An acquirer’s liability for violations committed when goods (items) are imported

The opportunity granted to acquirers to obtain information on the release of goods is important given that customs legislation provides for joint and several liability to pay customs duties.

When goods are moved illegally across the customs border, joint and several liability to pay customs duties and taxes arises for the persons and entities that move the goods or are involved in the goods being moved illegally, if they were or should have been aware that such movement was illegal. If the goods are imported into the customs territory of the Customs Union, liability also arises for the persons and entities that have acquired ownership or possession of the illegally imported goods if they were aware at the time when they acquired them that the goods had been imported illegally.

Moreover, the acquirer may be held administratively liable in accordance with article 16.21 of the Code of Administrative Offences*. The specified article does not provide that only the first acquirer of the goods is to be held administratively liable. Therefore, administrative liability may be imposed on all organisations and their employees who were involved in the sales chain within Russia before the goods were sold by retail.

The right to obtain information regarding the release of goods 

The new version of Federal Law No. 311-FZ ‘On customs regulation in the Russian Federation’ dated 27 November 2010 (‘Law No. 311-FZ), which took effect on 24 July 2016 provides that legal entities and individuals have the right to obtain information on the release of goods.

Such information is accessed by sending a written request to the customs authority or via the web-site of Russia's Federal Customs Service. The request must contain the following data: 

• the number of the declaration for goods: 
• the country of origin of the goods;
• the goods’ quantity or net weight;
• the declared goods’ serial numbers.

The customs authority’s reply contains the information regarding the goods that is stated in the relevant customs declaration: 

 

• the name of the goods;
• the manufacturer (if there is information available);
• the trade mark, the brand, the model, the stock number, the class of the goods;
• whether the information on the quantity of goods in kilograms (gross weight and net weight) and/or in other units of measure indicated in the customs declaration coincides with the relevant information in the person’s request;
• the status of the goods when they are released.

Currently, customs control after goods have been released is one of the priority areas for the customs authorities. If such control measures used to be ad hoc, now they are scheduled. First of all this relates to the general concept of the customs control stage being moved from the moment of customs declaration to the moment following the release of goods for the purpose of reducing the timeframes for customs operations and business expenses relating to them.

It should be noted that customs authorities are entitled to perform customs checks with respect to goods released for free circulation both when such goods are held by the declarants and when they are held by persons who have acquired the imported goods.

The Tax Code provides that, as far as goods which do not originate from the Russian Federation are concerned, the VAT invoices must contain data on the goods’ country of origin and the number of the customs declaration. The taxpayer who sells such goods is responsible only for the specified data in the VAT invoices the taxpayer provides being in line with the data contained in the VAT invoices the taxpayer received and with the data in the accompanying documents.

However this restriction concerns only the responsibility provided for by tax legislation. 

There was a case in our practice when the data on the names of air conditioners, their manufacturer and the country of origin coincided, but the data on their power differed: according to the VAT invoice, the power of the conditioners was 60 W, and according to the customs declaration it was 80 W. 

 
The check was conducted by the specialized unit of the Federal Customs Service which concluded that the customs declaration specified in the invoice did not confirm that the conditioners had been imported lawfully. The relevant unit of the Federal Customs Service raised claims against the acquirer of the conditioners.

If goods are identified which have been imported with violations of customs legislation, the acquirer of the goods faces customs risks which may differ depending on whether the customs authority identifies evidence confirming that, when the goods were acquired, the person knew or should have known that the goods had been imported unlawfully.

If such evidence is not available, the customs authority, in accordance with article 168 of Law No. 311-FZ, imposes attachment on the goods or seizes them and proposes that the person from which the goods have been seized use the right to make the customs payments relating to such goods (without any default interest accrued), file the documents (licenses, permits, conclusions, etc.) confirming that the non-tariff limitations have been observed and declare the goods in accordance with a simplified procedure.

The person has 1 month to exercise the right in question. If the person fails to exercise such right, the customs authority transfers the goods to the Federal Agency for State Property Management (Rosimuschestvo) for those goods to be sold, destroyed or recycled.

If the specified evidence is found, it is not the right, but the obligation of the acquirer of the goods to make the customs payments. In this case, the customs authority may enforce the underpaid amount and default interest and hold the acquirer liable based on article 16.21 of the Code of Administrative Offences.

Before the above changes were made to article 100 of Law No. 311-FZ, the right to receive information on the release of goods was provided for by Order No. 1347 of the Russian Federal Customs Service dated 31 October 2007. However, such right was granted only to persons engaged in the wholesale and retail trading of foreign goods. Manufacturing enterprises or organisations using foreign goods to provide services or to perform works could not exercise this right.

Moreover, the procedure itself for obtaining information about the release of goods required considerable effort and was often useless. A person’s request was to contain detailed information on the goods including the number of the customs declaration, the name of the goods with the model, the brand and other characteristics specified, the country of origin, the unit of measurement and quantity of the goods, and the number and date of the compliance certificate. If possible, the production date, the OKP code (National Product Classification Code) and the TN VED code (the code under the Commodity Classification for Foreign Trade) were also to be specified.

In reply, the customs could give information with respect to the requested goods on only the customs status of goods: 

 

• customs clearance had been completed, and the goods had been released for free circulation; 
• the goods had been conditionally released subject to limitations on the use and/or disposal of the goods in accordance with the conditions of individual tax regimes;
• the customs clearance of goods had not been performed in accordance with the set procedure. 

If the goods were not found in its database or if at least one of the characteristics specified in the request did not coincide, the customs authority only reported to the declarant that customs clearance had not been performed without even minimal additional information being specified (for example, that the model, the stock number, the colour, the technical specifications, the trade mark, the quantity, the TN VED code, etc., did not match).

Therefore, a negative response meant that the declarant had to obtain additional clarifications regarding the situation from the supplier and to independently identify the reasons why the customs authority did not have any information on the customs clearance of the goods.

There was negative court practice with respect to appeals against decisions of the customs authorities that the customs payments be recovered or against resolutions to impose administrative liability.

The position of the commercial courts

Discrepancies between data on the goods specified in the VAT invoices and data in customs declarations cannot serve as evidence sufficient to prove that the goods have been imported unlawfully. The previous possibility of and the procedure for checking whether goods have been imported lawfully do not ensure effective legal protection of the interests of the acquirers of the goods. In such a situation it would be unlawful to impose administrative liability on the acquirers of goods that have been imported unlawfully. 

Implications of legal updates

For the purpose of changing such court practice, the above amendments have been made to article 100 of Law No. 311-FZ. Now even any persons of the member states of the Customs Union and foreign persons are entitled to obtain information about the release of goods without any limitations.

The new version of the article provides for a simplified procedure for filing requests through the ‘User account of a party involved in foreign trade’ service at the address: http://ved.customs.ru/**.
The request must contain the minimum data, and in response the custom authority must provide detailed information on the goods.

Thus, if the customs authorities find out that unlawfully imported goods are in the possession of any person which has acquired foreign goods, the customs authorities may use the following arguments as grounds for their claims: 

 

• customs legislation provides for the right of free and quick access to the information that the customs authorities have about the release of particular shipment of goods. This allows the risk to be ruled out that the unlawfully imported goods will be acquired. The procedure for exercising this right is an effective means of protection; 
• the fact that an organisation has not exercised the granted right points to a failure to exercise due care and to take measures to comply with the customs legislation. 

What to think about and what to do

Organisations which acquire goods manufactured abroad from Russian suppliers would be well advised, in addition to general measures for checking their contracting parties, to: 

 

• make changes to the stage of pre-contractual work which are aimed at establishing the significant facts of the case;
• include in the agreement certain obligations of the seller which are aimed at preventing and minimising the implications of customs risks;
• check whether VAT invoices have been filled in correctly in terms of stating data about customs declarations and the country of origin of the goods; 
• set up regular work in terms of checking the release of the acquired goods.