The Custom Union between Russia, Belarus and Kazakhstan

The custom union based on the 6. October 2007 Custom Union Agreement among Russia, Belarus and Kazakhstan, is the most successful attempt at economic integration of any of the countries in the post-Soviet territory. On 10. January 2010, the Custom Union member-states implemented the Unified Custom Tariff for goods imported to the common custom territory from third party countries. A further step in easing trade amongst the participating countries was the introduction of a Custom Code on 6. June 2010. The Custom Code established standardized rules for the declaration of goods, the payment of custom duties and the application of standardized custom procedures in the territories. Code requirements relate mostly to custom regulations concerning the territory of the Custom Union, and do not extend to other areas of legal control such as taxes, administrative procedures and criminal liability of the individual states.  The Custom Code aims to facilitate cross-border trade and simplify custom procedures.   Starting with 1. July 2011, customs, transportation, quarantine, phyto-sanitary and veterinary controls are no longer conducted within the internal boundaries of the Custom Union. Now the border control officials of the member-states control the respective country borders connected to non-Custom Union nations.

Movement of Goods within the Union

The Custom Union is comprised of the territories of the member states. Within the common custom territory, no custom duties are levied, a zero VAT rate is in effect and no non-tariff regulation measures (licensing, quotas, embargo, etc.) are applied  with respect to goods originating from: (a) the territories of the member states ; and (b) third party countries, once released for free circulation onto the territory of the Custom Union[1]. Foreign goods released for internal consumption in the member states of the Custom Union are deemed to be the “goods of the Custom Union” and may be circulated within the territory of the Custom Union without restriction. For instance, goods traveling from Russia to Kazakhstan are deemed to be goods of mutual trade and not exports.

Export

Exportation is a procedure when goods of the Custom Union are transported permanently to areas outside of the Custom Union. Export duty rates are determined by legislation of the member states where the goods have been produced. National legislation of the member states also determines the custom value of goods. Custom officials from each member state where the goods cross the border have the authority to collect export duties.  Each member state develops and circulates a list which includes all goods subject to export duties and their duty rates. The member states have agreed to draft these lists together to ensure that the rates and goods listed are the same for all member states.

Import

All territories of the Custom Union utilize the Unified Custom Tariff to calculate import duties. This list includes the import rates for the members of the Custom Union. Only in extenuating circumstances, is it possible for member states to receive permission from the Custom Union Commission (an ongoing executive body) to deviate from the Unified Custom Tariff. Custom values for goods are estimated on the basis of standardized rules.

Taxes

The movement of goods across the boundaries of the common custom territory may be subject to taxation, namely, VAT and excise duty. These taxes shall be calculated in accordance with the rates in force in the country of import (i.e. in the country where the goods are released for free circulation), and will be collected by the tax authorities of this country, even if the goods actually crossed the borders through another member-state.

Non-tariff regulation of trade with other countries

Members of the Custom Union have agreed to act jointly in matters involving common foreign economic policy, including implementation of standardized measures of non-tariff regulation to protect domestic markets.  These measures, mostly of a quantitative character, can provide for embargoes, or import- and export restrictions for particular types of goods. The member states have approved a joint list for such goods.

Other instruments of non-tariff regulation within the Custom Union

The member states have approved a standardized list of goods subject to sanitary epidemiologic controls on the custom border of the Custom Union and standardized sanitary-epidemiologic and hygienic requirements. Forms that need to be submitted regarding the adherence to safety requirements for goods crossing the borders have been standardized as well. Plans are also underway to adopt standardized certificates for the labeling of goods originating from the Custom Union, and to take measures for the recognition of this label by custom offices of other countries.   Currently, standardized rules concerning technical regulations are optional but are expected to be approved soon by the Union and become mandatory. 

The prospects of the Custom Union seem promising. Comparisons are already being drawn between the Custom Union and the Great Silk Road – “a good business-hub, a channel, or a transport node from the South to Europe, or from Europe to China and India”. (from a speech of Mr. K. Kelimbetov, Kazakhstan’s Minister of Economy and Economic Development on the  World economic forum for Europe and Central Asia held in. Vienna, Austria 08-10 June 2011). According to of Russian Prime-Minister Putin,

 [a]s a result of removal of barriers complicating mutual trading, we created a receptive, fast-growing common market with more than 165 million of prospective consumers. These are very good conditions for businessmen from the Custom Union as well as from the other countries. Rules of the game […] became more stable […] we relied upon principles and norms of WTO. Therefore, for our partners from other countries, operations on this common area will become more comprehensible and predictable.