31 May 2023

Spain-Russia Trade: Legal Guide to Export and Import Transactions

May 31, 2023

BRACE Law Firm ©

Trade relations between Russia and Spain are governed by bilateral agreements, taking into account national legislation and European Union (EU) regulatory documents.

Spain is one of the largest countries in Europe and a member of the EU. The list of goods imported from Spain into Russia is quite diverse, and Spanish entrepreneurs primarily export the following to Russia:

clothing and footwear;
cosmetics and accessories;
food products, fruits, vegetables, and olive oil;
fabrics;
wine;
stone and gypsum products; and
plastics and plastic products, etc.

Russia primarily exports the following to Spain:

metals and metal products;
mineral products;
food products and agricultural raw materials;
chemical industry products;
machinery, equipment, and vehicles; and
wood, pulp, and paper products, etc.

Cargo delivery from Spain to Russia and from Russia to Spain is carried out using various modes of transport:

air freight;
road transport;
sea freight; and
multimodal transport.

In current political and economic conditions, it is necessary to consider the sanction restrictions introduced against Russia, including the closure of borders and direct air communication between countries. For the transportation of goods, a "parallel import" scheme is used, and the import of goods from one country to another is carried out through third countries.

Contracts with Spanish Companies

Given the different legislation of Russia and Spain, international legislation in this field applies to trade relations between foreign partners. In particular, the main document regulating trade relations between Russian and Spanish entrepreneurs is the United Nations Convention on Contracts for the International Sale of Goods [1] (the "UN Convention on Contracts for the International Sale of Goods"). The UN Convention on Contracts for the International Sale of Goods applies to contracts for the sale of goods between parties whose places of business are in different states.

After the selection of a partner and the goods to be supplied, the procedure for concluding a foreign trade contract begins. A proposal for concluding a contract addressed to one or more specific persons constitutes an offer if it is sufficiently definite and indicates the intention of the offeror to be bound in case of acceptance. A proposal is sufficiently definite if it indicates the goods and expressly or implicitly fixes or makes provision for determining the quantity and the price. [2] A statement made by or other conduct of the offeree indicating assent to an offer is an acceptance. Silence or inactivity does not in itself amount to acceptance.[3]

As a general rule, 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 and this Convention. [4]

At the same time, if the seller is not bound to deliver the goods at any other particular place, his obligation to deliver consists:

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, in cases not covered by the previous subparagraph, the contract relates to specific goods, or unidentified goods to be drawn from a specific stock or to be manufactured or produced, and at the time of the conclusion of the contract the parties knew that the goods were at, or were to be manufactured or produced at, a particular place — in placing the goods at the buyer's disposal at that place; and
in other cases — in placing the goods at the buyer's disposal at the place where the seller had his place of business at the time of the conclusion of the contract.

Also, the seller must deliver goods which are of the quantity, quality, and description required by the contract and which are contained or packaged in the manner required by the contract.[5]

In most cases, when concluding a foreign trade contract, the parties use the Incoterms International Rules (in the version chosen by the parties) to simplify the formalization of delivery terms in the text of the contract.

Taxation of Russian-Spanish Export and Import

When conducting trade activities, taxation is an integral part of international transactions. In order to avoid double taxation and prevent tax evasion with respect to taxes on income and capital, Russia and Spain concluded the Convention between the Government of Russia and the Government of the Kingdom of Spain dated December 16, 1998, On the Avoidance of Double Taxation and the Prevention of Fiscal Evasion with Respect to Taxes on Income and on Capital.

The terms of cooperation within the framework of mutual assistance in tax matters are reflected in the Convention on Mutual Administrative Assistance in Tax Matters.[6]

Methods for eliminating double taxation include:

In Spain: In accordance with the provisions and taking into account the limitations provided by the legislation of Spain (which may be amended from time to time without affecting their basic principle):

If a resident of Spain receives income or owns capital which may be taxed in Russia, Spain shall allow as a deduction from the tax on the income or capital of that resident an amount equal to the tax paid in Russia. Such deduction, however, shall not exceed that part of the income tax or capital tax, calculated before the deduction is given, which is attributable to the income or capital which, as the case may be, may be taxed in Russia.
With respect to dividends paid by a company which is a resident of Russia to a company which is a resident of Spain and which owns at least 25% of the capital of the company paying the dividends, or which owns a percentage participation established by the relevant Spanish legislation if such percentage participation is less than 25%.

Such deduction, together with the deduction allowed with respect to dividends, shall not exceed that part of the income tax or capital tax, calculated before the deduction is given, which is attributable to the income subject to taxation in Russia.

if the income received by a resident of Spain, or the capital owned by a resident of Spain, is exempt from tax in Spain, Spain may in any case, when calculating the amount of tax on the remaining part of the income or capital of such resident, take into account the exempt income or capital.

In Russia: If a resident of Russia receives income or owns capital that is taxed in Spain, the amount of tax on such income or capital payable in Spain may be deducted from the tax levied in Russia. Such deduction, however, shall not exceed the amount of tax on such income or capital calculated in accordance with the legislation and rules of Russia.

Currency Operations in Trade Interaction with Spanish Partners

Given that Spain and Russia use different currencies for settlements, the concluded foreign trade contract must determine the currency of the goods' value, the currency of settlements between partners, and take into account the requirements of the internal legislation of the entrepreneurs' countries to exclude violations of currency regulation legislation.

For Russian entrepreneurs, by virtue of currency regulation legislation, a transaction conducted in foreign currency obligates them, when carrying out foreign trade activities, to ensure the receipt from non-residents into their bank accounts in authorized banks of the foreign currency or currency of the Russian Federation due in accordance with the terms of the specified contracts for goods transferred to non-residents, work performed for them, services rendered to them, or information and results of intellectual activity transferred to them, including exclusive rights thereto. [7] In order to fulfill the requirement for the repatriation of foreign currency and the currency of the Russian Federation, contracts (agreements) concluded between residents and non-residents when carrying out foreign trade activities must specify the deadlines for the fulfillment of obligations by the parties under the contracts.

When carrying out foreign trade activities, residents are obligated to provide the following information to authorized banks:

on the deadlines for receiving foreign currency and (or) currency of the Russian Federation from non-residents into their accounts in authorized banks for the fulfillment of obligations under foreign trade agreements (contracts) by transferring goods to non-residents, performing work for them, rendering services to them, or transferring information and results of intellectual activity to them, including exclusive rights thereto, in accordance with the terms of foreign trade contracts, or on the deadlines for other fulfillment or termination of obligations under foreign trade contracts in cases and by methods permitted by the legislation of the Russian Federation;
on the deadlines for non-residents to fulfill obligations under foreign trade contracts by transferring goods to residents, performing work for them, rendering services to them, or transferring information and results of intellectual activity to them, including exclusive rights thereto, against advance payments made by residents, and the deadlines for the return of the specified advance payments in accordance with the terms of foreign trade contracts; and
on the deadlines for non-residents to fulfill obligations to return loans provided to them by residents in accordance with the terms of the loan agreements.

The procedure for residents to submit information to authorized banks is defined in Bank of Russia Instruction No. 181-I dated August 16, 2017, On the Procedure for Residents and Non-Residents to Submit Supporting Documents and Information to Authorized Banks when Conducting Currency Operations, on Uniform Forms of Accounting and Reporting for Currency Operations, and the Procedure and Deadlines for Their Submission.

Licensing of Export and Import of Certain Types of Goods in Spain and Russia

For most goods, an export license is not required. However, it is important to note that for some types of goods, it is necessary to obtain an export license. Licensing is applied to the export and (or) import of certain types of goods if the following have been introduced with respect to these goods:

quantitative restrictions;
exclusive rights;
permit procedures;
tariff quotas; or
import quotas as a special safeguard measure.

Licensing is implemented through the issuance by an authorized body to a foreign trade participant of a license for the export and (or) import of goods. For the issuance (formalization) of a license and a duplicate license, the authorized body charges a state fee (license fee) in the manner and amount provided by the legislation of the member state. Licenses and permits are issued for each product classified according to the TN VED of the EAEU, for which licensing or automatic licensing (surveillance) has been introduced.

The period of validity of a one-time license cannot exceed 1 year from the date it takes effect. The period of validity of a one-time license may be limited by the period of validity of the foreign trade contract or the period of validity of the document that serves as the basis for the issuance of the license.

For goods with respect to which quantitative restrictions on export and (or) import, or an import quota as a special safeguard measure, or tariff quotas have been introduced, the license validity period ends in the calendar year for which the quota is established.

The period of validity of a general license cannot exceed 1 year from the date it takes effect, and for goods with respect to which quantitative restrictions on export and (or) import or tariff quotas have been introduced, it ends in the calendar year for which the quota is established.

The period of validity of an exclusive license is established in each specific case.

For some types of goods (in particular, for precious metals), Russian Government decrees are provided that regulate the issuance of general export licenses, for example:

Government Decree No. 1853 dated October 18, 2022, On the Issuance of General Licenses for the Export of Master Alloy Gold (Dore Alloy);
Government Decree No. 539 dated April 17, 2020, On the Issuance of General Licenses for the Export of Refined Gold and Silver in the Form of Ingots; and
Government Decree No. 485 dated March 26, 2022, On the Issuance of General Licenses for the Export of Refined Gold and Silver in the Form of Granules, Refined Platinum, and Platinum Group Metals in the Form of Ingots, Granules, and Powders, etc.

Also, for example, for the export of steel, the rules for formalizing licenses for steel products exported to EU countries by all foreign trade participants in the territory of the Russian Federation, regardless of ownership form, are determined by the Order of the Ministry of Foreign Economic Relations of the Russian Federation No. 617 dated December 9, 1997, On the Organization of Work in the Ministry on Licensing the Export of Steel Products to European Union Countries.

Some goods that are dual-use goods require the provision of an export license because they can be used in defense activities.

Spain also uses restrictive mechanisms for the export and import of goods, especially those classified as defense goods, industrial goods, and agri-food products; for example, Spain uses a system for tracking trade flows carried out using documents preceding customs clearance, called, respectively, an export certificate (AGREX) and an import certificate (AGRIM).

These certificates pursue different goals, the main ones being:

management of tariff quotas for imports from the European Union;
administration of tariff quotas for imports from a country not belonging to the European Union;
preliminary statistical control of foreign trade operations; and
the formation of safeguard measures.

In general, Spain's foreign trade in industrial products with third countries is not regulated by any specific trade regime, and their import and export are free without obtaining permission from the Secretary of State for their customs clearance.

Nevertheless, exceptions may be made from the above in the following specific cases:

the application of sanctions in trade relations with certain countries; and
in special and specific market conditions and in accordance with the relevant Specific Rules adopted on the basis of the following regulatory documents:
- Regulation (EU) 2015/478 of the European Parliament and of the Council of March 11, 2015, on common rules for imports; and
- Regulation (EU) 2015/479 of the European Parliament and of the Council of March 11, 2015, on common rules for exports.

For the export of goods from Spain to Russia, it is necessary to obtain a one-time or global export license from the Spanish Ministry of Industry, Trade, and Tourism, including if the supply is made by a parent company to its branch in Russia.

In order to simplify the procedures for the export of agri-food products as much as possible, the authority to formalize export certificates that are not used to obtain an export quota has been delegated to almost all territorial and provincial trade offices.

In connection with the introduced sanction restrictions of the EU and retaliatory economic measures of Russia, when exporting goods that do not fall under restrictions — for example, chemical products, mineral fertilizers, IT, advanced technologies, telecommunications equipment, etc. — upon crossing the Spanish and Russian border, they may require a declaration (permit document) from the manufacturer/exporter stating that the goods are permitted for export from Spain to Russia and vice versa.

Prohibitions and Restrictions in Interaction with Partners from Spain

When concluding a foreign trade contract, it is important to pay attention to possible prohibitions and restrictions with respect to certain types of goods. Thus, by Government Decree No. 311 dated March 9, 2022, On Measures to Implement the Decree of the President of the Russian Federation No. 100 dated March 8, 2022, a ban on the export of certain types of goods outside the territory of the Russian Federation was introduced until December 31, 2023; at the same time, until December 31, 2023, the export of goods outside the RF according to the established list is carried out by decision of:

the Chairman of the Government of the Russian Federation;
the First Deputy Chairman of the Government of the Russian Federation;
the Deputy Chairman of the Government of the Russian Federation; or
the Deputy Chairman of the Government of the Russian Federation – Minister of Industry and Trade of the Russian Federation on the basis of proposals from the Ministry of Industry and Trade of the Russian Federation.

The introduced restrictions may be formalized by letters from the relevant state authorities, for example:

Rosselkhoznadzor Letter No. FS-ARe-7/4755-3 dated October 7, 2022, On the Introduction of Temporary Restrictions on the Export of Products from Spain to the Russian Federation;
Rosselkhoznadzor Letter No. FS-ARe-7/4240-3 dated February 11, 2022, On the Introduction of Temporary Restrictions on the Export of Products from Spain to the Russian Federation;
Rosselkhoznadzor Letter No. FS-ARe-7/4708-3 dated September 14, 2022, On the Introduction of Temporary Restrictions on the Export of Products to the Russian Federation from the Administrative Territory of Spain – Guadalajara Province; and
Rosselkhoznadzor Letter No. FS-ARe-7/4585-3 dated July 6, 2022, On the Introduction of Temporary Restrictions on the Export of Products to the Russian Federation from the Administrative Territory of Spain – Almeria Province.

The list of goods to which prohibitions and restrictions on import apply by the member states of the customs union within the framework of the EAEU in trade with third countries is determined by Annex No. 1 to the Decision of the Board of the Eurasian Economic Commission No. 134 dated August 16, 2012, On Regulatory Legal Acts in the Field of Non-Tariff Regulation.

When importing goods from Spain, additional enhanced control may also be introduced; for example, we cite several letters from Rosselkhoznadzor:

Rosselkhoznadzor Letter No. FS-ARv-7/4255-3 dated February 17, 2022, On the Introduction of Enhanced Laboratory Control Regarding Products from an Enterprise that Arrived in the Russian Federation from Spain;
Rosselkhoznadzor Letter No. FS-AR-7/2252-7 dated May 5, 2017, On the Introduction of Enhanced Laboratory Control Regarding Products from an Enterprise that Arrived in the Russian Federation from Spain; and
Rosselkhoznadzor Letter No. FS-NV-8/12570 dated July 14, 2014, On the Introduction of Enhanced Laboratory Control Regarding Products from an Enterprise that Arrived in the Russian Federation from Spain.

Spain determines restrictive measures within the framework of regulatory documents established by the European Union; an example of such a document is Regulation (EU) No. 833/2014 on restrictive measures motivated by Russia's actions destabilizing the situation in Ukraine.

Trade Relations within the Framework of Sanction Restrictions

The introduced sanction restrictions have significantly influenced Russian-Spanish trade relations; for most suppliers, logistics chains were broken, and it became impossible to carry out bank transfers. However, despite the introduced economic measures, a large number of goods are not imported directly into countries but are directed through third countries in order to avoid sanction restrictions.

Turkey has become the main "transit" country in the interaction of Russian-Spanish partners; in this case, the Russian company sends funds to a Turkish partner, which conducts settlements with Spanish suppliers. The goods undergo similar "clearing" and go to the customer not directly, but through the territory of the Republic of Turkey. Such a process takes more time than before, but in modern realities, it is a fairly simple way of delivering goods from one country to another.

As a rule, on the territory of Turkey, the goods undergo a customs clearance procedure, which increases not only the time for cargo delivery but also the cost of the goods for the customer.

Liability for Violation of Currency Legislation when Trading with Spain

A material condition for conducting foreign trade transactions is compliance with currency legislation, for the violation of which a Russian entrepreneur may be assigned administrative liability, and in some cases, criminal liability.

Failure by a resident to fulfill, within the established period, the obligation to receive foreign currency and (or) currency of the Russian Federation[8] due for goods transferred to non-residents, work performed for non-residents, services rendered to non-residents, or information or results of intellectual activity transferred to non-residents, including exclusive rights thereto, into their bank accounts in authorized banks results in a warning or the imposition of an administrative fine:

1) on citizens, persons carrying out entrepreneurial activities without forming a legal entity, and legal entities in the amount of:

1/150 of the key rate of the Central Bank of the RF of the amount of funds credited to accounts in authorized banks in violation of the established period, for each day of delay in crediting such funds;
from 3 to 5% of the amount of funds not credited within the established period to bank accounts in authorized banks, if a foreign trade agreement (contract) is concluded with a non-resident, the amount of obligations under which is determined in the currency of the RF and the terms of which provide for payment in the currency of the RF, with the exception of certain foreign trade contracts;
from 3 to 10% of the amount of funds not credited within the established period to bank accounts in authorized banks, if a foreign trade contract is concluded with a non-resident providing for the transfer by residents to non-residents of goods included in the unified TN VED of the EAEU under relevant codes, the amount of obligations under which is determined in the currency of the RF and the terms of which provide for payment in the currency of the RF;
from 5 to 30% of the amount of funds not credited within the established period to bank accounts in authorized banks, if a foreign trade contract providing for payment in foreign currency is concluded with a non-resident; and
from 5 to 30% of the amount of funds not credited within the established period to bank accounts in authorized banks, if a loan agreement is concluded with a non-resident.

2) on officials:

1/150 of the key rate of the Central Bank of the Russian Federation of the amount of funds credited to accounts in authorized banks in violation of the established period, for each day of delay in crediting such funds;
from 3 to 5% of the amount of funds not credited within the established period to bank accounts in authorized banks, if a foreign trade contract is concluded with a non-resident; and
from 5 to 30% of the amount of funds not credited within the established period to bank accounts in authorized banks, if a loan agreement is concluded with a non-resident, but not more than 30,000 rubles.

Failure by a resident to fulfill, within the established period, the obligation to ensure receipt into their accounts opened in authorized banks, and (or) into accounts opened in banks outside the territory of the RF in accordance with requirements established by the currency legislation of the RF, under foreign trade contracts, of the currency of the RF in the share determined by the Government of the RF, results in a warning or the imposition of an administrative fine:

1) on persons carrying out entrepreneurial activities without forming a legal entity, and legal entities in the amount of:

from 40,000 to 50,000 rubles.

2) on officials:

from 20,000 to 30,000 rubles.

The conversion of foreign currency, as well as the value of internal and external securities into the currency of the Russian Federation, is carried out at the rate of the Central Bank of the Russian Federation effective on the day of the commission or discovery of the administrative offense.

The calculation of the administrative fine for administrative offenses when crediting to accounts in authorized banks in violation of the established period is carried out based on the size of the key rate of the Central Bank of the Russian Federation effective during the delay period.

Non-compliance with the prohibitions and restrictions on the import of goods into the customs territory of the EAEU or into the RF and (or) the export of goods from the customs territory of the EAEU or from the RF, as established by international agreements of the EAEU member states, EAEU decisions, and regulatory legal acts of the RF, results in the imposition of an administrative fine:

on citizens in the amount of 1,000 to 2,500 rubles, with or without confiscation of the goods that were the objects of the administrative offense, or confiscation of the objects of the administrative offense;
on officials — from 5,000 to 20,000 rubles; and
on legal entities — from 50,000 to 300,000 rubles, with or without confiscation of the goods that were the objects of the administrative offense, or confiscation of the objects of the administrative offense.

When carrying out customs clearance, it is important to comply with the deadlines established by regulatory documents, as well as the procedural deadlines when challenging the decisions of customs authorities. [9]

Judicial Practice in Export and Import of Goods from Spain

Often, when conducting trade affairs with Spanish partners, Russian entrepreneurs seek judicial protection in case of violation of customs, tax, and currency legislation:

Decree of the Arbitration Court of the Povolzhsky District dated March 16, 2018, No. F06-30495/2018 in case No. A57-17005/2017 On Recognizing the Decision and Requirement of the Customs Authority as Unlawful. The customs authority, based on the results of the check, made a decision to refuse to apply the VAT rate in the amount of 10% with respect to the declared goods and issued a requirement for the payment of customs duties taking into account the calculation of the corresponding tax at a rate of 18%. The satisfaction of the claim was denied because the company did not prove the lawfulness of applying VAT with respect to the goods it imported at a rate of 10%.
Decision of the Supreme Court of the Kabardino-Balkarian Republic dated March 1, 2017, in case No. 21-30/2017 On Imposing Administrative Liability under Art. 16.2 of the CAO RF (Non-declaration or Misdeclaration of Goods). The satisfaction of the claim was denied.
Decree of the Oktyabrsky District Court of Novorossiysk dated April 29, 2016, in case No. 5-451/2016 On Imposing Administrative Liability under Art. 16.2 of the CAO RF (Non-declaration or Misdeclaration of Goods). The company was found guilty of committing an administrative offense provided for by Part 1 of Art. 16.2 of the CAO RF, and punishment was assigned in the form of confiscation of the objects of the administrative offense.
Decree of the Arbitration Court of the North Caucasus District dated September 14, 2022, No. F08-8868/2022 in case No. A63-8586/2020 On Canceling the Decision and Notification of the Customs Authority, Compelling the Rectification of the Violation, and Returning Overpaid Customs Duties. The customs authority made a decision to introduce amendments (additions) to the customs declarations and sent notifications about customs duties not paid within the established period, referring to the fact that the imported product is an alcohol-containing product produced by distillation of fermented poor-quality grape raw materials in violation of production technology. The satisfaction of the claim was denied because the non-compliance of the disputed product with the requirements of "GOST 31728-2014. Inter-state Standard. Cognac Distillates. Technical Specifications" was confirmed.
Decree of the Arbitration Court of the North-Western District dated July 21, 2022, No. F07-7572/2022 in case No. A56-73871/2021 On Recognizing the Decision to Introduce Amendments (Additions) to the Information Declared in the Goods Declaration as Invalid and on Compelling the Return of Overpaid Customs Duties. The customs authority determined the customs value of the imported goods using the reserve method. The satisfaction of the claim was denied because the documents submitted during customs declaration and upon the request of the customs authority did not confirm the customs value of the goods: the documents did not contain quantifiable information about the transaction price, delivery terms, and payment for the goods.

Interaction with foreign partners requires entrepreneurs to know a large number of regulatory documents regulating foreign economic activity, including Russian legislation and the legislation of the partner's country. An incorrect interpretation of the text of a foreign trade contract can lead to unfavorable consequences for the entrepreneur, both from the side of the foreign partner and from the side of the tax and customs Russian authorities.

In modern political and economic circumstances, it is also important when interacting with partners from the European Union to take into account the introduced sanction restrictions, currency and customs obligations established by Russian legislation, and if it is necessary to import goods through third countries, also the legislation of these countries.

It is important to note that goods that are classified as dual-use goods or are directly related to defense activities are currently subject to special control by the customs authorities.

In order to exclude the occurrence of unfavorable consequences when concluding and performing a foreign trade contract, it is important to work through all its terms, and to study not only the obligations under the contract but also the duties within the framework of currency and customs legislation. Such preparation of a foreign trade contract will make it possible to avoid unfavorable consequences from the side of the regulatory authorities, and will also reduce the risk of being held liable.

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References

United Nations Convention on Contracts for the International Sale of Goods. Concluded in Vienna on April 11, 1980.
Article 14 of the UN Convention on Contracts for the International Sale of Goods.
Article 18, id.
Article 30, id.
Article 35, id.
Convention on Mutual Administrative Assistance in Tax Matters. Concluded in Strasbourg on January 25, 1988.
Article 19 of Federal Law No. 173-FZ dated December 10, 2003, On Currency Regulation and Currency Control.
Clause 4 of Article 15.25 of the CAO RF.
Decree of the Arbitration Court of the Central District dated March 22, 2016, No. F10-411/2016 in case No. A62-1491/2015 On Recognizing the Decree on Imposing Liability under Part 1 of Art. 16.3 of the CAO RF as Invalid for Non-compliance with Prohibitions and Restrictions on the Import (Export) of Goods into the Customs Territory as Established by International Agreements of Customs Union Member States. The satisfaction of the claim was denied in connection with the missing of the deadline for appealing the actions and decisions of the administrative body.