Russia backs down from costly customs dispute, for now

Russia border guard.jpg

This article is part of our special report Road transport: Who’s in the driving seat?.

SPECIAL REPORT/ A letter to the head of Russian customs from the EU's top tax official, Algirdas Šemeta, has put a last ditch and temporary stop to a costly dispute that had seen European cargo emptied at the border, the EU commissioner told EURACTIV.

Earlier this year, the Russian Federation decided to forgo a UN convention that guarantees a country's tax revenue from goods travelling through its territory, called TIR, claiming that it was owed 20 billion rubles (€650 million) in unpaid levies.

Russia, Europe's third largest trading partner, then decided to impose its own national guarantees on goods entering the country from the European Union and other territories.

European officials denied that Russia was owed any unpaid taxes, and speculation has been rife as to Russia's motivation for the move.

Sources have openly questioned whether the new national tax guarantees were designed to temporarily boost the Russian budget or an internal dispute between the customs ministry and the body in charge of dealing with TIR requests, The Association of International Road Transport Carriers (Asmap).

But on Friday (13 September) – the day before a negotiating deadline –  Andrey Belyaninov, the head of the Federal Customs Service, announced that the national guarantees would only apply to customs offices "subordinate to the Siberian and Far Eastern regional Customs departments" until 1 December.

In other words, European haulers would no longer have to pay the extra guarantees beyond TIR and have their goods taken out and re-registered at the Russian border. 

But the Russian minister may yet re-impose the decision after 1 December, when Asmap's contract with the government runs out.

Šemeta, the European tax and customs commissioner, believes that EU-level pressure brought the temporary end to the dispute.

"I think it due to direct European pressure that Russia decided to stop the measure," Šemeta told EURACTIV at the margins of an International Road Transport Union (IRU) conference in Vilnius, Lithuania.

Only in Siberia

"I sent a letter on the tenth of September to the Russian customs minister Andrey Belyaninov. The ambassador passed the letter on to the minister on the 13th and he decided that the measure would only apply to Siberia and to the Far East from the 13th," he said.

The Russian decision to forgo TIR and impose national guarantees was supposed to enter into force on 14 September.

Šemeta hopes that the decision to postpone the measure will buy the EU enough time to settle the issue with Belyaninov. "Until December we have the time to negotiate and have an agreement with Russia," he said.

"I want an agreement that will protect European carriers. The [Russian] measure is clearly against the UN's TIR convention," the EU's top tax official added.

The border dispute has already caused significant disruption, due to European haulers having to pay extra guarantees and cargo arriving hours and sometimes days late.

TIR system

Under the TIR system, haulers pay an average of $70 (€52) per trip. While the Russian customs ministry has said that the new national system would be cheaper, the IRU estimates that new national guarantees would cost between $300 and $3000, if additional costs such as service brokers were taken into account.

The IRU is one of the largest actors in the TIR system, issuing some three million 'carnets' – or guarantees – around the world every year.

IRU Secretary General Umberto de Pretto expressed dismay at the Russian minister's decisions. "The IRU issues [what equates to] about €1 billion in bank guarantees for haulers every day. Do you think that as the secretary general of this organisation I'm going to allow these to continue in a situation like this?" he said.

"It's really pushing things to the limit."

Part of the Russian Federal Customs Ministry's motivation for halting its compliance with TIR was that the number of customs complaints was rising. To add to the confusion, before the current flare up, the IRU had considered Russia a model of effectiveness under the TIR system due to its low number of payment disputes.

Increasing disputes

"Russia said the number of disputes was increasing. There are only eight [ongoing] disputes. Eight cargo loads. And you're going to call into question an entire international agreement?" de Pretto told EURACTIV. "If you want to claim that you are owed €650 million you have to provide documentation."

The IRU secretary-general added that if the dispute continued, many EU countries would have "good grounds" to lodge a complaint with the World Trade Organization, of which Russia only became an official member in August last year.

Lithuania, an important transit region for cargo travelling between the EU and Russia, is the world's highest per-person beneficiary of TIR. Lithuanian officials had therefore lobbied Russia heavily to continue using the international convention.

But within a matter of days, Russia decided to increase controls on vehicles entering the country from Lithuania, pulling cargo out and leaving it by the roadside as customs officials carried out their own checks.

"This appeared to be retribution," said Marek Retelski, the head of the TIR department at the IRU.

Transport Commissioner Siim Kallas said in a speech at the IRU conference: "Regarding the TIR issue with Russia, we urge all parties involved to sit together and try to find a good solution as soon as possible. TIR is a tried and tested system that simplifies customs transit formalities and so avoids delays and queues at the border. These just add to the cost of trade between our countries, hampering trade and economic growth on all sides."

Marek Retelski, the head of the TIR department at The International Road Transport Union (IRU), said that goods for both Russia and the European Union would be more expensive if Russia was to impose its own checks and forgo the TIR system, and that this was not the right direction to take at a time when the Russian economy was stagnating. "We are hoping for more constructive talks," he said. In December, the contract of the company dealing with TIR requests in Russia, The Association of International Road Transport Carriers (Asmap), runs out. "If there is no agreement before 1 December additional guarantees may be required for European carriers, as long as we don't solve the contract issue with Asmap." He said it could take years to find another trusted body to deal with TIR requests.

Keir Fitch, deputy head of cabinet for the transport commissioner, Siim Kallas: "As regards the border with the Russian Federation, the smooth operation of border controls depends on the correct application of the TIR Convention, which is not always the case, as illustrated recently by the unilateral decision of the Russian Federal Customs Service to require a transit guarantee different from the TIR carnet. The EU is fully committed to the application of the TIR Convention, to which the EU, together with all its Member States, are Contracting Parties."

IRU President Janusz Lacny: "As regards the border with the Russian Federation, the smooth operation of border controls depends on the correct application of the TIR Convention, which is not always the case, as illustrated recently by the unilateral decision of the Russian Federal Customs Service to require a transit guarantee different from the TIR carnet. The EU is fully committed to the application of the TIR Convention, to which the EU, together with all its Member States, are Contracting Parties."

The international TIR transit system was developed soon after the second world war in order to help revitalise the economies of post-war Europe. The TIR Agreement was concluded in 1949 and led in 1959 to the first TIR Convention.

Each member of the European Union, including the Union itself, is a Contracting Party to the TIR Convention of 1975.

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