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Overview of customs clearance procedures in Russia

As is the case with many aspects of e-trading explored in this Passport, Russia sets itself apart from much of Europe and the rest of the world in its customs clearance procedures. Due to this likely unfamiliarity, an e-Retailer into the territory would be well-placed to educate himself on any existing regulatory and practical differences before he commences trading in this complex location. In any case, seeking professional advice is recommended at this stage of an e-Retailer’s international trading experience.

In Russia, customs clearance is strictly exercised and always occurs before goods are released to a purchaser. This advance declaration dictates the procedure of Russian customs clearance; goods need to be cleared either on the Russian border or within specially designated Russian customs clearance centres. Correspondingly, all associated duties and taxes need to be paid in full either before the product crosses into the country, or in advance of it leaving a designated warehouse.

Responsibility for paying customs duties and taxes for goods always rests with the buyer of goods. All supporting documentation - for example, certificates for certain types of goods, confirmation that such goods can enter Russia, as well as confirmation of product prices - must also be presented for customs clearance, though responsibility for such presentation varies with the clearance method adopted.

B2B customs clearance

B2B customs processes in Russia will be relevant to some e-Retailers during their trading experiences into the country – either at the outset of slightly later on. Establishing recognition and demand in the Russian marketplace will lead to an increase in order volumes, and eventually there will come a time when a distance seller should optimise his expenses by shipping in bulk. Should necessity dictate, there are myriad advantages for both retailer and consumer in this approach, i.e. cheaper delivery costs and enhanced speeds for the consumer, as well as less onerous labelling and customs requirements for the retailer.

Where a merchant elects to establish a physical presence in the Russian marketplace – for example where he sets up or contracts with a local warehouse - the customs procedures and rules directly below may apply.

There are three broad methods of customs clearing goods bound for Russia that are to be received by businesses in the territory, all of which require preliminary customs notification.

1. The first option is for all process and procedure to occur directly on the Russian border. Goods are brought to a customs post located on territory lines where they will remain until the purchaser sends all relevant documentation for inspection and pays any associated duties. In this instance, the responsibility for documentation and payment are entirely placed upon the buyer. After clearance, the goods are transported to their subsequent destination. Significant risks include delays with information delivery, especially due to time zone differences. 18% of B2B goods are customs cleared under this scheme.

2. Businesses also have the option of using customs clearance centres located within the territory of Russia itself. Goods can move directly to these internal centres, but in such a case will require specific transit documents that allow them to cross into the territory without immediate clearance. In this case, it is the carrier who has responsibility for presenting the relevant documentation at the customs clearance centre – including these transit documents - though it is the purchaser who must prepare this documentation and pay applicable duties for goods already within borders. 80% of goods are customs cleared under this scheme.

3. The third option when it comes to proceeding through Russian customs clearance necessitates the use of electronic declaration. With this method, though goods and their transportation vehicles are physically present on the Russian border, customs clearance itself takes place in one of the centres of remote declaration located within the territory. All relevant documentation is sent to this centre, and is usually presented in electronic format. The two customs points will then communicate electronically with each other with the aim of clearing the goods, and - should the goods require inspection - the internal centre will give the order to the customs post on the border to carry this out. Cleared goods can then be shipped to different destinations within Russia right from the border.

Within this scheme, responsibility for preparing and presenting relevant documentation and paying associated duties and taxes falls on the buyer. This method of customs clearance is the most recently implemented of the three set out, and just 2% of goods are currently customs cleared according to this scheme. As the electronic age moves forward, this will likely become the predominant method of facilitating customs clearance. Advantages include:

»»No representatives are required at the customs terminal;

»»Goods located at any border can be declared from a local customs office;

»» Logistics don’t depend on the location of declaration;

»» The likelihood of delays associated with paperwork are reduced.

If all required documentation is present and all applicable payments are made in advance, the average amount of time required for a shipment of goods to pass customs clearance checks is about 50 minutes.

Importantly, for all of these B2B customs clearance methods, a specially certified and equipped customs storage warehouse - or customs terminal - is required so goods awaiting customs clearance can be temporarily held, though the goods need not necessarily be unloaded from their transportation vehicle. Goods can await documentation and payment in one of these customs terminals for up to four months, though costs increase proportionately according to the amount of time goods are stored.

These customs terminals:

Inform customs upon arrival of goods for control;

Confirm the delivery of goods is received according to the transit procedure (in order to close transit declarations);

Control the goods in the customs terminal (for no more than 4 months);

Provide the services necessary for actual customs control: unloading/loading, weighing and packaging, etc.

Any carrier can bring shipments of goods to these designated customs terminals, and a variety of methods can be used to remove them. This is an important consideration if a shipment contains goods from multiple buyers.

Because these customs terminals are commercially motivated, there are of, course, costs associated with storing goods in them. Where the commercial storage unit is on the border, it is usually the carrier who covers the costs of storing goods. Conversely, where the goods are stored at a customs clearance centre within Russian borders, it is typically the purchaser who fronts these costs. These costs also cover some of the paperwork necessary for the customs clearance process.

It is necessary to realise that, under this system, the party who physically receives goods in Russia and initiates the B2B customs clearance procedure must be a Russian legal entity.

Commercial customs brokers operate specifically in Russia to ensure that all documents are prepared correctly for the import or export of goods, and will present them to customs on a company’s behalf. Customs brokers are licensed by the Russian Government, and must pay a security deposit of EUR 1 million as a guarantee of quality of service. Additionally, their activities are insured. If a company chooses to conduct their business through the medium of a customs broker, the company bypasses the need to communicate directly with Russian customs at all; all responsibility passes to this agent, and the customs broker will inform a purchaser of the progress of a particular order. The cost of this will depend upon the specifics and frequency of particular shipments of goods, the average price being roughly USD 150 per shipment. Typically, customs brokers not only handle the procedure associated with the import of goods but also offer transportation services as well.

Customs payments

There are several categories of payments required during customs clearance in Russia, including:

1. Duties for customs clearance. This is a mandatory fee assessed using government thresholds. These duties apply according to the value of the shipment imported, and the fee must be paid for every shipment of goods that crosses Russian borders. The average fee for such a shipment comes in at around RUB 4,000, or approximately USD 65. These funds are allocated to the federal budget.

2. Import customs duties, which range from 0 - 15% of the value of goods imported. The exact duty payable depends upon the category of goods brought into Russia, and there are specific materials available explaining how to calculate this fee for particular product. These rates have decreased as a consequence of Russia entering the World Trade Organisation (WTO).

3. VAT will also likely become payable, typically at 18%. There is, additionally, an important distinction to be noted here: Russian legal entities that conduct typical business activities within the borders pay VAT to the Government monthly. However, when goods are imported from abroad, a legal entity must pay VAT each time a shipment crosses Russian territory lines.

It is sometimes the case that an importer in Russia ends up paying out much more in customs duties than was anticipated because he is lacking some knowledge or experience of the process, so vigilance and prior research here is key.

This is additionally why, in many cases, it makes sense to use the services of a customs broker as an intermediary, as they can substantially decrease costs that may be incurred through a problem or delay during customs control, which start from around EUR 1,150 (about 10% of the normal cost of clearance) and one additional day at a customs terminal. An overwhelming majority of goods imported into Russia are customs cleared with the help of customs brokers; only a small percentage of international companies handle all customs clearance procedures solely via their own, in-house staff. Using a forwarder in your home territory who has experience of shipping goods to Russia is also strongly recommended.

Risk management

Customs control in Russia entails a thorough system of customs investigations. These include weight control, x-Rays, document checking and physical inspection. Some shipments through customs will be labelled ‘risk categories’, requiring additional inspection by authorities. Russian customs operate risk management systems which are in full compliance with European standards, though European classification systems are simpler. These systems investigate:

The price of the product;

The product information of previous shipments, i.e. manufacturing country, manufacturer and model (based on factory ID);

The correctness of classification.

For this reason, customs brokers or buyers should ensure that the information contained in customs documents is sufficient and correct; if it is not, customs will make enquiries of the purchaser/customs broker.

Russia uses its own version of the European harmonised codes for classifying goods, and the categories used to assess applicable customs clearance fees are wide-ranging. Every product matches with a designated code which has been assigned corresponding payable duties, and risk management systems are designed to ensure that goods requiring higher levels of duties are not imported citing incorrect codes, thus attracting lower duty rates. Customs does this in part by assessing the legal entities that are importing goods into Russia - examining histories and whether customs codes have been incorrectly allocated before. They will examine values of like shipments on a database, as well as current market prices of goods. Some companies have very good reputations and are awarded a ‘green channel’. For such companies, only 0.1% of goods are physically inspected.

This risk management system works automatically via a system of algorithms, with Russian customs trying to minimise as far as possible the potential for human error.

Any business exporting goods to Russia should be aware that Russian customs are very particular about the weight of goods shipped into the country. Some goods – for example particular categories of shoes – actually have their customs duties calculated according to the weight of a shipment. If a shipment requires further inspection due to being labelled a weight risk, this can result in further costs for a purchaser.

Documents for customs clearance

The full list and scope of the specific documents required for the successful import of goods into Russia is beyond the scope of this Passport, and expert advice is recommended in this area.

Particular categories of goods will require additional documentation in order to be imported into Russia. Shampoo, for example, requires a certificate of State registration. These documents certify that particular products meet set criteria, ultimately allowing them to be distributed in the territory. Though these documents are largely not particularly difficult to acquire, they take around three weeks to arrive and there is a cost associated with receiving them. These documents, then, need to be ordered well in advance of the customs clearance process.

B2C customs clearance in Russia

As regards customs procedures and regulation, B2C business transactions differ significantly from those that are conducted B2B, and, importantly, direct-toconsumer selling is the route many e-Retailers will choose when they first begin broaching the Russian ecommerce market.

Within B2C sales, customs payments are the responsibility of the end consumer, and in the event of a customs enquiry, it is the responsibility of the customer to explain the contents of a package. Customs can require a customer to show proof of the value of the contents of a particular parcel to ensure that the duties paid are accurate.

B2C customs duties and limits

From July 2010, a unified customs scheme was implemented for all goods delivered to individual customers in Russia from abroad; these rates are equivalent whether a package is delivered by a commercial carrier or the Russian Post, the national carrier of the Russian Federation. If the total value of a particular purchase is less than EUR 1000 and the full weight does not exceed 31 kg, this purchase will be exempt from customs duties altogether.

It is important to note that a customer can only receive a particular purchase from abroad customs duty-free in the case that the total value of online purchases received by this customer during any one month does not exceed a limit of EUR 1000 (including cost, freight and insurance). If they do, this customer will be required to pay customs duties of 30% on the amount exceeding this limit. Customers who purchase in excess of 31 kgs per month (combined) will be charged a duty rate of EUR 4 per kg on any excess. If the customer’s monthly orders exceed both maximum weight and value, a greater charge is applied.

Whilst during 2014 the Russian Government had approved the lowering of this duty-free threshold for cross-border trade from January 2015 – legislation which could have had a negative impact on ecommerce orders in the territory by increasing the number of orders subject to customs duties, in the wake of economic recession in Russia, no further action has been taken. However, with Russia’s ascension into the Eurasian Economic Union, it seems likely that the issue of harmonised thresholds will be reconsidered as soon as economy is back on track. A specific figure has yet to be publically disclosed, and opinions are divided, but it is anticipated that this new tax-free threshold will be around EUR 500. It is important to note that even this threshold is substantially higher than the average price of cross-border shipments, so the actual impact on cross-border ecommerce will be limited. In 2014, Greenway estimated that with the introduction of the new limit, every 100th shipment would require the payment of customs duties, as opposed to the current threshold which subjects one out of every 500 orders to the tax. Retailers selling luxury goods to Russian consumers, however, might suffer from the introduction.

As has been highlighted elsewhere in this Passport, there are strict limitations on certain categories of good when it comes to import into the Russian Federation. For example, some goods can be carried only by commercial carriers, and some only by the Russian Post.

Some goods are prohibited from shipment into Russia altogether, and there are some products that are always considered by Russian customs to be products for commercial – as opposed to personal – use, even when a consumer has stated otherwise.

An e-Retailer into Russia should thus be vigilant in checking which categories the goods he is offering fall into before offering the products to Russian consumers. For instance, medical and photo laboratory equipment are always considered to be commercial products, and thus need to be customs cleared in accordance with B2B procedures. Additionally, video and audio CCTV surveillance products, live plants and seeds are prohibited from import for personal use, whilst cultural valuables can be carried only by commercial carriers and not by the Russian Post.

Importantly, a different customs declaration procedure is followed depending upon whether a parcel goes through the Russian Post or a commercial carrier, though the duties paid are the same in either case.

If the product is shipped by a commercial carrier, the carrier prepares the declaration and presents a list of the items transported to customs. This will include such details as value, contents, country of origin and details of the buyer for customs’ inspection. If the shipment requires the payment of customs duties, a carrier will notify the customer regarding the payment of this duty.

If the parcel is transported by a national carrier in the Russian Federation, i.e. the Russian Post, then the national carrier of the shipment in the goods’ country of origin puts forward the customs declaration, and a CN22 form- a declaration created in accordance with international postal agreements –is issued to customs authorities. Russian customs accepts this CN22 as a declaration.

If Russian customs authorities don’t agree with the specifics of a declaration, i.e. if they think that the value has not been correctly stated, then customs can approach the end consumer directly and require them to present additional documentation.

Returns

When it comes to returns in Russia, there are no set rules. They hinge on the relationship between the retailer and the consumer, and it is the responsibility of the buyer to organise the process. As long as a foreign merchant does not have a legal entity within Russian borders, Russian consumers will not be able to enforce any Russian statute or obligations against them relating to consumer rights (see Legal Framework).

 

 

 

 

Demographics

Political, social and economic environment

Online and mobile usage

Online shopping behaviour

Marketing

Payment methods

Taxation

Legal framework

Logistics and communications

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