RUSSIAN TRADE REGULATION

1. RUSSIAN TRADE REGULATION

2. The major Ministries of the Russian Federation which support import/export transactions are: • The Ministry for Economic Development and Trade of Russia http://www.economy.gov.ru/ • The Ministry for Foreign Affairs of Russia http://www.mid.ru/ • The Ministry of Railways of Russia http://www.mps.ru/ • The Ministry of Transport of Russia http://www.mintrans.ru/ The other Ministries of the Russia which you can find on the Web-site http://www.government.gov.ru/english/

3. By the end of 1993, the Russian government had liberalized much of its import regime: • Eliminated nontariff customs barriers on most imports, although it still requires some licenses for health and safety reasons • In mid-1992 the government took control of imports of some critical goods, including industrial equipment and food items, which it sold to end users at subsidized prices • Established a two-column tariff regime in harmony with the General Agreement on Tariffs and Trade (GATT) • The Government has used licensing and quotas to restrict the export of certain key commodities

4. Foreign trade regulation is matter of federal jurisdiction. 1/ General principles of foreign trade activity are laid down in the RF Federal Law On Fundamentals of State Regulation of Foreign Trade of 8 December 2003 No. 164-FZ. 2/ On Special Protective, Antidumping and Compensatory Measures with respect to Imported Goods of 8 December 2003 No. 165-FZ 3/ On Currency Regulation and Currency Control of 10 December 2003 No.173-FZ, 4/ The RF Customs Code of 28 May 2003 5/ International agreements

5. CUSTOMS CODE • The Code itself became the law of direct action, and the number of customs regulating by-laws was reduced from almost 4,000 to approximately one hundred. • List of the documents required for customs clearance of international trade transactions are strictly specified, streamlining customs clearance procedures. • The timeframe for customs processing by the customs officials has been shortened from 10 to 3 days. • The importer now is able to choose the customs house to perform clearance - it can be either the customs at the border crossing point or the customs at the cargo's destination point.

6. CUSTOMS CODE (cont.) • New code provides for advanced customs clearance performed prior to shipment's arrival to the destination. Electronic variants of declarations and other documents can be submitted to the customs immediately after shipment or during inner transportation under customs supervision in Russia. That simplifies the process of unloading and eliminates necessity to place the goods in a bonded warehouse. • Total customs control of the declared goods is replaced by the selective for select conscientious foreign trade participants, other privileges can also be granted.

7. Russian customs have been traditionally playing only the fiscal role, bringing up to 40% of the country's budget revenue. At present, the customs service is changing its priorities to foreign trade facilitation, which will finally result in growth of trade operations and amount of collected duties. The new Custom Code of Russian Federation implements the basis for such evolution to more flexible and effective system.

8. INTERNATIONAL AGREEMENTS • The Russian Federation is a party to the UN Convention on Contracts for the International Sale of Goods (Vienna Convention 1980). • A number of bilateral trade treaties and treaties on navigation and commerce concluded by the Russian Federation with other countries. • Agreements On Free Trade with member-states of CIS are among them. • Double tax treaties. • Becoming a member of the World Trade Organization modifies the legislation to comply with WTO rules.

9. Regulations and Restrictions

10. The new RF Federal Law On Currency Regulation and Currency Control of December 2003 No. 173-FZ 1) pursuant to the law all restrictions for currency transactions shall be based on legislative acts (laws) only and not on regulations (delegated legislation); 2) the law puts an end to the practice of obtaining individual licenses for performing currency transactions; 3) the law lays down the new principle governing currency transactions: "what is not expressly prohibited is allowed"; 4) the law imposes limitations on the powers of state authorities exercising currency control.

11. The main objective of the law is to establish unified coherent rules for currency transactions. Current account operations are performed without restrictions. Capital account operations are subject to compliance with the following conditions: 1) special accounts for capital account currency operations – bank accounts for financial funds and custody accounts for securities; 2) reservation of certain amounts at a special deposit account with one of Russian banks for a limited time (under the law the amount of deposit may constitute up to 100% of the total amount of a related capital account currency transaction).

12. Most of the restrictions established by the law (including provisions regarding special accounts and depositing) will remain effective only until January 01, 2007. • As a general rule, the law prohibits payments in foreign currency between residents, however it states the list of operations which can be carried out without limitations (Art. 9) • Non-residents are entitled to carry out operations with securities of national issues provided that they comply with antimonopoly and securities legislation of the RF.

13. Export regulations. tariff and non-tariff measures are used • export quotas and licenses, • state monopoly for export of certain commodities, • customs and currency controls, • exclusive right to import and export certain kinds of goods), • prohibitions and restrictions on trade in services and intellectual property transfers, • economic and administrative measures.

14. Import policy measures. • import quotas (omnibus and country-specific), • special duties, • antidumping duties and minimal pricing requirements, • compensatory duties. Such measures may be implemented in case of material damage or a risk of material damage to a branch of national economy of the RF (WTO rules)

15. Customs regulations. Customs clearance is governed by the RF Customs Code of 28 May 2003 No. 61 FZ. The Code provides for the procedure of customs clearance, offences and procedure for their prosecution. 1/ Basic customs regime (export, international customs transit etc.); 2/ Economic customs regime (customs warehouse, free customs zone, processing within the customs territory, processing outside the customs territory) 3/ Final customs regime (reimport, reexport, destruction, rejection to the benefit of the state) 4/ Special customs regime (duty-free trade, temporary export, transfer of supplies and other special customs regimes). H) General meaning and purpose of each of the regimes are set forth in the RF Customs Code.

16. Certification requirements. • Declarations and certificates of conformity are the evidence that products meet the RF standards, provided for by technical regulations (general and special). Certification is mandatory only for products included in the list of commodities subject to the obligatory certification • Products, which are not subject to the mandatory attesting of conformity, can be imported without declarations or certificates of conformity.

17. Taxation of Foreign Trade. Commodities imported into Russia are subject to certain customs payments. These payments are: • customs duties, • fees for customs clearance, • value added tax, and excise tax. The Law on Customs Tariff of 21 May 1993 No. 5003-1 (as amended) establishes procedures for application of these payments. Rates of customs duties are set by the Customs Tariff, approved by the RF Government (Decree of the RF Government of 30 November 2001 No. 830). Rates of VAT and excise duties are set by the RF Tax Code.

18. Export customs duties and fees for customs clearance apply to certain commodities. Oil products are subject to a special export tax.

19. IMPORT REGULATION • TARIFF AND TAX MEASURES • NON-TARIFF MEASURES • CURRENCY CONTROL

20. TARIFF MEASURES • AVERAGE BINDED DUTY RATE 10% • DIFFERENTIATION OF DUTIES • ZERO RATES FOR COMPONENTS • ANTIDUMPING MEASURES

21. NON-TARIFF MEASURES • QUOTAS ND LICENSES (tariff quotas) A list of meat products and the size of their import to Russia – on the base of licenses (Ministry of Economic Development and Trade auction) • COMPLETE BAN on import of poultry, beef and pork subject to quotas - State Veterinary Service • Federal Law “On Special Protective, Anti-Dumping and Countervailing Measures on Import of Goods” (Dec. 2003)