To cross the border

Russia is in full swing preparing to transfer points of cargo customs clearance to the state border. A relevant concept has already been approved by all ministries and agencies and is to be approved by the RF Government in the nearest future. The reform draftsmen mean it is to facilitate the development of the presently depressed border territories, to take part of transport out of metropolises and to expedite customs clearance procedure. Meanwhile, representatives of business and regional authorities are skeptical about extensive plans of the customs representatives and are apprehensive about just the opposite effect.

Meaning it for the best

“With implementation of this concept we would like to optimize transport traffic, develop the territories, normalize customs clearance and control,” Aleksandr Kogan, State Duma Deputy, says. As Konstantin Chaika, State Secretary of the Federal Customs Service, thinks “implementation of the concept will result in the increase of cargo traffic and in appearance of mechanisms for self-deletion of “grey” clearance schemes.

However, customs representatives also acknowledge that implementation of the planned reforms will raise the potential for corruption in the customs sphere. For example, the decision of RF FCS board «On draft concept for customs clearance and control of goods in places close to the RF state border» notes that the concept implementation may “provide conditions for official venality of customs authorities hence special consideration should be given to anti-corruption activities of FCS of Russia”.

“Why to create problems and then to solve them? Isn’t it better not to create them at all?,” wonders Maria Chernobrovkina, Executive Director of St. Petersburg office of US Chamber of Commerce representation in Russia.

Grigori Dvas, Vice-Governor of the Leningrad region also questions reasonability of the complete transfer of customs clearance to the state border. According to him, it would be more efficient and cheaper to distribute the functions between internal customs points (cargo clearance) and border points (cargo inspection), from which information could be delivered to internal points by up-to-date link channels. “I see no sense in transfer of customs clearance to, let’s say, Ivangorod, if cargo is anyway to be transported to St. Petersburg,” Grigori Dvas says.

According to him, complete transfer of customs clearance to the state border will result in significant change of transport flows, will require plenty of personnel and will raise transport costs of the business thus decreasing the competitiveness of Russian economy.

According to the reform draftsmen, major expenses for creation of customs-logistics terminals near the border will be born by private investors. Oleg Belonogov, President of the Association of Transport-Logistics Complexes of the North-West, estimates construction of an average terminal (7.5 hectares) at some RUR 950 mln in prices of the first quarter of 2009. However investors need stability and predictability of the state activities. Meanwhile, who can guarantee that new border terminals are not left unclaimed in a number of years if a new concept for customs clearance appears in Russia?

“There are no guarantees that the system is not changed in 5 years,” Oleg Belonogov complains. We have lots of more important projects requiring financing – for example, Ust-Luga port, where infrastructure development is needed. And we start implementation of another concept being absolutely utopian in terms of costs.”

And what will be the rest?

By the way, the volume of the federal financing of the reform is not clear yet. According to the reform ideologist Vladimir Ivin, head of the analytical management of the RF Federal Customs Service, no understanding has been reached between FCS and the Ministry of Finance yet. It will be reached only after detailed feasibility study of the reform to be carried out with attraction of scientific research institutes. According to M. Afanasova, deputy head of the Foreign Economic Activity Norm Compliance Department of the Ministry of Economic Development and Trade, the concept feasibility study is to be completed during the first half of the current year. At the same time, experts forecast that the construction of the residential area for personnel to be employed for border terminals in the North-West federal district alone, without cost of energy supply, will require over RUR 10 bln.

Despite absence of economic assessment FCS has already started preparation for the transfer customs stations to the state border and has even criticized its North-West Department for insufficient efforts in motivation of business for construction of new customs-logistics terminals near the border.

Business community in its turn is concerned about the fate of the existing warehouse facilities as they cannot be transferred together with customs stations. 

“We think there is no great threat for the existing terminals in the context of the stations’ transfer as 90% of their functions fall on warehousing which will stay in demand. However, according to current practice certain business representatives get an advantage with appearance of customs points in their territory. Of course, they are to bear certain expenses related to the transfer of customs stations,” Vladimir Ivin says.

Representatives of the business community are sure that introduction of preliminary electronic declaring would be an easier and a cheaper way to solve the problem of red-tapism in the customs sector.

As Vladimir Ivin assured journalists, 82% of customs stations are ready to accept e-declarations today. According to Dmitri Nekrasov, head of the central administration for arrangement of customs clearance and control of Russia’s FCS, electronic portal for filing declarations will be launched only in late 2009.

At the same time, US Chamber of Commerce in Russia states only 34 customs declarations were filed via internet in 2008 as the customs is not ready technically to work by Internet on a large-scale basis. Cable-based operation is related to certain difficulties as there is no possibility to lay the cable to some offices.

As it became clear at the RF Duma expert council held in St. Petersburg, business representatives are skeptical about FCS plans as they can’t see reasonable economic justification for the reform.

However, its primary objective, is not, by all appearances, to make the life of FEA participant easier. As Konstantin Chaika, State Secretary of the Federal Customs Service, told the council “the study shows that implementation of the present concept will facilitate the development of border territories. The outlook relates to 2020-ies with the purpose to fill the gap and to develop the territories along the state border.”

As may be thereof supposed, the real target of the customs reform initiated by the Government relates not to the economic but to the political sphere and reflects the state’s strivings to return to the great-power way of development requiring reinforcement of border territories.