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General confusion about Customs Union that should get in force since today

Confusion surrounds the new rules governing the customs union among Russia, Kazakhstan and Belarus, set to go into effect on Thursday, as businesses struggle to understand the new regulations and Belarus waffles over its future role in the grouping.

General confusion about Customs Union that should get in force since today

Confusion surrounds the new rules governing the customs union among Russia, Kazakhstan and Belarus, set to go into effect on Thursday, as businesses struggle to understand the new regulations and Belarus waffles over its future role in the grouping. In November, the three countries agreed to form a customs union, which went into effect on Jan. 1. Under the terms of the union, the members adopted a unified system of tariffs, which utilized more than 90 percent of Russia's duty structure. The Unified Customs Code is set to take effect on July 1, according to the November agreement, and will govern the rules for customs clearance and control, bringing all the member states under a unified system. But the new rules are a source of confusion for many of the country's small business owners, many of whom met with government officials on Wednesday to voice their concern.

“It’s always frightening when the rules of the game change, especially of such a complicated game as external economic activity,” said Alexander Onishchyuk, a co-chairman of the foreign trade committee at Opora, Russia’s main small business lobby group. For starters, the bill regulating the enforcement of the new Customs Code has not even got its final approval from the State Duma, which means that the new regulations will be operating for several months before having legal enforcement mechanisms. The bill has been passed in a first reading, but isn't expected to be passed in a third and final reading until fall. In addition, until the bill is signed into law, both the old and the new customs codes will be operational, forcing businesses to look to the Federal Customs Service for guidance on which rules to follow from which code.

The service has published instructions on its web site, explaining how the old Customs Code will be enforced in terms of the new one. "In order for the business not to be confused over which norms may be enforced and which may not be enforced, we have prepared instructions," said Dmitry Kotikov, a spokesman for the service. The service has also sent instruction letters to all the regional customs bodies, he said. Ultimately, it's the businesses' responsibility to get acquainted with the new rules as the regional customs offices prepare for the change in legislation, he said. The service will also launch a 24-hour hotline on Thursday that will provide information on enforcing customs union rules. To top it all off, it's not even clear yet which countries will be abiding by the new rules. Belarus has been giving mixed signals about its intention to ratify.

In May, Russia and Kazakhstan agreed to launch the union without Belarus' participation after negotiations among the countries broke down when Moscow refused to cancel the export duties it charges on the oil it sells to Minsk. Since then, Belarus has announced its intention to work through the differences, but the Belarussian parliament declined to ratify the Customs Code on Wednesday as expected, meaning that the union will go into force Thursday without it. Belarus said Wednesday that a decision on the code would be made by July 5. "You will learn everything on July 4 to 5, maybe later," Belarus First Deputy Prime Minister Vladimir Semashko said, RIA-Novosti reported. "Everything depends on [Russia's] decision on oil products duties," he told reporters. Semashko said imposing duties on oil products was "absolutely illegal" and that Belarus was ready to wait for Russia to change its position on the fees. "Remove these things, and then we'll be ready to sign," he said.

The upshot of all the confusion is that a number of Russian firms don't plan to import actively over the next two month, Onishchyuk said. "Such companies have built up their inventories in advance, since they know it's better not to be involved in foreign trade while the rules are changing," he told The Moscow Times. The lack of information about the new rules is among the main problems the business community is facing, said Marina Lyakisheva, a customs law adviser with DLA Piper, who also attended the meeting. Businessmen demonstrated "an absolute unawareness" of the rules going into effect on Thursday, she said. But they weren't the only ones. Regional customs officers haven't received any instructions on how to implement the new rules either. "We'll work like we did before," said an officer at a customs post in the Smolensk region, which borders Belarus. "We haven't received any official instructions from the Federal Customs Service," said the officer, who asked to remain anonymous. The lack of information provided to the customs officers just opens the door for more corruption, Lyakisheva said.

Foreign organizations will also be watching the operations of the customs union carefully, in light of its impact on Russia's bid to join the World Trade Organization. Moscow submitted its application to join the WTO in June 1993, nearly 17 years ago, and despite promises from the United States to speed up its accession, Russia remains the largest economy outside the bloc. Some European Union and U.S. officials, as well as the WTO itself, have said a new layer of customs regulations could set back accession talks. Nevertheless, the Russian business community is optimistic about the new rules, saying they will be beneficial for companies. "Any border expansion is only a plus for the economy as a whole and every company, in particular. We undoubtedly welcome it," Onishchyuk said. "A number of barriers for the businesses conquering neighboring markets will be removed."



Author: Irina Filatova


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