Russian Importers Rush To Have HS Codes Changed On Products Exposed To “Secondary Use” Sanctions
Non-sanctioned Russian businesses are rushing to their US and EU suppliers to request HS code changes after ‘secondary use’ problems with sanctions are prohibiting their export to Russia.
‘Secondary use’ sanctions apply when a particular product is deemed to have potential military applications. This has ensnared multiple household and ordinary business-use products whose HS codes – a description of a particular product and its uses, usually employed by customs around the world to determine dutiable value – are too wide in nature.
This has resulted in chemicals used in the dry cleaning process for example, or types of electrical generators used in factories being banned from import to Russia, even though the products have no military capability whatsoever. Russian importers are requesting changes to HS codes to specify exact commercial usage to distance the products from military applications.
Changing HS codes requires a formal application to the World Customs Organization based in Brussels. These are prepared by local customs administrations in the country of product and/or manufacturing origin.
There are drawbacks, as the WCO only reviews HS codes every five years, with the latest amendment made on January 1st, 2022. The WCO reviews HS numbers to ensure they reflect changes and updates in technology and that they provide visibility into new product streams and emerging global issues. It remains unclear if the WCO are able to fast-track any changes, as obviously the fast imposition of globally applicable sanctions on Russia has made the new 2022 list somewhat outdated in numerous products. The United States in any event would almost certainly interfere with any changes to do so.
Russian importers facing HS code limitations concerning non-sanctioned use of products should discuss the issue with their suppliers who in turn may wish to discuss the issue with the pertinent local customs administration and the legal departments within them to ascertain if any leeway is possible. The matter will be of importance to suppliers as well who will be reluctant to lose Russian exports and revenues.
Russia Briefing is written by Dezan Shira & Associates. The firm has 28 offices throughout Eurasia, including China, Russia, India, and the ASEAN nations, assisting foreign investors into the Eurasian region. Please contact Maria Kotova at email@example.com for Russian investment advisory or assistance with market intelligence, legal, tax and compliance issues throughout Asia.