2011
November 2011 –Customs & Trade Newsletter
- Accession of Russia to the WTO and it’s implications
As part of the accession accord signed on the 10th November, Russia has agreed to undertake a series of important commitments to further open its trade regime and accelerate its integration in the world economy. The deal offers a transparent and predictable environment for trade and foreign investment. The Russian federation will have until 15th June 2012 to ratify it’s access to the WTO- 30 days after the Russian Federation will become a fully-fledged member.
Market access for Goods –tariff and quota commitments;
Russia has agreed to lower its tariffs on a wide range of products. Average duties after full implementation of tariff reductions will be:
- 14.9% for dairy products (current applied tariff 19.8%)
- 10.0% for cereals (current applied tariff 15.1%)
- 7.1% for oilseeds, fats and oils (current applied tariff 9.0%)
- 5.2% for chemicals (current applied tariff 6.5%)
- 12.0% for automobiles (current applied tariff 15.5%)
- 6.2% for electrical machinery (current applied tariff 8.4%)
- 8.0% for wood and paper (current applied tariff 13.4%)
Final tariffs will be bound at zero for cotton and information technology (ITA) products (current applied tariff on ITA products is 5.4%).
The final bound rate will be implemented on the date of accession for more than one third of national tariff lines with another quarter of the tariff cuts to be put in place three years later. The longest implementation period is 8 years for pork, followed by 7 years for motor cars, helicopters and civil aircraft.
Tariff rate quotas (TRQs) would be applied to beef, pork, poultry and some whey products. Imports entering the market within the quota will face lower tariffs while higher duties will be applied to products imported outside the quota.
Market access for services
The Russian Federation has made specific commitments on 11 services sectors and on 116 sub-sectors.
On telecommunications, the foreign equity limitation (49%) would be eliminated four years after accession. The Russian Federation also agreed to apply the terms of the WTO’s Basic Telecommunications Agreement.
Foreign insurance companies would be allowed to establish branches nine years after Russia accedes.
Foreign banks would be allowed to establish subsidiaries. There would be no cap on foreign equity in individual banking institutions, but the overall foreign capital participation in the banking system of the Russian Federation would be limited to 50% (not including foreign capital invested in potentially privatized banks).
On transport services, the Russian Federation made commitments in maritime and road transport services, including the actual transportation of freight and passengers.
On distribution services, Russia would allow 100% foreign-owned companies to engage in wholesale, retail and franchise sectors upon accession to the WTO.
Deloitte Update
Yuri Volkov, Partner, Deloitte Moscow writes:
Russian customs law and that of the Customs Union (between Russia, Belarus and Kazakhstan) is based on international principles and is embedded in the legislation of these countries. As such, we do not expect there to be substantial changes in the short term.
Unfortunately, it has to be recognized that the Russian authorities do not always adhere to the customs legislation as they exercise their duties. Their reputation for increasing Revenue collection without following the applicable customs legislation is well founded. For example, they will often apply the references prices of commodities as the basis for customs valuation rather than the transaction value. We do not expect that these unwelcome practices will change overnight or even in the medium-term.
However, as noted above, there may be some ease of restrictions with regard to the importation licensing of some goods. The position will need to be reviewed for each particular commodity.
As a planning tool for each particular company, the reduction of import duty rates should be taken into account. However, much will depend on the specific protocol for each commodity which outlines when the reduced rate comes into effect. Currently, these protocols are not publicly available, however we are in contact with the Russian authorities to get more specific information and we will provide an update as soon as this is available.
Our view is that Russia may become a WTO member in late spring – summer 2012.
Yuri Volkov
yvolkov@deloitte.ru
- WCO advises on the new Harmonised System (HS)Nomenclature edition effective 1st Jan 2012. (More info at; hs@wcoomd.org)
The WCO ‘s 4th Review of the HS Nomenclature has been completed and is effective form 1st Jan 2012.A review takes place of the HS Nomenclature every 5 years approx..
The nomenclature changes take place to take into account the evolution of technology and changes of consumer habits. If this update is not done then serious difficulties and disputes arise when classifying products .For example in the 4th HS Review due out in January there is a new heading for hygiene absorbent products , such as baby diapers( nappies ) , female sanitary products and the like . These products are classified as HS 2007 according to their constituent materials; they fall into HS heading 48.18, 56.01, 61.11, or 62.09.
However, over the past 40 years the technology behind these products has evolved from simple knit or woven cloth to cellulosic-wood –pulp based products and super absorbent polymers (SAP) combined with plastic films.
Hence, as of 1 st January 2012 these hygiene absorbent products, of any material, will fall in heading 96.19 in HS 2012.
The Revenue commissioners are responsible for taking inputs from the trade in Ireland and making recommendations for simplifying the HS Nomenclature to suit Irish trade needs. The IEA will be working with exporters to see where classification issues, particularly in ICT and pharmaceutical and other new technology sectors, are causing difficulties and will be endeavouring to ensure the Harmonised System is made more user-friendly and easier to apply in the future.
- Notification of Combined Nomenclature Code (Tariff) Changes 1st January 2012
The Combined Nomenclature (CN) is updated at the end of every year and any changes take legal effect from the 1st January of the following year. The 2012 CN was published by the European Commission in Official Journal L282, dated 28th of October 2011 (Reg (EU) 1006/2011, dated 27.09.2011). There are significant code changes on goods such as meat, fish, fruit and vegetable preparations, fuels, chemicals, articles of iron or steel, printers, recorded / unrecorded media, set –top boxes, cycles and sanitary products.
- A link to the 2012 CN has been published on the Revenue website at
2012 Combined Nomenclature (PDF)
. This link will enable exporters to check whether CN codes (8 digit level) relevant to their activities will be impacted by the changes. - A further link on the Revenue website at Taric Code 2012 will enable traders to check whether there will be changes at Taric code level (10 digit level). Particular caution is required in this regard as changes of this type can occur at irregular intervals and with little notice from the EU Commission.
Exporters will also find Correlation Tables 2011-2012 at Correlation Tables 2011 - 2012 on the Revenue website. The Correlation Tables will assist traders to establish if their particular codes will be affected by the changes. However, only individual traders will know the codes which are of interest to them and it is important to note that the onus is on each individual trader to carry out checks to confirm whether or not their existing codes will be changing.
- Safety and Security controls at Export
The EU Common Risk Rules involving safety and security checks on export declarations are expected to be going “live” at the end of November. This will involve risk analysis being performed on every export SAD before the goods leave Ireland. These requirements are mandatory under EU rules.
Revenue is fully aware of the concerns about the possibility of delays arising for exports when the system goes “live”. To guard against this, there will be an intensive testing period before live release. If the testing identifies particular problems for individual traders, they will be contacted to discuss the issue and find appropriate solutions. For example it might be possible to carry out checks at an exporters premises before goods are dispatched.
They IEA will advise members of the actual live release date in due course.
Revenue advised that exporters and agents can help to avoid problems by ensuring that the data on the export (SAD) declaration is correct. It will also help if the declarations could be submitted as early as possible (as soon as the goods are available for presentation to Customs) as this would allow time to carry out the check if it was needed.
Revenue advised that exporters / agents should contact the AEP Helpdesk or their local Control Officer if they have particular concerns about the new checks.
- Control of excisable goods – application of reduced controls
This item relates to proof of export and the stamping of excise documents at Dublin Port. It will no longer be necessary for exporters to provide hard copy export documents for stamping at the Dublin port customs office prior to shipment The export documents will be held by the companies on file whereby the local Control Officer can check them for proof of export. Following a pilot scheme involving one company where these procedures were simplified, the IEA have now managed to have this facility extended to other companies with excisable exports.
- US and EU agreement on AEO and C-TPAT mutual recognition
Revenue informed the IEA that the mutual recognition agreement between the US and EU regarding AEO and C-TPAT was scheduled to be signed by end of October –and they now await confirmation of that signing (as of 21st Nov). The US has visited 13 member states examining AEO approval standards in conjunction with examining trader premises on the ground.
The EU is also looking at possibilities for mutual recognition with other trading blocs.
The trade enquired as to the number of AEO approvals in Ireland compared to other MS. Revenue replied that there are 7,878 traders with approved AEO status across the EU. Ireland currently has 69 AEO approvals in place with a further 20 in the pipeline. It was noted that some of the larger exporters that possess AEO status have also asked their trading partners (transport companies etc) to seek AEO approval status.
- Quick Updates
Downloadable SAD’s
Revenue have advised that exporters will have access to download and retrieve their submitted SAD’s. Testing has commenced on this facility and is progressing well. The IEA will issue an information note to the exporters/agents informing them when the system is available.
New VAT Regulations
Revenue advised that this was a directly binding EU Regulation so national legislation is not required. However, Revenue plans to issue some Guidance Notes on the issue. These are currently being drafted in consultation with TALC (Taxes Administration Liaison Committee) and are expected to issue shortly
Air Cargo Security and Authorised Economic Operators – need to avoid duplication of procedures and inspections
The IEA have requested Revenue if the benefit of AEO status could be aligned with Air Cargo Security status. Revenue advise that the AEO programme gives credit to holders of AEO status, if they have regulated agent status under the Air Cargo Security Programme. However, reciprocal recognition does not apply.
Revenue explained that the current arrangements are based on EU rules and it would not be possible to harmonise the rules at national level unless this was first done at EU level. It was confirmed that both the Dept. of Transport and Revenue were aware of the problem and would be raising the issue at EU level where possible. The IEA will be putting pressure on the EU Commission to harmonise the AEO and Air Cargo security system.
Modernised Customs Code
Revenue informed the IEA that the Council Regulation governing the Modernised Customs Code had been adopted pre Lisbon Treaty. The EU Commission concluded that the comitology rules in the Regulation need to be amended to reflect Lisbon rules. Over the last few months, a recast of the Code and amendments to the text has been completed. The EU Commission will present the revised proposal to the European Parliament and Council in December. Negotiation will then take place in the Council and EP to come up with a final version. The date of implementation has not yet been decided, but it could be extended to 2015 to allow for IT and MCC Implementing Provisions. The extent of the IT developments required is still under active consideration.
Import Control System
Revenue gave the IEA an update in relation to ICS. The number of declarations (ENS) lodged through the system across the EU has reached over 20 million. Ireland receives between two and three thousand declarations per month.
While the system in Ireland has largely settled down there are still some problem issues that Revenue is working to resolve. The goods description and routing remain as the most evident problems associated with ICS. Revenue again emphasised the need for correct data to be submitted on declarations. Up to this Revenue has been flexible around the actual examination of red routed consignments but as the system settles down more attention will have to turn to this aspect.
Inco Terms
In January 2011, changes were introduced to the Incoterm Codes to be used in international trade. Originally it was envisaged that only the new terms would be used but it appears that both sets of terms are in use. The IEA have requested that Revenue to issue an AEP notification bulletin, this we understand will be done over the next few weeks .
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