Supreme Court of the Russian Federation Thematic Review No. 9/2026: analysis of legal positions and their primary sources

The company submitted to the customs authority a declaration for the goods—a tabletop game for children made of plastic with metal, paper and silicone components, “Interactive Educational Set: Globe of the Earth.” Believing that the imported goods fell within Section 95 of the EAEU CN, “Toys, games and sports requisites; parts and accessories thereof,” the company declared the corresponding classification code1.

Following the inspection, the customs authority issued a decision classifying the goods under Section 49 of the EAEU CN, “Printed books, newspapers, pictures and other products of the printing industry; manuscripts, typescripts and plans”2.

Disagreeing with the customs authority’s decision, the company applied to the court seeking a declaration that it was unlawful.

The first-instance court dismissed the company’s claim; the appellate and cassation courts upheld that judgment. The courts proceeded on the basis that, in substance, the disputed goods were a map-globe and educational material rather than a toy. This precluded application of the classification code declared by the company.

In setting aside the judicial acts issued in the case and remitting the case for reconsideration, the Judicial Chamber of the Supreme Court of the Russian Federation drew attention to the following.

Pursuant to paragraph 1 of Article 20 of the Customs Code of the EAEU, goods must be classified under the EAEU CN when declared for customs purposes.

The court reviews the validity of a classification decision issued by the customs authority on the basis of an assessment of the evidence submitted by the customs authority and the declarant confirming information about the features (properties and characteristics) of the declared goods that are relevant to their correct classification under the EAEU CN. For purposes of interpreting the provisions of the EAEU CN, courts take into account the Explanatory Notes to the EAEU CN recommended by the EEC as supplementary working materials (paragraph 21 of Plenum Resolution No. 49).

Accordingly, for the correct classification of goods, their characteristics must be established from the perspective both of their composition and functional features and of their intended use, and then compared with the wording of the relevant tariff heading, taking into account the Explanatory Notes to the EAEU CN.

As follows from the Explanatory Notes to the EAEU CN, tariff heading 4905 of the EAEU CN, selected by the customs authority, includes all printed globes, maps, charts and plans depicting natural or artificial features of countries, cities and seas, maps of the starry sky, etc.; conventional signs are used to indicate contours and the like.

For goods to fall under this heading, it must be established that they are not only globe-shaped but also have the necessary topographical elements, can be used to obtain accurate information about planet Earth and, as specifically mentioned in the Explanatory Notes to the EAEU CN concerning heading 4905, are not toys.

The declarant, however, submits that the disputed goods are a toy, lack geographical accuracy and reliable images, and convey no substantive information—that is, they do not have the characteristics of a geographical map-globe—and therefore fall under heading 9504 of the EAEU CN.

Since the declarant’s arguments could indicate that the goods were misclassified in the contested decision of the customs authority, but were not properly assessed in the judicial acts issued in the case, the case was remitted to the court of first instance for reconsideration.

In another case, during customs declaration, the company classified the goods (aluminium fastening fittings) under EAEU CN code 8302 49 000 9 3.

Following the inspection, the customs authority issued decisions classifying the imported goods under EAEU CN code 8302 50 000 0 4.

Disagreeing with the customs authority’s conclusions, the company applied to the court seeking a declaration that the decision issued was invalid.

The first-instance court dismissed the company’s application; the appellate and cassation courts upheld that judgment. In the courts’ view, based on the wording of tariff subheading 8302 50, “hat racks, hat pegs, brackets and similar articles,” all brackets made of base metal had to be classified under this code, regardless of how they were used.

In setting aside the judicial acts issued in the case and granting the company’s claims, the Judicial Chamber of the Supreme Court of the Russian Federation drew attention to the following.

Participants in foreign economic activity are entitled to expect that the classification of goods under the EAEU CN, which is relevant, among other things, to determining the amount of customs payments, will be objective, predictable and transparent and will not depend on the discretion of the customs authorities.

The decisive factors in classifying goods under the EAEU CN must be their objective characteristics and properties as defined in the wording of the tariff heading (subheading) and the relevant section or chapter notes. The intended use of the goods may also be one of the objective classification criteria where the legal significance of that criterion follows from the description of the relevant tariff heading (subheading).

The courts established that the subject matter of the company’s foreign trade contracts was the development and supply of systems and component parts for aircraft.

The classification decisions challenged by the company were issued by the customs authority in respect of sets of brackets that were component parts for fastening aircraft parts (side panels, door-opening trim, ceiling panels and luggage racks), as well as for installing the fastening parts of a galley, the support of a water-supply system, a waste-removal system, an equipment rack for the water-supply system and a waste-removal system.

Thus, the goods imported by the company, being fastening fittings enabling various aircraft components to be connected to the fuselage and to cabin components, correspond, by their intended use, to the description of heading 8302 in relation to code 8302 49 000 9 of the Commodity Nomenclature of Foreign Economic Activity.

Subheading 8302 49, “other mountings, fittings and similar articles,” contrary to the courts’ conclusions regarding its limited scope, permits the classification of fastening fittings used in the manufacture of aircraft engines (code 8302 49 000 1) and for other uses (code 8302 49 000 9).

Agreeing with the customs authority’s arguments regarding the classification of the goods under subheading 8302 50, “hat-racks, hat-pegs, brackets and similar articles,” the courts erroneously gave decisive significance to the word “bracket” appearing in the description of the goods in dispute; that is, they relied on the name of the goods rather than on their objective characteristics and properties, including their intended use.

The company applied to the customs authority to amend (supplement) the information previously declared in the customs declarations for the imported goods (network-powered rotary hammers with a built-in electric motor), by reclassifying them from subheading 8467 215 to subheading 8467 296 of the Commodity Nomenclature of Foreign Economic Activity.

Following its review, the customs authority decided to refuse to amend (supplement) the information declared in the declarations, because the purpose and characteristics of the goods met the requirements applicable to drilling equipment included under subheading 8467 21 of the Commodity Nomenclature of Foreign Economic Activity.

Disagreeing with the customs authority’s decision, the company applied to the court seeking a declaration that it was unlawful.

The first-instance court’s decision, upheld by the appellate and cassation courts, granted the company’s claim. In examining the dispute, the courts proceeded on the basis that rotary hammers are power tools performing several different functions; consequently, there were no grounds for classifying the rotary hammer under subheading 8467 21 of the Commodity Nomenclature of Foreign Economic Activity, “drills of all types.”

In setting aside the judicial decisions issued in the case and ruling to dismiss the company’s claim, the Judicial Chamber of the Supreme Court of the Russian Federation drew attention to the following.

Goods are classified under the Commodity Nomenclature of Foreign Economic Activity in accordance with the General Rules for the Interpretation thereof. The classification criteria are the materials from which the goods are made, the functions performed by the goods, and their intended purpose, as determined from the wording of the headings of the Commodity Nomenclature of Foreign Economic Activity and the notes to sections and chapters.

It follows from the wording of heading 8467 of the Commodity Nomenclature of Foreign Economic Activity and the Explanatory Notes thereto that this heading includes tools incorporating an electric motor, a motor powered by compressed air, an internal-combustion engine, or any other motor.

Subheading 8467 21 of the Commodity Nomenclature of Foreign Economic Activity includes electric drills of all types. The wording of the subheading is reinforced by the word “all,” meaning any or all types, including even those that only partially fall within the definition of a “drill,” regardless of what additional functions the goods perform besides drilling.

As is apparent from the descriptions of subheadings 8467 21, “drills of all types,” and 8467 29, “other,” of the Commodity Nomenclature of Foreign Economic Activity, the former applies where the goods constitute a drill or one of its types, while the latter applies where the goods do not correspond to any of the preceding subheadings.

According to the description of the goods in dispute, they are intended for drilling in concrete, brick and stone, as well as for light chiselling work. The goods are also suitable for non-impact drilling in wood, metal, ceramics and plastic, and for driving and removing screws.

Thus, the goods in dispute fully correspond to the wording of the subheading “drills of all types” and, under the General Rules for the Interpretation, are subject to classification under subheading 8467 21 of the Commodity Nomenclature of Foreign Economic Activity, which also describes the goods being classified more precisely.

The correctness of classifying this type of goods under code 8467 21 is confirmed by EEC Board Decision No. 110 of 3 October 2024, “On the Classification of a Rotary Hammer in Accordance with the Unified Commodity Nomenclature of Foreign Economic Activity of the Eurasian Economic Union,” under which a rotary hammer consisting of a handheld rotary-action tool with a built-in electric motor, intended for impact and ordinary drilling of holes in various materials and for chiselling concrete, bricks and natural stone, with or without an additional screw-driving/removal function, is classified under subheading 8467 21 of the Commodity Nomenclature of Foreign Economic Activity pursuant to Rules 1 and 6 of the General Rules for the Interpretation.

The EEC Board adopted that decision in exercising the powers established by Article 22(1) of the EAEU Customs Code, for the purpose of ensuring the uniform application of the Commodity Nomenclature of Foreign Economic Activity in the member states of the Union.

Thus, the totality of the circumstances established by the courts in the case demonstrates that the customs authority’s chosen classification of the goods under the Commodity Nomenclature of Foreign Economic Activity was correct and that there were no grounds for changing the classification of the goods imported by the declarant.

When declaring the imported goods, the company identified the Kingdom of Thailand as their country of origin and submitted certificates of origin issued by an authorized body of that state.

After the goods were released, the customs authority concluded that their origin had not been confirmed because the company was not the consignee identified in the certificates (the consignee was a company registered in the People’s Republic of China); consequently, the certificates submitted did not relate to the goods in dispute. On that basis, the customs authority decided to amend (supplement) the information declared in the goods declaration with respect to the anti-dumping duty.

Disagreeing with the customs authority’s decision, the company challenged it in court.

The first-instance court granted the company’s claims because the certificates were not unreliable.

The appellate court, whose conclusions were endorsed by the cassation court, set aside the first-instance court’s decision and dismissed the company’s application on the ground that the certificates submitted by the declarant had been issued not to the company but to another consignee.

In setting aside the judicial decisions of the appellate and cassation courts issued in the case and upholding the first-instance court’s decision, the Judicial Chamber of the Supreme Court of the Russian Federation drew attention to the following.

Where measures to protect the domestic market—special protective, anti-dumping and countervailing measures—are applied on the basis of the origin of goods, the origin of like goods imported into the customs territory of the Union must be confirmed by a certificate of origin (Article 48(1) of the EAEU Treaty, paragraph 25 of the Rules for Determining the Origin of Goods).

Under Article 314(1) of the EAEU Customs Code, which establishes the specific features of customs control of the origin of goods, such control includes verification of documents concerning the origin of goods; information on the origin of goods declared in the customs declaration and/or contained in documents submitted to the customs authorities; including verification of the reliability of the information contained in documents concerning the origin of goods, the authenticity of certificates of origin, and the correctness of their preparation and/or completion.

Paragraph 5 of that article establishes a list of cases in which the origin of goods is deemed unconfirmed, namely: mandatory documents concerning the origin of goods have not been submitted; the information contained in the documents concerning the origin of goods has been found to be unreliable; the certificate of origin is not authentic or has been prepared and/or completed in breach of the requirements governing its preparation and/or completion; or the state authority or authorized organization that issued and/or was authorized to verify the certificate of origin has failed, within the period established by the rules for determining the origin of imported goods, to provide a response to a request and/or additional documents and/or information.

At the same time, the EEC may establish other cases in which the origin of goods is deemed unconfirmed (paragraph 43 of the Rules for Determining the Origin of Goods).

Thus, the applicable legal framework establishes an exhaustive list of circumstances that discredit a specific certificate of origin and, consequently, the information it contains concerning the country of origin of the goods. The provisions cited do not provide for any other cases in which the origin of goods is deemed unconfirmed on the basis of such a certificate. At the same time, discrepancies in other information in the document concerning the origin of goods are not classified as grounds for deeming the origin unconfirmed.

Furthermore, a change, in the ordinary course of business, of the destination country or consignee of goods—as a result of civil-law transactions concerning the goods during their transportation—does not give rise to an obligation to replace a previously issued certificate of origin, issued in the country of export or production, whose authenticity is not called into question. Such circumstances cannot be regarded as requiring a new certificate to be obtained.

When the company made its declaration, it submitted explanations stating that the goods in dispute had been manufactured by a company registered in the Kingdom of Thailand.

Initially, the goods were to be supplied through the territory of the People’s Republic of China, which is why the company registered there was identified in the certificates as the consignee.

The company entered into a contract with a company registered in the United Arab Emirates, which purchased the goods in dispute and transferred them, together with the certificates, to the applicant.

These circumstances accounted for the fact that the certificates identified a person other than the declarant as the consignee of the goods.

In those circumstances, the customs authority had no grounds to conclude that the origin of the declared goods had not been confirmed or to impose anti-dumping duties.

Pursuant to a foreign-trade contract, the company imported goods (fruit) into the customs territory and presented them for customs clearance, determining their customs value on the basis of the price specified in the contract (under the transaction value method for imported goods).

The customs authority established that the declarant had purchased the goods at a price understated in comparison with prices for similar goods and that the transaction had been concluded between related parties, since the seller held a 100% interest in the company’s charter capital. At the same time, the company failed to provide evidence disproving the indications that the customs value had been determined unreliably.

Following customs control, a decision was made to amend (supplement) the information declared in the goods declaration, thereby determining a higher customs value for the goods.

The company applied to the court seeking to have that decision of the customs authority declared invalid.

The court of first instance dismissed the company’s claims. The appellate court, whose conclusions were upheld by the cassation court, set aside the decision of the court of first instance and granted the company’s application.

In setting aside the judicial decisions of the appellate and cassation courts issued in the case and upholding the first-instance court’s decision, the Judicial Chamber of the Supreme Court of the Russian Federation drew attention to the following.

Under paragraph 13 of Article 38 of the Customs Code of the EAEU, customs authorities are entitled to verify the reliability of the declared customs value of imported goods against their actual value.

Application of the method for determining customs value based on the transaction involving imported goods requires compliance with a number of conditions. One such condition is that the relationship between the buyer and the seller must not have affected the transaction value.

Under paragraph 5 of Article 39 of the Customs Code of the EAEU, if the seller and the buyer are related parties and, based on information provided by the declarant or obtained by the customs authority by other means, the customs authority detects indications that the relationship between the seller and the buyer affected the price actually paid or payable, the customs authority shall notify the declarant of those indications in writing or electronically. In such a case, the customs authority shall conduct customs control, including an analysis of the circumstances surrounding the sale.

In clarifying the meaning of this provision, the Plenum of the Supreme Court of the Russian Federation noted that where the declaration of goods indicates that a transaction involving imported goods was concluded between related parties, or where the relationship between the parties to the transaction is established during customs control and the customs authority identifies indications that the customs value was declared unreliably, the declarant must confirm that the price actually paid or payable for the goods was established without the parties’ relationship affecting it, including by disclosing pricing information (paragraph 20 of Plenum Resolution No. 49).

Consequently, where a transaction is concluded between related parties, the declarant bears the burden of proving that the relationship between the seller and the buyer did not affect the price of the goods.

In this case, during customs control, the customs authority identified risk factors that made it highly probable that the relationship between the seller and the buyer had affected the transaction value, in view of the deviation between the value of the goods declared for customs purposes and the prevailing prices for identical goods.

The customs authority invited the declarant to exercise the rights provided for in subparagraphs 1 and 2 of paragraph 5 of Article 39 of the Customs Code of the EAEU and submit documents substantiating the reliability of the price of the goods supplied that had been declared for customs purposes. However, during the customs control measures, the company did not disclose information on the pricing applied when the goods were imported into the Russian Federation.

In the circumstances, the export declaration, invoices, bank documents and other documents submitted by the declarant could not be recognized by the courts as proper evidence when verifying the reliability of the customs valuation method applied by the company, because the customs authority did not dispute the fact that the transaction had taken place or that the goods supplied had been paid for; it questioned only the pricing mechanism and required proof that the relationship with the seller had not affected the transaction price.

The company exported timber under foreign-trade contracts and, when declaring the goods, stated the contractual price of the timber as the customs value of the exported goods.

The customs authority conducted an unscheduled customs audit, following which the customs value was increased to include the agency fee received by the company from the foreign buyer for locating rolling stock to deliver the timber from the loading station to the border railway station.

Disagreeing with the customs authority’s decision insofar as it included the costs of transporting the goods within the territory of the Russian Federation in the customs value, the company challenged it in court.

The court of first instance dismissed the company’s claims. The appellate court, whose conclusions were upheld by the cassation court, set aside the decision of the court of first instance and granted the company’s application.

In setting aside the judicial decisions of the appellate and cassation courts issued in the case and upholding the first-instance court’s decision, the Judicial Chamber of the Supreme Court of the Russian Federation drew attention to the following.

Under paragraph 4 of Article 38 of the Customs Code of the EAEU, the customs value of goods exported from the customs territory of the Union is determined in accordance with the customs-regulation legislation of the Union member state whose customs authority carries out the customs declaration of the goods.

The procedure for determining the customs value of goods exported from the Russian Federation is established by the Government of the Russian Federation (Part 2 of Article 23 of the Law on Customs Regulation).

Under paragraphs 8 and 12 of the Rules for Determining the Customs Value of Exported Goods, the basis for determining customs value must, to the maximum extent possible, be the transaction value of those goods—the price actually paid or payable for the goods when sold for export from the Russian Federation to the country of destination.

The price actually paid or payable for the goods being valued (exported) is the total amount of all payments for those goods made or to be made by the buyer directly to the seller and/or to another person for the seller’s benefit. Payments may be made directly or indirectly, in any form (paragraph 19 of the Rules for Determining the Customs Value of Exported Goods).

It follows from these provisions that the price actually paid for exported goods includes a non-exhaustive list of payments made or to be made to achieve the ultimate result of foreign-trade transactions (the export of goods). Such payments are considered to form part of the price used for customs purposes even if, at the discretion of the parties, they were not included in the contractual price of the goods.

The costs of carriage (transportation) affect the actual value of the goods transported and therefore must be taken into account in their customs valuation as one of the components of customs value when it is determined under the first method (based on the transaction value of exported goods), if those costs essentially constitute part of the price of the goods but were not included in the contractual price because the parties to the foreign-trade transaction manipulated individual components of the transaction value by artificially dividing it, without economic justification, among several civil-law contracts.

In such a case, the costs of carriage (transportation) of the exported goods must be regarded as payment for the value of the goods themselves, made indirectly (an indirect payment).

In the case under consideration, under all the goods declarations, the foreign buyer accepted the goods as to quality not at the time the timber products were shipped in the territory of the Russian Federation, as provided for by the foreign-trade contracts, but after the goods had left the customs territory. In the foreign buyers’ payment orders, when payments were remitted under the agency agreements, the buyers systematically specified the accounts (invoices) issued by the company with references to the foreign-trade contracts for the supply of timber products.

The foreign buyers made payments under the agency agreements to the company, which had nominally ceased to own the timber products and formally received payment for transporting goods owned by another party; in economic substance, however, those payments were in fact payment for the goods and therefore had to be included in the transaction value for the purposes of calculating customs value.

In another case, the company applied to the court seeking to have the customs authority’s decision declared unlawful insofar as it included in the customs value the costs of transporting the goods from the station of departure to a seaport in the territory of the Russian Federation.

The court of first instance granted the claims. By a ruling of the appellate court, the decision of the court of first instance was set aside and the application was dismissed.

In setting aside the ruling of the appellate court and upholding the decision of the court of first instance, the cassation court stated as follows.

Under the terms of the foreign-trade contracts, the company exports metal products to a foreign company that undertakes to accept, pay for and remove the purchased goods beyond the customs territory of the Russian Federation. Under the contracts, title to the goods passes when they are handed over to the carrier at the railway station of departure (the FCA delivery basis under the International Rules for the Interpretation of Trade Terms, “Incoterms 2010”).

A defining feature of the FCA delivery basis is that the buyer pays the transportation costs for delivery of the goods and assumes the risk of accidental loss when the goods are handed over to the carrier at the station of departure7.

The case materials confirm that, during the movement of the goods from the railway station to the seaport, the transportation costs were borne by the foreign company (the buyer) for the benefit of the transport company (the freight forwarder).

No evidence was submitted to the court that the parties’ actual legal relationship entailed a different allocation of obligations to pay for delivery, or that the FCA delivery basis had been chosen to conceal the costs of transporting the goods.

In these circumstances, the cassation court concluded that including in the customs value the costs of transporting the goods from the station of departure to the seaport in the territory of the Russian Federation was unjustified.

Pursuant to a foreign trade contract concluded between the company and a foreign company, goods were imported into the customs territory of the EAEU, with their customs value determined using the transaction value method. The deduction of costs for transporting the goods after their arrival in the EAEU territory was claimed. In the orders and invoices submitted by the company, the cost of transporting the goods was stated separately.

Following the inspection, the customs authority issued decisions amending (supplementing) the information stated in the declarations, taking the view that the transportation costs claimed as deductions from the transaction price were not supported by documentary evidence because the declarant had failed to submit a contract of carriage (freight forwarding contract) for the goods in question.

Disagreeing with the customs authority’s decisions, the company brought proceedings before the court.

The court of first instance dismissed the company’s application; its decision was upheld by the appellate and cassation courts.

The Judicial Chamber of the Supreme Court of the Russian Federation disagreed with the lower courts’ conclusions, held the customs authority’s decisions unlawful and annulled them for the following reasons.

Under subparagraph 2 of paragraph 2 of Article 40 of the EAEU Customs Code, the customs value of imported goods must not include the costs of transporting the imported goods through the customs territory of the Union from the place where those goods arrived in the customs territory of the Union, provided that those costs are stated separately from the price actually paid or payable, declared by the declarant and supported by documentary evidence.

Customs legislation does not contain a pre-established list of documents to be submitted upon declaration to confirm compliance with the conditions set out in subparagraph 2 of paragraph 2 of Article 40 of the EAEU Customs Code.

Compliance with these conditions may be confirmed by various types of evidence, depending on the specific features of the civil-law contracts selected by the supplier of the means of transporting the goods, and so forth.

In light of paragraph 1 of Article 38 of the EAEU Customs Code, the requirements imposed on a declarant to substantiate the customs value must be compatible with commercial practice (paragraph 12 of Resolution No. 49 of the Plenum). Where the declarant faced objective obstacles to submitting the requested documents (information) and provided the customs authority with an appropriate explanation, failure to submit those documents cannot constitute the sole basis for recalculating the customs value of the goods.

The foreign trade contract concluded by the company on DAP delivery terms in accordance with the International Rules for the Interpretation of Trade Terms “Incoterms 2010” means that the seller delivers the goods, cleared for export, to the carrier nominated by the seller for carriage to the place of destination. The seller must pay the costs and freight necessary to deliver the goods to the specified destination. Under these delivery terms, the seller must bear all costs and risks associated with delivering the goods to the place of destination.

To substantiate the customs value of the goods, the declarant submitted copies of orders, invoices and bills of lading in which the cost of transportation before and after the goods’ arrival in the customs territory of the EAEU was stated separately. The contract contains no obligation for the supplier to provide the buyer with any other documents.

In the course of the proceedings, the customs authority submitted no evidence refuting the accuracy of the information declared by the company regarding the costs of transporting the goods or the relevance of those costs to the declared goods.

In these circumstances, the customs authority’s calculation of the customs value of the goods on the basis of the transaction value of the imported goods, without deducting the costs of transporting the goods after their arrival in the customs territory of the Union, resulted in an arbitrary determination of the customs value of the goods supplied.

Since the declarant submitted to the customs authority the necessary evidence confirming that the deduction of the costs of transporting the goods after their arrival in the EAEU territory was justified, the company’s application was to be granted.

In another case, the company brought proceedings seeking to have declared unlawful a decision of the customs authority that excluded from the customs value the deductions claimed by the declarant for transporting the goods after their arrival in the customs territory of the Union.

The court of first instance granted the company’s claims. The court held that the company had substantiated the claimed deductions by submitting commercial invoices containing separate information on the cost of transporting the cargo to and outside the territory of the Russian Federation, as well as the rates for transporting the goods.

The appellate court set aside the decision of the court of first instance and dismissed the company’s application, noting that the transportation costs in the commercial invoices had been calculated by the foreign supplier itself, while the calculation contained no references to evidence showing who had set the rates indicated by the seller or what conditions had been taken into account.

The cassation court set aside the appellate court’s judgment and reinstated the decision of the court of first instance.

In setting aside the judicial acts issued in the case and remitting the case for a new hearing, the Judicial Chamber of the Supreme Court of the Russian Federation noted as follows.

The term “costs of carriage (transportation)” has an autonomous meaning for the purposes of Chapter 5, “Customs Value of Goods,” of the EAEU Customs Code and covers costs satisfying the criterion of being connected with the movement of goods. The type of civil-law contract under which the costs were incurred (carriage, freight forwarding, agency, commission or another contract), the number of persons involved in moving the goods (carriers, freight forwarders, agents and others), and other similar circumstances have no legal significance for customs valuation purposes.

At the same time, the documents submitted must in all cases comply with the requirements established by paragraphs 9−10 and 13 of Article 38 of the EAEU Customs Code; that is, they must eliminate the risk of an arbitrary determination of the customs value, serve as a source of reliable, quantitatively determinable and documentary-supported information, and enable the customs authority to satisfy itself that the information is accurate.

To substantiate the nature and amount of the costs of transporting the goods, the company submitted only documents issued by the foreign supplier, including invoices for the goods issued by that supplier. The company did not submit documents confirming the cost of transporting the declared goods because the foreign company refused to provide them.

At the same time, in the course of the proceedings the customs authority noted that the foreign company and the company were related parties within the meaning of Article 37 of the EAEU Customs Code, as indicated in the goods declarations. Neither the declarant nor the foreign supplier related to it disclosed evidence confirming that the carriers (freight forwarders) had actually applied the rates used by the supplier to determine and state the transportation costs in the invoices.

These arguments were relevant to the proper resolution of the case because, taken together, they could indicate that the deductions for transportation costs stated in the declarations were arbitrary and show that, through its conduct, the company deprived the customs authority of the opportunity to satisfy itself that those deductions had been applied accurately and correctly, which is incompatible with paragraphs 9−10 and 13 of Article 38 of the EAEU Customs Code.

Since the courts had not established the circumstances relevant to assessing the lawfulness of the contested decision of the customs authority, the case was remitted for a new hearing.

Following the inspection, the customs authority concluded that the customs value of the goods declared by the company had to include remuneration for the use of the foreign company’s know-how, software, website and trade name under the commercial concession agreement, and accordingly issued decisions amending (supplementing) the information stated in the goods declarations.

The company brought proceedings seeking to have the customs authority’s decision declared unlawful.

The court of first instance granted the company’s claim; its decision was upheld by the appellate and cassation courts. The courts held that the supply and commercial concession agreements contained no provisions requiring the buyer to pay the licence fees in question as a condition of the sale of the imported goods.

In setting aside the judicial decisions issued in the case and ruling to dismiss the company’s claim, the Judicial Chamber of the Supreme Court of the Russian Federation drew attention to the following.

Under subparagraph 7 of paragraph 1 of Article 40 of the EAEU Customs Code, licence fees and other similar payments for the use of intellectual property, which relate to the imported goods and which the buyer has directly or indirectly paid or is required to pay as a condition of the sale of the imported goods for export to the customs territory of the EAEU, are added to the customs value of imported goods determined on the basis of their transaction value.

Payments for the use of intellectual property not included in the price actually paid or payable for the imported goods are treated as one of the additions to the price where two requirements are met cumulatively: the payments relate to the imported goods and their payment is a condition of the sale of the goods being valued, directly or indirectly, for export to the customs territory of the Union (paragraph 17 of Resolution No. 49 of the Plenum).

It follows from these provisions that the inclusion of licence fees in the customs value is not limited to cases where the imported goods themselves are the subject matter of licence agreements (for example, where a trademark is affixed to the goods) and the sale contract expressly states that a licence agreement must be concluded and licence fees paid as a condition of the sale of the goods.

Where goods are imported under transactions between members of the same corporate group, the decision whether to conclude agreements governing the importer’s use of intellectual property is exclusively a matter for the foreign supplier and the group members related to it, creating a significant risk of manipulating the elements of the goods’ value that form their customs value. In such cases, payment of royalties may constitute a condition of sale for the importation of the goods by virtue of internal corporate-group rules governing business operations, even though this is not directly reflected in the contractual terms.

In determining whether licence fees relate to the goods being valued (imported goods) and whether payment of those fees is a condition of the sale of goods acquired in transactions concluded within a single corporate group, significance attaches to the relationship between the importer’s assumption of the obligation to pay royalties and the resulting creation or preservation of its ability to use the imported goods not only legally (on a lawful basis), but also in practice, taking into account the corporate group’s internal rules for organising commercial activities under a particular brand.

If requirements for using intellectual property rights have been established within a corporate group and make it possible to sell goods to the country of importation for subsequent retail sale, including requirements concerning the use of know-how, software, a website and a trade name, the corresponding payments made to the supplier or another member of the corporate group may be regarded as elements of the goods’ actual value which, under subparagraph 7 of paragraph 1 of Article 40 of the EAEU Customs Code, must be taken into account for customs valuation purposes.

According to the case materials, the company is an importer of clothing, footwear and accessories bearing the Bershka trademark, which are sold in Bershka branded retail stores in the Russian Federation and through an online store.

The company imports clothing, footwear and accessories under supply agreements concluded with a company registered in Spain. The company also imports store equipment under a supply agreement concluded with a company registered in the Netherlands. In addition, the company concluded a commercial concession agreement with the company registered in the Netherlands and acting as the equipment supplier, under which the foreign right holder grants the company (the user) the right to use the Bershka trademark, as well as know-how, software, the website and the commercial designation. For use of the trademark, the commercial concession agreement provides for payment of remuneration in the amount of 1.5% of the invoice value of the imported goods.

All of the companies mentioned are part of the same group of persons as the company.

The totality of these circumstances indicates that, in this case, the company's activities consisted exclusively in distributing Bershka goods (the licence payments related to the imported goods), and that exports of goods for import into the Russian Federation without concluding a commercial concession agreement were not contemplated, given the specific nature of the group of companies' activities.

Consequently, the courts' conclusions that the rights granted under the commercial concession agreement served solely to identify the enterprise and were used in its administrative and business activities could not be recognised as grounds for granting the claims.

In another case, the company imported into the customs territory of the EAEU and declared goods bearing an affixed trademark: bottle closures, tableware and cutlery.

Following the inspection, the customs authority recalculated the customs value of the goods in dispute, including the licence payments made by the company.

Disagreeing with the decision issued by the customs authority, the company applied to the court for a declaration that it was unlawful.

The court of first instance dismissed the company's claims. The court of appeal, whose conclusions were upheld by the court of cassation, set aside the decision of the court of first instance and granted the company's claim.

In setting aside the judicial acts issued in the case and remitting the case for reconsideration, the Judicial Chamber of the Supreme Court of the Russian Federation drew attention to the following.

Under subparagraph 7 of paragraph 1 of Article 40 of the EAEU Customs Code and the explanations set out in paragraph 17 of Plenum Resolution No. 49, payments for the use of intellectual property (royalties and licence payments) must be taken into account for the customs valuation of imported goods as one of the components of customs value when it is determined using the first method (the transaction value of the imported goods), to the extent that they affect the goods' economic value.

If a specific intellectual property object for whose use licence payments are made is imported into the customs territory and is an integral part of the goods, the value of that object, as an inseparable component of the goods, creates a higher commercial value of the goods for the buyer and the seller and is therefore included in the price paid or payable for the imported goods (the transaction value).

At the same time, the inclusion of licence payments in customs value does not directly depend on the method used to determine the amount of royalties (whether by reference to the value of the imported goods or to other indicators of the importer's financial and business activities), the frequency of licence payments, or other similar circumstances.

The courts established that the trademark was affixed to goods imported by the company into the customs territory of the EAEU under the foreign trade contracts concluded by it and served to identify the alcoholic products manufactured by the company.

The exclusive rights granted to the company under the licence agreement include use of the trademark for the manufacture, sale and other introduction into civil circulation of goods bearing the trademarks, including the right to use the trademarks on the goods and their packaging. Under the licence agreement, after its expiry or early termination, the licensee may not use the trademarks.

Thus, payment of the licence fees also covers the import of the goods valued during customs control and is a condition of their use, since the declarant had no other purpose for importing the goods in dispute than sealing wine bottles and attracting buyers' attention.

In these circumstances, the Judicial Chamber for Economic Disputes of the Supreme Court of the Russian Federation recognised as lawful the customs authority's arguments that there were grounds for including the licence payments in customs value.

Under a foreign trade contract, the company imported into the territory of the Russian Federation goods (steel rings) intended for subsequent use in assembling finished products (bearings). The customs value of the goods was determined and declared by the declarant on the basis of the transaction value of the imported goods.

Following the inspection, the customs authority identified violations consisting in the failure to include licence payments in the customs value of the goods and decided to amend (supplement) the information stated in the goods declarations.

Disagreeing with the customs authority's decision, the company applied to the court for a declaration that the decision was unlawful.

The court of first instance dismissed the company's claims; its decision was upheld by the courts of appeal and cassation.

In setting aside the judicial acts issued in the case and remitting the case for reconsideration, the Judicial Chamber of the Supreme Court of the Russian Federation drew attention to the following.

The determination of the customs value of goods must not be based on the use of an arbitrary or fictitious customs value of goods (paragraph 9 of Article 38 of the EAEU Customs Code). Accordingly, the method used to determine the amount of royalties is relevant to calculating the price actually paid or payable for those goods.

Where imported goods are used to manufacture other goods (finished products), including by assembling finished products from a number of components or by mixing different components, and licence payments are made generally for the finished products and the imported goods, additional assessments depend on whether it is possible to establish the amount of royalties attributable to the imported goods.

If the declarant fails to provide evidence making it possible to determine precisely what amount of the royalties paid by it relates to goods imported into the customs territory, the amount of royalties to be included in customs value may be determined on the basis of information available to the declarant and the customs authority, including commercial and accounting documents, with a certain degree of flexibility in the calculation methods used, provided that the calculation is not arbitrary (paragraph 2, subparagraph 7 of paragraph 5, paragraph 6 of Article 45 and paragraph 4 of Article 325 of the EAEU Customs Code).

It follows from the case materials that the company and a foreign company concluded a licence agreement under which the company was granted a non-exclusive licence and a right for consideration to manufacture, use and import finished products and components at a production facility or to sell them to consumers.

The declarant disclosed documents showing that the licence payments were calculated based on the value of the entire product, while the components accounted for no more than 31% of the finished product. The declarant also submitted a calculation of the components used in the manufactured products for specified calendar months to demonstrate that not all of the licence payments related to the imported goods. The company purchased components from both foreign and Russian suppliers, as confirmed by the relevant supply agreements submitted in the case.

These circumstances indicate that not the entire amount of licence payments used by the customs authority in its calculations when adding royalties to the price paid for the imported goods related to the imported goods.

In setting aside the judicial acts of the commercial courts and remitting the case for a new hearing, the Judicial Chamber for Economic Disputes of the Supreme Court of the Russian Federation indicated that it was necessary to determine correctly the amount of royalties attributable specifically to the imported component of the finished product, rather than to the finished product as a whole.

In another case, the company concluded a licence agreement with a foreign company for use of a production technology. Under its terms, the licensee undertook to purchase from the licensor parts for manufacturing finished products and to pay royalties for manufacturing the licensed products. The parties also concluded a sale and purchase agreement for components for manufacturing the products.

Following the inspection, the customs authority identified violations consisting in the failure to include licence payments in the customs value of the goods and decided to amend (supplement) the information stated in the goods declarations.

Disagreeing with the decision issued by the customs authority, the company applied to the court for a declaration that it was unlawful.

The court of first instance granted the company's application; its decision was upheld by the courts of appeal and cassation.

In setting aside the judicial acts issued in the case and remitting the case for reconsideration, the Judicial Chamber of the Supreme Court of the Russian Federation drew attention to the following.

The existence of specific features in the use of mandatory parts when the licensee manufactures licensed products does not mean that it is impossible to calculate the corresponding portion of licence payments attributable to each of the imported goods.

At the same time, the approach applied by the customs authority resulted in the unjustified inclusion in customs value of payments whose payment was not related to a specific imported product, which in turn imposed on the declarant an obligation not arising from subparagraph 7 of paragraph 1 of Article 40 of the EAEU Customs Code.

Since the calculations submitted by the declarant and the customs authority of the portion of the licence payments attributable to each imported product had not been judicially assessed, the case was remitted to the court of first instance for a new hearing.

The company, which had concluded a licence agreement with a foreign company defining the terms of use of a trademark, imported into the territory of the Russian Federation goods bearing that trademark.

Following the inspection, the customs authority recalculated the customs value of the goods to include trademark royalty payments, as well as VAT paid by the company in carrying out its duties as a tax agent.

Disagreeing with the customs authority's conclusions, the company applied to the court, arguing that licence payments should be included in customs value only after deducting the VAT amounts paid by it as a tax agent pursuant to the requirements of Chapter 21 of the Tax Code of the Russian Federation.

The court of first instance dismissed the company's claim. By a ruling of the court of appeal, which was upheld by the court of cassation, the decision of the court of first instance was set aside and the company's application was granted.

In setting aside the judicial acts issued in the case and remitting the case to the court of first instance for a new hearing, the Judicial Chamber of the Supreme Court of the Russian Federation drew attention to the following.

Under subparagraph 3 of paragraph 2 of Article 40 of the Customs Code of the EAEU, the customs value of imported goods must not include expenses in the form of duties, taxes and fees paid in connection with the importation of goods into the customs territory of the Union or the sale of imported goods in the customs territory of the Union, provided that they are distinguished from the price actually paid or payable for the imported goods.

However, VAT amounts assessed, withheld and paid by the declarant in performing its duties as a tax agent do not satisfy the conditions listed above, since they are paid by the declarant on behalf of the right holder, with the possibility of claiming the withheld amount as a deduction when calculating its own tax (Article 24, paragraphs 1 and 2 of Article 161, paragraph 3 of Article 171 of the Tax Code of the Russian Federation).

Thus, royalty payments in full are taken into account both in determining the basis for calculating customs payments on the importation of goods and in determining the VAT tax base when the tax is withheld by a tax agent, but on different grounds. This is due to the specific features of tax collection by customs and tax authorities and, given the possibility of applying tax deductions, does not result in multiple taxation.

Since there are no grounds for treating VAT amounts assessed, withheld and paid from amounts accrued in favor of the right holder in the performance by the company of its duties as a tax agent as permissible deductions from the price actually paid for the goods, those amounts must be included in the customs value of the goods as additional charges to the price in the form of royalties.

The customs authority conducted a verification of the accuracy of the information declared in the goods declarations by a company importing clothing, footwear and accessories bearing the Pull&Bear trademark, which were subsequently sold in Pull&Bear branded retail stores in Russia and through the online store.

According to the customs authority, in breach of subparagraph 3 of paragraph 1 of Article 40 of the Customs Code of the EAEU, the customs value of the imported products did not include dividends paid by the company to its participant, who was also the clothing supplier.

Disagreeing with the customs authority’s decision to include the dividends in the customs value of the imported goods, the company applied to the court seeking a declaration that the decision was invalid.

The claim brought by the company was upheld by the first-instance court, whose decision was left unchanged by the appellate and cassation courts. The courts held that an element such as dividends may affect the structure of the customs value if their payment is an agreed condition of the sale of specific imported goods; however, the customs authority had not provided evidence that payment of the dividends in dispute was one of the conditions of sale of the imported goods.

In setting aside the judicial acts issued in the case and remitting the case for reconsideration, the Judicial Chamber of the Supreme Court of the Russian Federation drew attention to the following.

The price actually paid or payable for the imported goods relates to goods moved across the EAEU customs border. Accordingly, under paragraph 9 of Article 39 of the Customs Code of the EAEU, dividends or other payments made by the buyer to the seller are not included in the customs value of the imported goods if they are unrelated to the imported goods.

At the same time, when the customs value of goods is determined based on their transaction value, a portion of the income (revenue) from the subsequent sale, disposal in another manner or use of the imported goods that accrues directly or indirectly to the seller is added to the price actually paid or payable for those goods (subparagraph 3 of paragraph 1 of Article 40 of the Customs Code of the EAEU).

It follows from the provisions cited that dividends received by a participant (shareholder) of a business company as a result of the distribution of net profit are not included in the customs value of imported goods, since they constitute income from investments made by the participant (shareholder) in the establishment or acquisition of the enterprise and, as such, are unrelated to the importation of the goods.

However, payments designated as dividends that are dividends only in form are deemed connected with the imported goods and included in their customs value under subparagraph 3 of paragraph 1 of Article 40 of the Customs Code of the EAEU if, in substance, they ensure that the seller receives part of the income (revenue) accruing to it from the sale of the imported goods.

Thus, if the founders of a limited liability company resolve to pay income (net profit) received in connection with the sale of goods imported under foreign-trade agreements concluded with suppliers who are also founders (participants) of the Russian business company, and the declarant has not provided evidence confirming that the transaction value of the imported goods corresponds to their actual value, that income (net profit) may be included in the customs value of the imported goods.

Following the customs inspection, a portion of the net profit transferred to the foreign seller and founder of the company was included as an additional charge in the customs value of the goods imported by the company; the customs authority classified it as part of the value of the imported goods.

During customs-control measures and the consideration of the case, the company did not provide evidence refuting the indications that the customs value had been determined inaccurately; in particular, with reference to paragraph 5 of Article 39 of the Customs Code of the EAEU and paragraph 20 of Plenum Resolution No. 49, it failed to disclose documents and information concerning the pricing applied when the goods were exported to the Russian Federation.

In these circumstances, the courts’ findings that the customs authority had no grounds to adjust the customs value by the amount of the income (revenue) received by the company from the sale of the imported goods and transferred by it to its sole foreign founder and supplier of the goods were held to be unfounded.

In another case, following an inspection of a company, the customs authority concluded that dividends transferred to a supplier that was also the company’s founder were connected with the goods imported by the company and had to be added to the price actually paid or payable for those goods under subparagraph 3 of paragraph 1 of Article 40 of the Customs Code of the EAEU. The customs authority therefore adopted decisions amending the information stated in the goods declarations.

Disagreeing with that decision, the company applied to the commercial court seeking a declaration that it was unlawful.

The claims brought by the company were upheld by the first-instance court, whose decision was left unchanged by judgments of the appellate and cassation courts.

In quashing the judicial acts issued in the case and remitting the case for a new hearing, the Judicial Chamber for Economic Disputes of the Supreme Court of the Russian Federation stated as follows.

It follows from the interrelated provisions of paragraph 15 of Article 38, paragraphs 1 and 3 of Article 39, and subparagraph 3 of paragraph 1 of Article 40 of the Customs Code of the EAEU that the transaction value of imported goods may be supplemented by other payments (elements) that are borne by the buyer, generate income for the seller from the customs territory of the relevant state and therefore are deemed to form part of the price used for customs purposes, even if they were not included in the contractual price of the goods.

If goods are imported under transactions between members of the same group of companies, and the Russian buyer’s income (revenue) is generated predominantly from the sale of imported goods, the decision to pay dividends becomes solely a matter of the foreign supplier’s and/or the group companies’ related participants’ discretion (in the absence of statutory restrictions), creating a significant risk of manipulating the elements of the value of the goods that form their customs value.

Having established indications of such manipulation by the declarant in forming the transaction value of imported goods in cases involving transactions between related parties, the customs authorities may examine the circumstances surrounding the sale of the goods, and the declarant must confirm that the price actually paid or payable for the goods was established without the relationship between the parties to the transaction influencing it, including by disclosing pricing information.

In the course of the proceedings, the customs authority consistently argued that the declarant was the sole authorized exclusive seller of Chanel-branded goods in Russia. At the same time, the declarant’s sole supplier and founder was a foreign entity—the company “Chanel” (France)—to which the dividends were paid.

Revenue from the sale of goods purchased from the company “Chanel” accounted for the largest share of the company’s financial results; the company’s primary source of income was cash receipts from the sale of imported goods, and its principal business activity was the importation and sale of imported goods.

Thus, given that the company “Chanel” was both the company’s founder and the supplier of the goods sold by the company in the Russian Federation, the income (net profit) paid to the company “Chanel” was income received in connection with the sale of imported goods and had to be included in the customs value of the goods.

Although the relationship between the persons referred to above and the specific features of their corporate relations served as the basis for adopting the decisions challenged, the company failed to respond to the customs authority’s request for documents and information confirming or refuting indications that the customs value had been determined inaccurately, and did not disclose documents or information concerning pricing.

Since the customs authority’s arguments and the evidence submitted in support of them had not received a proper judicial assessment, the case was remitted for a new hearing.

The company and a foreign company entered into contracts for the repair and maintenance of vessels owned by the applicant. After the repair work was completed at a foreign port, the vessels were placed by the declarant under the customs procedure for release for domestic consumption; the company included the repair costs in the cost of the vessel-processing operations.

Following the inspection, the customs authority established that, after the repair work had been performed by the company’s branch at a foreign port, the federal autonomous institution “Russian Maritime Register of Shipping” had provided services for the annual inspection of the company’s vessels. The customs authority therefore decided to amend (supplement) the information declared in the goods declaration, considering that the annual inspection costs had to be included in the processing cost because of the relationship between the repair and the inspection of the vessels.

Disagreeing with the customs authority’s decision, the company applied to the court seeking a declaration that it was unlawful.

The first-instance court upheld the company’s application.

The appellate court’s judgment, which was left unchanged by the cassation court, quashed the first-instance court’s decision and dismissed the company’s application.

In quashing the judgments of the appellate and cassation courts and upholding the first-instance court’s decision, the Judicial Chamber for Economic Disputes of the Supreme Court of the Russian Federation proceeded from the following.

The declaration of maritime vessels after repair was carried out in accordance with paragraph 3 of Article 277 of the EAEU Customs Code, under which, where operations not provided for in paragraphs 1 and 2 of that Article are performed, temporarily exported means of transport for international carriage, upon their importation into the customs territory of the Union, must be placed under the customs procedure for release for domestic consumption, with payment of import customs duties and taxes in accordance with Article 186 of the EAEU Customs Code, without placing them under the customs procedure for processing outside the customs territory.

For the declarant’s payment obligation to be correctly determined in accordance with the referential nature of paragraph 3 of Article 277 of the EAEU Customs Code, the rules for determining the customs value of goods established for the customs procedure for processing goods outside the customs territory of the Union must be applied.

Under Article 179 of the EAEU Customs Code, processing of goods outside the customs territory of the Union includes: processing or treatment of goods; manufacture of goods, including their installation, assembly, disassembly and fitting; and repair of goods, including their restoration, replacement of component parts and modernization. At the same time, the cost of operations for processing outside the customs territory of the Union is determined as the aggregate of the actually incurred expenses for: 1) processing (repair) operations; and 2) foreign goods used in the processing (repair) process, if they are not included in the expenses for the processing (repair) operations (paragraph 2 of Article 186 of the EAEU Customs Code).

It follows from the above provisions of customs legislation that, upon the importation and release for domestic consumption of goods in accordance with paragraph 3 of Article 277 of the EAEU Customs Code, the customs value is the cost of processing the goods, reflecting the economic value of the improvements made to them.

At the same time, the approach established by law for determining the customs value of such goods on the basis of the cost of operations for their processing outside the customs territory of the Union may not be arbitrarily changed or supplemented by the customs authority, since, by virtue of paragraph 9 of Article 38 of the EAEU Customs Code, the determination of the customs value of goods must not be based on the use of an arbitrary or fictitious customs value of goods.

For the dispute to be correctly resolved, it is necessary to establish whether, by their nature, the inspection services provided to the declarant constituted improvements to the maritime vessels possessing economic value.

Under paragraph 1 of Article 23 of the Merchant Shipping Code of the Russian Federation, vessels are inspected to confirm their compliance with the requirements of international treaties of the Russian Federation.

Paragraphs 243−247 of the Technical Regulation on the Safety of Maritime Transport Facilities9 provide that, by the vessel classification body (FAU “RMRS”), conformity assessment may be carried out either in the form of technical supervision during the construction, conversion, modernization or repair of a vessel, or in the form of an inspection of a vessel in service, which includes checking the availability of approved technical documentation, an external examination, measurements, operational checks and tests, and the preparation and issuance of documents by the vessel classification body.

Thus, as the court of first instance correctly pointed out, the classification and inspection of vessels constitute an independent sphere of activity of state authorities, FAU “RMRS” and vessel owners; they cannot be classified as repair or other types of processing of vessels, do not seek to restore the vessel to a sound or operational condition, and are carried out solely to confirm the vessel’s compliance with safety requirements and international treaties of the Russian Federation.

It follows from the case materials that the disputed services provided by FAU “RMRS” were not aimed at restoring the vessels or improving their technical condition and therefore cannot be classified as any stage of repair work; nor can they be classified as part of an operation for processing outside the customs territory under Articles 179 and 186 of the EAEU Customs Code, since they do not meet the criteria established by those provisions.

A federal state unitary enterprise (the declarant), having entered into an aircraft maintenance agreement with a foreign company, placed a civil aircraft and its engines under the customs procedure for processing outside the customs territory pursuant to a goods declaration. To complete that customs procedure, the declarant placed the aircraft under the customs procedure for release for domestic consumption.

Following a desk customs audit, the customs authority adopted a decision and sent the declarant a notice to pay customs duties and taxes.

Disagreeing with the audit results, the declarant applied to the court seeking to have the customs authority’s acts declared invalid.

The court of first instance dismissed the claims in a judgment upheld by the courts of appeal and cassation.

In quashing the judicial acts rendered in the case and remanding the case for reconsideration, the Judicial Chamber of the Supreme Court of the Russian Federation stated as follows.

Under paragraph 1 of Article 176 of the EAEU Customs Code, under the customs procedure for processing outside the customs territory, Union goods are exported from the customs territory of the EAEU to obtain, as a result of processing operations outside the customs territory of the EAEU, products of their processing intended for subsequent importation into the customs territory of the EAEU, without payment of export customs duties on those Union goods.

Under paragraphs 1 and 2 of Article 186 of the EAEU Customs Code, when products of processing are placed under the customs procedure for release for domestic consumption, import customs duties are calculated on the basis of the cost of operations for processing outside the customs territory of the EAEU. The cost of those operations is determined as the aggregate of the actually incurred expenses for: processing (repair) operations; and foreign goods used in the processing (repair) process, if they are not included in the expenses for the processing (repair) operations.

Thus, upon the importation and release for domestic consumption of goods previously exported for processing, including repair (replacement of component parts), the customs value is the cost of processing, not the value of the goods themselves.

It follows from the case materials that, during the foreign company’s maintenance of the aircraft, replacement engines were installed instead of the engines previously installed on it.

Additional customs duties and taxes on the replacement engines were assessed on the basis of the customs value determined by the customs authority using information on the value of used and serviceable engines specified in a letter from the manufacturer of engines of that model.

However, where the temporary installation of parts constituted part of the aircraft’s maintenance and repair procedure, the aircraft’s customs value, when it was cleared through customs, had to be determined on the basis of the cost of the work performed, including the cost of using the temporary parts, if such cost was payable. The assessment of customs duties and taxes based on the value of parts installed temporarily as part of the processing (repair) of the goods has no legal basis or economic justification.

The person applied to the court seeking to have the customs authority’s decision not to classify the goods (iron ore) as goods for personal use declared unlawful, arguing that they privately engaged in research activities.

The court of first instance dismissed the claim in a judgment upheld by the courts of appeal and cassation.

The courts proceeded from the following.

In the person’s presence, an official of the airport customs post conducted a customs inspection of their baggage using technical means—electronic scales and a camera. An act of customs inspection was drawn up, stating that the baggage contained iron ore in packages with a total weight of 8 256 grams.

The customs authority issued a decision not to classify the iron ore transported by the person across the EAEU border as goods for personal use (paragraphs 4 and 5 of Article 256 of the EAEU Customs Code).

Under paragraph 7 of Article 256 of the EAEU Customs Code, with respect to goods transported across the customs border of the Union by individuals that are not classified as goods for personal use under Chapter 37 of the EAEU Customs Code, the provisions of that Chapter do not apply. Such goods must be transported across the customs border of the Union in accordance with the procedure and on the terms established by other chapters of that Code.

The value, weight and/or quantity limits within which goods for personal use may be imported into the customs territory of the Union without payment of customs duties and taxes are established by Decision No. 107 of the Council of the EEC dated 20 December 2017 (Annex No. 1).

Subparagraph 46 of paragraph 1 of Article 2 of the EAEU Customs Code defines goods for personal use as goods intended for the personal, family, household and other needs of individuals unrelated to entrepreneurial activity, transported across the customs border of the Union in accompanied or unaccompanied baggage, sent in international postal items, or transported by other means.

The criteria for classifying goods transported across the customs border of the Union as goods for personal use are established by paragraph 4 of Article 256 of the EAEU Customs Code. Under that provision, the relevant criteria are the information stated in an individual’s declaration concerning the goods transported; the nature of the goods, determined by their consumer characteristics and customary practices of their use in everyday life; the quantity of goods, assessed with regard to their homogeneity (for example, having the same name, size, style or color) and the individual’s and their family members’ ordinary need for the relevant goods; and the frequency with which the individual crosses the border and/or transports goods across the customs border or has goods sent to them (that is, the quantity of homogeneous goods and the number of their movements over a specified period), except for the goods referred to in paragraph 6 of that Article (paragraph 38 of Plenum Resolution No. 49).

The goods transported in this case are not goods prohibited from export outside the Union or subject to mandatory declaration, provided that they are goods for personal use.

In assessing the case materials, the courts reached the following conclusion: the consumer characteristics and quantity of the goods transported by the person indicate that they clearly do not constitute goods meeting the ordinary needs of an individual.

Consequently, such goods are not goods for personal use and are subject to mandatory declaration.

A customs representative submitted a passenger customs declaration to the customs post, declaring for personal use a BMW X6, manufactured in 2020, with a customs value of USD 57 775.

In the course of conducting control measures, the customs authority analysed data from the website of an international online car auction and established that the vehicle in dispute might have been sold for USD 150 000. This information served as the basis for adjusting the customs value and issuing a decision and notice concerning customs payments that had not been paid within the prescribed period.

The customs representative challenged the decision adopted by the customs authority and the notice it sent in court.

The court of first instance granted the claim, finding that the customs representative had submitted all the necessary documents confirming the customs value.

The court of appeal, whose conclusions were upheld by the court of cassation, set aside the judgment of the court of first instance and dismissed the application, finding that the website data from the international online car auction obtained by the customs authority constituted grounds for adjusting the customs value declared by the customs representative.

The Judicial Chamber of the Supreme Court of the Russian Federation set aside the judgments of the courts of appeal and cassation and upheld the judgment of the court of first instance, stating as follows.

In adopting the EAEU Customs Code, the member states of the Union took into account not only the specific features of conducting business activities in the territory of the Union, but also the active participation of individuals in international trade for the purpose of acquiring goods for personal use.

Given the purposes for which goods are imported for personal use and the status of the purchasers of such goods, the EAEU Customs Code establishes a simplified procedure for moving those goods across the Union’s customs border (Chapter 37 of the EAEU Customs Code), specifically providing for special rules governing the declaration of goods, including vehicles, the payment of customs duties and taxes, and the release of goods.

The EAEU Customs Code sets out separate rules for determining the value of goods imported for personal use because purchasers of such goods are not persons engaged in business activities and, by virtue of customary business practices, have limited ability to submit documents, including commercial documents.

Under paragraph 1 of Article 267 of the EAEU Customs Code, an individual must submit the originals of the documents on the basis of which the value of goods for personal use was declared in order to confirm that value; for goods for personal use delivered by a carrier, the originals or copies of those documents must be submitted.

In addition, an individual may submit price lists, catalogues, advertising brochures and booklets of foreign organisations engaged in the retail sale of similar goods (paragraph 2 of Article 267 of the EAEU Customs Code).

In resolving disputes relating to the movement by individuals of goods for personal use across the Union’s customs border, the general provisions on the customs value of imported goods established by Chapter 5 of the EAEU Customs Code do not apply; the value of goods for personal use is determined under the rules established by Article 267 of the EAEU Customs Code (paragraph 40 of Resolution No. 49 of the Plenum).

Consequently, where the customs authority disagrees with the information submitted by the declarant, the burden of proving that the declared customs value cannot be used to calculate customs duties and must be adjusted rests with the customs authority.

The customs authority based its conclusion that the value of the goods imported for personal use was inaccurate on a single item of evidence—information from the website of an international online auction. At the same time, the customs authority failed properly to assess the correspondence with the website administration, which showed that the administration could not provide information about the vehicle because it lacked information about the reason for setting the price at USD 150 000, and did not confirm that the vehicle had in fact been sold through that website; the vehicle remains listed as “for sale”.

Moreover, according to information obtained from the vehicle manufacturer’s authorised dealer, the price of a new vehicle of that model during the period in question was no more than USD 100 000; consequently, purchasing a used vehicle for USD 150 000 would have made no economic sense.

The courts failed to take the foregoing into account and proceeded solely on the basis that the customs authority was permitted to use information stated in catalogues and on the websites of foreign organisations as information on the value of goods for personal use (paragraph 4 of Article 267 of the EAEU Customs Code); however, that provision does not establish that such information constitutes conclusive evidence.

In another case, the customs authority brought proceedings against an individual seeking recovery of arrears in the payment of additionally assessed customs duties and late-payment penalties.

The court of first instance granted the customs authority’s claim; its judgment was upheld by the courts of appeal and cassation. The court ordered recovery of the customs duties additionally assessed by the customs authority, finding that the value of the imported vehicle declared by the declarant did not correspond to the vehicle’s actual customs value.

The Judicial Chamber of the Supreme Court of the Russian Federation set aside the judicial acts adopted in the case and remitted the case for a new hearing, for the following reasons.

The customs representative submitted a passenger customs declaration for the goods—a vehicle manufactured in 2021. Customs duty was paid on the imported goods, and the vehicle was released for free circulation.

The decision following the customs authority’s inspection of documents and information after the release of the goods and/or vehicles, conducted in accordance with Article 267 of the EAEU Customs Code, stated that, according to information posted on the Internet, the vehicle had been sold at a price significantly higher than the declared value.

Under paragraph 10 of Article 38 of the EAEU Customs Code, the customs value of imported goods and the information relating to its determination must be based on accurate, quantifiable and documentary-supported information.

The declarant bears the obligation to provide the customs authority with complete and accurate information about goods for personal use necessary to determine the amount of customs payments payable (paragraph 25 of Article 266 of the EAEU Customs Code).

Given the public-law nature of customs relations, when assessing the declarant’s compliance with these requirements of the EAEU Customs Code, courts should proceed from a presumption that the information, documents and data submitted by the declarant during customs control are accurate; the burden of rebutting that presumption lies with the customs authority (paragraph 8 of Resolution No. 49 of the Plenum).

To substantiate the customs value, the declarant submitted a contract it had concluded with a foreign company for the purchase of the vehicle, an invoice, a receipt, a bank account statement for the period in which payment for the vehicle was made, and correspondence with the bank.

In addition, according to information from the foreign company that sold the vehicle, obtained by the customs authority during customs control measures, the vehicle had been involved in a serious accident and had been undergoing repairs for a long time, which was the principal reason why its owner had substantially reduced its price.

The individual submitted to the case file an expert report by an organisation stating that the vehicle had undergone repair work that had reduced its market value by at least 25 %.

Nevertheless, as the sole evidence that the declarant had understated the vehicle’s customs value, the customs authority submitted to the case file a paper printout of a computer screenshot containing the address of an Internet page stating that a vehicle of the same make and model, but manufactured in 2022, had been offered for sale on the marketplace.

Such a vehicle could not be recognised as an equivalent vehicle for the purposes of paragraph 3 of Article 267 of the EAEU Customs Code, because the vehicle imported by the individual was manufactured in 2021.

The customs authority also failed to take into account that the vehicle price from the website cited for comparison was not final. The final price of such a vehicle is formed taking into account the cost of its delivery to the customer, document-processing expenses and auction participation fees.

These circumstances demonstrate that the adjustment of the customs value of the vehicle purchased by the declarant, based on information obtained by the customs authority on the Internet, was unfounded and unlawful.

Consequently, the customs authority did not rebut the declarant’s arguments or the accuracy of the information, documents and data concerning the vehicle’s value that the declarant submitted during the customs control measures.

An individual brought proceedings seeking a declaration that unlawful was the customs authority’s decision to calculate customs duty under a passenger customs declaration on the basis of information available to the customs authority concerning the price of similar goods.

The court of first instance granted the claims.

The court held that the information on the value of the goods obtained by the customs authority during customs control was insufficient to adopt the contested decision; using information on the value of similar goods posted on a website as a source of information was contrary to Article 267 of the EAEU Customs Code; the declarant had submitted the original documents on the basis of which the value of the goods for personal use had been declared to confirm the vehicle’s value; and information obtained from the Internet could not be regarded as objective.

The court of appeal set aside the judgment of the court of first instance and adopted a new judgment dismissing the individual’s claim.

Under paragraph 25 of Article 266 of the EAEU Customs Code, customs payments in respect of goods for personal use are calculated by the customs authority releasing those goods on the basis of the information declared by the declarant during customs declaration and the results of customs control.

Under paragraph 3 of Article 267 of the EAEU Customs Code, the customs authority determines the value of goods for personal use on the basis of information available to it concerning the price of similar goods, including in the following cases:

− there are reasonable grounds to believe that the documents submitted by the individual referred to in paragraph 1 of this Article, or the documents required by the acts of the Universal Postal Union accompanying international postal items, contain inaccurate information, if the individual does not, in accordance with paragraph 2 of this Article, prove the accuracy of the information contained in the documents submitted to confirm the value of the goods for personal use (subparagraph 4);

− the declared value of goods for personal use does not correspond to the market value of similar goods in the country of purchase, at which such similar goods are sold or offered for sale under ordinary market trading conditions (subparagraph 5).

The courts established that a customs representative, acting on behalf of the person, filed a passenger customs declaration in which a vehicle (country of origin: the People’s Republic of China) was declared for personal use; the value of the vehicle stated in the declaration was determined in accordance with the documents on the basis of which the value of the goods for personal use had been declared.

In the course of customs control procedures, the customs authority questioned the customs value of the vehicle declared by the declarant because the documents submitted contained inconsistencies: the CMR consignment note submitted identified an individual as the recipient of the vehicle, whereas the export declaration identified a Russian legal entity as the recipient; the export declaration listed documents allegedly attached to it, but no such documents accompanied the vehicle transaction; and the banking documents (a notice of the transfer of funds to the People’s Republic of China) stated a purpose of payment for the vehicle that differed from that declared in the passenger customs declaration.

Having established inconsistencies in the documents submitted, which had not been refuted by the declarant or the customs representative, the customs authority calculated the customs payments using information about vehicles posted on a website on the Internet and identified several price sources corresponding to the declared vehicle (in terms of make, year of manufacture, engine displacement, drivetrain, mileage and specifications). The values of comparable vehicles ranged from 142,500 to 152,800 yuan, which did not correspond to the value stated in the passenger customs declaration (118,000 yuan). Accordingly, the customs authority recalculated the declarant’s customs payments.

The appellate court found well-founded the customs authority’s conclusion that there were grounds for determining the customs value of goods for personal use on the basis of information available to it on the price of comparable goods (Article 267(3) of the EAEU Customs Code).

The cassation court upheld the judgment of the appellate court.

The customs authority brought an action against the person (a foreign national) seeking recovery of customs payments and late-payment interest.

The first-instance court granted the claim in part and ordered that customs payments and late-payment interest for the period from 8 September 2018 to 19 July 2022 be recovered from the person in favour of the customs authority, on the ground that the person had not submitted documents confirming entitlement to exemption from customs duties when completing the customs declaration and therefore had no such entitlement from 8 September 2018.

By a ruling of the appellate court, which the cassation court left unchanged, the first-instance judgment was set aside and a new judgment was issued dismissing the claim.

The courts took the following into account.

On 7 September 2017, a foreign national temporarily imported into the customs territory of the Customs Union a vehicle belonging to him, with the period of temporary importation running until 31 December 2017.

On 1 December 2017, he applied to the customs authority to extend the period of temporary importation, and the maximum period for the temporary importation of the vehicle was extended until 7 September 2018.

In examining the person’s documents, the customs authority established that he had not removed the vehicle from the customs territory of the Customs Union within the prescribed period, and therefore sent him a notice.

The person failed to comply with the customs authority’s demand.

At the hearing, he explained that he had entered the territory of the Russian Federation for permanent residence and had imported his vehicle for personal use as a participant in the State Programme to Assist the Voluntary Resettlement in the Russian Federation of Compatriots Living Abroad; he was a family member of a participant in that State Programme, and the relevant certificate had been issued in his wife’s name.

Since 2 March 2018, that person has been a citizen of the Russian Federation.

At the time the disputed legal relationship arose (7 September 2017), the movement by individuals across the customs border of the Customs Union of goods for personal use, including vehicles, was governed by Chapter 49 of the Customs Code of the Customs Union11 and the Agreement between the Government of the Russian Federation, the Government of the Republic of Belarus and the Government of the Republic of Kazakhstan dated 18 June 2010 “On the Procedure for the Movement by Individuals of Goods for Personal Use across the Customs Border of the Customs Union and the Performance of Customs Operations Related to Their Release”12.

Under Article 358(2) of the Customs Code of the Customs Union, foreign individuals may temporarily import into the customs territory of the Customs Union vehicles for personal use registered in foreign states for the duration of their temporary stay, but for no more than one year, with exemption from customs payments.

Where temporarily imported goods for personal use remain in the customs territory of the Customs Union because they have not been exported upon expiry of the prescribed period, customs duties and taxes are levied on those goods in accordance with the procedure established by the customs legislation of the Customs Union (Article 358(5) of the Customs Code of the Customs Union).

The EAEU Customs Code, in force since 1 January 2018, contains similar provisions (Article 264(1), Article 268(1), (5) and (6) of the EAEU Customs Code).

Presidential Decree No. 637 of 22 June 2006 approved the State Programme to Assist the Voluntary Resettlement in the Russian Federation of Compatriots Living Abroad. Under paragraphs 18 and 19 thereof, a participant in the State Programme is issued a certificate in the form established by the Government of the Russian Federation for a period of three years. Upon expiry of the certificate, the compatriot loses participant status, and the family members specified in the certificate lose their status as family members of a participant in the State Programme. The participant in the State Programme and his or her family members are also entitled to exemption from customs payments in accordance with the customs legislation of the Customs Union13.

The certificate of participation in the State Programme to Assist the Voluntary Resettlement in the Russian Federation of Compatriots Living Abroad was issued to the person’s spouse, with the person included among those relocating as a family member, effective from 19 April 2017—that is, before the vehicle was imported into the territory of the Russian Federation.

Thus, when the vehicle was imported into the territory of the Russian Federation on 7 September 2017, the person was a family member of a participant in the State Programme to Assist the Voluntary Resettlement in the Russian Federation of Compatriots Living Abroad who had relocated for permanent residence to a Member State of the EAEU—the Russian Federation—and, under paragraph 24 of the Agreement of 18 June 2010, which was in force when the vehicle was imported (until 29 March 2018), was entitled to exemption from customs payments.

In addition, he complied with all other conditions applicable when the vehicle was imported, established by paragraph 24 of Annex 3 to the Agreement of 18 June 2010 and applicable when the case was considered by the court, as well as with the conditions introduced from 29 March 2018 by subparagraph (b) of paragraph 6 of Annex No. 3 to Decision No. 107 of the EEC Council dated 20 December 2017.

In view of the foregoing, the person was entitled to import the vehicle for personal use into the customs territory of the Customs Union free of import customs duty.

In these circumstances, the first-instance judgment was set aside and the administrative claims were dismissed.

The person brought an action against the customs authority challenging decisions issued following customs control and seeking an order requiring the return of the funds paid as customs payments, asserting that he had complied with all the requirements established by subparagraph (a) of paragraph 6 of Annex No. 3 to Decision No. 107 of the EEC Council dated 20 December 2017 for entitlement to exemption from customs payments.

The first-instance court dismissed the claimant’s demand.

The court upheld the customs authority’s conclusion that, for the purposes of applying subparagraph (a) of paragraph 6 of Annex No. 3 to Decision No. 107 of the EEC Council dated 20 December 2017, when filing the second and subsequent passenger customs declarations, an individual who had obtained the right to exemption from customs payments when importing goods for personal use into the customs territory of the Union ceased to qualify as an individual who had not previously imported goods for personal use into the customs territory of the Union free of customs duties and taxes because that individual had been recognized as having relocated for permanent residence to a Member State of the Union or had obtained refugee or forced migrant status under the legislation of a Member State of the Union and, accordingly, lost the right to exemption from customs duties and taxes, notwithstanding that the goods had been imported within eighteen months from the date of issuance of the document confirming that the foreign individual had been recognized as having relocated for permanent residence to a Member State of the Union.

The appellate court, whose judgment was left unchanged by the cassation court, set aside the first-instance judgment and issued a new judgment granting the administrative claim; the customs authority’s decisions were declared unlawful and set aside, and the authority was ordered to return the funds paid to the person.

The appellate and cassation courts proceeded from the following.

After living permanently in a foreign state for more than twenty years, the person moved to the Russian Federation for permanent residence14 and, between 4 October and the end of 2021, imported personal belongings eight times, believing that, as a foreign national relocating to the Russian Federation for permanent residence, he was entitled to import, as needed, personal belongings purchased before the date on which he was recognized as a relocating person, repeatedly during the eighteen-month period.

All goods imported by the administrative claimant were used and had been acquired by him before the date of issuance of the document confirming that the foreign individual had been recognized as having relocated for permanent residence to a Member State of the Union.

Following the inspection, the customs authority issued decisions seeking recovery of customs payments unpaid under seven passenger customs declarations because the person had failed to comply with the conditions for importing the goods.

The cases and conditions for importing goods for personal use into the customs territory of the Union free of customs payments are determined by the EEC (subparagraph 46 of paragraph 1 of Article 2, Article 255 and paragraph 8 of Article 266 of the EAEU Customs Code, and Annex No. 3 to Decision No. 107 of the EEC Council dated 20 December 2017).

It follows from the provisions of subparagraph (a) of paragraph 6 of Annex No. 3 to Decision No. 107 of the Council of the Eurasian Economic Commission dated 20 December 2017 (as worded on the date on which the legal relations arose) that the purpose of this legal regulation was to grant a one-time exemption from customs duties and taxes to persons who had moved to a Member State of the Union for permanent residence when importing, by any means, used goods for personal use, allowing a period of eighteen months for the importation of such goods.

In such a case, within eighteen months from the date on which they were recognized as having moved to a Member State of the Union for permanent residence or obtained refugee or forced migrant status in accordance with the legislation of the Member State, those persons are entitled to import used goods for personal use more than once without paying customs duties and taxes15.

Thus, the exemption from customs duties on the importation of used goods for personal use depends not on the number of times the customs area was crossed or passenger customs declarations were processed, but on the fact that the goods were imported within eighteen months from the date of issuance of the document confirming recognition of the foreign individual as having moved to a Member State for permanent residence, provided that the individual had not previously held that status or, if they had, had not used the exemption from customs duties and taxes.

The person brought an action challenging the customs authority’s decision refusing to release the goods (the vehicle), the actions of that customs authority in sending a request to amend (supplement) the information declared in the declaration, and seeking to impose on the customs authority an obligation to release the vehicle for circulation using the calculations of import customs duties and taxes stated in the goods declaration.

The court of first instance dismissed the claim in a judgment upheld by the courts of appeal and cassation.

The court of first instance proceeded on the basis that the vehicle was a single motor vehicle and that the vehicle design safety certificate had been issued for it in breach of the requirements of the Customs Union Technical Regulation “On the Safety of Wheeled Vehicles” (TR CU 018/2011), approved by Decision No. 877 of the Customs Union Commission dated 9 December 2011, in the absence of the required vehicle type approval16.

Relying on paragraph 2 of the Rules for Applying Mandatory Requirements to Certain Wheeled Vehicles17 and paragraph 87 of the list of goods to which certain provisions of the Civil Code of the Russian Federation do not apply18, the court of cassation concluded that the vehicle imported by the person did not qualify as a single motor vehicle. Accordingly, the customs authority had lawfully sent the person a request to submit a vehicle type approval for release of the goods for domestic consumption.

The Judicial Chamber of the Supreme Court of the Russian Federation set aside the judicial acts adopted in the case for the following reasons.

Under a retail sale contract concluded with a foreign company, the person acquired a vehicle of a foreign make for personal use.

The person’s customs representative submitted a customs declaration to the customs authority in which the vehicle in question was declared as goods for the person’s own needs. A vehicle design safety certificate was attached to the declaration as a document certifying the vehicle’s compliance with the requirements of the Technical Regulation.

Because the vehicle type approval had not been submitted, the customs authority decided to refuse release of the vehicle.

A single motor vehicle means a vehicle imported into the single customs territory of the Customs Union by an individual for their own needs (paragraph 6 of the Technical Regulation).

For a single motor vehicle, the document certifying compliance with the requirements of the Technical Regulation when the vehicle is placed on the market is a vehicle design safety certificate (paragraph 8 of the Technical Regulation).

In view of paragraphs 6, 13 and 42 of the Technical Regulation, a vehicle type approval is time-limited, is issued for a specified period, including for the systematic importation of mass-produced vehicles or batches thereof, and is not a necessary document certifying compliance with the requirements of the Technical Regulation when single motor vehicles imported by individuals for their own needs are placed on the market.

Accordingly, a vehicle design safety certificate should have been issued for the vehicle imported by the individual for their own needs; the Technical Regulation does not establish a validity period for such a certificate because the vehicle was imported as a one-off. Under the Technical Regulation, the vehicle design safety certificate for this vehicle is issued without a vehicle type approval, which can be obtained only with the permission of the manufacturer (rightholder).

The vehicle imported by the person does not belong to a type for which a vehicle type approval is issued. Neither the manufacturer nor its authorized representative applied for issuance of that document. Vehicle type approval is not included in the list of documents, prescribed by the Technical Regulation, to be submitted by an applicant to obtain a vehicle design safety certificate.

Accordingly, the Judicial Chamber of the Supreme Court of the Russian Federation remitted the case to the court of first instance for reconsideration.

Under contracts concluded with the company for the purchase of equipment, a foreign supplier supplied spare parts free of charge to replace defective equipment components as part of warranty servicing. Upon importing the spare parts into the customs territory, the company paid VAT and claimed it for reimbursement.

The tax authority refused to reimburse the company for the VAT amount, proposing that it pay the tax arrears and make the necessary amendments to its accounting and tax records. Disagreeing with the tax authority’s decision, the company applied to the court for a declaration that the decision was unlawful.

By a decision of the court of first instance, left unchanged by judgments of the appellate and cassation courts, the relief sought was denied.

The Judicial Chamber of the Supreme Court of the Russian Federation set aside the judicial acts adopted in the case and granted the company’s application for the following reasons.

Under paragraph 1 of Article 38 of the Tax Code of the Russian Federation, the taxable object is the sale of goods (works or services), property, profit, income, expenditure or another circumstance having a monetary, quantitative or physical characteristic, the existence of which under tax and levy legislation gives rise to a taxpayer’s obligation to pay tax.

The importation of goods into the territory of the Russian Federation is identified as a separate taxable object for VAT purposes (subparagraph 4 of paragraph 1 of Article 146 of the Tax Code of the Russian Federation).

At the same time, the legislation provides no special rules for calculating or exempting from VAT payable at customs in respect of goods imported to replace defective goods without additional payment to the supplier. Accordingly, when goods transferred free of charge to replace components are imported, those components are treated as goods for the purposes of levying import VAT.

Under paragraph 2 of Article 171 and paragraph 1 of Article 172 of the Tax Code of the Russian Federation, VAT amounts paid by a taxpayer upon the importation of goods into the territory of the Russian Federation under the customs procedures of release for domestic consumption, processing for domestic consumption, temporary importation and processing outside the customs territory are deductible if the goods are used in transactions subject to VAT, after they have been recorded in the accounts and provided that documents confirm the actual payment of the tax amounts upon importation into the territory of the Russian Federation. At the same time, the Tax Code of the Russian Federation contains no requirement that the imported goods must have been paid for by the taxpayer in order for the taxpayer to deduct import VAT.

In the course of the proceedings, the company submitted that it had satisfied the conditions under Articles 171 and 172 of the Tax Code of the Russian Federation for claiming a VAT deduction: the spare parts had been imported under the customs procedure of release for domestic consumption; VAT had been paid in full from the taxpayer’s own funds; the spare parts had been recorded by the taxpayer and were intended for activities subject to VAT. The spare parts supplied were intended for transactions subject to VAT, namely, they were used to repair equipment directly involved in production activities. The disputed spare parts were written off by the company for the repair of the equipment, as documented and not disputed by the tax authority.

In view of the foregoing, the courts’ conclusions that the company had failed to satisfy the conditions under Articles 171 and 172 of the Tax Code of the Russian Federation for claiming tax deductions in respect of the imported spare parts cannot be regarded as lawful.

The company imported into the customs territory of the EAEU the product “condensed (concentrated), pasteurized whole milk,” code 0402 91 590 0 of the Foreign Economic Activity Commodity Nomenclature.

The results of customs control established that the company had failed to discharge its obligation to pay import customs duties and taxes in respect of the goods in question, for which the customs transit procedure had been terminated because of a breach of the customs regime. Accordingly, the company was sent notices concerning customs payments, special, anti-dumping and countervailing duties, interest and penalties that had not been paid by the prescribed deadline, and the company applied to the court to challenge those notices.

The court of first instance dismissed the company's claim. By a ruling of the court of appeal, which was upheld by the court of cassation, the decision of the court of first instance was set aside and the company's application was granted.

In setting aside the judicial acts adopted in the case and deciding to dismiss the company’s application, the Judicial Chamber of the Supreme Court of the Russian Federation drew attention to the following.

Under paragraph 1 of Article 46 of the Customs Code of the EAEU, customs payments include, among other things, import customs duty and VAT levied upon the importation of goods into the customs territory of the Union.

Paragraphs 2 and 5 of Article 164 of the Tax Code of the Russian Federation provide for VAT to be imposed at the tax rate of 10% on the sale and importation of certain food products, including milk and dairy products.

If the goods are not delivered to the place of delivery of the goods within the period for customs transit established by the customs authority, import customs duties and taxes, and special, anti-dumping and countervailing duties shall be payable as if the foreign goods placed under the customs transit procedure had been placed under the customs procedure for release for domestic consumption without the application of tariff preferences or exemptions from import customs duties and taxes (paragraphs 5 and 6 of Article 153 of the Customs Code of the EAEU).

In the case under consideration, the goods were placed under the customs transit procedure pursuant to a decision of the Federal Service for Veterinary and Phytosanitary Supervision prohibiting their import because the goods failed to comply with veterinary and sanitary requirements and could not be identified as goods with code 0402 91 590 0 of the Commodity Classification for Foreign Economic Activity.

At the same time, the reduced VAT rate established by law is justified by the social importance of certain goods and was introduced by the state to make them accessible to consumers. No evidence was submitted in the case file that the goods under consideration, by their characteristics and intended use, could be used for these purposes. On the contrary, the courts established that the company had violated the requirements of Federal Law No. 29-ФЗ dated 2 January 2000 “On the Quality and Safety of Food Products,” as well as the conditions for importing the goods.

In the case under consideration, the importation of the goods into the EAEU territory—and, accordingly, their sale—was prohibited because a document confirming that phytosanitary control had been passed was not submitted, which precludes applying to those goods the preferential tax treatment consisting in the application of a reduced VAT rate.

The company applied to the court seeking to have the customs notice invalidated insofar as it assessed penalties and seeking an order to pay penalties in the amount of 1,146,554 rubles 54 kopecks, arguing that, when the obligation to pay the customs payments arose, the federal budget held advance payments made by the applicant whose amount exceeded the arrears stated in the notice.

The court of first instance, whose conclusions were upheld by the appellate and cassation courts, dismissed the company’s claims.

In setting aside the judicial acts issued in the case and granting the company’s application, the Judicial Chamber of the Supreme Court of the Russian Federation drew attention to the following.

As established by the courts during the proceedings, on the date when the penalty-calculation period began, the company’s personal account contained funds in the relevant amount.

In finding that the demand for payment of penalties was justified, the courts proceeded from the premise that the applicant’s overpayment of advance payments did not evidence the payer’s performance of its obligation to pay customs payments, since advance payments remained the property of the person who made them and could not be regarded as customs payments or funds paid as security for customs duties and taxes.

At the same time, in reaching that conclusion, the courts failed to take the following into account.

Under Articles 28 and 35 of the Law on Customs Regulation, funds paid toward future payments and not identified by the payer by specific types and amounts of duties, taxes and customs fees or by specific goods are paid into Federal Treasury accounts.

The fact that advance payments are identified for the purposes of performing the obligation to pay specific customs payments only after the payer submits an instruction to use the advance payments or on the customs authority’s initiative (Articles 35 and 71 of the Law on Customs Regulation) does not mean that, before an instruction concerning the advance payments was given, the funds were not held in the treasury or used by the state in executing the federal budget on a cash basis.

Accordingly, the courts’ conclusion, with reference to paragraph 4 of Article 48 of the Customs Code of the EAEU, that funds paid as advance payments remain the property of the person who made the advance payments until they are refunded does not refute the company’s position that no losses were caused to the budget, since those provisions of the Customs Code of the EAEU merely recognize the customs authority’s right to collect customs payments without dispute and out of court from the advance payments made, and the payer’s right to demand a refund of the funds (the unspent balance of the advance payments) from the federal budget.

Under paragraph 29 of Plenum Resolution No. 49, when determining whether there are grounds for the customs authorities to apply Article 72 of the Law on Customs Regulation and charge penalties, courts must take into account that the federal budget’s holding of advance payments, overpaid or over-collected customs payments exceeding the amount of the additional assessments made against the declarant may indicate that no budgetary losses requiring compensation through the collection of penalties were caused, unless otherwise follows from the evidence submitted by the customs authority, including information on the use or refund of advance and customs payments during the penalty-calculation periods and information on other customs payments due for the same period.

Thus, the decisive circumstance for charging penalties is the fact that losses were caused to the budget, which may be proven by the customs authority, taking into account the circumstances in which the payer spent and disposed of the advance payments and the existence of other outstanding customs payment arrears relating to the same period.

In the absence of losses to the budget because the funds paid by the applicant as advance payments were sufficient, the customs authority had no grounds to issue a notice requiring payment of penalties in the claimed amount.

An individual entrepreneur applied to the court seeking to have invalidated the customs authorities’ decisions amending and supplementing the information declared in the goods declaration after the goods were released, as well as notices of customs payments, special, anti-dumping and countervailing duties, interest and penalties not paid within the prescribed period.

The claim brought by the individual entrepreneur was granted by the court of first instance, whose decision was upheld by the appellate court.

The cassation court, setting aside the judgment of the court of first instance and the appellate judgment, dismissed the entrepreneur’s claims.

In setting aside the judicial acts issued in the case insofar as they concerned penalties and remitting the case for a new hearing in that part, the Judicial Chamber of the Supreme Court of the Russian Federation established the following.

In dismissing the entrepreneur’s claims in full, the cassation court failed to take into account Resolution No. 497 of the Government of the Russian Federation dated 28 March 2022 “On Introducing a Moratorium on the Initiation of Bankruptcy Proceedings upon Applications Filed by Creditors.”

It follows from the notices challenged by the applicant that the customs authority charged penalties for the period from 21 January 2021 to 29 June 2023.

Under paragraph 1 of Article 9.1 of Federal Law No. 127-ФЗ dated 26 October 2002 “On Insolvency (Bankruptcy),” to ensure economic stability, the Government of the Russian Federation may, in exceptional cases, introduce for a specified period a moratorium on the initiation of bankruptcy proceedings upon applications filed by creditors.

By Resolution No. 497 of the Government of the Russian Federation dated 28 March 2022 “On Introducing a Moratorium on the Initiation of Bankruptcy Proceedings upon Applications Filed by Creditors,” a six-month moratorium on the initiation of bankruptcy proceedings upon applications filed by creditors was introduced throughout the Russian Federation from 1 April 2022 with respect to legal entities and individuals, including individual entrepreneurs, except for the persons specified in paragraph 2 of that Resolution.

It follows from the explanations contained in paragraph 7 of Plenum Resolution No. 44 of the Supreme Court of the Russian Federation dated 24 December 2020 “On Certain Issues Concerning the Application of Article 9.1 of Federal Law No. 127-ФЗ dated 26 October 2002 ‘On Insolvency (Bankruptcy)’” that, during the moratorium, interest for the use of another person’s funds (Article 395 of the Civil Code of the Russian Federation), penalties (Article 330 of the Civil Code of the Russian Federation), penalties for late payment of a tax or fee (Article 75 of the Tax Code of the Russian Federation), and other financial sanctions are not charged on claims that arose before the moratorium was introduced against a person subject to it (subparagraph 2 of paragraph 3 of Article 91 and the tenth paragraph of paragraph 1 of Article 63 of Federal Law No. 127-ФЗ dated 26 October 2002 “On Insolvency (Bankruptcy)”).

At the same time, during the moratorium introduced by the aforementioned Resolution of the Government of the Russian Federation, penalties on customs payments were not charged; accordingly, the period beginning on 1 April 2022 and lasting six months must be excluded when calculating penalties.

The customs authority applied to the court seeking recovery from the person of customs payments and penalties in the amount of 165,598 rubles 78 kopecks for the period from 20 October 2022 to 11 December 2023.

The court of first instance granted that claim.

By an appellate judgment, which was upheld by the cassation court, the judgment of the court of first instance was amended with respect to the amount of the customs payment and penalty arrears. In that part, a new judgment was issued ordering recovery from the person of a different amount of customs payments and penalties for the period from 9 May to 11 December 2023, in the amount of 44,526 rubles 90 kopecks. The judgment was upheld in all other respects. The court proceeded from the premise that enforcement measures could be applied only after the period for complying with the notice of unpaid customs payments, interest and penalties had expired; therefore, penalties had to be calculated from the date the notice was sent through the date on which the customs authority clarified its claims.

In setting aside the appellate and cassation judgments and reinstating the judgment of the court of first instance, the Judicial Chamber of the Supreme Court of the Russian Federation proceeded from the following.

In October 2022, the person imported into the customs territory of the Union, for personal use, a vehicle originating in the Republic of Korea, paying customs duty and customs fees for customs operations.

Following customs control, it was established that the vehicle released for free circulation had a different value. As a result of the adjustment, a new customs receipt order was issued, and the customs authority sent the person a notice of customs payments and late-payment interest not paid within the prescribed period, which the person failed to comply with.

Under paragraph 1 of Article 268 of the EAEU Customs Code, the obligation to pay customs duties and taxes on goods for personal use imported (that have been imported) into the customs territory of the Union and subject to customs declaration using a passenger customs declaration arises for the declarant when the passenger customs declaration is registered by the customs authority.

It follows from Article 72 of the Law on Customs Regulation that the obligation to pay late-payment interest arises on the day following the day on which the period for performing the obligation to pay customs payments and special, anti-dumping and countervailing duties established by international treaties and instruments in the field of customs regulation and/or by Russian legislation on customs regulation expires (Part 3); late-payment interest is charged for each calendar day of delay in performing the obligation to pay customs payments and special, anti-dumping and countervailing duties, beginning on the day following the day on which that period expires, unless otherwise provided by Part 28 of Article 76 of this Federal Law (Part 7).

Part 16 of Article 72 of the aforementioned law provides for a similar procedure for charging late-payment interest from the day following the day on which the period for performing the obligation to pay customs payments expires.

Thus, the legislature provided for late-payment interest as one means of securing performance of the obligation to pay them and linked the commencement of the charging of late-payment interest to the day on which the period for performing the obligation to pay customs payments expires.

At the same time, Part 6 of Article 71 of the Law on Customs Regulation provides for the application of recovery measures after the period for complying with the notice (clarification of the notice) has expired. Part 8 of that article, which permits the customs authority to charge late-payment interest after the period for complying with a notice (clarification of the notice) concerning customs payments not paid within the prescribed period has expired, is not inconsistent with Parts 10 and 11 of Article 72 of that law, which merely differentiate the late-payment interest rate before and after the customs authority submits claims for its recovery, as reflected in the calculation contained in the case file.

In view of the foregoing, the appellate court had no grounds to alter the period for charging late-payment interest and to recover it from the date on which the notice concerning customs payments not paid within the prescribed period was sent.

By a ruling of the first-instance court judge, the person was held administratively liable for committing the offence provided for by Part 1 of Article 16.2 of the Code of Administrative Offences of the Russian Federation.

According to the case materials, the person, having arrived in the Russian Federation from a foreign state, passed through the green channel in the arrivals hall of an international airport during customs control, without declaring in writing in the customs declaration the goods being carried, namely 48 items of clothing.

The person maintained that the suitcase contained personal belongings being carried in connection with the move from the Netherlands to the Russian Federation for residence.

It followed from the testimony of the witness—the customs inspector who directly inspected the citizen's baggage—that, because the person crossed the border frequently, a decision was made under paragraph 4 of Article 256 of the EAEU Customs Code not to classify the items in the baggage as goods for personal use.

In assessing those circumstances, the appellate court judge disagreed with the findings of the first-instance court judge for the following reasons.

Part 1 of Article 16.2 of the Code of Administrative Offences of the Russian Federation establishes administrative liability for failure to declare, in the prescribed form, goods subject to customs declaration, except in the cases provided for by Article 16.4 of that Code19.

The dual-channel system provides for an individual's independent choice, when passing through the Union's customs border, of the appropriate channel (red or green) for performing (or not performing) customs operations related to the customs declaration of goods for personal use. An individual's crossing of the entrance (entry) line of the green channel constitutes a declaration by that individual that there are no goods subject to customs declaration (paragraphs 2 and 3 of Article 257 of the EAEU Customs Code).

Under paragraph 4 of Article 256 of the EAEU Customs Code, the classification of goods moved across the Union's customs border as goods for personal use is carried out by the customs authority on the basis of the individual's oral or written declaration, using a passenger customs declaration, concerning the goods moved across the Union's customs border; the nature and quantity of the goods; the frequency with which the individual crosses the Union's customs border; and/or the movement of goods across the Union's customs border by or to that individual.

The criteria for classifying goods moved across the Union's customs border as goods for personal use are established by paragraph 4 of Article 256 of the EAEU Customs Code, under which such criteria include: the information stated in the individual's declaration concerning the goods being moved; the nature of the goods, determined by their consumer properties and customary practices of household application and use; the quantity of the goods, assessed with regard to their homogeneity (for example, the same name, size, style or colour) and the individual's and family members' ordinary need for the relevant goods; and the frequency with which the individual crosses the customs border and/or moves goods across it or to that individual (that is, the number of homogeneous goods and the number of times they are moved during a given period), except for the goods specified in paragraph 6 of that article (third to fifth paragraphs of paragraph 38 of Plenum Resolution No. 49).

As noted by the appellate court judge, the nature and quantity of the goods moved by the citizen through the customs control zone—the green channel—assessed in terms of their homogeneity (same name, size, style or colour) and the individual's ordinary need for the relevant goods, and also taking into account the frequency of the individual's previous crossings of the customs border with the Russian Federation, did not unequivocally and sufficiently establish that the items found in the person's baggage were not intended for personal use.

The items being carried had no individual packaging or labels identifying the firms; most of the items were of the same size, differed in model and assortment, and some showed signs of use.

At the same time, customs legislation does not establish what quantity of imported items may be regarded by the customs authority as imported for personal use.

The case materials contained no evidence that, when previously crossing the border with the Russian Federation, the person, who held dual Russian and Dutch citizenship, had also carried goods.

Moreover, there was no evidence that the person engaged in commercial activity, including activity connected with the sale of clothing.

In those circumstances, the first-instance court judge's ruling against the person in the administrative-offence case under Part 1 of Article 16.2 of the Code of Administrative Offences of the Russian Federation was set aside, and the proceedings were discontinued because the circumstances on which the ruling was based had not been proven (paragraph 3 of Part 1 of Article 30.7 of the Code of Administrative Offences of the Russian Federation).

The courts' rulings found the person guilty of committing the administrative offence provided for by Part 1 of Article 16.2 of the Code of Administrative Offences of the Russian Federation.

Paragraph 2 of Article 257 of the EAEU Customs Code provides that a dual-channel system may be used at locations where goods cross the Union's customs border. The green channel is a specially designated place at locations where goods cross the Union's customs border, intended for the movement across the Union's customs border, in accompanied baggage, of goods for personal use that are not subject to customs declaration; the red channel is a place for the movement of goods for personal use that are subject to customs declaration, as well as goods declared to customs at the individual's option.

A person arrived in the Union's customs territory through an airport and moved three pieces of accompanied baggage through the Union's customs border via the green channel of the customs control zone (the international arrivals terminal of the airport). During customs inspection, goods not intended for personal use were found, including new men's and women's clothing of different sizes and styles, branded and polyethylene bags. In breach of Articles 104 and 105 of the EAEU Customs Code, the person failed to comply with the obligation to declare, in the prescribed form, goods for personal use subject to customs declaration.

This act was classified under Part 1 of Article 16.2 of the Code of Administrative Offences of the Russian Federation.

Under subparagraph 46 of paragraph 1 of Article 2 of the EAEU Customs Code, goods for personal use are goods intended for the personal, family, household and other needs of individuals not connected with entrepreneurial activity, moved across the Union's customs border in accompanied or unaccompanied baggage, sent in international postal consignments, or moved by another means.

The judges reasonably proceeded on the basis that the goods being carried did not meet the characteristics of goods for personal use, taking into account their quantity, which clearly exceeded the ordinary needs of the individual and the individual's family members, as well as their nature (new goods, including homogeneous goods, of different sizes with manufacturer's tags and labels) and the presence of more than 100 branded polyethylene bags of the manufacturers of those goods, intended for packaging.

Moreover, the person was registered as an individual entrepreneur and engaged in entrepreneurial activity connected with the sale of clothing.

The person's assertion that the goods were carried in shared accompanied baggage, that half of the goods were carried by another person and belonged to that person, was inconsistent with the case materials and was not found substantiated. All the accompanied baggage was registered in that person's name when checking in for the flight, as confirmed, among other things, by the baggage manifest.

In those circumstances, no grounds were established for setting aside or varying the judicial acts issued in the case.

The company applied to the commercial court for a declaration that the decision imposing on it administrative liability under Part 1 of Article 16.2 of the Code of Administrative Offences of the Russian Federation was unlawful and for its annulment.

The decision was issued after the customs authority, during a customs inspection of the declared goods classified under HS code 4407 11 930 0 — “sawn wood of Scots pine, beams, small beams, boards” — discovered that rough-squared Scots pine timber had not been declared, although it belonged to a group of goods classified under HS code 4403 22 100 0.

The court of first instance dismissed the claim; the appellate and cassation courts upheld that judgment.

The Judicial Chamber of the Supreme Court of the Russian Federation set aside the judicial decisions and granted the company’s claim on the following grounds.

Part 2 of Article 16.2 of the Code of Administrative Offences of the Russian Federation establishes administrative liability where, during the customs declaration of goods, a declarant or customs representative states inaccurate information about their classification code under the HS, together with incomplete or inaccurate information in the description of the goods concerning their quantity, properties or characteristics affecting their classification, or concerning their name, description, country of origin, customs value or other information, if that information served or could have served as grounds for exemption from customs duties or taxes or for reducing their amount.

If goods are fully declared in terms of quantity, but the declarant or customs broker (representative) states inaccurate information in the customs declaration about the goods’ qualitative characteristics required for customs purposes, those acts constitute the administrative offence under Part 2 of Article 16.2 of the Code of Administrative Offences of the Russian Federation, provided that the information served as grounds for exemption from customs duties or taxes or for reducing their amount (paragraph 30 of Resolution No. 18 of the Plenum of the Supreme Court of the Russian Federation dated 24 October 2006, “On Certain Issues Arising for Courts in Applying the Special Part of the Code of Administrative Offences of the Russian Federation”).

At the same time, it follows from Parts 1 and 2 of Article 16.2 of the Code of Administrative Offences of the Russian Federation that the legislature treats the non-declaration of goods as an administrative offence presenting a greater public danger than the inaccurate declaration of goods, as reflected in the significant difference between the penalties established by those provisions.

Moreover, the elements of the administrative offence under Part 1 of Article 16.2 of the Code of Administrative Offences of the Russian Federation are formal, whereas liability under Part 2 of Article 16.2 arises only if the inaccurate declaration of goods resulted or could have resulted in adverse consequences — non-payment or underpayment of customs duties.

As follows from the case materials and as established by the courts, the company fully declared the goods. That declared quantity also included the rough-squared Scots pine timber discovered during the customs inspection and classified under HS code 4403 22 100 0; the error in classifying the goods, however, concerned information about their qualitative characteristics and was not accompanied by inaccurate declaration of their quantitative characteristics.

Accordingly, in the circumstances under review, inaccurate information was provided about the goods’ qualitative characteristics, while the goods themselves were fully declared. The acts therefore constituted the administrative offence for which liability is established by Part 2 of Article 16.2 of the Code of Administrative Offences of the Russian Federation, rather than Part 1 of that article.

Since liability under Part 2 of Article 16.2 of the Code of Administrative Offences of the Russian Federation arises only if the inaccurate declaration of goods resulted or could have resulted in adverse consequences — non-payment of customs duties — and the customs authority did not establish that circumstance in the administrative-offence proceedings, the contested decision of the customs authority was declared unlawful and annulled.

The company declared goods for customs purposes (activated aluminium oxide Be-106 (for drying)), classifying them under commodity subheading 2818 20 000 0 of the HS, “inorganic chemicals; inorganic or organic compounds of precious metals, rare-earth metals, radioactive elements or isotopes” (import customs duty rate — 0 percent).

Following an additional inspection for the purpose of classifying the goods under the HS, based on a customs expert’s report, the customs authority concluded that the goods in dispute should be classified under commodity subheading 6815 99 000 8 of the HS, “articles of stone or of other mineral substances (including carbon fibres, articles of carbon fibres and articles of peat), not elsewhere specified or included; other articles; other” (import customs duty rate — 12 percent).

Because an incorrect HS classification code and incomplete information about the goods’ classification features (the technology used to obtain the goods) had been stated in the customs declaration, resulting in a reduction of the customs duties, the customs authority issued a decision imposing on the company administrative liability under Part 2 of Article 16.2 of the Code of Administrative Offences of the Russian Federation.

Disagreeing with that decision, the company challenged it in court.

The court of first instance granted the claim; the appellate court upheld that judgment.

Having established that the company had stated in the declaration information about the goods’ name, intended use and appearance, as well as information about their chemical composition contained in the documentation submitted by the manufacturer, the courts concluded that the company had stated all information about the goods in dispute necessary to establish the classification features. The failure to state the manufacturing process in the declaration could not indicate an inaccurate or incomplete description of the goods, since that information, in itself, did not affect the classification of the goods in dispute within HS Chapter 68.

The cassation court set aside the judicial decisions of the first-instance and appellate courts and dismissed the company’s claims on the following grounds.

The customs expert’s report stated that the production process for the sample (goods) included, among other operations, drying and calcination at temperatures ranging from 180 to 600 °C.

At the same time, that process constituted a significant distinguishing feature accounting for the difference between the goods in HS Chapter 28 and mineral and stone articles in Chapter 68.

Since the production of the goods — activated aluminium oxide Be-106 (for drying) — included several processing operations, including a forming stage, the goods were subject to classification under HS heading 6815.

In view of the foregoing, the production process (method) and the physical form of the goods were important classification features, the establishment of which was necessary for the correct classification of the goods.

Because the company did not state information about the manufacturing process in the goods declaration, resulting in their incorrect classification and a reduction in the customs duties, those acts constituted the objective element of the administrative offence under Part 2 of Article 16.2 of the Code of Administrative Offences of the Russian Federation.

Article 16.3 of the Code of Administrative Offences of the Russian Federation establishes administrative liability for failure to comply with prohibitions and restrictions established by international treaties of the EAEU member states, decisions of the EEC, or regulatory legal acts of the Russian Federation concerning the importation of goods into the customs territory of the EAEU or into the Russian Federation and/or the exportation of goods from the customs territory of the EAEU or from the Russian Federation, except as provided for by Part 3 of Article 16.2 of this Code.

During verification measures, customs officials stopped a vehicle carrying goods described as “cylindrical ingots of nickel alloys,” which had been shipped by the company to a foreign state.

According to a letter from the Federal Service for Technical and Export Control, goods consisting of deformable, non-powdered, nickel-based alloys may be used to manufacture products for both civilian and military purposes. In view of the risk that the metal products supplied to the recipient company could be used for military purposes, and because the foreign state belonged to the unfriendly foreign states (under Decree of the Government of the Russian Federation No. 430-р dated 5 March 2022), the foreign-trade transaction for their export had to be considered under Article 20 of Federal Law No. 183-ФЗ dated 18 July 1999, “On Export Control,” which requires authorization from the Commission on Export Control of the Russian Federation for such foreign-trade operations.

The letter also stated that several applications concerning the possibility of exporting similar metal products to unfriendly foreign states had previously been considered. Following a state examination conducted on an interagency basis of foreign-trade transactions involving the supply of such products to unfriendly foreign states, authorization to carry them out had been refused.

The company did not have authorization from the Commission on Export Control of the Russian Federation. The export of the goods described as “cylindrical ingots of nickel alloys” from the Russian Federation to the relevant foreign state was prohibited, and the prohibitions and restrictions in the field of export control established by Article 7 of the EAEU Customs Code were not complied with when the company exported the goods from the Russian Federation.

As a participant in foreign economic activity, and in view of the prevailing geopolitical situation, the company should and could have examined whether the current legislation of the Russian Federation established prohibitions or restrictions on exporting the goods in question to the territory of an unfriendly foreign state. Moreover, the company could have requested information from the manufacturer about whether authorization from an authorized organization was required for the export.

In those circumstances, the company was found guilty of the administrative offence under Article 16.3 of the Code of Administrative Offences of the Russian Federation and was subjected to an administrative penalty.

By a decision of the first-instance judge, upheld by the decision of the appellate judge, the company was found guilty of the administrative offence under Article 16.3 of the Code of Administrative Offences of the Russian Federation and was subjected to an administrative penalty.

Under Part 1 of Article 7 of the EAEU Customs Code, goods are moved across the customs border of the Union and/or placed under customs procedures in compliance with the prohibitions and restrictions.

Pursuant to Article 59 of the Treaty on the EAEU, quarantine phytosanitary measures apply to products included in the list of regulated products (regulated cargo, regulated materials, and regulated goods) subject to quarantine phytosanitary control (supervision) at the customs border of the Union and in the customs territory of the Union; quarantine pests included in the unified list of quarantine pests of the Union; and regulated objects.

By Decision No. 318 of the Customs Union Commission dated 18 June 2010, the Regulation on the Procedure for Conducting Quarantine Phytosanitary Control (Supervision) at the Customs Border of the Eurasian Economic Union and the List of Regulated Products (Regulated Cargo, Regulated Materials, and Regulated Goods) Subject to Quarantine Phytosanitary Control (Supervision) at the Customs Border and in the Customs Territory of the Eurasian Economic Union were approved21.

Under Section I of the List of Regulated Products, the following goods are included in that category: wooden crates, boxes, packing cases or baskets, drums and similar containers; wooden cable drums; wooden pallets, skids and other load boards; and wooden box boards, which are independent goods or are declared separately (HS code 4415).

Pursuant to subparagraph 2 of paragraph 4.1.1 of the Regulation, for the purposes of conducting a documentary inspection, the official of the authorized body must be provided with a phytosanitary certificate issued in hard copy for the imported consignment of regulated products (translated, where necessary, into the official language (official languages) of the Member State to whose official of the authorized body it is submitted), or information on the number, date, and country of issue of a phytosanitary certificate issued electronically, where a consignment of regulated products posing a high phytosanitary risk is imported, except in cases involving the importation of wooden packaging and securing materials (where they bear marking in one of the forms prescribed by the unified quarantine phytosanitary requirements confirming that the materials have been treated by heating throughout the entire thickness of the wood or by fumigation), as well as in the cases provided for by the unified quarantine phytosanitary requirements.

In the proceedings, it was established that, for the purpose of importing the goods into the Russian Federation, when the customs transit procedure was completed, a vehicle carrying goods arrived at a permanent customs control zone—a customs post. The goods were transported on wooden pallets and supports constituting packaging materials22. The company was the carrier of those goods.

During quarantine phytosanitary control of the packaging materials on which the goods were placed, the authorized official established that four wooden pallets and six wooden supports lacked marking in one of the forms prescribed by the unified quarantine phytosanitary requirements confirming that those materials had been treated by heating throughout the entire thickness of the wood and by fumigation.

Following the quarantine phytosanitary control, the official issued a quarantine phytosanitary control (supervision) report prohibiting the release of those regulated products in the form of wooden packaging materials because the wooden packaging materials lacked special marking.

Those circumstances formed the basis for holding the company administratively liable under Article 16.3 of the Code of Administrative Offences of the Russian Federation.

The judge of the cassation court upheld, without change, the decisions of the judges of the courts of first instance and appeal concerning the company in the administrative-offence case under Article 16.3 of the Code of Administrative Offences of the Russian Federation.

The company applied to the court challenging three decisions of the customs authority holding it administratively liable under Part 3 of Article 16.12 of the Code of Administrative Offences of the Russian Federation (failure to submit, within the period set by the customs authority, documents and information necessary for customs control), insofar as the amount of the administrative fine imposed was concerned—150,000 rubles (rather than 50,000 rubles).

The applicant argued that, when imposing the administrative penalty in the form of a fine, the customs authority had failed to apply the provisions of Part 5 of Article 4.4 of the Code of Administrative Offences of the Russian Federation, which allow an administrative penalty for two or more administrative offences, liability for which is provided for by the same article and which are identified in the course of a single control measure, to be imposed as for one offence.

The court of first instance dismissed the claims on the ground that, although the administrative offences committed by the company involved the same elements of an offence, proceedings had been initiated on the basis of different facts and not in the course of a single control measure. Those administrative offences had been identified during inspections of different goods declarations.

The appellate court set aside the court's decision and granted the claims.

In examining the customs authority's cassation appeal, the cassation court noted the following.

The courts established that the customs authority had inspected three customs declarations on the same day.

Following the inspection, the customs authority sent the company administrative-offence reports drawn up in relation to those declarations. After drawing up those reports, the customs authority scheduled the examination of all the administrative-offence cases for the same date and time, and a single official of the customs authority conducted the proceedings in those cases.

It follows from the foregoing that the customs authority identified all three administrative offences in the course of a single control measure.

The fact that the company's commission of the offences was established as a result of an administrative investigation conducted separately for each declaration is legally irrelevant, since application of Part 5 of Article 4.4 of the Code of Administrative Offences of the Russian Federation requires only that two or more administrative offences, liability for which is provided for by the same article (part of an article) of the Code of Administrative Offences of the Russian Federation, be identified during a single control (supervisory) measure.

The customs authority's drawing up of separate administrative-offence reports for each of the violations does not indicate that the company committed several independent administrative offences under Article 16.12 of the Code of Administrative Offences of the Russian Federation, since each such violation is classified as failure to submit, within the prescribed period, the documents and information necessary for customs control and constitutes the elements of the objective side of a single administrative offence.

Consequently, when imposing penalties in the administrative-offence cases, the customs authority failed to take into account that the company had been held administratively liable under the same article of the Code of Administrative Offences of the Russian Federation for a violation identified in the course of a single control measure and, accordingly, failed to take into account the requirements of Part 5 of Article 4.4 of the Code of Administrative Offences of the Russian Federation.

In light of the foregoing, the appellate court lawfully set aside the decision of the court of first instance and granted the company's claims.

By a decision of the judge of the court of first instance, the company (the charterer) was found guilty of the offence under Article 16.21 of the Code of Administrative Offences of the Russian Federation and subjected to an administrative penalty in the form of a fine amounting to one half of the value of the goods constituting the subject matter of the administrative offence—the tugboat—with confiscation of that vessel for the benefit of the state.

Article 16.21 of the Code of Administrative Offences of the Russian Federation establishes liability for using goods that have been unlawfully moved across the customs border of the EAEU and in respect of which customs duties or taxes have not been paid, or the prohibitions and restrictions established by international treaties of the EAEU Member States, decisions of the EEC, or regulatory legal acts of the Russian Federation have not been complied with, or goods released, including conditionally, under a customs procedure, where their use, transfer into another person's possession or use, or disposal by other means is permitted in violation of the established prohibitions and/or restrictions, as well as for acquiring, storing, or transporting such goods.

It was established that the tugboat had been imported into the customs territory of the EAEU by the shipowner under the temporary importation customs procedure on the basis of a bareboat charter. Subsequently, the shipowner and the charterer entered into a time charter for a term of 8 days, after which the vessel was returned to its owner.

Pursuant to Article 277 of the Customs Code of the Customs Union, temporary importation (admission) is a customs procedure under which foreign goods are used for a specified period in the customs territory of the Customs Union with conditional, full or partial, relief from import customs duties and taxes and without the application of non-tariff regulation measures, followed by placement under the re-export customs procedure.

By virtue of paragraph 2 of Article 279 of the Customs Code of the Customs Union, temporarily imported goods must remain in the actual possession and use of the declarant.

Under paragraph 3 of Article 279 of the Customs Code of the Customs Union, the declarant may transfer temporarily imported goods into the possession and use of another person: 1) for their technical maintenance, repair (excluding major repairs and/or modernization), storage, transportation, and other purposes in cases specified by the legislation and/or international treaties of the Customs Union Member States, without the permission of the customs authority; 2) in other cases, with the permission of the customs authority.

Since the shipowner had not applied to transfer into another person's use the goods conditionally released under the specified customs declaration, and the customs authority had not issued permission to transfer the temporarily imported goods to third parties, the facts identified formed the basis for initiating administrative-offence proceedings against the charterer.

The judge of the court of first instance reasonably found that, although the charterer could, with a reasonable degree of care and diligence when entering into the time charter, have established the basis on which the vessel was possessed by its owner, the charterer had failed to take all measures within its power to comply with the rules and regulations for whose violation the Code of Administrative Offences of the Russian Federation provides administrative liability.

The sanction of Article 16.21 of the Code of Administrative Offences of the Russian Federation provides for legal entities' administrative liability in the form of a fine ranging from one half to twice the value of the goods constituting the subject matter of the administrative offence, with or without their confiscation, or confiscation of the subject matter of the administrative offence.

Pursuant to Part 2 of Article 3.3 of the Code of Administrative Offences of the Russian Federation, confiscation of the subject matter of an administrative offence may be established and applied as either a principal or an additional administrative penalty.

An administrative penalty is a state-established measure of liability for committing an administrative offence and is imposed to prevent new offences both by the offender and by other persons (Article 3.1 of the Code of Administrative Offences of the Russian Federation).

At the same time, when considering the company's defence counsel's appeal, the judge of the court of cassation drew attention to the fact that, in imposing the principal and additional penalties on the company, the judge of the court of first instance had not substantiated the need to impose the additional penalty of confiscating the tugboat or its proportionality as the only possible means of achieving a balance between public and private interests in the proceedings in the case, including in view of the short period for which the vessel had been used.

In these circumstances, by an order of the judge of the court of cassation, the order of the judge of the court of first instance was varied by deleting the reference to the imposition of confiscation of the goods that constituted the subject matter of the administrative offence.

By an order of the judge of the court of first instance, the person was found guilty of committing an administrative offence under Part 1 of Article 16.2 of the Code of Administrative Offences of the Russian Federation and was sentenced to an administrative fine; the goods seized during the customs inspection were returned.

The judge of the appellate court disagreed with the conclusions of the judge of the court of first instance and varied the order on the following grounds.

During the proceedings, it was established that, during customs control and the customs inspection of the vessel, tobacco products and alcoholic beverages without excise stamps, belonging to the person, were found on the floor in open cardboard boxes in the storeroom. The goods had not been declared or reported in the form prescribed by the customs legislation of the EAEU.

In issuing an order holding the citizen administratively liable, the district court judge returned the unlabelled alcoholic beverages and tobacco products to their owner. However, the circulation of unlabelled alcoholic beverages and tobacco products is prohibited by Paragraph 1 of Article 25 of Federal Law No. 171-ФЗ of 22 November 1995, “On State Regulation of the Production and Circulation of Ethyl Alcohol, Alcoholic and Alcohol-Containing Products and on Restricting the Consumption (Drinking) of Alcoholic Products,” and Parts 2 and 5 of Article 4 of Federal Law No. 268-ФЗ of 22 December 2008, “Technical Regulations for Tobacco Products.” A decision should have been made to destroy the seized goods that constituted the subject matter of the administrative offence and did not bear the required labelling.

In these circumstances, the order of the judge of the court of first instance was varied by stating that the unlabelled tobacco products and alcoholic beverages seized during the customs inspection were subject to destruction.