Kurmangazy A. Talzhanov, Managing Partner of Integrites International Law Firm, on the formation and targets of the Customs Union, and how the agreement benefits investors.

The development of the global economy amid the financial crisis has accelerated the launch of the regional integration processes, one of which is a Customs Union, which was created in accordance with the agreement for establishing a common customs territory and the formation of a Customs Union in October 6, 2007. This is primarily related to ensuring the harmonization of international legal regulation of importers and exporters within the framework of the Customs Code of the Customs Union. The Customs Union includes three member states: the Republic of Kazakhstan, the Russian Federation, and the Republic of Belarus. Within the integration process, entrepreneurial activity in the territory of the Customs Union has been greatly expanded.

The Customs Union is a form of trade and economic integration that resulted in creating the common customs territory. Within the space, there are no customs duties or restrictions of an economic nature, except for special protection, anti-dumping, and countervailing measures. Within the Customs Union, the unified customs tariffs and other common measures on the regulation of goods trading conjointly third countries are applied.

The boundaries of the Customs Union territory are considered to be the customs border of the Customs Union. The transportation of goods in the territory of the Customs Union shall be carried out freely. The goods that are recognized as the goods of the Customs Union shall be subject to free movement.

The goods of the Customs Union shall specify goods that are situated in the territory of the Customs Union, made or produced in the territory of the member countries of the Customs Union, or are imported into the customs territory and further acquired the status of the Customs Union goods (i.e. have passed customs clearing and released to free circulation).

The free movement of the goods in the territory of the Customs Union assumes the absence of customs registration for goods when crossing the border of a member state. Thus, if the goods of an importer fall under the terms of the Customs Union, their import into the territory of Kazakhstan will be carried out without customs registration or the payment of customs duties and taxes.

In addition, when the importer’s goods, which have been previously imported from the Russian Federation, for example, have passed customs clearing and have been released to free circulation, they shall be considered as Customs Union goods. The transportation of such goods to the territory of Kazakhstan for the rendering of services will be carried out without customs registration or payment of customs duties and taxes.

Customs support and preliminary decision-making shall apply to an import’s customs duties and taxes, which are defined according to the Uniform Customs Tariff of the Customs Union, at a VAT of 12% and customs charges for the declaration of goods. Thus, in case of imports by an importer in the territory of Kazakhstan of equipment from non-member countries, the customs procedure for temporary import (admission) shall apply. These terms and conditions of commodity circulation greatly simplify the cooperation of companies importing from countries of the Customs Union and eliminate the problems that previously occurred during the import process. Nevertheless, one of the main problems still remains the lack of financial resources for continuing the stable import of goods.

In this context, the relevance of trade and project finance in the Customs Union has been rapidly increasing, and the demand for this type of service continues to grow.

Being one of the leader-companies in trade and project finance among the Customs Union CIS countries, the International Law Firm Integrites helps companies to find financial sources for business development. Thus, our company can be considered as a contributor to the economic development of the CIS countries, and in particular, the Customs Union. Trade finance provides an excellent opportunity to access one of the most profitable and affordable international sources of financing for companies that are involved in the importation of goods.

Typically, resident banks in CIS countries provide short-term loans at very high interest rates. In this regard, national importers are interested in cost-effective financing sources. One of these schemes is aimed to obtain a loan from a bank—a non-resident of the CIS secured by the guarantee of foreign export credit agencies (ECA).

The Integrites’ concept—trade and project finance—is a type of financing for foreign trade operations through the use of current turnover assets of the foreign supplier or the foreign bank.

The main objective of trade and project finance is to reduce the risks related to foreign trade operations, as well as provide the importer with the financial resources necessary to carry out a foreign operation. The difference between trade and project finance is the amount and term of financing and the level of risks the ECA incurs.

Accordingly, the difference may be in the level of the ECA’s commission for participation in this international transaction.

The fees of foreign banks secured by the ECA’s guarantees are much lower than the commissions charged by commercial banks in CIS countries. Accordingly, the use of trade or project finance instruments is substantially more beneficial to importers in CIS countries.

Integrites experts provide their clients with comprehensive assistance in attracting trade and project finance, from assessment of a borrower’s solvency through Integrity Check to the complete structuring of trade finance transactions, including the participation of the ECA. Taking into account the wide range of our experience in assisting our clients in the procedure of obtaining trade finance, it should be noted that, as a rule, the amount of insurance coverage provided by the ECA is 80%-90% of the value of the loans extended.

Structured trade finance is one of the priorities of Integrites. Our specialists have wide experience in minimizing the risks associated with the implementation of foreign economic operations, and in finding the optimal solutions to finance your company’s import activities within the countries of the CIS.

Depending on the complexity and specificity of a particular transaction, the Integrites team is ready to offer the most effective tools of trade financing, including the preparation of investment memorandums, export credit insurances, and export factoring services and forfeiting.

The basic principle of our company in providing trade finance services is that Integrites prepares contracts of guarantee, providing guarantees for the deferral of payments through the ECA, under which the foreign banks may provide money for CIS importers. This allows the importers of the Customs Union to significantly reduce the cost of implementing import operations by reducing the share of loans in their credit portfolio. The transactions under consideration range from €150,000 and up. The term to raise short-term and long-term financing transactions may last from two to five months. In the case of positive results during the evaluation of a company’s exporting capacity, this period may be extended.

In conclusion, we would like to say that the integration process which is being formed within the Customs Union to date has greatly increased the demand for such legal practices, such as the customs law, antitrust law, tax law, investments, and corporate and commercial law.

Accordingly, the Integrites International Law Firm is ready to kindly assist importers in the member countries of the Customs Union, both in the provision of legal services and through the involvement of tools of trade and project financing.

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