WHAT PROBLEMS FOREIGN COMPANIES USUALLY FACE IN RUSSIA?

Russian business environment has developed much in recent years, yet there are still problems which foreign companies usually face in Russia:

1.  Bureaucracy. 

Bureaucracy is still one of the problems foreign companies usually face in Russia.

Currently there is a number of separate legal authorities and each of them requires regular reporting, makes inspections to the business units and are able to issue penalty in case reports are not in line with corresponding regulations or were not submitted in due time.

The main legal bodies are Tax control, Customs, Federal agency for Social Insurance, Russian Pension Capital Fund, Federal State Statistics Service and Labor Inspection Service.

In 2016 it is planned that some of above legal authorities will be merged together, but currently they are still separate.

Also to mention each and every business transaction in Russia should be accompanied by correct set of documents. Papers in Russia are very important.

Hint:

-                  You need to have experienced accountant either in-house or outsourcing to submit reports to all bodies above timely and without mistakes. Accountant will also need to ensure each business transaction is accompanied by necessary paperwork.

-                  Corresponding electronic accountant systems should be installed to perform correct reporting and accounting routines. Most commonly used system for this purpose is 1C system in various modifications.

2. Customs.

Problems with Russian Customs is a usual thing foreign companies encounter in Russia.

If you intend to import goods to Russia you will first need to define commodity code in accordance with Russian Customs code. First six numbers of commodity code are the same as

for Harmonized System code (HS code).

When the code is specified you can find out what certification or licenses are needed to have goods imported into Russia and what is Customs duty for the code.

Basically there is 2 options to interact with Customs:

-        You can interact directly by registering your Company as importer.To proceed this way you will need to submit necessary legal papers and buy and install software for submitting electronic Customs declarations.

-        You can interact through licensed Customs broker who will then bear joint and several responsibility for submitted declarations

Based on 10+ years experience of interaction with Russian Customs I recommend to use licensed Customs broker. One declaration with up to 5 commodity codes and one means of transport currently cost about 200 EUR but will save you much more money by reducing time of Customs clearance resulting on less storage fees and demurrage as well. 

Licensed Customs broker have money deposit at Customs account which serves some kind of insurance towards Russian Customs ensuring Customs that duties will be paid in full compliance with applied commodity code. In case of disputes Customs is able to withdraw money from Customs broker license deposit as Customs broker share responsibility with importer on declaring goods.

This makes another good reason for Customs broker to check documentation properly and fight for your rights in case of disputes.

Unfortunately quality of services provided by various Customs brokers differs significantly from Company to Company. To make right choice you should ask Customs Broker to provide his license, reference list of the Customers he is working with including contact details and search open sources (internet) to check Company registration data and ensure that the Company is not under bankruptcy procedure, court procedures, etc.

Hint: 

- Please dedicate some time to select reliable Customs broker. 

- Test delivery might be needed to check if Customs broker is good or not, this might be small or low-value consignment. .

3. Bribes

Bribes is another common problem for foreign companies operating in Russia.

Unfortunately bribes still exist in Russia.

Being involved in operation of international companies in Russia I can confirm that we have successfully done all business processes without any bribes. Yet you can face this problems during tenders, any other competition, etc. when you know you have better price, quality or terms or combination of above but are losing due to some “other” reasons. Official refuse will politely correspond to some minor article in technical requirements, documentation requirements, etc.

Hint: 

- Do not pay bribes on no condition.

Regards, Yury