Specifics of Issuing Form ST-1 Certificates of Origin for Medicinal Products and Medical Devices

 

September 23, 2022

BRACE Law Firm ©

 

A Form ST-1 certificate is a document that confirms the country of origin of goods. Initially, it applied to export operations in accordance with the Agreement On a Free Trade Zone dated October 18, 2011. The parties to the Agreement—CIS countries—reached an agreement to provide each other with customs benefits and other preferences when importing goods into the territory of the participating countries. The rules for determining the country of origin of goods in the Commonwealth of Independent States were approved by the Agreement dated November 20, 2009 (the "Agreement of November 20, 2009", the "Rules for Determining the Country of Origin").

In addition to this area, the ST-1 certificate found application in procurement for state and municipal needs. Thus, Article 14 of Federal Law No. 44-FZ dated April 5, 2013, On the Contract System in the Sphere of Procurement of Goods, Works, and Services for Ensuring State and Municipal Needs (the "Contract System Law") established a national regime for state procurement in the Russian Federation. In this regard, goods of Russian origin and goods from member states of the Eurasian Economic Union [1] (the "EAEU countries") are granted advantages over goods of foreign origin in several cases, while in other cases, the law establishes a ban on the procurement of certain foreign products.

To confirm the right to an advantage, it is sometimes necessary to provide a certificate of origin of goods of Form ST-1 (the "ST-1 certificate", the "Form ST-1 certificate"). This article examines in detail what this document is, in which cases it is required in state and municipal procurement, and the specifics of obtaining it for medicinal products and medical devices.

What Does the ST-1 Certificate Confirm and in Which Cases Is It Issued?

The Form ST-1 certificate is a document that confirms that the country of origin of the goods is the Russian Federation or other EAEU countries. For goods originating from third countries, including other member states of the Agreement on the Rules for Determining the Country of Origin of Goods in the Commonwealth of Independent States dated November 20, 2009, Form ST-1 certificates are not issued.

According to Clause 2.1 of the Rules for Determining the Country of Origin, "country of origin" means the country in whose territory the goods were fully produced or subjected to sufficient processing or refining.

Let us consider the criteria by which the country of origin is determined in more detail. Goods considered fully produced in a member state of the Agreement of November 20, 2009, include natural resources, grown plant products, animals and products obtained from animals raised in the country, scrap and waste, etc. The full list is provided in Clause 2.2 of the Rules for Determining the Country of Origin. In other cases, the following principles and criteria for determining the country of origin apply:

1. If a product manufactured in a member state of the Agreement of November 20, 2009, involves materials from other member states, the cumulative principle may apply, according to which the origin of the product is determined by the country of manufacture of the final product.
2. The criterion of sufficient processing/refining also applies. According to this criterion, if two or more countries participate in the production of a product, the product is considered to originate from the country in whose territory it was subjected to the last substantial processing or refining sufficient to give the product its characteristic properties.

Thus, if materials from other states having ST-1 certificates were used in the production of the product, the country of origin is the country where the final stage of manufacture took place. If ST-1 certificates for the materials are absent, the origin of the product is determined based on the criterion of sufficient processing/refining. In this case, the following circumstances are considered:

• A change in the TN VED EAEU commodity heading resulting from processing/refining at the level of at least one of the first four digits;
• The implementation of a sufficient number of stages of the production and technological cycle allowing the products to be attributed to a specific manufacturing state;
• The ad valorem share rule, where the value of the used materials of foreign origin reaches a fixed percentage share in the price of the final product. The use of materials of foreign origin is permitted if the commodity heading of the raw material is identical and its value does not exceed 5%.

Regardless of the above, operations specified in Section 3 of the Rules for Determining the Country of Origin do not meet the criteria for sufficient refining. These include, for example, operations to ensure the preservation of goods during storage or transportation, operations to prepare goods for sale and transportation (sorting, repacking, etc.), operations for disassembling and assembling packaging, and simple packaging operations.

In Which Procurements of Medicinal Products and Medical Devices Is an ST-1 Certificate Required?

It is not necessary to confirm the country of origin with an ST-1 certificate in all state procurements. In some cases, a declaration of the country by the participant in the bid will suffice. The provision of an ST-1 certificate is required for the procurement of the following medicinal products and medical devices:

• Medicinal products included in the VED List for which access restrictions have been established in accordance with Decree of the Government of the Russian Federation No. 1289 dated November 30, 2015 [2];
• Medical devices for which access restrictions have been established in accordance with Decree of the Government of the Russian Federation No. 102 dated February 5, 2015 (Lists No. 1 and No. 2 of the Decree) [3];
• Radio-electronic products that are medical devices and classified under the following OKPD 2 codes: 26.51.53.140, 26.51.53.190, 26.51.70.110, 26.60.11.111, 26.60.11.112, 26.60.11.113, 26.60.12.110, 26.60.12.129, 32.50.1, 32.50.21.112, 26.60.11.119, 26.60.11.120, 26.60.11.129, 26.60.11.130, 26.60.12.111, 26.60.12.119, 26.60.12.120, 26.60.12.124, 27.40.39.110, 32.50.13.190, 32.50.13, 26.60.12.121, 26.60.12.122, 26.60.12.123, 26.60.12.131, 26.60.12.132, 26.60.13.130, 26.60.13.190, 26.60.13, 26.60.13.120, 26.60.13.140, 26.60.13.150, 26.60.13.180, 26.60.13.190, 28.25.13.110, 32.50.50, 28.25.14.110, 32.50.50.190, 32.50.12, 32.50.21.121, 32.50.21.122, 32.50.21.129, 32.50.21.160, 32.99.59.000, if the procurement notices are posted before December 31, 2022.

We clarify that if the ST-1 certificate is not provided, the Bidder's application is equated to applications containing offers for the supply of goods from a foreign state and may be rejected if the set of conditions provided for by the aforementioned decrees is present.[4]

Specifics of Issuing ST-1 Certificates for Medicinal Products and Medical Devices

The following regulations govern the procedure for issuing Form ST-1 certificates in the territory of the Russian Federation for state procurement purposes:

• For medicinal products included in the VED List—Order of the Chamber of Commerce and Industry of the Russian Federation No. 93 dated December 21, 2015 [5] (the "CCI Order No. 93");
• For medical devices—Order of the Chamber of Commerce and Industry of the Russian Federation No. 29 dated April 10, 2015 [6] (the "CCI Order No. 29").

Both orders have identical content; therefore, we will consider the procedure for issuing certificates using CCI Order No. 93 as an example, as well as the distinctive features of CCI Order No. 29.

The authorized Chambers of Commerce and Industry (the "CCI") have the right to issue ST-1 certificates. Currently, the Chamber of Commerce and Industry of Russia and 177 regional chambers of commerce and industry have the right to issue Form ST-1 certificates for state procurement of medicinal products and medical devices. The full list of authorized CCIs and their codes is provided in the appendix to CCI Order No. 93 and is also available on the website of the Chamber of Commerce and Industry of the Russian Federation. The CCIs issue certificates on a paid basis in accordance with the tariffs established by the CCI of Russia, approved by Order of the Chamber of Commerce and Industry of the Russian Federation No. 85 dated December 5, 2017.

The ST-1 certificate may be issued both to manufacturers of goods and to interested Bidders.

The Form ST-1 certificate is issued in printed form in Russian on a special protected A4-format blank produced by typographical methods. The Agreement of November 20, 2009, sets forth the form of the certificate and the requirements for completion. Furthermore, CCI Order No. 93 and CCI Order No. 29 establish specifics for completing ST-1 certificates for medicinal products and medical devices, respectively. In particular, the entry: "For the purposes of procurement for state and municipal needs" is made in column No. 5 of the ST-1 Certificate, "For official marks". The CCI of Russia maintains a unified electronic database of Form ST-1 certificates issued in the Russian Federation. The authenticity of the ST-1 Certificate can be verified on the CCI website.

In the event of loss or damage to the certificate, a duplicate may be issued upon the applicant's written request, and in the case of a technical error made during the issuance of the Form ST-1 Certificate, a new Form ST-1 Certificate may be issued.

Note that despite the seeming insignificance of the technical aspects of the document's issuance, a violation or ignorance of this procedure may entail adverse consequences for the Bidder. For example, in one case, the Customer's auction commission did not find information about a submitted certificate when checking its authenticity using the official CCI website. According to the response received from the CCI to the institution's request, the certificate had been re-issued on another blank with a different number due to corrections, and the previously issued one had been annulled; therefore, it could not be found in the database. Guided by this information, the auction commission refused the participant's admission to the bidding. The courts recognized that the actions of the auction commission were legal and justified, and there was no offense under Part 2 of Article 7.3 of the CAO RF ("unlawful refusal of admission") in the actions of the chairman of the auction commission.[7]

In another case, a participant submitted the same ST-1 Certificate for several electronic auctions, which stated in column 5: "For the purposes of procurement for state and municipal needs, electronic auction No. 0318300537921000095". The Customer decided that this contradicted CCI Order No. 29 and did not grant preferences to the participant who offered goods of Russian origin. The antimonopoly authority recognized these actions as illegal and issued an order to review the results of the bidding. During the consideration of the case challenging the decision of the antimonopoly authority, it was established that the same goods were being procured in these auctions: bacterial filters, breathing circuit tubes/masks, and anesthetic breathing circuits. The court stated: in accordance with Section 5 of CCI Order No. 29, the following entry is made in column No. 5: "For the purposes of procurement for state and municipal needs". The order does not provide for specifying the procurement number. In view of the foregoing, the court concluded that the applications of the winners with an offer of foreign goods should have been rejected. The court refused to recognize the decision and order of the antimonopoly authority as illegal.[8]

Procedure for Submitting Documents to Obtain an ST-1 Certificate

To obtain an ST-1 certificate, an application must be filed with the authorized CCI, accompanied by a set of documents. CCI Order No. 93 and CCI Order No. 29 regulate the application form and the set of documents, which depend on whether a primary expert act was previously issued for the goods or not.

As a general rule, the ST-1 certificate is issued based on a primary expert act of the CCI located at the place of the direct manufacturer of the goods (its branch or separate subdivision). These expert acts are issued for a permanent nomenclature of goods for a term of one year (the "annual expert acts").

Documents for Obtaining an ST-1 Certificate for Medicinal Products

If an annual expert act has been drawn up, the following are provided to obtain an ST-1 certificate for medicinal products:

• An application specifying information about the annual expert act in the form established by CCI Order No. 93;
• Legal and registration documents of the applicant (for legal entities—copies of constituent documents, a certificate from the FNS of Russia on tax registration specifying the OGRN, an information letter from Rosstat specifying the OKPO code; for individual entrepreneurs—a copy of the IP certificate and a copy of the passport; for individuals—a copy of the passport);
• A letter of guarantee or information about a contract with an obligation to purchase the goods specifically from this manufacturer in the necessary quantity and nomenclature if recognized as the winner of the procurement (if the applicant is not the manufacturer and/or owner of the goods).

In the absence of an annual expert act, it will additionally be necessary to provide information and documents regarding the production of medicinal products:

• A copy of the license for the production of medicinal products;
• Information and documents confirming the possibility of carrying out production activities;
• A copy of the document containing information on the stages of the technological production process in the EAEU territory, or in its absence—other supporting documents;
• Copies of marketing authorizations for the medicinal products;
• Copies of certificates of conformity for products subject to mandatory certification or declaration;
• A list of active pharmaceutical ingredients and excipients used in production, as well as packaging materials and components;
• Information on production (technological) operations or production stages carried out in the territories of EAEU countries;
• Information on the materials used (if the medicinal product is manufactured using foreign materials (raw materials) and components): a description of all materials (raw materials) and components of foreign origin from which the goods are manufactured, specifying the country of origin; a calculation of the unit price of the goods; accounting documents confirming expenses related to the production of the final product.

Documents for Obtaining ST-1 Certificates for Medical Devices

According to CCI Order No. 29, a slightly different set of documents is required to obtain an ST-1 certificate for medical devices.

In the presence of an annual expert act, similar to medicinal products, an application specifying information about the annual expert act, legal and registration documents of the applicant, and a letter of guarantee (information about the contract) with an obligation to purchase the medical device are provided.

In the absence of an annual expert act:

1. Information and documents confirming the existence of production:

• Information on the availability of production areas (certificate of ownership or lease agreement and an act of acceptance and transfer of production areas);
• Information on production capacities (list of equipment and balance sheet certificate or lease agreement and an act of acceptance and transfer of equipment);
• Information on the availability of personnel (certificate of the number of personnel engaged in production, list of positions).

2. Information and documents confirming the fact of manufacturing the goods:

• A set of technological documentation;
• Registration certificates, except when, in accordance with Article 38 of Federal Law No. 323-FZ dated November 21, 2011, On the Fundamentals of Health Protection of Citizens in the Russian Federation, the medical device is not subject to state registration;
• Licenses and permits for types of work performed within the framework of production operations;
• Certificates of conformity for products subject to mandatory certification;
• A list of materials (raw materials) and components used in the production of the goods;
• Information on production (technological) operations or production stages carried out in the territories of EAEU countries.

3. Information on the materials used (if the medical device is manufactured using foreign materials (raw materials) and components):

• A description of all materials (raw materials) and components of foreign origin from which the goods are manufactured, specifying the country of origin;
• A calculation of the unit price of the goods;
• Accounting documents confirming expenses related to the production of the final product.

The head of the applicant or a person authorized by them signs the submitted information and documents; the chief accountant additionally signs accounting documents.

The Form ST-1 certificate is issued within 3 (three) working days from the date of submission of the full set of documents. If the information and documents are not submitted in full, the CCI suggests that the applicant submit the missing documents. The period for eliminating deficiencies is 5 working days, which may be extended by 10 working days upon request. If the deficiencies are not eliminated, the CCI will send a reasoned refusal to issue the certificate. Another ground for refusal is if it is not possible to determine the compliance of the declared goods with the requirements of CCI Order No. 93 or CCI Order No. 29.

Validity Periods of Form ST-1 Certificates

The issue of the validity periods of the ST-1 Certificate deserves special attention, as many disputes arise in practice.

According to Clause 3.7 of CCI Orders No. 93 and No. 29, the Form ST-1 Certificate is issued for the duration of the procurement and ceases its effect after its completion. Manufacturers of medicinal products are permitted to be issued certificates for a period of up to 1 year, but not exceeding the validity period of the annual expert act. A similar rule is established in Clause 6.4 of the Rules for Determining the Country of Origin.

Customers are often unaware of this norm and reject applications, which is recognized as illegal by antimonopoly authorities and entails adverse consequences for the Customer—in the form of an obligation to review the results of the procurement—and for the Customer's commission—the imposition of fines for unlawful refusal of admission.

Let us provide an example from judicial practice. The Customer's auction commission recognized a participant's bid as inconsistent with the requirements of the Contract System Law and Government Decree No. 1289 on the ground that the participant attached an ST-1 certificate with an expired validity period. Based on the results of the participant's complaint, the antimonopoly authority recognized the refusal of admission as illegal and ordered the elimination of the identified violations. The Customer applied to the court to recognize the decision and order of the antimonopoly authority as invalid. During the court's consideration of the case, it was established that the Form ST-1 certificate submitted as part of the bid was issued to the manufacturer of the medicinal product on August 29, 2017, and the bid for participation in the auction was filed on May 11, 2018. According to Clause 6.4 of the Rules for Determining the Country of Origin, the Form ST-1 Certificate may be used within 12 months from the date of its issuance, i.e., until August 29, 2018. In this regard, the court concluded that the participant confirmed the country of origin of the goods. It refused to grant the request to recognize the decision and order of the antimonopoly authority as invalid.[9]

Additionally, we clarify that in this case, an ST-1 Certificate issued by the CCI of the Republic of Belarus was considered, in connection with which the courts applied the norms of the Rules for Determining the Country of Origin rather than CCI Order No. 93. The error in the Customer's conclusions was caused by the application of the national legislation of the Republic of Belarus. As the courts pointed out, the validity period of the Form ST-1 certificate issued by the Belarusian Chamber of Commerce and Industry cannot exceed 6 months only in cases where the goods are supplied for the state and municipal needs of the Republic of Belarus. Regarding the period of application of the Form ST-1 certificate for goods exported from the Republic of Belarus, it is necessary to be guided by Clause 6.4 of the Rules for Determining the Country of Origin.

When determining the validity period of the ST-1 for medicinal products, one should also consider Note 1 to Clause 3.8 of CCI Order No. 93, according to which, if an ST-1 certificate with a validity of up to one year ceases its effect during the conduct of the procurement for which it is intended, its validity is extended until the completion of such procurement. Thus, in one of the procurements, a participant attached a certificate with a validity period until September 25, 2020, as part of the bid. The Customer's commission decided that the bid did not meet the requirements, as at the time of consideration of bids on October 5, 2020, the certificate's validity had expired. During consideration by the antimonopoly authority, it was established that the procurement procedure was published on August 18, 2020, which means that in accordance with the note to Clause 3.8 of CCI Order No. 93, the ST-1 certificate is considered valid until the completion of the procurement. The complaint was recognized as justified, and an order was issued to review the results of the procurement.[10]

Specifics of Applying ST-1 Certificates with a Validity Period of Up to One Year

In accordance with Clause 6.6 of CCI Orders No. 93 and No. 29, annual ST-1 certificates are recognized as documents confirming the country of origin of goods, along with certificates issued for a specific procurement.

A manufacturer of goods who has received a Form ST-1 certificate with a validity of up to one year is entitled to provide a copy of such certificate certified by them to Bidders for use in state and municipal procurement. At the same time, the period for applying such a copy cannot exceed the validity period of the original certificate.

Manufacturers often forget to certify copies, which can lead to adverse consequences for the Bidder. Let us demonstrate this with an example from practice. A company filed a complaint with the antimonopoly authority regarding an unlawful refusal of admission to participate in an electronic auction. As established during the consideration of the complaint, the company offered a medicinal product of Russian origin for supply. The Customer's auction commission decided to reject the company's bid because the ST-1 certificate provided as part of the bid did not meet the requirements of Clauses 6.3 and 6.6 of CCI Order No. 93 (the copy of the ST-1 certificate was not certified by the manufacturer). The antimonopoly authority concluded that the company did not properly confirm the information about the country of origin; the decision to reject the bid was justified.[11] At the same time, we note that not all antimonopoly authorities adhere to this position; the opposite point of view is also encountered.[12]

In another case, the auction commission also decided that the ST-1 certificate was submitted as an improperly certified copy. During the consideration of the case, the arbitration court established that a scanned image of the original ST-1 certificate was attached to the bid. Consequently, the applicant's arguments that the Bidders did not attach the corresponding document (certificate) were unfounded.[13]

To minimize risks, we recommend that Bidders submit ST-1 certificates issued in accordance with the requirements of regulatory acts as part of their bid.

Other Cases of Issuance and Application of the ST-1 Certificate

In addition to state procurement, confirmation of the country of origin by a Form ST-1 certificate is also required for import-export operations to obtain the right to tax benefits and advantages provided by the national legislation of the member states of the Agreement on the Rules for Determining the Country of Origin of Goods in the Commonwealth of Independent States dated November 20, 2009.

Furthermore, in accordance with Clause 1 of Decree of the Government of the Russian Federation No. 312 dated March 9, 2022 [14], a permissive procedure for the export of certain types of medical devices outside the territory of the Russian Federation to the territories of the member states of the Eurasian Economic Union was established until December 31, 2022, according to the list specified in Appendix No. 6 to this Decree. The provision on the permissive procedure does not apply to goods originating from the territory of the Russian Federation accompanied by a certificate of origin of goods of Form ST-1. The procedure for issuing certificates in these cases is regulated by the Agreement on the Rules for Determining the Country of Origin of Goods in the Commonwealth of Independent States dated November 20, 2009.

In conclusion, we note that obtaining ST-1 certificates for use in state procurement allows a participant offering goods produced in Russia or EAEU countries to receive preferences, which, in turn, is a significant measure to support the country's economy. At the same time, its issuance, provision for participation in procurement, and consideration for advantages require special attention from all participants in the procurement process.

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References

[1] The EAEU member states are Russia, Belarus, Kazakhstan, Armenia, and Kyrgyzstan.

[2] Decree of the Government of Russia No. 1289 dated November 30, 2015, On Restrictions and Conditions for Admission of Medicinal Products Originating from Foreign States Included in the List for the Purposes of Procurement for Ensuring State and Municipal Needs.

[3] Decree of the Government of Russia No. 102 dated February 5, 2015, On Restrictions and Conditions for Admission of Certain Types of Medical Devices Originating from Foreign States for the Purposes of Procurement for Ensuring State and Municipal Needs.

[4] Letter of FAS Russia No. IA/10439/16 dated February 19, 2016.

[5] Order of the Chamber of Commerce and Industry of the Russian Federation No. 93 dated December 21, 2015, On the Regulation on the Procedure for Issuing Form ST-1 Certificates of Origin for the Purposes of Procurement for Ensuring State and Municipal Needs (for medicinal products included in the list of vital and essential medicinal products).

[6] Order of the Chamber of Commerce and Industry of the Russian Federation No. 29 dated April 10, 2015, On the Regulation on the Procedure for Issuing Form ST-1 Certificates of Origin for the Purposes of Procurement for Ensuring State and Municipal Needs.

[7] Decision of the Arbitration Court of the Tula Region dated May 16, 2017, in case No. A68-9924/2016, Resolution of the Supreme Court of the Russian Federation No. 38-AD18-5 dated August 14, 2018.

[8] Resolution of the Arbitration Court of the North Caucasus District No. F08-5256/22 dated June 23, 2022, in case No. A32-19822/2021.

[9] Determination of the Supreme Court of the Russian Federation No. 309-ES19-15008 dated September 16, 2019, in case No. A71-15547/2018.

[10] Decision of the Directorate of the Federal Antimonopoly Service for Moscow No. 077/06/57-17197/2020 dated October 13, 2020.

[11] Decision of the Directorate of the Federal Antimonopoly Service for the Tula Region No. 04-07/202-2018 dated September 10, 2018.

[12] Decision of the St. Petersburg OFAS Russia No. 44-5140/20 dated October 6, 2020.

[13] Determination of the Supreme Court of the Russian Federation No. 304-ES21-22446 dated December 7, 2021, in case No. A67-8435/2020.

[14] Decree of the Government of the Russian Federation No. 312 dated March 9, 2022, On Introducing on a Temporary Basis a Permissive Procedure for the Export of Certain Types of Goods Outside the Territory of the Russian Federation.