the Russian Federation stated that according to the exemptions listed in Article 357.9 of the Customs Code and Article 131 of the Federal Law "On Customs Regulation", customs fees for customs clearance were not chargeable in respect of goods forwarded in international postal items unless a declaration was required in written form and the said goods were declared by lodging a separate customs declaration (i.e., if the declared value of transferred goods exceeded RUB 10,000). In the latter cases, the rate of customs fees for customs clearance of goods amounted to RUB 250 as regards the goods, assigned for personal, family, household or other activities not connected with entrepreneurial activity, which were sent to a physical person (item (d), Table 20); if the goods were considered to be commercially traded, the relevant fee according to the scale listed in Table 20 was applied. He added that there were no differences provided for by the legislation in this matter, in respect of the treatment of foreign postal services, including express delivery operators, and the post service of the Russian Federation. In particular, there were no special exemptions for goods sent via the post service of the Russian Federation.
380. The representative of the Russian Federation recalled that when the current system of the customs clearance fees was introduced, it was intended that this system would be consistent with the requirements of the WTO Agreement, including Article VIII of the GATT 1994 and not burdensome for the participants in foreign trade.
381. Some Members, however, insisted that this system had some features that were not consistent with the provisions of Article VIII of the GATT 1994. One Member noted that high value declarations would incur a customs clearance fee of nearly US$3,500, an amount that could not be considered to be limited in amount to the approximate cost of services rendered. In addition, goods whose customs clearance may not require much handling or that used electronic format or other simplified methods for filing declarations could be subject to the same fees as similarly valued goods that required additional services. Finally, because customs clearance operations were funded from the State budget of the Russian Federation, and revenues from the fees were remitted to the State budget, it was difficult to establish that such revenues were used only for customs clearance operations. This Member requested that the Russian Federation amend its legislation to address these concerns and to establish a WTO-compliant system of customs clearance fees.
382. In response, the representative of the Russian Federation confirmed that the Customs Code mandated that the level of customs fees, including customs clearance fees, not exceed the cost of services rendered and that total revenues from customs clearance fee collections in 2009 accounted for only 25 per cent of the cost of customs clearance operations that year. He expected that further development of trade facilitation measures and expansion of enhanced customs clearance and control technologies would lead to decreased cost of services rendered in connection with customs clearance. He also confirmed that, prior to the date of accession, his Government would amend the system of customs clearance fees, i.e., reduce the maximum level for the customs clearance fee to the RUB equivalent of Special Drawing Rights (SDR) amount equal to RUB 30,000 as of the date of accession and establish lower fixed fees for the customs clearance of goods using electronic format or other simplified methods for filing declarations, to ensure compliance with the provisions of the WTO Agreement, in particular, of Article VIII of the GATT 1994. The Working Party took note of these commitments.
- (b) Other Fees
383. The representative of the Russian Federation said that other fees applied to imports or to the act of importation included: (i) port user fees; (ii) State duties; and (iii) consular fees. He confirmed that the Tax Code provided for the non-discriminatory application of State duties (Article 3 of Federal Law No. 146-FZ of 31 July 1998 "Part I of the Tax Code of the Russian Federation" (as amended on 17 July 2010). State duties could not be applied differently because of social, racial, national, religious or any other type of criteria, and the establishment of differential taxes and fees for the same purpose was prohibited.
384. The list of port fees applied in the Russian Federation was established in Federal Law No. 261-FZ of 8 November 2007 "On Seaports in the Russian Federation and on Amending Particular Legislative Acts of the Russian Federation". Port fees used in the particular seaports of the Russian Federation had been approved by the Order of the Ministry of Transport of the Russian Federation No. 187 of 17 December 2007 "On Approval of Port Fees Collected in Seaports of the Russian Federation" Table 21 and Table 22. These port fees were collected per 1 gross tonne of vessel conventional capacity, stated in International Measuring (classification) Certificate, according to provisions of the International Convention on Tonnage of 1969 and, included the following: tonnage (to be collected for each arrival into the port and departure from it), beaconage (to be collected for each arrival into the port, departure and transit through port harbourage), canal fees (to be collected upon each pass of canal on arrival, departure and transit through port harbourage), ecological fees (to be collected in ports, providing facilities for collection of wastes of all types, except ballast water), pilotage fees (to be collected for out-of-port pilotage through fairways and channels (for miles) and in-port pilotage and (for operations)), navigation fees (to be collected for each arrival into the port and departure from it), and, ice-breaker fees (to be collected for each arrival into the port, departure and transit through port harbourage with dependence on the season of the year). General provisions for port fees collection and their maximum rates were established in the Order of the Federal Service on Tariffs No. 522-t/1 of 20 December 2007 (particularities of collection of specific fees in each port were provided in Annex 10(b)), Port fees were collected by the authorities of the commercial seaports of the Russian Federation on a non-discriminatory basis from Russian and foreign vessels and floating facilities, irrespective of their legal organizational form, legal status and pattern of ownership.
385. State duties were collected in accordance with Chapter 25.3 of Federal Law No. 117-FZ of 5 August 2000 "Part II of Tax Code of the Russian Federation" (as amended on 28 December 2010). The provisions of the Tax Code of the Russian Federation related to State duties entered into force on 1 January 2005. The Law of the Russian Federation No. 2005-1 of 9 December 1991 "On State Duty", which previously regulated the application of State duties, had been abolished. Pursuant to Article 333.16 of the Tax Code of the Russian Federation, State duties were levied for the performance of legally significant actions, i.e., notary actions, including the issuance of documents, copies and duplicates, except for actions carried out by consular offices and only in the cases foreseen in the legislation. The list of applicable State duties was reproduced in Table 23.
386. Several Members again questioned how an ad valorem State duty for the attestation of agency Agreements and for accepting money and securities in deposit could relate to the cost of the service rendered. They also requested clarification of whether these duties applied to the act of importation or exportation, and what sorts of customs documents required a stamp tax. Regarding fees that were applied to imports for requirements, such as standards certification or vehicle taxes, these Members also noted that to the extent that these fees were inconsistent with Article III of the GATT 1994, they should be revised or eliminated prior to accession. Clarification was also requested regarding the precise meaning of legally significant action "for performing other notary actions" or "for the performance of the technical work for the making of the documents".
387. In response, the representative of the Russian Federation stated that, pursuant to the Tax Code of the Russian Federation, State duties had to be paid only if so required under Chapter 25.3 of the Code. Mandatory customs operations and procedures, such as authentication of customs documents, attestation of agency Agreements and acceptance of money and securities in deposit by customs bodies did not require any payment of a State duty. Concerning the meaning of legally significant actions, he said that, according to Chapter 25.3 of the Tax Code of the Russian Federation, legally significant actions were:
- statements of claim and other claims and complaints filed with courts of general jurisdiction, arbitration courts, justice courts and the Constitutional Court of the Russian Federation;
- notarial acts by public notaries employed by notary offices or duly authorised officials of executive authorities, local administrations;
- State Registration of acts of civil status and other legally significant actions performed by vital statistics offices; and
- issuance of documents by courts, institutions and agencies for consideration and issuance of documents associated with acquisition of Russian citizenship (national status) or denunciation thereof and performance of other legally significant actions.
388. Referring to consular fees, he noted that in accordance with the Vienna Convention on Consular Relations (1963) and Consular Articles provisions (1976), the main objective of the consular offices was the protection of rights and legal interests of Russian citizens and legal entities abroad. Consular offices of the Russian Federation collected fees for the issuance of documents of legal significance to Russian natural persons or legal entities constantly or temporarily residing or located in foreign countries, as well as to citizens of foreign states, foreign legal entities, and persons without citizenship. Acts performed by the consular offices of the Russian Federation included those related to passport and visa matters, citizenship, certification and notarization of documents, and power of attorney notarization. None of these acts were directly related to exports or imports of goods and their fees were applied on a reciprocal basis.
389. Noting the statement above, some Members sought clarification from the Russian Federation on whether consular fees were levied on consular operations involving importation or exportation. In particular, they asked the Russian Federation to confirm whether any requirement existed for authentication of customs documentation by overseas Russian Federation consulates prior to exportation. Some Members expressed concerns about the charging of fees for consular purposes that were connected with importation (see Table 24) at a lower rate from certain countries where the service was performed (the Baltic countries and CIS countries) as this practice would be in violation of Article I of the GATT 1994 and should be eliminated prior to accession. Other Members of the Working Party expressed concern about the discriminatory application of consular fees by Sub-Federal entities, apparently in contravention of the legislation of the Russian Federation. The same Members requested that the Russian Federation enter into a commitment to apply a uniform consular fee policy to all and to eliminate current discriminatory practices prior to accession.
390. The representative of the Russian Federation responded that his Government imposed no requirement for the issuance of consular invoices or certificates for exports to the Russian Federation, nor for the authentication of customs documentation required for importation. He confirmed that consular fees were charged only by the consular offices of the Russian Federation. No consular offices were established by Sub-Federal entities and no consular fees were applied at Sub-Federal level. He also noted that the consular fees listed in Table 24 were not connected with the type of consular acts covered by Article VIII:4(a) of the GATT 1994, and were not in any way directly related to exportation or importation. These acts were covered by bilateral consular treaties and performed mainly in respect of Russian citizens and Russian legal entities. In his view, such bilateral treaties, providing for differential treatment for consular services on a reciprocal basis, were common among WTO Members.
391. The representative of the Russian Federation confirmed that the lists of fees and charges for customs services, port fees used in commercial seaports and State duties that could be applied in the context of international trade listed in Table 20, Table 21, Table 22, Table 23, Table 24 were comprehensive as of the date stated in each table.
392. The representative of the Russian Federation confirmed that the Russian Federation would, from the date of accession, ensure that any fees and charges imposed on or in connection with importation and exportation, including those discussed in paragraphs 357, 373, 445, 460, 463, 481, 563, and 664 or introduced in the future, would be applied in conformity with the relevant provisions of the WTO Agreement, in particular Articles VIII and X of the GATT 1994. He further confirmed that, from the date of accession, all laws and regulations regarding the application and level of any such fees and charges would be published. Further, upon receipt of a written request of a concerned Member, the Russian Federation would provide to that Member information on the revenue collected from a specific fee or charge and on the costs of providing the associated services. The Working Party took note of these commitments.
- Application of Internal Taxes on Imports
393. The representative of the Russian Federation stated that, as from 1 January 2010, the legal framework governing the application of indirect taxation on imports (and exports) among the CU Parties was contained in the Agreement on the Principles of Indirect Tax Collection at Export and Import of Goods, Performing Work and Rendering Services in the Customs Union, signed on 25 January 2008, and as amended by the Protocol on Amending the Agreement On the Principles of Collection of Indirect Taxes on Exports and Imports of Goods, Performing Works and Rendering Services in the Customs Union of 11 December 2009 (hereafter: Protocol on Amending the Agreement on Indirect Tax on Exports and Imports). Its provisions were elaborated in the Protocol on the Order of Levying of Indirect Taxes in View of Performance of Works and Rendering Services in the Customs Union of 11 December 2009, and the Protocol on the Procedure of Collection of Indirect Taxes and on the Mechanism of Carrying Out the Control over their Payment while Exporting/Importing Goods in the Customs Union, signed on 11 December 2009.
394. These CU Protocols and the Agreement established that imports among CU Parties would be subject to excise and Value Added Taxes (VAT) and that exports among CU Parties would be exempted or taxed at a zero rate, provided that documentary confirmation of the fact of the export was submitted and that the tax authorities of the CU Parties possessed information confirming tax payment to the budgets of other CU Parties for these goods. The Agreement also confirmed that the rate of duty of these indirect taxes applied to imports would not exceed the rate applicable to domestic goods. The Agreement on Indirect Tax on Exports and Imports (as amended) provided that application of indirect taxes on imports into Special Economic Zones (SEZs) would be established in a separate CU Treaty. Article 70 of the CU Customs Code, adopted on 27 November 2009, and implemented on 1 July 2010, confirmed that CU Parties' customs services (the FCS in the Russian Federation) would collect VAT and excise taxes on imports into the Customs Union from third parties. Articles 72, 73, and 75 stated that the levels, method of collection and taxable base for these taxes on imports were determined by the national legislation of the CU Parties. Thus, to a large extent, the national legislation of the Russian Federation determining the application of indirect taxes to imports and exports, prior to 1 January 2010, continued to apply.
- (a) Excise Taxes
395. The representative of the Russian Federation noted that the legal framework for excise taxation in the Russian Federation was provided in Chapter 22 (Excise Tax) of the Tax Code (Federal Law No. 110-FZ of 24 July 2002 "On the Introduction of Chapter 22 into Force"). It set the list of products, which were subject to excise taxes and tax rates (see Table 25). In pursuance of the above-mentioned Act, excise tax rates for imports and those for domestic products were identical.
396. He further noted that Article 193.1 of the Tax Code of the Russian Federation provided that excise taxes were applied on the basis of specific rates for all types of excisable goods, excluding cigarettes with filters, non-filter cigarettes, and mouthpiece cigarettes. For these tobacco products combined tax rates applied, consisting of both a specific and an ad valorem tax rate. Currently, ad valorem tax rates were not applied in respect of other excisable goods. The tax base for calculating the ad valorem alternative for the excise tax for cigarettes was the ex-factory price exclusive of VAT for domestic products and the duty paid customs value exclusive of VAT for imported cigarettes.
397. If excisable goods were placed under customs treatments of transit, bonded warehouse, re-export, processing under customs control, free customs area, destruction and refusal in favour of the State, the excise tax did not have to be paid. Products for which a zero level excise tax was indicated (e.g., beer with an alcohol content less than or equal to 0.5 per cent) were included in the list of excisable goods only for the effective State monitoring of their turnover.
398. In respect of further concerns of some Members related to the principle of levying excise taxes on imports from CIS countries, including other CU Parties, the representative of the Russian Federation noted that from 1 July 2001, when Chapter 22 of the Tax Code of the Russian Federation had entered into force, excise taxes had been levied in a uniform manner on all imports, based on the country of destination principle, except for Belarus. As from 1 February 2005, on the basis of the Agreement of 15 September 2004 between the Russian Federation and the Republic of Belarus, the country of destination principle was also applied to imports from Belarus. This principle was extended to the Customs Union with Kazakhstan and Belarus on 1 January 2010, in accordance with the Agreement on Indirect Tax on Exports and Imports for which Chapter 7 of the CU Customs Code confirmed these principles for taxation of imports from third countries.
399. Some Members noted that excise taxes on imports of automobiles were applied on the basis of the engine capacity, which was an unjustified discrimination against trade in similar products. Members also sought information on an announced prospective application of a similar discriminatory excise tax on agricultural machinery on the same basis. In their view, these measures were not in conformity with WTO provisions, e.g., Articles I, III, XI of the GATT 1994.
400. The representative of the Russian Federation replied that the excise tax on automobiles was being applied on the basis of engine capacity. It was aimed at the taxation of Russian consumers of luxury cars and taking into account the environmental concerns and that it constituted a usual and normal measure. The measure was not aimed at discrimination against particular countries or manufacturers, as such, luxury and powerful cars were produced in the Russian Federation too. He also noted that excise tax rates for imported and domestic products were equal under Article 193 of the Tax Code of the Russian Federation. Reasoning from the preceding, he stated that, in his view, excise tax on imports of automobiles had no discriminatory effect on imports. He added that agricultural machinery had never been subject to excise taxes and that the Russian Federation had no intention of introducing excise taxes on agricultural machinery.
401. Some Members requested additional information on how the Russian Federation calculated the single payment that natural persons importing motorcars paid in place of the customs duty, VAT and excise tax.
402. The representative of the Russian Federation explained that the calculation of single payment was regulated by Chapter 23 of the Customs Code of the Russian Federation, as elaborated by the Government Resolution No. 718 of 29 November 2003 "On the Approval of the Regulation on the Application of the Uniform Rates of the Customs Duties and Taxes With Respect to Goods Transferred Across the Customs Border of the Russian Federation by Natural Persons for Personal Use" and based on the uniform rates set in the above-mentioned Resolution. According to Article 360.4 of the CU Customs Code, the application of customs duties, taxes, and customs fees on goods imported by physical persons for personal use and also terms of their payment were governed by the Agreement on the Order of Transportation of Goods through the Customs Border of the Customs Union by Physical Persons for Personal Purposes and on Performance of Operations, signed on 18 June 2010. Based on these provisions, there had been no changes to the regime of the Russian Federation in calculating a single import payment for physical persons importing motorcars.
403. The rates applied under this regime were differentiated, depending on the age of the cars, within three categories: (i) new ones from the date of the production of which not more than three (full) years passed; (ii) used ones from the date of production of which not less than three, but not more than seven (full) years passed; and (iii) used ones from the date of production of which more than seven (full) years passed. The Government Resolution provided that imports by natural persons of motor cars into the customs territory of the Russian Federation were subject to a single payment, which replaced the customs duty, VAT and excise tax. The amount of such single payments was approximately equal to the sum of customs duty, VAT and excise tax.
404. Several Members expressed appreciation for the comprehensive listing of excise taxes and other information on their application to domestic and imported goods in Table 25. They noted that the differentiation of excise tax rates within specific categories of alcoholic beverages, e.g., for different types of beer, wine, and spirits, might have a de facto discriminatory effect on imports. In addition, a higher excise tax was levied on alcoholic beverages containing more than 28 per cent alcohol by volume. At a later stage, Members sought confirmation that any differential in the rates of excise tax applied to alcoholic beverages had been eliminated, and sought information on how the Russian Federation intended to eliminate these measures and bring its excise tax regime on alcohol and alcoholic beverages into conformity with the WTO Agreement. Furthermore, on alcoholic beverages, some Members sought clarification regarding the excise warehouses of the Russian Federation and whether this would be extended to imported products. They considered that an extension to imported products would create a barrier to trade and could have a discriminatory result.
405. In response, the representative of the Russian Federation stated that the differentiation of excise tax rates applied to specific categories of alcoholic beverages (beer, wine and spirits) was based on the principle of harmonizing the applied rate of taxation with the concentration of pure alcohol in those beverages and, therefore, these taxes were not having a discriminatory effect on imports. For example, Russian-produced wines (fortified wines) were subjected to the highest excise rates in comparison with imported wines (natural wines). The representative of the Russian Federation confirmed that the Russian Federation would not apply any system of excise taxation to imported alcoholic products that would be discriminatory.
406. With respect to the excise warehouses for alcoholic beverages, the representative of the Russian Federation explained that, in accordance with Federal Law No. 107-FZ "On the Alteration of Part II of the Tax Code of the Russian Federation and on the Invalidation of Certain Legislative Acts", the regime of excise warehouses for excisable goods had not been applied since 1 January 2007.
407. Noting further that differential rates of excise tax were levied on natural gas depending on whether it was sold in the Russian Federation for export to other CIS countries (15 per cent), or whether it was for export to other countries (30 per cent), some Members felt that this practice was discriminatory and asked how the Russian Federation would bring it into conformity with WTO rules upon accession.
408. The representative of the Russian Federation clarified that the excise tax on sales of natural gas had been eliminated as of 1 January 2004 and replaced by a 30 per cent export duty (see Section on "Export Duties").
409. Some Members also asked for a detailed clarification on the national treatment implications of calculating excise taxes on imports on the customs value plus the total of customs duties and levies payable, while the excise taxes on domestically produced goods were based on actual value only. Members sought the elimination of these practices and a commitment from the Russian Federation that full conformity with WTO provisions would be ensured in the application of excise taxes, as from the date of accession to the WTO.
410. In response to concerns about the inclusion of the customs duty in the taxable base for the excise taxes levied on imports of goods to the customs territory of the Russian Federation, the representative of the Russian Federation stated that this requirement of the legislation of the Russian Federation was consistent with the practice of implementation of the GATT 1994 and the only excisable products partially subject to ad valorem rates were cigarettes. All other were subject to specific rates.
- (b) Value Added Tax
411. Some Members requested confirmation that the Value Added Tax (VAT) was now applied in a uniform manner to all domestic and imported products and that this was also the case with respect to CIS countries, including the other CU Parties. Clarification was also requested on whether the same principle applied to imports and exports of energy products such as gas and oil. A Member requested clarification concerning the different VAT treatment of ice-cream produced from milk and dairy products (10 per cent) and ice-cream produced from fruits and berries (18 per cent).
412. In response, the representative of the Russian Federation replied that, in accordance with Chapter 21 of Federal Law No. 117-FZ of 5 August 2000 "Part II of Tax Code of the Russian Federation" (as amended on 30 July 2010) and Federal Law No. 118-FZ of 5 August 2000 "On Introduction of Part II of the Tax Code", VAT was applied in a uniform manner to all domestic and imported products on the basis of the country of destination principle, and that it had also been the case with CIS countries since 1 July 2001, except for bilateral trade with the Republic of Belarus. As from 1 February 2005, on the basis of the Agreement of 15 September 2004 between the Russian Federation and the Republic of Belarus, the country of destination principle was also applied on imports from the Republic of Belarus. An appropriate provision was included in Article 2 of Federal Law No. 102-FZ of 18 August 2004 "On Amending Part II of the Tax Code of the Russian Federation and Other Legislative Acts of the Russian Federation", bringing the legislation of the Russian Federation into conformity with the above Agreement. This was confirmed for Parties to the Customs Union with the implementation, on 1 January 2010, of the Agreement on Indirect Tax on Exports and Imports and, for imports from third countries, in Chapter 7 of the CU Customs Code. An exhaustive list of basic food products and products for children subject to 10 per cent VAT was adopted by Government Regulation No. 908 of 31 December 2004. Ice-cream produced from fruits and berries was not included in the list as it was not a basic dairy product.
413. He noted that, according to the Tax Code of the Russian Federation, VAT was levied at a single rate of 18 per cent for most products. However, according to Articles 149 and 164 of the Tax Code, for some goods, the rates of zero per cent and 10 per cent were applied. The comprehensive list of these goods was presented in Table 26 and Table 27. All these rates and exemptions were applied in a non-discriminatory manner both to domestic and imported goods. Also, according to Article 151 of the Tax Code, goods placed under the specified customs regimes of transit; customs warehouse; re-export; duty free shop; processing under customs control; free customs zone; free warehouse; destruction and refusal in favour of the state, and movement of stores (e.g., fuel-on-board means of transport for consumption during the trip), were exempt from VAT. The tax base for the imposition of the VAT included excise taxes, if any. For imported goods, the tax base for the imposition of the VAT also included customs duties.
414. Referring to the list of VAT exemptions listed in Table 26, some Members noted that a reference was made therein that "sale of products of own manufacture of organizations engaged in the production of agricultural products which generate 70 per cent and more of the overall share of incomes from the sale in the total sum of their incomes" were exempted from VAT. They enquired about the products in question and whether imports of similar products also qualified for exemption and, more generally, how the exemption of domestic agricultural output from VAT could be justified under Article III:2 of the GATT 1994. Noting that fish caught in the high seas by Russian registered vessels were also VAT exempted, these Members further enquired whether this exemption was extended to imported fish products as well. Some Members also enquired whether the provision for VAT exemption for certain agricultural producers, or producers in any other sector, also applied where output was bartered for goods or services or used as payment in kind for discharging financial obligations to financial institutions or other creditors. If that was the case, these Members requested full details on the legal basis for such goods and services being deemed to satisfy the relevant criteria for VAT exemption.
415. The representative of the Russian Federation replied that, in the case of fish caught in the high seas by Russian registered vessels, the VAT collection resulted from the fact that fish so caught were considered to be Russian produced fish and, as such, its delivery into the customs territory of the Russian Federation did not constitute an importation. These goods were thus not subject to VAT when brought to the customs territory of the Russian Federation, but were subject to VAT when the first transaction had been performed.
416. In response to the concerns of Members concerning VAT exemption for agricultural products of some producers, he further explained that under Article 149:3(20) of the Tax Code of the Russian Federation these products substituted payments for the job of natural persons employed by the producers, if 70 per cent or more of own income of such producers was generated from the sale of the agricultural products of their own manufacture. Such form of payments was used in the agricultural sector by entities in critical situations with no actual money either to pay salaries or VAT when paying for the job of employed persons by agricultural products. This VAT exemption was widely used in the 1990s, but its usage had since declined to negligible levels. The agricultural products at issue were unprocessed products of plant growing and cattle breeding (meat, fish, eggs, vegetables, fruits, etc.). This provision was not applied to the cases when the output of the above-mentioned producers was bartered for goods or services, or used as payment to reimburse financial obligations to financial institutions or other creditors.
417. The representative of the Russian Federation confirmed that the VAT exemption under Article 149:3(20) of the Tax Code of the Russian Federation exempting certain domestic agricultural products from payment of the VAT would be eliminated as from the date of accession. The Working Party took note of this commitment.
418. Members also noted that discriminatory application of the VAT existed in the automotive sector. Used cars imported by individuals were not charged a VAT or excise tax. They also noted that the VAT was applied on an arbitrary basis on medical equipment, medical devices, and pharmaceuticals. These measures were not in conformity with Article III of the GATT 1994. Some Members also expressed concern about the practice of the customs authorities of the Russian Federation to apply the previously existing VAT rate of 20 per cent (now 18 per cent) to imports of pharmaceutical products instead of the special VAT rate of 10 per cent introduced by the Tax Code and sought confirmation from the Russian Federation that this practice had been abolished. In addition, these Members sought clarification on the application of the maximum VAT on imports of pharmaceutical products for clinical trials rather than the reduced rate provided for by law. In addition to a discriminatory VAT (20 or 18 per cent instead of 10 per cent), which customs tended to apply in the absence of a special permit from the Ministry of Health, these Members stated that the Part II of the Tax Code allowed for exemptions and asked the Russian Federation to consider VAT exemption of these products as they were not for resale.
419. As regards the application of VAT in the automotive sector, the representative of the Russian Federation explained that Government Resolution No. 718 of 29 November 2003 "On the Approval of the Regulations on the Application of the Uniform Rates of the Customs Duties and Taxes with Respect to Goods Transferred across the Customs Border of the Russian Federation by Natural Persons for Personal Use" provided that in respect of imports by natural persons of motor cars into the customs territory of the Russian Federation a single payment could be applied, which accumulated the customs duty, VAT and excise tax. The authority of the Russian Federation in the context of the Customs Union to apply this regime to imports of automobiles by physical persons for their own use had been confirmed by Article 360.4 of the CU Customs Code and by the Agreement on the Order of Transportation of Goods through the Customs Border of the Customs Union by Physical Persons for Personal Purposes and on Performance of Operations, signed on 18 June 2010, as described in paragraph 402 above.
420. He added that the application of the single payment in question was not an option for a natural person who imported a car under the procedure of the release of goods for domestic consumption (i.e., with possibility of resale). In this case, the general order of calculation and payment of customs duties and taxes would be implemented. If a person imported a car for personal use, however, that person had to make a lump-sum payment, the amount of which was to be based on the uniform rate set in the Resolution. The amounts of payments under the two above-mentioned procedures were practically similar, i.e. for the same vehicle the sum of duty, VAT, and excise tax made under the first procedure would be similar to the amount of the payment made in a lump sum under the second procedure.
421. On the application of VAT on pharmaceutical products and medical equipment, as well as products for clinical trials, the representative of the Russian Federation explained that such products had to be registered in the Ministry of Health as pharmaceutical products and medical equipment to be eligible for the reduced VAT rate. The VAT rate was zero per cent for the products included in the exhaustive list of the products of high importance adopted by the Government Resolution No. 19 of 17 January 2002, the list of medical products intended for rehabilitation of invalids adopted by Government Resolution No. 998 of 21 December 2000, the list of medical products intended for production of immunobiological substances adopted by Government Resolution No. 283 of 29 April 2002, the list of spectacle lens and spectacle frames (except for sunglasses) adopted by Government Resolution No. 240 of 28 March 2001, the VAT rate was zero per cent. For other registered pharmaceutical products and medical equipment, as well as products for the clinical trials registered in the Ministry of Health, the VAT rate was 10 per cent. In the absence of such registration, these products were subject to the general VAT rate of 18 per cent. In addition, since 1 January 2008, Articles 164.2(4) and 164.5 of the Tax Code of the Russian Federation had provided that medical products for clinical studies registered in the Ministry of Health were subject to the reduced excise tax rate of 10 per cent.
422. Some Members of the Working Party noted that space equipment originating in some countries faced, at a minimum, a 20 per cent (now 18 per cent) VAT, while those from other countries enjoyed an exemption from the VAT. They indicated that this was inconsistent with the MFN provisions in Article I of the GATT 1994 and sought the immediate application of equivalent VAT treatment to all space equipment regardless of its country of origin.
423. The representative of the Russian Federation confirmed that there had been some cases of exemptions from levying VAT on space equipment, resulting from bilateral agreements. Since November 2007, the MFN VAT rate applicable to space equipment had been zero per cent, according to Article 164 of the Tax Code (see Table 26).
424. The representative of the Russian Federation confirmed that from the date of accession, the Russian Federation would apply its internal taxes and exemptions thereof, including VAT, excise taxes, and other taxes in a non-discriminatory manner in compliance with Articles I and III of the GATT 1994. In particular, the representative of the Russian Federation confirmed that from the date of accession the Russian Federation would apply VAT for space equipment on an MFN basis. The Working Party took note of this commitment.
- Quantitative Import Restrictions, including Prohibitions and Quotas and Import Licensing Systems
- (a) Quantitative Import Restrictions, including Prohibitions and Quotas
425. The legal authorization for the application of quantitative import restrictions in the Russian Federation was contained in agreements established in the Customs Union (CU) with Kazakhstan and Belarus. By Decision No. 19 of 27 November 2009 of the CU Interstate Council, the Agreement on Common Measures of Non-Tariff Regulation in Respect of Third Countries, signed on 25 January 2008 (hereafter: "CU Agreement on Non-Tariff Regulation"), and the Agreement on the Procedure of Introduction and Implementation of Measures, Concerning Foreign Trade in Goods, on the Common Customs Territory in Respect of Third Countries (hereafter: "Agreement on Measures Concerning Foreign Trade"), signed on 9 June 2009 took effect on 1 January 2010. As a consequence, decisions to impose non-tariff measures on third-country imports into the CU would be taken by the CU Commission. Prior to the establishment of the CU, the imposition of non-tariff measures was governed by Chapter 5 of the Federal Law No. 164-FZ. According to the CU Agreement on Non-Tariff Regulation, non-tariff measures could include quantitative restrictions, exclusive import or export licenses, or automatic licenses (permits) or non-automatic licenses. By its Decision No. 132 of 27 November 2009, the CU Commission approved the Common List of Goods that are Subject to Non-Tariff Measures (see Table 28), which also came into force on 1 January 2010.
426. The representative of the Russian Federation noted that, in his view, the Russian Federation did not maintain any quantitative import restrictions, prohibitions or quotas within the meaning of Article XI of the GATT 1994, nor was any such measure in place in the CU. Imports of goods were free of any quantitative restrictions imposed previously pursuant to Article 21 of Federal Law No. 164-FZ of 8 December 2003 "On the Fundamentals of State Regulation of Foreign Trade Activity" (as last amended on 7 April 2010). Under the CU, import restrictions could be applied pursuant to Article 7 of the CU Agreement on Non-Tariff Regulation and in accordance with Federal laws and international treaties of the Russian Federation, if those measures: (i) were necessary to maintain public morals or law and order; (ii) were necessary to protect the life or health of citizens, environment, life or health of animals and plants; (iii) were related to the import or export of gold or silver; (iv) were applied to protect cultural valuables and heritage; (v) were required to prevent the exhaustion of irreplaceable natural resources and implemented simultaneously with curtailment of the domestic production or consumption associated with the utilization of irreplaceable natural resources; (vi) were linked to a limitation of export of domestic raw materials to provide sufficient quantity of such materials for the domestic manufacturing industry in periods when domestic prices for such materials were kept lower than world prices as the result of a stabilization plan implemented by the government; (vii) were essential to acquire or distribute goods in case of their general or local shortage; (viii) were essential to comply with the international obligations; (ix) were essential to ensure the defence of the country and security of the state; and (x) were necessary to ensure the observance of regulatory legal acts not contravening international commitments and related to the application of the customs law, preservation of the environment, protection of intellectual property and other legal acts.
427. In addition, pursuant to Article 3 of the CU Agreement on Non-Tariff Regulation, quantitative import restrictions could be introduced on agricultural or fishery products imported into the CU in accordance with Article XI:2 of the GATT 1994 when such measures were necessary to: (i) reduce the production or sale of similar domestic goods; (ii) reduce the production or sale of domestic goods that could be directly replaced with imported goods unless there was a large-scale production of similar domestic goods; (iii) remove from the market a temporary surplus of similar domestic goods by providing the available surplus of such goods to some groups of consumers either free of charge or at prices inferior to market prices; (iv) remove from the market a temporary surplus of domestic goods that may be directly replaced with imported goods unless there was a large-scale production of similar domestic goods by providing the available surplus of such goods to some groups of consumers either free of charge or at prices inferior to market prices; and (v) limit the production of products of animal origin whose production was dependent upon imported goods, provided the production of similar domestic goods was negligible. In response to a question from a Member, the representative of the Russian Federation explained that "domestic good" in this context meant a good produced in any CU Party.
428. Referring to the statement of the representative of the Russian Federation in paragraph 427, a Member enquired whether any import restrictions under Article XI:2(c) of the GATT 1994 had been or were being applied. This Member requested the Russian Federation to enter a commitment to comply with Article 4.2 of the WTO Agreement on Agriculture, which had superseded Article XI:2(c) of the GATT 1994, as from the date of its accession and to remove any measures that could be inconsistent with that Article. In response, the representative of the Russian Federation said no import restrictions under Article XI:2(c) of the GATT 1994 were being applied under either the existing legislation of the Russian Federation or CU Commission Decisions. He further stated that, from the date of accession, the Russian Federation would comply with Article 4.2 of the WTO Agreement on Agriculture.
429. He further stated that, pursuant to Article 8 of the CU Agreement on Non-Tariff Regulation, the CU Commission was authorised to apply quantitative import restrictions and prohibitions to fulfil the obligations of a Party under international sanctions regimes or to protect the external financial situation and safeguard the balance of payments (see Section on "Balance of payments" of this Report). To meet these obligations, the CU Commission was authorised to apply quantitative import restrictions or grant exclusive licenses to import or export based on proposals from the CU Parties. Such measures would be taken in accordance with the Federal Laws of the Russian Federation and the international Agreements to which the Russian Federation was a Party. In response to a question from a Member, the representative of the Russian Federation explained that the list of general exceptions stipulated in Articles 7 and 8 of the CU Agreement on Non-Tariff Regulation was exhaustive and no other document within the CU provided for such exceptions.
430. The representative of the Russian Federation explained that, as of 1 January 2010, pursuant to Article 9 of the CU Agreement on Non-Tariff Regulation and Article 1 of the Agreement on Measures Concerning Foreign Trade, the authority to impose non-tariff measures in the CU on third-country imports was transferred from the individual Parties to the CU Commission. A proposal to apply a non-tariff measure could be filed by a Party or the CU Commission, and the CU Commission was required to make its determination within 30 days from the date the proposal was submitted, and the decision would come into force within 45 days from the date of publication. Any non-tariff measure was applied to goods originating in third countries, and applied equally to imports from all countries.
431. In response to a question from a Member, the representative of the Russian Federation explained that under Article 9 of the CU Agreement on Non-Tariff Regulation and Article 8 of the Agreement on Measures Concerning Foreign Trade, and pursuant to the procedures set-forth in the latter Agreement, a CU Party could unilaterally impose temporarily a non-tariff measure if such a measure was aimed at: (i) the observance of public morality, law and order; (ii) defence and security; (iii) protection of life or health of the citizens, environment, life or health of animals and plants; (iv) protection of cultural values and cultural heritage; (v) protection of intellectual property; (vi) prevention of the exhaustion of irreplaceable natural resources; (vii) prevention or reduction of the critical shortage in the domestic market of food or other goods that were essential for the domestic market; or (viii) protection of the external financial position and safeguarding the balance of payments. Furthermore, Articles 6.1 and 7.1 of the Agreement on Measures Concerning Foreign Trade provided further grounds to introduce unilateral non-tariff measures with a view to protecting national interests or external financial position as well as safeguarding the balance of payments. Such a unilateral measure could be imposed for only six months. The CU Parties not imposing the non-tariff measure were to take the necessary steps to prevent the importation of the subject goods into the Party which unilaterally applied the non-tariff measure.
432. Noting the statement of the representative of the Russian Federation that measures applied on the basis of Article 7 of the CU Agreement on Non-Tariff Regulation were justifiable under Articles XX and XXI of the GATT 1994 and other respective provisions of the WTO Agreement, some Members stated that certain elements of that Article, such as paragraph 6, reached beyond grounds provided for under the GATT, in particular Articles XX and XI. The same Members requested a commitment that Article 7 of the CU Agreement on Non-Tariff Regulation, whether applied by the Russian Federation or the competent bodies of the CU, would be in conformity with the relevant provisions of the WTO Agreement.
433. In response, the representative of the Russian Federation stated that, in his view, Article 7 of the CU Agreement on Non-Tariff Regulation was in conformity with Article XX (j) of the GATT 1994. He also confirmed that measures applied on the basis of Article 7 of the CU Agreement on Non-Tariff Regulation would be in conformity with the relevant provisions of the WTO Agreement, whether applied by the Russian Federation or the competent bodies of the CU.
434. In response to a question from a Member, the representative of the Russian Federation recalled that the temporary ban on the importation of ethyl alcohol enforced under Federal Law No. 61-FZ of 31 March 1999 "On Temporary Ban on Ethyl Alcohol Imports" had been terminated on 31 December 2001. He further said, that Article 13 of Federal Law No. 171-FZ of 22 November 1995 "On State Regulation of Producing and Turnover of Ethyl Alcohol, Alcoholic and Alcohol-Containing Products", which had restricted imports of distilled spirits to no more than 10 per cent of alcohol sales in the Russian Federation, was repealed on 1 January 2006 by Federal Law No. 102-FZ of 21 July 2005 "On Amending the Federal Law on the State Regulation of Producing and Turnover of Ethyl Alcohol, Alcoholic Products and Alcohol-Containing Products and on Declaring as no Longer Valid Some Provisions of the Federal Law on the State Regulation of Producing and Turnover of Ethyl Alcohol, Alcoholic Products and Alcohol-Containing Products".
435. Noting the statement of the representative of the Russian Federation concerning the lifting of the temporary ban on imports of ethyl alcohol, some Members requested clarification of whether the Russian authorities considered that imports of ethyl alcohol could still be affected by Government Resolution No. 1292 of 3 November 1998 "On the Approval of Rules for the Issuance of Quotas for the Manufacture of Ethyl Alcohol from All Types of Raw Materials and Special Permits for Its Delivery" (as amended on 16 May 2001). As this Resolution seemed to contemplate placing quotas on deliveries by domestic producers, the question remained as to whether the Russian Federation eventually planned to place quotas on imports.
436. In response, the representative of the Russian Federation stated that the rules of putting quotas on production of ethyl alcohol from all types of raw materials, methylated spirits and alcohol-containing solutions had been recognised as invalid by Resolution of the Supreme Court of the Russian Federation No. GKPI 2001-783 of 16 May 2001 "On Recognition as Invalid and Inapplicable the Rules on Putting Quotas on Production of Ethyl Alcohol and Alcohol-Containing Solution", approved by Government Resolution No. 1292 of 3 November 1998. The rules of issuance of special permits for delivery (release) of ethyl alcohol produced from all types of raw materials, methylated spirits and alcohol-containing solutions had been recognised as invalid and inapplicable by Resolution of the Supreme Court No. GKPI 00-1251 of 23 November 2000 "On Recognition as Invalid and Inapplicable the Rules of Issuance of Special Permits for Delivery (Release) of Ethyl Alcohol Produced from All Types of Raw Materials, Methylated Spirits and Alcohol-Containing Solutions", approved by the Resolution of the Government of the Russian Federation No. 1292 of 3 November 1998.
437. He further noted that according to Federal Law No. 102-FZ of 21 July 2005 "On Amending the Federal Law on the State Regulation of Production and Circulation of Ethyl Alcohol, Alcoholic Products and Alcohol-Containing Products and on Declaring as no Longer Valid Some Provisions of the Federal Law on the State Regulation of Production and Circulation of Ethyl Alcohol, Alcoholic Products and Alcohol-Containing Products", the restriction on distilled spirits mentioned in Article 13, Point 2 of Federal Law No. 171-FZ of 22 November 1995 "On the State Regulation of Production and Circulation of Ethyl Alcohol, Alcoholic Products and Alcohol-Containing Products" was no longer valid.
438. Noting that the Russian Federation did not exclude the possible introduction of a State monopoly on the distribution of alcoholic products, and that CU Regulations provided that the CU Commission could issue an exclusive import licence for such enterprises, some Members requested the Russian Federation to ensure that, in the event of such introduction, it would not create a disguised restriction on imports of alcoholic products into the Russian Federation, nor would it create unduly burdensome procedures for imports. In response, the representative of the Russian Federation referred to paragraph 253 of the Section "Registration requirements for import/export operations" of this Report.
439. Some Members expressed concerns about measures applied by the Russian Federation that, in their view, restricted trade in beef, pork, and poultry meat and products. These Members requested information on the basis for these measures and on when they would be terminated. In response, the representative of the Russian Federation informed the Members that, for the purpose of ensuring the conditions for the stable development of the Russian production of poultry, beef and pork meat, and products thereof, on the basis of Government Resolution No. 1111 of 24 December 2010 "On Import of Beef, Pork and Poultry Meat in 2011", and taking into account Federal Law No. 164-FZ of 8 December 2003 "On the Fundamental Principles of State Regulation of Foreign Trade Activity" and the Law of the Russian Federation No. 5003-1 of 21 May 1993 "On Customs Tariff" (as last amended on 28 June 2009), the Government had approved the list of goods and volumes of their importation into the Russian Federation from 2010 to 2012. These quotas were administered by issuance of non-automatic licenses by the Ministry of Industry and Trade, as described in the Section "Tariff Quotas" of this Report. Earlier safeguard import quotas had been converted into TRQs on 1 January 2006, as described in the Section "Tariff Quotas" of this Report.
- (b) Import Licensing Systems
440. The representative of the Russian Federation noted that, from 1 January 2010, the legal basis for the import licensing system in the Russian Federation was established in the Agreement on Common Measures of Non-Tariff Regulation in Respect of Third Countries, signed on 25 January 2008 (hereafter: CU Agreement on Non-Tariff Regulation), the Agreement on the Introduction and Application of Measures Concerning Foreign Trade in Goods on the Common Customs Territory in Respect of Third Countries (hereafter: CU Agreement on Measures Concerning Foreign Trade), signed on 9 June 2009, and the Agreement on Licensing in the Area of Foreign Merchandise Trade of 9 July 2009 (hereafter: CU Licensing Agreement) and the Agreement on the Regime and Implementation of Tariff Quotas as of 12 December 2008. The purpose of the licensing regime was to monitor and control imports of goods which, for various reasons, were classified as sensitive by the CU Parties and/or by the international community. By CU Commission Decision No. 132 of 27 November 2009 "On a Single Non-Tariff Regulation of the Customs Union of the Republic of Belarus, the Republic of Kazakhstan and the Russian Federation" (hereafter: CU Commission Decision No. 132), the CU Commission approved the Common List of Goods that might be subject to Non-Tariff Measures (hereafter: Common List, see Table 28), which came into force on 1 January 2010. For the Russian Federation, in addition to the products already subject to such requirements, wines, vitamins and a number of radio-electronic products became newly subject to non-tariff measures as a result of CU Commission Decision No. 132. The procedure for the importation of specific products, such as products with cryptographic capabilities, precious stones and precious metals, and medicines and pharmaceutical ingredients, were set-out in CU Commission regulations. The authorised body of each CU Party was responsible for issuing and monitoring the implementation of non-automatic licenses and/or automatic licenses (permits).
441. The representative of the Russian Federation explained that in addition to the CU Agreements and Commission Decisions, national legislation of the Russian Federation, including Federal Law No. 164-FZ of 8 December 2003 "On the Fundamentals of State Regulation of Foreign Trade Activity" (as last amended on 7 April 2010) and Government Resolution No. 364 of 9 June 2005 "On the Approval of the Regulations for Licensing in the Area of Foreign Trade in Goods and on Creating and Keeping a Federal Data Bank of Issued Licenses", continued to regulate the application of the licensing regime in the Russian Federation. For example, Federal Law No. 164-FZ established the conditions and procedures for applying supervision of export and/or import of certain kinds of goods. Similarly, Federal Law No. 164-FZ set-forth the procedures for applying for an import licence or permit. In cases where a licence and/or permit application was not approved, the right of the importer to appeal the decision was regulated by the national legislation of the CU Parties. In the Russian Federation, the right to appeal was regulated by the Regulations for Licensing in the Area of Foreign Trade in Goods ratified by Government Resolution No. 364 (paragraph 18), according to which "decisions and actions of the authorised body responsible for issuing licenses could be appealed according to the stipulated procedure".
442. Some Members requested information on whether an import licence or permit issued by one CU Party would allow importation of the good into all CU Parties or would importation be limited to the Party issuing the licence or permit.
443. In response, the representative of the Russian Federation explained that an import licence or permit authorised the licensee or permit holder to import the relevant good into only the CU Party that issued the licence or permit; the licence or permit did not authorize the licensee or permit holder to import the relevant good into other CU Parties. He further explained that the licence or permit did, however, give the licensee/permit holder the right to transit the good through the territory of the other CU Party to the territory of the Party that issued the licence or permit.
444. According to Article 5 of the CU Agreement on Non-Tariff Regulation, licensing was required: (i) in the event of temporary quantitative restrictions on imports of certain types of goods; (ii) to regulate the importation of certain goods for reasons of national security, health, safety or environmental protection; (iii) to grant an exclusive right to import certain goods; or (iv) to carry out international obligations. Import licenses were also required to regulate the importation of goods subject to tariff rate quotas. The type of non-tariff restrictions and the list of goods subject to these restrictions were established by the CU Commission. The current list of such goods was set-out in Table 28. The CU Commission could decide to add or remove goods from this list upon request of a CU Party or on its own initiative.
445. The representative of the Russian Federation explained that according to the CU Licensing Agreement, the Ministry of Industry and Trade (the "authorised State body of executive power" in the Russian Federation) issued three types of licenses: one time, general, and exclusive. One time licenses were issued to applicants on the basis of a foreign trade contract relating to goods subject to import licensing. One time and general licenses were issued to applicants upon a decision of the authorised body of the Russian Federation. Both types of licenses granted the right to import certain types of goods subject to licensing in the quantity determined by the licence and were valid for one year or, for goods with respect to which provisional quantitative restrictions had been introduced, until 1 January of the following calendar year. Exclusive licenses gave the applicant the exclusive right to import certain types of goods. The goods subject to exclusive licenses were to be decided by the CU Commission, but until now exclusive import licences had not been issued in the Russian Federation. Under the CU Licensing Agreement, licenses were issued within 15 working days after submission of the complete set of documents. These documents consisted of an application for licence, an electronic copy of the application, a copy of the contract, a copy of a certificate confirming that the applicant was registered with a regional tax authority as a tax-payer, a copy of the activity licence (if applicable) and other documents, as required. The fee charged for the issuance of a licence was reduced from RUB 3,000 to RUB 2,600. Renewal of a licence would be subject to a fee of RUB 200.
446. A Member requested clarification regarding the respective powers of the CU Commission and national level governments in relation to general and exclusive licenses. The representative of the Russian Federation explained that in accordance with paragraph 1 of Article 3 of the CU Licensing Agreement, exclusive licenses were issued by authorised bodies of the CU Parties in cases stipulated by the Decision of the CU Commission. He further explained that, in accordance with the CU Commission Decision No. 168 of 27 November 2009, the competent national authority (the Ministry of Industry and Trade, in the case of the Russian Federation) issued exclusive licenses for import or export to foreign trade participants, and the CU Commission, consistent with a Decision of the CU Interstate Council, issued general licenses. In accordance with CU Decision No. 168, until the CU Parties ratify the "Procedure of Licence Suspension and Expiration", the CU Commission was to base its decisions regarding suspension and expiration of licenses on the national legislation of each CU Party.
447. In response to a question from a Member, the representative of the Russian Federation confirmed that proprietary and/or confidential information contained in an import licence application would be protected under the applicable laws of the Russian Federation.
448. The authorised body of the Russian Federation had the right to terminate or suspend an import licence in the case of a change in the constituent documents of the licensee registered as a legal entity (a change of the organizational-legal form, name, or its location) or a change in the passport information of the licensee being a natural person. In such circumstances, the CU Licensing Agreement provided that the licensee was to request that the authorised body terminate the existing licence, and register a new licence. In order to register a new licence, the licensee was required to submit a new application and documents confirming the above-mentioned change(s). In case of loss of the licence, the licensee was entitled to a duplicate licence, which would be issued within five calendar days from the date of submission of the request explaining the causes and circumstances of the loss of the licence. The licence holder wishing to renew a licence had to submit a new application, along with the full set of required documents.
449. The representative of the Russian Federation explained that according to the CU Licensing Agreement, permits were issued by the authorised body of the Russian Federation without restriction to all applicants. Permits were issued within three working days from the date of the submission of the draft permit in a format approved by the Commission, and remained valid until the end of the calendar year in which they were issued. No other documents were required for issuance of a permit.
450. A Member requested clarification of whether a CU Party must apply automatic import licenses to all goods on the Common List of Goods across the CU. The representative of the Russian Federation explained that automatic licensing was carried out in respect of goods whose export/import was subject to supervision. The list of goods subject to supervision was stipulated by the CU Commission. Goods subject to supervision were included into the Common List of Goods, but not all goods included into the Common List were subject to automatic licenses. In some cases, the requirement for permit was stipulated in the Regulations on the procedure for import/export attached to each section of the Common List of Goods.
451. In response to a question from a Member, the representative of the Russian Federation responded that no goods were currently subject to automatic-licensing except for goods containing encryption technology, as described in paragraph 481.
452. Import licenses were generally issued by the Ministry of Industry and Trade of the Russian Federation, based on "conclusions" issued by the relevant competent authorities following an "expert examination" of the good. In the case of weapons, ammunitions and dual-purpose goods, however, licenses were issued by the Ministry of Defence of the Russian Federation. The licensing regime was applied to imports from all non-CU countries, including imports from CIS countries without discrimination as regards to the country of origin.
453. Several Members of the Working Party expressed concern regarding the justification of the Russian Federation for the application of non-automatic import licenses pursuant to Article XX of the GATT 1994 for products listed in Table 28. These Members requested additional explanation to understand how the provisions in the chapeau of Article XX of the GATT 1994 would be met. They noted that, while import licensing might be an appropriate mechanism to administer certain controls, the justification for these controls, as well as the specifics of the import licensing procedures used to administer them, needed in all cases to be fully in accordance with WTO provisions, including those on non-discrimination.
454. In response, the representative of the Russian Federation said that neither the Russian Federation, nor the competent bodies of the CU intended to limit the quantity and value of imports by means of import licenses, except as provided for in international conventions such as the Montreal Protocol or the Basel Convention or for the implementation of other measures justified under the WTO Agreement. He added that, in his view, the application of non-automatic import licenses for the products listed in Table 28 was in conformity with Articles XX and XXI of the GATT 1994.
455. Several Members replied that the current application of licensing requirements to products such as pharmaceuticals, sugar, goods with encryption technology and alcoholic beverages clearly operated to restrict imports. They requested the Russian Federation to describe the legal basis for these measures and to explain how these restrictions would be modified or eliminated to meet WTO requirements.
- (i) Sugar
456. Some Members asked for more detailed information on how the Russian authorities considered that each of the requirements of Articles 1 and 3 of the WTO Agreement on Import Licensing Procedures had been met in relation to non-automatic import licensing in the administration of its TRQ for raw sugar (HS 170111).
457. The representative of the Russian Federation responded that the TRQ on raw sugar (HS 170111) had been eliminated pursuant to the Government Resolution No. 720 of 29 November 2003 and the Government Resolution No. 757 of 18 December 2003 "On the Abolishing of the Licensing of the Import of Raw Sugar to the Russian Federation" had removed raw sugar from the list of products requiring an import licence. He added that pursuant to Government Resolution No. 782 of 17 July 1998 (as amended on 18 December 2003), imports of starch treacle had required licensing. This measure, however, had had a temporary surveillance character, had been taken in order to collect trade data that could be used, if necessary, to justify possible measures aimed at regulating imports, and was abolished since 1 January 2007 by Government Resolution No. 700 of 20 November 2006. At the current time, the Russian Federation does not require import licensing for the importation of raw sugar.
- (ii) Alcoholic beverages and Alcohol-Containing Products
458. Noting that for alcoholic beverages and alcohol-containing products, import licenses were only issued where the applicant already had an activity licence, some Members requested information on the rationale for this apparent duplicative requirement. They also required information on the number of licenses issued every year and how many of these were currently in force. These Members requested the Russian Federation to make a commitment that any import licenses on ethyl alcohol, alcoholic drinks, alcohol-containing products (as well as on pharmaceutical products, and products with encryption technology, which had a similar system) would be granted automatically on the basis of a regime compatible with WTO requirements, including Article 2 of the WTO Agreement on Import Licensing Procedures.
459. Some Members expressed concerns about the need for specific licensing requirements for certain types of alcoholic products. Specifically, they asked about the rationale for the mandatory licensing requirement for wines and certain alcoholic beverages exceeding 28 per cent volume, such as vodka and tequila. Members also expressed concerns about disruption in the issuing of these licenses in the course of the change of responsibility within the Government of the Russian Federation for the licenses in question.
460. In response, the representative of the Russian Federation said that, pursuant to the CU Agreements listed in paragraph 440, as well as СU Commission Decision No. 132 and the "Regulations of the Order of Import of Ethyl Alcohol and Alcoholic Products to the Customs Territory of the Customs Union", imports of ethyl alcohol, wines, and some alcoholic beverages exceeding 28 per cent volume (vodka and other white distilled alcoholic beverages) as listed in Table 28 were subject to import licensing in the Russian Federation. Licenses were issued by the Ministry of Industry and Trade upon receipt of the documents listed in paragraph 445 of this Report, including a copy of the import contract. In his view, import licensing of alcohol and alcoholic beverages was undertaken for purposes consistent with the requirements of Article XX(b) of the GATT 1994. However, the representative of the Russian Federation confirmed that the non-automatic import licensing requirement for alcoholic beverages would be eliminated and replaced upon accession by an automatic licensing procedure whereby licenses would be issued upon submission of the appropriate and complete documentation as described above. At present, fees charged for the issuance of all types of import licence amounted to RUB 2,600. The representative of the Russian Federation noted that according to Order No. 1212 of the Ministry of Industry and Trade of the Russian Federation of 30 December 2009"On the Distribution of Authorities in the Ministry of Industry and Trade of the Russian Federation and its Territorial Bodies for Issuing the Licenses and other Permissive Documents for the Implementation of Export-Import Operations with Particular Types of Goods", vodka was in the list of goods subject to licensing procedures and there were no additional licensing requirements for vodka.
- (iii) Pharmaceuticals
461. The representative of the Russian Federation noted that the importation of medicines and pharmaceutical ingredients was governed by the CU Agreements listed in paragraph 440, as well as by Decision No. 132, and more specifically by the "Regulations On the Order of Entry into the Customs Territory of the Customs Union of Medicines and Pharmaceutical Ingredients", as well as relevant domestic legislation, i.e., Government Resolution No. 438 of 17 July 2005 "On the Order of Importation and Exportation from the Russian Federation of Pharmaceuticals for Medical Use" and Federal Law No. 61-FZ of 12 April 2010 "On the Circulation of Medicines". Some Members noted that pharmaceutical licensing requirements were extremely burdensome and constituted a problem for their exporters. A major obstacle was that pharmaceuticals had to be re-registered periodically, e.g., once every four years, and this re-registration was not automatic, often resulting in firms losing their current licence and being unable to import products for a period of time. Regarding Government Resolution No. 438 "On the Procedure of Importation in and the Exportation from the Russian Federation of Pharmaceuticals for Medical Use", some Members indicated that paragraph 2 of that Resolution appeared to suggest that foreign manufacturers were required to have offices in the Russian Federation in order to obtain an import licence. They requested clarification as to whether this requirement would imply that foreign manufacturers of pharmaceuticals must have an office in the Russian Federation to obtain a licence to import, and noted that in this case such a requirement would be inconsistent with WTO provisions. In addition, they asked the Russian Federation to elaborate on the purpose of these requirements, particularly in the case of licensing products such as flavourings and dual use precursor chemicals, and on whether they required the examination of every contract to import. Members also expressed concerns regarding treatment of imports when there were differences between the quantity shipped and that listed in the contract. In some cases, small disparities had resulted in a refusal to permit import even of the contracted amount. Members also requested information on possible expedited procedures to obtain licenses for any significant coverage. The same Members also recalled the concerns raised under the Section "Registration Requirements for Import/Export Operations" of this Report.
462. In response, the representative of the Russian Federation explained that, in his view, import licensing of pharmaceuticals was justified by Article XX(b) of the GATT 1994 and was aimed at implementing the policies of the Government in the field of human and animal life and health protection.
463. He further explained that, currently, in accordance with the Federal Law No. 61-FZ "On the Circulation of Medicines" of 12 April 2010, and Federal Law No. 128-FZ of 8 August 2001 "On Licensing of Specific Types of Activities" (as amended on 14 July 2008), to import pharmaceuticals into the territory of the Russian Federation, foreign enterprises that were producers or wholesalers could be registered as legal persons on the territory of the Russian Federation (described in paragraph 256 of this Report), and granted a licence for relevant type of activity (pharmaceutical production or distribution), and a licence for importation. The issuance of a licence for pharmaceutical wholesale or production allowed the legal entity to obtain a licence for importation of medicines. The fee charged for the issuance of the licence to import/export medicines amounted to RUB 1,300. He also noted that foreign enterprises were subject to the same uniform procedures as provided under Government Resolution No. 438 of 16 July 2005 "On the Procedure for Importation and Exportation of Medicines for Medical Purposes". In response to a question from Members, regarding future requirements to obtain and present import and/or activity licenses in connection with importation of pharmaceuticals, the representative of the Russian Federation referred Members to paragraph 275 and the requirements and procedures that would apply to pharmaceuticals, alcohol and goods with encryption technology from the date of the accession of the Russian Federation to the WTO. As regards concerns from Members in respect of the periodic re-registration requirement, the representative of the Russian Federation noted that according to the registration procedure of the Ministry of Health and Social Development, the first registration of a pharmaceutical in the territory of the Russian Federation was valid for five years. However, when the registration was renewed there were no restrictions on the duration of validity of that registration and in that case a temporary loss of the licence due to re-registration was not possible. The representative of the Russian Federation further explained that the validity of the first registration would be automatically prolonged until the re-registration procedure was completed to avoid any interruptions in delivery to the market. In response to a question from a Member, the representative of the Russian Federation confirmed the five-year limit period applied to the first registration of each producer in the Russian Federation.
464. Noting the concerns expressed by Members regarding the treatment of imports when there were differences between the quantity shipped and that listed in the contract, the representative of the Russian Federation explained that the quantity shipped could be smaller than that listed in the contract, but not larger. In the latter case, customs clearance would be refused for the amount exceeding that in the contract.
465. One Member requested clarification of the requirements for importing products for testing purposes related to obtaining registration and approval for circulation of pharmaceuticals in the Russian Federation. This Member requested information on whether a representative office, for example, could import products into the Russian Federation for such purposes without obtaining an activity licence or import licence.
466. In response, the representative of the Russian Federation explained that, under the new Law, a product imported into the Russian Federation for testing and examination related to its registration as a pharmaceutical in the Russian Federation was considered to be a non-registered pharmaceutical. In accordance with Government Resolution No. 771 of 29 September 2010 "On the Rules of Importation of Pharmaceutical Products for Medical Use into the Territory of the Russian Federation", the import of certain amounts of non-registered pharmaceuticals, necessary for clinical trials, or with the view of their State Registration, or non-registered pharmaceutical products used for medical treatment of certain patients were allowed under permission of the Ministry of Health and Social Development of the Russian Federation. Thus, a representative office could import such products for testing and examination without obtaining an activity licence or import licence.
467. Noting further that pharmaceutical exporters had expressed concerns over certain Russian import licensing requirements (for instance, if the molecule unique to the pharmaceutical had not changed, periodic renewal of licenses appeared unnecessary and could be expensive and burdensome to the industry), some Members asked whether such requirements were equally applied to similar domestic products, as the failure to do so could constitute a violation of Article III of the GATT 1994. Noting that some pharmaceutical exporters had expressed concerns that the administration of licenses by the Ministry of Health and Social Development and the Ministry of Industry and Trade did not presently meet WTO requirements, such as transparency, fees for services rendered, processing within a reasonable time-frame and forbearance on minor documentation errors, these Members requested clarification on the steps that the Russian Federation intended to take to ensure that the administration of import licenses would conform to WTO requirements. In this regard, some Members asked the Russian Federation to explain how the 0.05 per cent administrative fee charged by the Ministry of Health and Social Development for issuing permits to import pharmaceutical products was consistent with the requirements of Article VIII of the GATT 1994.
468. Some Members also requested additional clarification of the status of any legislative initiative in the Russian Federation, which could operate to restrict imports of pharmaceuticals having domestic analogues. These Members felt that, if adopted, such legislation could be inconsistent with the provisions of Articles III and XI of the GATT 1994. Noting further that the Russian Federation had acknowledged that the Law concerning pharmaceuticals (Federal Law No. 86-FZ of 22 June 1998 "On Medicines") was inconsistent with the new Foreign Trade Law and Import/Export Licensing Resolution, some Members expressed their expectation that this Law would be amended or repealed to ensure WTO conformity by the date of accession.
469. The representative of the Russian Federation replied that the Federal Law No. 86-FZ of 22 June 1998 "On Medicines" had recently been replaced by Law No. 61-FZ of 12 April 2010 "On the Circulation of Medicines". This new Law was intended to achieve WTO compliance. He also added that there were no plans in the Russian Federation to introduce new legislation, which could operate to restrict imports of pharmaceuticals, including veterinary drugs, having domestic substitutes. Activity licences to engage in production or wholesale were made available to all registered companies (domestic or foreign owned) which satisfied government regulatory criteria. For issuance of preliminary permits for imports of pharmaceutical products, the Ministry of Health and Social Development of the Russian Federation (or Rosselkhoznadzor in cases of veterinary drugs) did not now levy any charge or fees. Consultations and preparation of the documents for examination of an application were done by the Federal State Unitary Enterprise "The Information and Methodical Centre on Expertise, Registration and Analysis of the Turnover of Medicines for Medical Purposes" of the Federal Health and Social Development Supervision Service. The cost of the services was determined according to the Civil Code of the Russian Federation on the basis of the volume of performed work as agreed by the parties to the corresponding contract. A preliminary permit issued by the Federal Health and Social Development Supervision Service of the Ministry of Health and Social Development of the Russian Federation or Rosselkhoznadzor in cases of veterinary drugs was the ground for issuing an import licence. He also referred to his explanations under the above Section on "Registration Requirements for Import/Export Operations" of this Report. As regards concerns from Members on conformity of administration of licenses by the Ministry of Health and Social Development of the Russian Federation and the Ministry of Industry and Trade of the Russian Federation with WTO requirements (such as transparency, fees for services rendered, processing within a reasonable time-frame and forbearance on minor documentation errors), the representative of the Russian Federation noted that information on this issue was contained in paragraphs 193, 194 and 200 of the Section "Government Entities Responsible for Making and Implementing Policies Affecting Foreign Trade; Right of Appeal". Responding to the question of a Member, in respect of differences in application of regulations relevant for implementation of safety and other types of controls in respect of imported and domestic products, he explained that, such differences were caused by the fact that imported goods were subject to controls at the point of customs clearance and domestic goods at production sites, but such differences had not created different burdens for importers and domestic producers and hence, had not caused protection to domestic production. Answering a question by a Member on the consistency of the 0.05 per cent administrative fee, charged by the Ministry of Health and Social Development for issuing permits to import pharmaceutical products, he stated that this fee had been abolished.
470. Some Members of the Working Party stated that their traders had experienced difficulties with other Ministries or institutions charging extra fees in connection with importation permits based upon the contract value of the goods. These Members requested that the Russian Federation enter into a commitment to eliminate all such non-WTO consistent measures upon its accession to the WTO.
- (iv) Products with Encryption Technology
471. Some Members requested information on the application by the Russian Federation of requirements for importation of goods containing encryption technology. These Members noted that most countries did not limit imports of these products and questioned the need and justification for licensing, in particular, non-automatic licensing of commercially traded, mass-market goods, and goods that were covered under the Information Technology Agreement (ITA). Members expressed concern that such licensing requirements could nullify or impair the market access commitments on a wide-range of products of undertaken by the Russian Federation. Members stated that, to the extent that the Russian Federation intended to establish or apply licensing requirements, such requirements should apply only to products that clearly presented a threat to security. In such cases, licensing procedures should be applied in a non-discriminatory manner and comply with all WTO requirements.
472. In response, the representative of the Russian Federation explained that, prior to 1 January 2010, the Russian Federation administered a system of import licensing of all goods, which contained encryption technologies. Since that date, the CU Agreements listed in paragraph 440 and CU Commission Decision No. 132, and the CU Regulation "On the Order of Entry into the Customs Territory of the Customs Union and Removal of the Customs Territory of the Customs Union of Encryption (cryptographic) Means", dated 1 December 2009, and national regulation set-out the requirements for importing goods with encryption technology. He confirmed that any procedures or requirements relating to licensing imports of goods containing encryption technology, whether by the Russian Federation or by the competent bodies of the CU, would be applied on a non-discriminatory basis and in conformity with the relevant provisions of the WTO Agreement, in particular, Articles I and III of the GATT 1994, and that procedures related to the notification, evaluation, approval, and licensing of goods containing encryption technology, would be transparent and predictable and would not impose unreasonable or burdensome requirements on such goods. The Working Party took note of these commitments.
473. The representative of the Russian Federation explained that, in order to facilitate trade, the Russian Federation would develop and apply an interim system of regulation of goods containing encryption technology. Under this interim system, all encryption products would be divided into three groups: (i) certain goods containing encryption technology could be imported without any formalities related to encryption; (ii) other goods with encryption technology would be subject to a one-time notification requirement; and, (iii) a category of goods with encryption technology would be subject to an expert evaluation and require an import licence. This import licence would be issued by the Ministry of Industry and Trade, based on a "conclusion" issued by the executive body in the field of national security of the CU Party (the Federal Security Service in the Russian Federation), following an "expert examination". He noted that other formalities, such as customs or those necessary to implement technical regulations would continue to apply in respect of imports of all these goods.
474. In response to a request by one Member to clarify the meaning of the wording "without any formalities related to encryption" in paragraph 473, the representative of the Russian Federation said that such formalities were understood as the formalities concerning the goods listed in Table 29 and described in the second and subsequent sentences of paragraph 477, and the formalities listed in paragraph 481 concerning the goods, which were subject to import licensing and expert evaluation.
475. In response to the request of the same Member to clarify what "formalities" not related to encryption could be applied to goods with encryption technology, the representative of the Russian Federation noted, that such formalities could relate to the requirements resulting from application of the legislation on customs regulation, technical regulation, intellectual property rights, and other legal acts, which were usually applied with respect to the imported goods or goods designed for internal circulation in the market. He added that all goods with encryption technology (not specially designed or modified for military use) de-controlled by the Wassenaar Arrangement by means of Category 5, Part 2, would be allowed to be imported "without any formalities related to encryption".
476. The representative of the Russian Federation confirmed that the conditions for importation of goods containing encryption technology, subject to current and any future exemptions, indicated in all of the Notes to Category 5, Part 2 "Information Security" of the Wassenaar Arrangement Dual Use List, whether imposed by the Russian Federation or the competent bodies of the Customs Union, would not be more restrictive than those in effect as of 18 November 2006. In response to a question from a Member, the representative of the Russian Federation added that mobile phones currently legally sold at the retail level in the Russian Federation were included among such goods. The Working Party took note of these commitments.
477. With respect to goods falling into the categories set-out in Table 29, the representative of the Russian Federation confirmed that, within the framework of the interim system, any restrictions existing before 1 January 2010 would be eliminated and no new restrictions, such as experts evaluations, approvals, and licenses, for the importation of those goods would be adopted or applied, whether by the Russian Federation or the competent bodies of the CU. He further informed Members that within the framework of the interim system, importation of goods in the categories set-out in Table 29 would be permitted based on a one-time submission of a notification. To comply with this requirement, the manufacturer of the good would submit a completed paper copy of a form containing information specified in Table 30. Further, the representative of the Russian Federation confirmed that no licenses would be required, whether by the Russian Federation or by the competent bodies of the CU, for imports into the Russian Federation of goods with encryption technologies, included in Table 29, and the exemptions set-out in paragraph 476. The Working Party took note of these commitments.
478. Addressing a request from a Member, he confirmed that all goods with encryption technology released by future Wassenaar Arrangement Category 5, Part 2 "Information Security" de-controls would be allowed to be imported "without any formalities related to encryption". Goods subject to a notification requirement, in accordance with paragraph 477 were listed in Table 29. In accordance to a question from a Member, the representative of the Russian Federation explained that, consistent with Wassenaar practice, the regulating country (the Russian Federation) would determine which goods qualified as "mass market goods", as defined in Table 29. He added that the data to be submitted for a "one-time notification" application were listed in Table 30. He confirmed that, if a good had been imported subject to the "one-time notification" process, that good would not be subject to any other notifications by any parties importing that good. The information on goods approved for import through the "one-time notification" process would be available to the public on the websites of the Federal Security Service.
479. In response to a question from a Member, the representative of the Russian Federation explained that, if proprietary information was submitted in the notification, and the manufacturer identified that information as proprietary, that information would be protected. Confirmation of notification would be automatic, unless the manufacturer or its authorised representative in the Russian Federation were contacted within ten working days after submission of the notification regarding its compliance with the requirements, including whether the product was correctly subject to notification, as set-out in paragraph 477. In the Russian Federation, the Federal Security Service would maintain a public internet site where such confirmations would be posted. Any importer or shipper could rely on a relevant confirmation. Once a good was notified and confirmed, an importer/shipper would only be required to indicate that the good appears on the internet site in the relevant customs declaration. He further explained that this notification procedure was intended to facilitate the entry of the goods listed above and would not result in any delays or additional approval procedures.
480. The representative of the Russian Federation confirmed that goods that had been subject to examination under import procedures related to encryption, prior to the establishment of this interim system, and, which were covered by the categories set-out in Table 29, would be automatically posted on the internet site without making the notification set-out in paragraph 477. The Working Party took note of these commitments.
481. For goods containing encryption technology that need an import licence, the representative of the Russian Federation confirmed that, within the framework of an interim system, such goods would need to undergo expert evaluation and approval only once. If an expert evaluator needed additional information for its evaluation, it would be required to notify the manufacturer or his authorised representative in the Russian Federation and request such information within ten working days of the application. Manufacturers would not be obligated to submit source code and failure to submit such code alone, would not result in denial of an application. After the good was approved, the same good, or a good used for the same purpose with identical encryption, could be imported into the Russian Federation with a licence issued in a manner consistent with Article 2 of the WTO Agreement on Import Licensing Procedures. The time period for completing import licensing procedures, including the time required to obtain an experts' evaluation, to receive approval and the import licence, would not exceed three months. Fees for experts' evaluations and licensing would be transparent and based on the costs of services rendered. The Working Party took note of these commitments.
482. In response to a question from a Member, in respect of the expert evaluation process, i.e., requirements regarding information related to encryption algorithm, the representative of the Russian Federation noted that the information regarding respective requirements was described in paragraph 481.
483. The representative of the Russian Federation confirmed that the Russian Federation would engage interested Members in a review of the operation of this interim system. The purpose of this review would be to clarify and refine procedures for notification, confirmation, and licensing of goods with encryption technology and, where possible, to further improve and expand the products covered under paragraph 476 and Table 29. The Working Party took note of these commitments.
484. In response to a question from a Member about the timing of the review, the representative of the Russian Federation informed that, at the current stage, it was not possible to define the timing of the conversion from the interim system to the permanent one, as it depended on the effectiveness of the interim system and on the scope of the questions emerging within the process of the interim system application.
485. Members welcomed the information on the regulation of goods containing encryption technology. These Members, however, expressed concerns about how the Russian Federation would ensure that goods not containing encryption technology would be excluded from any requirements relating to importation of goods containing such technology. In their view, goods that did not contain encryption technology should not be subject to any encryption-related requirements or formalities. Further, the Russian Federation should not require an activity licence for the importation of: (i) goods containing encryption technology that were not subject to requirements or formalities related to encryption; and (ii) goods subject only to notification requirements.
486. The representative of the Russian Federation confirmed that goods that did not contain encryption technology would not be subject to any encryption-related requirements or formalities. He further confirmed that activity licenses would not be required as a condition for importation of goods that were not subject to requirements or formalities related to encryption and goods subject only to notification requirements. The Working Party took note of these commitments.
487. The representative of the Russian Federation confirmed that, from the date of accession, quantitative restrictions on imports, such as quotas, bans, permits, prior authorization requirements, licensing requirements or other requirements or restrictions having equivalent effect that could not be justified under the provisions of the WTO Agreement would be eliminated and not introduced, re-introduced or applied, whether by the Russian Federation or the competent bodies of the CU. From the date of accession, any such requirements or restrictions on imports, whether applied by the Russian Federation or the competent bodies of the CU, would be in conformity with the provisions of the WTO Agreement. He confirmed that the administrative procedures of the Russian Federation for the operation of its import licensing regime and their application would, from the date of accession, be in compliance with all relevant provisions of the WTO Agreement, including the Agreement on Import Licensing Procedures. The Working Party took note of these commitments.
- Customs Valuation
488. The representative of the Russian Federation stated that the basic provisions relating to customs valuation principles and policies in the Russian Federation were contained in the Agreement on the Determination of Customs Value of Goods, Transferred Across Customs Border of the Customs Union of 25 January 2008 (hereafter in this Section: the CU Agreement) and the Customs Code of the Customs Union, adopted on 27 November 2009 (hereafter: the CU Customs Code). The CU Agreement and the CU Customs Code entered into effect in the Russian Federation on 1 July 2010. Prior to 1 July 2010, customs clearance and control in the Russian Federation, including customs valuation, had been carried-out in accordance with national legislation, principally the Law of the Russian Federation No. 5003-1 of 21 May 1993 "On Customs Tariff" (as amended by Federal Law No. 144-FZ of 8 November 2005) (hereafter: the Customs Tariff Law) and the former Customs Code of the Russian Federation (Federal Law No. 61-FZ of 28 May 2003). The CU Agreement specified those areas that were to be implemented through national legislation. For the Russian Federation, this legislation was principally Part III of the Customs Tariff Law. In other cases the CU Agreement applied directly as law. Provisions of the Code No. 195-FZ of 30 December 2001 "On Administrative Offences of the Russian Federation", and the "Arbitration Procedural Code of the Russian Federation" No. 95-FZ of 24 July 2002 related to customs valuation also continued to apply after 1 July 2010. Additional legal provisions for customs valuation were found in the Federal Law "On Customs Regulation" and in other related national legal acts.
489. The representative of the Russian Federation further explained that, in accordance with Article 1.3 of the CU Agreement, the relevant provisions of the CU Agreements and national legislation were based on the provisions of the WTO Agreement on Implementation of Article VII of the GATT 1994 (hereafter: CVA) and that it was the intent of his Government to fully implement that Agreement. All six methods of customs valuation applied were based on the provisions of Articles 1, 2, 3, 5, 6, 7 and 8 of the CVA, including most of the provisions of the Interpretative Notes. In particular, Article 2 and Article 4.1 of the CU Agreement established that the "Customs valuation of imported goods shall be, as a matter of principle, based on the price of transaction with these goods..." and "The customs value of goods imported to the Common Customs Area of the Customs Union was the price of the respective transaction, i.e., the price actually paid or payable for these goods sold for export to the country of importation to the Common Customs Area of the Customs Union...". The provisions of Articles 9, 10, 11, 12, 13 and 16 of the CVA were also incorporated in these documents and implemented by the provisions of the national law of the Russian Federation. The rest of the Interpretative Notes would be incorporated either in Ministerial Orders (e.g., the Ministry of Finance) or in a decision of the CU Commission. In his view, the CU Agreements and the existing and prospective national legislation laid out a predictable and transparent regime on customs valuation and, once fully implemented, would establish the customs valuation regime of the Russian Federation in conformity with the CVA.
490. The representative of the Russian Federation stated that the methods of valuation provided for in the CVA other than the transaction value were contained in Articles 6 to 10 of the CU Agreement and Articles 19 to 24 of the Customs Tariff Law.
491. He noted that Article 10 of the CU Agreement and Article 24 of the Customs Tariff Law provided for the use of the fall-back method. If the customs value of the imported goods could not be determined under the provisions of Articles 4 and 6 to 9 of the CU Agreement (Articles 19 to 23 of the Customs Tariff Law), the customs value would be determined using reasonable means consistent with the principles and general provisions of the CU Agreement.
492. The methods of customs valuation used under the fall-back method were generally the same as those provided by Articles 19 to 23 of the Customs Tariff Law and consistent with the provisions of Articles 4 and 6 to 9 of the CU Agreement; however, these methods were to be applied with some flexibility. For example, the following was allowed:
a. determination of customs value could be based on the transaction value of identical or similar goods produced in the country other than the country of production of the goods being valued;
b. in determining customs value using the transaction value of identical or similar goods, a reasonable flexibility was allowed in respect of the interpretation of the requirement of Articles 6 and 7 of the CU Agreement and Articles 20 and 21 of the Customs Tariff Law that the identical or similar goods should be exported at or about the same time as the goods being valued, as a rule, up to 90 days;
c. customs values of identical or similar imported goods already determined under the provisions of Articles 8 and 9 of the CU Agreement and Articles 22 and 23 of the Customs Tariff Law could be used in determining customs value; and
d. in determining customs value using the deductive method, the "90 days" requirement established by paragraph 3 of Article 8 of the CU Agreement and paragraph 3 of Article 22 of the Customs Tariff Law could be administered flexibly (in accordance with the Interpretative Note to Article 7.3(c) of the CVA).
493. The representative of the Russian Federation also noted that the customs value of exports was determined in accordance with paragraph 2 of Article 13 and Article 14 of the Customs Tariff Law, Article 112 of the Federal Law "On Customs Regulation" and Government Resolution No. 500 of 13 August 2006 "On the Procedure of Determination of Customs Value of Goods, Conveyed across the Customs Border of the Russian Federation" (as amended by Government Resolution No. 772 of 2 October 2009). This Resolution approved:
- "Rules of Determination of Customs Value of Imported Goods in Cases of their Illegal Conveyance across the Customs Border of the Russian Federation";
- "Rules of Determination of Customs Value of Imported Goods in Cases of Damage of Goods owing to an Accident or force majeure"; and
- "Rules of Determination of Customs Value of Goods, Exported from the Customs Territory of the Russian Federation".
He also noted that these Acts had been amended on the basis of the provisions of the CU Agreement and had been provided to the Working Party.
494. The representative of the Russian Federation also pointed out that, pursuant to the provisions of the "Rules of Determination of Customs Value of Goods, Exported from the Customs Territory of the Russian Federation", the determination of customs value of exported goods was made in accordance with the methods stated in Articles 4 and 6 to 9 of the CU Agreement. If the exported goods were not subject to any duties, a customs value was not determined and declared. The procedures for declaration and control of customs value of exported goods were stipulated by the competent Federal body in accordance with the Federal Customs Service Order No. 932 of 27 September 2006 and of Federal Customs Service Order No. 2417 of 16 April 2008.
495. The representative of the Russian Federation added that, in accordance with Article 2 of the CU Customs Code, the term "customs territory of importation", as defined in Article 15.2 of the CVA, was the Common Customs Area of the Customs Union, consisting of the territories of the Republic of Belarus, the Republic of Kazakhstan, and the Russian Federation, as well as artificial islands, installations and other objects located beyond the territory of CU Members in respect of which those CU Members enjoy exclusive jurisdiction. Article 3 of the CU Agreement confirmed that goods "produced" in the customs territory (including identical or similar goods) included those extracted, raised, or manufactured, as defined in Article 15.1 of the CVA. Concerning the definition of "goods of the same class or kind" found in Article 15.3 of the CVA, he confirmed that the term used in Article 3 of the CU Agreement, i.e., that these goods belong to "one or the same group of goods or a line of commodities, which are manufactured in the framework of a certain economic activity", has the same meaning as referred to in the CVA. These provisions continued to be implemented through the Customs Tariff Law.
496. A Member expressed concern regarding the treatment of related parties and noted, in this regard, that Article 4.4 of the CU Agreement, requiring the imported good in such cases to meet certain price benchmarks. This did not appear to be consistent with either Interpretative Note 1 to Article 1.2(a) and (b) of the CVA or with Article 4.3 of the CU Agreement. The representative of the Russian Federation responded that, in accordance with Article 4.3 of the CU Agreement, the fact that the buyer and the seller were related should not in itself be grounds for regarding the transaction value as unacceptable. In such case, the circumstances surrounding the sale should be examined. If on the basis of information, presented by the declarant or received by the customs administration by other means, signs that such relationship had influenced the price were discovered, the customs administration should inform the declarant in written form about such signs. The declarant was then entitled to demonstrate to the customs administration that the relationship did not influence the price. He also noted that, in a sale between related persons, the transaction value also should be accepted whenever the declarant demonstrated that such value closely approximated one of the following occurring at or about the same time:
- the transaction value in sales to unrelated buyers of identical or similar goods for export to the Russian Federation;
- the customs value of identical or similar goods as determined under the provisions of Article 8 of the CU Agreement; or
- the customs value of identical or similar goods as determined under the provisions of Article 9 of the CU Agreement.
497. The representative of the Russian Federation confirmed that from the date of accession, in accordance with the WTO Agreement on Implementation of Article VII of the GATT 1994 ("CVA"), the Russian Federation would accept two means of establishing the acceptability of a transaction value between related parties, i.e., the analysis of the circumstances surrounding the sale, as well as the demonstration by the declaring party that the transaction value closely approximates the "test value" indicated by the customs administration. He added that the provisions of Article 8.3 of the CVA that require that additions to the price paid or payable would be made only on the basis of "objective and quantifiable data" were implemented in Article 5.3 of the CU Agreement which refers to "reliable and computable information". The representative of the Russian Federation also confirmed that Article 8.1 of the CU Agreement and Article 22 of the Customs Tariff Law provided that the priority of application of Articles 8 and 9 of the CU Agreement (corresponding to Articles 5 and 6 of the CVA) was determined at the request of the importer, in accordance with Article 4 of the CVA. The Working Party took note of these commitments.
498. In addition, the representative of the Russian Federation confirmed that, pursuant to Article 1.2 of the CU Agreement, Article 70 of the CU Customs Code, and Articles 117 and 123 of the Federal Law on Customs Regulation, customs payments included: import customs duty; export customs duty; value-added tax levied upon importation of goods into the customs territory of the Russian Federation; excise tax levied upon importation of goods into the customs territory of the Russian Federation; and customs fees. Chapter 16 of the Administrative Code of the Russian Federation provided that the valuation provisions of customs legislation would also be used in the determination of fines applied to imports or exports in the case of administrative liability for violations of the customs legislation.
499. Members thanked the Russian Federation for its explanations of the provisions of CU Agreements and Protocol and its national legislation that implemented the CVA, which appeared to address many of their concerns. However, some additional aspects of the CVA did not appear to be reflected in the CU documents. These included deficiencies related to: (i) acceptance of a related party transaction value and the circumstances of sale test; (ii) the right to a written explanation as to how the customs value was determined; (iii) the establishment of a publication requirement for the exchange rate used in valuation; (iv) confidentiality requirements for data provided; (v) the right of appeal "without penalty" to a judicial authority; and (vi) the publication of all laws, regulations, judicial decisions and administrative rulings of general application. The CU Agreement and Protocol and national implementing legislation also appeared to lack a provision for the acceptance of paragraph 2 of Decision No. 4.1 of the Technical Committee on Customs Valuation, which provided that the "Valuation of Carrier Media Bearing Software, for Data Processing Equipment" should be based on the value of the media, and Decision No. 3.1 "On the Treatment of Interest Charges in the Customs Value of Imported Goods".
500. Members also noted that the CU Agreement did not appear to contain adequate provision for the use of a guarantee system, including use of a surety bond, to allow clearance of goods through customs if the final determination of customs value had been delayed, as required by Article 13 of the CVA. In addition, many of the Interpretative Notes, contained in Annex 1 of the CVA which was an integral part of that Agreement, were not fully reflected in any of the CU or national legislation provided by the Russian Federation for Working Party review. Members sought assurances that these deficiencies would be addressed and corrected in further amendments to national laws or in implementing regulations.
501. Members sought a commitment that the CU Agreement and Protocol, and the national legislation of the Russian Federation on customs valuation would be brought into full conformity with the provisions of the GATT 1994 and the CVA and that the relevant laws, regulations and practices would be fully consistent with the relevant WTO provisions, as from the date of accession. They further asked the Russian Federation to commit not to use minimum values, reference prices or fixed valuation schedules to establish the customs value of imports.
502. In response, the representative of the Russian Federation said that provisions concerning the acceptance of a related party transaction value and the circumstances of sale test had been included partially in Article 4.3 of the CU Agreement. Implementation was addressed in Article 19 of the Law of the Russian Federation No. 5003-1 of 21 May 1993 "On Customs Tariff" (as amended on 3 December 2007). The remainder of the provisions would be implemented through a CU Commission decision or additional national regulation prior to accession. Terms such as identical goods, similar goods, and related parties were used as described in Article 15 of the WTO Customs Valuation Agreement, and their definitions could be found in Article 3 of the CU Agreement. Regarding the publication of the exchange rate, he noted that the requirements of Article 9 of the WTO Customs Valuation Agreement had been integrated in Article 78 of the CU Customs Code. Pursuant to this Article, customs authorities of the relevant CU Party were required, for the calculation of customs duties and taxes and the determination of customs value, to use the exchange rate established in accordance with the national legislation of this CU Member. In the case of the Russian Federation, this was accomplished by paragraph 15 of Article 4 of Federal Law No. 86-FZ of 10 July 2002 "On the Central Bank of the Russian Federation" (as amended by Federal Law No. 216-FZ of 22 September 2008) and the "Order of the Central Bank of the Russian Federation" (as amended on 26 April 2007). According to these measures, the Central Bank fixed and published the official exchange rate of foreign currencies with respect to the Ruble, and the information could be accessed on the Internet (www.cbr.ru).
503. Concerning confidentiality requirements (Article 10 of the CVA), he noted that Article 8 of the CU Customs Code prescribed the measures customs authorities should take to protect information provided to them for customs purposes. In addition, Article 114 of the Federal Law on the Customs Regulation provides that "…a customs body and declarant may exchange information provided that the requirements to protect commercial secrets stated in the legislation of the Russian Federation are fulfilled". Article 13 of Federal Law No. 98-FZ of 29 July 2004 "On Commercial Secrets" established requirements for all government authorities and bodies to ensure the protection of confidential information presented to them by legal persons or individual entrepreneurs. This included information provided by declarants for customs purposes, including valuation. He also confirmed that the exceptions to confidentiality were limited to judicial proceedings.
504. The obligations of the Russian Federation with respect to Article 12 of the WTO Customs Valuation Agreement were dealt with in Article 10 of the CU Customs Code which stipulates that all acts of customs legislation were to be published in official or other publications as well as via TV, radio and information technologies. The CU Commission was to provide free access for persons concerning CU legislation published in official publications or on official internet websites. Article 51 of the Federal Law "On the Customs Regulation" provides that a competent customs Federal body and other customs authorities were to ensure free and gratuitous access to the information about legal acts in force in the sphere of customs affairs. Customs bodies were to ensure access to the information concerning draft legal acts as well as to the information about amendments to them not entered into force except for the cases when such preliminary notice would impede the fulfilment of customs control or reduce its effectiveness. In accordance with the Statute of the EurAsEC Court, all its rulings were to be published in official sources of the EurAsEC Court, the EurAsEC, the CU and CU Parties.
505. In response to a question from a Member in respect of who could declare goods and the obligations and rights of the declarant with regard to a declaration, the representative of the Russian Federation referred to Chapter 27 of the CU Customs Code, in particular Articles 179 through 194 that described customs declaration of goods, including who could declare goods and the rights and obligations of the declarant.
506. In response to a question from a Member in respect of the availability of advanced ruling on customs valuation, the representative of the Russian Federation noted that the current legislation of the Russian Federation did not envisage the adoption of any preliminary decision, i.e., advanced ruling regarding customs value. The customs value of the goods was determined by the declarant and declared to the customs authorities at the instance of the goods declaration.
507. He added that Article 4.7 of the CU Agreement reflected the provisions of Decision No. 3.1 "On the Treatment of Interest Charges in the Customs Value of Imported Goods" of the Technical Committee on Customs Valuation, which provided that the amount of interest charges would not be included in the customs value. This principle was implemented in the State Customs Committee (SCC) Letter No. 01-06/22236 of 18 June 2004 "On the Determination of the Customs Value of Goods, Imported in Accordance with Foreign Trade Agreements of Different Types". Paragraph 2 of Decision No. 4.1 "On the Valuation of Carrier Media Bearing Software, for Data Processing Equipment" of the Technical Committee on Customs Valuation was reflected in SCC Letter No. 0315/12632 of 18 April 1999 "On the Customs Control over the Intellectual Property Objects" and in SCC Letter No. 15-14/8524 of 17 March 2006 "On the Customs Clearance of the Information Transmitted through the Internet". These provided that the customs valuation for imports of data or software for computers should be based on the value of the carrier media only. Copies of the relevant texts had been provided to the Working Party. In response to this information, a Member noted that the Russian Federation considered SCC Letters to be recommendations, and that their provisions were not legally binding. He requested that the provisions of Decision No. 3.1 and paragraph 2 of Decision No. 4.1 be implemented in a binding legal instrument, for example in the Federal Law "On Customs Regulation" or in a Ministerial Order or other forms of customs regulation.
508. In response to a question from a Member regarding the implementation of Decision No. 6.1 "On Customs Valuation Regarding Cases Where Customs Administrations Have Reasons to Doubt the Truth or Accuracy of the Declared Value", the representative of the Russian Federation noted that the procedure, envisaged by Articles 68 and 69 of the CU Customs Code fully reflected the provisions of the above-mentioned Decision. In case the customs authorities discover signs suggesting that the information on customs value of the goods stated by the declarant might contain fictitious details, the customs office performed additional measures of control, including inspection of the documents and/or goods. Release of the goods was permitted by customs on condition of presentation of a guarantee of the dutiable payments. For confirmation of the stated information, the declarant, upon request of the customs authorities, provided additional documents, information and explanations. He added that the declarant had the right to prove the correctness of the selected method of determination of the customs value of the goods and the authenticity of the information presented to the customs authorities. In circumstances where the transaction value was rejected, the customs authority proposed to the declarant to determine the customs value of the good by using another method. In such situations, the customs authorities and the declarant could hold consultations with regard to the method applicable for the determination of the customs value of the goods. Notably, the customs value was determined by the customs authority by proceeding sequentially through the methods of the determination of the customs value of the goods, as confirmed in Article 1 of the CU Agreement.
509. In response to concerns from Members regarding the deficiencies in the CU Customs Code and the legislation of the Russian Federation concerning a guarantee system, he said that the requirements of Article 13 of the CVA were reflected in Article 11 of the CU Agreement, Articles 85 to 88 of the CU Customs Code and Chapter 16 of the Federal Law "On Customs Regulation". According to Article 69 of the CU Customs Code, if the procedure for the determination of goods customs value had not been carried-out within the time terms prescribed for the goods release, the said goods would be released against the guarantee of the declarant to disburse the dutiable payments. The goods would be released once customs duties were paid or a sufficient guarantee was posted. Pursuant to Article 196 of the CU Customs Code, the customs authority had to take a decision on release of the goods no later than one working day from the date of acceptance of a customs declaration, as long as the submission included all of the requisite documents and information required by customs legislation of the Russian Federation. In practice, more than 90 per cent of goods cleared Customs within one day or less, and steps were being taken to reduce the actual time periods further. The representative of the Russian Federation also noted, that, if during the examination of a customs declaration and any other documents or data, customs authorities discovered: (i) any signs suggesting that the information stated by the declarant of goods contained fictitious information influencing the amount of dutiable payments; or (ii) that proper supporting evidence had not been provided for the declared information, customs authorities were required to release the goods based on the presentation of a guarantee for dutiable payments for the amount of customs payments that might be additionally charged as a result of additional examination. In that case, the goods must be released no later than in one day following the date that a guarantee for dutiable payments was presented. (Article 69 of the CU Customs Code and Article 137 of the Federal Law "On Customs Regulation").
510. In response to a question from a Member regarding the purpose of the guarantee, the representative of the Russian Federation stated that guarantees of payments of customs duties and taxes were required in certain cases prescribed by the CU Customs Code and by other customs legislation of the Russian Federation, including the Federal Law "On Customs Regulation". In particular, this included the following cases:
- transportation of goods in accordance with the procedure of customs transit;
- if goods were put under the customs procedure of processing of goods beyond the customs territory;
- conditional release of goods; and
- change of time-frames for payment of customs duties, taxes if international treaties or legislation of the CU Parties provide for that.
511. He also noted that the amount of the guarantee of payment of customs duties and taxes was determined by the customs authorities, as prescribed by Article 137 of the Federal Law "On Customs Regulation". Customs authorities were required to notify the declarant in writing of the amount required for the guarantee. The amount of a guarantee was determined in each particular case on the basis of the information at the disposal of customs authorities and corresponded to the difference between the ultimate amount of customs duties for which the goods might be liable and the sum paid by the declarant on the basis of the declared customs value. The amount of guarantee calculated by the customs authorities was based on the information at their disposal on identical and similar goods. In accordance with Article 86 of the CU Customs Code, the guarantee could take the form of: (i) a personal guarantee including surety bond; (ii) a payment in cash at the cashier's desk or transfer of funds to the account of the customs office at the Federal Treasury (cash deposit); (iii) a bank guarantee; or (iv) a mortgage of goods and other property (see paragraph 288 of the Section "Customs Regulations and Procedures" of this Report).
512. The representative of the Russian Federation also noted that, pursuant to Article 141 of the Federal Law "On Customs Regulation", the customs authorities accepted as the guarantee a bank guarantee issued by a bank or an insurance company. These included firms registered in the Register of Banking Organizations and Other Credit Organizations. With regard to acceptance by customs authorities of bank guarantees in order to guarantee payment of customs duties, the Ministry of Finance of the Russian Federation determined the maximum amount of a bank guarantee and the maximum amount of all concurrent bank guarantees issued by the same bank (and/or insurance company) for inclusion of these sums into the Register of Banks and Other Credit Organizations.
513. The representative of the Russian Federation stated that, in 2008, the share of goods released into free circulation upon presentation of guarantee of payment of customs payments that might be additionally levied as a result of customs valuation control, constituted about 1 per cent of trade. The Federal Customs Service did not place obstacles to the use of guarantees to facilitate customs release of imports. He noted that goods could be declared during the 30 days prior to actual importation. In some cases, this process reduced the need for the application of the system of guarantees of the Russian Federation, as described in paragraphs 510 to 512.
514. With respect to Article 14 of the WTO Agreement on Implementation of Article VII of the GATT 1994, which stated that the Interpretative Notes in Annex I form an integral part of the WTO Agreement on Implementation of Article VII of the GATT 1994, the representative of the Russian Federation confirmed that the provisions of many of the Interpretative Notes were already reflected in the CU Agreement and implemented along with other provisions of the WTO Agreement on Implementation of Article VII of the GATT 1994 in the Customs Tariff Law, and the CU Customs Code. The remaining notes would be implemented either in Ministerial Orders (e.g., the Ministry of Finance) or in a decision of the CU Commission. He confirmed that the Russian Federation would implement all of the Interpretative Notes in Annex I to the WTO Agreement on Implementation of Article VII of the GATT 1994. The Working Party took note of this commitment.
515. A Member also asked if the requirements of Article 16 of the WTO Customs Valuation Agreement were contained in existing legislation, e.g., that upon written request, the importer would have the right to a written explanation as to how the customs value was determined. He also noted that the customs authority could ask for additional explanations from the declarant and should offer him the opportunity to comment in case a declared customs value gave rise to doubt.
516. In response, the representative of the Russian Federation pointed out that all above-mentioned provisions were reflected in Article 11 of the CU Customs Code. Customs bodies were required to consult the interested parties free of charge on the issues concerning the legislation of the CU or other issues in the competence of customs authorities in the determination of customs value. On the written request of an interested party, a customs body must provide information in written form as soon as possible, but not later than the date stated in the national legislation of the CU Members. In the case of the legislation of the Russian Federation, that period was 30 days.
517. In response to a question from a Member about the option of using a "green corridor" scheme in the customs legislation of the Russian Federation, he noted, that Article 38 of the CU Customs Code and Article 86 of the Federal Law "On Customs Regulation" provided for special simplified customs formalities to hasten customs clearance for persons who meet the requirements established by the Code. He stated that these provisions were described in paragraph 283 of the Section "Customs Regulations and Procedures" of this Report. He added that to speed up the process of customs clearance and the application of the principle of selectivity, within the framework of a risk management system, the Federal Customs Service (hereafter: FCS) planned to identify certain bona fide participants in foreign economic trade, in respect of which the FCS might apply particular forms of customs control, which were done on the basis of the results of risk analysis, after release of the goods.
518. Noting that the Russian Authorities had described a special technique or technology of customs control, introduced by the FCS in order to prevent under-invoicing of customs value, some Members expressed concerns that this method could be used as a form of administratively applied valuation. They requested clarification of the modalities of application, the products to which it applied, such as electronic goods, household appliances, and flat glass, and the legal justification for the use of this special technique. In their view, the use of minimum prices for the purposes of customs valuation or arbitrary valuation methods to select goods for additional customs procedures, even if intended to address a specific problem, would have to be eliminated prior to accession and replaced with procedures meeting WTO requirements. They consequently asked the Russian Federation to clarify how and when that system would be eliminated or changed.
519. In response, the representative of the Russian Federation stated that the special technique of customs valuation had been used with respect to the valuation of certain imported products (described in documents WT/ACC/RUS/28 and WT/ACC/SPEC/RUS/33) aimed at preventing gross under-invoicing of customs value through the use of false documents including a clearly understated contractual price, which, in his view, was in line with Article 17 of the WTO Customs Valuation Agreement. The special technique, which, in fact, meant the delegation of authority for the verification of customs value to different levels of customs offices, depending on the price characteristics of the goods, originally had been implemented pursuant to SCC Order No. 755 of 30 June 2004 "On Measures for Strengthening of Control of Customs Value". The special technique was abolished by FCS Order No. 909 of 30 September 2005. He added that pursuant to Article 10 of the CU Agreement and Article 24 of the Customs Tariff Law, it had been confirmed that minimum prices were not applicable for customs valuation purposes.
520. Referring to the statement by the Russian Federation that minimum prices were not applicable for customs valuation purposes, some Members noted that minimum customs values were applied to a wide range of products, such as automobiles, textile products, carpets, beef, soda ash and electric products. These Members asked the Russian Federation to confirm that application of minimum customs values would be terminated and that the system of minimum customs values for household appliances in each character of these products, as well as in each place of manufacturers' headquarters would be amended. In response, the representative of the Russian Federation noted that, in accordance with Article 17 of the WTO Customs Valuation Agreement and Article 5.3 of the CU Agreement, declared customs value and data presented, were to be based on authentic, computable information supported by documentary proof. The procedure of the verification was determined by the respective orders of the Federal Customs Service. This legislation also established that minimum prices were not applicable for customs valuation purposes.
521. Other Members of the Working Party noted that specific issues of concern in the area of customs valuation, included the use of de facto fixed import prices for some goods and the methods of risk management applied by the Russian Federation in the area of customs valuation, including the practice of the customs authorities of the Russian Federation "at the central level" of issuing what was known as customs "letters" to customs officials setting out indicative prices for imported products. This Member asked the Russian Federation to confirm that risk management measures, including customs "letters", would not be used, in law or in fact to establish the value of imported or exported goods; would not be based exclusively on import or export statistics; nor be applied in a manner which would discriminate, in law or in fact, between the trade of different WTO Members. In addition, this Member asked the Russian Federation to confirm that traders would be entitled to appeal decisions on customs valuation, where such valuation was made, in law or in fact, by the application of indicative prices set-out in customs "letters" or other risk management measures. Another Member stated that, should the Russian Federation establish a valuation database, as part of its risk management system, it should be based on the provisions of the World Customs Organization (WCO) Guidelines, and operated in conformity with the WTO Customs Valuation Agreement.
522. In response to a question from a Member, the representative of the Russian Federation stated that the customs authorities of the Russian Federation did not apply indicative prices as reference prices for customs valuation. The customs authorities of the Russian Federation used the risk management system in valuation control in full conformity with WTO rules. Pursuant to Article 94 of the CU Customs Code, and Article 161 of the Federal Law "On Customs Regulation", customs control, including customs valuation control, was based on the main principles of selectivity and sufficiency, i.e., the customs authorities applied only a minimal set of those forms of customs control, which were sufficient to ensure compliance with the CU Customs Code and the customs legislation of the Russian Federation. In selecting the relevant forms of customs control procedures, including in the area of customs valuation, customs authorities used, inter alia, risk management systems. The risk management system was used only for preventing breaches of the CU Customs Code and customs legislation of the Russian Federation, as follows: (i) recurring breaches; (ii) breaches that were predicated on evasion of dutiable payments in considerable amounts; (iii) breaches that infringed on the State security; (iv) protection of human life and health; (v) protection of the environment; (vi) violations of the customs law of the Customs Union; and/or (vii) the legislation of the Member States of the Customs Union, whose observance was vested in customs authorities. Applying methods of risk analysis, customs authorities selected certain categories of goods, which were subject to more thorough control. This control could include documentary checking, examination of goods, request of additional documents, information or explanations from the declarant, and post-customs control. Article 99 of the CU Customs Code and Article 164 of the Federal Law "On Customs Regulation" provided for "post-release control". One form of such control was known as "customs revision" or "post-clearance audit". The customs authorities of the Russian Federation performed customs revisions to verify the authenticity of information stated in customs declarations and the other documents submitted in the process of customs clearance by comparing the details contained in such documents with the accounting and reporting information, accounts, and other information provided by the declarant. The procedures for a customs revision were described in Article 99 of the CU Customs Code and Article 161 of the Federal Law "On Customs Regulation".
523. The representative of the Russian Federation added that Customs authorities were not limited to using test value as the only risk indicator. In detecting risks in the area of customs valuation they, in particular, used the following risk indicators: (i) profile and compliance records of traders; (ii) sufficiency and reliability of documents; (iii) description of goods; (iv) route and method of transportation; (v) terms of payment and scheme of settlement; etc.
524. He stated that about 25 per cent of 11,000 commodity items of the HS Code of the Russian Federation were currently covered by risk profiles, a pre-determined combination of risk area, and risk indicators, based on information which had been gathered, analysed and categorized, as well as guidelines on taking appropriate measures to prevent or minimize the risk. A risk profile was a risk assessment tool. Such goods were usually those most heavily taxed. He stressed that information contained in risk profiles or information letters, was not legally binding on customs officials and could not be used to determine the customs value, replace the transaction price of imported goods, or used as a method of valuation or as a mechanism for determining the minimum prices. Government Resolution No. 1009 of 13 August 1997 "On the Approval of the Rules for Preparing the Normative Legal Acts of the Federal Bodies of the Executive Power and their State Registration" prohibited issuance of normative legal acts in the form of letters. Divergence between the test values in these sources and the declared value of the goods could - where corroborated by insufficient or doubtful information on the value of goods, their qualitative characteristics, or the conditions of the underlying sales transaction provided in the accompanying documents - entail a more thorough investigation by the Customs authorities of the declared value, applying controls such as those described above. However, any decision on customs valuation could only be taken in accordance with the provisions of the basic legislation of the Russian Federation in force, which, in his view, complied with the provisions of the WTO Agreement. He also pointed out that the FCS of the Russian Federation conducted continuous monitoring of the efficiency of use by customs officials of price-related information, and that price information was constantly updated depending on changes in market conditions.
525. The representative of the Russian Federation added that appeal procedures for customs matters were authorised by Article 9 of the CU Customs Code, and regulated by the Federal Law No. 311-FZ of 27 November 2010 "On Customs Regulation", Code No. 195-FZ of 30 December 2001 "On Administrative Offences", and the Arbitration Procedural Code of the Russian Federation (No. 95-FZ of 24 July 2002). Specifically, Article 36 of the Federal Law "On Customs Regulation" stipulated that, in case the declarant disagreed with a decision, action or inaction by a Customs authority, the declarant could challenge any decision or action (inaction) of a customs body or its officer, if in the opinion of this person such action (inaction) or decision violated the rights or legal interests of this person or impede their realization or impose an illegitimate responsibility. This included the right to appeal the decision, as indicated both at the higher Customs authority and at the Court or Arbitration Court. In the context of such an appeal, the declarant could contest the decision on customs valuation, inter alia, on the grounds that the Customs authority had used indicative price information contained in risk management measures, such as "customs letters" to determine customs value of goods, rather than the valuation methods laid down in Articles 4 to 10 of the CU Agreement and Articles 19 to 24 of the Customs Tariff Law. He confirmed that the Court could issue a binding decision requiring that the FCS or the relevant Customs body and its officials provide the Court, prior to its decision, with all relevant documents that were used in making the decision, including "customs letters", for review and, in this case, the declarant would have access to the documents provided to the Court.
526. He emphasized that the lodging of a complaint with the Customs authorities against a decision, action (inaction) by the Customs authority or its official did not rule out the possibility of the simultaneous or subsequent lodging of a complaint of a similar content with a court or arbitration court (Article 37 of the Federal Law "On Customs Regulation"). Не confirmed that, in all cases, an importer, i.e., the owner of the goods, had the right to appeal a decision, action or inaction of a Customs authority regarding a determination of customs value without penalty to a judicial authority and that the decision on appeal must be provided in writing. He also stated that, in accordance with Article 46 of the Constitution of the Russian Federation, everyone was guaranteed the right of judicial appeal to protect one's rights and freedoms. Detailed information on the right of appeal was also provided in the Section "Framework for Making and Enforcing Policies" of this Report.
527. The representative of the Russian Federation confirmed that the Russian Federation would, from the date of accession, apply its customs valuation laws, regulations and practices, including those to prevent under-valuation of goods, in conformity with the WTO Agreement, including Article I of the GATT 1994 and the WTO Agreement on Implementation of Article VII of the GATT 1994. Accordingly, the Russian Federation would not use any form of minimum value, such as reference prices, or fixed valuation schedule for customs valuation of goods. Additional procedures and controls to prevent under-valuation of goods would be applied only where strictly necessary to address genuine risks of under-valuation, duly established through the application of risk management, and risk management, would not be based exclusively, or predominantly on price information (whether based on trade statistics, information from exporters or other sources). Additional procedures and controls to prevent under-valuation of goods, including requests for additional information, would be applied due to a divergence between the declared value of goods and price information for specific categories of goods (established by, or otherwise available to, the Customs authorities of the Russian Federation) only if, exceptionally, the divergence was sufficiently large to raise justified doubts about the correctness of the declared value. Decisions on customs valuation could be appealed on the grounds that they were, in law or in fact, based on minimum values, a fixed valuation schedule or reference prices for specific categories of goods established by, or otherwise available to, the Customs authorities of the Russian Federation, rather than on the valuation principles and methods as laid down in the CU Agreement, the CU Customs Code and implementing legislation of the Russian Federation, or the WTO Agreement on Implementation of Article VII of the GATT 1994. He further confirmed that, in determining the value of imports, the Russian Federation would apply the provisions of paragraph 2 of Decision No. 4.1 of the Committee "On Valuation of Carrier Media Bearing Software for Data Processing Equipment" and Decision No. 3.1 "On the Treatment of Interest Charges in Customs Value of Imported Goods". The Working Party took note of these commitments.
- Rules of Origin
528. The representative of the Russian Federation stated that from 1 July 2010, the Russian Federation applied rules of origin to imports pursuant to Chapter 7 of the CU Customs Code and Chapter 10 of the Federal Law on Customs Regulation (No. 311-FZ of 27 November 2010).
Non-preferential rules of origin and their application were governed by the provisions of the Agreement on Common Rules for Determining the Country of Origin of Goods of 25 January 2008, including the Rules of Determination of the Country of Origin (hereafter: CU Agreement on Rules of Origin), the CU Customs Code, and the Federal Law on Customs Regulation. These instruments closely followed the work of the World Customs Organization (WCO) and the WTO regarding the application and harmonization of non-preferential rules of origin. The principles for determining the country of origin of goods were based on international practices and implemented the recommendations of the revised Kyoto Convention, which came into force in 2006. Article 58.3 of the CU Customs Code provided that the determination of the country of origin must be carried out in accordance with international treaties of the Member States of the Customs Union, which defined the procedure of determining the country of origin of goods. He further stated that the determination of the origin of goods originating from developing countries and eligible for the system of preferences maintained by the Russian Federation was governed by the Agreement on Rules of the Origin of Goods, Originating from Developing and Least-developed Countries of 12 December 2008, including the Rules Determining the Origin of Goods from Developing and Least-developed Countries (hereafter: CU Agreement on Rules of Origin for Developing and Least-developed Countries (LDCs)). The customs procedures for determining the country of origin of goods established pursuant to the CU Customs Code replaced those contained in the Customs Code of the Russian Federation (Federal Law No. 61-FZ of 28 May 2003). The relevant provisions of Law of the Russian Federation No. 5003-1 of May 1993 "On Customs Tariff" were superseded, with the exception of Articles 3 and 36, which remained in effect in respect of application of MFN customs duties rates and provision of tariff preferences, respectively.
529. Members of the Working Party sought to ensure that the CU Agreements and Customs Code and the Federal Law on Customs Regulation provided for rules of origin that complied with the WTO Agreement on Rules of Origin. Several Members requested further information and clarification from the representative of the Russian Federation on how these measures established preferential and non-preferential rules of origin. Members also expressed the view that the requirement of the Russian Federation that imports of non-MFN origin were subject to twice the MFN tariff rate, if MFN origin could not be initially proven, was unduly burdensome, given that after the accession of the Russian Federation to the WTO, goods originating in a only a small number of countries could originate from non-MFN trading partners. These Members sought a commitment from the Russian Federation that it would assess the MFN rate on all goods originating from countries enjoying MFN duty rate from the date of the accession to the WTO of the Russian Federation. They also noted that goods, whose origin had not been clearly established, were cleared through customs only after payment of customs duties at a double MFN rate of the customs tariff. Some Members asked the Russian Federation to clarify whether in such cases it was possible to submit a certificate of origin or other proof subsequent to customs clearance and, if origin was subsequently satisfactorily established, whether excess duties were then refunded. Some Members also expressed concerns about the consistency with the WTO Agreement on Rules of Origin of the provisions of the CU Customs Code and the CU Agreement on Rules of Origin providing that "the country of origin could also be understood to mean a group of countries, region or part of a country, if this was necessary to identify them, with a view to determining the origin of goods." They observed that the WTO Agreement referred to a "country" of origin, not to groups of countries or regions, or part of a country and they requested a clarification of the meaning of these provisions and specific examples of how and under what circumstances the origin of a good could be ascribed to a region or part of a country. These Members requested confirmation from the Russian Federation that these provisions would be applied in full conformity with the WTO Agreement.
530. In response, the representative of the Russian Federation informed Members that the option of specifying a region or part of a country was applied in cases where it was necessary to define the origin of the goods as such. So far it had been applied within the procedure of implementation of trade defence measures.
531. The representative of the Russian Federation explained that, pursuant to Article 58 of the CU Customs Code, goods were recognised as originating from a specific country, if they were wholly made in that country or substantially transformed in accordance with criteria set-forth in the CU Agreement on Rules of Origin and CU Commission decisions. The country of origin of goods could also be a group of countries, a customs union, a region, or a part of a country, if the exact country of origin within the group of countries was difficult or could not be determined. Under those circumstances, the relevant group of countries, customs union, or, if necessary to identify origin, a region or part of a country could be considered as the country of origin of the goods. The basic criterion for substantial transformation for non-preferential goods was the shift in the tariff classification of the good on the level of at least one of the first four digits, as prescribed by paragraph 4 of the Rules of Determination of the Country of Origin annexed to the CU Agreement on Rules of Origin. Paragraph 2 of the Rules of Determination of the Country of Origin supplied an exhaustive list of the kinds of goods which could be produced wholly in a country. Paragraph 5 included an illustrative list of operations which did not satisfy the criteria for production of a good within a country. Other criteria of sufficient transformation could be established exclusively by the CU Commission, as set-out in paragraph 6.
532. The representative of the Russian Federation also explained that, in the event that goods were supplied in a dismantled or unassembled state over several shipments - when it was impossible to deliver the whole lot at one time due to production or transportation problems or when the lot of goods had, by mistake, been divided into parts - paragraphs 8 and 9 of the CU Rules of Determination of the Country of Origin established a number of specific rules to assist in determining the country of origin of goods (e.g., the indicated goods could, at the discretion of the importer, be considered as one shipment).
533. The representative of the Russian Federation further explained that, in accordance with Article 62 of the CU Customs Code, when goods were brought into the customs territory of the Customs Union, a document must be shown to confirm the country of origin of the goods, if the Russian Federation (or other CU Party) granted preferential tariffs to the country of origin of the goods under the Protocol on Common System of Tariff Preferences of Customs Union, signed on 28 January 2008, or other international treaties and agreements of the Russian Federation (or other CU Party) or the legislation of the Russian Federation. The CU Customs Code also established cases where certificates of origin were mandatory or where the customs authorities had the authority to require that a certificate of origin be provided. This authority existed when there was reasonable basis to believe that the information initially provided on the country of origin of the relevant goods was false. Currently, a certificate of origin (either the "A" Document attached to the Annex to the Agreement on Rules of Origin of Goods from Developing and Least-developed Countries or, for CIS preferences, the ST-1 document) was required. Goods were considered as originating from a developing or least-developed country subject to tariff preferential treatment when they were fully produced in such a country. He added that Part III of Annex I of the Agreement on Rules of Origin of Goods from Developing and Least-developed Countries provided that CU Parties could establish a procedure for the application of criteria of substantial transformation for countries eligible for tariff preferences, based on the determination that the value of inputs used in the production process originating from countries not covered by preferential treatment or of unknown origin did not exceed 50 per cent of the total declared value. He also noted that Part VI of Annex I provided the terms for application of the rules of direct purchase and direct shipping for granting preferential tariffs. He further informed Members that the provisions of Article 111 of the Law "On Customs Regulation", which stipulated the procedure for issuance of the assessment of origin of goods, was, in his view, in full conformity with Article 2(h) of the WTO Agreement on Rules of Origin and Article 3 (d) to (f) of Annex II to the said Agreement, and that the provisions of Article 3(g) of the Annex were reflected in Articles 8 and 10 of the CU Customs Code.
534. He added that, pursuant to Article 63 of the CU Customs Code, MFN treatment was granted, if the country of origin was declared and accepted as being a country receiving MFN tariff treatment. For MFN treatment no certificate of origin was required. Where MFN treatment existed in respect of the country of origin, customs duties were charged at the MFN rates. The CU Customs Code also provided that customs duties were charged at the double rate only when the customs authorities actually had evidence that the goods at issue had originated from a country in respect of which the Russian Federation did not apply MFN treatment. These goods could enter the Customs Union, but a security would have to be provided for the payment of customs duties at the double MFN rates, until the origin of the goods could be established.
535. He stated that when the certificate of origin or other proof was accepted, MFN treatment would be applied for one year after release of the goods and the importer could recover the difference in the duties paid. Customs duties were reimbursed within one year from the date of over-payment of customs duties upon the submission, by the payer, of a request, as provided for in Chapter 13 of the CU Customs Code. Such a request had to be submitted to the customs office to which duties had been paid.
536. He further noted that, pursuant to Article 63.1 of the CU Customs Code, if the customs authorities had no indication that a good was originating from a country in respect of which the Russian Federation did not apply MFN treatment, customs duties would be charged at the MFN tariff rate irrespective of the availability or absence of a certificate of origin.
537. The representative of the Russian Federation added that, pursuant to Article 61 of the CU Customs Code, the certificate of origin of goods constituted documentary proof of the country of origin of goods issued by the competent body or organization of a given country or of the country of exportation of the said goods, if the country of exportation issued such certificates based on the information obtained from the country of origin of such goods. According to Article 62 of the CU Customs Code the certificate was required only in cases where tariff preferences were claimed. The certificate of origin was to be submitted with the customs declaration and other documents presented for customs clearance. If the certificate of origin of goods was not properly executed (e.g., there were violations of the Customs Union requirements for its design and/or completion, as contained in Annex II to the Agreement on Rules for Determining the Origin of Goods from Developing and Least Developed Countries of 12 December 2008); the customs authorities had the authority to accept or deny the certificate as a basis for granting tariff preferences. Pursuant to Section VIII of the CU Agreement on Rules of Origin of Developing and Least-developed Countries, in case of reasonable doubts in respect of authenticity of the certificate or information contained in it, the customs authorities could lodge a request with the competent bodies or organizations in the country that had issued the certificate of origin to provide additional documentary proofs. The customs authorities could also request additional documentary proofs or clarifications for the purpose of carrying out spot checks. Such spot checks, however, must not impede the process of customs clearance of goods based on the information of their country of origin declared during the customs formalities in respect of these goods. He also stated that, when the certificate of origin or other proof was not accepted, MFN treatment would be applied until the origin of the goods was established. The importer could recover the difference in the duties paid for a period of one year from the date of over-payment upon the submission, by the payer, of a request, as provided for in Chapter 13 of the CU Customs Code. Such a request had to be submitted to the customs office to which duties had been paid.
538. As for the rules of origin for goods traded within the Customs Union and/or goods covered by Free Trade Agreements between the Russian Federation and other CIS Members, the representative of the Russian Federation explained that the Russian Federation applied the "Rules of Origin of Goods" approved by the Council of Heads of CIS Governments on 30 November 2000 (hereafter: Decision of 30 November 2000) and the Agreement of the CIS States of 12 April 1996 "On Rules of Origin of Goods Originating from Developing Countries for the Purposes of Tariff Preferences under the General Preferences System". These rules had been developed pursuant to the international practice for determination of origin. Additional criteria of direct purchase were used, along with requirements that the exporter be established legally in a Party to the CIS Free Trade Agreement (as originally provided for in the Decision of the Heads of Government of other CIS Countries of 18 October 1996). Currently, there were no other arrangements for the determination of the country of origin of goods within the framework of the Customs Union, the Eurasian Economic Community, or the CIS. This situation would change when the Agreement of the CIS States of 20 November 2009 on the Rules of Origin in the CIS entered into force and replaced the rules of origin established earlier by the Decision of 30 November 2000 for all CIS Members.
539. Concerning Free Trade Arrangements of the Russian Federation with Serbia and Montenegro (and in the future, with any other countries not Members of the CIS), he noted that the rules of origin for these preferential arrangements were contained in the Free Trade Agreements themselves.
540. Members sought clarification of the requirement that the exporter be a legally established resident in a Party to a CIS Free Trade Agreement, and asked, if corporate registration would satisfy that requirement, or whether there were other criteria that must be satisfied.
541. In response to the request for additional information, the representative of the Russian Federation stated that, as for the requirement that the exporter be legally established in a Party to the CIS Agreement there were not any other criteria apart from registration.
542. Several Members also requested information on the right to request an origin determination prior to shipment, and requested a commitment that these provisions be applied in line with the requirements of Article 2(h) and Annex II, paragraph 3(d) of the WTO Agreement on Rules of Origin. They sought information on where these provisions could be found in the Agreements of the Customs Union that governed the application of the rules of origin and the customs legislation of the Russian Federation. They also indicated that the preferential rules of origin for CIS countries and other preferential trade agreements to which the Russian Federation belonged should fully reflect the interim rules of Annex II of the WTO Agreement on Rules of Origin. In this regard, these Members requested clarification of whether the Decision of the Council of the Governments of the Commonwealth of Independent States on the Rules of Origin of Goods of 30 November 2000 or the provisions of the CU Agreements on Rules of Origin and on Rules of Origin for Developing Countries and LDCs met these requirements, and sought a commitment as to their implementation in accordance with the WTO Agreement on Rules of Origin upon the accession to the WTO of the Russian Federation. Some Members also asked for a clarification of whether customs procedures included any guarantee system which allowed release of goods pending determination of preferential origin and how any associated rectification procedure (subsequent refund or recovery of customs duties) actually operated. These Members further inquired whether provisions existed in the customs laws of the Russian Federation for the protection of confidential information supplied for the purpose of application of the rules of origin.
543. In response, the representative of the Russian Federation stated that, pursuant to Article 111 of the Federal Law "On Customs Regulation" (No. 311-FZ of 27 November 2010), the Federal Customs Service could make a preliminary decision on the country of origin of goods. He informed Members that information on guarantee systems was in the "Customs Valuation" and "Customs Regulations and Procedures" Sections of the Report. As for confidentiality of information, he explained that Article 8 of the CU Customs Code established confidentiality requirements for all information presented by declarants for customs purposes. That Article provided that the customs authorities "…shall not disclose, use for personal purposes or transfer the information containing state, commercial, banking, tax, or other legally protected secrets, and other confidential information to third parties, including public authorities, except in cases stipulated by this Code and/or the laws of the Member States of the Customs Union." Specific provisions on confidentiality of data were contained in Article 13 of Federal Law No. 98-FZ of 29 July 2004 "On Commercial Secrets", which obligated Government authorities and bodies in the Russian Federation to ensure the protection of confidential information presented to them by legal persons or individual entrepreneurs. He stated that, in his view, the CU Customs Code, other international agreements and the national legislation of the Russian Federation described in this Section contained provisions to fully reflect the requirements of the WTO Agreement on Rules of Origin.
544. Members of the Working Party thanked the representative of the Russian Federation for this information, but noted that neither the CU Customs Code nor the CU Agreements and Rules providing for the application of rules of origin appeared to provide for a time period of no later than 150 days after a request for issuing a preliminary decision on the origin of a product had been submitted, provided that all required information had been submitted. They requested that the representative of the Russian Federation identify the requirements implementing Article 2(h) and Annex II, paragraph 3(d) of the WTO Agreement on Rules of Origin be identified in CU Agreements or decisions and the customs legislation of the Russian Federation. Those Members also requested information on whether Custom Union and the preferential rules of origin for the FTAs of the Russian Federation with CIS, EAEC, the Single Economic Space, or other such Agreements, reflected the interim rules of the WTO Agreement in Annex II of the Agreement on Rules of Origin.
545. Concerning the requirements of Article 2(h) and Annex II, paragraph 3(d) of the WTO Agreement on Rules of Origin, the representative of the Russian Federation explained that, in accordance with Article 58 of the CU Customs Code, customs authorities of a CU Party had the authority to make preliminary decisions in respect of country of origin in the order stipulated by its national legislation. In the Russian Federation, these requirements currently were reflected in FCS Order No. 906 of 23 July 2008 "On the Approval of the Regulations on the Procedure for Provision by the FCS of the State Service of Taking Preliminary Decisions on the Classification of a Commodity in Accordance with Commodity Classification of Foreign Economic Activity and on the Country of Origin of a Commodity". In addition, preliminary decisions on the origin of a product had to be taken within 90 days from the date of receipt of a request by an interested party by the customs body, in accordance with the Article 111 of the Federal Law "On Customs Regulation", No. 311-FZ of 27 November 2010, which became effective on 27 December 2010. The request needed to contain information sufficient to make such a decision. Preliminary decisions were valid for three years unless they were changed, withdrawn or terminated. After the entry into force of the Federal Law on Customs Regulation, a new FCS order for making a preliminary decision in respect of country of origin in line with the provisions of Article 111 would be developed and applied.
546. One Member reiterated that the Orders of the State Customs Committee (SCC) of the Russian Federation No. 961-r of 4 October 2001 and No. 1002 of 19 October 2001 ran counter to the provisions of the Constitution of the Russian Federation, particularly, Article 15 which stated that "if an international treaty to which the Russian Federation is party provides for other rules than those
set-forth by Russian Federation domestic law, the rules of the international treaty should apply". That Member was of the view that those Orders of the State Customs Committee violated the provisions of the bilateral agreement between this Member and the Russian Federation on Customs Check Points, and should immediately be eliminated to ensure the consistency with the requirements of that bilateral agreement.
547. In response, the representative of the Russian Federation noted that the Orders of the State Customs Committee of the Russian Federation No. 961-r of 4 October 2001 and No. 1002 of 19 October 2001 had been abolished.
548. The representative of the Russian Federation confirmed that from the date of accession, measures on rules of origin, whether adopted by the Russian Federation or the competent bodies of the CU, would be applied in the Russian Federation in conformity with the provisions of the WTO Agreement on Rules of Origin, and would reflect the interim rules in Annex II to that Agreement, including the provisions for transparency, right of appeal, and notifications to the WTO Committee on Rules of Origin. He further confirmed that, consistent with the requirements of Article 2(h) and of Annex II, paragraph 3(d), both for non-preferential and preferential rules of origin, customs authorities would provide an assessment of the origin of goods subject to import upon the request of an exporter, importer or any person with a justifiable cause and issue the assessment no later than 150 days after a request provided that all necessary elements had been submitted. According to the provisions of the WTO Agreement on Rules of Origin, any request for such an assessment would be accepted before trade in the goods concerned had begun, and any such assessment would be valid for three years provided that the facts and conditions, including the rules of origin, under which they had been made remain comparable. He further confirmed that the practice of using "double MFN" rates as the default tariff rates for imports of undeterminable origin had been eliminated. The Working Party took note of these commitments.
- Other Customs Formalities
549. Several Members stressed that the simplification of border controls and customs documentation necessary for importation in the Russian Federation would have a favourable impact through reduced costs and improved efficiency for Russian traders.
550. In response, the representative of the Russian Federation stated that the policy of his Government was aimed at creating favourable conditions for trade facilitation, including customs formalities. To that end, customs formalities in the Russian Federation were being brought into compliance with the internationally accepted rules, in particular, with the Revised Kyoto Convention on the Simplification and Harmonization of Customs Procedures. A number of such improvements had been established with the implementation of Federal Law No. 61-FZ of 28 May 2003, i.e., the Customs Code of the Russian Federation, on 1 January 2004. Further efforts to streamline and harmonize customs formalities had occurred with the entry into force of the CU Customs Code, on 1 July 2010, and with additional domestic legislation in the form of Federal Law No. 311-FZ of 27 November 2010 "On Customs Regulation" and Federal Law No. 394-FZ of 28 December 2010 "On the Transfer of Certain Types of Controls to Customs". The maximum clearance period was reduced from 72 to 24 hours. These Laws replaced Federal Law No. 61-FZ, except for Article 357.10 that stipulated the right of the Government to introduce rates of fees for customs clearance and established the current authority of the FCS in the area of customs clearance and customs checkpoints.
551. One Member of the Working Party noted that, under State Customs Committee Order No. 155 of 14 February 2001 "On the Procedure for Coordination of Decisions to Release Goods for Free Circulation" and Order No. 949 of 31 December 1999 "On Amending Order No. 258 of the SCC of 26 April 1996" (in the wording of SCC Order No. 43 of 31 January 1997 and, as amended on 10 March 2000) certain goods that qualified as "high-risk" (e.g., certain foodstuffs) were not released for free circulation without the specific approval of a higher customs authority. The process of obtaining such approval could last from one to two weeks. Under rules introduced in October 2001 by the North Western Customs Authority, shipments of "risk products" (a wide group of products including coffee, furniture, tyres and washing machines) were subject to burdensome documentary requirements, including in relationship to the ownership of the vehicle transporting the goods. The Russian Federation had also imposed restrictions that required customs clearance for certain goods, including textiles, clothing and electrical products, to take place only on borders with certain Asian countries as well as in certain ports and airports. Consequently, such items originating in Asia could no longer be exported to the Russian Federation via the customs territory of that Member. As well as raising concerns in relation to conformity with WTO requirements on trade in transit, these Orders made it impossible for companies, exporting to the Russian Federation, to use raw materials from the Far East for sub-contracting and, subsequently, created a barrier to business cooperation. The cumulative effect was that exporters to the Russian Federation faced unpredictable, non-transparent, lengthy and generally burdensome customs procedures for certain imported goods at the designated customs checkpoints of entry into the territory. Checks on imported goods should not be applied in such a heavy-handed or non-transparent manner. These Members considered that the Russian Federation should enter a commitment to respect standard WTO requirements of transparency, predictability and uniform application in this regard.
552. Another Member said that his authorities had concerns with the practice used by the Russian Federation customs bodies in respect of the transport companies of this Member. He noted that country-specific restrictive customs procedures were incompatible with WTO provisions, notably those in Articles I and VIII of the GATT 1994. This Member requested the Russian Federation to ensure that these and other country-specific measures, relating to customs procedures, would be brought in to full conformity with the WTO requirements, prior to accession.
553. In response to concerns from Members regarding the designated customs entry checkpoints, the representative of the Russian Federation noted that, pursuant to Article 156 of the CU Customs Code and Article 193 of Federal Law No. 311-FZ, the Government of the Russian Federation had the right to designate customs entry checkpoints for certain categories of goods and could establish certain places for entry at the border in compliance with the legislation of the Russian Federation regarding the State border. These measures were necessary and were not intended to complicate import processing. He explained that the measures mentioned by Members, including the designation of customs entry checkpoints for particular goods and at certain border customs checkpoints, were aimed to assure accurate classification and valuation of the goods and to increase predictability and accuracy of customs procedures for traders and transporters. They were not intended to act as a hidden or unnecessary restriction to trade, bearing in mind insufficient resources to equip all border customs checkpoints with the necessary equipment and storage facilities. He also mentioned that respective restrictions and procedures were in accordance with the International Convention on the Simplification and Harmonization of Customs Procedures (Revised Kyoto Convention, 1999), in particular, with its Specific Annex A, Chapter 1, according to which national legislation specified the places at which such goods could enter the territory of the Russian Federation.
554. With regard to the designated customs checkpoints for import declaration, the representative of the Russian Federation stated that his Government paid substantial attention to the implementation of legislative and practical measures aimed at the creation of stable and predictable conditions for implementation of customs formalities. After the entry into force on 1 January 2004 of the Customs Code of the Russian Federation, the number of legislative acts establishing restrictions on places of declaration of goods was reduced by two thirds and amounted to twelve at that time, as compared with 34 in mid-2003. He added that a Plan on Further Phasing out Restrictions in Respect of Specific Customs Points for the Declaration of Specific Types of Goods had been prepared and implemented. By October 2005, another four SCC Orders "On Establishing Specific Customs Checkpoints for the Declaration of Specific Types of Goods" had been abolished by the MEDT Order No. 347 of 23 December 2004, namely: SCC Order Nos. 1049, 1050, and 1051 of 19 September 2003, and SCC Order No. 1540 of 25 December 2003. Also, SCC Order No. 1443 of 11 December 2003 "On Establishing Specific Customs Checkpoints for the Declaration of Specific Types of Goods" had been abolished by MEDT Order No. 128 of 13 June 2005 and MEDT Order No. 68 of 4 April 2005 "On Establishing Specific Customs Checkpoints for the Declaration of Specific Types of Goods" had been abolished by MEDT Order No. 193 of 17 August 2005. The representative of the Russian Federation added that SCC Order No. 155 of 14 February 2001 "On the Procedure for Coordination of Decisions to Release Goods for Free Circulation" mentioned in paragraph 551 had been invalidated by SCC Order No. 28 of 5 August 2002. He explained that the release of goods was now governed by Chapter 28 of the CU Customs Code, as elaborated in Section 25 of Federal Law No. 311-FZ (Articles 218 to 223).
555. The representative of the Russian Federation noted that these measures had resulted in the gradual elimination of product categories of goods from the list of those subject to declaration for import at the designated customs checkpoints. The customs checkpoints designated for the purpose of customs declaration of certain goods for import were established throughout the customs territory of the country in proximity to respective international transport infrastructure or regions of major consumption or processing of imported products. This process of simplification and liberalization would be accelerated under the trade regime of the Customs Union.
556. The representative of the Russian Federation added that, after implementation of the
above-mentioned Plan, only a limited number of categories of goods remained subject to customs declaration and/or entry at the designated customs checkpoints. By 1 January 2011, the list of goods subject to such restrictions of the place of declaration and/or entry had been reduced to include only the following goods: (i) poultry meat and poultry offal for food (HS Code 0207), which was permitted only at sea and air checkpoints if, the country of origin was not connected with the Russian Federation by means of land transportation, meat and meat by-products used as food (HS Code 02); (ii) goods subject to excise tax (certain alcohol and tobacco products, certain automotive goods); (iii) alcohol products originating in the Republic of Moldova; (iv) goods transported by pipelines and electric power grids; (v) certain wood products (HS Codes 4401, 4403, 4404, 4406, 4407); (vi) goods transported by international mail; (vii) goods for exhibitions; (viii) goods transported by air; (ix) precious stones and metals (HS Codes 9101, 9102, 9103, 9105, 9111, 9112); (x) banknotes, securities, and coins (HS Codes 4907 00 300 0, 4907 00 900 0, 7118 90 000 0); (xi) fissionable and radio-active materials (HS Codes 2612, 2844 and HS Code 8401 30 000); (xii) goods subject to temporary admission; and (xiii) diplomatic correspondence and goods, conveyed by certain categories of foreign persons. He also noted that a comprehensive list of categories of goods currently subject to measures requiring declaration for import and/or entry at designated customs checkpoints was reflected in Table 13 and Table 14. The Russian Federation expected that, gradually, goods crossing the border could be declared at the majority of customs checkpoints rather than at the designated customs checkpoints, and that the Russian Federation was ready to constructively address, in the meantime, to the extent possible, any specific concerns of Members with a view to facilitating trade flows.
557. Currently, in accordance with Article 190 of the CU Customs Code and Articles 10.4 and 205 of Federal Law No. 311-FZ, the FCS was authorised to designate specific customs checkpoints for the declaration of specific types of goods in order to ensure the effectiveness of control over the observance of the customs legislation, only if it was necessary to use specialised equipment and/or special knowledge to perform customs formalities, in respect of such goods as cultural valuables, goods of precious metals, weaponry, military material and ammunition, radioactive and fission materials, and other certain kinds of goods; or if it was necessary to accelerate the release of goods, such as express cargo, exhibition samples, goods imported to or exported from exclusive economic zones, etc. (Article 205 of Federal Law No. 311-FZ). In case a customs declaration was submitted to a different customs checkpoint than that designated, the customs declaration would be denied.
558. In response to the concern of a Member, the representative of the Russian Federation added that the policy of its customs authorities was to establish such customs checkpoints close to places where goods, such as precious stones and metals destined for exhibitions were mostly sold, exhibited, consumed or used otherwise. For example, designated customs checkpoints for the clearance of goods for exhibitions were functioning directly in the premises of the biggest exhibition centres in Moscow or St. Petersburg.
559. A Member asked whether the public was permitted to comment on the categories of goods designated for special treatment or on the development of such special methods, prior to implementation. The representative of the Russian Federation replied that Article 53 of Federal Law No. 311-FZ provided for the possibility of holding consultations and other procedures with the FCS, aimed at ensuring transparency with regard to matters relating to Customs Union legal acts, and other matters within the competence of national customs authorities.
560. Members of the Working Party also noted that the industry and exporters had regular experience of inconsistencies between administrative decisions taken by the authorities of the Russian Federation and the prevailing legislation of the Russian Federation. Moreover, inconsistencies appeared to exist between the general legislative framework and subsidiary regulations and administrative guidance issued by the Government bodies of the Russian Federation (such as the FCS). They expected the Russian Federation to undertake a commitment that, upon accession, all regulations, formalities and requirements connected with the importation of goods, including in relation to statistical control, customs clearance, documents, documentation and certification, inspection and analysis, and any changes to these regulations, formalities and requirements would be published promptly and, in any case, sufficiently in advance of its entry into force and would be applied in a uniform, impartial and reasonable manner across the customs territory of the Russian Federation, consistent with WTO requirements, including Articles VIII and X of the GATT 1994. Customs regulations, formalities and requirements should also be applied and operated in a fashion consistent with WTO requirements.
561. In response, the representative of the Russian Federation referred to Sections "Customs Regulations and Procedures" and "Transparency" of this Report. He added that the provisions of normative legal acts of the Federal executive body charged with customs affairs were not to conflict with the provisions of customs legislation and other legal acts of the CU or normative legal acts of the Russian Federation and/or should not establish requirements, bans and restrictions not envisaged by customs legislation and other legal acts of the CU and normative legal acts of the Russian Federation.
562. The representative of the Russian Federation confirmed that Table 13 and Table 14 were comprehensive lists of the categories of goods currently subject to measures requiring their declaration and/or entry at designated customs checkpoints. He further confirmed that if any such measures were contrary to the WTO Agreement, they would be eliminated as of the date of accession of the Russian Federation to the WTO and that future measures concerning the declaration and/or entry of specific categories of goods at designated customs checkpoints, whether introduced, re-introduced or applied pursuant to national legislation, CU Agreements, or other CU legal acts, would be consistent with the WTO Agreement. Furthermore, he confirmed that, from the date of accession, all laws, regulations, decrees, decisions, judicial decisions and administrative rulings of general application connected with the importation of goods, including those relating to statistical control, customs clearance, documentation and certification, inspection and analysis, and any changes to these laws, regulations decrees, decisions, judicial decisions and administrative rulings of general application whether introduced, reintroduced, or applied by the Russian Federation or the competent bodies of the CU would be published promptly and posted on the official websites of the responsible governmental bodies in such a manner as to enable governments and traders to become acquainted with them and that the Russian Federation would also publish the names of the governmental bodies responsible for administering them. Further, he confirmed that the Russian Federation would administer these laws, regulations, decrees, decisions, judicial decisions and administrative rulings of general application in a uniform, impartial and reasonable manner throughout its territory, as required by the WTO Agreement. He further confirmed that the Russian Federation would not apply country-specific customs procedures in a manner inconsistent with the WTO Agreement, including Articles I and X of the GATT 1994, and would apply the principles of non-discrimination and transparency within the meaning of these Articles. The Working Party took note of these commitments.
- Preshipment Inspection
563. Noting that the authorities of the Russian Federation had stated that the Russian Federation did not currently require any inspection services prior to shipment, but had been considering, at some point, recourse to such measures, Members asked the Russian Federation to explain its laws and regulations authorizing the employment of preshipment inspection and to undertake a commitment indicating that, if such services should be employed in the future, they would conform to WTO provisions in their operations, e.g., in the application of fees for services rendered, observance of other WTO requirements in customs processing, and in providing right of appeal to the Government.
564. In response, the representative of the Russian Federation stated that Article 7 of the Agreement on Common Measures for Non-Tariff Regulation with Regard to Third Counties, signed on 25 January 2008 (hereafter: Agreement on Non-Tariff Regulation), authorised the imposition of non-tariff regulatory measures on the basis of national interests, inter alia, to implement national laws not in conflict with international agreements. The CU Agreement on the Introduction and Application of Measures Concerning Foreign Trade in Goods on a Common Customs Territory in Respect of Third Countries of 25 January 2008 (hereafter: CU Agreement on Measures Concerning Foreign Trade) implemented the CU Agreement on Non-Tariff Regulation and authorised the CU Commission to introduce non-economic measures affecting goods in foreign trade from third countries on the basis of proposals from the CU Parties. Pursuant to Article 6 of the latter Agreement, the Russian Federation could propose to introduce preshipment inspection. If the CU Commission rejected the proposal, such measures could be imposed unilaterally for up to six months, as provided for in Article 8 of the Agreement on Measures Concerning Foreign Trade.
565. He added that, in conformity with the provisions of these CU Agreements, if the Russian Federation decided to introduce preshipment inspection with respect to certain goods, Article 28 of Federal Law No. 164-FZ of 8 December 2003 "On the Fundamentals of the State Regulation of the Foreign Trade Activity" (as amended on 2 February 2006) authorised the creation of such a regime, and laid down the objectives and conditions thereof. Federal Law No. 164-FZ provided that preshipment inspection could be introduced for a period not exceeding three years. He noted that the Russian Federation had no current plans to introduce a preshipment inspection scheme.
566. The representative of the Russian Federation confirmed that, from the date of accession, if a preshipment inspection scheme were to be introduced in the future, whether by the Russian Federation or by the competent bodies of the CU, its operation would be in conformity with the relevant provisions of the WTO Agreement, including the Agreement on Preshipment Inspection, and the Agreement on Implementation of Article VII of the GATT 1994, inter alia, in respect of the due process and transparency requirements of the WTO Agreement, in particular Article X of the GATT 1994 and the Agreement on Implementation of Article VII of the GATT 1994 and confidentiality of data received would be ensured. In addition, it would be ensured by the Russian Federation or by the competent bodies of the CU that charges and fees for preshipment inspection would comply with Article VIII of the GATT 1994, that preshipment entities would establish and maintain appeals procedures as foreseen by Article 2.21 of the WTO Agreement on Preshipment Inspection, and that that scheme would not constitute an undue and additional burden on exporters to or importers of goods into the Russian Federation. Further, he confirmed that the duration of any such scheme would be limited to three years and that importers and exporters would not be precluded from challenging facts found and findings made by preshipment inspection entities as part of administrative appeals against decisions of the Russian Federation or the competent bodies of the CU where such decisions were based on those facts or findings. The Working Party took note of these commitments.
- Balance of payments
567. The representative of the Russian Federation noted that, from 1 January 2010, the legal basis for applying non-tariff measures on goods to address the situation of the balance-of-payments (BOP) of the country could be found in the CU Agreement on Common Measures for Non-Tariff Regulation with Regard to Third Countries of 25 January 2008 (hereafter: CU Agreement On Non-Tariff Regulation). More specific provisions regarding the implementation of the CU Agreement on Non-Tariff Regulation in this area were elaborated in the CU Agreement on Introduction and Application of Measures Concerning Foreign Trade in Goods on a Common Customs Territory in Respect of Third Countries (hereafter: CU Agreement on Measures Concerning Foreign Trade) of 9 June 2009. Article 8 of the CU Agreement on Non-Tariff Regulation provided that measures limiting foreign trade in goods may be imposed with a view to protecting the external financial situation and maintaining a steady balance of payments. Article 9 of that Agreement and Articles 7 to 9 of the CU Agreement on Measures Concerning Foreign Trade further provided the conditions for the CU as a whole and, in exceptional circumstances, for individual CU Parties unilaterally to introduce trade restrictive measures to protect the external financial position and maintain the balance of payments. Previously, Article 15 of Federal Law No. 63-FZ of 14 April 1998 "On Measures to Protect the Economic Interests of the Russian Federation with Respect to Foreign Trade in Goods" and, later Federal Law No. 164-FZ of 8 December 2003 "On the Fundamentals of State Regulation of Foreign Trade Activity" had provided such authority. In accordance with Federal Law No. 63-FZ, and due to particular balance-of-payment difficulties, Government Resolution No. 791 of 17 July 1998 "On Introduction of an Additional Import Duty" had introduced a special import surcharge at a rate of 3 per cent ad valorem applied to all tariff items. Government Resolution No. 235 of 27 February 1999 "On Amending Resolution of the Government of the Russian Federation No. 791 of 17 July 1998 'On Introduction of an Additional Import Duty'" had eliminated the import surcharge from 1 March 1999.
568. Noting the repeal of the balance-of-payments measure in 1999, some Members asked whether similar import surcharges would be authorised under any CU legislation other than the CU Agreement on Non-Tariff Regulation and the CU Agreement on Measures Concerning Foreign Trade, e.g., the CU Customs Code or Decision No. 18 of 27 November 2009 "On Common Customs Tariff Regulation of the Customs Union of the Republic of Belarus, Republic of Kazakhstan and the Russian Federation" of the Interstate Council on Common Customs Tariff Regulations, or under national legislation of the Russian Federation. In this regard, these Members sought a commitment confirming that, as from the date of accession, any such measures for BOP purposes would be applied in full conformity with relevant WTO provisions.
569. In response, the representative of the Russian Federation stated that the CU Agreement on Non-Tariff Regulation and the Agreement on Measures Concerning Foreign Trade, provided for the application of non-tariff measures for BOP purposes with regard to imported goods. One or more CU Parties could propose the adoption of such non-tariff measures to the CU Commission. If the CU Commission rejected the proposal, such measures could be imposed unilaterally for up to six months as provided for in Article 8 of the CU Agreement on Measures Concerning Foreign Trade. With regard to services, Federal Law No. 164-FZ of 8 December 2003 "On Fundamentals of State Regulation of Foreign Trade Activity", provided for restrictions on trade in services for BOP purposes. He confirmed that there were no other provisions in CU Agreements or in the legislation of the Russian Federation that dealt with BOP measures on goods or services.
570. The representative of the Russian Federation noted that restrictions on goods could be implemented by means of introducing an import quota or other non-tariff measures for a term required to restore the balance-of-payments of the Russian Federation. He further noted that, should such measures be imposed, the Government would designate a Federal executive body responsible for the implementation of these measures. With regard to services, BOP measures would be implemented through restrictions on trade in services.
571. Some Members expressed concern that a mechanism for the application of tariffs or other price-based measures to safeguard the balance of payments of the Russian Federation, as provided for in the WTO Understanding on the Balance-of-Payments Provisions of the GATT 1994 and Article XII of the GATT 1994, was not foreseen in the CU Agreement on Non-Tariff Regulation, the Agreement on Measures Concerning Foreign Trade or any other CU Agreement or regulation of the Russian Federation. Furthermore, these Members noted that the Agreement on Common System of Customs Regulation of 25 January 2008 did not permit the Russian Federation to take unilateral tariff measures to safeguard its balance of payments.
572. In response, the representative of the Russian Federation confirmed that the Russian Federation was not permitted to take unilateral tariff measures and that there was no mechanism to apply tariffs or other price-based measures to safeguard the balance-of-payments of the Russian Federation.
573. In response to a Member who noted that the WTO Understanding on Balance-of-Payments Provisions of the GATT 1994 imposed an order of priority of measures, the representative of the Russian Federation said that since only non-tariff measures could be applied, no order of priority vis-à-vis the use of priced-based measures was specified in the CU Agreements or national law.
574. The representative of the Russian Federation confirmed that any measure to safeguard its balance of payments, whether taken by the Russian Federation or by the competent bodies of the CU, would be in conformity with the relevant provisions of the WTO Agreement, in particular, the Understanding on the Balance-of-Payments Provisions of the GATT 1994 and Article XII of the GATT 1994. The Working Party took note of these commitments.
- Anti-dumping, countervailing and safeguard measures
575. The representative of the Russian Federation noted that the following legal acts regulated anti-dumping, countervailing and safeguard measures in the Russian Federation: (i) the Protocol of 17 February 2000 on the Mechanism of Application of Safeguard, Anti-dumping and Countervailing Measures in Trade of the Member States of the Customs Union as between the Republics of Belarus, Kazakhstan, Tajikistan, the Kyrgyz Republic and the Russian Federation (hereafter in this Section: the Protocol); (ii) Agreement of 25 January 2008 on Application of Safeguard, Anti-dumping and Countervailing Measures in Respect of Third Countries between the Republics of Belarus, Kazakhstan and the Russian Federation (hereafter: Agreement of 25 January 2008); (iii) the Decision of the Commission of the Customs Union No. 191 of 26 February 2010 "On the Application of Safeguard, Anti-dumping and Countervailing Measures in the Territory of the Customs Union of Belarus, Kazakhstan and the Russian Federation" (hereafter: Commission Decision No. 191); and, (iv) the following national legislation: Federal Law No. 165-FZ of 8 December 2003 "On Safeguards, Anti-dumping and Countervailing Measures Applied to the Imports of Goods", as amended by Federal Law No. 280-FZ of 30 December 2006 "On Amending the Federal Law On Safeguards,
Anti-dumping and Countervailing Measures Applied to Imports of Goods"; Government Resolution No. 546 of 13 October 2004 "On Adopting the Rules on Calculation of the Amount of Specific Subsidy of a Foreign State (Union of Foreign States) and on the Invalidation of Certain Acts of the Government of the Russian Federation Regulating Issues of Application of Safeguards, Antidumping and Countervailing Measures".
576. The representative of the Russian Federation further noted that the Agreement of 25 January 2008 entered into force on 1 July 2010 between its Parties, and would be directly applicable in the territory of the Russian Federation, after the expiration of the transitional arrangement that was set-out in the Agreement On Application of Safeguard, Anti-dumping and Countervailing Measures to the Third Countries in Transitional Period (hereafter: the Transitional Agreement) and Federal Law No. 165-FZ of 8 December 2003 "On Safeguards, Antidumping and Countervailing Measures Applied to Imports of Goods". During the transitional period, the provisions of the national regulations would apply to the extent they did not contradict the Agreement of 25 January 2008. Upon the expiration of the transitional period, national regulations would be abolished. The investigations ongoing on the date of the entry into force of the Agreement of 25 January 2008 were to be continued in accordance with the new rules and the national regulations to the extent those regulations did not contradict that Agreement. Therefore, if the national industry met the criteria of the industry of the Customs Union stipulated by the Agreement, the investigation would be continued, otherwise it would be terminated.
- (a) Transitional Regime
577. The representative of the Russian Federation informed Members that the Ministry of Industry and Trade of the Russian Federation was the national investigating authority, for safeguards, anti-dumping and countervailing investigations. During the transitional period provided for in the Transitional Agreement signed on 19 November 2010, the national authority of the Russian Federation would continue ongoing investigations and -would conduct new trade remedies investigations in the Russian Federation upon the request of the domestic industry of the Customs Union. However, all decisions to impose, extend, review or terminate trade remedy measures would be taken by the CU Commission on the basis of a proposal from the Government of the CU Party that carried out the investigation. After the transitional period investigations would be carried out at the CU level by a single designated competent authority under a request of the CU industry or upon the own initiative of the competent authority.
578. During the transitional period, economic disputes and other cases connected with the safeguard, anti-dumping and countervailing measures (including cases challenging normative legal acts and decisions, actions or inactions of the authorities and officials) would still be considered by courts of arbitration of the Russian Federation in accordance with the order stipulated in the Arbitration Procedural Code of the Russian Federation.
579. Since national laws of the Russian Federation would continue to apply during the transition period, several Members expressed concerns that Federal Law No. 63-FZ of 14 April 1998 "On Measures to Protect of the Economic Interests of the Russian Federation in Foreign Trade in Goods" did not secure full conformity of the Russian Federation with relevant WTO provisions. In particular, investigations seemed to be limited to injury and causality aspects without requiring a proper determination of dumping, while any measures applied would be expected to remain in place for "a limited period of time necessary to eliminate injury".
580. In response, the representative of the Russian Federation stated that Federal Law No. 165-FZ of 8 December 2003 "On Safeguards, Anti-dumping and Countervailing Measures Applied to Imports of Goods" had been enacted with the objective of introducing full conformity with the WTO Agreement. This Law, which had entered into force on 15 December 2003, replaced the relevant provisions of Federal Law No. 63-FZ of 14 April 1998 "On Measures to Protect the Economic Interests of the Russian Federation in Foreign Trade in Goods" (with minor exceptions, such as paragraph 26 of Article 2 and Articles 6.5, 24 and 25). The regulations originally written for the previous legislation had been partly included in the new Law and the new Government Resolution No. 546 of 13 October 2004 "On Adopting the Rules on Calculation of the Amount of a Specific Subsidy of a Foreign State (Union of Foreign States) and on the Invalidation of Certain Acts of the Government of the Russian Federation Regulating Issues of Application of Safeguards, Anti-dumping and Countervailing Measures" (hereafter: Government Resolution No. 546). He further noted that Federal Law No. 165-FZ had been amended by Federal Law No. 280-FZ of 30 December 2006 "On Amending Federal Law 'On Safeguards, Anti-dumping and Countervailing Measures Applied to Imports of Products'".
581. The representative of the Russian Federation explained that Federal Law No. 165-FZ established procedures for trade remedies investigations, and imposition of safeguards, anti-dumping and countervailing measures. Under this Law, anti-dumping and countervailing measures could be imposed only following an investigation showing evidence of dumped or subsidized imports, material injury to a domestic industry, threat of such injury or material retardation of the establishment of an industry ("material injury") and causality between the dumped or subsidized imports and material injury. Safeguard measures could be imposed only following an investigation showing evidence of substantially increased imports, serious injury or threat of serious injury ("serious injury") and causality between the increased imports and serious injury. The measures could only be in place for up to five years for anti-dumping and countervailing measures and four years for safeguards. The period of an application of anti-dumping and countervailing measures could be extended if a review of the measures showed that the expiry of the measure was likely to lead to a recurrence of dumping, subsidization and injury. The period of application of a safeguard measure could be prolonged up to the maximum period not exceeding eight years in whole (including the period of application of any provisional measure, the period of initial application and any extension thereof) when the investigation authority determined, following a review investigation to remedy or prevent injury, the prolongation of the measure was required and there was evidence that the industry was adjusting to changing market conditions. The decision on prolongation of the safeguard measure would be taken by the Government of the Russian Federation, based on the results of the investigation authority report, and the measure prolonged must not be stricter than the initial one. The Law brought the terminology in these areas into compliance with the rules and provisions of the WTO. It provided a clear distinction between serious and material injury and expanded the Authority of the Government in the initial and main phase of investigation. In his view, the Law defined actionable subsidies in full consistency with WTO provisions. In a similar manner, the definition of dumping contained in the Law corresponded to Article 2 of the WTO Agreement on Implementation of Article VI of the GATT 1994.
582. Other main improvements contained in Federal Law No. 165-FZ vis-à-vis Federal Law No. 63-FZ were the detailed description of the investigation procedure and concepts such as increased imports, dumping, subsidies, serious and material injury, causal link, the definition of domestic industry, and other matters. Several provisions of Federal Law No. 165-FZ were directed at improving the mechanism of imposition, review and termination of safeguard, anti-dumping and countervailing measures. The provisions determining the procedure for the application of safeguard, anti-dumping, and countervailing measures (including provisional duties and securities) were framed in a more detailed and intelligible manner. The representative of the Russian Federation confirmed that the same standards would be maintained in any investigation carried out either by the competent authorities of the Russian Federation or competent bodies of the CU from the date of entry into force of the Agreement of 25 January 2008.
583. Federal Law No. 165-FZ empowered the responsible Federal executive body (once an investigation had been undertaken pursuant to this Law) to propose the imposition of safeguard, anti-dumping or countervailing measures. It also permitted the responsible authority to propose their review and termination. Before the entry into force of the Agreement of 25 January 2008, following such proposals, the decision to impose, review or terminate a measure would be taken by the Government of the Russian Federation. According to Federal Law No. 165-FZ, an anti-dumping or countervailing measure could be terminated by decision of the Government of the Russian Federation when the review of the measure established that the measure was not needed for the elimination of material injury caused by dumped or subsidized imports and that there was no likelihood that such injury would occur again if the measure was terminated. Under the Agreement of 25 January 2008, such decisions were taken by the CU Commission. Federal Law No. 165-FZ stipulated also the rules concerning cases where the Government of the Russian Federation could decide to increase the pace of liberalization of a safeguard measure or to withdraw it. After the transitional period, the CU Commission would have similar authority to increase the pace of liberalization of a safeguard measure or to withdraw it.
584. Noting that Article 35(4) of Federal Law No. 165-FZ appeared to limit the extent of information disclosed on the findings of safeguard investigations to "key conclusions" and that Article 35(5) of Federal Law No. 165-FZ appeared to limit the extent of information disclosed on the findings of anti-dumping and countervailing investigations to "an explanation of the final determination", a Member expressed concerns about the consistency of Article 35 with Article 3 of the WTO Agreement on Safeguards, Article 12 of the WTO Agreement on Anti-Dumping and Article 22 of the WTO Agreement on Subsidies and Countervailing Measures. This Member invited the Russian Federation to address these issues in legislation. This Member also observed that Article 6.9 of the WTO Agreement on Anti-dumping was not reflected in the mentioned Law and requested the Russian Federation to implement the content of this Article in legislation. A Member further noted that Article 9 of Federal Law No. 165-FZ, regarding the application of safeguard measures, only partly reflected Article 5.2(b) of the WTO Agreement on Safeguards, since it omitted to state the obligation of the Russian Federation to hold consultations with Members on allocation of quotas in the occurrence of disproportionate imports. This Member invited the Russian Federation to enter into a commitment reflecting that the provisions of the WTO Agreement on Safeguards would be fully respected upon WTO accession and that in the event of such a situation, the Russian Federation would hold consultations under Article 12.3 of the WTO Agreement on Safeguards with supplying Members.
585. Some Members noted that Federal Law No. 165-FZ did not incorporate Annex I or Annex II of the WTO Agreement on Anti-dumping concerning Procedures for On-The-Spot Investigation and Best Information Available and asked, if the Russian Federation would address these issues in its legislation. Another Member asked, with regard to Article 12.6 of the WTO Agreement on Subsidies and Countervailing Measures and Article 6.7 of the WTO Agreement on Anti-dumping, how the administering authority of the Russian Federation determined the accuracy of the information submitted by domestic and foreign parties. That Member also noted that the amended Parts 3 and 5 of Article 35, while providing more detail regarding what must be included in preliminary and final determinations, as provided under Article 12 of the WTO Agreement on Anti-dumping and Article 22 of the WTO Agreement on Subsidies and Countervailing Measures, did not detail the procedures for interested parties to provide comments in the course of the investigation process, as provided under Article 6 of the WTO Agreement on Anti-dumping and Article 12 of the WTO Agreement on Subsidies and Countervailing Measures.
586. The representative of the Russian Federation confirmed that Articles 35(4) and 35(5) of Federal Law No. 165-FZ, as amended by Federal Law No. 280-FZ, were applied in a manner consistent with Article 3 of the WTO Agreement on Subsidies and Countervailing Measures by disclosure of findings and reasoned conclusions on all pertinent issues of fact and law; with Article 12 of the WTO Agreement on Anti-dumping, notably by disclosure of all relevant information on the matters of fact and law and, reasons which had led to the imposition of final measures or the acceptance of a price undertaking; and with Article 22 of the WTO Agreement on Subsidies and Countervailing Measures notably by disclosure of all relevant information on the matters of fact and law and, reasons which had led to the imposition of final measures or the acceptance of undertakings. He further confirmed that the issue of incorporation of Annex I and Annex II of the WTO Agreement on Anti-dumping concerning Procedures for On-the-Spot Investigation and Best Information Available had been addressed in the provisions of Federal Law No. 165-FZ.
587. In respect of the issue on the determination of accuracy of the information available, he responded that Federal Law No. 280-FZ, which amended Federal Law No. 165-FZ, addressed all of these points in accordance with the WTO Agreement. In particular, Articles 25.12, 28.2, 28.3, 29.1 of Federal Law No. 165-FZ, as amended by Federal Law No. 280-FZ, were devoted to the determination of accuracy of the information submitted by domestic and foreign parties by means of additional procedures in the course of investigation. These articles, in his view, were in full conformity with WTO provisions. He added that, under Federal Law No. 165-FZ, as amended by Federal Law No. 280-FZ, and consistent with Article 6 of the WTO Agreement on Anti-dumping and Article 12 of the WTO Agreement on Subsidies and Countervailing Measures, interested parties were able to provide comments at any stage of the investigation and meet with the investigating authority upon request. He further responded that the amended part 4 of Article 28 of the Law obligated the investigating authority, prior to the submission to the Government of the Russian Federation of a report making proposals as to the final results of the investigation, to provide all interested parties a non-confidential version of that report in sufficient time so that all interested parties had a meaningful opportunity to comment on the essential facts and defend their interests.
588. A Member noted that Federal Law No. 280-FZ, which amended Federal Law No. 165-FZ, provided that foreign exporters and producers, which had not had an individual margin calculated, would receive the "highest (calculated) rate". This Member asked whether this would apply to cases where the investigating authority must sample and could not review all cooperating parties. The Member then noted that Article 9.4 of the WTO Agreement on Anti-dumping required that a weighted average be used in situations where there were administratively too many respondents to calculate an individual rate for each.
589. The Representative of the Russian Federation stated that Federal Law No. 280-FZ, which amended Federal Law No. 165-FZ, addressed these concerns in accordance with the WTO Agreement. Specifically, in cases where foreign exporters or producers of the dumped imports were not selected for the calculation of an individual dumping margin, but had submitted requested information (e.g., sales information for the purposes of selecting the sample of exporters or producers for whom individual dumping margins would be calculated) within time limits ascertained for its consideration, the representative of the Russian Federation confirmed that the anti-dumping duty would not exceed the weighted average dumping margin, which was established with respect to the selected foreign exporters or producers of the dumped imports.
590. A Member pointed out that Article 16.3 of Federal Law No. 165-FZ did not contain all the provisions of Article 9 of the WTO Agreement on Implementation of Article VI of the GATT 1994. In particular, it did not foresee the possibility of a newcomer review according to Article 9.5 of the WTO Agreement on Implementation of Article VI of the GATT 1994. This Member further noted that Article 13.3 of Federal Law No. 165-FZ of 8 December 2003 "On Safeguards, Anti-dumping and Countervailing Measures applying to imports of Products" did not seem to require that consideration must be given to whether price-undercutting was "significant" or that the effects of imports were to depress prices to a "significant" degree, or prevent price increases, which otherwise would have occurred to a "significant" degree, as required by Article 3.2 of the WTO Agreement on Anti-dumping. This Member finally noted that Article 6.1 of Federal Law No. 165-FZ provided the possibility for the Russian Federation to impose safeguard measures when imports rose in relation to domestic consumption. However, Article 2 of the WTO Agreement on Safeguards only allowed the imposition of safeguard measures when imports rose in absolute terms or in relation to domestic production. He also pointed out that Article 8 of Federal Law No. 165-FZ did not contain any reference to the existence of "critical circumstances" before the imposition of provisional safeguard measures, as provided by Article 6 of the WTO Agreement on Safeguards. This Member invited the Russian Federation to take up all these issues in its legislation.
591. The representative of the Russian Federation stated that, in his view, Federal Law No. 280-FZ, which amended Federal Law No. 165-FZ, addressed all of these points in accordance with the WTO Agreement. He confirmed that, from the date of accession, WTO requirements would be met in applying anti-dumping, countervailing and safeguard measures in the Russian Federation, whether by the competent authority of the Russian Federation or by the competent body of the CU. The Working Party took note of this commitment.
592. A Member posed questions to the Russian Federation regarding the regional industry provisions provided under Russian law. Specifically, this Member asked whether the law of the Russian Federation prohibited the assessment of duties on less than a country-wide basis. This Member noted that Article 4.2 of the WTO Agreement on Anti-dumping only allowed country-wide application of duties without limitation if: (i) an opportunity to cease exporting at dumped prices was provided; and (ii) duties could not be levied on only the products of the specific producers supplying the region in question. The representative of the Russian Federation responded that the Constitution of the Russian Federation effectively prohibited the collection of duties on less than a country-wide basis and that Parts 3 and 4 of Article 33 of Federal Law No. 165-FZ contained provisions regarding the regional industry provisions that fully corresponded to provisions of Article 4.2 of the WTO Agreement on Anti-dumping.
- (b) Regime established Under the Agreement of 25 January 2008
593. The representative of the Russian Federation noted that the provisions of the Agreement of 25 January 2008 provided the principles for CU Parties (the Russian Federation, the Republics of Belarus and Kazakhstan) to apply trade remedies with regard to third countries. Principles for applying trade remedies between the Russian Federation, the Republics of Belarus, Kazakhstan and Tajikistan and the Kyrgyz Republic were stipulated in the Protocol of 17 February 2000, which was in force as between the three CU Parties until the creation of a single customs territory on 1 July 2010 and was currently no longer applied in their mutual trade.
594. The representative of the Russian Federation explained that CU Commission Decision No. 191 of 26 February 2010 provided that, from 1 July 2010, all final decisions with respect to application of common trade remedies in the Russian Federation and the Republics of Kazakhstan and Belarus would be taken by the Commission of the Customs Union. During the transitional period, decisions were taken on the basis of a proposal from the Government of one of the CU Parties that carried out the investigation, as described in the preceding part of this section. After the transition period, decisions related to the introduction, review or termination of trade remedies would be taken by the CU Commission on the basis of a proposal from the single designated competent authority of the CU following the investigation. The procedural rules for trade remedy measures would be set-out in a separate CU Regulation. The decisions of the CU Commission would be applied by all Parties to the CU, within the whole territory of the CU, to the imports of relevant third countries.
595. Upon the entry into force of the Agreement of 25 January 2008, in all trade remedy investigations, the domestic industry was defined as: (i) all producers of a like product (for the purposes of the anti-dumping and countervailing investigation); (ii) a like product or directly competitive product (for the purposes of safeguard investigation) in the CU Parties; or (iii) those producers who constituted not less than 25 per cent of the whole production volume in the CU Parties, respectively. Similarly, the relevant import was the import into the entire single customs territory of the CU.
596. One Member expressed concern that, under the Agreement on Implementation of Article VI of the GATT 1994 and the WTO Agreement on Subsidies and Countervailing Measures, an investigating authority was obligated to examine the degree of support for, or opposition to, the application for the imposition of anti-dumping or countervailing duties prior to the initiation of an investigation. Specifically, an application must be supported by those domestic producers whose collective output constituted more than 50 per cent of the total production of the like product produced by that portion of the domestic industry expressing either support for, or opposition to, the application and that no investigation was to be initiated when domestic producers, expressly supporting the application accounted for less than 25 per cent of total production of the like product, produced by the domestic industry. This Member asked how the Russian Federation intended to comply with its obligations in this regard with respect to: (i) measures in place in the territory of only one of the CU Parties prior to the date of the entry into force of the Agreement of 25 January 2008; (ii) ongoing investigations on the date of the entry into force of this Agreement; and (iii) new investigations after the entry into force of this Agreement.
597. The representative of the Russian Federation responded that in accordance with paragraph 2 of Article 29.3 of the Agreement of 25 January 2008, the application must be submitted together with the evidence of support of such application on the part of producers of a like product in the CU Parties. The following evidence of the support of such application would prove sufficient: (i) documents verifying that the production share of the like product by producers in the CU Parties, who supported the application, constituted not less than 25 per cent of the total production volume of the like product in the CU Parties; and (ii) documents verifying that the production volume of the like product by producers in the CU Parties, who supported the application, constituted more than 50 per cent of the production volume of the like product by producers in the CU Parties, who have expressed support or opposition to the application.
598. He further explained that all these issues would also be addressed in the Transitional Agreement signed on 19 November 2010. The measures, which were in place in the national territories were subject to the expedited reviews, before application of these measures on the Common Customs territory. These reviews were to be conducted in conformity with the new rules and the national regulations to the extent those regulations did not contradict the Agreement of 25 January 2008. The investigations ongoing on the date of the entry into force of this Agreement were to be continued in accordance with the same principles. Therefore, if the national industry met the criteria of the industry of the Customs Union, stipulated by the Agreement of 25 January 2008, the investigation would be continued or, following a review, the application of an existing national measure would be extended to the Common Customs territory, otherwise it would continue to be in force within the territory of the party, which applied the original measure until the termination date without right to review in order to prolong the measure. In respect of new investigations, they could be initiated on behalf of the industry of the Custom Union or on the own initiative of the competent body and conducted on the same principles.
599. Concerning the concept of threat of material injury, a Member referred to the provisions of the Agreement of 25 January 2008 that did not seem to require that the change in circumstances, which would create a situation in which the dumping or the provision of subsidies would cause injury, must be clearly foreseen and imminent, and asked the representative of the Russian Federation to clarify the application of this concept by the Russian Federation. In response, the representative of the Russian Federation stated that the Agreement of 25 January 2008 provided that the determination of the threat of material injury was to be based only on economic evidence. Injury to a domestic industry of the CU Parties, as a result of the dumped or subsidized imported products, was to be established based on the results of the analysis of the volume of the dumped or subsidized imported products, its effect on the prices of like products in the market of the CU Parties and domestic producers of the like products in the Custom Union, etc. All facts should be foreseen and imminent.
600. A Member pointed to paragraph 4 of Article 37 of the Agreement of 25 January 2008, which stated that the CU Commission and other parties having access to confidential information, during the investigation, were liable for making the confidential information public, as provided for by the laws of the country where the competent body had the seat, and asked to explain this provision. This Member further asked the representative of the Russian Federation to clarify how this provision was consistent with paragraph 2 of Article 37 of the Agreement of 25 January 2008 and Article 6.5.1 of the Agreement on Implementation of Article VI of the GATT 1994 and Article 12.4.1 of the WTO Agreement on Subsidies and Countervailing Measures, which made clear that the responsibility for providing public summaries of confidential data rested with the interested party that provided the confidential data. Moreover, this Member asked the representative of the Russian Federation to explain who would have access to confidential information during the investigation, and how the CU Commission would ensure that the confidential data of a party was protected. Another Member asked the representative of the Russian Federation to explain how the Russian Federation would ensure that information provided on a confidential basis was not disclosed to others.
601. In response, the representative of the Russian Federation reiterated that the CU Commission was liable for making confidential information public and that the interested parties providing confidential information were required to provide a non-confidential summary. He further noted that the competent authority, which conducted a trade remedy investigation, must have access to confidential information, and that this information would be protected by internal regulations of the CU Commission, Article 37 of the Agreement of 25 January 2008, and the Protocol on the Order on Submission to Authority Conducting the Investigation the Information including Confidential Information for the Purposes of Safeguards, Anti-dumping and Countervailing Investigations, signed on 19 November 2010. He stated that, in the Russian Federation, protection of confidential information was provided for in Article 727 of the Civil Code.
602. A Member asked the representative of the Russian Federation to explain how it would ensure that the information provided during the course of a trade remedy investigation would be used only for the purpose of that investigation. The representative of the Russian Federation confirmed that information provided during a trade remedy investigation would be used only for the purpose of that investigation.
603. A Member requested the Russian Federation to ensure that, non-confidential summaries provided sufficient detail and understanding of the confidential information, in accordance with the relevant provisions of the WTO Agreement. The representative of the Russian Federation noted that, in accordance with Article 37 of the Agreement of 25 January 2008, interested parties providing confidential information must also provide a non-confidential summary thereof. These summaries must be in sufficient detail to permit a reasonable understanding of the substance of the information submitted in confidence. If the competent body finds that the reasons presented by the interested party did not warrant classifying the presented information as confidential, or that the interested party, who failed to present a non-confidential summary of the confidential information also failed to provide evidence to support the claim that the information was not susceptible of summary, or presented evidence that did not support the claim that the information was not susceptible of summary, the competent body could disregard such information. In his view, these provisions fully complied with Article 6.5 of the Agreement on Implementation of Article VI of the GATT 1994 and Article 12.4 of the WTO Agreement on Subsidies and Countervailing Measures.
604. A Member requested the representative of the Russian Federation to clarify whether non-confidential case files would be made available to the general public, as well as interested parties, and to explain how the public files would be accessed (e.g., public reading room, online). This Member further asked the representative of the Russian Federation to explain any limitations placed on access to non-confidential information submitted to or issued by the CU Commission during the course of trade remedy proceedings. The representative of the Russian Federation explained that these issues would be addressed in a CU Commission internal regulation.
605. A Member asked the representative of the Russian Federation to explain how, under the new regime introduced upon the entry into force of the Agreement of 25 January 2008, the transparency and due process provisions of the Agreement on Implementation of Article VI of the GATT 1994, the WTO Agreement on Subsidies and Countervailing Measures, and the Agreement on Safeguards would be complied with, in the conduct of trade remedy investigations. In particular, this Member asked the representative of the Russian Federation to describe what opportunities interested parties would have to comment on and make arguments pertaining to decisions made by the CU Commission and positions taken by other parties in the proceedings. Furthermore, this Member wanted to know what procedures would be put in place to ensure that interested parties would have sufficient opportunities to defend their interests throughout the course of the investigation. In response, the representative of the Russian Federation stated, that the competent authority must ensure the publication of the notification concerning the imposition of the provisional and definitive
anti-dumping, countervailing or safeguard measures. Such notification must consist of all relevant non-confidential information and facts, which formed the basis for the decision. Interested parties would be permitted to comment on the decisions by the competent authority, within the corresponding period of time. He further confirmed that interested parties were permitted to comment on the decisions by the competent authority within the corresponding period of time, envisaged in the Transitional Agreement. Also paragraphs 9 and 10 of Article 30 of the Agreement of 25 January 2008 stipulated that, upon request of any interested party, the competent authority must allow for consultations on the issues under investigation. The information submitted in written form by any interested party, as evidence related to the investigation, would be provided in writing to participants in the investigation by the competent authority with due regard to the protection of confidential information. The competent authority would give the participants in the investigation an opportunity to examine the other information used in the course of the investigation, which was related to the investigation and was not confidential. Based on the written requests from an interested party, the competent authority must conduct hearings. During the hearings, interested parties would have the right to present their position orally.
606. A Member referred to paragraph 5 of Article 30 of the Agreement of 25 January 2008 which stated that interested parties could register to participate in trade remedy investigations, and enquired whether this registration requirement would be specified in the initiation notice. This Member further asked the representative of the Russian Federation to clarify the implications, if an interested party did not register and whether such non-registration would preclude an interested party from defending its interests throughout the remainder of the investigation. The representative of the Russian Federation confirmed that the registration requirements for an interested party must be specified in the initiation notice and, that reasonable efforts would be made to notify all interested parties on the registration requirements and that all interested parties would be given sufficient time to register. He further explained that interested parties would be deemed as non-cooperative, if they did not respond to their questionnaire, within the period specified in the questionnaire, or within a longer period, if it was granted in response to a request from the interested party. Relevant information would be sent to registered interested parties only and the duty rate for non-cooperating parties would be determined on the basis of facts available from other sources.
607. A Member asked for confirmation that the comments and arguments presented by interested parties throughout the course of the investigation would be addressed by the competent authority and requested an explanation of the manner in which the competent authority would do this. The representative of the Russian Federation confirmed that all comments and arguments must be addressed to the competent authority in writing and would be taken into consideration in the investigations.
608. A Member referred to paragraph 3 of Article 30, paragraph 2 of Article 39 and paragraph 2 of Article 40 of the Agreement of 25 January 2008, which stated that decisions pertaining to trade remedies would be published by the CU Commission in the "official print publication" and asked the representative of the Russian Federation to identify the official journal and/or national newspapers, which would publish decisions pertaining to trade remedy proceedings. This Member also enquired whether such decisions would also be made available online. The representative of the Russian Federation confirmed that the decisions pertaining to trade remedies would be published in the official publication of the CU Parties. Moreover, the decisions were required to be published on the website of the competent authority. Besides, in accordance with Articles 29.11 and 39.2 of the Agreement of 25 January 2008, the competent authority must notify in writing the exporting country on the imposition of an anti-dumping or countervailing measure and about any other decision concerning application of a trade remedy measure.
609. A Member referred to paragraph 7 of Article 7 of the Agreement of 25 January 2008, which stipulated that the CU Commission might impose a special duty or safeguard on imports of agricultural products without conducting a prior investigation and asked the representative of the Russian Federation to describe the conditions in which such an action would be warranted. This Member also enquired how the CU Commission would ensure that such an action was consistent with the WTO Agreement on Safeguards, which required an investigation to find serious injury, or threat of serious injury, to the domestic industry, prior to the application of a measure, or consistent with Article 5 of the WTO Agreement on Agriculture. The representative of the Russian Federation explained that paragraph 7 of Article 7 related to special safeguard measures in respect of agricultural products, which were introduced in accordance with the WTO Agreement on Agriculture. In accordance with this Article, a special duty on agricultural products might be imposed only if the growth of imports of the product to the single customs territory of the Parties' State surpassed the baseline levels. Specific conditions for determination of baseline level were stipulated in paragraph 8 of Article 7 of the Agreement of 25 January 2008.
610. A Member noted that Article 10 of the Agreement of 25 January 2008 described the way sampling was used to determine the dumping margin and asked whether the selection of exporters, producers and importers was made in consultation with and with the consent of the exporters, producers or importers concerned. The representative of the Russian Federation informed Members that, in accordance with the provisions of Article 10.8 of this Agreement, in cases when the competent body concluded that it was impracticable to determine the individual margin of dumping for every exporter and/or producer of the product due to a large number of exporters, producers or importers of the product, types of products involved, or for any other reason, it could restrict the determination of the individual margin of dumping, either to a reasonable number of interested parties or by using samples of the product from every exporting country which were, as far as the competent body was aware of, statistically valid on the basis of information available to the competent body, at the time of selection, and could be examined without any disruptions in the course of the investigation. He further confirmed that the selection of exporters, producers and importers would be made in consultation with and with the consent of the exporters, producers or importers, as it would be provided for in future CU administrative regulation.
611. A Member noted that paragraph 11 of Article 10 and paragraph 4 of Article 16 of the Agreement of 25 January 2008 stated that the "all others" rate or duty would be based on the highest margin of dumping determined during the investigation and asked the representative of the Russian Federation to explain why the CU chose to make an adverse inference (i.e. the highest margin of dumping) in setting the "all others" rate, as opposed to choosing a more neutral method (e.g., the weighted-average margin of all participating respondents). Furthermore, this Member asked the representative of the Russian Federation to explain how this methodology was consistent with Article 9.4 of the Agreement on Implementation of Article VI of the GATT 1994.
612. The representative of the Russian Federation stated that, if the competent authority found that an interested party had failed to cooperate for the purpose of the investigation, the competent authority could use an inference that was adverse to the interests of that interested party. The competent authority could also determine the dumping margin on the basis of any other information at its disposal, including the weighted-average margin of all participants.
613. The representative of the Russian Federation confirmed that, if an interested party cooperated, but was not selected for the calculation of an individual dumping margin, the anti-dumping duty applied would be applied in accordance with Article 9.4 of the Agreement on Implementation of Article VI of the GATT 1994. The Working Party took note of this commitment.
614. Noting the information given by the representative of the Russian Federation on the new legislation on trade defence instruments, some Members of the Working Party asked the representative of the Russian Federation to explain what would happen to the trade remedies imposed by the Government of the Russian Federation to third countries, not Members to the CU under the regime applicable in the Russian Federation, prior to the entry into force the Agreement of 25 January 2008. In response, the representative of the Russian Federation explained, that an Expert Group established under the CU Commission Decision No. 339 of 17 August 2010 "On the Application of Safeguard, Anti-dumping and Countervailing Measures in the Territory of the Customs Union of Belarus, Kazakhstan and the Russian Federation" had elaborated a new expedited review mechanism for the individual measures of the Russian Federation, as well as those of the Republics of Belarus and Kazakhstan, which were also stipulated in the Transitional Agreement. According to this mechanism, the expedited reviews would be conducted by the investigating authority of the party, which applied the original measure, in order to determine whether the existing national measure should be applied in the single customs territory of the CU or be terminated. The sole criteria used in this review would be the determination of the share of domestic producers in the investigation, as if such an investigation would have been conducted in respect of the whole CU. If the review established the producers in the CU, accounting for not less than 25 per cent of total production in the CU, which would have supported the measure, this measure would be applied in the single customs territory of the CU. The decision, to apply the measure in the single customs territory of the CU, was taken by the CU Commission, upon the proposal of the Government whose competent authority had conducted the investigation.
615. Some Members of the Working Party expressed serious concern about the sole principle applied in the expedited reviews, as presented by the Russian Federation, and invited the Russian Federation to enter into a commitment to conduct a full review of the measures currently applied in its territory that might not meet the requirements of the WTO Agreement, including with regard to whether measures should be applied throughout the CU or terminated. Interested parties should be properly informed about the possibility of such reviews and reviews should be initiated, upon the respective requests of interested parties. The results of these reviews would then be the basis for extending the application of measures to the CU, or terminating the relevant measure.
616. The representative of the Russian Federation stated that, from the date of accession of the Russian Federation to the WTO, interested parties could request the initiation of reviews of trade remedy measures imposed by the Russian Federation or applied in the Russian Federation pursuant to a decision of the CU Commission, identifying the elements of the measures, which were not consistent with the WTO Agreement. He stated that he expected that Russian exporters, after accession of the Russian Federation to the WTO, could also request reviews of measures currently applied by WTO Members against Russian products. One Member replied that, in its trade remedy administration, Russian exporters were presently permitted to ask for reviews of existing measures and that such reviews had been regularly conducted. This Member further stated that Russian exporters would also be able to ask for reviews, after the accession of the Russian Federation to the WTO, and that such reviews would continue to be conducted.
617. In respect of transmission of functions to conduct trade remedy investigations from national authorities to the CU Commission, the representative of the Russian Federation noted, that it would happen when: (i) a relevant unit was formed in the supra-national body; (ii) methodological documents in respect of trade remedy procedures and calculations were worked out in order to develop the Agreement of 25 January 2008, including the arrangements on protection of the confidential data on a supra-national level; and (iii) the supra-national statistic base in respect of internal and external trade was elaborated. The decision to transfer the function to conduct trade remedy investigations from national authorities to a supra-national body would be taken by the Interstate Council of EurAsEC. Until then, trade remedy investigations would be conducted by national authorities on behalf of the industry of the Customs Union, as it was stipulated in the Agreement of 25 January 2008.
618. The representative of the Russian Federation confirmed that every administrative decision, action or inaction of the authorities and officials of the Russian Federation in charge of investigations, impositions, reviews, terminations or applications of trade remedies in the Russian Federation, could be referred for "judicial review". He said that before 1 July 2010, judicial review in these cases was regulated by Federal Law No. 165-FZ. In accordance with Article 36 of that Law, economic disputes and other cases regulated by this Law (including cases challenging normative legal acts and decisions, actions or inactions of the state authorities and officials) were considered by the courts of arbitration. The judicial procedure of the hearing of disputes by the courts of arbitration was regulated by Federal Law No. 95-FZ of 24 July 2002 "Arbitration Procedural Code of the Russian Federation". It provided for the judicial procedure to protect the rights and legal interests of economic operators. In accordance with paragraph 5 of Article 27 of this Code, courts of arbitration considered disputes within their jurisdiction, to which: (i) Russian organizations; (ii) Russian physical persons; (iii) foreign organizations; (iv) foreign physical persons; (v) stateless persons involved in commercial activity; or (vi) organizations with foreign investments, could be parties, unless otherwise provided for by an international treaty of the Russian Federation.
619. The representative of the Russian Federation explained that decisions of the Commission of the Custom Union were supposed to be considered by the EurAsEC Court. Currently, norms regulating appeals to decisions of CU bodies were stipulated in the Statute of the EurAsEC Court. The Statute of the EurAsEC Court was adopted by the EurAsEC Interstate Council Decision No. 502 of 5 July 2010. The competence of the EurAsEC Court was broadened by the new Statute and now covered issues within the CU, as provided for by the Protocol on the Amendment of the Treaty Establishing the EurAsEC", adopted on 7 October 2007. In particular, the Statute provided for the right of the economic operator in the CU Parties to bring a case against the decisions of the CU Commission to the EurAsEC Court (paragraph 2, Article 14). In accordance with the Statute, recourse to the Court by the economic operators and peculiarities of the judicial procedure were determined by the international treaty (paragraph 3, Article 14). Such treaty was the Treaty on Judicial Recourse to the EurAsEC Court of the Economic Operators on Disputes within the Framework on the CU and Peculiarities of the Judicial Procedure on them, approved by the Decision of the Interstate Council of the EurAsEC No. 534 of 9 December 2010 (as described in paragraph 162).
620. The representative of the Russian Federation confirmed that, from the date of accession, compliance with the provisions of the Agreement on Implementation of Article VI of the GATT 1994, the Agreement on Subsidies and Countervailing Measures, and the Agreement on Safeguards, whether by the competent authorities of the Russian Federation or the competent bodies of the CU, would be ensured. He further confirmed that the Russian Federation would notify and implement, upon accession, all appropriate laws and regulations applicable in the Russian Federation in conformity with the provisions of these Agreements. The representative of the Russian Federation further confirmed that any trade remedy measure applied on the date of WTO accession of the Russian Federation and any trade remedy measure procedure launched before the date of accession as well as any trade remedy measure resulting therefrom, whether by the competent authority of the Russian Federation or the competent bodies of the CU, would be consistent with the relevant WTO Agreement, as of the date of accession. He also confirmed that all interested parties, as defined in the relevant WTO Agreement, would have access to any non-confidential information that was relevant to any trade remedy measure applied on the date of WTO accession of the Russian Federation, or adopted subsequently, on the basis of an investigation or review launched before its accession. The representative of the Russian Federation also confirmed that, from the date of WTO accession of the Russian Federation, any interested party could request the initiation of a review of any trade remedy measure, applied on the date of accession or adopted subsequently, on the basis of an investigation or review launched before the WTO accession of the Russian Federation, identifying the elements of that measure, which were, in their view, not consistent with the above-mentioned WTO Agreement. In addition, and with respect to the WTO Agreement on Safeguards, he confirmed that the Russian Federation would, in particular, hold consultations under Article 12.3 of the WTO Agreement on Safeguards with supplying Members and disclose information as provided for by Article 3 of that Agreement. He further confirmed that information in anti-dumping investigations would also be disclosed, as provided for in Articles 6.9 and 12 of the WTO Agreement on Anti-dumping and, in the case of countervailing investigations by Articles 12.3 and 12.8 of the WTO Agreement on Subsidies and Countervailing Measures, whether by the competent authorities of the Russian Federation or competent bodies of the CU. The Working Party took note of these commitments.
2. Export Regulations
621. The representative of the Russian Federation stated that export duties were levied pursuant to Article 3 of the Law of the Russian Federation No. 5003-1 of 21 May 1993 "On Customs Tariff" (as last amended on 3 December 2008). The CU Agreement of 25 January 2008 "On Export Duties with regard to Third Countries" did not provide for unified export tariffs and export tariff regulation. Thus, after the establishment of the Customs Union, export duties remained subject to regulation at the national level.
622. The representative of the Russian Federation stated that export duties were applied on an MFN basis with the exceptions described in this Section. Goods exported to Parties of the Treaty on the Customs Union and Single Economic Space of 26 February 1999 (the Republics of Belarus, Kazakhstan, Tajikistan and the Kyrgyz Republic) were exempted from application of export duties.
623. The representative of the Russian Federation further informed Members that, taking into account the provisions of the Free Trade Agreement between the Russian Federation and Ukraine, and, in accordance with the Government Resolution No. 291 of 30 April 2010 "On Rates of Export Customs Duties on Gas delivered from the Territory of the Russian Federation to the Territory of Ukraine", a special regime of export duties on natural gas had been established with respect to Ukraine. According to this Resolution, a certain volume of natural gas (up to 40 billion cubic metres per year, since 2011 until 2019, inclusive) exported from the Russian Federation to Ukraine could be exempted from export duties. The export duty on natural gas, exported from the Russian Federation to Ukraine, above this volume (that is, above 40 billion cubic metres per year, during the period from 2011 to 2019, inclusive) was determined based on Government Resolution No. 795 of 23 December 2006 "On the Establishment of the Rates of the Export Customs Duties on Goods Exported from the Territory of the Russian Federation beyond the Borders of Countries that are Parties to Agreements on Customs Union".
624. The representative of the Russian Federation noted that the Russian Federation applied export duties to goods exported to other CIS countries with which the Russian Federation had concluded Free Trade Agreements. All changes in export duties were published officially.
625. One Member expressed concern that the Russian Federation applied different export duties to oil produced in the Eastern Siberian fields and in Caspian fields, on the one hand, and oil produced in the rest of the country, on the other. Under Resolution No. 1110 of 24 December 2010 "On Approval of Rates of Export Duties on Crude Oil and Certain Types of Goods Produced from Crude Oil Exported outside the Territory of the Russian Federation and the Territories of States - Members of the Customs Union", the applied export duty for oil produced in the above-mentioned fields was US$117.5 per tonne, whereas the duty for oil produced in other fields was US$317.5 per tonne. This Member noted that, due to the existing transmission infrastructure, the oil with a lower export duty was not equally available to all WTO Members and this export duty differentiation could result in a de facto discrimination between oil exports on the basis of the country of destination. Furthermore, this Member noted that a slight chemical difference between these two types of crude oil, produced in the Russian Federation, might not be sufficient to consider that these two types of crude oil were not like products. This Member requested the Russian Federation to eliminate any existing unjustified discriminatory practices with regard to applied export duties for crude oil and to undertake a commitment to apply export duties in a non-discriminatory manner, in conformity with Article I of the GATT 1994.
626. In response to a question from a Member, the representative of the Russian Federation explained that in 1998 export duties had been imposed on raw materials and semi-finished goods, mainly for fiscal purposes, and now ranged from 3 to 50 per cent, with a few exceptions where higher export duties were applied. In very few cases (oil seeds, raw hides and skins), export duties had been imposed to ensure greater availability of raw materials for the domestic industry. Export duties on non-ferrous and ferrous metals waste and scrap (and those in the guise of other products, e.g., used axle-boxes) had been imposed to address problems of environmental protection.
627. The representative of the Russian Federation also explained that, over the last few years, the overall number of products subject to export duties had been reduced four times, from 1,200 to 310 tariff lines.
628. In response to requests from Members of the Working Party, the representative of the Russian Federation informed Members that export duties were subject to regular review (the latest changes to Government Resolution No. 795 of 23 December 2006 "On the Establishment of the Rates of the Export Customs Duties on Goods Exported from the Territory of the Russian Federation beyond the Borders of Countries that are Parties to Agreements on Customs Union" had been made on 12 November 2010). Export duties were also the subject of bilateral tariff negotiations with some Members.
629. Several Members of the Working Party were of the view that export duties acted as indirect subsidies to domestic downstream users and, thus, could distort international trade. Noting that the Russian Federation had argued that export duties were levied mainly for fiscal purposes, some Members expressed concerns that the effect of these duties was to discriminate against foreign buyers and to raise the level of the export price so that third-country producers encountered their own difficulties of supply for the products concerned; suffered from increased production costs resulting from higher input or energy costs; and/or faced a situation where they lost relative competitiveness on the global market for downstream products, as a result of the indirect price support given to domestic Russian producers competing in the same markets. This was particularly the case, as a result of export duties on minerals, petrochemicals, natural gas, raw hides and skins, ferrous and non-ferrous metals and scrap. Some Members also expressed a concern that export duties on certain products, notably, wood and ferrous and non-ferrous metals, were being used to distort investment decisions in processing industries and gave companies, which were producing in the Russian Federation, a cost advantage. These Members requested the Russian Federation to make a commitment to phase-out export duties under an established timetable describing specific modalities. The Russian Federation should also commit that export duties would not be applied on other products and that, once eliminated, export duties on products, currently affected, would not be re-introduced. In particular, some Members were concerned that the introduction of new export duties, or their re-introduction after elimination, created considerable uncertainty as to the reliability of supplies of certain raw materials from the Russian Federation. Some Members also requested the Russian Federation to reduce the number of products subject to export duties, especially the products with higher value added (e.g. a coniferous bonded wood), so that the negative impact in trade in such products could be minimized.
630. Some Members of the Working Party also stated that the Russian Federation should describe its future plans, in conjunction with its application of export duties, VAT, and excise charges to exports. In particular, those Members sought confirmation that the Russian Federation had removed some export duties, and information on plans in this regard. In light of improvements in the economic situation in the Russian Federation, those Members enquired whether the export taxes were still necessary to deal with external debt. Some Members sought clarification on the increase of export duties on oil and natural gas and expressed concern about the potential impact of such measures on prices. Some Members of the Working Party stated, however, that they considered that export duties could play a legitimate role as a tool for trade policy.
631. In response, the representative of the Russian Federation stated that certain export duties continued to play an important fiscal role in the Russian Federation. He noted that, in most cases, export duties did not affect the price at which an exported commodity (i.e. natural gas, oil, oil products, non-ferrous metals) was purchased abroad. He further noted that the level of export duties on crude oil and oil products was linked to the world price of crude oil and, therefore, fluctuated accordingly. They were being revised monthly, according to paragraph 14, point 4 of Article 3 of Law of the Russian Federation No. 5003-1 of 21 May 1993 "On Customs Tariff". As for the 30 per cent export duty on natural gas, he explained that this export duty had replaced the pre-existing excise taxes on natural gas, which were eliminated (see Section "Excise Taxes"). Export duties of a fiscal nature permitted the Russian Federation to replenish the budget (which was also required to comply with the international financial commitments of the Russian Federation).
632. Export duties of a regulatory nature were used to influence the volume of exports and address both problems of environmental protection and economic needs. These duties concerned, for instance, such goods as non-ferrous scrap, which were mainly destined for exportation, as there was hardly any domestic demand (especially, for aluminium and nickel scrap). He further explained that the export duty was also linked to the need to prevent illegal production of non-ferrous scrap and was considered the most effective way to curb this phenomenon, as it made exports of those products unprofitable or, substantially, reduced profitability. He added that his Government was considering other means to address this problem, such as a licensing mechanism to monitor exports. He stated that, in his view, export duties could not be considered as a subsidy in the sense of the WTO Agreement on Subsidies and Countervailing Measures.
633. As for the export duty rates on raw timber (HS 4403), which were increased several times since the beginning of 2007, the purpose of this measure was to accelerate the restructuring of the wood and paper industry of the Russian Federation and to address environmental concerns. Certain Members expressed doubts about the existence of environmental concerns that would justify this measure. Concerning timber, the latest changes to export duties were made by Resolution No. 442 of 16 June 2010 "On the Rates of Export Customs Duties Related to Certain Types of Timber, Exported Beyond the Borders of Countries that are Members of CU Agreements". According to this Resolution, the export duty rate for a small group of "other" precious woods was reduced from €100 per cubic metre to 25 per cent or not less than €15 per cubic metre.
634. In the non-ferrous metals sector, export duties on copper cathode and unalloyed nickel (HS Codes 7403 11 00 and 7502 10 00) were increased to 10 per cent (from zero for copper and from 5 per cent for nickel) following Resolution No. 893 of 12 November 2010 "On the Rates of Export Customs Duties related to Copper Cathode, Exported Beyond the Borders of Countries that are Members of CU Agreements" and Resolution No. 893 of 12 November 2010 "On the Rates of Export Customs Duties related to Unalloyed Nickel, Exported Beyond the Borders of Countries that are Members of CU Agreements".
635. The representative of the Russian Federation further observed that export duties were permitted under WTO rules, and that many Members of the WTO applied export duties as an instrument of trade policy. In this regard, his Government considered that the request of several Members that the Russian Federation established a timetable to completely phase-out export duties was excessive.
636. In response to the request of a Member to eliminate export duties on ferrous scrap and copper cathode well in advance of accession, the representative of the Russian Federation noted that export duties were the subject of bilateral negotiations and their results would be duly reflected. This Member indicated that it had accepted the invitation to engage in bilateral negotiations with the Russian Federation to reduce its export duties on the above-mentioned products, in the context of the accession of the Russian Federation to the WTO. In its view, the results of these negotiations, which could be found in Table 31, would form part of the balance of commitments and concessions in the terms of accession of the Russian Federation. This Member emphasized that, if the Russian Federation subsequently increased these export duties above the commitment level, it would disturb the balance of concessions established in the bilateral and multilateral negotiations for WTO accession, and this Member would have the right to take appropriate action to re-balance the concessions. Some other Members stated that this was without prejudice to their views in respect of the status and legality of export duties in the framework of the WTO Agreement.
637. As noted above, the Russian Federation undertook bilateral tariff negotiations on export duties with some Members of the Working Party. The tariff concessions and commitments resulting from these negotiations were contained in Part V of the Schedule of Concessions and Commitments on Goods of the Russian Federation, which formed Annex 1 to the Protocol on the Accession of the Russian Federation. The representative of the Russian Federation stated that Table 32 of this Report included all export duties applied by the Russian Federation.
638. The representative of the Russian Federation confirmed that the Russian Federation would implement, from the date of accession, its tariff concessions and commitments contained in Part V of the Schedule of Concessions and Commitments on Goods of the Russian Federation. Accordingly, products described in Part V of that Schedule would, subject to the terms, conditions or qualifications set-forth in that Part of the Schedule, be exempt from export duties in excess of those set-forth and provided therein. The representative of the Russian Federation further confirmed that the Russian Federation would not apply other measures having an equivalent effect to export duties on those products. He confirmed that, from the date of accession, the Russian Federation would apply export duties in conformity with the WTO Agreement, in particular with Article I of the GATT 1994. Accordingly, with respect to export duties and charges of any kind imposed on, or in connection with exportation, any advantage, favour, privilege or immunity granted by the Russian Federation to any product destined for any other country shall be accorded immediately and unconditionally to the like product destined for the territories of all other WTO Members. The representative of the Russian Federation confirmed that the Russian Federation would, from the date of accession to the WTO, administer export tariff rate quotas (TRQs) in a manner that is consistent with the WTO Agreement and in particular the GATT 1994 and the WTO Agreement on Import Licensing Procedures. The Working Party took note of these commitments.
- Application of VAT Refund to Exports
639. In response to a question by a Member about the regulations relevant to VAT refund, the representative of the Russian Federation explained that the refund of VAT was made in accordance with the Tax Code of the Russian Federation (Federal Law No.117-FZ dated 5 August 2000, last amended on 7 March 2011). He reaffirmed that the implementation of VAT refund would be made promptly and properly within the period specified under the relevant laws and regulations.
- Quantitative Export Restrictions, Including Prohibitions and Quotas
640. The representative of the Russian Federation noted that, from 1 January 2010, the legal basis for the application of export restrictions, including prohibitions and quotas, on goods exported to third countries from the CU could be found in: (i) EurAsEC Board of Heads of States Decision No. 19 of 27 November 2009 and the Agreement on Common Measures of Non-Tariff Regulation in respect of Third Countries, signed on 25 January 2008 (hereafter: CU Agreement on Non-Tariff Regulation); (ii) the Agreement on the Procedure of Introduction and Implementation of Measures, Concerning Foreign Trade in Goods, on the Common Customs Territory in Respect of Third Countries (hereafter: CU Agreement on Measures Concerning Foreign Trade), signed on 9 June 2009; and (iii) the Agreement on Licensing Procedures in the Sphere of Foreign Trade in Goods, signed on 9 July 2009 (hereafter: CU Agreement on Licensing). As a consequence, decisions to impose non-tariff measures on exports from the CU Parties to third countries would be taken by the CU Commission. The CU Commission Decision No. 132 of 27 November 2009 "On a Single Non-Tariff Regulation of the Customs Union of the Republic of Belarus, Republic of Kazakhstan and the Russian Federation" approved the Common List of Goods that are Subject to Non-Tariff Measures (see Table 28), which also came into force on 1 January 2010. The representative of the Russian Federation explained, that, prior to the establishment of the CU, the imposition of non-tariff measures on exports was governed by Federal Law No. 164-FZ of 8 December 2003 "On the Fundamentals of State Regulation of Foreign Trade Activity" (as amended on 2 February 2006). He noted that this legislation would remain in effect, to the extent provided for in the CU legislation. In addition, separate CU Agreements (referred to in Section "Export Licensing Procedures") set-out the circumstances in which exports of precious metals and stones, as well as mineral raw materials were subject to bans or quantitative restrictions.
641. The representative of the Russian Federation further explained that, according to Article 3 of the CU Agreement on Non-Tariff Regulation, the export of goods from the Russian Federation, being a CU Party, was carried out without quantitative limitations, except to prevent or reduce a critical shortage of foodstuffs or other goods considered essential for the domestic market. According to Article 7 of the CU Agreement on Non-Tariff Regulation, and in accordance with Federal Laws and international treaties, non-tariff measures could be imposed on exports from the Russian Federation, if those measures: (i) were necessary to maintain public morals or law and order; (ii) were necessary to protect the life or health of citizens, environment, life or health of animals and plants; (iii) were related to the import or export of gold or silver; (iv) were applied to protect cultural valuables and heritage; (v) were required to prevent the exhaustion of irreplaceable natural resources and implemented simultaneously with curtailment of the domestic production or consumption associated with the utilization of irreplaceable natural resources; (vi) were linked to a limitation of export of domestic raw materials to provide sufficient quantity of such materials for the domestic manufacturing industry in periods when domestic prices for such materials were kept lower than world prices, as the result of a stabilization plan implemented by the Government; (vii) were essential to acquire or distribute goods in case of their general or local shortage; (viii) were essential to comply with international obligations; (ix) were essential to ensure the defence of the country and security of the State; and (x) were necessary to ensure the observance of regulatory legal acts not contravening international commitments and related to the application of the Customs Law, preservation of the environment, protection of intellectual property, and other legal acts.
642. He further stated that, pursuant to Article 8 of the CU Agreement on Non-Tariff Regulation, the CU Commission was authorised to apply quantitative export restrictions and prohibitions to fulfil the obligations of a CU Party under international sanctions regimes or to protect the external financial situation and safeguard the balance of payments (see Section "Balance of payments" of this Report). To meet these situations, the CU Commission was authorised to apply quantitative export restrictions or grant exclusive licenses to import or export based on proposals from a CU Party. Such measures would be implemented in accordance with Federal Laws of the Russian Federation and the international Agreements to which the Russian Federation was a party. In response to a question from a Member, the representative of the Russian Federation explained that the list of general exceptions stipulated in Articles 7 and 8 of the CU Agreement on Non-Tariff Regulations was exhaustive and no other document within the CU provided for such exceptions. He further explained that although the imposition of export restrictions was not provided for under Article 7 of the CU Agreement on Measures Concerning Foreign Trade, the CU Parties would amend the CU Agreement on Measures Concerning Foreign Trade to include the authority to apply export restrictions in appropriate situations.
643. The representative of the Russian Federation explained that, as of 1 January 2010, pursuant to Article 9 of the CU Agreement on Non-Tariff Regulation and Article 1 of the CU Agreement on Measures Concerning Foreign Trade, the authority to impose non-tariff measures on exports from a CU Party to third countries was transferred from the individual Parties to the CU Commission. A proposal to apply a non-tariff measure could be filed by a Party or the CU Commission, and the CU Commission was required to make its determination within 30 days from the date the proposal was submitted. The decision, if positive, would come into force 45 days after the date of publication. Such non-tariff measures would be applied to goods destined for third countries, and applied equally to exports to all countries.
644. In response to a question from a Member, the representative of the Russian Federation explained that under Article 9 of the CU Agreement on Non-Tariff Regulation and Article 8 of the CU Agreement on Measures Concerning Foreign Trade, and pursuant to the procedures set-forth in the latter Agreement, a CU Party could unilaterally impose temporarily a non-tariff measure, if such a measure was aimed at: (i) the observance of public morality, law and order; (ii) defence and security; (iii) protection of life or health of the citizens, environment, life or health of animals and plants; (iv) protection of cultural values and cultural heritage; (v) protection of intellectual property; (vi) prevention of the exhaustion of irreplaceable natural resources; or (vii) prevention or reduction of the critical shortage in the domestic market of food or other goods essential for the domestic market. He further noted that the CU Parties would amend the CU Agreement on Measures Concerning Foreign Trade to allow a CU Party to impose unilaterally a non-tariff measure on a temporary basis if such measure was aimed at the protection of the external financial position and safeguarding the balance of payments. Furthermore, based on its "national interest" a CU Party could, pursuant to Article 6.1 of the CU Agreement on Measures Concerning Foreign Trade, request the CU Commission to impose non-tariff measures on exports. If the CU Commission rejected the proposal, the CU Party could, under Article 6.7 of that Agreement, impose such measures unilaterally, in conformity with Articles 8 through 10 of the CU Agreement on Measures Concerning Foreign Trade. Under these Agreements, unilateral measures could be imposed for only six months. The CU Parties, not imposing the non-tariff measure, were to take the necessary steps to prevent the exportation of the subject good(s) from the CU Party applying the non-tariff measures to third countries. CU Parties, not applying the measure, were to require licenses and/or permits for exportation of the subject goods from their respective territories.
645. Some Members noted that quantitative export restrictions, including quotas, bans and non-automatic licensing restrictions were prohibited by the GATT 1994, unless specifically justified, and requested the Russian Federation to list (identifying by HS tariff number) and justify any current export bans or quantitative restrictions in place. These Members also requested additional information on exports of unprocessed precious metals and stones, the quantitative restrictions on the export of natural gas and the ban on exports of grain (and the consistency of these measures with the requirements of Article XI of the GATT 1994). Concerning gas, they noted that, as provided for in Federal Law No. 69-FZ of 31 March 1999 "On Gas Supply in the Russian Federation" and noted in the most recent OECD Economic Survey, Gazprom was required to supply the domestic market. They considered this to be a de facto restraint on exports. Members also asked the Russian Federation to provide a list of all quantitative restrictions eliminated since 1996 and to clarify the reference to "essential national interests", as a justification for export quotas and any possible relation of this reference to relevant WTO provisions that referred to essential security interest.
646. The representative of the Russian Federation explained that, pursuant to Government Resolutions No. 599 of 5 August 2010 and No. 654 of 30 August 2010, the temporary ban on grain exports was applied due to the severe drought conditions that had sharply reduced the 2010 harvest of the Russian Federation, in order to prevent critical shortages of food for human and animal consumption, which would occur, unless steps were taken to maintain domestic supplies. He further explained that the Russian Federation would terminate the export ban in accordance with the CU Agreement on Non-Tariff Regulation and the CU Agreement on Measures Concerning Foreign Trade, unless it was justified under the relevant provisions of the WTO Agreement, and the CU Commission decided that all CU Parties would apply the export ban.
647. In response to a question from a Member, the representative of the Russian Federation confirmed that upon accession to the WTO, the Russian Federation would apply such quantitative export restrictions, in accordance with Article XI of the GATT 1994 and Article 12 of the WTO Agreement on Agriculture.
- (a) Precious stones and metals
648. The representative of the Russian Federation noted that, as of 1 January 2010, the procedures for the import and export of precious metals and stones were set-forth in the Regulations "On the Order of Entry into the Customs Territory of the Customs Union within the Eurasian Economic Community and the Export from the Customs Territory of the Customs Union within the Eurasian Economic Community of Precious Metals, Precious Stones and Commodities Containing Precious Metals" (hereafter in this Section: the Regulations) adopted by the CU Commission Decision No. 132 of 27 November 2009. Pursuant to these Regulations, those products listed in section 2.9 and 2.10 of the Common List attached to Decision No. 132 of 27 November 2009 (see Table 28) were subject to licensing requirements. In addition, the relevant provisions of the Presidential Decree No. 1137 of 20 September 2010 as well as the Agreement on Licensing, continued to apply, as provided in the Regulations on Precious Stones and Metals.
649. The representative of the Russian Federation further stated that the exportation from the Russian Federation under the customs regime of export of natural diamonds (except for unique natural diamonds and the natural diamonds of the form "board" and "drilling", regardless of their sizes and degrees of processing, sieve diamonds of "-3+2" classes and lower classes), refined platinum and metals of platinum group in the form of bullions, plates, powder and granules, and also nuggets of the precious metals, the raw precious metals, ores and concentrates of precious metals, the raw goods, containing precious metals, scrap and waste products of precious metals was implemented without quantitative restrictions on the basis of the licenses, which had been given out by the Ministry of Industry and Trade (MIT) of the Russian Federation. He explained that Presidential Decree No. 742 of 21 June 2001 "On the Procedure for Importation into and Exportation from the Russian Federation of Precious Metals and Precious Stones" and Presidential Decree No. 1373 of 30 November 2002 "On Regulations on Importation to the Russian Federation and Exportation from the Russian Federation of Natural Diamonds and Cut Diamonds" had been amended. These amendments abolished quantitative export restrictions on natural diamonds, unwrought platinum and metals of the platinum group and raw materials, containing precious stones, and removed bans on the export of certain types of goods, such as wastes and scraps of precious metals; precious metals ores and concentrates.
650. With regard to procedures for exporting precious stones and precious metals, the representative of the Russian Federation explained that information on the formalities for obtaining an export licence was provided in the Section "Export Licensing Procedures" of this Report. He also explained that all documentation and procedures for exports or imports of these goods were to be completed at specific customs checkpoints (see Sections "Other Customs Formalities (Import)" and "Other Customs Export Formalities" of this Report).
651. In response to a question from a Member, the representative of the Russian Federation noted that the Russian Federation had eliminated all quantitative restrictions on exports of precious stones and metals, and that it had brought its national legislation on export restrictions for precious metals and stones into accordance with WTO disciplines. Presidential Decree No. 742 of 21 June 2001 "On the Procedure for Importation into and Exportation from the Russian Federation of Precious Metals and Precious Stones" (as amended on 11 January 2007) had abolished quantitative export restrictions and export licensing of articles made of precious stones and meant for industrial-technical purposes; precious metals in the form of products and articles; as well as articles of precious stones and natural pearls and coins. Presidential Decree No. 1373 of 30 November 2002 "On Regulations on Importation to the Russian Federation and Exportation from the Russian Federation of Natural Diamonds and Cut Diamonds" had abolished the need to obtain a licence to export cut diamonds. Under Presidential Decree No. 1373, agents engaged in the manufacturing of cut diamonds were entitled to export and/or remove from customs treatment for processing outside the customs territory up to 15 per cent of the value of natural diamonds, they had purchased within the year from agents of natural diamonds' extraction or the State Fund of Precious Metals and Precious Stones of the Russian Federation. The MIT issued licenses for the exportation of natural diamonds. Presidential Decree No. 26 of 11 January 2007 "On Improvement of State Regulation for Importation into the Russian Federation and Exportation from the Russian Federation of Precious Metals and Precious Stones" had abolished export quota requirements for precious metals, unprocessed natural diamonds, as well as the prohibition for exportation of precious metals ores and concentrates, wastes and scraps of precious metals and unprocessed precious metals.
652. A Member of the Working Party sought information about matters relating to the Regulations on Precious Stones and Metals, other than measures applied to facilitate the participation of the Russian Federation in the Kimberley Process. Information was sought on: the registration requirements applied to organizations involved in the production, domestic or foreign sale of those products; whether any legal or natural person, domestic or foreign, had the right to freely engage in the exportation, or the domestic purchase for export sale, of precious metals and precious stones produced in the Russian Federation; whether owners of precious metals and precious stones could freely sell any amounts of those products, they owned, to any intending exporter; the re-importation requirement for processed diamonds applied to exports of raw diamonds up to 15 per cent of the value of raw diamonds purchased during the current year; and the date of termination of the export quota provided to Alrosa. The Member also requested the elimination of all quantitative export restrictions and other restrictions on the exportation of precious metals and precious stones without an appropriate WTO justification by the date of accession, including all export bans, export quotas, restrictions on the right to export, export reporting requirements, re-importation requirements in relation to foreign processing of domestic raw diamonds, unjustifiable customs checkpoint requirements and the right of first purchase of Gokhran of precious metals and precious stones produced in the Russian Federation, and sought a commitment by the Russian Federation not to introduce or re-apply such measures after accession and to only apply measures relating to or in connection with the exportation of these products, where justified, under and in conformity with WTO provisions. The Member, moreover, urged the Russian Federation to consider monitoring exports of precious metals and precious stones through the adoption of automatic licensing, as alternative to export registration, reporting requirements, and other restrictions.
653. The representative of the Russian Federation said that the information concerning persons who had the right to engage in the exportation of precious metals and precious stones produced in the Russian Federation, and the registration requirements for them were contained in the Section "Registration Requirements for Import/Export Operations" of this Report. The Regulations on Precious Stones and Metals, as well as Presidential Decree No. 742 of 21 June 2001 "On the Form of Import and Export on the Territory of the Russian Federation of Precious Metals and Precious Stones" and Presidential Decree No. 1373 of 30 November 2002 "On Approval of the Regulations on Import into the Territory of the Russian Federation and Export from the Territory of the Russian Federation of Natural Diamonds and Brilliants" formed the legal basis for these issues. He added that all organizations, which were involved in operations with precious stones and metals, had to be registered at State inspections of assay (Federal Law No. 41-FZ of 26 March 1998). A mandatory requirement for registration entailed reporting to the fiscal authorities of the Russian Federation.
654. In accordance with paragraph 14 of the Regulations on Precious Stones and Metals, legal entities and individual entrepreneurs that had legal possession of the precious stones and metals, and were authorised to carry out operations with precious stones or metals, or their agents, may export precious stones and metals (excluding diamonds) from the CU, in accordance with the laws of the Russian Federation. Similarly, under paragraph 24 of the Regulations on Precious Stones and Metals, the export for processing of precious metals and gemstones might be carried out only by legal persons or individual entrepreneurs who held an activity licence. The regulations further established minimum pricing requirements for diamonds as well as raw precious metals, ores and concentrates of precious metals, and prohibited the exportation of raw materials for further processing only upon the finding from the CU Party that the raw materials could not be processed within the CU. In response to the question from some Members, the representative of the Russian Federation explained that the export quota of Alrosa had been eliminated in Presidential Decree No. 1137 of 20 September 2010. He further informed Members, that the prohibition on exports of raw materials for further processing under the condition, that such materials could not be processed in the territory of the CU, applied only to goods, exported under the customs procedure of the processing beyond the CU customs territory. According to the above-mentioned customs procedure, goods were exported from the customs territory without any restrictions and payments under condition that products processed from these raw materials would be re-imported to the customs territory of the CU.
655. The representative of the Russian Federation added that Federal Law No. 90-FZ of 18 July 2005 "On Amending of Legislative Acts of the Russian Federation", amended Federal Law No. 41-FZ of 26 March 1998 "On Precious Metals and Precious Stones", in accordance with the new legislation, namely, Federal Law No. 173-FZ of 10 December 2003 "On Currency Regulation and Currency Control" and Federal Law No. 164-FZ of 8 December 2003 "On the Fundamentals of State Regulation of Foreign Trade Activity". Under Federal Law No. 173-FZ, precious stones and metals were not recognised as currency valuables. Furthermore, pursuant to Federal Law No. 153-FZ of 11 November 2003 "On Amending Article 5 of the Law of the Russian Federation "On State Secrets'", and Presidential Decree No. 243 of 3 March 2005 "On Amendments to the List of State Secret Data, Approved Decree of the President of the Russian Federation No. 1203 of 30 November 1995", data on extraction, transfer, consumption of precious stones and metals had been excluded from the list of State secret data. The amendments simplified the procedure for performing transactions with precious stones and metals, and made these transactions more transparent.
- Export Licensing Procedures
656. The representative of the Russian Federation stated that, as with import licensing, as of 1 January 2010, the legal basis for the export licensing system in the Russian Federation was established in: (i) the Agreement on Common Measures for Non-Tariff Regulation in Respect of Third Counties, signed on 25 January 2008 (hereafter: CU Agreement on Non-Tariff Regulation); (ii) the Agreement on the Introduction and Application of Measures Concerning Foreign Trade in Goods on the Common Customs Territory in Respect of Third Countries, signed on 9 June 2009 (hereafter: CU Agreement on Measures Concerning Foreign Trade); and (iii) the Agreement on Licensing in the Area of Foreign Merchandise Trade of 9 July 2009 (hereafter: CU Agreement on Licensing). The CU Commission Decision No. 132 of 27 November 2009 approved the Common List of Goods that might be subject to non-tariff measures (see Table 28), including those subject to export licensing, which also came into force on 1 January 2010.
657. The representative of the Russian Federation explained that in addition to the CU Agreements and Commission Decisions, national legislation of the Russian Federation, including Federal Law No. 164-FZ of 8 December 2003 "On the Fundamentals of State Regulation of Foreign Trade Activity" (as amended on 2 February 2006), and Resolution No. 364 of 9 June 2005 "On the Approval of the Regulations for Licensing in the Area of Foreign Trade in Goods and on Creating and Keeping a Federal Data Bank of Issued Licenses", continued to regulate the application of the licensing regime in the Russian Federation. For example, Federal Law No. 164-FZ established the conditions and procedures for applying supervision of export and/or import of certain kinds of goods. Similarly, Federal Law No. 164-FZ set-forth the procedures for applying for an export licence or permit.
658. The most sensitive goods were subject to non-automatic licensing (Table 33). Among the goods subject to non-automatic licenses, were goods with cryptographic capabilities, governed by the Regulations of 27 November 2009 "On the Order of Entry into the Customs Territory of the Customs Union and Removal of the Customs Territory of the Customs Union of Encryption (Cryptographic) Means", and mineral raw materials, governed by Regulations "On the Order of Exportation of Mineral Raw Materials from the Customs Territory of the Customs Union", adopted by CU Commission Decision No. 132. A limited number of goods were subject to automatic licensing for the purpose of monitoring trade flows (see Table 28). He confirmed that Table 28 was comprehensive and that there were no other exports subject to licensing requirements at this time.
659. The representative of the Russian Federation explained that according to the CU Licensing Agreement, the Ministry of Industry and Trade (hereafter: authorised state body of executive power in the Russian Federation) issued three types of licenses: (i) one-time; (ii) general; and (iii) exclusive. One-time licenses were issued to applicants on the basis of a foreign trade contract relating to goods subject to export licensing. One-time and general licenses were issued to applicants, upon decision of the authorised body of the Russian Federation. Both types of licenses granted the right to export certain types of goods, subject to licensing, in the quantity determined by the licence and were valid for one year or, for goods with respect to which provisional quantitative restrictions had been introduced, until 1 January of the following calendar year. Exclusive licenses gave the applicant the exclusive right to export certain types of goods. The goods subject to exclusive licenses were to be decided by the CU Commission; the holders of an exclusive licence would be designated by the authorised body of each CU Party. The representative of the Russian Federation noted that, in 2007, prior to the establishment of the CU export licensing regime, Gazprom had been granted an exclusive export licence that was effective in the territory of the Russian Federation. He explained, however, that until now, no CU exclusive export licenses had been issued in the Russian Federation. The territorial application of a CU exclusive export licence was currently being negotiated by the CU Parties.
660. One-time and general licenses were issued by the Ministry of Trade and Industry, with the exception of licenses for the exportation of military products and goods that could be used to create weapons of mass destruction, means of transportation of such weapons, and other armament and defence technology, which were delivered by the Ministry of Defence of the Russian Federation. Licenses were issued upon receipt of the following documents: (i) an application for the licence; (ii) an electronic version of the application; (iii) a copy of the contract; (iv) a copy of a certificate confirming that the applicant was registered by a regional tax authority as a tax-payer; (v) a copy of the activity licence, if applicable; and (vi) other documents, as required.
661. The representative of the Russian Federation explained that, if the good in question was subject to a quota, export licenses would be required. Pursuant to Government Resolution No. 1299 of 31 October 1996, tender announcements for quota allocations had to be published in mass media ("Rossiiyskaya Gazeta", "Parlamentskaya Gazeta", etc.), at least 30 days prior to the date of the tender. Information on tenders, auctions and procedures for holding tenders and auctions for the sale of a quota were published on the website of the Ministry of Economic Development (www.economy.gov.ru). Additional information was provided in the Section "Import Licensing Systems" of this Report.
662. Several Members of the Working Party expressed concerns about the export licensing regime of the Russian Federation, whilst noting that the Russian Federation did not presently apply many export quotas. The same Members considered that a system of non-automatic export licensing, however, applied to a wide range of products and that such measures had the potential to be applied in a manner contrary to the general prohibition of quantitative restrictions on exports, provided for in Article XI of the GATT 1994. In the case of precious stones and metals, the legislation on export licensing was applied to certain products listed in Table 28, as provided for in Presidential Decree No. 742 of 21 June 2001 "On the Procedure of Importation into and Exportation from the Russian Federation of Precious Metals and Precious Stones". Pursuant to the Decree, exports of platinum were permitted under licenses within quantitative limits. While a rationale could exist for the application of certain controls on exports under the relevant GATT exception clauses (including Articles XX and XXI of the GATT 1994), for example, in respect of the exports of dual use goods, hazardous products, endangered species, etc., the rationale for such controls on the exports of other goods, particularly pharmaceuticals, precious stones and metals, other than gold and silver, was less clear. Automatic licensing, which was already applied for exports of raw hides and skins, provided a mechanism to monitor export flows, if this was considered desirable. However, as discretionary controls on these particular products were unlikely to meet the relevant criteria of the exceptions clauses of the GATT 1994, it was essential that any licensing regime be genuinely automatic in order to avoid restrictions on trade.
663. Several Members also requested more information on the procedures followed and fees charged in connection with the issuance of export licenses. They requested confirmation that any fees charged on exports were related to the cost of services rendered, in accordance with WTO provisions. Some Members questioned whether the restrictions on precious stones and metals, semi-precious stones, objects made thereof, certain alloys, semi-fabricates, ores, concentrates and wastes could be justified under the WTO provisions invoked by the authorities of the Russian Federation. These Members considered that the Russian Federation should provide a more detailed explanation of the measures applied to these products that the Russian Federation was seeking to justify under Article XV:9(b) of the GATT 1994, including: (i) a description of each measure and its legal basis; (ii) the bodies involved in applying those measures, including details of their responsibilities; (iii) the products affected by each measure; (iv) the export licensing procedures applicable, including details of any restrictions on eligibility for export licenses, and other terms and conditions associated with their issuance; (v) the provisions of the exchange arrangements of the Russian Federation with the IMF, which were currently in force and required the Russian Federation to adopt or maintain the measures applied by means of non-automatic export licensing that the Russian Federation was seeking to justify under Article XV:9(b) of the GATT 1994; and (vi) the plans of the Russian Federation to eliminate all measures applied by means of non-automatic export licensing that might be required under those arrangements at the conclusion of their term.
664. In response, the representative of the Russian Federation stated that the Register of Licensed Goods in the Russian Federation was available on the official website of the MIT (www.minpromtorg.gov.ru), which contained: (i) the code of the goods, according to the Commodity Nomenclature of the Russian Federation; (ii) the basis for licensing; (iii) the Federal enforcement authority responsible for licensing; and (iv) the reference to the normative act defining the order of licensing. According to Government Resolution No. 364 of 9 June 2005 "On the Approval of Regulations about the Order of Licensing in the Sphere of Foreign Trade in Goods and about the Order of Formation and Conducting Federal Bank of the Given Licences in the Sphere of Foreign Trade", the fee for the issuance of the licence was RUB 1,000, the fee for re-issuance was RUB 100 and the fee for the processing of the application for issuance of the licence was RUB 300.
665. The representative of the Russian Federation explained that work was on-going to bring national and CU export licensing provisions into conformity with WTO disciplines. Federal Law No. 157-FZ "On the State Regulation of Foreign Trade Activity" had been replaced by Federal Law No. 164-FZ of 8 December 2003 "On the Fundamentals of State Regulation of Foreign Trade Activity". This Federal Law, which had been adopted on 8 December 2003, came into force on 15 June 2004. Corresponding amendments would be made to Government Resolution No. 364 of 9 June 2005 "On the Approval of Regulations about the Order of Licensing in the Sphere of Foreign Trade in Goods and about the Order of Formation and Conducting Federal Bank of the Given Licences in the Sphere of Foreign Trade". Further work was required on, inter alia, the Agreement on Non-Tariff Regulation and the Regulations on Precious Stones and Metals.
666. He further noted that work was also being conducted to bring the export licensing regime for precious stones and metals of the Russian Federation in accordance with WTO disciplines. Specifically, Presidential Decree No. 742 of 21 June 2001 "On the Procedure of Importation into and Exportation from the Russian Federation of Precious Metals and Precious Stones" and Presidential Decree No. 1373 of 30 November 2002 "On Regulations on Importation to the Russian Federation and Exportation from the Russian Federation of Natural Diamonds and Cut Diamonds" had been amended, taking due account of other international commitments, relevant for trade in natural and cut diamonds. In this regard, the Russian Federation had replaced the licensing restrictions on exports of precious stones, diamonds, and metals with an automatic licensing regime. These amendments reduced the number of licensed goods and removed bans and other quantitative restrictions on the export of certain types of goods, as well as providing for future liberalization of international trade involving this category of goods. The representative of the Russian Federation also noted, that documents required for the issuance of a licence included: (i) for exports of precious stones and metals, a certificate of special registration in the State Assay Chamber of the Ministry of Finance (Federal Law No. 41-FZ of 26 March 1998 "On Precious Metals and Precious Stones") and for crediting organizations, an authorization of the Central Bank or of a credit institution, licensed by the Central Bank to perform operations with precious metals (Federal Law No. 395-1 of 2 December 1990 "On Banks and Banking Activities", as amended on 27 July 2010); and (ii) for exports of ores of non-ferrous metals containing precious metals, a decision of the Ministry of Finance and the Ministry of Industry and Energy regarding the practicability and feasibility of commercial recovery of precious metals (Presidential Decree No. 742 of 21 June 2001 "On the Procedure of Importation into and Exportation from the Russian Federation of Precious Metals and Precious Stones"). Concerning queries by Members of the Working Party on export licensing of medicines and pharmaceuticals, the representative of the Russian Federation explained that, previously, under Federal Law No. 86-FZ of 22 June 1998 "On Medicines" (as amended on 18 December 2006), pharmaceuticals, which included raw materials for the manufacture of pharmaceuticals, could be exported only by legal persons having a licence for the production or wholesale trade of these goods, and pursuant to Government Resolution No. 854 of 6 November 1992 (as amended on 27 November 2006), exports of raw materials for the manufacturing of medicines had been subject to an export licence issued by the MIT, in coordination with the Federal Service for Supervision in the Sphere of Healthcare and Social Development of the Russian Federation. Under the CU Agreement on Non-Tariff Regulation, export licensing was permitted, in accordance with national legislation, for only those pharmaceuticals listed in section 2.12 of Table 28. Raw materials for manufacturing pharmaceuticals were not included in the list, and thus, export licensing of these materials was not provided for. He further explained, that under Federal Law No. 61-FZ of 12 April 2010 "On Circulation of Medicines", no restrictions were placed on the export of pharmaceuticals from the Russian Federation. Finally, Government Resolution No. 854 continued to apply only to the extent that it did not conflict with CU Decisions, and thus, did not provide a basis for restricting the exports of raw materials for the manufacture of medicines.
667. In response to questions regarding licensing requirements in the field of energy, the representative of the Russian Federation clarified that Federal Law No. 117-FZ of 18 July 2006 "On Export of Gas" applied to the gas (Commodity Classification of Foreign Economic Activity of the Russian Federation codes: 2711210000 and 2711110000) produced at all types of fields of hydrocarbon raw materials and transported in the gaseous or liquefied state. Federal Law No. 117-FZ established that the exclusive right to export gas (and respective licenses) would be granted to the organization being the owner of the unified gas supply system or to its 100 per cent subsidiary. The MIT was responsible for issuing the licence for the export of gas.
668. The representative of the Russian Federation confirmed, that, from the date of accession, quantitative restrictions on exports or restrictions on the sale for export of goods, such as quotas, bans, permits, prior authorization requirements, licensing requirements (including the requirements listed in Table 33), domestic market supply requirements or measures having equivalent effect that could not be justified under the provisions of the WTO Agreement, would be eliminated and not introduced, re-introduced or applied, whether by the Russian Federation or the competent bodies of the CU. He further confirmed that discretionary authority to temporarily ban exports or otherwise restrict exports, including under provisions of the Agreement on Licensing, the Precious Stones and Metals Regulations, or Federal Law No. 164-FZ of 8 December 2003 "On the Fundamentals of State Regulation of Foreign Trade Activity" whether exercised by the Russian Federation or the competent bodies of the CU, would be applied from the date of accession in conformity with the provisions of the WTO Agreement. He also confirmed that, if the Russian Federation took recourse to Article XX(i) of the GATT 1994, with respect to any measures, whether applied by the Russian Federation or the competent bodies of the CU, restricting exports of domestic materials necessary to ensure essential quantities of such materials to a domestic or CU processing industry, such measures would not operate to increase the exports of or the protection of such industry. The Working Party took note of these commitments.
669. The representative of the Russian Federation explained that the conditions that had led to the need to protect its exchange position had significantly improved and that the IMF arrangements had terminated. In light of these developments, the Russian Federation would ensure, from the date of accession, that the export licensing regime for precious stones and metals, semi-precious stones, objects made thereof, certain alloys, semi-fabricates, ores, concentrates and wastes, whether adopted and applied by the Russian Federation or the competent CU body, was consistent with WTO requirements. The Working Party took note of this commitment.
- Other Customs Export Formalities
670. Members of the Working Party expressed concern about the practice of the Russian Federation of maintaining only a very limited number of customs checkpoints designated for declaration and exportation of certain products, for example, timber products such as logs, and metal scrap, and also the practice to close promptly certain customs checkpoints, thus creating serious impediments to trade. Some Members requested further clarification on the State Customs Committee (SCC) Order No. 1002 of 19 October 2001 "On Appointing Exportation Checkpoints" which stipulated the customs clearance checkpoints (now referred to as "customs checkpoints for declaration") that might be used for exportation of certain timber products by rail or road. A Member noted that this Order had been provisionally amended on 14 January 2002 to include customs checkpoints for declaration at its country borders with the Russian Federation and asked whether the Russian Federation intended to make a definitive amendment to SCC Order No. 1002, so as to avoid possible trade distorting effects. Another Member asked for information on the sorts of timber products covered by measures of the Russian Federation and a clarification on whether the restricted use of customs checkpoints for declaration of exports would also cover additional products. Members also raised concerns about SCC Order No. 1219 of 27 December 2000 "On Defining Places for the Customs Formalization and Export of Ferrous and Non-Ferrous Metals Scrap and Wastes", which provided that non-ferrous and ferrous metal scrap could be declared and exported only through the seaports of the Russian Federation. These Members were concerned that, in addition to creating potential delays and bottlenecks and adding to shipment costs, such restrictions could also act as de facto trade barriers. They asked the Russian Federation to provide additional information on these and other restrictions on which customs checkpoints could be used to declare and to export these products, to update the Working Party on steps being taken to increase the number of customs checkpoints authorised for the declaration and export of specific products such as metal scrap and timber products, and to ensure that these and other measures related to exportation would be brought in full conformity with WTO provisions upon accession.
671. One Member expressed concern about the limitation of customs checkpoints for exit and for declaration of certain products, specifically for wood. This Member asked about the implementation of Federal Customs Service (FCS) Order No. 1327 of 10 December 2002 "On Import Duty Rates". This Member noted that those measures must be based on justifiable reasoning and impede rightful trade flows as little as possible by ensuring a sufficient number of designated customs checkpoints relative to the importance of the trade flows, taking into account the geographic situation.
672. The representative of the Russian Federation explained that the policy of his Government was to base identification of designated customs checkpoints on the provisions of the International Convention on the Simplification and Harmonization of Customs Procedures (Revised Kyoto Convention, 1999), in particular, its Specific Annex A, Chapter 1. He further stated that, pursuant to Article 190 of the CU Customs Code, Articles 10.4 and 205 of Federal Law No. 311-FZ of 27 November 2010 "On Customs Regulation", the FCS was authorised to designate specific customs checkpoints for the declaration of specific types of goods for export for the purpose of ensuring the effectiveness of control over the implementation of customs legislation. The grounds for establishing such points were the same as those for imports, which were specified in paragraph 553 of the Section "Other Customs Formalities for Imports". He also noted that a comprehensive list of categories of goods currently subject to measures requiring declaration at designated customs checkpoints was reflected in Table 13 and Table 14.
673. In response to the specific concerns expressed by some Members, the representative of the Russian Federation said that the selection of designated customs checkpoints for the declaration of wood for export, listed in FCS Order No. 1327 of 10 December 2002 "On Import Duty Rates", was based on the following criteria: (i) availability of equipment necessary for customs control in respect of specified goods; (ii) conditions of transport infrastructure; and (iii) existing flows of trade in specified goods. He added that the said Order had been amended by FCS Order No. 362 of 2 April 2008, and the list of designated customs checkpoints for export declaration had been extended, based on the same criteria, up to 139 checkpoints. He further stated that the FCS Order No. 1327 was superseded by the FCS Order No. 801 of 20 April 2010 "On Checkpoints for Declaration of Certain Types of Goods", which also envisaged the list of 139 authorised checkpoints for declaration of wood for export.
674. He added that SCC Order No. 1002 of 19 October 2001 "On Appointing Exportation Checkpoints" for certain types of timber products (Codes of Commodity Nomenclature of Foreign Economic Activity of Russia: from 4401 10 0000 fuel wood in the form of logs and lumber; 4403; from 4404 chopped wood, piles and spiles, sharpened but not length sawed; 4406; 4407; 4409) had been invalidated by Order of the Ministry of Economic Development (MED) No. 105 of 25 May 2005 "On the Invalidation of some Legal Acts of the State Customs Committee of Russia". In addition, SСС Order No. 1219 of 27 December 2000 "On Defining Places for the Customs Formalization and Export of Ferrous and Non-Ferrous Metals Scrap and Wastes" had been invalidated by SСС Order No. 98 of 28 January 2004.
675. Pursuant to Law of the Russian Federation No. 4730-1 of 1 April 1993 "On the State Border of the Russian Federation" (as last amended on 31 January 2010), State border checkpoints were established by international agreements of the Russian Federation or by the Government, upon proposal of Federal executive bodies; or upon proposal of the subjects of the Russian Federation, as approved by the border guard agencies and frontier troops and the other Federal executive bodies concerned, taking into account the interests of adjacent and other foreign states. According to Article 162 of the CU Customs Code and Article 195 of Federal Law No. 311-FZ, goods and vehicles could depart from the territory of the Russian Federation at State border checkpoints or at other places established in compliance with the legislation on the State border of the Russian Federation during the customs bodies' working hours. The provisions of Article 162 of the CU Customs Code, however, did not extend to goods carried by sea (river) vessels and aircraft crossing the CU customs territory without stopping at a port or an airport located in the CU customs territory, as well as to the goods transported by pipeline and power lines/electricity transmission lines. Each exit checkpoint from the territory of the Russian Federation had a customs office responsible for accepting notifications of departure of goods and means of transport (such as vessels, lorries, or railway cars) from the CU customs territory, formalizing the completion of customs transit procedure, accepting customs declarations, and performing customs operations necessary for the departure of goods and means of transport and other customs operations.
676. With regard to the designated customs exit checkpoints, the representative of the Russian Federation added that, according to Article 195 of Federal Law No. 311-FZ, the Government of the Russian Federation had the right to designate customs exit checkpoints for certain categories of goods and could establish certain places for exit at the border in compliance with the legislation of the Russian Federation regarding the State border.
677. The representative of the Russian Federation confirmed that Table 13 and Table 14 were comprehensive lists of the categories of goods currently subject to measures requiring their declaration and/or exit at designated customs checkpoints. He further confirmed that, if any such measures were contrary to the WTO Agreement, they would be eliminated as of the date of accession of the Russian Federation to the WTO and that future measures concerning the declaration and/or exit of specific categories of goods at designated customs checkpoints, whether introduced, re-introduced or applied pursuant to national legislation, or CU Agreements or other CU Legal Acts, would be consistent with the WTO Agreement. Furthermore, he confirmed that from the date of accession all laws, regulations, decrees, decisions, judicial decisions and administrative rulings of general application connected with the exportation of goods, including those related to statistical control, customs clearance, documentation, and any changes to these laws, regulations, decrees, decisions, judicial decisions and administrative rulings of general application, whether introduced, re-introduced or applied by the Russian Federation or the competent bodies of the CU, would be published promptly and posted on the official websites of the responsible governmental bodies in such a manner as to enable governments and traders to become acquainted with them and that the Russian Federation would also publish the names of the governmental bodies responsible for administering them. Further, he confirmed that the Russian Federation would administer these laws, regulations, decrees, decisions, judicial decisions and administrative rulings of general application in a uniform, impartial and reasonable manner throughout its territory as required by the WTO Agreement. The Working Party took note of these commitments.
3. Internal Policies Affecting Foreign Trade in Goods
- Industrial policy, including subsidy policies
678. The representative of the Russian Federation stated that the provision of subsidies in the Russian Federation was regulated by budget, tax, customs, and anti-monopoly (competition) legislation. Under the relevant legislation, the following types of State support (financial contributions) were available to a recipient: (i) direct transfers of budgetary funds, including those under Federal-targeted and investment programmes; (ii) budgetary loans, credits, and guarantees; and (iii) postponements of payments of or exemptions from taxes and customs duties. Subsidies were being provided both at the Federal and Sub-Federal levels. In response to questions from Members, the representative of the Russian Federation stated, that, except as otherwise stated in the Working Party Report, his authorities had not identified any subsidies prohibited under Article 3 of the WTO Agreement on Subsidies and Countervailing Measures provided at any level of government in the Russian Federation. The Russian Federation had submitted a "Notification on Industrial Subsidies Granted from the Federal Budget of the Russian Federation" and a "Notification of Industrial Subsidies Allocated from the Budgets of the Subjects of the Russian Federation" for the year 2002 circulated to Members of the Working Party in WT/ACC/RUS/52 of 25 May 2005 and WT/ACC/RUS/51 of 23 May 2005, respectively, and additional information in documents WT/ACC/SPEC/RUS/31 of 20 February 2003, and WT/ACC/RUS/57 of 27 June 2008.
679. State support to the industrial sector of the Russian economy was mainly provided under Federal-targeted programmes. Direct transfers from the Federal budget or a regional budget to industries were also available. For details, he referred to Notifications on Industrial Subsidies Granted within the Territory of the Russian Federation, provided to Members in documents WT/ACC/SPEC/RUS/31 and WT/ACC/RUS/57. In response to questions of some Members about support to the coal industry, the representative of the Russian Federation explained that under the Resolution of the Government of the Russian Federation No. 1523 of 3 December 1997 "On State Financing of Restructuring of the Coal Industry" there were RUB 595.6 million (US$20 million) provided in the years 2001 to 2005. This Governmental Order was replaced by the Resolution of the Government of the Russian Federation No. 840 of 24 December 2004 (as amended on 22 October 2007) "On the List of Measures for the Coal Industry Restructuring". Under this Governmental Resolution, State support to the coal industry had been provided mainly to enhance social security of employees, secure safe work conditions in coal mining and liquidate major loss-making mines. No prohibited subsidies of any kind within the definition of Article 3 of the WTO Agreement on Subsidies and Countervailing Measures were available to the coal industry.
680. He added that the principles and mechanisms for granting export credits and export credit guarantees were foreseen in the Concept of Development of Financial Support (Guarantees) of Export of Industrial Products in the Russian Federation, adopted under Order of the Government of the Russian Federation No. 1493-r of 14 October 2003. The Concept envisaged procedures for granting:
- state guarantees against political and commercial risks arising during implementation of export contracts with foreign importers. State guarantees could only be provided if the Government of the foreign importer had provided counter-guarantees, or the contract was concluded with a sovereign buyer or the bank-creditor had provided credit to the foreign country. Under certain circumstances, counter-guarantees were not obligatory, e.g., if the foreign buyer had an investment-grade rating and was a resident of a country with an investment-grade sovereign rating;
- export credits including supplier credit; and
- partial compensation of interest rates of export credits including supplier credits.
681. Funding of export credits, guarantees, and partial compensation of credit stakes were envisaged in the Federal Budget. The total sum of the State export guarantees issued in 2005 to 2009 was US$990 million, of which US$282 million was issued in 2009. Also in 2009, export credits were provided in the total amount of RUB 55 billion (US$1.8 billion) and partial compensation of credit stakes for the total amount of US$300 million. A mechanism for granting credits and guarantees compliant with the rules and norms of the WTO Agreement on Subsidies and Countervailing Measures, which incorporates by reference the OECD Arrangement on Officially Supported Export Credits, was being elaborated in furtherance of the Concept.
682. A Member asked about more recent developments with respect to this mechanism. This Member also inquired how premiums were determined and if there was mechanism to ensure that the premiums were sufficient to cover long term operating costs and losses of the programme.
683. In response, the representative of the Russian Federation noted that "Eximbank of Russia" (Joint-Stock Company) had been designated as an agent for the Government of the Russian Federation in providing State financial (guarantee) support for industrial exports, and the terms of its functioning were stipulated in the Agreement between the Ministry of Finance and Eximbank of Russia No. 01-01-06/04-28 on Performing the Functions of an Agent of State financial (guarantee) Support for Industrial Exports of 22 April 2006, which was replaced by the Agreement No. 01-01-06/04-102 of 28 May 2009. The possibility of issuing State guarantees was examined by the Committee of Directors of JSC "Eximbank of Russia" based on the ability of the exporter to meet repayment commitments, financial performance and sufficiency of the loan coverage. Positive findings of the bank in respect of exporters were not directed by the authorities of the Russian Federation. Commission rates for bank guarantees were estimated on the basis of an agreement between JSC "Eximbank of Russia" and a principal. In accordance with the tariff of commission rates of the Bank, the minimum level of commission rate for bank guarantees was set at the level of 0.15 per cent of the guarantee amount, but the actual rate, which was charged, depended on a risk assessment that was carried out for each recipient.
684. In response to requests from some Members for information on prohibited subsidies, both at the Federal and Sub-Federal levels of governments, the representative of the Russian Federation replied that, according to the Budget Code of the Russian Federation, budget funds were provided to recipients with the purpose specified in the drafts of both Federal and regional budgets, which were also examined and approved by Federal authorities. The Federal Service for Financial and Budget Surveillance and Federal Treasury, subordinated to the Ministry of Finance, ensured that budget funds were properly allocated. Provision of State aid within the entire territory of the Russian Federation was regulated by Federal Law No. 135-FZ of 26 July 2006 "On Protection of Competition" (as amended on 5 April 2010). According to this Federal Law, funds could be granted in accordance with a relevant Federal law; a relevant regional law establishing the regional budget for the corresponding financial year; or a local law of the same kind. Funds also could be granted from a reserve fund (federal, regional, or local) in case of emergency situations, armed conflicts, or execution of anti-terrorist operations. In all other cases, State aid could only be granted upon a preliminary written permission of the anti-monopoly authority, for the following goals, as provided by the Federal Law:
685. The Sub-Federal Governments of the Russian Federation generally provided the same forms of State support to industrial production sectors as did the Federal Government. Such support was mostly aimed at the financial rehabilitation of enterprises, resolution of social problems, and reimbursement of losses. For details, he referred to the Notifications on Industrial Subsidies Granted within the Territory of the Russian Federation, circulated to Members in documents WT/ACC/RUS/52, WT/ACC/RUS/51, WT/ACC/SPEC/RUS/31 and WT/ACC/RUS/57.
686. The representative of the Russian Federation stressed that in accordance with the principles established by the budget and anti-monopoly legislation of the Russian Federation, including those related to the respective responsibilities of the Federal and Regional Authorities, the Ministry of Finance and the Federal Antimonopoly Service ensured that the subsidies provided both on Federal and Sub-Federal levels were consistent with the national legislation and international commitments of the Russian Federation. He added that, according to Order of the Government of the Russian Federation No. 1505-r of 19 October 1998 (as amended of 23 July 2001), the executive authorities of the subjects of the Russian Federation reported on a regular basis (quarterly) the forms and amounts of industrial and agricultural subsidies, granted from the regional budgets, specifying its purposes, to the Ministry of Economic Development of the Russian Federation, the Ministry of Finance of the Russian Federation and the Ministry of Agriculture of the Russian Federation. This allowed the Federal Authorities to control the conformity of the subsidies, granted by the regional governments, with all Federal legislation and the obligations under international treaties of the Russian Federation.
687. Some Members of the Working Party asked to what extent loans at below market interest rates provided under Government Resolution No. 538 of 15 May 1999 "On Providing Budgetary Loans to Finance the Implementation of High-Return Contracts for Production and Supply of Products, Including Export Supplies" were contingent upon export performance, and requested clarification whether that Resolution had been repealed. Some Members of the Working Party also noted that certain subsidy programmes, such as production sharing agreements and other programmes for the automotive, farm equipment, and civil aircraft industry appeared to provide subsidies, which constituted prohibited subsidies pursuant to Article 3.1(b) of the WTO Agreement on Subsidies and Countervailing Measures. In addition, aspects of certain rail freight tariffs, as well as programmes for the consumer goods industry and textile industry also appeared to conflict with Article 3.1(a) of that Agreement. Members of the Working Party requested that the Russian Federation eliminate all such programmes from the date of accession.
688. The representative of the Russian Federation replied that pursuant to Government Resolution No. 538 of 15 May 1999 "On Providing Budgetary Loans to Finance the Implementation of High-Return Contracts for Production and Supply of Products, Including Export Supplies" loans equal to RUB 50.0 million had been granted from the Federal Budget to OAO "Rostselmash" in 1999. Since 2000, that Resolution had not been applied and no funds had been granted from the Federal Budget. He further stated that production-sharing agreements and the automotive programmes established under Presidential Decree No. 135 of 5 February 1998 "On Additional Measures to Attract Investments for Development of Domestic Car Making", and Government Resolution No. 413 of 23 April 1998 "On Additional Measures to Attract Investments for Development of Domestic Car Making" and the Resolution of the Government of the Russian Federation No. 166 of 29 March 2005 "On Introduction of Amendments to the Customs Tariff of the Russian Federation with Respect to the Spare Parts Imported with Aim of Industrial Assembling", Joint Order No. 73/81/58n of the Ministry of Economic Development, the Ministry of Industry and Energy of the Russian Federation and the Ministry of Finance of the Russian Federation of 15 April 2005 "On Approval of the Order, Defining the Term "Industrial Assembling" (as amended on 24 December 2010 by Joint Order No. 678/1289/184n) and Establishing Conditions for Its Application to Imports to the Territory of the Russian Federation of Car Parts for Motor Vehicles (Tariff Positions 8701-8705) and Their Components" were discussed in the Section "Trade-Related Investment Measures" of this Report. Regarding civil aircraft programmes, he referred to the information in the Section "Trade in Civil Aircraft" of this Report. As to the issue of certain rail freight tariffs, the representative of the Russian Federation stated that this issue, from his view, was not connected with a violation of any provision of the WTO Agreement on Subsidies and Countervailing Measures. He added that railway tariffs were addressed in the Section "Pricing Policies" of this Report.
689. Concerning "OAO Rosagroleasing", a Russian agricultural equipment leasing company, the representative of the Russian Federation explained that the open Joint Stock Company Rosagroleasing had been established in February 2001 to support agricultural producers using the new national system of agricultural leasing. He mentioned that the activity of this entity was described in the Section "Polices Affecting Foreign Trade in Agricultural Products" of this Report. In addition the representative of the Russian Federation noted that under Government Resolution No. 90 of 4 February 2009, the Ministry of Agriculture provided loans to farmers at an interest rate below the market rates for the purchase of farm machinery manufactured in the Russian Federation. In 2009, the total funding of the programme for purchase of such farm machinery was RUB 1,200 million (US$40 million).
690. Some Members noted that the loan programme of the Ministry of Agriculture for farm machinery was limited to purchases of domestically-produced farm machinery. These Members expressed concerns regarding this limitation and sought a commitment that any programme that the Russian Federation made available would comply with WTO requirements and would not provide subsidies contingent upon the use of domestic rather than imported products and would not otherwise discriminate against imported products.
691. Some Members expressed concerns regarding subsidies granted under Government Resolution No. 1194 of 31 December 2009 to private persons purchasing automobiles, and in particular with regard to the limitations of this programme to automobiles produced in the Russian Federation. These Members sought a commitment that, in the future, any programme that the Russian Federation made available would comply with WTO requirements, would not provide subsidies contingent upon the use of domestic rather than imported products and would not otherwise discriminate against imported products.
692. Some Members expressed concerns regarding subsidies granted to those purchasing or leasing civil aircraft in the Russian Federation and, in particular, on the limitations of this programme to civil aircraft produced in the Russian Federation. These Members sought a commitment that, in the future, any programme that the Russian Federation made available would comply with WTO requirements and would not discriminate against imported products. These Members also referred to the discussions and commitment undertaken by the Russian Federation in relation to civil aircraft in the Section on "Trade in Civil Aircraft" of this Report.
693. Some Members noted that the Ministry of Industry and Trade loan programme for consumer goods and textiles industries on technical retooling, reportedly, was contingent upon the export of the subsidised products. These Members sought a commitment that any programme that the Russian Federation made available in the future would comply with WTO requirements and would not provide subsidies contingent upon the export of the subsidised goods and would not discriminate against imported products.
694. In response to concerns from some Members about the loan programme for consumer goods and textiles industries referred to in paragraph 693, the representative of the Russian Federation explained that, in accordance with the Resolution of the Government of the Russian Federation No. 993 of 29 December 2007, the programme was neither in law nor in fact contingent upon export performance.
695. Some Members stated that the Russian Federation should recognise that the government regulation of natural monopoly prices could constitute a subsidy under the WTO Agreement on Subsidies and Countervailing Measures. These Members asked the Russian Federation to provide a description of the existing pricing mechanisms and any reforms under way to bring domestic prices for oil, natural gas and electricity closer to market prices. In particular, those Members requested that the Russian Federation provide details of the recent reforms of the pricing of electricity to commercial consumers.
696. In response, the representative of the Russian Federation pointed out that his authorities continued to believe that the government regulation of natural monopoly prices did not constitute a subsidy under the WTO Agreement on Subsidies and Countervailing Measures. Regarding domestic prices for oil, natural gas and electricity, he referred to the information provided in the Section "Pricing Policies" of this Report.
697. Several Members asked the Russian Federation to confirm that all subsidy programmes at all levels of government would be administered in line with the WTO Agreement on Subsidies and Countervailing Measures and that, upon accession, all necessary information on all subsidies programmes at all levels of government would be notified to the WTO Committee on Subsidies and Countervailing Measures in accordance with Article 25 of the WTO Agreement on Subsidies and Countervailing Measures.
698. The representative of the Russian Federation confirmed that, except as otherwise provided in the Working Party Report, upon accession, the Russian Federation would eliminate all subsidies programmes administered within its territory falling within the scope of Article 3 of the WTO Agreement on Subsidies and Countervailing Measures or modify these programmes so that any subsidy provided would not be contingent upon exportation or the use of domestic over imported goods. He also confirmed that any subsidy programme in place or established after accession within the territory of the Russian Federation would be administered in conformity with the WTO Agreement on Subsidies and Countervailing Measures. In addition, the Russian Federation would provide a subsidies notification in accordance with Article 25 of the WTO Agreement on Subsidies and Countervailing Measures to the WTO Committee on Subsidies and Countervailing Measures as provided in paragraph 1430. He also confirmed that the Russian Federation would not invoke any of the provisions of Articles 27 and 28 of the WTO Agreement on Subsidies and Countervailing Measures. The Working Party took note of these commitments.
- Technical Barriers to Trade
699. The representative of the Russian Federation informed Members of the Working Party that the legal framework of his country for technical regulations, standards and conformity assessment systems was governed by international agreements of the EurAsEC7 and of the CU8, by other EurAsEC and CU Acts, and the national legislation of the Parties to these agreements. He noted that the legal framework outlined in these Agreements and Acts required certain products circulating in the territories of the EurAsEC and CU Parties respectively to meet established mandatory technical, as well as sanitary and phytosanitary (SPS), requirements. In particular, trade (including both importation and circulation in the domestic market) in products in the territory of the Russian Federation could be restricted or banned if the products in question did not meet these requirements. The CU Parties, all of whom also were members of EurAsEC, had agreed to harmonize their policies and regulatory systems in the area of technical regulation within the established EurAsEC system and sought to confirm and to intensify their cooperation in this area within the framework of the CU. The goal of this harmonization was to ensure uniform requirements for the circulation of goods within the territories of the CU Parties in the area of technical regulation, realized through common technical regulations that had been developed using procedures established in conformity with CU or EurAsEC Acts adopted as international agreements or decisions among the participating EurAsEC and CU Parties. These technical regulations were applied directly in the territories of the CU Parties, and no separate national legislation was necessary. The provisions of the EurAsEC and CU Agreements and other EurAsEC and CU Acts were based on the WTO Agreement on Technical Barriers to Trade (TBT Agreement), and technical regulations were applied with the purpose of protecting the life and (or) health of humans, property, environment, animal and plant life and (or) health, and preventing actions that might mislead consumers, as well as for the purpose of ensuring energy efficiency and saving resources. The representative of the Russian Federation emphasized that technical regulations adopted and applied within the EurAsEC and CU were not adopted for any other purposes.
700. The representative of the Russian Federation stated that the legal basis for the common policy was the EurAsEC Agreement on the Basics of Harmonization of Technical Regulations of the Member States of the Eurasian Economic Community of 24 March 2005 (hereafter: EurAsEC Agreement on Basics of Technical Regulation Harmonization) and the EurAsEC Agreement on Implementation of Coordinated Policy in the Field of Technical Regulation, Sanitary and Phytosanitary Measures of 25 January 2008 (hereafter: EurAsEC Agreement on Technical Regulation Policy Coordination), as well as the Agreement on Uniform Principles and Rules of Technical Regulation in the Republic of Belarus, Republic of Kazakhstan and the Russian Federation of 18 November 2010 (hereafter: CU Agreement on Uniform Technical Regulation Principles); Regulation on Development of Technical Regulations of Eurasian Economic Community, approved by EurAsEC Interstate Council Decision No. 1175 of 17 August 2008, Regulation on Development of Technical Regulations of Eurasian Economic Community; and CU Commission Decision No. 527 of 28 January 2011, Regulation on Development, Adoption, Amendment and Cancellation of Technical Regulations of the Customs Union (CU Commission Decision No. 527). These Agreements and Decisions established the main instruments of the common policy applied in the Russian Federation in the following areas:
- harmonization of national legislation in the area of technical regulation;
- development and adoption of technical regulations of the CU and of EurAsEC stipulating mandatory and binding requirements for the goods subject to technical regulation;
- implementation of common procedure on development of technical regulations in the territory of each CU and EurAsEC Party;
- harmonization of standards and the implementation of relevant international standards as a basis for the elaboration of technical regulations;
- implementation of common forms and rules for conformity assessment;
- conducting conformity assessment (confirmation) of products or product-related production processes, installation, set-up, operation (use), storage, carrying (transportation), sale and disposal, including testing and certification; as well as
- accreditation and/or designation of certification (conformity confirmation) bodies and accreditation of test laboratories (centres) participating in the process of mandatory confirmation of conformity.
701. He added that the CU Agreement on the Circulation of Goods Subject to Mandatory Conformity Assessment on the Customs Territory of Customs Union of 11 December 2009 (hereafter: CU Agreement on Mandatory Conformity Assessment) provided for development of a list of goods for which it was possible to issue a certificate and to register a declaration of conformity assessment using a common form during the transition period, until the adoption of CU technical regulations. The CU Agreement on Mutual Recognition of Accreditation of Certification (Conformity Assessment) Bodies and Test Laboratories (Centres) Performing Work on Conformity Assessment of 11 December 2009 (hereafter: CU Agreement on Mutual Recognition of Accreditation Bodies) established the principles for a common CU system of mutual recognition of accreditation, the responsibilities of the accreditation bodies of the CU Parties, and general principles of accreditation, pending the gradual replacement of this mutual recognition system by the adoption and application of common EurAsEC and CU technical regulations by the CU Parties.
702. Responding to questions from Members on the relationship between EurAsEC and CU technical regulations and international standards, the representative of the Russian Federation affirmed that Article 5.2 of the EurAsEC Agreement on Technical Regulation Policy Coordination and Article 4.4 of the CU Agreement on Uniform Technical Regulation Principles established that the relevant international standards, and other documents (i.e., rules, directives and recommendations or any other documents accepted by international standardizing organizations) would be used as the basis for elaborating the EurAsEC and CU technical regulations, except in cases where such documents were absent, or did not conform with the purposes of the technical regulations of the Customs Union, in particular, due to climatic and geographical factors or technological and other particularities. CU Commission Decision No. 527 which provided for regulations for the development, adoption, amendment and cancellation of technical regulations on the territories of the CU Parties, was amended and improved by CU Commission Decision No. 606 of 7 April 2011 "Amendments to the Regulations on the Development, Adoption, Amendment and Cancellation of the Technical Regulations of the Customs Union" (hereafter: CU Commission Decision No. 606). CU Commission Decision No. 319 of 18 June 2010 "On Technical Regulation in the Customs Union" (hereafter: CU Commission Decision No. 319) established the CU Unified List of Products for which it was possible to use a certificate or to register a declaration of conformity assessment using a CU common form or national form during the transition period until the adoption of CU technical regulations. This list was replaced by CU Commission Decision No. 620 of 7 April 2011 "On the Unified List's Update with Regard to Products Subjected to Mandatory Conformity Assessment (Confirmation) within the Framework of the CU with Issuance of Single Documents", approved by CU Commission Decision No. 319 of 18 June 2010. In accordance with Explanatory Note 1, paragraph 2 to the list of products adopted by CU Commission Decision No. 620, a declaration of conformity based on the CU common form could not be used for goods produced by foreign manufacturers located outside the territory of the CU. However, CU Commission Decision No. 620 still provided for the possibility of using a certificate of conformity for such goods based on the CU common form. In the Russian Federation, a declaration of conformity for goods manufactured outside of the Russian Federation could be done under Federal Law No. 184-FZ of 27 December 2002 "On Technical Regulation" (as last amended on 28 September 2010) (hereafter in this Section: Federal Law No. 184-FZ). CU Commission Decision No. 319 also determined the criteria for the inclusion of conformity assessment bodies and test laboratories into a Unified Register of certification bodies and testing laboratories of the Customs Union (hereafter: the CU Unified Register) and established the rules for the formation and maintenance of the Unified List and Unified Register by the national authorised bodies. CU Commission Decision No. 319 also established the regulations for the importation of products listed on the CU Unified Register. Article 4 of the CU Agreement on Uniform Technical Regulation Principles provided that technical regulations could only be developed for goods on the Unified List of 61 "risky" products in respect of which mandatory requirements (technical regulations) could be established in the framework of the Customs Union. The list of 61 products was approved by CU Commission Decision No. 526 of 28 January 2011 "On the Unified List of Products, in Respect of Which Mandatory Requirements are Established in the Frame of the Customs Union" (hereafter: CU Commission Decision No. 526). This list could be expanded by subsequent CU Commission Decisions if new risks were identified. Of these 61 products, 47 had been identified for priority attention in the development and adoption of CU technical regulations. However, in instances where EurAsEC technical regulations also had been adopted, the EurAsEC technical regulations prevailed to the extent that they duplicated the CU technical regulations in whole or in part. Schedules for the development of priority EurAsEC and CU technical regulations that would establish the desired harmonized regime were provided in the EurAsEC Interstate Council Decision No. 521 of 19 November 2010 "the Schedule of Development of EurAsEC First-Priority Technical Regulations" (hereafter: EurAsEC Interstate Council Decision No. 521) and CU Commission Decision No. 492 of 8 December 2010 "On Schedule of Development of Priority Technical Regulations of the Customs Union" (hereafter: CU Commission Decision No. 492), respectively, with a view to their development during 2011. CU Commission Decision No. 621 of 7 April 2011 "On the Regulation on the Application of Model Schemes of Conformity Assessment (Confirmation) in the Technical Regulations of the Customs Union" (hereafter: CU Commission Decision No. 621), established common forms and regulations on the application of model conformity assessment schemes to ensure compliance with the requirements of technical regulations of the Customs Union. The CU Commission had also approved a draft Agreement submitted for approval by the CU Parties establishing types of administrative violations and charges for the violations in the sphere of technical regulation and the application of the sanitary, veterinary, and phytosanitary measures. Once CU or EurAsEC technical regulations came into effect, they would be applied with direct effect, and relevant national requirements, established by laws of the CU or EurAsEC Parties, would no longer be applied in the territories of those Parties. Additional certification among the CU Parties would no longer be necessary. It was expected that, by 31 December 2012, the CU Commission would have adopted all of the 47 priority CU technical regulations which would enter into force no later than 31 December 2014, after a transitional period before application of the relevant CU technical regulations to allow producers, importers, and exporters to become acquainted with the new technical regulations. By that date, all other national mandatory technical requirements applied on the territory of CU Parties would be replaced by CU technical regulations or would no longer be applied. Notification of when implemented CU technical regulations superseded national technical regulations would be posted on the MIT website and in the official journal of Rosstandart, the Herald. Certificates of conformity issued under national mandatory technical requirements before entry into force of relevant CU or EurAsEC technical regulations could be used for the full term of their validity.
703. The representative of the Russian Federation noted that these EurAsEC and CU Agreements and the EurAsEC and CU Acts implementing the CU policy on technical regulation substantially had replaced Federal Law No. 184-FZ as the overall legal framework for technical regulations, standards, and conformity assessment systems in the Russian Federation with the establishment of the CU regime on 1 January 2010. Certain provisions of Federal Law No. 184-FZ remained in effect, however (to the extent they did not conflict with CU and EurAsEC Agreements and EurAsEC and CU Acts, including CU Commission Decisions). The development and application of standards, conformity assessment, state control and supervision, metrological control, and liability issues in the Russian Federation would continue to be administered on the national level under the CU and EurAsEC regimes, with regard to the following issues:
- national standards within the meaning of the TBT Agreement (development, adoption) and standards organizations;
- sets of rules;
- state control and supervision (inspection) to ensure compliance with the requirements of technical regulations;
- assurance of uniformity of measurements;
- violations of technical regulations and withdrawal of products from the domestic market;
- operation of the national aspects of developing and maintaining the system of certificates of conformity assessment and declarations of conformity, including national part of the Unified Register of certificates and declarations;
- operation of the national aspects of developing and maintaining the system of certification bodies and testing laboratories (centres) of the CU, including accreditation and national part of the Unified Register of certification bodies and testing laboratories;
- voluntary conformity assessment;
- rights and obligations of applicants in the field of mandatory conformity assessment;
- coordination of the activities, positions and procedures of the Government in the field of technical regulation;
- procedures for the determination of liability in the case of violation of technical regulations and sanctions therefore until the decision to transfer these issues to the CU was made;
- providing required transparency; and
- financing in the field of technical regulation.
Other EurAsEC and CU Acts and domestic legislation pertaining to standards, technical regulations, and conformity assessment in the Russian Federation were listed in Annex 3 to the Report.
704. A Member noted that the Russian Federation continued to adopt mandatory phytosanitary measures under its national law on plant quarantine, through measures that were not considered to be technical regulations. This Member requested an explanation of this practice. In response, the representative of the Russian Federation explained that technical regulations applied only to matters related to the life and health of humans and animals. Since phytosanitary measures related to plant life and health they were not considered to be technical regulations, but were purely SPS measures and were adopted under procedures that ensured transparency and compliance with the WTO SPS Agreement.
- (b) Institutions
705. The representative of the Russian Federation stated that draft technical regulations were developed in the participating countries using internal procedures before being proposed by the authorised national bodies in the field of technical regulation to the designated EurAsEC or CU bodies for harmonization, further review, and adoption as provided for in the relevant international agreements or CU decisions. For EurAsEC, the Commission for Technical Regulation and Sanitary, Veterinary and Phytosanitary Measures in Trade of the EurAsEC Integration Committee (hereafter: the EurAsEC Commission for Technical Regulation), through the authorised national bodies of the EurAsEC Parties, coordinated the Parties' efforts on the development of technical regulations, including sanitary and phytosanitary measures. After publishing a draft technical regulation and collecting public comments, the EurAsEC Integration Committee then forwarded the agreed draft technical regulation to the EurAsEC Interstate Council for adoption as an Agreement as provided for in Article 3 of the EurAsEC Agreement on Technical Regulation Harmonization. In the CU framework, this coordination and transparency role was fulfilled by the Coordination Committee on Technical Regulation, Sanitary and Phytosanitary Measures (hereafter: the CU Coordination Committee) which received draft technical regulations from the authorised bodies of the CU Parties, coordinated the development of a draft text and resolved disputes concerning it among the CU Parties' authorities. The Coordination Committee, with the assistance of the CU Commission Secretariat, then circulated the draft technical regulation for public review and comment and prepared analysis and recommendations on the draft technical regulations before forwarding the proposals to the CU Commission for adoption through decisions. As set-out in Article 6.1 of the EurAsEC Agreement on Technical Regulation Policy Coordination and Article 7.2 of the CU Agreement on Uniform Technical Regulation Principles, Mandatory Assessment (Confirmation) of Conformity (Compliance) of Products with Requirements of the EurAsEC and CU Technical Regulations, was confirmed by a declaration of compliance or certification that was issued by a certification body listed in the Unified Register, based on tests performed by accredited laboratories and testing centres. Among CU Parties, unified conformity assessment procedures were established in the technical regulations on the basis of model schemes of conformity assessment.
706. Concerning accreditation of conformity assessment bodies: accreditation enabled a conformity assessment body included in the Unified Registry to issue documents on conformity assessment within the area of its accreditation that would be accepted within the territory of the Russian Federation as well as the rest of the CU. Articles 2 and 3 of the CU Agreement on Mandatory Conformity Assessment, established the responsibility of the CU Parties' accreditation bodies to conduct comparative examinations (peer assessment) of procedures in the bodies of other CU Parties and to implement, where possible, relevant international standards in the national accreditation system; to maintain the national Register of accredited certification bodies and laboratories; and, to consider complaints from enterprises connected with an accredited certification body or laboratory. Article 4 authorised the CU Commission to create and maintain the Unified List of Products for which it was possible to issue a certificate and to register a declaration of conformity assessment using a common form during the transition period, until the adoption of CU technical regulations (CU Commission Decision No. 620). The CU Commission also was charged to create common forms for the certification and declaration of conformity; the Unified Register of certification bodies and testing laboratories at the level of the CU; and the Unified Register of certificates of conformity and declarations of conformity. CU Commission Decision No. 319 established these facilities and the regulations for their maintenance. In contrast, EurAsEC did not maintain either a Unified Register of certification bodies and testing laboratories or a Unified List of Products subject to technical regulations and mandatory conformity assessment at the Community level. Therefore, each EurAsEC Party determined the products subjected to mandatory confirmation of conformity with respect to EurAsEC technical regulations. The same situation currently existed with certification bodies and test laboratories. With time, as the CU and EurAsEC systems of technical regulation evolved, it was expected that the EurAsEC Interstate Council would adopt the CU Unified Register of accepted certification bodies and laboratories, but currently, each EurAsEC Party determined its own list of certification bodies and laboratories.
707. The representative of the Russian Federation explained that the Federal Agency for Technical Regulation (formerly Gosstandart and now known as Rosstandart) currently was the State body responsible for accreditation within the GOSTR conformity assessment system which was the most widely applicable system in the Russian Federation. There were 15 other Federal Ministries and agencies responsible for accreditation in the mandatory sphere in specific areas: the Ministry for Emergency Situations (accreditation of bodies carrying out certification of fire fighting equipment): Rostehnadzor; Rosgeldor; Rosreestr; and Rospotrebnadzor. In accordance with the Presidential Decree of the Russian Federation No. 86 of 24 January 2011 "On Single National System of Accreditation" (hereafter: Presidential Decree No. 86) a single national accreditation body under the authority and control of MED would be established and would replace both Rosstandart and the other existing accreditation bodies in the Russian Federation by the end of 2011. This Body would accredit conformity assessment bodies in accordance with ISO/IEC, Guideline 2, Guideline 65 and ISO/IEC Standard 17000, Standard 17011, and Standard 17025 that would perform conformity assessment procedures related to CU and EurAsEC technical regulations. He noted that the order of determination of fees for the accreditation procedures currently was established by the accreditation bodies themselves; however it was planned that a single order would be created when the single national accreditation body was established.
708. The representative of the Russian Federation also informed Members of the Working Party that, in accordance with Government Resolution No. 438 of 5 June 2008 "On the Ministry of Industry and Trade of the Russian Federation", the MIT was the national executive authority in the Russian Federation responsible for the development and elaboration of national policy in the area of technical regulation, including standardization, conformity assessment procedures (including testing and certification) and for coordinating the development of technical regulations. MED was the national executive authority in the Russian Federation responsible for the development, elaboration of national policy and legal regulation in the area of accreditation (Presidential Decree No. 86). Rosstandart was the national authorised body on standardization of the Russian Federation, pursuant to Government Resolution No. 294 of 17 June 2004 "On the Federal Agency for Technical Regulation and Metrology" (as last amended on 6 April 2011) (hereafter: Government Resolution No. 294). Rosstandart was authorised (pursuant to Government Resolution No. 294), inter alia, to carry out expert assessment of national standards; publish notifications about development of drafts of technical regulations (which were required to contain, pursuant to Article 7(3) of Federal Law No. 184-FZ, the rules and forms of the conformity assessment procedures to comply with such regulations) and national standards; develop a programme for the elaboration and approval of national standards; carry out accreditation procedures with respect to conformity assessment bodies within the area of its responsibility until the establishment of the single national accreditation body (for further details, see paragraph 802 below); and, execute the functions of the national body on standardization. Rosstandart also maintained the national information database containing technical regulations and standards, the list of goods subject to mandatory conformity assessment, as well as the following registers of: conformity declarations that had passed registration; certificates that had been issued; registered systems of voluntary certification; and on ensuring the unity of measurements on the territory of the Russian Federation, as provided for in Government Resolution No. 248 of 6 April 2011 "On Amendments to the Regulations of the Federal Agency on Technical Regulation and Metrology", and CU Commission Decision No. 319. Rosstandart also carried out the publication of the technical regulations. A detailed description of the current responsibilities of the CU Bodies and Federal Executive authorities were given in Table 37.
709. One Member of the Working Party asked a question regarding the responsibilities of MIT in carrying out the CU harmonized regime: which organizational measures had been taken to avoid a conflict of interest between its accreditat