Russian Federation: Development Of The Practice Of Challenging Import Customs Duty Rates As Contrary To Russia's WTO Commitments

The Russian Federation has been a member of the World Trade Organization (WTO) since August 22, 2012. As one of the conditions for its accession to the WTO Russia undertook a number of commitments that are defined in the December 16, 2011 Protocol on the Accession of the Russian Federation to the Marrakesh Agreement Establishing the World Trade Organization dated April 15, 1994 (the "Protocol").

According to the Protocol, related customs duty rates are set for most of the Foreign Economic Activity Commodity Classification codes, which means that Russia agrees not to raise them above a preagreed level.

The customs duty rates set in the Unified Customs Tariff of the Customs Union (UCT CU) and exceeding the agreed level are to be gradually (annually) reduced over a transitional period according to a specified schedule.

Some of the commitments undertaken as a condition for WTO accession have not been fully met in practice. For example, during the transitional period the Unified Customs Tariff for a number of Foreign Economic Activity Commodity Classification codes could be set as an import customs duty that is higher than the preagreed level, or a combined rate contravening the Protocol, which provides for the use of only its ad valorem part (in a percentage of customs value), and the use, in turn, of a specific rate (depending on the physical features of the product: volume, weight, quantity, etc.) has led to foreign trade participants paying excess customs duties and taxes in the declaration process (for example, EAEU Foreign Economic Activity Commodity Classification codes 1511 90 190 2, 4810 29 300 0, 8418 10 200 1, 8418 10 800 1, 8418 21 800 0 and others).

There is currently uniform court practice with regard to challenging import customs duty rates used at the time of declaration if they are inconsistent with the WTO commitments. The courts unanimously recognize a violation of international treaties of Russia and provisions of Customs Union customs legislation and order the customs authorities to refund excess payments to foreign trade participants.

Russia's violation of its WTO commitments is also confirmed by the arbitration group's final report approved following consultations initiated pursuant to a European Union complaint against Russia under Annex 2 (the "Understanding on Rules and Procedures Governing the Settlement of Disputes") to the Marrakesh Agreement Establishing the World Trade Organization dated April 15, 1994, whose provisions are binding on Russia.

The lawyers of Dentons' Tax and Customs practice have considerable experience representing companies in the courts in various disputes with the customs authorities, including challenging customs duty rates within Russia's WTO commitments, which allows companies to recover amounts of excess customs duties and taxes paid to the budget. We would be happy to assist you in developing and implementing a strategy on this issue, and on other issues of applying customs laws.

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