31 March 2023

Import from Turkey to Russia: Legal & Customs Guide

March 31, 2023

BRACE Law Firm ©

Trade between Russia and Turkey has been conducted for a long time, but due to the sanctions imposed against the Russian Federation, Turkish suppliers have come into significantly higher demand than before. The supply of a wide range of Turkish goods has allowed the Russian market to fully satisfy the needs of consumer demand.

Political and economic changes in the world and the imposition of sanctions against Russia have led to changes in the Russian import market. Due to the exit of major European suppliers of a wide variety of goods, entrepreneurs began to seek manufacturers from other countries.

Turkey is not a member of the Eurasian Economic Union. [1] Therefore, the interaction for importing Turkish goods into the territory of Russia is carried out according to the general rule. Contracts for the sale of goods between foreign partners are governed by the United Nations Convention on Contracts for the International Sale of Goods. [2] Under this Convention, the seller is obligated to deliver the goods, hand over any documents relating to them, and transfer the property in the goods as required by the contract. [3] Additionally, the seller must deliver goods that correspond in quantity, quality, and description to the requirements of the contract and which are contained or packaged in the manner required by the contract. [4]

In addition to international norms governing the conclusion of contracts for the supply of goods, it is important to know and apply the law of the country of the party to the contract. The Turkish Code of Obligations, which regulates, among other things, contract law, applies in Turkey. [5]

Regulatory Framework for Importing Goods from Turkey to Russia

Interaction between Russian and Turkish partners is governed by various regulatory documents, including international law, Russian legislation, and Turkish legislation:

The United Nations Convention on Contracts for the International Sale of Goods; [6]
The Protocol on Measures for the Further Development of Trade and Economic Cooperation between the USSR and Turkey dated June 26, 1978;
The Treaty on the Principles of Relations between the Russian Federation and the Republic of Turkey dated May 25, 1992;
The Agreement between the Government of the Russian Federation and the Government of the Republic of Turkey On the Avoidance of Double Taxation with Respect to Taxes on Income; [7]
The Agreement between the Government of the Russian Federation and the Government of the Republic of Turkey on the Establishment of a Mixed Intergovernmental Russian-Turkish Commission on Trade and Economic Cooperation dated May 14, 1992;
The Agreement between the Government of the Russian Federation and the Government of the Republic of Turkey on Settlements and Payments (entered into force on October 4, 2019);
The Agreement between the Government of the Russian Federation and the Government of the Republic of Turkey on International Road Transport dated November 6, 2020;
The Agreement between the Government of the Russian Federation and the Government of the Republic of Turkey on the Organization of Multimodal International Railway-Ferry Service through the Ports of Kavkaz (Russian Federation) and Samsun (Republic of Turkey) dated May 12, 2010;
Law of the Republic of Turkey No. 3577 and Instruction No. 23861 dated October 30, 1999, On the Prevention of Unfair Competition in Imports;
International Incoterms rules in various editions;
The Customs Code of the Eurasian Economic Union.

The foreign trade contract concluded must reflect international law and comply with the legislation of the partner's country without violating Russian law.

Delivery of Goods from Turkey to Russia

Under the general rule of the Convention on Contracts, if the seller is not bound to deliver the goods at any other particular place, its delivery obligation consists of the following:

if the contract of sale involves carriage of the goods — in handing the goods over to the first carrier for transmission to the buyer;
if the contract relates to specific goods, or unidentified goods to be drawn from a specific stock or to be manufactured or produced — in placing the goods at the buyer's disposal at that place;
in other cases — in placing the goods at the buyer's disposal at the place where the seller had its place of business at the time of the conclusion of the contract. [8]

Goods are delivered from Turkey to Russia by sea, air, or road transport, including multimodal transport. To specify delivery conditions, international Incoterms rules were developed, which stipulate the main delivery bases. When concluding a foreign trade contract, international transaction participants choose a delivery basis convenient for both parties. The chosen basis under the Incoterms rules regulates delivery conditions, customs clearance conditions, payment of customs fees and duties, cargo insurance, etc., and distributes these duties between the seller and the buyer depending on the delivery basis stipulated by the foreign trade contract.

It is important to note that when buying and selling goods, not only the goods themselves are transferred, but also all supporting documentation. Furthermore, if the seller is obligated to hand over documents relating to the goods, it must do so at the time, place, and in the form required by the contract.[9]

Product Cost and Payment for Supplies from Turkey

Performance of the contract is paid for at the price established by agreement of the parties. [10] Furthermore, the buyer must pay the price when the seller, in accordance with the contract, places either the goods or documents controlling their disposition at the buyer's disposal. [11]

Every foreign trade contract must contain a provision on the cost of the goods, including the unit price, the total contract amount, and the currency of settlements between participants of the international transaction, indicating the currency name and code. The currency code is indicated in accordance with the Currency Classifier. [12] This information is important for currency and customs control.

In accordance with international law, the buyer's obligation to pay the price includes taking such steps and complying with such formalities as may be required under the contract or according to laws and regulations to enable the payment to be made. [13] Simultaneously, the parties to a foreign trade contract must independently determine the payment terms (prepayment, advance, or payment upon delivery).

The calculation of customs payments depends on the contract amount, as the transaction value method for imported goods is the primary method for calculating the customs value. At the same time, it is necessary to consider that settlements with Turkish partners are conducted in foreign currency, which falls under the currency control of the Russian Federation. [14] It is also important to consider that if the amount of an import contract is equal to or exceeds 3 million rubles, the contract must be registered with an authorized bank. All settlements under the contract are made only through accounts opened with the authorized bank that registered the contract, or in the authorized bank that accepted the contract for service, and/or through its account opened in a non-resident bank. [15]

When drafting the terms of a foreign trade contract, it is important to carefully prepare and stipulate the section on the cost of goods and the settlement procedure. The subject of disputes arising with customs authorities is the determination of the customs value of the goods and amendments to the customs declaration following a change in the value of the imported goods. As examples of disputes with customs authorities where Turkish partners acted as sellers, the following cases can be cited:

Resolution of the Arbitration Court of the Volgo-Vyatka District dated September 29, 2021, No. F01-5178/2021 in Case No. A82-8488/2020 On Declaring Unlawful the Customs Authority’s Decisions to Amend Information in Product Declarations and Ordering the Acceptance of the Declared Customs Value. The declarant determined the customs value of goods (pneumatic rifles and pistols) using the transaction value method. The customs authority adjusted the customs value, determining it according to the identical goods method. Following the review of the dispute, the court decided to satisfy the claims because the declarant provided documents on the transaction's main terms, information on delivery and payment conditions, and no inconsistencies or contradictions were found in the submitted documents.
Resolution of the Arbitration Court of the North-Western District dated March 7, 2023, No. F07-1532/2023 in Case No. A56-20389/2022 On Declaring Invalid the Customs Authority’s Decisions to Amend Information in Product Declarations and Ordering the Refund of Excessively Paid Customs Payments. During the audit, it was established that information regarding the customs value of goods declared by the company was declared unreliably. Following the review of the dispute, the court decided to deny the claim because the customs authority confirmed an unjustified discrepancy between the customs value declared by the company and the actual value of the goods.
Resolution of the Arbitration Court of the Ural District dated February 10, 2021, No. F09-8769/20 in Case No. A60-23363/2020 On Declaring Invalid the Customs Authority’s Decision to Amend Information Declared in the Declaration. The customs authority increased the customs value of imported goods (diesel generators), which led to an increase in the VAT amount. Following the review of the dispute, the court decided to satisfy the claims since the price of goods declared by the declarant, determined by the transaction value, was confirmed by documents submitted at the authority's request. Transportation costs were lawfully included in the value of the goods, and there were no grounds for the authority to apply the fallback method.

Considering the practice of handling cases with customs authorities, it is important to note that the product cost reflected in the contract plays a significant role not only for settlements with the seller of the goods but also for determining the customs value and paying customs fees and duties.

Use of Trademarks when Importing Goods from Turkey

Considering the large-scale production by Turkish suppliers of a wide variety of goods, it is important to remember to respect intellectual property rights, for the violation of which liability is provided in the Russian Federation. When concluding a foreign trade contract, it is necessary to be prudent and check not only the future counterparty but also the goods that will be supplied to the territory of the Russian Federation.

In accordance with the civil legislation of the Russian Federation, no one has the right to use designations similar to a right holder's trademark without its permission for goods for which the trademark is registered, or for similar goods, if such use results in a likelihood of confusion.[16] Simultaneously, goods, labels, and packaging on which a trademark or a confusingly similar designation is illegally placed are counterfeit. [17]

Responsibility is provided in Russia for the violation of intellectual property rights and the use of trademarks without appropriate permission. As an example of imposing administrative liability, we cite several cases:

Resolution of the Intellectual Property Court dated September 14, 2022, No. S01-1547/2022 in Case No. A43-41917/2021 On Imposing Liability under Part 1 of Article 14.10 of the CAO RF for the Unlawful Use of Another’s Trademark. The Privolzhskaya Electronic Customs applied to the Arbitration Court of the Nizhny Novgorod Region to hold a limited liability company liable for administrative liability under Part 1 of Article 14.10 of the CAO RF for the illegal use of another's trademark. The customs authority's claim was satisfied because the fact that the company performed actions aimed at importing counterfeit goods into the territory of the Russian Federation was documented.
Resolution of the Intellectual Property Court dated December 27, 2019, No. S01-1388/2019 in Case No. A47-1694/2019 On Imposing Administrative Liability under Part 1 of Article 14.10 of the CAO RF for the Unlawful Use of Another’s Trademark. During the review of the case, it was established that counterfeit goods were imported into the territory of Russia by the company. During the customs inspection upon opening the cargo compartment of the vehicle, it was established that the "sweatpants" were marked with the "NIKE" trademark. Upon request to the company Nike Innovate C.V., it was established that the exclusive right to the trademark "NIKE", including for the import and storage of products, had not been transferred to the defendant. The claims were satisfied because the company's actions established the elements of the alleged offense.

Importing Sanctioned Goods through Turkey

The sanctions restrictions of the Russian Federation have significantly affected the market of supplied goods. Many brands have left the territory of Russia; however, European goods enter Russian markets bypassing sanctions restrictions.

The supply of European goods to Russia is carried out through several countries, including through Turkey. As a rule, this happens as follows: a carrier from Turkey delivers the goods from the Eurozone to its country, where the goods are re-labeled and then sent to the Russian Federation under the guise of Turkish goods. It is important to note that Turkish suppliers do not maintain the brand's reputation; in this case, the manufacturer bears the losses.

However, when using such a scheme for importing goods, it is important to understand that Turkish authorities may impose restrictions on the transit of sanctioned goods to Russia, which will lead to significant losses for entrepreneurs. A similar ban was introduced in March 2023; however, the transit of goods was subsequently restored, but with certain restrictions. For example, the supply of products from Canada and the USA is impossible, as is the supply of certain categories of goods, especially regarding the transit of dual-use goods. [18]

At the same time, when importing sanctioned goods through Turkey, the possibility of warranty and after-sales service is excluded for the final consumer. Also, for example, sanctioned goods cannot be used in another country for technical reasons because they were imported for use in Turkey.

Before choosing to purchase goods from Turkish suppliers, it is important to study all the subtleties of supplying sanctioned goods so that the products can be used in the territory of the Russian Federation and the Russian entrepreneur does not fall under penalties in accordance with Russian legislation.

Prohibitions and Restrictions on Importing Goods from Turkey

Goods are moved across the Union's customs border and/or placed under customs procedures in compliance with prohibitions and restrictions. [19] Prohibitions and restrictions when crossing the customs border of the Russian Federation allow for regulating the spread of various infections. As examples of introduced bans on the import of goods from Turkey, several cases can be cited:

Letter of Rosselkhoznadzor dated February 21, 2023, No. FS-ARe-7/5002-3 On Introducing Temporary Restrictions on the Import of Products from Turkey into the Russian Federation;
Letter of Rosselkhoznadzor dated October 9, 2020, No. FS-KS-3/28180 On Prohibiting the Import into the Russian Federation of Peppers Exported from a Turkish Enterprise;
Letter of Rospotrebnadzor dated January 11, 2022, No. 02/414-2022-22 On Suspending the Import of Food Products from the Republic of Turkey into the Territory of the Russian Federation.

After eliminating the reasons for which the bans on importing goods from Turkey to Russia were introduced, such restrictions are lifted and imports resume:

Letter of Rosselkhoznadzor dated December 30, 2019, No. FS-KS-7/35750 On Lifting Restrictions on the Import of Fish Products from a Turkish Enterprise into Russia;
Letter of Rosselkhoznadzor dated September 8, 2021, No. FS-Yush-3/25759 On Permitting the Import of Tomatoes and Peppers from the Antalya and Izmir Regions of the Republic of Turkey into the Russian Federation;
Letter of Rosselkhoznadzor dated March 1, 2018, No. FS-KS-3/4627 On Permitting the Import of Products from the Republic of Turkey into the Russian Federation.

Compliance with prohibitions and restrictions allows for regulating unforeseen circumstances related to the delivery of goods of various directions, which could significantly affect the state of health of citizens of the Russian Federation, especially if food products are imported.

Customs Clearance for Importing Goods from Turkey to the Russian Federation

Goods moved across the customs border of the EAEU are subject to being placed under customs procedures. [20] Furthermore, goods are subject to customs declaration when placed under a customs procedure, which is carried out by the declarant or a customs representative. At the same time, customs declaration is carried out in electronic form; however, cases of paper declaration processing are permitted:

when placing goods under the customs transit procedure;
with respect to goods for personal use;
with respect to goods sent in international mail;
with respect to international transport vehicles;
when using transport, commercial, and/or other documents as a customs declaration;
in other cases determined by the Commission.

The following information must be specified in the product declaration:

Information about the declared customs procedure.
Information about the declarant, customs representative, sender, recipient, seller, and buyer of the goods.
Information about international transport vehicles, as well as vehicles by which the goods were transported (will be transported) across the customs territory of the Union.
Information about the goods:

name, description necessary for calculating and collecting customs duties, special, antidumping, and countervailing duties, and other payments whose collection is entrusted to customs authorities, for ensuring compliance with prohibitions and restrictions, internal market protection measures, taking measures by customs authorities to protect rights to intellectual property objects, identification, and classification under a single 10-digit code of the Commodity Nomenclature of Foreign Economic Activity;
the product code in accordance with the Commodity Nomenclature of Foreign Economic Activity;
origin of the goods;
name of the country of departure and country of destination;
manufacturer of the goods;
trademark;
name of the place of origin of the goods, which is an intellectual property object included in the unified customs register of intellectual property objects of member states and/or the national customs register of intellectual property objects maintained by the customs authority of the member state to whose customs authority the product declaration is submitted;
packaging description;
price, quantity in kilograms (gross weight and net weight) and in additional units of measurement;
customs value of the goods (amount, method of determining the customs value of the goods);
statistical value.

Information regarding the calculation of customs duties, special, antidumping, and countervailing duties:

rates of customs duties, taxes, customs fees, special, antidumping, and countervailing duties;
customs payment benefits;
tariff preferences;
amounts of calculated customs duties, taxes, customs fees, special, antidumping, and countervailing duties;
currency exchange rate applied for calculating customs duties, taxes, special, antidumping, and countervailing duties in accordance with this Code.

Information about the transaction with the goods and its terms.
Information about compliance with prohibitions and restrictions.
Information about compliance with the conditions for placing goods under a customs procedure.
Information about documents confirming the data specified in the product declaration.
Information about documents confirming compliance with the legislation of member states, the control over compliance with which is entrusted to customs authorities.
Information about the person who filled out the product declaration and the date of its preparation.

The release of goods is carried out by the customs authority on the condition that:

the conditions for placing the goods under the declared customs procedure are met;
customs fees for the performance of actions related to the release of goods by the customs authorities have been paid.

Considering that goods from Turkey can enter the territory of Russia by various modes of transport, in order to improve the procedure for customs clearance and customs control of goods imported into the customs territory of the Russian Federation from the Republic of Turkey by air transport, the Instruction on the Specifics of Conducting Certain Customs Operations was approved. [21] This instruction determines the list, sequence, and maximum deadlines for the performance of customs operations by customs authority officials during the customs clearance of goods imported by air transport from the territory of the Republic of Turkey into the customs territory of the Russian Federation.

Drafting a Foreign Trade Contract with Turkish Suppliers

Despite the international regulation of interaction when concluding contracts for the sale of goods, concluding a foreign trade contract with Turkish partners will significantly simplify interaction with them.

It should be noted that a concluded foreign trade contract not only guarantees the protection of the buyer in the event of dispute situations but is also necessary for conducting the procedure of customs clearance of goods when crossing the border of the Russian Federation.

Before concluding an international contract, it is important to determine all the components of the foreign trade contract: decide on the subject of the transaction, stipulate the quality and quantity of the supplied goods, fix the value of the goods, choose the delivery basis for the cargo, reflect the terms of product supply, and insurance of the goods until the transfer of the cargo to the buyer. The terms of the contract depend on the supplied product and the capabilities of the seller and the buyer.

It is important to understand that the more thoroughly the terms of the contract with Turkish partners are stipulated, the simpler it will be to interact with them and resolve dispute points related not only to cargo delivery and product quality but also to its payment.

Customs Fees and Duties for Importing Goods from Turkey

Customs fees are mandatory payments collected for the performance of customs operations by customs authorities related to the release of goods. [22] The rates and basis for calculating customs fees are established by the Government of the Russian Federation. [23]

For the purposes of applying customs and tariff regulation measures, export customs duties, prohibitions and restrictions, internal market protection measures, and maintaining customs statistics, the Unified Commodity Nomenclature of Foreign Economic Activity of the Eurasian Economic Union is used. [24]

The amount of customs fees for each specific transaction depends on the customs value of the imported product and the correctness of its determination. Given that the opinions of entrepreneurs and customs authorities regarding the determination of customs value may diverge, in the event of dispute situations, the resolution of the dispute is transferred to court:

Resolution of the Ninth Arbitration Appeal Court dated November 21, 2022, No. 09AP-65630/2022 in Case No. A40-52206/2022. A decision to amend (supplement) the information declared in the product declaration was challenged. The documents submitted by the declarant to the customs authority allowed for the identification of the imported product by quantity and confirmed the reliability of the information declared by the declarant regarding the customs value of the product, which the declarant determined by the transaction value of the imported goods. As a result of the case review, the court satisfied the applicant's claims.
Decision of the Arbitration Court of the Nizhny Novgorod Region dated January 10, 2023, in Case No. A43-18293/2022 On Declaring Invalid the Decision of the Privolzhskaya Electronic Customs. There were grounds for making changes to the information declared in the product declaration due to the discovery of signs during customs control indicating the unreliability of the declared customs value, and the failure of the company, despite repeated requests from the customs authority, to provide documents and information confirming the declared customs value of the goods with certainty. The court denied the claim.

Considering the different court practice when importing goods from the Republic of Turkey to the Russian Federation, it is important for entrepreneurs to correctly draft a foreign trade contract, in which all necessary conditions are reflected not only for the delivery of cargo from Turkey to Russia but also for further interaction with customs authorities during customs procedures.

In addition, it is necessary to consider the introduced restrictions on the import of goods into the Russian Federation, existing bans related to sanctions restrictions, changing legislation, etc. All these factors can significantly affect the possibility of performing a foreign trade contract. In this regard, the participation of translators and experienced foreign trade lawyers in unstable economic conditions will allow entrepreneurs to simplify interaction with Turkish partners and customs authorities, as well as minimize possible risks for both parties to an international transaction.

________________________________

References

[1] Treaty on the Eurasian Economic Union. Signed in Astana on May 29, 2014.

[2] United Nations Convention on Contracts for the International Sale of Goods. Concluded in Vienna on April 11, 1980.

[3] Article 30 of the Convention on Contracts.

[4] Paragraph 1 of Article 35 of the Convention on Contracts.

[5] Turkish Code of Obligations dated January 11, 2011.

[6] United Nations Convention on Contracts for the International Sale of Goods. Concluded in Vienna on April 11, 1980.

[7] Agreement between the Government of the Russian Federation and the Government of the Republic of Turkey on the Avoidance of Double Taxation with Respect to Taxes on Income. Concluded in Ankara on December 15, 1997.

[8] Article 31 of the Convention on Contracts.

[9] Article 34 of the Convention on Contracts.

[10] Article 424 of the Civil Code of the Russian Federation.

[11] Article 57 of the Convention on Contracts.

[12] Decision of the Commission of the Customs Union dated September 20, 2010, No. 378 On Classifiers Used for Filling Out Customs Documents.

[13] Article 54 of the Convention on Contracts.

[14] Article 22 of Federal Law No. 173-FZ dated December 10, 2003, On Currency Regulation and Currency Control.

[15] Instruction of the Bank of Russia dated August 16, 2017, No. 181-I On the Procedure for Residents and Non-residents to Submit Supporting Documents and Information to Authorized Banks when Conducting Currency Operations, on Unified Accounting and Reporting Forms for Currency Operations, and the Procedure and Deadlines for their Submission.

[16] Paragraph 3 of Article 1484 of the Civil Code of the Russian Federation.

[17] Paragraph 1 of Article 1515 of the Civil Code of the Russian Federation.

[18] Turkey Sees Double in Transits / Sanctions Against Russia // N. Skorlygina, T. Kornev // Kommersant Newspaper No. 47 dated March 21, 2023.

[19] Paragraph 1 of Article 7 of the Customs Code of the EAEU.

[20] Paragraph 1 of Article 127 of the Customs Code of the EAEU.

[21] Order of the FCS of Russia dated March 20, 2008, No. 292 On Approving the Instruction on the Specifics of Conducting Certain Customs Operations during Customs Clearance and Customs Control of Goods Imported by Air Transport from the Republic of Turkey into the Customs Territory of the Russian Federation.

[22] Paragraph 1 of Article 47 of the Customs Code of the EAEU.

[23] Resolution of the Government of the Russian Federation dated March 26, 2020, No. 342 On Rates and the Basis for Calculating Customs Fees for Customs Operations Related to the Release of Goods.

[24] Decision of the Council of the Eurasian Economic Commission dated September 14, 2021, No. 80 On Approving the Unified Commodity Nomenclature of Foreign Economic Activity of the Eurasian Economic Union and the Common Customs Tariff of the Eurasian Economic Union, as well as on Amending and Recognizing Certain Decisions of the Council of the Eurasian Economic Commission as Void.