President orders customs reforms

The thought of having to deal with Russian customs officials is scaring potential investors away from the country, says President Dmitry Medvedev, and the situation on the country’s borders has worsened in the past six months.

Customs administration was the main topic during recent a meeting Medvedev hosted on the country’s investment climate in Sochi.

Expenses related to customs procedures are often unpredictable, and both domestic and foreign businesses – including potential exporters of hi-tech goods – face problems at the border, Medvedev said.

Russia’s customs procedures are ranked near the bottom globally for ease of use, economic development minister Elvira Nabiullina conceded. About 44pc of shipments are inspected in Russia, whereas in the United States and Germany no more than 3pc are checked, and in Britain just 2pc, she said.

Companies must provide an average of eight documents to export goods from Russia, and 13 to import them; roughly twice the amount of paperwork required in developed countries, added Nabiullina, noting that unnecessary procedures extend customs processing by about five days. Even Kazakhstan and Belarus, Russia’s partners in a new customs union, have more efficient procedures, the minister claimed.

At the meeting, Medvedev ordered a reduction in the number of outdated customs regulations, the creation of a “green channel” for hi-tech goods, and an analysis of the influence of customs on falling trade volumes and business activity.

Surveys of entrepreneurs seem to show that attitudes toward Russia’s customs service are worsening. In November 2009, a majority of respondents thought customs operations efficient, whereas by May there were an equal number of executives with positive and negative feelings about the customs service, according to the Delovaya Rossia business lobby, which surveyed 600 to 700 senior executives.

The inefficient customs service is one of the main barriers to business in Russia, Boris Titov, who heads the lobby group, claimed. Officials are worried only about following bureaucratic formalities, not the possible costs they are inflicting on business, he said.

Anton Guskov, a spokesman for the association of Russian electronics and computer retailers and producers (RATEK), reiterated the point that Russia’s customs procedures are actually more difficult to negotiate than those of its partners in the customs union.

In Belarus and Kazakhstan, customs policies are intended to stimulate honest foreign trade, he claimed. Direct importers or producers may bring in goods through a “green channel, electronic declarations are used, and inspections are conducted after goods have passed through customs and into the country.

As in other countries, much depends on the discretion of customs officials, which is why it is important to change their mentality, said Galina Balandina of Pepeliaev Group , and a former director of the Economic Development Ministry’s state trade regulation department. “As long as the customs service is primarily judged on how much revenue it generates for the budget, officials will have a vested interest in checking shipments as often as possible,” she asserted.

She suggests that the only way to change the situation is for customs posts to be graded on processing times and the costs they create for business.

If the gap with Belarus and Kazakhstan continues, many Russian companies involved in foreign trade could move their production to such neighbouring countries, Balandina warned.

Spokespeople for the Federal Customs Service and the Economic Development Ministry declined to comment.

Originally published in The Moscow Times

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