Tariff preferences: nature, types, characteristics and purpose

According to Art. 74 of the Customs Code of the Customs Union, the country's tariff preference is considered one of the varieties of benefits associated with customs payments. In our article we will talk about the concept, characteristics of the category. In addition, we consider its classification and the issue of preferences.

History of formation

It is advisable to start with the history of the formation of the system of tariff preferences of the Customs Union. It is worth noting that this concept is translated from Latin as “preferring”. The first mention of it falls at the end of the last century. This is a more favorable customs regime than in the traditional spirit. It is provided by a country of commodity products coming from certain countries or their groups.

The history of the emergence of tariff preferences in developing countries directly relates to the history of the formation and subsequent development of the colonial world systems. It is worth clarifying: it is the preferential type tariff policy that has become the basis on which the economies of monopolies have developed. All this was realized due to restrictions in terms of foreign trade of those countries that were considered satellites. The most widespread system of tariff preferences, which covered about 100 dependent territories, was possessed by the following countries: Holland, England, Belgium, France. It must be added that for them, colonies were considered one of the key sources of enrichment.

Benefits for the Metropolis

Since the colonies usually exported raw materials freely available to many markets, and the metropolis, in turn, exported finished goods, the policy of customs and tariff preferences had great advantages for the metropolis than for the colonies.

So, at the initial stages, the term in question was included in a special type of tariff plan relationship arising between the metropolis and the colony, according to which each of these parties retained the so-called tariff identity, however, stipulated for other benefits that were not provided to other countries, as a rule, in the form of full or partial exemption from export and import duties.

Concept of category

A country’s tariff preference should be understood as exemption (full or partial) from payment of import customs duties in respect of goods originating from countries that together with the Russian Federation form a free trade zone, or from those that have signed agreements that aim to form such zones or lower rates of import customs duties in respect of commercial products originating from developing or less developed countries, using a unified system of preferences for TTS. This definition is spelled out in paragraph 1 of Art. 36 of the Federal Law of the Russian Federation "On the Customs Tariff".

Classification

As it turned out, tariff preferences should be understood as certain advantages that are provided for in the field of customs duties, and in direct proportion to the country where the goods were released. Consider the classification of a category.

In the Customs Union, a differentiated type customs tariff is applied, that is, with such rates that depend on countries. Today, the Unified system of tariff preferences of the TS is relevant. It is worth noting that it is used to promote the development of both developing and less developed countries in economic terms:

• For commodity products originating in developing countries, rates of 75 percent of customs duty rates related to the Unified Customs Tariff are used.
• In respect of a commodity product originating from less developed countries, there are zero import customs duty rates.
• If MFN is provided to countries, then it will be about 100 percent.
• The rest is 200%.

Approved Lists

It is worth knowing that by the decision of the CU Commission of November 27, 2009 No. 130 the following lists of countries and goods were approved:

• A list of developing countries that are users of the Unified System of Tariff Preferences (EAEU) of the Customs Union.
• List of less developed countries that are considered system users.
• A list of commodity products that originate and are imported from developing and less developed countries. It should be added that when importing them, one way or another, the provision of tariff preferences is relevant.

Using Preferences

Further, it is advisable to consider the application of tariff preferences. Under paragraph 2 of Art. 35 of the Federal Law of the Russian Federation “On the Customs Tariff”, benefits can be granted only by decision of the Government of the Russian Federation in the form of exemption from paying customs duties, or in the form of lowering its rate relative to the following categories of commodity products:

• Exported from Russia as part of a complete plan for the construction of facilities related to investment cooperation abroad in accordance with international treaties of the Russian Federation.
• Exported from Russia within the scope of volumes of deliveries specifically for export for state needs of federal significance. It is worth noting that it is determined according to the legislation of the Russian Federation regarding the placement of orders for the supply of marketable products, the execution of work, as well as the provision of services for municipal and state needs.

In addition, by the Decision of the EurAsEC Interstate Council, they approved the “List of goods that originate and are imported from developing and less developed territories, the import of which has tariff preferences”.

Terms of Service

According to Section VI of the agreement “On the Rules for Determining the Origin of Commodity Products from Developing and Less Developed Territories” (hereinafter referred to as the Agreement), customs preferences regarding commodity products originating from these countries, for which the tariff regime in terms of preferences is considered relevant, are provided only subject to direct purchase of such a product in these countries and its direct supply to the EAEU of the states that are parties to the agreement.

Commodity products are considered to be purchased directly if the importer purchased it from a person who was registered in a certain order as a business entity in a developing or less developed country. A prerequisite is that this product should come from it. In addition, a preferential tariff regime should apply to this country.

Documenting

Consider the paper required to use the tariff preference. According to Section VII of the Agreement, in the certificate related to the origin of marketable products from a developing or less developed territory, to which the preferential treatment in terms of tariffs is extended, the person who moves the goods must submit a certificate-declaration regarding their origin (hereinafter - certificate). It is worth noting that its form was adopted in the framework of the general system of preferences, filled out according to the requirements for registration declarations-certificates regarding the origin of goods.

The period of use of the certificate for the provision of tariff preferences is limited, as a rule, to 12 months directly from the date of issue.You need to know that this document is submitted to the customs authorities on paper, in other words, in printed form in English or Russian. If necessary, customs authorities have the right to demand the translation of paper into the state language.

It is important to keep in mind that the quantity of delivered marketable products in fact should not exceed that indicated in the certificate (by more than 5%). If a document is lost, it is customary to accept a copy (duplicate). However, it must be officially certified.

If the consignment is small?

It is worth noting that in terms of small batches of marketable products (the customs value of which is equivalent to no more than 5000 US dollars), it is not necessary to submit a certificate. In this situation, the exporter has the right to declare the country where the goods occurred in commercial or other shipping documentation.

If there are reasonable doubts as to the reliability of the declared information on the origin of the commodity products, the customs structure has the right to require a certificate of its origin.

Controversial Use of Preferences

In practice, questions often arise that are related to the refusal of customs structures to provide preferences to declarants, usually because they have doubts about the authenticity of the certificate. Usually this happens due to inconsistency, according to the customs structure, of the seal or signature in the certificate to those available at the customs, to the samples. In this case, the result is a decision containing a refusal to provide preferences.

However, under paragraph 5 of Art. 61 TC TC, if the customs structure has any doubts about the authenticity of the submitted documents, then when implementing customs control it has the right to apply either to authorized structures or to organizations of the territory where the certificate of origin of goods was issued, with a request for additional documents or clarifying information. It is worth noting that such treatment cannot become an obstacle to the release of marketable products on the basis of data on the country of origin, which are stated when it is placed under the customs procedure.

Need a check!

In the cases described above, it makes sense for the declarant to independently send the request directly to the authorized body of the place where the certificate was issued during the inspection by the customs structure. The request in this case should contain the need to confirm the authenticity of the certificate. When an official response is received, it must be submitted to the customs structure.

In case of refusal to provide preferences, the declarant has the right to appeal the actions of the customs structure to the arbitration court. In addition, by virtue of part five of Article 200 of the Arbitration Procedure Code of the Russian Federation, the obligation to prove the lawfulness of the impugned inaction (actions) is assigned to the person or body that carried out the actions or distinguished themselves by inaction.

Features and limitations

We examined the tariff preferences of developing countries. Further, it is advisable to analyze the limitations and features that apply to commercial products imported from less developed territories. It is important to note the following nuances:

• According to the execution of the Government of the Russian Federation of July 26, 1996 and according to the Federal Law “On Amendments and Additions” to the Federal Law “On Excise Taxes” of January 10, 1997, customs preferences are not provided for excisable commodity products if less developed countries are considered to be their country of origin.
• Do not provide preferential plan regimes that are provided for commercial products originating from less developed countries that are users directly with the preference scheme of the Russian Federation regarding those goods that are listed in Appendix 5 to SCC Order No. 258.

Final part

In conclusion, it is worth noting that today the Russian NSP is considered a broader term than a couple of years ago. Critical importance is given to the problem of identifying the country of origin of marketable products (as a fundamental component of the Russian NSP). This is reflected, first of all, in a significant shortage of customs plan payments and to a large extent affects the revenue share of the federal budget.

The process of Russia’s inclusion in the World Trade Organization (abbreviated as WTO) also involves revising the NSP towards its harmonization and unification with the General System of Preferences, as well as practical work in terms of trade and political relations at the international level. Apparently, by now, the need has arisen for highlighting the issues of NRS as one of the key tasks of the RF Government Commission on tariff and customs nuances, as well as on measures to protect foreign trade, which were approved in April 1995.