What does the EurasEC customs union give us?

Jill Washington

13 December 2010

The movement of goods across the inner borders of the EurasEC countries requires no customs clearance or declarations. ©Ministry of Foreign Affairs of Kazakhstan

The movement of goods across the inner borders of the EurasEC countries requires no customs clearance or declarations. ©Ministry of Foreign Affairs of Kazakhstan

On 1 July 2010, the Republic of Belarus, Kazakhstan, and the Russian Federation created a customs union within the framework of the Eurasian Economic Community (EurasEC). This was done on the basis of more than twenty international legal instruments previously signed by these countries. State borders within this territory are preserved, but customs borders are eliminated, so that customs borders move to the outer perimeter of the three states. From now on, the movement of goods across the inner borders of the three countries requires no customs clearance or declarations.

This will generate considerable savings for importers and exporters within the customs union. For example, in the past, companies engaging in import-export operations to and from the Russian Federation had to issue about 160 cargo customs manifests per year. These are no longer required. Since the costs of customs broker services for issuing a single cargo manifest were in the range of 10,000 to 22,000 tenge ($66-$146), considerable savings will result. In addition, it is no longer necessary to pay 3000 tenge ($20) per day (at least) for temporarily storing goods while awaiting customs clearance. Likewise, payment of customs duties—€50 and €20 for each additional page—for issuing a cargo manifest is no longer required.

Trade between these three countries had been restricted by such licenses, quotas, and other non-tariff barriers. Many of these restrictions, such as limitation on the export of foreign exchange, have now been removed. As a result, the movement of goods from Russia to Belarus today is now similar to the movement of goods and food products from one region of Kazakhstan to another. However, non-fiscal customs control will be temporally preserved at Kazakhstani-Russian border until 1 July 2011.

Licensing has always been one of the barriers in the development of external trade. With the customs union, most of these barriers have been removed. The significance of this is apparent in the fact that, prior to the customs union, some 115 warehouses, 56 duty-free warehouses, more than 200 temporary storage warehouses, and 10 duty-free stores were licensed. Revenues accruing from licensing fees were considerable, in the €5-20 thousand range. Licensing has been replaced by registration with the customs authorities. If a company meets the requirements, it is automatically registered without a license.

Although customs clearance does not exist within the customs union, the obligation to pay indirect taxes remains. For entrepreneurs from these countries, payment of these duties will be delayed for at least a month (compared with the situation before the customs union). VAT and excise tax must be paid not when imports cross the border, but instead by the 20th day of the next month. This reduces the costs of tax compliance and frees up working capital.

Prior to the customs union, shuttle traders crossed Kazakhstan’s borders under a simplified customs regime. From 1 July 2010 this is no longer the case; shuttle traders must now submit cargo customs manifests when crossing the border. At first glance, this looks like a violation of economic rights. But this is not true. Goods worth some $4 billion are annually imported into Kazakhstan by individuals; practically each time they had to issue a cargo customs manifest. According to statistics, the simplified customs regime allowed them to only import goods worth $100 million, less than 3 percent of total imports. The cargo customs manifest regime was the most popular framework for expediting shuttle imports through customs, and so it remains.

 

Marat Aldangorovich Sarsembaev is a professor of the Daneker Academy of International Law, Astana, Kazakhstan.