Chapter 19. CUSTOMS ECONOMIC PROCEDURES
§1 Inward Processing Procedure
Article 173. Content of a Customs Procedure
1. The inward processing procedure constitutes a customs procedure under which imported goods are utilised in the customs territory of the Russian Federation within a designated period of time (goods processing period) for the purpose of their processing with complete conditional exemption from customs duties and taxes provided the goods compensating products are exported from the customs territory of the Russian Federation within prescribed time limits.
2. The imported goods subjected to the inward processing procedure shall be liable for all restrictions and prohibitions stipulated by the Federal Law of the Russian Federation on the State Regulation of Foreign Trade Activities.
Article 174. Terms of Placement of Goods under a Customs Procedure
1. Goods may be subjected to the inward processing procedure upon permission issued by the customs office concerned (Article 179).
2. The inward processing procedure is permitted when the customs authorities are capable of identifying the imported merchandise in the resulting [compensating] products manufactured thereof (Article 175), except the case when this customs procedure is completed with exportation of the compensating products equivalent to the originally imported merchandise as per Article 186 of this Customs Code.
3. Subject to inward processing procedure may be foreign goods, which have undergone other customs procedures, provided the terms and conditions stipulated by this Customs Code are observed.
4. The Government of the Russian Federation has the right to determine the cases when the inward processing procedure with regard to specific categories of imported goods will be prohibited if goods identical in description, quality and specifications are manufactured in the Russian Federation, or impose restrictions on the quantities or value of the foreign goods imported to the customs territory of the Russian Federation for inward processing with a view to protecting the interests of domestic producers. The above-mentioned restrictions and prohibitions shall go into effect not earlier than in ninety days from the day of official publication of respective normative acts to that effect of the Government of the Russian Federation.
Article 175. Identification of Goods in Compensating Products
1. Identification of imported goods in the compensating products manufactured thereof may be effected by the following methods provided such methods are applicable proceeding from the nature of said goods and the processing operations they are subjected to:
(1) seals, stamps, digital and other markings affixed by the declarant, processor, or customs officer to the imported goods;
(2) detailed description of imported goods, their photographic images, and scaled drawings;
(3) comparison of the results of examination of samples and specimens of the imported goods and the compensating products manufactured thereof;
(4) use of serial numbers and other markings made by the manufacturer of the imported goods.
2. The customs authorities determine the relevance of the declared method of identification of the goods, which were imported to the customs territory of the Russian Federation for inward processing, in compensating products manufactured thereof.
3. Upon a request of an interested person and with the consent of the customs office concerned, identification of goods for customs purposes may be achieved by analysing the submitted information pertaining to raw materials, construction elements and components used for manufacturing imported goods, as well as the technology applied for manufacturing the compensating products thereof, or by exercising customs control throughout the whole period of goods processing operations.
Article 176. Goods Processing Operations
1. The operations applied to the goods subjected to the inward processing procedure include:
(1) goods processing and machine-tooling operations;
(2) manufacture of new goods, including goods’ assembly or disassembly;
(3) goods repairs, including their restoration, substitution of their components, and restoration of their consumer properties;
(4) complete processing of goods conducive to or facilitating manufacture of merchandise notwithstanding the goods complete or partial consumption during processing operations.
Article 177. Time Terms of Goods Processing Operations
1. The time required for goods processing operations shall be determined by the declarant in coordination with the customs authorities and it may not exceed two years.
2. Duration of the inward processing procedure shall be determined proceeding from the time required for the goods processing operations, as well as based on the time required for disposal of the compensating product.
3. Upon a motivated request by the person duly authorised to subject goods to the inward goods processing procedure, the customs authorities may extend the initially prescribed time terms of the goods processing operations within the time limits stipulated by Item 1 herein if said person is not capable of completing the customs procedure within the initially prescribed period without violating the terms and conditions stipulated by this Paragraph for the reasons beyond his (or her) control.
4. The goods processing period begins on the day of their placement under the terms of the inward processing procedure, or on the day when the first consignment is subjected to said procedure in case goods are imported by separate consignments.
Article 178. Rate of Yield for Compensating Products
1. The rate of yield of the compensating products (their quantities or pro rata share in the compensating products manufactured as a result of processing of a given quantity of imported goods) shall be determined by the declarant in coordination with the customs office concerned proceeding from the actual conditions of the goods processing procedure, as specified in Item 3 herein.
2. In determining the rate of yield of compensating products, the customs authorities rely on the conclusions provided by expert organisations (including customs laboratories) based on the applied goods processing technology.
3. In case the processing operations with the goods featuring permanent properties and characteristics are conducted in compliance with specific technical conditions conducive to the output of the compensating products of invariable quality, the competent bodies duly authorised by the Government of the Russian Federation will establish, for customs clearance purposes, standardised rates of yield for the compensating products.
4. The description, quality, and quantity of the processing products shall be finalised following the approval of the rate of yield of the compensating products.
Article 179. Permit for Inward Processing Procedure
1. A permit for the inward processing procedure may be issued to any interested Russian person including the person who is not directly involved in goods processing operations.
2. A permit for the inward processing procedure is issued by a customs office based on an application submitted by an interested person.
3. A permit for the inward processing procedure contains:
- the description, quality and quantities of the imported goods and of the compensating products manufactured thereof;
- the goods processing operations and their methods;
- the rate of yield of compensating products;
- the methods of identification of imported goods in compensating products;
- the time terms of goods processing;
- other information determined by the Federal Customs Authority as required for customs clearance purposes.
The form of the permit for goods processing is determined by the Federal Customs Authorit
4. A permit for goods processing remains in effect throughout the prescribed time limit of goods processing.
5. Upon a written authorisation by the customs authorities, the person holding a permit for goods processing may transfer this permit to another Russian person throughout the period of its validity provided the latter person assumes full responsibility for further observance of the terms and conditions of goods processing specified in this Paragraph.
Note: the person who received the initial permit for goods processing operations shall be obliged to submit to customs authorities a report of his (or her) fulfilment of the terms and conditions set forth herein for the whole period when the goods were used in compliance with the inward processing procedure and remit all requisite customs duties and taxes if given period featured the events necessitating dutiable payments in accordance with this Customs Code.
The person, to whom said permit for the inward processing procedure is transferred, shall be obliged to assume full responsibility for further observance of the terms and conditions stipulated herein and formalise the all required documents in his (or her) name if observance of this customs procedure is secured by necessary guarantees (Article 160). This person will enjoy all the rights and bear the same responsibility as the person who was issued the initial permit for goods processing beginning from the day the customs office passes a resolution transferring the permit for goods processing operations.
6. A permit for the inward processing procedure may be issued either before or after the goods have been brought to the customs territory of the Russian Federation provided the declarant has observed all the terms and conditions set forth in this Paragraph.
7. The person who was issued a permit for the inward processing procedure shall be responsible for the disbursement of customs duties and taxes as per Item 2 of Article 320 of this Customs Code.
Article 180. Issuance of Permit for the Inward Processing Procedure
1. In order to obtain a permit for the inward processing procedure a person shall be obliged to submit an application to the customs office concerned containing the following details:
- on the applicant;
- on the person(s) directly involved in the goods processing procedure;
- on the goods intended for inward processing, compensating products thereof, wastes and residues;
- on the goods processing operations, their methods and duration;
- on location of production facilities involved in goods processing operations;
- on the rate of yield for compensating products;
- on the methods of identification of imported goods in the compensating products manufactured thereof;
- on substitution of imported goods by their equivalent goods;
- on the time terms of goods processing.
2. The form of the application and the form of presentation of information contained therein is determined by the Federal Customs Authority.
The application ought to be supplemented with the documents confirming the declared information.
3. The customs office concerned considered the submitted application the documents supplemented thereto within 30 days from the day of their acceptance. Within the designated period the customs authorities verify the observance by the applicant of the established terms and conditions and pass a resolution with regard to coordinating the declared rate of yield of the compensating products and duration of the processing procedure.
The customs office has the right to request that third parties, as well as the state agencies provide the documents verifying the information stated in Item 1 herein. Those persons shall be obliged to furnish the requested documents within ten days from the day they receive such a request from said customs office.
Note: the customs office has the right to extend the period of consideration of the application, but for not more than two months from the date of its acceptance.
4. Submitted as an application for goods processing may be the customs declaration whereby said goods were placed under the inward processing procedure provided the original goods at the instance of their importation and the compensating products manufactured thereof at the instance of their subsequent exportation are declared simultaneously to the same customs office in case:
(1) the purpose of placement of goods under the inward processing procedure is their repairs, including the repairs effected on the compensatory basis;
(2) the customs value of the of goods placed under the inward processing procedure does not exceed 500,000 roubles;
(3) placed under the inward processing procedure are remnants of the earlier imported goods pursuant to Article 184 of this Customs Code.
5. In case said customs declaration is used as an application for the goods inward processing procedures, the time term of its consideration should not exceed the time limit set for the verification of customs declaration, as stipulated by Item 1 of Article 359 of this Customs Code.
6. The customs authorities will deny a permit for the goods processing procedure only in case the person who is submitting the application has not observed the terms and conditions set forth in this Paragraph, or in the event the customs authorities resolved to refuse to coordinate the declared rate of yield of the compensating products and time terms of goods processing.
Refusal by the customs authorities to issue a permit for the goods processing procedure ought to be properly substantiated and motivated. An applicant will be given a written notification with regard to the denial of said permit.
Article 181. Withdrawal of a Permit for Goods Processing
1. A permit for goods processing may be revoked by the customs authorities in case placement of goods under the inward processing procedure is precluded pursuant to the legal act of the Government of the Russian Federation adopted as per Item 4 of Article 174 of this Customs Code.
2. A decision to revoke the permit goes into effect on the date of entry into force of the respective legal act of the Government of the Russian Federation.
3. In the instance of withdrawal of a permit for goods processing, placement of goods under the inward processing procedure will be prohibited due to withdrawal of the permit, whereas the goods, which had been placed under the inward processing procedure before the permit was revoked, should complete the prescribed customs procedure pursuant to the requirements of this Paragraph.
4. The form of withdrawal of a permit for the inward processing procedure is determined by the Federal Customs Authority.
Article 182. Exemption of Compensating Products from Export Duties. Application to Compensating Products of Prohibitions and Restrictions pursuant to Federal Law of the Russian Federation on the State Regulation of Foreign Trade Activities
1. At the instance of exportation from the customs territory of the Russian Federation, the compensating products resulting from the goods inward processing shall be exempted from export duties.
2. The compensating products resulting from the goods inward processing shall be liable for all restrictions and prohibitions pursuant to the Federal Law of the Russian Federation on the State Regulation of Foreign Trade Activities.
Article 183. Wastes
1. The wastes which have formed as a result of the goods inward processing procedure shall be liable for customs duties and taxes equivalent to those applicable to the goods imported to the customs territory of the Russian Federation in that state, except the cases when said wastes have been exported from the customs territory of the Russian Federation or processed into the state in which their further commercial utilisation on the customs territory of the Russian Federation is no longer possible and they cannot be restored to their original state by any economically feasible method.
The wastes liable for customs duties and taxes should be declared.
2. For the purpose of levying customs duties and taxes, wastes shall be regarded as goods imported to the customs territory of the Russian Federation.
The customs value applicable to wastes shall be determined pursuant to the Russian legislation on taxes and duties with consideration of the peculiarities specified by Item 3 herein.
3. Wherever it is impossible to determine the wastes’ customs value using the method based on the value of a transaction with imported goods, the method based on the value of a transaction with identical goods, or the method based on the value of a transaction with homogeneous goods pursuant to the applicable law of the Russian Federation, the waste’s customs value shall be determined as equivalent to one of the following values:
- the price of sale of the appraised wastes at the instance of their initial sale in the customs territory of the Russian Federation to a buyer who is not interdependent upon any participant of the goods processing transaction;
- the price of sale of the goods identical to or homogenous with appraised wastes provided said goods were manufactured as a result of analogous processing operations under the terms and conditions of the inward processing procedure at the instance of their initial sale in the customs territory of the Russian Federation to a buyer who is not interdependent upon any participant of the goods processing transaction;
- the price of a transaction with the goods identical to or homogenous with appraised wastes which were sold as export goods to the Russian Federation and imported to the Russian Federation in the period concurrent with the time of declaration of the appraised wastes;
- the price of the goods identical to or homogenous with appraised wastes transacted at the domestic market of the Russian Federation between independent buyers and sellers less the taxes levied on said goods at their sale in the Russian Federation.
Article 184. Residues
1. The unprocessed residual goods, which have been subjected to the inward processing procedure, may either be exported from the customs territory of the Russian Federation without payment of any export customs duties or subjected to the inward processing procedure.
2. The non-exported residual goods shall be subject to customs duties and taxes equivalent to those applicable to goods delivered to the customs territory of the Russian Federation in that state.
The wastes liable for customs duties and taxes should be declared.
The amount of customs duties and taxes shall be determined proceeding from the residues’ quantities and value pro rata the amount of customs duties and taxes which would be levied on the goods whose processing resulted in the formation of said residues if said goods were released for free circulation on the day of their placement under the inward processing procedure.
Article 185. Completion and Suspension of the Customs Procedure
1. The goods inward processing procedure shall be completed by exportation of compensating products from the customs territory of the Russian Federation or by placement of the imported goods and the compensating products manufactured thereof under other customs procedures not later than the date of expiration of the time term stipulated for the goods processing (Article 177).
2. In case the compensating products are exported from the customs territory of the Russian Federation in several lots, the final verification of their quantity specified in the goods processing (Article 179) may be conducted periodically upon exportation of the compensating products, but at least quarterly and not later than within 30 days following the exportation of the last lot of the compensating products. In case such verifications reveal that the holder of a processing permit is liable for dutiable payments, the amounts of such payments shall be exempted from any penalty fees provided they are reimbursed within 10 working days from the date when the customs office concerned issued a written resolution stipulating remittance of said amounts. The customs authorities will be obliged to send their resolution stipulating the exigency of dutiable payments to the holder of the processing permit not later than on the day following the day of passage of said resolution.
3. The inward processing procedure may be completed by way of release for free circulation of the imported goods and/or the compensating products manufactured thereof, or by placement of the imported goods and compensating products under other customs procedures provided the terms and conditions stipulated by this Customs Code are observed.
4. At the instance of their release for free circulation, the imported goods or/and compensating products manufactured thereof shall be liable for customs duties and taxes equivalent to those which would be payable if the imported goods and compensating products manufactured thereof were declared for release for free circulation on the day of placement of said goods under the inward processing procedure plus the interest chargeable on the quoted amounts according to the refinance rates established by the Central Bank of the Russian Federation as though remittance of the quoted amounts were postponed from the date of their placement under the inward processing procedure.
5. Upon a request made by an interested person, the inward processing procedure may be suspended in the following situations:
- in case of placement of compensating products to a bonded warehouse as per Item 3 of Article 217 of this Customs Code;
- in case of placement of compensating products under other customs procedures, which do not stipulate release of goods for free circulation.
6. Suspension of the inward processing procedure shall entail suspension of the goods processing period (Article 177). The interests chargeable and disbursed in accordance with this Article shall not be charged or disbursed throughout the duration of suspension of the inward processing procedure.
Any goods processing operations (Article 176) are prohibited throughout the period when the inward processing procedure is suspended
7. The goods inward processing procedure may be completed by way of exportation of the imported goods in their original [unchanged] state (re-export).
Article 186. Equivalent Compensation
1. Upon permission of the customs authorities, the imported goods, which have been placed under the inward processing procedure, may be replaced with other goods including Russian goods if their description, quality, and specifications coincide with those of the imported goods (equivalent compensation).
2. The products obtained as a result of processing of equivalent goods shall be regarded as compensating products of the imported goods in accordance with this Chapter.
3. For customs clearance purposes, the equivalent goods shall have the status of imported goods, whereas the imported goods shall have the previous status of the equivalent goods.
4. In case equivalent compensation is permissible, exportation of the compensating products may be performed prior to the importation of goods for inward processing provided a permit for processing said goods is available. The customs authorities shall establish the time limits for importation of such goods.
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