TOP INTERVIEWS Interview with Mr. Mikhail Valentinovich Vanin Chairman of the State Customs Committee of the Russian Federation Moscow, April 19th 2002 Russia is a huge country. Consequently, the customs committee represents a broad and sophisticated national infrastructure. Could you please give us a brief overview of how the whole system is structured? The country is large and that is why the customs service is large as well. Over 63 000 officers work and serve in our system. There are 150 customs houses in the country, about 800 customs checkpoints. The country is divided into seven customs regions, which corresponds to the political and administrative division, and the customs committee is the supreme hierarchical authority. Thus it is a three level system: the customs committee, regional administrations and the houses. The State Customs Committee is presently the major donor to the state budget, since we are responsible for over 40% of national budget revenues. For a customs authority, this percentage is too high. Practice shows that, the more stable the economy is the smaller is the share of customs of foreign trade in the budget. A simple example is in the USA where customs revenues account for only 1% of total budget income. In comparison, the share customs duties in Moldavia is 75% of the government budget, which suggests that the national economy is unstable. In the past, high customs clearance rates resulted in the creation of a large quantity of illicit brokerages, which encouraged smuggling. So last year you lowered customs duties in order to improve regulation and collection. How has the situation changed since last year? This relationship is correct - the higher the duties, the higher the level of smuggling. If we also take into consideration that Russian borders are very transparent (especially in the south), the problem of smuggling remains a pressing one. Although we work with border services to re-enforce our frontiers, it is absolutely impossible to close the Russian - Kazakhstan border which stretches for 7500 km. This is why economic methods of regulating foreign trade are more effective than administrative ones. Upon our recommendation, the government took the decision about one year and a half ago to reduce the customs duties for 30% of the goods listed in the imports customs tariffs. Out of 11500 articles, customs import duties were lowered for 4000 articles. Along with this, the rates were unified for the goods which have similar customary characteristics. Moreover, we combined economic measures with additional administrative measures to fight smuggling and illicit customs brokerages. The results speak for themselves: in the year 2000 the customs service collected about $12 billion from customs duties. In the year 2001 we collected $20 billion, while the import volume stayed relatively constant. Our customs service is not only entitled with fiscal rights but also with legal powers similar to police powers: we run investigations, undercover operations and a whole set of law enforcement functions in order to reduce customs offences, which still remains a major issue. In order to track customs clearance and prevent false declarations, you have implemented a new information system. How has this increased transparency and control of customs activity? I can affirm that we have one of the best information system in the country. We invested important funds and efforts in our IT system, and today we dispose of a unified electronic information system for the whole Russian customs service. With this system we can observe how all customs declarations are obtained on the whole territory of Russia in real time; we see what commodities are declared, who declares it, who is the sender and the receiver, who is the inspector, and what particular customs duties are accrued. The whole procedure is being monitored, which improves tracking, increases accountability and also helps to minimize paperwork of customs officials . The information system helps regulate activity by calculating customs fees and detecting risk commodities. This has already enabled us to implement a risk management mechanism which highlights any irregular customs clearance procedure with a RED banner. If someone declares an item such as coffee or computers for the price lower than the stock price, the declaration procedure automatically stops and the responsible official is summoned to make a decision regarding the procedure. We intend to improve the system further and to prepare ourselves for the responsibilities which will lay ahead as we join WTO. There is now a new draft version of the Customs Code being discussed in the Duma. The focus is on legal adherence, and the new code must also be in accordance to the WTO… Will it be? The new customs code will be a crucial instrument in improving the customs administration. In the first place, it will be a law of direct impact - there will be no reference or blanket regulations. The code was prepared by us and the Ministry of Economic Development, passed with the expertise of the EU and the WTO. It will comply with the latest issue of the Kyoto International Convention on Simplification & Harmonization of Customs Procedures, which is the main charter for customs services around the world. Today the code passes its second reading in the Parliament and we hope that this year the Code will be adopted. We plan for it to come into force on July 1st, 2003. How will the new Customs Code promote and facilitate trade? A simple example will be our reduction of customs clearance delays from 10 days to 3 days thanks to the new code. This new code envisages new customs regimes used internationally to develop industry and investments. This new customs regime include transforming goods in order to add new value to them under customs control (for there not to be duties when they are reexported), leasing, or temporary import. The code gives more rights to business circles and enables individuals to contest the decisions of the customs bodies through a court system; it will no longer be the customs authorities who takes the decision of expropriating commodities. Today the decisions of government, customs committee function strictly under the new customs code. A customs system should also promote economic development, by creating an open and competitive business environment. So how is the State Customs Committee working to become an effective economic policy instrument? We believe that our role is high in promoting the economy and the legislative process. All important decisions regarding foreign trade are taken with the participation of the customs committee. We are an instrument for the regulation of foreign trade, especially in light of the fact that customs duties account for over 40% of the total budget revenue. Following the country's development the share of customs income will gradually diminish. And thus we would have more time to engage in our priority activity - law enforcement, preventing drug and armament smuggling and executing the functions of our partners in the USA, France, Germany. The position of Chairman of the State Customs Committee is a difficult one. What motivates you and brings you the greatest professional satisfaction? A major challenge for me are the monthly financial directives of the government. In fact, they represent an important professional satisfaction because they show very convincingly our positive results: the level of customs duties collection is increasingly high, despite the fact that the import fees were considerably reduced and collection volumes remained about the same… and we are very proud of this increase in the import fees collection because it is a tangible indication of the increased efficiency of our customs administration. As Chairman I receive detailed analyses of daily and monthly activity. I am following every aspect of our activities every day on matters such as import and export duties, excise marks and collection of value added taxes. Although we have been successful in fighting illicit trade and improving transparency, every day I will continue to strive for a better customs system. Note: WINNE cannot be held responsible for the content of unedited transcriptions.