Border crossing and customshandling in network production

1. Border crossing and customshandling in network production

2. ZAO Trafo – RTL Oy situation • ZAO Trafo and RTL Oy form an integral international concern. • The concern has produced in Russia 15 years and supplies its products all around the world, Scandinavia, EU, and China • ZAO Trafo has 200 people who produce electronic components and electric machines in Vyborg • RTL Oy supplies Trafo with materials and distributes the ready products to customers all around the world

3. Export of Electric components

4. Export of electric machine units

5. Export of welding machines

6. eu and ru customs procedures The 15 years of transborder network production operation has allowed to compare EU customs procedures in Finalnd with RU customs procedures in Vyborg

7. Law and tarifКодекс и ТН-ВЕД • The customs Codex is not a difference. Both EU and RU codexes are based on Kyoto international agreements and very similar • The EU customs Tarif and RU ”ТН ВЕД”are not different, they are practically identical • EU and RU Customs duty (Пошлина) is not a difference. EU and RU customs both accept the customs procedure of Processing (таможенной режим переработка) • So where is the difference ??

8. Statutes, orders, letters, oral infoПостановления, приказы, письма, устные инструкций EU Customs procedures RU Customs procedures • Fast - goods moves • Simple and low cost • Promote export • Give adequate fiscal control • Slow – goods stands • Complicated, high cost • Prevent export • Do not give adequate fiscal control

9. The position of the goods inspection among the 4 – 5 customs operations (inspection, economy, regimes, identification, etc.) has a dramatic effect on the speed of customs handling.Slow customs handling in Russia makes participation in international production networking difficult for Russian companies EU Customs procedures Order of procedures RU Customs procedures Order of procedures • First customs operation is receiving the declaration and inspecting goods. • Second customs operation is releasing the good for free movement • Document handling operations are performed within 2 weeks after permitting free movement. • Goods stands still during the first operation 10 – 30 minutes • First operations (3-4 customs departments) aredocument handling • Last operations are customs inspections and release of goods • All operations have to be completed and signed before release. • Goods stands still during all operations 1 – 10 days

10. The number of documents required with each customs declaration affects the operational cost of both the customs authority and the enterprises and generates severe cost and time delays.This reduces the international competitiveness of Russian companies. EU Customs procedures, Declarations RU Customs procedures, Declarations • Export documents typically 8 pages, Customs Declaration, pro-forma-invoice, CMR, TIR • Import documents typically 16 pages, Customs Declaration, commercial invoice, CMR, TIR, earlier export documents • Non-variable information is not repetively presented at every import/export occasion • Export declaration typically 100? Pages • Import declaration typically 100? Pages • Non-variable information is repetively presented at every import/export occasion

11. Goods is declared based its Tarif position (EU) and TNVED position Russia. EU customs limits identification to the Tarif position description. In the tolling regime Russian customs extends identification requirements without any limit outside of TNVED. Descrition beyond the TNVED detalisation uses time and resources of customs and companies without bringing any benefit to the state. International competitiveness of Russian companies is reduced. EU Customs procedures, Identification, tolling RU Customs procedures, Identification, tolling • Goods identification: EU-customs requirements limited to the 10 position TARIF description • True price: EU requires true (stock value) price at border passing time • Tolling licence: prices of materials and products are not defined in tolling licence due to the above true price requirement. • Risk analysis: price risk analysed against true declared price • Goods Identification: RU- customs requirements not limited to the 10 position TNVED description and unlimited, not defined in writing. • Fictive price: RU-customs requires the licenced price to be declared at the border passing • Tolling licence: prices of products and materials defined in the tolling license due to the above fictive price requirement • Risk analysis: price risk analysed against the fictive price required in declaration

12. The tolling customs procedure requires a continous ”balance table” to be kept in order to monitor imports, exports and quota. EU-customs sets quota only for materials and welcomes excess in the export. RU-customs sets separate quotas for materials and products and punishes excess in the export direction. Use of replacing Russian materials is prevented. EU Customs procedures, Balance and quota RU Customs procedures, Balance and quota • Quota: Licence quota is set only for materials The products volume is a function of product structures and material flow. • Balance: any excess in the export direction, without separate prior permission, is welcomed. Within quota limits. • Product structures, recipies: Companies are supposed to use estimated product structures for licence applications and actually resulting structures for declaration and balance control. 100% coincidence is not expected. • Quota: Licence quota is set separately for materials and also for each separate product • Balance: any excess in the export direction withour prior permission is punished, even if within quota limits. • Product structures, recipies: Companies are supposed to use estimated product structures for licence applications and also later for declaration and balance control. 100% coincidence is required.

13. Tolling licences are granted for long periods, typically 1 – 3 years. Changes and additions are expected. In EU-customs procedures most changes require information only after fact and some require permission. With RU-customs any licnece change requires the full application procedure. the complexity of RU-customs procedures prevents foreign participation in the development of russian industry by foreign sme companies. EU Customs procedures, Licence changes, additions RU Customs procedures, Licence changes, additions • Small changes: Minor changes like addition of products require information to customs only after the fact. • Major changes: Larger changes like addition of new materials and quota changes require customs permission. Only the new variable licence information is supplied to the Customs • Small changes: Any change requires the full licence application procedure, outside expert opinions, Customs permission and equal handling time. • Major changes: Magnitude makes no difference. A full licence application is required each time. Some changes like quota additions are not permitted at all during the licence duration.