Chapter 19. CUSTOMS ECONOMIC PROCEDURES
§3 Outward Processing Procedure
Article 197. Content of the Customs Procedure
1. The outward processing procedure constitutes a customs procedure under which goods are exported from the customs territory of the Russian Federation for the purpose of their processing within a designated period of time (goods processing period) and subsequent re-importation of compensating products manufactured of the exported goods with their complete or partial exemption from customs duties and taxes.
2. Goods are exported from the customs territory of the Russian Federation based on the outward processing procedure with complete conditional exemption from export duties. The exported goods shall not be liable for any economic restrictions and prohibitions stipulated by the Federal Law of the Russian Federation on the State Regulation of Foreign Trade Activities.
3. The goods exported based on the outward processing procedure shall not be exempted from any domestic taxes; the paid domestic taxes levied thereto shall not be redeemed or reimbursed.
Article 198. Terms of Placement of Goods under Customs Procedure
1. Goods may be subjected to the outward processing procedure upon permission issued by the customs office concerned (Article 203).
2. The outward processing procedure is permitted when the customs authorities are capable of identifying the exported merchandise in the resulting [compensating] products manufactured thereof (Article 199), except the case when the compensating products are substituted by foreign merchandise as per Article 206 of this Customs Code.
3. For the goods to be subjected to the outward processing procedure, they ought to have the status of goods in free circulation. It would be permissible to place under the outward processing procedure the goods enjoying privileges with regard to customs duties and taxes in accordance with the statutes of Russian law provided they are subjected to the outward processing procedure for the purpose of their maintenance/repairs.
4. The Government of the Russian Federation has the right to determine the cases when the outward processing procedure will be prohibited with regard to specific categories of goods, as well as impose restrictions on the quantities or value of the goods targeted for the outward processing procedure 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 199. Identification of Goods in Compensating Products
1. Identification of exported 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 exported goods;
(2) detailed description of exported goods, their photographic images, and scaled drawings;
(3) comparison of the results of examination of the preliminarily taken samples and specimens of the exported goods and the compensating products manufactured thereof;
(4) use of serial numbers and other markings made by the manufacturer of the exported goods;
(5) documentary proofs that subject to the outward processing procedure have been the exported goods;
(6) other identification techniques based on application of innovative technologies.
2. The customs authorities determine relevance of the declared technique applied identifying the goods exported for the outward processing procedure in the compensating products manufactured thereof with consideration of the nature of said goods and the processing operations to which they are subjected.
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 goods, as well as the technology applied for manufacturing the compensating products thereof.
Article 200. Goods Processing Operations
The operations applied to the goods subjected to the outward 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, replacement of their components, and restoration of their consumer properties.
Article 201. 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 outward processing procedure shall be determined proceeding from the time required for the goods processing operations and the time required for the haulage of compensating products within the goods processing period defined in Item 1 herein.
3. Upon a motivated request by the person duly authorised to subject goods to the outward 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.
4. The goods processing period begins on the day of their placement under the terms of the outward processing procedure, or on the day when the first consignment is subjected to said procedure in case goods are exported by separate consignments.
Article 202. Rate of Yield for Compensating Products for the Customs Clearance Purpose
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 exported goods) shall be determined by the declarant in coordination with the customs office concerned proceeding from the actual conditions of the goods processing procedure, except the instances specified in Item 4 herein, if such measure is acknowledged as expedient for customs control purposes. The rate of yield of the compensating products shall be determined prior to the exportation of goods from the customs territory of the Russian Federation.
2. The rate of yield of the compensating products is coordinated by the customs authorities based on pertinent documentation submitted by the declarant containing comprehensive information on the goods processing technology. In determining the rate of yield of compensating products, the customs authorities will also rely on the conclusions provided by expert organisations (including customs laboratories) based on the applied goods processing technology.
3. The description, quality, and quantity of the processing products shall be finalised following the approval of the rate of yield of the compensating products.
4. 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.
In case of use of standardised rates of yield of compensating products, their importation, for customs clearance purposes, shall not be permitted with complete or partial exemption from customs duties and taxes in the quantities exceeding the established rates of yield of compensating products.
Article 203. Permit for the Outward Processing Procedure
1. Exportation of goods with a view to subjecting them to the outward processing procedure shall only be acceptable for the holder of a valid permit for goods’ outward processing procedure.
2. A permit for the outward processing procedure is issued to a declarant.
3. A permit for the outward processing procedure contains:
- the description, quality and quantities of the goods stated for the outward processing procedure and of the compensating products manufactured thereof;
- the goods processing operations and their methods;
- the rate of yield of compensating products provided said rate is determined (Item 4 of Article 202) or coordinated on the date of issue of the permit;
- the methods of identification of exported 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 Authority.
4. A permit for goods processing remains in effect throughout the prescribed time limit of goods processing.
5. The person holding a permit for goods processing shall bear full responsibility for disbursement of customs duties and taxes as per Item 2 of Article 320 of this Customs Code.
Article 204. Issuance of Permit for Outward Processing Procedure
1. In order to obtain a permit for the outward 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, and his (her/their) location;
- on the goods intended for outward processing;
- 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 provided said rate is determined (Item 4 of Article 202) or coordinated on the date of issue of the permit;
- on the compensating products and their quantities;
- on the methods of identification of exported goods in the compensating products manufactured thereof;
- on substitution of compensating products by foreign 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 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 declared information.
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 goods were placed under the outward processing procedure provided the original goods at the instance of their exportation 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 outward processing procedure is their repairs, including the repairs effected on the compensatory basis;
(2) the customs value of the goods placed under the outward processing procedure does not exceed 500,000 roubles.
5. In case said customs declaration is used as an application for the goods outward 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. In this situation, the compensating products shall be declared at the instance of their importation to the same customs office that issued a permit for their processing procedure.
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 205. 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 outward processing procedure is precluded pursuant to the legal act of the Government of the Russian Federation adopted as per Item 4 of Article 198 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 outward processing procedure will be prohibited due to withdrawal of the permit, whereas the goods, which had been placed under the outward 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 outward processing procedure is determined by the Federal Customs Authority.
Article 206. Substitution of Compensating Products by Foreign Goods
Substitution of compensating products by foreign goods, whose description, quality and specifications coincide with those of the compensating products, will only be permitted provided the operations, to which said goods have been subjected pursuant to the outward processing procedure, constituted repairs, or in the instances when customs authorities do not perform identification of goods in accordance with this Customs Code. In case substitution of compensating products by foreign goods is acceptable, importation of foreign goods may be completed prior to the exportation of the Russian goods concerned for their outward processing procedure.
Article 207. Application of Partial of Complete Exemption of Compensating Products from Customs Duties and Taxes
1. Compensating products may be granted complete exemption from customs duties and taxes provided the goods concerned have been exported and subjected to the outward processing procedure for the purpose of warranty (gratuitous) repairs. As regards outward processing of the goods that were released for free circulation in the customs territory of the Russian Federation, such goods will not be granted complete exemption from customs duties and taxes if they were release for free circulation with consideration of the defects constituting the reason for their repairs.
2. In other cases compensating products shall be partially exempted from customs duties and taxes, except excise taxes, in the following order:
(1) the amount of payable customs duties and taxes shall be defined as a difference between the total import duties levied on compensating products and the total import duties that would be levied on the exported goods as though they were released for free circulation provided their compensating products are subjected to specific rates of customs duties and their outward processing operation is not repairs, or based on the cost of the goods processing operations, which, in the absence of documents confirming the value of such operations, may be defined as a difference between the customs value of compensating products and the customs value of the goods exported for outward processing thereof.
(2) the payable VAT amount shall be determined based on the cost of the goods processing operations, which, in the absence of documents confirming the value of such operations, may be defined as a difference between the customs value of compensating products imported to the customs territory of the Russian Federation and the customs value of the goods exported for outward processing thereof.
3. The excise tax levied on compensating products shall be remitted in full except the instances when a goods outward processing operation constitutes repairs of the exported goods.
4. Compensating products shall not be granted partial or complete relief from customs duties and taxes in case of their importation after the expiry of their prescribed term of processing (Article 201), or in violation of other terms and conditions stipulated by this Paragraph or their inadequate confirmation.
Article 208. Completion of the Customs Procedure
1. The goods outward processing procedure shall be completed by importation of compensating products to the customs territory or by another method stipulated by this Article.
2. In case the compensating products are imported to the customs territory of the Russian Federation in several lots, the final verification of their quantity specified in the goods processing permit (Article 203) may be conducted periodically upon importation of the compensating products, but at least quarterly and not later than within 30 days following the importation 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 outward processing procedure may be completed by re-importation of the exported goods and/or placement of said goods under the customs procedure applicable to exported goods provided all the terms and conditions stipulated by this Customs Code are observed. Substitution of the goods’ outward processing procedure with the export customs procedure is prohibited if the exported goods and the compensating products manufactured thereof are liable for mandatory re-importation pursuant to conformable statutes of the Russian Federation. Substitution of the goods’ outward processing procedure with the customs procedure applicable to imported goods is permissible without de facto presentation of goods for inspection to the customs authorities.
In case of substitution of the outward processing procedure by the export procedure, the exported goods shall be liable for export duties, if such duties are stipulated, as well as for the interest thereon calculable as though disbursement of the export duties has been postponed from the date of acceptance of the pertinent customs declarations.
4. In case compensating products are placed under a customs processing procedure which does not stipulate their release for free circulation, the amounts of export customs and duties levied on such goods shall not exceed the amounts levied on goods pursuant to Items 2 and 3 of Article 207 of this Customs Code without consideration of penalty fees and interest, except the instance stipulated by Item 5 herein.
5. Upon importation of compensating products manufactured from the goods, which were exempted from customs duties and taxes prior to their exportation (Item 3 of Article 198), at the instance of their release for free circulation such compensating products shall be liable both for the customs duties and taxes payable as per Article 207 of this Customs Code and the import customs duties and taxes from which such products were exempted prior to their exportation for the outward processing procedure.
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