New rules for determining origins of goods in the CIS

Pepeliaev Group advises that Federal Law No. 103-FZ dated 1 June 2011 has ratified the Agreement on the Rules for Determining the Origin of Goods in the Commonwealth of Independent States, signed in Yalta on 20 November 2009 (the “Agreement”). According to the CIS Executive Committee, the Agreement came into force for the Russian Federation on 23 July 2011. From this date, the previously applicable Rules for determining the country of origin of goods, approved by the Decision of the CIS Council of Heads of Government dated 30 November 2000, no longer apply to Russia (cl. 2 of the Decision of the CIS Council of Heads of Government dated 20 November 2009).

The Rules for determining the country of origin of goods (the “Rules”) are an integral part of the Agreement and are applied in relation to goods originating in countries that are signatories to the Agreement and are in trading circulation between these states within the scope of the CIS free trade zone.

The new Rules contain a number of significant changes and new developments when compared to those that were previously applied.

1. The conceptual apparatus has been extended because new terminology and definitions have been introduced, such as: ‘material of foreign origin’, ‘set of products’, ‘consignment of goods’ and ‘ex-works terms’.

2. The transactions are clarified which do not meet the criterion of goods being sufficiently processed or treated. Among other things, the following have been added to their number: washing; cleaning; coating with oxide, oil or other substances; pressing; operations involving dyeing or polishing; peeling; grinding grains and rice; operations that involve colouring sugar or creating pieces of sugar; removing peel; cutting fruits; sorting and selecting (including creating selections of items); bottling; packing in cases, boxes and other simple packaging operations; dividing a product into component parts which does not lead to there being a significant difference in the components from the outgoing product, etc.

3. The particular features are defined of the country of origin of a selection of products, which means a group of elements /products classified as a selection in accordance with the 3rd Principal Interpretation Rule of the Commodity Classification for Foreign Trade (“CCFT”).

The Rules establish that an item to which the criterion of goods being sufficiently processed or treated is applied is a product which is defined as an individual item for classification under the CCFT goods classification rules. Should the origin of selections of products be determined by applying the criterion of sufficient processing or treatment, each specific element of which the selection is comprised will be examined.

Should it be determined that elements or products of which the goods are comprised do not originate from states that are signatories to the agreement, then the use of such elements or products is possible on condition that such items do not represent more than 15% of value of the selection on terms ex-works.

4. The requirements and procedure for completing a certificate of the origin of goods on form ST-1 has been amended.

In particular, a new column 9 – ‘Criterion of origin’ has been introduced in the certificate. Care should be taken when filling in this column when the criterion of being sufficiently processed or treated is applied to goods.
In accordance with the Rules, if a certificate is submitted which contains in column 9 information concerning a commodity classification in which a finished product is classified differs from the information contained in the customs classification, the issue of whether the free trade regime can be granted is resolved by the customs authority of the country of import after the importer / consignee presents an opinion concerning the origin of the goods or an expert review certificate issued by a competent authority or other organisations and which unambiguously evidences that the product was sufficiently processed or treated in a Customs Union member state.

5. Various instances are specified that were not previously stipulated in which a certificate of the origin of goods is issued on form ST-1. Among such instances is the export of goods for an exhibition / trade fair with a view to subsequent sale.

6. The grounds are more clearly defined for not recognising a form ST-1 certificate, as are the rights and obligations of the custom authorities and competent bodies that issued the certificate in terms of checking its authenticity and confirming that it was properly issued.

It is provided that, should doubts arise as to whether the form ST-1 certificate or information contained in it is free of error, the customs authority in the country of import may contact the authorised body which certified the form ST-1 certificate, or the competent authorities in the country of origin of the goods with a request, stating reasons, to provide additional information or clarifications. This may include requests connected with simple spot checks of form ST-1 certificates. In addition, the competent authorities are obliged to reply within six months of being contacted. If, during the total six-month timeframe (three months from the date of the initial request and three months from the date of a follow-up request) the customs authority in the country of import has not received a reply relating to the certificate it asked about from the competent authorities in the country of export or country of origin of the goods, the certificate may not be recognised as valid. The grounds for customs authorities not to recognise a certificate are listed in clauses 9.1 and 9.3 of the Rules.

When ratifying the agreement, the Russian Federation made a series of stipulations aimed at protecting the interests of the country’s commodity producers.

In the interests of sugar producers, a stipulation was made that, in determining the country of origin of white sugar (CCFT code 1701), the Russian Federation reserved the right to apply the fundamental condition of the criterion of sufficient processing or treatment, which is expressed in the amendment of the above CCFT commodity heading on the level of at least one of the first four digits. This stipulation, in essence, removes the possibility of white sugar refined from raw sugar being imported into Russia from CIS member states. Kazakhstan, Kyrgyzstan and Ukraine have made similar stipulations regarding sugar.

A stipulation has also been made regarding the amendment of the commodity heading on the level of one of the first four digits relating to commodity headings 1507-1515 of the CCFT (vegetable oils). With a view to protecting domestic producers of various types of oils and margarine products, the Russian Federation will apply the ad valorem share rule in relation to commodity heading 1516 of the CCFT – the value of the materials used in production must not exceed 50% of the price of the finished product, but when goods are produced under commodity headings 1517 and from 2106 90 980 of the CCFT, the cost of the materials under commodity headings 1511 and 1513 of the CCFT (palm, coconut and palm kernel oil) must not exceed 50% of the price of the finished product.

Under article 2 of Federal Law No. 103-FZ dated 1 June 2011 on the ratification of the Agreement, the above provisions do not apply in mutual trade between the Member States of the Customs Union (Russia, Belarus and Kazakhstan).

Pepeliaev Group’s experts have significant practical experience in customs law and foreign trade activity, as well as in cases concerning administrative offences arising from infringements of customs rules.

Our firm’s lawyers will provide any necessary advisory assistance on issues regarding the application of the customs legislation of the Russian Federation and the Customs Union. Moreover, they act as representatives for companies before the customs authorities and courts when decisions, acts and omissions of officers of the customs authorities are appealed in a customs case. They also defend clients in cases involving administrative offences at all stages of the administrative proceedings.

in Moscow – Galina Balandina, Partner, Head of Customs and Foreign Trade Regulation Practice, at +7 (495) 967-00-07 or by e-mail; Igor Novokshonov, Associate, at +7 (495) 967-00-07 or by i.novokshonov@pgplaw.ru;

in St Petersburg - Sergey Spasennov, Partner, Head of St. Petersburg office, at +7 (812) 640-60-10 or by e-mail