Legal Guide to Importing from India to Russia: Customs & Contracts

 

March 15, 2024

BRACE Law Firm ©

 

India is currently one of the most dynamically developing countries. According to Goldman Sachs analysts, the Indian economy will overtake not only Japan and Germany but also the United States over the next half-century, taking second place in the world by 2075, second only to China. [1]

India is one of Russia's key partners in Asia. Intensive bilateral interaction between the two countries occurs in the political sphere within the framework of the Shanghai Cooperation Organization (SCO), BRICS, and other interstate associations, as well as in trade.

According to the Foreign Policy Concept, building a particularly privileged strategic partnership with the Republic of India in all areas of cooperation represents one of the key regional directions of Russian foreign policy. [2] Particular attention is paid to increasing trade volumes, as well as investment and technological ties.

According to the Indian statistical service, trade turnover between Russia and India at the end of 2023 amounted to approximately $65 billion, a significant share of which is oil and petroleum products. Russia ranked fourth among India's largest trading partners. Regarding the export of Indian goods to Russia, it increased 1.4 times to $4 billion in 2023. By the level of purchases, Russia rose seven positions to become the thirtieth among other countries purchasing Indian goods.[3]

Structure of Imports from India and Restrictions on the Import of Goods

According to the Federal Customs Service, the leading positions in the structure of Russian imports from India in 2021 were occupied by chemical products, machinery, equipment and vehicles, food products and agricultural products, and precious metals and stones.[4] At the same time, the pressure of sanctions imposed by Western countries against Russia creates conditions for reorienting foreign economic relations to "friendlier" markets and expanding the range of imports. Solving the problem of supplying equipment, technologies, spare parts, and other components, the import of which from Western countries is currently difficult, is possible through expanding the trade partnership with India. This provides grounds to expect a further increase in the share of machinery, equipment, and vehicles in the structure of Russian imports from India.

Before entering into a contract for the supply of a particular product, it is necessary to study the list of goods prohibited for import into the customs territory of the Eurasian Economic Union from specific countries, including India.

Eurasian Economic Commission Board Decision No. 30 dated April 21, 2015, On Non-Tariff Regulation Measures (the "EEC Decision No. 30") adopted a list of goods whose import into the customs territory of the Eurasian Economic Union is prohibited, as well as lists of goods for which a permissive import procedure and quantitative import restrictions have been established.

Thus, according to Annex No. 1 to the EEC Decision No. 30, it is prohibited to import into the territory of the Eurasian Economic Union, for example:

• ozone-depleting substances prohibited for import and products containing them;
• hazardous waste prohibited for import (for example, mercury and its compounds);
• certain plant protection products and other persistent organic pollutants prohibited for import (for example, heptachlor, including mixtures and preparations containing it) and other goods.

In accordance with Annex No. 2 to the EEC Decision No. 30, a permissive import procedure to the customs territory of the Eurasian Economic Union is established, inter alia, regarding the following goods:

• precious stones and metals;
• narcotic drugs, psychotropic substances, and their precursors;
• certain medicinal products;
• special technical means for clandestine information gathering and other goods.

When importing animals or products of animal origin from India, one should be guided by the Unified List of Goods Subject to Veterinary Control (Supervision), approved by Customs Union Commission Decision No. 317 dated June 18, 2010. As follows from the title of the list, the relevant state bodies and institutions of the Eurasian Economic Union member states in the field of veterinary medicine exercise control over goods at the customs border and in the customs territory to prevent the import and movement (transportation) of controlled goods hazardous to human and animal health into the customs territory of the Eurasian Economic Union.

For example, regarding the product "Frozen peeled shrimp with tail fin (aquaculture)," produced by No. 990 M/s Devi Fisheries Limited (India), enhanced laboratory control has been established due to the primary detection of prohibited and harmful substances. [5]

Alternatively, for example, in accordance with a letter from Rosselkhoznadzor: "supplies of buffalo meat from India must be accompanied by the form of the Unified Veterinary Certificate for meat, raw meat, and sub-products obtained during the slaughter and processing of cattle exported to the Customs Union (Form No. 22), approved by CUC Decision No. 607 dated April 7, 2011, which must be mandatory visaed by an authorized veterinary inspector of the Russian Federation who is permanently present during the procurement and shipment of buffalo meat intended for export to Russia. Simultaneously, we inform you that supplies of buffalo meat from the Republic of India to the territory of the Russian Federation must be carried out through sea checkpoints: Kaliningrad, Vladivostok, Saint Petersburg, and Novorossiysk." [6]

There are many other similar restrictions, prohibitions, and requirements, which necessitates a thorough check before launching the processes of importing goods from India.

Legal Regulation of Trade Relations Between India and Russia

The basis of Russian-Indian economic relations is the intergovernmental Agreement on Trade and Economic Cooperation dated May 4, 1992 (the "Agreement"). Upon signing this Agreement, the governments of both countries agreed to develop trade and economic cooperation on a stable and long-term basis, as well as to grant each other Most Favored Nation treatment in all matters of trade and commercial cooperation.

In accordance with Articles 7 and 8 of the said Agreement, the import of goods and services will be carried out at world prices based on contracts concluded between individuals and legal entities of both countries in accordance with national legislation and international practice.

The next document forming the basis of Russian-Indian relations is the Treaty of Friendship and Cooperation Between the Russian Federation and the Republic of India of 1993, [7] according to which the parties agreed to assist each other in developing mutually beneficial trade and economic cooperation. In accordance with their national legislation and international obligations, they will also create the necessary economic, financial, and legal conditions to facilitate entrepreneurial and other economic activities, bilateral and multilateral joint ventures, and to encourage investments consistent with the principle of national sovereignty over their natural resources.

Another important regulatory act for Russian-Indian trade and economic relations was the Declaration on Strategic Partnership Between the Russian Federation and the Republic of India, signed in New Delhi on October 3, 2000 (the "Declaration"). The Declaration brought Russian-Indian relations to a new, strategic level and touched upon all areas of interaction between the two countries. It is worth noting that the most extensive section of the document is devoted to trade and economic relations. Today, this is the most comprehensive document regulating relations between the two countries.

The Declaration provides for:

• deepening and diversifying cooperation in energy, metallurgy, technology, and other fields;
• creating favorable conditions for mutual investment;
• developing cooperation in the banking and financial sectors;
• simplifying customs procedures and reducing tariff restrictions;
• coordinating cooperation in international trade, economic, and financial organizations.

The next step in strengthening Russian-Indian relations was the negotiations on the creation of a new association called "BRIC" between Brazil, Russia, India, and China, which took place in 2006. The need for such an association was explained by economic reasons: within the framework of the new world-level "conglomerate," countries could exchange experience and create joint projects in economic, legal, and other spheres. In 2010, the Republic of South Africa (RSA) joined BRIC. As a result, at the beginning of 2011, the union acquired the composition and name with which it exists now — BRICS.

Trade is becoming one of the most important areas of mutually beneficial cooperation, contributing to the further growth of the national economies of these countries. However, many obstacles are encountered in this direction. The countries that joined BRICS are characterized by completely different economic, political, social, and, accordingly, legal levels of development. This fact causes practical difficulties when concluding foreign trade contracts between various counterparties from BRICS countries in general, and between counterparties from Russia and India in particular.

A huge role in concluding foreign trade contracts is assigned to international treaties containing, above all, unified substantive norms. However, within the framework of the BRICS countries, as many researchers note, there is practically not a single treaty in which all these countries participate simultaneously. [8]

An analysis of the status of international conventions showed that it is indeed very difficult to find conventions in which both Russia and India participate. The first such exception, in the field of arbitration, is the Convention on the Recognition and Enforcement of Foreign Arbitral Awards, concluded in New York in 1958 (the "New York Convention"). All five BRICS states are parties to this Convention. Russia, as the successor to the USSR, and India since 1960, [9] which means the possibility of considering disputes between Russian and Indian companies in commercial arbitration and their subsequent enforcement both in Russia and in India.

The next exception, already in the field of methods for securing the performance of obligations, is the Cape Town Convention on International Interests in Mobile Equipment of 2001, which entered into force in 2006. For Russia, this Convention entered into force on September 1, 2011; for India, on July 1, 2008.

Three protocols have been adopted to the Convention: on aircraft equipment, on railway equipment, and on space equipment. Russia and India, like other BRICS countries, participate in the Protocol on Aircraft Equipment. The Convention and the Protocol are considered as a single document.

A few remarks must be made regarding the United Nations Convention on Contracts for the International Sale of Goods of 1980 (the "Vienna Convention"). Today, the Vienna Convention is one of the most famous and authoritative international treaties on the regulation of sales contracts between participants from various countries around the world. However, among the BRICS countries, this Convention has been ratified by only three states, including Russia since August 16, 1990. India is not a party to the convention.

At the same time, the Vienna Convention is applicable not only to relations between entities operating in the territory of member states (subparagraph "a" of paragraph 1 of Article 1) but also if the rules of private international law lead to the application of the law of a member state (subparagraph "b" of paragraph 1 of Article 1). Thus, the Vienna Convention may also apply in contractual relations between counterparties from Russia and India. The parties may agree in their contract on Russian law as the applicable law since the Vienna Convention, by virtue of ratification, is part of Russian legislation.

For example, a sole arbitrator, when considering a dispute between a Russian plaintiff and an Indian defendant in the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation, pointed out that "in accordance with part 4 of Article 15 of the Constitution of the Russian Federation and paragraph 1 of Article 7 of the Civil Code, international treaties of the Russian Federation are an integral part of its legal system. The Russian Federation is a party to the 1980 United Nations Convention on Contracts for the International Sale of Goods (the "Vienna Convention").

According to subparagraph "b" of paragraph 1 of Article 1 of the Vienna Convention, it applies in cases "when the rules of private international law lead to the application of the law of a Contracting State." Based on the foregoing and considering that the Contract was concluded between parties established in Russia and India, the sole arbitrator concludes that the applicable law in this case is the provisions of the Vienna Convention.

Thus, taking into account the existing agreement of the parties on the choice of law, the sole arbitrator recognizes that Russian substantive law applies subsidiarily to the provisions of the Vienna Convention." [10]

Company Verification in India

Counterparty verification is a mandatory stage of preparation for a transaction, especially if the counterparty is a foreign company. In this case, the risks only increase since it will be more difficult to hold a foreign company liable.

There are four documents that can be requested from an Indian supplier for independent verification during the preliminary search for a counterparty:

• Company Business License;
• Taxpayer Certificate (GST Certificate);
• Import-Export Certificate (IEC);
• ISO 9001 Certificate.

Any active company in India must have a business license and a company identification number. Most companies in India (with the exception of LLPs) have a CIN — Corporate Identity Number. Using the company name and its CIN, you can check the company's registration data on the website of the Ministry of Corporate Affairs of India. Companies with LLP status are assigned an LLPIN code, which can also be checked on the ministry's website.

The CIN number contains basic information about the organization, and by looking at this 21-digit code, you can understand the type, place, and date of the company's registration. For example, let's analyze CIN code U67190TN2014PTC096978. The first letter of the CIN symbolizes the company's status — U (unlisted) or L (listed company). The next 5 digits represent the industry to which the company's activities belong. For instance, textile production belongs to group 1711, manufacturing of wearing apparel to group 1810, etc. The next two digits of the CIN symbolize the state of India in which the company is officially registered. The following 4 digits of the number indicate the year in which the company was registered. The next 3 letters indicate the type of company ownership. For example, PLC is a public limited company, SGC is a state government company, OPC is a one-person company, etc. The last 6 digits of the registration number are the actual unique registration number officially assigned to the company.[11]

Another mandatory document that all Indian companies must have is the taxpayer certificate, or GST Certificate. It is assigned to any company that provides products or services and has an annual revenue of approximately $21,000. The company's tax registration number (GSTIN) can also be checked on the Indian government website in the Goods and Services Tax section. [12]

It should be noted that not all manufacturing companies in India have an export license allowing them to export products directly. Therefore, many manufacturing companies cooperate with trading companies to export products abroad. The presence of an export license is a huge plus for a company profile, as it implies the supplier's greater experience in international trade and cooperation with foreign clients. An export license can also be checked personally on the government website by entering the IEC number.

Typically, one of the most common international certificates requested from suppliers is ISO 9001. This document confirms the certification of the quality management system in any industry, not just manufacturing. It is implied that a company possessing this certificate has a quality control department that performs the functions of process control and checking products for compliance with requirements. This system implies measures for rectifying deficiencies and monitoring the efficiency of operations.

Indian suppliers possess an ISO 9001 certificate if they export to countries in America and Europe, as it is a requirement of major brands for initiating cooperation. However, the presence of such a certificate does not imply that the supplier's daily operations are well-tuned and fully comply with this system, as many suppliers obtain this certificate only for show and do not attach particular importance to maintaining the efficiency of the internal quality control system. [13]

Checking these documents is only a primary check of the company and is used at the first stages of selecting a list of potential suppliers. For a more detailed check of the company, production facilities, equipment, and internal quality control system, we advise potential importers of goods from India to conduct it independently by visiting the enterprise's territory or by involving an auditor for this purpose, especially if the purchase of complex equipment is planned.

Concluding a Contract with Partners from India

In Russian legislation, the main condition that must be agreed upon in a supply contract under any circumstances is its subject matter. According to Article 506 of the Civil Code of the Russian Federation (the "Civil Code"), under a supply contract, a seller (supplier) engaged in entrepreneurial activity undertakes to transfer, within a specified period or periods, goods produced or purchased by him to the buyer for use in entrepreneurial activity or for other purposes not related to personal, family, household, and other similar use.

When agreeing on the subject of supply, the parties to the contract should be guided by the general provisions on sales contracts (Articles 455 and 465 of the Civil Code). In accordance with these articles, the terms of a supply contract regarding the subject (goods) are considered agreed upon if they allow for the determination of the name and quantity of the goods. When concluding and subsequently performing a supply contract, one should be guided by paragraphs 1 and 3 of Chapter 30 of the Civil Code.

We will dwell in more detail on the legislation of India regulating the issues of concluding a contract in general, and a supply contract in particular, since, despite the development of trade relations with India, this issue has been covered very poorly by Russian legal science.

Most branches of Indian legislation were formed under the influence of English law during the period of British rule. A significant part of the current civil legislation of modern India was adopted before independence. Thus, the Contract Act, which is the main source of contract law, was adopted as far back as 1872, and the Sale of Goods Act in 1930. As a result of the adoption of these and other laws developed by English lawyers, India entered the common law system.

The legal definition of a contract is enshrined in the Contract Act of 1872. The definition given in point (h) of Article 2 of this Act appears general and allows for various doctrinal interpretations: "a contract is an agreement enforceable by law"[14].

An "agreement" is understood as a "promise or a set of promises" through which both parties form duties to provide consideration. Consideration is understood as some benefit promised by one party to the other party in the process of forming the contract (Article 23 of the Contract Act of 1872). At the same time, consideration must not be prohibited by law, i.e., it must be of the kind that is permitted; its provision must not violate the provisions of any current laws or be fraudulent; it must not consist of causing injury to the person or property of another, nor be contrary to public policy. Consideration may consist of the provision of money, things, services, a promise to perform certain actions in the future or to abstain from performing them, etc.

Along with the provision of consideration, which creates a prerequisite for the existence of a contract, an obligation arises when a proposal to enter into a transaction is accepted. In other words, an agreement consists of a proposal, or "offer", and its acceptance. The offer is the starting point in the process of concluding a contract. The conclusion of any agreement is initiated by one of the parties making a proposal to the other party to buy something, use some service, etc. Reaching an agreement is the result of the proposal being accepted. Thus, acceptance represents the second stage of concluding a contract. Acceptance is an act of the offeree manifesting his consent to the terms of the proposal; it demonstrates the offeree's readiness to bind himself to the terms of the offer proposed to him. For an acceptance to be considered to have taken place, its acceptance must correspond in detail to the terms of the offer, it must be unconditional and absolute, and the offeror must receive a message about the acceptance of the proposal (Articles 3 – 9 of the Contract Act of 1872).

Thus, in India, a contract is a promise, the legal basis of which consists of an offer, an acceptance, and consideration, which are mandatory elements of a contractual legal relationship. It is in the interaction of these elements that the reflection of the nature of the contract lies. The absence of one of the elements gives rise to the invalidity of the contract. [15]

At the same time, according to Article 10 of the Contract Act of 1872, all agreements are contracts when they are concluded by the mutual consent of the parties, upon the provision by the parties of legally valid consideration and in relation to a lawful object of the transaction, and in the absence of grounds for invalidity.

Consent is recognized as free when the following are absent:

• coercion into concluding the contract within the meaning of the provisions of Article 15 of the Contract Act of 1872 (for example, as a result of threats, etc.);
• undue influence, understood within the meaning of the provisions of Article 16 of the Contract Act of 1872 (for example, dominance over the will of the counterparty and using it for unfair purposes), or fraud within the meaning of the provisions of Article 17 of the Contract Act of 1872 (for example, promising something without the intention to perform it), or misrepresentation within the meaning of the provisions of Article 18 of this Act (for example, unintentionally leading the counterparty to a mistaken idea about the essence of the subject of the contract);
• mistake within the meaning of the provisions of Articles 20–22 of the Contract Act of 1872 (for example, about the essence of the contract — instead of a sales contract, a person assumes that he is concluding a gift contract). [16]

Consent is considered to be caused by the listed reasons if it would not have been obtained had coercion, undue influence, fraud, misrepresentation, or mistake not existed. [17]

Having briefly considered the general provisions on the contract, let us proceed directly to the contract of sale. In accordance with the Indian Sale of Goods Act of 1930 (the "Indian Sale of Goods Act"), a contract of sale of goods is recognized as a contract whereby the seller transfers or agrees to transfer the property in goods to the buyer for a price (Article 4(1)). It should be noted that if under a contract of sale the property in the goods is transferred from the seller to the buyer, the contract is called a sale, but if the transfer of property in the goods is to take place at a future time or subject to some condition thereafter to be fulfilled, the contract is called an agreement to sell (Article 4(3)). An agreement to sell becomes a sale when the time elapses or the conditions are fulfilled subject to which the property in the goods is to be transferred (Article 4(4)).

A contract of sale is made by an offer to buy or sell goods for a price and the acceptance of such offer. The contract may provide for the immediate delivery of the goods or immediate payment of the price or both, or for the delivery or payment by installments, or that the delivery or payment or both shall be postponed (Article 5(1)). A contract of sale may be made in writing or by word of mouth, or partly in writing and partly by word of mouth, or may be implied from the conduct of the parties (Article 5(2)).

The subject of the contract according to Article 6 of the Indian Sale of Goods Act may be existing goods, owned or possessed by the seller, or future goods, as well as goods the acquisition of which by the seller depends upon a contingency which may or may not happen.

According to Article 9 of the Indian Sale of Goods Act, the price may be fixed by the contract or may be left to be fixed in a manner thereby agreed or may be determined by the course of dealing between the parties.

The Indian Sale of Goods Act also considers warranty terms, acceptance procedures, liability of the parties, and other issues necessary for the parties to perform their obligations under the concluded contract.

Applicable Law and Dispute Resolution Procedure Between Russian and Indian Companies

When agreeing on the terms of a foreign trade contract, the parties resolve the issue of which applicable law to determine, as this issue plays a significant role in interpreting the contract and the emergence of disputes, for example, regarding the timing and procedure of delivery and the quality of goods.

According to Article 1211 of the Civil Code, in the absence of an agreement between the parties on the law to be applied to the contract, the law of the country where the party that performs the performance of decisive importance for the content of the contract has its place of residence or main place of activity at the time of concluding the contract applies. In a contract of sale, such a party is recognized as the seller. Thus, in a foreign trade contract of sale in which the supplier is an Indian company, Indian law will be the applicable law, and the parties will have to be guided by the provisions of the Contract Act of 1872 and the Sale of Goods Act. The parties may also choose any law — both Russian and the law of a third country.

According to the rules of the law chosen by the parties, possible disputes will be considered in the place they also agree upon in their contract. For all the attractiveness of choosing Russian arbitration or a Russian state arbitration court as the place for considering disputes between the parties, foreign counterparties may not agree to such a condition, except in exceptional cases. For example, with a stronger bargaining position for the Russian side. Therefore, most likely, in foreign trade contracts, the parties will try to agree on the consideration of disputes in foreign arbitration institutions to their mutual consent.

Meanwhile, experts highlight several difficulties of international proceedings in the current sanctions environment:

• Foreign consultants refuse or are unable to work with persons on sanctions lists. To provide services, they must obtain special licenses, which few firms are ready for.
• Sanctions make it difficult to enforce decisions rendered in favor of a sanctioned person, as they prohibit transactions with them.
• For the same reason, it is difficult to pay for the services of foreign consultants, experts, and arbitration fees.
• The tightening of the KYC (know your customer/client) procedure for Russian persons can also slow down or complicate the search for and involvement of foreign consultants and the formation of the composition of arbitrators.
• The search for local lawyers in European, American, or other unfriendly jurisdictions for Russian persons is extremely complicated.[18]

Experts believe that among foreign ones, arbitration institutes of countries that have not applied sanctions against Russia should be considered. In particular, it is noted that today Russian business often chooses the Hong Kong International Arbitration Centre (HKIAC). This is due to the fact that Hong Kong law is in many ways similar to English law and everything is in order with the independence of justice there. In addition, before the introduction of sanctions, it managed to establish itself as one of the best international arbitration institutions. At the same time, the institute has a flexible system for paying arbitration costs — at an hourly rate or depending on the amount of the dispute. Furthermore, HKIAC received the status of a permanent arbitration institution in Russia three years ago. This has increased its popularity for disputes involving Russian parties. Another option is the Istanbul Arbitration Centre (ISTAC). Its arbitration rules are in many ways similar to the ICC rules, and Turkey's law on international arbitration is largely based on the UNCITRAL Model Law and Switzerland's law on private international law. Due to these similarities and its location, ISTAC is an attractive neutral forum for parties from various jurisdictions. [19]

Choice of Route and Delivery Basis for Goods from India

Despite a fairly large number of airports and ports, transport links in the country are poorly developed. Incorrect choice of a route for moving goods, without considering the specifics of roads, railway lines, and sea ports, can lead to an increase in transportation costs and increase the risk of cargo delay in transit. Strikes by both drivers and customs and airport employees are very frequent. It is also necessary to consider that India is a multinational and multicultural state, so there are many both state and religious holidays here. Days off can be both throughout the country and in an individual state. [20]

Delivery of goods from India to Russia directly is carried out mainly by sea and air transport. They differ from each other in the duration of the route and the cost of logistics services.

Air transport has baggage restrictions on dimensions and weight; in addition, it has a high cost. Nevertheless, air routes are quite popular and are suitable for perishable and urgent goods.

Sea transport, on the other hand, allows for the transportation of goods of any type with practically no restrictions on weight and dimensions.

According to India's national investment promotion and facilitation agency, maritime transportation accounts for about 70% of the country's trade turnover. There are 13 major sea ports in the state — 12 state-owned and 1 private — as well as 200 secondary ones. The busiest is Nava Sheva (also known as the Jawaharlal Nehru Port). It accounts for about 50% of the country's total container cargo volume, and it is also the 24th port in terms of cargo turnover among the 100 largest container ports in the world. The second largest port is Chennai, formerly known as Madras.[21]

Delivery of goods from India can also be carried out using various combinations of several types of vehicles — multimodal transportation.

It should be mentioned that recently the development of the International North-South Transport Corridor (the "INSTC") has been widely discussed in Russia due to its economic benefit, as well as the reorientation of the Russian economy from the West to the East. This route represents the shortest path from Russia to India. The INSTC project was developed back in 1999 by Russia, Iran, and India. The main advantages of the INSTC over other routes (in particular, over the sea route through the Suez Canal) are considered to be reducing the transportation distance by half or more and reducing the cost of container transportation compared to the cost of their transportation by the sea route.

The project was under coordination and consideration for a long time before implementation began. Its active practical implementation has begun in the last decade, when Russia designated its course towards rapprochement, above all, with the countries of the East in foreign policy and economy. The INSTC route is 7,200 km — from Saint Petersburg to the Indian port of Mumbai (Bombay) — and provides for the operation of rail, sea, and river transport. The INSTC assumes the use of several routes for cargo transportation. Cargo transportation along the North-South corridor between Russia and India could take less than 25 days in the future. The INSTC is still far from full functioning; its long-term expansion and improvement are necessary. [22]

In any foreign trade transaction, there are many conditions that the parties need to agree upon. For example, who organizes the delivery of the goods, when and where the seller should transfer the goods to the buyer, and who is responsible for the safety of the cargo during its transportation. Basic delivery terms represent key elements of contracts for the international sale of goods. They are set out in the document of the International Chamber of Commerce — a code of international trade customs, also referred to as Incoterms.

The current edition is Incoterms 2020, which entered into force on January 1, 2020. It should be noted that the new edition does not cancel the previous ones. Any version can be used, but it should be specified in the documents to make it clear where the basis is taken from.

In Incoterms 2020, there are 11 regulations with three-letter abbreviations that define the conditions of interaction between foreign trade participants — delivery bases. The parties choose the appropriate term from the list. Each term already contains a fixed set of conditions. The corresponding delivery basis is fixed by the parties in the contract, product specification, or invoice.[23]

All bases are distributed into groups from E to D — by increasing responsibilities and risks of the seller.

• Group E. Pickup; all risks after receiving the goods at the warehouse are borne by the buyer.
• Group F. The seller is responsible for undergoing customs procedures in his country and loading the goods onto the vehicle provided by the buyer, while delivery and customs clearance in the country of import are on the buyer.
• Group C. Delivery is organized and paid for by the seller, but he bears risks only until he transfers the cargo to the carrier. The seller is obliged to insure the cargo along the entire delivery path at his own expense, but in favor of the buyer.
• Group D. These are turnkey delivery options. The seller organizes the delivery and is responsible for the cargo until the buyer receives it at the agreed point or cargo terminal.[24]

When choosing one or another basis for the supply of goods from India, it is necessary to pay close attention not only to the choice of the place where the delivery will be considered completed but also to resolve issues concerning the distribution of costs during customs procedures. We believe that when importing goods from India, the costs of exporting goods from India should be borne by the supplier due to possible difficulties with the Indian customs. We also draw your attention to the fact that the onset of the moment of transfer of the risk of loss or damage to the delivered goods depends on the choice of the delivery basis.

VAT and Other Customs Payments when Importing from India to Russia

In accordance with the provision of Article 46 of the Customs Code of the Eurasian Economic Union (the "CC EAEU"), the system of customs payments upon import of goods includes import customs duty; value-added tax ("VAT") and excises paid upon import of goods into the customs territory of the EAEU; and customs fees.

Please note that the procedure for calculating and paying VAT when importing goods from India is the same as when importing goods from another country that is not part of the EAEU. No features for imports from India have been established. VAT payers are recognized as all organizations, including those applying the simplified tax system or exempt from paying VAT, which are associated with the movement of goods across the customs border of the Russian Federation in accordance with the customs legislation of the Russian Federation.

In accordance with Articles 146 and 151 of the Tax Code of the Russian Federation (the "Tax Code"), the object of VAT taxation is the import of goods into Russia. VAT in full must be paid if you import goods in the customs procedures of release for internal consumption or processing for internal consumption. Partial payment of VAT may be required if the product is placed under the temporary import procedure (subparagraph 5 of paragraph 1 of Article 151 of the Tax Code, Article 223 of the CC EAEU) or you import products of processing goods that were previously exported in the processing procedure outside the customs territory (subparagraph 6 of paragraph 1 of Article 151 of the Tax Code, Article 186 of the CC EAEU). Importers are exempt from paying VAT when importing technological equipment whose analogs are not produced in Russia or medical goods.

When importing from India, taxpayers are required to fill out a customs declaration, and before filing the customs declaration, pay the tax at customs simultaneously with other customs payments. The payment of VAT and customs duties is a mandatory condition for the release of goods. Therefore, until you pay them, the goods will not be released.

To calculate VAT, you need to determine the tax base. To do this, you will need to add the customs value of the goods, duties on them, and excises, and then multiply the base by a rate of 10% or 20%. As a general rule, a rate of 20% applies. A rate of 10% applies to food, children's, medical, and other socially significant goods specified in Article 164 of the Tax Code. Specific names and codes of types of goods that are taxed at a rate of 10% are contained in the lists approved by the Government of the Russian Federation.

VAT can be accepted for deduction if the following conditions are met (paragraph 2 of Article 171, paragraph 1 of Article 172 of the Tax Code):

• you have recorded the imported goods;
• they are intended for activities subject to VAT;
• you have the necessary primary documents;
• you have documents confirming the payment of import VAT.

The period when you can apply the deduction is 3 years from the date of recording the imported goods (paragraph 1.1 of Article 172 of the Tax Code). You can apply the deduction in parts. An exception is "import" VAT on fixed assets and equipment for installation: it can be accepted for deduction only at once in the full amount, but at any time within 3 years.

Customs Value when Importing from India to Russia

The customs value indicated in the customs declaration for imported goods is the determining element for calculating customs duties and taxes and also participates in the regulation of trade and economic relations. The CC EAEU distinguishes six methods for determining customs value, discussed in Articles 39, 41-45 of the CC EAEU. The most frequently used method is the first method, which we will consider and highlight the problems that may arise when importing goods from India.

In accordance with Article 38 of the CC EAEU, as a general rule, the customs value of goods is determined by the declarant. According to Article 39 of the CC EAEU, the basis of the customs value of imported goods is the transaction value of these goods (Method 1), i.e., the price actually paid or payable for these goods when sold for export to the customs territory of the Eurasian Economic Union with the addition of such additional charges as costs for packaging the imported goods, including the cost of packaging materials and packaging work, raw materials, materials, parts, semi-finished products and other goods from which the imported goods are produced (consist), costs for the transportation (shipment) of imported goods to the place of arrival of such goods on the customs territory of the Eurasian Economic Union and other costs in accordance with Article 40 of the CC EAEU.

It should be noted that the customs value of the imported goods will be determined as the transaction value upon fulfillment of the conditions also specified in Article 39 of the CC EAEU. For example, there should be no restrictions regarding the buyer's rights to use and dispose of the goods, except for restrictions that limit the geographical region in which the goods can be resold; do not significantly affect the value of the goods; are established by acts of the bodies of the Eurasian Economic Union or the legislation of member states.

As court practice shows, the importer's use of the transaction value when determining the customs value of the imported goods can lead to disputes with the customs authorities.

As pointed out by the Supreme Court of the Russian Federation, "taking into account the public nature of customs legal relations, when assessing the declarant's compliance with these requirements of the CC EAEU, courts should proceed from the presumption of accuracy of information (documents, data) presented by the declarant during customs control, the burden of refuting which lies with the customs authority.

The customs value, determined based on the price of goods established by the contract, cannot be considered quantitatively determinable and documented if the declarant has not presented evidence of the transaction based on which the goods were purchased, in any form not contrary to the law, or the price information contained in the documents presented by him does not correlate with the quantitative characteristics of the goods, or information about the conditions of delivery and payment of the goods is absent." [25]

In considering one of the cases involving counterparties from India (seller) and Russia (buyer), judicial instances established the following:

The Company submitted to the case file in copies the Contract, invoices dated September 24, 2019, No. RN 11, RN 12, export customs declarations with translation into Russian, and cover letters dated December 3, 2019, and January 14, 2020.

The courts established the Company's failure to document the fact of payment for the goods supplied under the Contract, in particular, the non-submission of SWIFT documents, which prevented the customs authority from establishing the amount paid by the Company to the supplier.

The courts assessed the price list of the manufacturer of goods presented by the Company critically, as it does not indicate the start and end dates of its validity, it did not allow Customs to analyze the actual value of the imported goods. The Company did not present transport and forwarding documents confirming the fact of payment and the cost of the relevant services.

Under such circumstances, the customs authority, having established the unreliability of the data declared by the Company when declaring the customs value, rightfully rendered decisions to make changes (additions) to the data declared in the disputed DTs based on the available information on the value of goods. [26]

However, there is another position. When considering a similar case with the participation of an Indian seller and a Russian buyer, "judicial instances established that the documents submitted by the company in confirmation of the correctness of determining the customs value of the goods at the transaction price express the content and conditions of the concluded transaction, are interrelated, contain relevant references, are signed by the parties, and contain all the necessary information on the name of the goods and its value. The description of the goods in these documents corresponds to the will of the parties and allows for the identification of the goods. The information in these documents allows for reliably establishing the price in relation to the quantitatively determined characteristics of the goods, delivery conditions, and payment. In confirmation of payment for the imported goods, the declarant submitted applications for the transfer of funds and a bank control statement."[27]

Based on the court decisions cited above, it should be concluded that the importer needs to reliably and in detail indicate the price for the imported goods in the contract and its annexes when determining the customs value of the goods at the transaction price, as well as in confirmation of such value, attach applications for the transfer of funds specified in the contract, invoices from the counterparty, and a current price list.

We note that: "The mere existence of information from the customs authority about the sale of homogeneous, similar goods at prices different from those declared by the declarant, in the absence of other evidence refuting the reliability of the documents and information submitted by the Company in justification of the declared customs value, cannot be the basis for adjusting the customs value." [28]

Russia and India consider each other as strategic partners in the economic sphere, but despite the development of Russian-Indian relations, not as much attention is paid in our country to interaction on legal issues, in particular, the conclusion of foreign trade contracts. Russian importers have no idea about the laws of India regulating the issues of concluding contracts and do not know how to verify an Indian counterparty. Problems may arise when choosing the applicable law and the place for considering disputes. In this article, we have considered only the main legal aspects associated with the import of goods from India into Russia.

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References

[1] July 11, 2023, 14:24 / In the world. INTERFAX Portal.

[2] Decree of the President of Russia No. 229 dated March 31, 2023, On the Approval of the Concept of the Foreign Policy of the Russian Federation.

[3] February 20, 2024, 09:54 / Economy. Vedomosti Portal.

[4] Ovakimyan M.S., Nidziy E.A., Volkova A.V. Analysis of trade and economic cooperation between Russia and the Republic of India at the current stage. Russian Foreign Economic Bulletin Journal, 1-2024.

[5] Letter of the Federal Service for Veterinary and Phytosanitary Surveillance No. FS-ARv-7/5701-3 dated February 5, 2024.

[6] Letter of the Federal Service for Veterinary and Phytosanitary Surveillance No. FS-EN-8/24146 dated December 5, 2014.

[7] Ratified by Resolution of the Supreme Council of the Russian Federation No. 4896-1 dated April 29, 1993.

[8] Alimova Ya.O. Possibility of unification in the sphere of cross-border contractual relations in BRICS countries. Lex Russica Journal, 2019, No. 11(156).

[9] Ibid.

[10] Decision of the ICAC at the RF CCI dated May 17, 2016, in case No. 217/2015.

[11] December 23, 2022, How to check a supplier from India yourself? Yandex ZEN Website.

[12] Ibid.

[13] Ibid.

[14] K.M. Belikova. Conclusion, execution, and termination of a contract in India. Asia-Pacific Region: Economics, Politics, Law Journal, 2015, No. 2.

[15] Ibid.

[16] Ibid.

[17] V.A. Belov. Indian Contract Act of 1872 (general information, general commentary, original text, and Russian translation). Pravovedenie Journal, 2014, No. 4.

[18] Arbitration in a new way: international disputes in the era of sanctions. June 21, 2022, E. Nozikova / Pravo.RU website.

[19] Ibid.

[20] Delivery from India. // Unitrade Logistics website in Russia.

[21] India: slow logistics and customs "by the clock." December 15, 2023, LOGIRUS website, Logistics in Russia.

[22] International North-South Transport Corridor and its significance for Iran. July 26, 2023. Website of the Russian International Affairs Council.

[23] Incoterms 2020. Fedorenko K. March 22, 2022, InterCity Logistics website.

[24] How to choose delivery terms for an international transaction and arrange it using Incoterms rules. Fedorenko K. March 18, 2023. Tinkoff Journal website.

[25] Resolution of the Plenum of the Supreme Court of the Russian Federation No. 49 dated November 26, 2019, On Some Issues Arising in Judicial Practice in Connection with the Entry into Force of the Customs Code of the Eurasian Economic Union.

[26] Resolution of the Arbitration Court of the North-Western District No. F07-1015/2021 dated April 7, 2021, in case No. A56-9947/2020.

[27] Resolution of the Arbitration Court of the North Caucasus District dated June 14, 2022, in case No. A32-7964/2020.

[28] Resolution of the Arbitration Court of the North-Western District No. F07-16944/2022 dated December 20, 2022, in case No. A56-110305/2021.