Country of Origin of Goods in Russia & EAEU: Legal Rules

January 31, 2023

BRACE Law Firm ©

Rules for determining the origin of goods apply for the purposes of customs and tariff regulation, the application of non-tariff regulation and domestic market protection measures, the establishment of requirements for labeling the origin of goods, the implementation of state and municipal procurement, and the maintenance of foreign trade statistics.

To achieve these objectives and for a product to enter the market of a foreign state, the goods must pass through the customs border with accompanying documents that specify the country of origin.

Furthermore, information regarding the country of origin has become particularly relevant due to the necessity of protecting the Russian domestic market, which has significantly affected foreign suppliers through various prohibitions and restrictions. This information is also highly relevant for the Russian market in the context of procurement under Federal Law No. 44-FZ dated April 5, 2013, On the Contract System in the Sphere of Procurement of Goods, Works, and Services for Ensuring State and Municipal Needs (the "Contract System Law").

In accordance with the Agreement on the Rules for Determining the Country of Origin of Goods in the Commonwealth of Independent States, signed in Yalta on November 20, 2009 (the "Agreement on the Rules for Determining the Country of Origin of Goods in the CIS" or the "Agreement"), the country of origin is the country in which the product was fully produced or subjected to sufficient processing or transformation.

It is important to distinguish the country of origin of goods from:

• The manufacturer's location. The manufacturer's location does not always coincide with the place of production;
• The country of the trademark. A trademark is often registered in one country while production occurs in another. A significant volume of manufacturing is located in China, India, and other countries;
• The appellation of origin. This is usually associated with unique items produced in a specific location that have acquired a generic name, such as "Vologda lace".

The country of origin is also vital for identifying and directing foreign trade activities, including:

• Reducing the amount of counterfeit products entering the domestic market;
• State regulation of foreign trade;
• Implementing prohibitions and restrictions due to the economic and political situation in the country and the world;
• Applying customs regulation measures;
• Maintaining statistics on trade operations and goods.

The determination of the country of origin is carried out in accordance with the criteria established in the Agreement on the Rules for Determining the Country of Origin of Goods in the CIS. Goods considered fully produced in a member state of the Agreement include:

• Natural resources extracted from the subsoil of the country, on its territory, in its territorial sea, from its seabed, or from the air within the territory of the country;
• Plant products grown and/or harvested in the country;
• Live animals born and raised in the country;
• Products obtained in the country from animals raised therein;
• Products obtained through hunting or fishing in the country;
• Marine fishing products and other marine products obtained by a vessel of the country or a vessel leased (chartered) by it;
• Products obtained on board a processing vessel of the country exclusively from fishing products;
• Products obtained from the seabed or marine subsoil outside the territorial sea of the country, provided that the country has exclusive rights to develop such seabed or subsoil;
• Waste and scrap (secondary raw materials) resulting from manufacturing or other processing operations, as well as used items collected in the country that are suitable only for processing into raw materials;
• High-tech products obtained in outer space on spacecraft belonging to or leased (chartered) by the country;
• Goods manufactured in the country from the products specified in the points above.

If materials originating from one or more member states of the Agreement—confirmed by a certificate of origin and subjected to subsequent phased processing or transformation in another member state or states — are used in the production of a final product in one of the member states, the country of origin of such a product is the country where the last processing or transformation took place. If third countries (other than member states of the Agreement) participate in the production, the country of origin is determined according to the criterion of sufficient processing or transformation.

In Russia, the All-Russian Classifier of Countries of the World is also used to determine the country of origin, [1] which is harmonized with International Standard ISO 3166-97 "Codes for the Representation of Names of Countries." It is important to note that upon the creation of the Eurasian Economic Union, the parties agreed that, pursuant to Article 37 of the Treaty on the Eurasian Economic Union, [2] unified rules for determining the origin of goods imported into the customs territory of the Union apply. These rules largely coincide with the Agreement on the Rules for Determining the Country of Origin of Goods in the CIS. At the same time, for the purposes of applying customs and tariff regulation measures, non-tariff regulation, domestic market protection, requirements for labeling origin, state (municipal) procurement, and foreign trade statistics, specific rules apply for determining the origin of goods imported into the customs territory of the Union. [3]

Often, a product is not entirely manufactured in a single country but rather subjected to processing (e.g., raw materials extracted in a specific country). In such cases, the country of origin is determined by the criterion of sufficient processing or transformation, which is met if the following conditions are fulfilled:

• A change in the HS code (TN VED) at the level of any of the first four digits resulting from the processing or transformation;
• The performance of necessary production and technological operations, upon the completion of which the product is deemed to originate from the country where these operations occurred;
• The ad valorem share rule, where the value of used materials of foreign origin reaches a fixed percentage in the price of the final product.

The Unified Commodity Nomenclature of Foreign Economic Activity determines the classification of goods according to the rules approved by EEC Council Decision No. 80 dated September 14, 2021, On Approval of the Unified Commodity Nomenclature of Foreign Economic Activity of the Eurasian Economic Union and the Common Customs Tariff of the Eurasian Economic Union, and on Amending and Repealing Certain Decisions of the Council of the Eurasian Economic Commission.

The following operations do not meet the criterion of sufficient processing or transformation:

• Operations to ensure the preservation of goods during storage or transportation;
• Operations to prepare goods for sale and transportation (breaking up shipments, forming consignments, sorting, repackaging) and operations for disassembling and assembling packaging;
• Washing, cleaning, dust removal, coating with oxide, oil, or other substances;
• Ironing or pressing textiles (all types of fibers and yarns, woven materials from any fibers or yarns, and products made from them);
• Painting or polishing operations;
• Husking, partial or full bleaching, grinding, and polishing of cereals and rice;
• Operations for coloring sugar or forming lump sugar;
• Peeling, seed removal, and butchering of fruits, vegetables, and nuts;
• Sharpening, grinding, or cutting that does not lead to a significant difference between the resulting components and the original product;
• Sifting through a sieve or screen, sorting, classifying, selecting, or matching (including the composition of sets of articles);
• Bottling, packing in cans, flasks, bags, cases, boxes, and other simple packaging operations;
• Simple assembly operations or disassembling products into parts;
• Splitting a product into components that does not lead to a significant difference between the resulting components and the original product;
• Mixing products (components) that does not lead to a significant difference between the resulting product and the original ingredients;
• Slaughtering animals and butchering (sorting) meat;
• A combination of two or more of the points mentioned above.

To transport goods across the border of another state, customs procedures must be completed with the execution of necessary documentation, including the country of origin. For member states of the Agreement, the country of origin is reflected in a certificate of origin, which is a document issued by an authorized body certifying the country of origin. Form ST-1 is set forth in Annex No. 2 to the Rules for Determining the Country of Origin of Goods. In certain cases for specific states, a certificate of origin for mass-produced products may be used instead of Form ST-1. The requirements for filling out the certificate of origin for mass-produced products are set forth in Annex No. 2 to the Decision of the Eurasian Intergovernmental Council. [4]

The following types of certificates are currently in use:

• Certificate of origin under Form ST-1 for member states of the Agreement;
• Certificate of origin under the General Form for goods exported to other countries, [5] excluding CIS countries;
• Certificate of origin under Form ST-2 for goods exported from the Russian Federation to the Republic of Serbia; [6]
• Certificate of origin under Form A [7] for determining the origin of goods from developing and least developed countries;
• Certificate of origin under Form EAV for goods exported from the Russian Federation to the Socialist Republic of Vietnam. [8]

For Eurasian Economic Union countries, in accordance with the EAEU Customs Code, information on the origin of goods is reflected in a declaration, which may be a commercial or any other document related to the goods containing origin details declared by the manufacturer, seller, or sender of the country of origin or the country of export.

It is important to note that, given the development of electronic document management across all sectors, an electronic system for certification of origin may be used in addition to paper certificates. This system was created to allow the customs authorities of the importing country to verify the issuance and correct completion of Form ST-1 certificates declared during customs clearing, without the need to present the original paper document. The main provisions regarding the electronic system for certification of origin are set forth in Annex No. 4 to the Agreement.

The possession of a document confirming the country of origin allows entrepreneurs to move goods across state borders with minimal time expenditure, significantly impacting trade turnover. However, the failure to provide a correctly executed certificate of origin or information on the origin of goods is not grounds for the detention of goods by customs authorities, except in cases provided for by the national legislation of the Agreement member states. At the same time, the customs authority of a member state may refuse entry to goods only if there are sufficient grounds to believe that the goods originate from a country whose goods are not subject to entry into the importing country under international treaties or national legislation. [9]

One of the significant areas of trade turnover in the Russian Federation is the procurement of goods, works, and services for state and municipal needs, which is regulated by special normative acts. In this context, it is important to note that the Contract System Law requires not only the determination of the country of origin but also its disclosure in the procurement documentation, including for direct contracts concluded without bidding procedures. For procurement activities in this area, the Council of the Eurasian Economic Commission approved the Rules for Determining the Country of Origin of Certain Types of Goods for the Purposes of State (Municipal) Procurement, [10] which include the Criteria for Determining the Origin of Industrial Goods of Member States. Additionally, National Treatment has been established for the procurement of goods, works, and services to meet the needs of state (municipal) customers. Legal acts of the Government of the Russian Federation may establish a ban on the admission of goods originating from foreign states, as well as restrict the admission of goods, works, and services. Examples of such Government resolutions include:

• Government Resolution No. 1236 dated November 16, 2015, On Establishing a Ban on the Admission of Software Originating from Foreign States for the Purposes of Procurement for State and Municipal Needs;
• Government Resolution No. 102 dated February 5, 2015, On Restrictions and Conditions for the Admission of Certain Types of Medical Devices Originating from Foreign States for the Purposes of Procurement for State and Municipal Needs;
• Government Resolution No. 617 dated April 30, 2020, On Restrictions on the Admission of Certain Types of Industrial Goods Originating from Foreign States for the Purposes of Procurement for State and Municipal Needs;
• Government Resolution No. 832 dated August 22, 2016, On Restrictions on the Admission of Certain Types of Food Products Originating from Foreign States for the Purposes of Procurement for State and Municipal Needs;
• Government Resolution No. 1289 dated November 30, 2015, On Restrictions and Conditions for the Admission of Medicinal Products Originating from Foreign States Included in the List of Vital and Essential Drugs for the Purposes of Procurement for State and Municipal Needs.

Meanwhile, the variety of goods on the domestic market allows for all consumer needs to be met; however, one should not forget that a violation of consumer protection legislation, including regarding the completeness of information about a specific product, may result in liability. For example, a violation of a consumer's right to receive necessary and reliable information about a product (work, service), the manufacturer, or the seller entails a warning or the imposition of an administrative fine. [11]

The country of origin is a significant component of trade interaction, not only within domestic trade turnover and state (municipal) procurement but also for participation in foreign trade as a whole. The correct application of regulations in determining the country of origin — both within Russian legislation and international law — allows the business community to reduce risks, including the risk of liability under national legislation and the risk of being unable to conduct foreign trade operations on international markets.

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References

[1] Resolution of the Gosstandart of Russia No. 529-st dated December 14, 2001, On the Adoption and Implementation of the All-Russian Classifier of Countries of the World.

[2] Treaty on the Eurasian Economic Union (signed in Astana on May 29, 2014).

[3] EEC Council Decision No. 49 dated July 13, 2018, On Approval of the Rules for Determining the Origin of Goods Imported into the Customs Territory of the Eurasian Economic Union.

[4] Decision of the Eurasian Intergovernmental Council No. 2 dated April 10, 2020, On Amending the Decision of the Eurasian Intergovernmental Council No. 5 dated August 12, 2016, and on the Application of the Certificate of Origin for Mass-Produced Products.

[5] Regulation on the Procedure for the Execution, Certification, and Issuance of Certificates of Origin, as Well as Other Documents Related to Foreign Trade Activities (approved by the Resolution of the Board of the Chamber of Commerce and Industry of the Russian Federation on December 23, 2010).

[6] Regulation on the Procedure for Issuing Certificates of Origin under Form ST-2 for Goods Exported from the Russian Federation to the Republic of Serbia (Annex to the Order of the Chamber of Commerce and Industry of the Russian Federation No. 62 dated July 7, 2021).

[7] EEC Council Decision No. 60 dated June 14, 2018, On Approval of the Rules for Determining the Origin of Goods from Developing and Least Developed Countries.

[8] Order of the Chamber of Commerce and Industry of the Russian Federation No. 131 dated October 27, 2016, On Approval of the Regulation on the Procedure for Issuing Certificates of Origin under Form EAV for Goods Exported from the Russian Federation to the Socialist Republic of Vietnam.

[9] Section 10 of the Agreement on the Rules for Determining the Country of Origin of Goods in the Commonwealth of Independent States (signed in Yalta on November 20, 2009).

[10] EEC Council Decision No. 105 dated November 23, 2020, On Approval of the Rules for Determining the Country of Origin of Certain Types of Goods for the Purposes of State (Municipal) Procurement.

[11] Clause 1 of Article 14.8 of the Code of Administrative Offenses of the Russian Federation.