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For Business
Cooperation with business community
Meeting of the Advisory Council held on June 22nd
22.06.2005

1. Signing of the Agreement on cooperation between the Federal Customs Service and the Chamber of Commerce and Industry of the Russian Federation by A.Zherikhov, Head of the FCS, and E.Primakov, President of the RCCI

2. On the coordination of the actions of the FCS of Russia and actions by representatives of the business circles during preparation of amendments and changes in order to alter the Customs Code of the Russian Federation

The Speech:

G..Balandina, Head of Legal Administration

3. On the practice of using the Customs Code of the Russian Federation to defend intellectual property

 Co-speeches:

A.Popovichev, coordinator of RusBrand Group of brands producers

. Kudryashev, Head of Main Administration for Commodity Items and Trade Restrictions

4. Miscellaneous:

) some of the issues of customs clearance of pharmaceutical goods and medicines.

 information

V.Muzyaev, President of JSC Protech

V.Dyachenko, First Deputy Head of Main Administration of Customs Control

 A.Voronin, Head of Main Administration of Federal Customs Revenues

b) Approval of tentative Agenda for the following meeting of the Council

A.Zherikhov

Dear Eugeniy Maximovich,

Dear members of the Advisory Council for implementation of customs policy under the auspices of the FCS of Russia,

Dear guests and colleagues,

Today we have another meeting of the Council, and I would like to welcome everyone here and say that we have a special meeting today.

The members of the Advisory Council have received the Agenda of the meeting.

The first issue is the signing of the Agreement on cooperation between the Federal Customs Service and the Chamber of Commerce and Industry of the Russian Federation. The second issue is the coordination of the activities of the Federal Customs Service and the representatives of the business circles during preparation of amendments and changes for altering the Customs Code of the Russian Federation. The floor is going to be given to Galina  Balandina, the Head of the Legal Administration.

The third issue: it is expected that the instances of practical application of the Customs Code of the Russian Federation in defending of intellectual property will be reviewed. Alexey Popovichev, coordinator of RusBrand brands producers, will speak on this issue.

His co-speaker is Andrey  Kudryavtsev, Head of Main Administration for Commodity Items and Trade Restrictions. In the section Miscellaneous we are going to review some issues of customs clearance of pharmaceutical goods and medicines. The floor will be given to Vadim  Muzyaev, President of JSC Protech. Victor  Dyachenko, First Deputy of the Main Administration of Customs Control of the FCS of Russia and Alexander  Voronin, Head of Main Administration of Federal Customs Revenues, are going to speak on behalf of the FCS of Russia.

 Later on we shall discuss and approve the Agenda for our next meeting. You have the copies of the Agenda. Does anybody have any objections to this plan of work? Nobody? Thank you.

 As I have already mentioned, our meeting today is going to be somewhat special. We are planning to sign the Agreement on cooperation between the FCS of Russia and the RCCI. First of all I would like to welcome and thank Eugeniy Maximovich Primakov, the President, for his visit to the premises of the FCS, signifying the importance of our cooperation.

 I would like to stress that our cooperation is deeply rooted and has a long history, which started within the Advisory Council. You may remember, Eugeniy Maximovich, that we got together under your management in the Chamber of Commerce and Industry, when we were still in the status of the State Customs Committee of the Russian Federation. Now we have a different status, a different name, and now we are not working out a customs policy, we are implementing a customs policy. But we still have the Advisory Council for implementation of customs policy with Sergey Nikolayevich Katyrin, Vice-President of the RCCI in the capacity of the Co-Chairman of the Council.

Today, we are together signing the Agreement on cooperation, and here I would like to repeat that the FCS of Russia in its work relies heavily on the professionals of the Chamber of Industry and Commerce. This is the basis, a method to verify our management decisions; we appreciate it and shall continue to work in the same way.

I must note that the years of cooperation between the FCS of Russia and the RCCI have brought good results. The most illustrative example of such cooperation was our joint work on the Customs Code. That which is new and progressive in the Customs Code has been developed by us together; and we have presented to you prior to the meeting of the Council what electronic declaring, preliminary informing, the risks management analysis system and many other things are about. Everything which has been used from January 1st, 2004 onwards by the Federal Customs Service is the result of our mutual work. We appreciate this very much and now we would like to thank you Eugeniy Maximovich and all the members of the RCCI and your regional divisions for your constructive work.

We still have a lot of work to do. In the year and half since the Customs Code has been in operation we have acquired certain experience of the specific law enforcement; some questions have arisen both on behalf of the business community and from our side too, and these are to be resolved by means of making certain amendments to the Customs Code. I would like to inform you that it was our initiative to start the procedure of joining Russia to the new Revision of the Kyoto Convention. The major idea of the Kyoto Convention is the simplification and harmonization of customs procedures. It has very many Annexes, and in our opinion we should not join all of them. But if Russia joins the Convention in some individual provisions and sections, it is going to become a very important step forward from the point of view of customs regulations simplification, and not only for the Customs Service but mostly for the business community. This procedure is going to take more than one year but the vector of development direction has been chosen correctly. I believe that we will always consider the opinion of such a respected authority as the RCCI.

I would like such constructive cooperation to give impetus to our regional authorities: regional customs administrations, customs offices and your regional Chambers of Industry and Trade located all over the Russian Federation. We still have many problematic issues to work on, and we are aware of them. Business is helping us; we are open for cooperation in order to have a dialogue. We cannot achieve all the tasks we have set for ourselves. We are not sufficiently informed about what we are doing; the same refers to the participants of foreign economic activity. Here the vector was chosen a long time ago; we are pursuing the policy of the Federal Customs Service not only by means of the Advisory Council, but also by other means. For example, a month ago at one of our Moscow-based customs offices we had an initiative under the slogan: What are your complaints? The information of this initiative had been published in Rossiyskaya Gazeta. Any businessman was able to make his/her complaint, openly, without any mediators. The discussions we had were very useful and we learned important lessons from them. We believe such actions are to take place not only in Moscow but in other regional customs administrations too. Should you have any problems you wish to discuss with us, we shall be ready to consider them. The benefits of such communication with business are self-evident. Firstly, it gives an opportunity to representatives of medium-size and small business to talk to customs directly. And in the second hand, customs officers are learning of the problems in direct contact with the people for whom such problems are very acute. We shall go on with this work.

 Eugeniy Maximovich, let me emphasise that due to the shortage of time we have been able to show only part of our software products. Unfortunately, we have not been able to show you the Risks Management System. But you have observed the way Kaliningrad transit works. For us it is a very important direction of work, since the share of the European Union in trade turnover with Russia is more than 54%.

If we are to integrate the transit schemes we might be able to eradicate as a result the facts of substitution of the documents, distortion of information, and as a result of distortion of authentic declaring, we may be able to achieve full payment of customs duties, and the most important competitiveness of Russian manufacturers. It would be not just another step forward, but would raise work to a higher level.

 We are moving towards selective customs control instead of the total administrative control that was practiced in the not-so-distant past. We are going to provide conscientious participants of foreign trade activities in accordance with Article 68 of the Customs Code. This mechanism has been worked out and regulatory documents are ready.

It is very important that the dialogue between the FCS of Russia and business remains bilateral and mutually useful. But for this we need to exchange our information bases. I want to thank you for the opportunity you have provided us to use the information bases of the RCCI. We have been asking the RCCI for the Certificates of origin, and regarding the authenticity of the issued Certificates. We have acquired good mutual experience in ATA Carnets utilization, making the work of foreign economic activity participants much easier. I think that within the framework of interaction between the FCS of Russia and the RCCI we can do many things for the protection of national producers and for the promotion of competitive Russian goods in foreign markets. There is a lot of mutual work to do, related to Russias accession to the World Customs Organization. We are ready for an exchange of opinions and coordination of our efforts.

In other words we need to learn to speak one language and we are already making very good progress in it. The Agreement we are going to sign today is aimed at achieving this goal. If you do not object, we, on behalf of the FCS, are also ready to sign this Agreement. Thank you, Eugeniy Maximovich.

E.PRIMAKOV

Dear Alexander Egorovich!

 Dear colleagues,

 First of all, I would like to thank you for inviting us here to your town. And this is a respectable town. My gratitude is far from being a ceremonial gesture, I must say. Indeed, we have been offered a great deal of information in the few hours that we have spent here. I would like to emphasize the following: we have drawn a lot of common conclusions regarding this information. In many respects we take one and the same stand. At the same time, however, this implies certain disagreements. They are bound to occur, they always do, but the entrepreneurial community, which we present, is interested in a better and stronger link between our organizations.

The signing of todays Agreement on Cooperation is not an ordinary event. Well-coordinated work by customs inspectors is a matter of concern to the Russian entrepreneurial community as a whole. And not only the community engaged in foreign economic activity. What I mean is the whole entrepreneurship, because today we dwell on a very important problem I would say, overwhelmingly important, and that is the renewal of capital funds, now out-of-date and with an average age of 25 years in our industry. And it is a matter of concern to all industrialists, or many of them, who consider it vital to accomplish this renewal in the near future in order to retain their competitive strength. But they may not even be engaged in foreign economic activity. So, Id rather mention motivation of the whole business community.

I believe that, to the same extent, our customs inspectors are motivated in well-coordinated and well-developed activities of domestic business organizations. This condition is determinative for our joint efforts and for the effective development of our country. Accordingly, our cooperation is based on mutual interests and, more importantly, on the premise that we start to accomplish it without delay. You will have already noticed but I would like to emphasize again that the FCS of Russia has become one of the first state structures to take the lead in organizing a direct and by no means informal dialogue with domestic industrialists and their public organizations.

 To this effect, the accomplished fact of signing our Agreement in the framework of a regular session of the Advisory Committee on realization of the customs policy appears to be far from accidental. The history of this authority, which spans almost ten years, highlights the importance of its existence in the interests of all participants of foreign economic activities and of the state, and of the implementation of principles of cooperation and partnership between customs authorities and the business community.

The accession of Russia to the International Customs Agreements on ATA Carnets marks a remarkable stage of cooperation between the Chamber of Commerce and Industry (the RCCI) and the customs authorities. In view of the reference that you also made to the above, I thank you for keeping an eye on this problem.

 This procedure is prescribed for the temporary importation of commodities, and the Chamber of Commerce and Industry (the RCCI) of the Russian Federation, as it is well known, acts as a guaranteeing organization.

It would be worth noting as well that fruitful cooperation has been established among the network of 173 regional chambers throughout Russia. It presents a large-scale system, actively operating in coordination with regional customs departments on the matters of carrying out examination, quality control, quantity, complexity and value of commodity. A month ago during a regular session of the Board of the Chamber of Commerce and Industry of the Russian Federation, we gave detailed consideration to the issues of streamlining the chambers activities.

 At the same time, I would like to focus on certain problems arising from the Agreement subject to signing today.

 Firstly, we must improve coordination of our work to streamline legislative control of customs activity. As you have already noted, the Russian Chamber of Commerce and Industry (the RCCI) has been closely cooperating with the FCS of Russia during the period of development and enactment of the Customs Code of the Russian Federation. However, by no means all comments and amendments for which you, of course, are not to blame - were approved by legislators. A year and a half of application of the Code has revealed certain legal incompleteness of a number of its provisions. I would like to identify at least two problems. One of them is related to the application of streamlined customs procedures for conscientious participants of foreign economic activity. The other one concerns the specifics of the conveyance of foreign trade cargo by different modes of transport. I do not want to spend too much time on this, but I believe that the time has come to analyze those comments and proposals which have appeared within the last 18 months, and for us, together with the FCS of Russia, to apply to the Russian Government with the idea of introducing amendments to the Customs Code in force.

Secondly, within the framework of the Agreement we must take more active steps in the direction of strict and steadfast compliance of all business structures with the legislation in force in the region of foreign trade operations. It is directly pertinent to the Russian Chamber of Commerce and Industry (RCCI). It would be an obvious overstatement to unjustifiably simplify the present situation as a united parade of companies, walking through the gates of business. Have we really managed to eliminate gray and black import? Or have we managed to eliminate false declarations, falsification of customs code numbers? Let me give you just one example. Unfortunately, there is no decline in the level of illegal export of seafood, estimated at the value of 4-5 billion US dollars annually. And it is still going on.

Thirdly, the joint efforts of customs authorities and the chambers of commerce and industry, aimed at implementing the electronic declaration system, are exceptionally important. Today you have demonstrated the advantages of this system. We saw them with our own eyes. In my opinion, you are merely obliged to disseminate this experience among businessmen. In the first place, the system is intended for businessmen. Today, you gave an example of how IKEA, for instance, arranges for more than 90% of its commodity exports for realization in Russia, which will undergo, so to speak, accelerated customs clearance procedures, making them practically glide down to the end users. This practice must be implemented. Needless to say, it will minimize possible business corruption.

 Fourthly, according to domestic and foreign manufacturers involved in foreign economic activity related to Russia, a sensitive issue is the problem of streamlining customs procedures. In this connection it seems important, and we have already touched upon this subject, to take advantage of the well-proven practice of creating joint customs terminals and the streamlined procedure of commodity conveyance across the state border specific green corridors. We call this the green corridor, though only with one-way traffic of imports. We unanimously came to the conclusion that it is wrong. These green corridors may and must be spread widely, but not, of course, limited to Sweden, Finland and Russia.

The creation of joint customs terminals is a difficult problem, of which we are well aware. This problem rests on solution of an organizational and legal nature, but it must be put into motion. We were glad to hear that the first steps are being taken in this direction jointly with Poland.

Fifthly, the RCCI and customs authorities must enhance coordination of their activities with state judicial instances on the matters of protection of intellectual property. The mass character of continuing encroachment on the rights of domestic and foreign right-holders is no secret. By experts estimates, the state budget and conscientious businessmen suffer 3 billion US dollars worth of annual losses, caused by commercial counterfeiting and by realization of faulty and infringing products.

In conclusion, I would like to emphasize that, in my opinion, the signatory Agreement establishes favorable prospects for even larger, full-scale, multidisciplinary and fruitful cooperation between the RCCI and the FCS of Russia, between the entire business community and customs structures. And I must say that customs organizations, obviously, are enhancing their activities, positively experiencing the development stage, non-existent in recent times. We must do our best to make our intentions and wishes a tangible reality. Thank you for your time.

A.ZHERIKHOV

Thank you, dear Evgeniy Maximovich. I think well add to our arsenal what you wish us to do, and in the first place, well get down to solving these problems. As I understand, its the opinion of the business community and yourself that in many respects our positions are the same, though many problems cause our concern. By teamwork and joint efforts and with the assistance of this reputable and respectful organization, I believe that we must and that we are able to push it. If there are no objections, I propose we should get down to signing. Thank you.

E. PRIMAKOV

 By the way, I will sign with your pen.

 A. ZHERIKHOV

Thank you. We are accustomed to seal it straight away. We make it simple. That is right. Not only are all of our proceedings regulated, but it is mandatory and out responsibility to seal them. Thank you.

E. PRIMAKOV

Next time I undertake to take with me a seal like this (of this size).

A. ZHERIKHOV

 Evgeniy Maximovich, we have all of our procedures certified, therefore the inspector has applied a seal and he will sign it in witness thereof. Evgeniy Maximovich, in honor of our event I would like to present the Emblem of the FCS of Russia to the RCCI Management.

E. PRIMAKOV

Thank you very much.

A.ZHERIKHOV

 With your permission, I would like to show one more souvenir. For all the business community to see, here is a GZHEL a sort of spoon. It may be interpreted in many ways. I think the co-signing means that from now on well sup and clear up the mess together.

E. PRIMAKOV

 It may be understood as if you were supping with an oversized spoon.

A. ZHERIKHOV

One may say with a spoon, but its also possible to say, and I say it openly and frankly: indeed, the FCS of Russia has to work a lot at clearing ourselves up. So we can use it this way. It may have a variety of meanings.

E. PRIMAKOV

Thanks indeed. In turn, Id like to add: this is Mercury a god of trade, which is, presumably, related to customs.

A. ZHERIKHOV

 And he is our principal one. Thank you, Evgeniy Maksimovich. Dear colleagues, with your permission I would like to ask Vladimir Alexandrovich to proceed with the review of the agenda of the Advisory Council. And if you dont mind, together with Evgeniy Maximovich, taking advantage of his visit to the FCS of Russia, we would like to talk a little about our activities. Any objections? By the way, we are offered to make a good-memory photo. So I propose we have a 3-minute break and then well proceed with our agenda.

V.SHAMAKHOV

Take your seats, please. Let us carry on with our agenda under, so to speak, a certain blessed beginning now the co-signing of the Agreement has made us more obliged to maintain a closer consolidation. Well try to somehow justify this consolidation by giving consideration to all three issues. Now that we have, in fact, adopted the agenda, we shall stick to it. For all that, I would request only a minor exception. As Leonid Arkadievich Lozbenko is about to leave now, I think it will be very interesting and advisable if he brings to your notice a small piece of information specifically regarding the standards, briefly mentioned by Alexander Egorovich. Leonid Arkadievich took part in the development of these standards, but more importantly, in their acceptance and even more importantly he will take part in their implementation. Leonid Arkadievich, please proceed.

L.LOZBENKO

 Thank you, Vladimir Alexandrovich, my biggest care is to retain responsibility for all that.

Dear colleagues, as you will remember, a year and a half ago we mentioned the preliminary work taking place in the WCO. In 2002 in Kananaskis, Canada, G8 issued instructions, if anything, guidelines, prescribing the WCO to develop concrete measures of counteracting terrorism in the time of concurrent assistance, rendered to commercial business. I will tell you openly, we were a little bit too late. I mean that the WCO was too late about this problem. A quick response followed from the International Maritime Organization (IMO) and ICAO, while it was more complicated with us. A big working team was organized, consisting of representatives from all world regions. There were 12 of our representatives. As the European Vice-President, I represented Europe, and in the course of 18 months we have been elaborating the approach to the standards development, etc. Now we can say confidently that there has been what you might call a revolution in customs activities. Contrary to our previous activities, which included mainly import and some export customs control, today we control the whole logistics chain.

 There will be two basic principles: customs-customs and customs-business. There are 17 main principles, which we are going to study in detail now in order to apply them to the general vision of how they will be realized in Russia. It is not an easy matter, but at the same time, it does not seem to be something that is beyond our capabilities.

 In 2004, the Americans initiated active application of this system in overseas container transportation. They had had one years experience of this application. They stationed their officers in ports of exit on a joint basis, and, frankly, we were shocked by the figure presented to the Council by the Head of the US Customs Service in his annual report on the result of this activity. For the companies participating in this activity, the level of US customs control of this activity within the USA decreased by 6 times, and you are aware of their level. This was really shocking for the customs industry. In contrast, the business community was very happy. Now, this situation will spread everywhere, covering the other modes of transport. In fact, this is what we have just mentioned and this is what well have to implement.

 Following standard practice, the conceptual approaches were adopted at the sitting of the Session itself. Immediately during the Councils Session, 100 states out of 166 member states signed and passed over to the Secretary General the memorandum of their intention to commence this work within their territories. I will address the issue of bilateral agreements to be concluded later on with the states, which have already expressed this intention.

 And now, a few words about how we are going to do it. It will include both preliminary distribution of information, declaration in electronic format and authorized carriers. Are we really prepared to commence this active work? Without doubt, and I can state frankly: none of the states, even the USA, is fully prepared for implementation of this particular concept. It takes a lot of resources, including financial as well as political will, to enable customs authorities as establishments to obtain understanding of this process. So the that business community will become knowledgeable about the meaning of authorized carriers or participants of foreign economic activities, so that adequate amendments will be introduced into legislations. But, somehow or other, the activity has already begun.

And I can tell you, we are actively polishing our vision and our concept of how it all should be implemented. In the near future, right after the summer period, well be able to present you with our account of preparation status at one of the Advisory Councils meetings, devoted to realization of customs policy. And its going to be teamwork.

 Vladimir Alexandrovich was right to say that nobody would be able to avoid this responsibility as we have co-signed the Memorandum of Intent as well. Well have to do a vast amount of work in future, but well only benefit from accomplishing it. And I can tell you frankly why. Today we have 3 main lines of activities: EEC 54% of turnover, China and Turkey. Both China and Turkey were ahead of us in applying this decision. I mean to say, we are starting to have a large international basis, enabling us to tell China and Turkey straightforwardly: if you could afford to detain our proposals on preliminary activities for months, now, sorry, but we are going to get the WCO engaged in this matter.

Thank you, Vladimir Alexandrovich.

 V. SHAMAKHOV

Thank you, Leonid Arkadievich. Does anybody have any pressing or urgent questions? We still have a lot of work to do. Now, I would like to specify a little why, in my opinion, the WCOs response followed a bit later than that of the ICAO or the IMO. In my opinion its because in airports and seaports of the majority of countries worldwide, the responsibility for the security of passengers and cargo is borne by relevant services of airports and seaports but not by customs. Meanwhile, under our legislation the situation is different, but more customary and natural for the Russian Customs Service. Leonid Arkadievich, do you think we should take the lead, taking advantage of the framework of new standards? This will enable us to bring other states, above all the border ones, up to this level, including the aforementioned China and Turkey. That is, it is beneficial for us. Thank you.

Well, then lets proceed with the approved items of the agenda. In my opinion, they are interesting as well as essential today. First on the agenda are the Customs Code, intellectual property and the issue of pharmaceuticals. So, it is my pleasure to give the floor to Galina Vladimirovna Balandina, Head of Legal Administration of the FCS of Russia, who will talk on the first item. Galina Vladimirovna, welcome to the floor.

G.BALANDINA

Thank you, Vladimir Alexandrovich.

Ladies and Gentlemen! To our regret, the work on the amendments to be introduced into the Customs Code probably began shortly after the Code was signed by the Russian President. As you know, many officials from governmental agencies were dissatisfied. There was a period when the date of the Codes enactment, January 1, 2004, was totally endangered. There was severe criticism of our opponents in the time of preparation of the Customs Code, but, as they say, time has put everything right. What we have now is a very efficient and forcible document. The Codes rating within the country and abroad is much higher than I would have expected. And now the question is how to construct the work on further improvement of the Customs Code.

Why do I so promptly speak of further improvement of the Code? Because it seems that there is not a single person in attendance today ready to deny the wrong concept, initially selected as the basis of the Code, and that conceptually the Code needs to be revised. Many persons in attendance today are aware of the complexity of the work carried out to prepare the Code. How hard it was to reach compromises. What incredible difficulties and expenditures, including time, it has taken to elaborate this document.

What do we encounter today? From October 18 last year which is, in fact, the initial date announcing the collection of proposals on improving the Customs Code, parliament hearings were held on the appraisal of the first 9-month period of the Codes effectiveness. As a matter of fact, we the Federal Customs Service - have received no professional or constructive proposals as to what provisions of the Code have to be amended. Well, with the exception of that notorious Article 68, when initially proposals were made regarding the Codes earliest enactment, followed by the proposal to minimize the threshold term for representatives of major foreign business.

 As a matter of fact, this is the main criticism put forward in this respect. The situation persisted until, under the auspices of the State Duma in the framework of the Council of Experts, attached to the Customs and Foreign Economic Activity Regulation Subcommittee of the Budget and Tax Committee of the State Duma, work was initiated to collect and discuss proposals made by business companies in respect of amendments to the Customs Code. What were we confronted with? By my estimate, 95% of received proposals were complaints about customs performance, and they must be discussed as well. Of course, we dont claim to discuss them during private sessions or only within the Advisory Council meeting or during closed sessions of the FCS of Russia. There is absolutely nothing to prevent the business community from discussing our drawbacks in public. But in reality, I suppose, it causes a distraction from working on the amendments made to the Code both in terms of time and expense. At least 4 months of this job failed to result in any kind of constructive proposals on the amendments made to the Customs Code. Nevertheless, a few constructive proposals, but only 5% of the total volume, were discussed in the Duma. And I consider it appropriate to raise the question of the importance of business circles in the framework of this activity.

I assume that if, while working on the Code, the association identifies its role by limiting it only to the collection of proposals by its members and to bring these proposals to the attention of the Duma or the FCS of Russia after making their accurate copy, then you incite us to discuss these problems with 15000 participants of foreign economic activity, apart from carriers representatives and other persons, involved in foreign economic activity. Those are the people who are involved in the activity ,affected by the provisions of the Code. And this work is not constructive.

 I consider that previous experience has shown that the Association, representing the interests of business circles, is professionally capable of putting forward professional, competent and constructive proposals.

 As yet we have still not been given these proposals regardless of the fact that, and I repeat it again, the territory of discussions was not even the FCS of Russia, but the State Duma the legislative body.

By August 1, 2005, the FCS of Russia will have the Draft Federal Law on Amendments to the Customs Code framed. And Id like to state that this draft contains only a minimum quantity of registered proposals, both made by the business community and served to the Duma due to the aforementioned reasons. And we are still forced to handle alone the problems affecting interests of big business. There is nobody to render us professional assistance. The FCS of Russia acts as a promissor, who is indebted to business companies, state agencies, ministries and the RF Government. It turns out that we must get from business companies only challenges, and point out our discrepancies without practical proposition in respect of the proper manner of legislation improvement.

Now, here is my outline of our lines of activity, as this issue affects the interests of many of those present. We take into account the prospective steps that Russia takes in the direction of legislation streamlining in connection with accession to international conventions. These are not only international conventions on the harmonization of streamlining customs procedures, but also our pursuit for the approximation of our laws and the laws of the EEC, for our accession to trade facilitation conventions. To this end, some of the Codes provisions related to transit and declaration procedures will have to be revised.

Besides, refinement will be made of the provisions related to determination of customs value, the procedure of conveying transport vehicles across the state border, more specifically customs charges payment upon post-repair re-entry of transport vehicles, and refinement of customs clearance procedures of commodities exported beyond the bounds of the customs territory of the Russian Federation, both by pipeline transfer and by application of other streamlined procedures, including temporary and periodical declaration.

 This is itemization of the procedure for disposing commodities not appropriated by the federal government; an introduction to the Customs Law of new institutes, including the institute of acknowledgement of uncollectible customs charge arrears. Because of its similarity with the tax procedure, the effective customs procedure is not applicable. This is the legalization of shifting stocks of merchandise, conditional only on the expiration of the time limit for collection of payments and bringing persons to responsibility for violation of customs regulations. This is an introduction to the Customs Code of the ex officio institute in respect of trademarks acknowledged as established within the territory of the Russian Federation. This is the procedure of customs operations carried out in respect of commodities sold through catalogues. This is an introduction to the institute of authorized consignor and consignee - those persons authorized by a customs authority to carry out transit customs operations.

The Customs Code contains a number of apparent legal errors and faults of a technical nature, which now need to be rectified. The main purpose of our work is detection and rectification of these errors and faults. It seems to me that out of the 429 articles of the current Code, approximately 60 articles will be subject to introduction of amendments. Our further actions in respect of all our proposals will lie in filing our request for support authorization from the Ministry of Economic Development. Later we are prepared to open a public discussion, making them the point at issue as far as possible within any territory. This kind of a document, affecting many interests, is impossible to get through without being discussed by the business community.

Incidentally, the question comes up. In what way are we going to construct our teamwork? Sergei Nikolayevich Katyrin recollects that during the preparation of the Code, we arrived at the signing of written agreements of mutual concessions and obligations with every association. We rightfully give the Customs Code the name of the law of compromise, saying that we'll come to terms here, but you must understand that protecting the state interests, we will set a barrier-gate there. Therefore, now that proposals are being received from the people with whom we once came to arrangements on the total demolition of this barrier-gate, it is impossible to discuss it 150 times more.

Dear members of trade associations, dear professionals, I beg of you not only understanding, but amenability for the proposals you come up with. Now, we have the advantage of making another attempt to find consensus or compromises. While deciding on this mode of work, we were in search of the vector of development of the customs legislation and trying to identify conceptual issues. Today, the point at issue is nuances, refinement of individual details. Today, the subject matter is the importance of professional isolation of the causes of obstructive problems, related to application of the Customs Code. They might also be provisions of an unrevoked normative act, which was created by the RF State Customs Service sometime in 1993, but not provisions of the Customs Code.

Today, we experience difficult problems with legal and regulatory control in the field of customs activities. Your support would also be useful so as to expedite solution of these problems with the involvement of ministries who are lodged with the power to carry out legal and regulatory control, but strangely do not seem in a hurry to put these powers to use. These ministries listen to the counsel of businesses.

I am not prepared today to propose concrete tools for our further work coordination. I merely understand that we must avoid what happened last spring at the State Duma. We are unable to prevent you from applying to the deputies or to other persons who may serve as vehicles of your ideas, but it will be neither a coordination of our actions, nor an effective dialogue. I am aware that it will be very difficult here to reach the previous dialogue, when we discussed together every article and could find one compromise or another, at least because today the FCS of Russia does not have any of those authorities which were available during the preparation of the Customs Code. As plenipotentiary members, the RF Ministry of Economic Development and the RF Ministry of Finance have been integrated into the process of customs regulation.

 Nevertheless, these actions need to be coordinated. We are open to any dialogue, including critical dialogue. But the question is: who on behalf of business circles will assume not only the right but the responsibility to converse with us on this matter? I would appreciate, Sergei Nikolayevich, your adequate response to this matter. Four months spent in the venue of the State Duma gave almost no results. I am through with my report and ready to answer your questions, if any.

 V.SHAMAKHOV

Thank you, Galina Vladimirovna, and I would like to make a note of boldness and fidelity of the definitions, given the weak points and problems which we must all clarify together as soon as possible. And thats where once again I would like to emphasize that business circles and their representatives must be aware that customs, more than anybody else, are concerned and motivated by further development of business activities. We have been allotted immense tasks on assessments to budget. We shall meet this challenge provided business continues to develop and prosper. However, we must coordinate our approval of those regulations, which, if duly observed, would not obstruct development of business, acting in accordance with the law. Therefore, before we come to a mutual agreement, we should unlikely expect anybody else who is able to shoulder us effectively, including various ministries, etc.

In my opinion, therefore, we must, in the first instance, come to this agreement in the venue of the Chamber of Commerce and Industry as a representative of globally associated business and of the FCS of Russia.

Is anybody willing to comment on this matter?

S.KATYRIN

Galina Vladimirovna, Id like to note, first, that its a waste of time to go on holding our discussions in the approved format in the State Duma as this format will never enable us to obtain any results .

I admit that it took us a long time to write the Code, but every day of this writing we would make a certain amount of progress. And we are prepared to put our hand to the plough again. I am aware of how the discussion was arranged in the State Duma. The Chamber did not take part in this arrangement and its unlikely that our colleagues took part in these discussions. Having said that, I suggest that we take the same road, though a shorter one in comparison with the one we took when we were writing the Code. I suggest our associates in blocs and in the Chamber should get together with you and lawyers and express all their requests in order to present the opinion of the business community to the State Duma, but not with those segmental representatives, arriving to see deputies sometimes as guests and sometimes to participate in discussions. I would propose to invite representatives of the Ministry of Economic Development as we have managed to maintain our mutual cooperation in practice. At least, in order to minimize the way of passing law, we hold joint readings of the law on small business simultaneously with the Ministry of Economic Development of Russia, deputies of the State Duma and with senators of the Soviet of the Federation. I would like to propose the same procedure now. To avoid uncertainty as to the initial location, we are prepared to organize this type of dialogue in our venue, inviting all parties concerned to hold joint discussions. Our teamwork would be much more efficient, providing the agreed proposals were presented to deputies who could take part in their elaboration. On a routine basis we can mutually coordinate assignments of the schedule and arrange for a meeting of our associates for the purpose of fruitful discussions.

V. SHAMAKHOV

Thank you, Sergei Nikolayevich. Now, I would appreciate the opinion of the Advisory Council members, heads and representatives of associations on the subject matter. You are welcome.

A. AGALAROV

On behalf of the business community I will try to explain their inert response to the Customs Code. The truth is that the business community deals with customs structures in the field and at the customs terminals, while the provisions specified in the Customs Code are not always realized. What I mean is that the regulations specified by the Customs Code are not observed in full. Therefore, complaints about practices that are sometimes used in the field are nothing but a natural reaction for businesses. It is clear that it is a little difficult to respond positively to an unconvincing document. Here is a good example. We are building an exhibition center. Last year Building 1 was finalized, and we arranged to bring in industrial air-conditioners, which were seized by customs as non-industrial though their weight is 2 tons and power consumption is 78 kW. Mr. Kudryashovs intermediation helped to release them promptly. Currently, the same type of conditioners are being held at the same terminal in despite of the classification number assigned to them. I suppose I am lucky to be present here and to be able to apply to Mr. Kudryashov again, but such events occur regularly. Although the new Code indicates that there is no requirement for validation of the classification number, they still require it as mandatory for item release. And what is more, they require it for those items, which were assigned this number last year. I can give more similar examples as evidence of the persistence of the situation.

S. KATYRIN

I would suggest that we divide this equitable observation into 2 parts as the subjects of ensuing discussions. One part concerns the execution of the relevant Customs Code in force, and it must be formulated and brought to the customs service for the purpose of modification of control measures. There is also another part, concerning the Code itself. Separating them will effectively facilitate the discussion.

V.SHAMAKHOV

 I agree with the proposal made by Sergei Nikolayevich. Galina Vladimirovna has mentioned this idea in her report. It holds true 95% of the time, and is fair in many respects. We are ready to organize a standing public association or a roundtable with a view to considering all the deficiencies of customs administration. There are a lot of them. We shall be able to discover them within inspection audits as we conduct them in hundreds. But they cannot be castigated all at once. However, adoption of a law is quite a different category, and we must do our best to make the Code a law of direct effect, thereby eliminating double treatment and disabling departments to correct the Code by means of regulatory acts, etc. We are also aware of the reason why participants of foreign trade are sometimes afraid to talk to customs from the position of the Code. In this case, we are your teammates. Lets consider how we are going to handle and improve administration. It is very important for us as well. Taking control of administration is one facet; the second is improvement of the Code, which could be carried out in the format suggested by Sergei Nikolayevich on the basis of the Chamber of Commerce and Industry. It is the reception center of proposals, flowing from all associations; it is our workplace, and representatives of the Ministry of Economic Development and the State Duma are invited there to crystallize an agreed document. Because judging from our experience in the Duma, it is hardly possible. The State Duma seems to be the right place to discuss administration issues, providing everyone is anxious to do so. Filing a complaint is a legal right of all those who are resentful against collectors of customs. May I know your treatment of this assessment?

V. ALISEICHIK

I would like to have my say in support of Sergei Nikolayevich. The way we take is well tested, including that of handling the Customs Code. Its the case, when we dont have to invent a bicycle, instead we should stick to the system which has proved to be an effective tool in obtaining some successful results. Secondly, we must not mix operational activities with the Code itself, as it is evident from practice that this mixture will be to no purpose. No one would doubt the necessity of refinement of the code. Here is a minor example from transit control. Do you know the time limits for domestic and international transit? By the way, now there is nobody in customs and in transport associations who stands for this isolation, because it results in nothing but confusion. They must be deliberately removed, because there is just transit and Russia needs no specific transits. In view of the above I think that Sergei Nikolayevich came up with a reasonable proposal.

V. SHAMAKHOV

 Thank you, Vladimir Ivanovich.

V.OKULOV

 I also wish to support the proposal made by Sergei Nikolayevich and, thereupon, to trust him with organizing the collection of those proposals which have been elaborated by the Customs Service. As I understand it, the provisions of the Customs Code are of a working nature and not installed on the website, but will appear there one of these days. It would be right, if our draft resolution included the commission to organize this work.

G. BALANDINA

Thank you, Vladimir Alexandrovich. If I may add a few words, please. Sergei Nikolayevich, I would not be so concerned and talking for so long about the activities of the State Duma, if it were not for alternative drafts, resulting from proposals, and we all know what an alternative draft Code really is, and if it were not for the participation of everyone sitting at this table, including representatives of the Chamber of Commerce and Industry. Based on the above, I would like to propose the following course of events. I am not authorized to alter the decision the minister made, before making it public, to assure himself of its acceptability to the Ministry. August 1, 2005 is the date for presentation of its amendments. Later, we are prepared for discussions if the point in issue is the draft, framed by the Service. This is my clarification.

S.KATYRIN

 The State Duma may discuss another 20 alternative drafts. But in the end they will vote for the one submitted by the RF Government. Therefore, it is expedient to concentrate upon the venue of the question settlement. But the minister should be aware that the issue will be discussed, and that the business community will formulate, express and defend their proposals.

V. SHAMAKHOV

 So far no other motions have been made, so we suggest that the Chamber of Commerce and Industry (S.N.Katyrin) should be chosen as venue, coordinator and organizer.

E.SUDAKOV

I would like to add a few words in terms of approaching solution of the problem. Amendments to the Customs Code, if they enhance the activities of the business community, will be approved by all carriers. Based on the example of Articles 164-165, you are aware of the three years that we, together with the State Duma, have been trying hard to cope with it, so I think that it would probably be insufficient to place the solution of these problems upon the Chamber of Commerce and Industry and upon associations. We have to work in parallel with deputies. This work is sizeable and time-consuming enough.

V.SHAMAKHOV

Thanks, it has been mentioned already. Certainly, we should work with the deputies, but preferably openly in the venue of the Chamber of Commerce and Industry of Russia, but not as individual lobbying of someones specific interests. You mentioned that a unanimous vote should be expected provided the Code reflects the interests of the business community. I would accept that, but only partially. The Code must reflect both business and state interests. Our task is to find the vector line, interconnecting interests of business and state. If the Code reflects only business interests, it will hardly be adopted, and if it reflects only states interests, it will be hardly survive. It is important to combine the interests of the state with business interests. And it is not a compromise, but a brisk, systematic link, a vector.

S.KATYRIN

I do not agree with the observation made to the effect that if business votes for it, then the State Duma will vote for it too, not at all. In Novorossiysk we held a round-table discussion on the development of a transport nodal point and discovered that deputies businessmen who own ships and trains, have their own, specific point of view, based on their private business. So, they will vote for the interests of business as a general rule. This should be taken into account as well.

V.SHAMAKHOV

 Any other proposals? Anybody willing to speak up? The proposal made was approved and made public. Is it maintained by all Council members? Then, as the approximate reaction has been announced, well have it formulated and make an official decision. Now, well proceed to the next item. We have two supplementary reports on the practical activity of application of the Customs Code of the Russian Federation in respect of protection of intellectual property. The first will be presented by Alexei Valentinovich Popovichev, coordinator of the RusBrand Group trademark manufacturers.

A.POPOVICHEV

Good afternoon, dear colleagues, ladies and gentlemen! I believe that all those present have encountered a counterfeited item at least once, and had, at best, their spirit dejected and at worst, some of their household goods broken. In his talk, Mr. E.M.Primakov mentioned that it is still the issue of the day. The figure he gave to denote the losses is approximately 3 billion USD, though it varies, but their magnitude is really impressive they are enormous.

 Not only do the manufacture and distribution of counterfeit products undermine the publics health and the state economy, but they exert their adverse influence upon Russias international image. Solving this problem is one of the important conditions for Russias entrance into the World Trade Organization. Of course, it is no secret that a considerable portion of counterfeit goods find their way to Russia from abroad by crossing the state border. To this effect, we observe the increasing role of the FCS of Russia in safeguarding the domestic market against this kind of merchandise. It is worth noting that adopting the new Customs Code and, by all means, its incorporation of Chapter 39, for the first time legally securing customs authorities activities on protection of intellectual property, has been a substantial breakthrough in preventing counterfeit goods.

First, we would like to make a note of the facility of registration of trademarks of the FCS of Russia, implemented in accordance with the Customs Code. We believe that this registration can become an effective tool of extinction of counterfeited merchandise, penetrating the territory of Russia.

Now, as for what we have got upon 18 months expiry of operation of the Code: we can state that the procedure of trademarks registration has been well adjusted and effective. Right-holders enjoy professional and effective assistance, provided by the FCS of Russia in registration of their trademarks, thereby considerably decreasing their registration period and their entry into the Register to be protected by the FCS of Russia. At the same time, we should make a note of those changes which have taken place in strengthening the enforcement of intellectual property rights when crossing the border. Experience of legal practice is being gradually accrued in this sphere. According to our experience, trademark registration produces a substantial preventative effect as well. We observe a decrease in the export of counterfeited commodities labeled with registered trademarks. It can be explained quite logically. Risks are increasing. At the same time, we observe a growing number of unfair importers, who are beginning to make use of black and gray market arrangements. Monitoring data still indicate a considerably high index number of counterfeited products in Russia. I have already mentioned some estimates, and our organizations estimates agree with the figures presented by Mr.

 E.Primakov.

 Primarily, it must be noted that sportswear, footwear, perfumery and toiletry are the first to suffer this infliction. What kind of problem do we identify in this respect? In our opinion, one of the difficult problems is insufficient coordination between regional units of the FCS of Russia and the same between individual customs terminals and right-holders. In this connection Id like to make a note of the irregularity of current counter-actions, but at the same time, we observe high activity in counter-actions achieved in the Urals, the Southern and Volga Regions, and by the Siberian Customs Administrations, particularly by the custom houses of Penza, Koltsovo, Rostov, Krasnodar, Tatarstan and Kaliningrad. It is feasible to achieve high efficiency of customs operations, but it takes their adjustment and establishing of information exchange one of the things that leads to successful expansion of countermeasures. What are the real ways to intensify the struggle against counterfeited products today? First of all, it is essential to respond promptly to the development of the situation by means of enhanced activities to uncover channels of import of counterfeits, and by a broader application of the system of post-audits and operational search. On our part, we would like to note that manufacturing companies are prepared to discuss this problem with us, providing adequate information and promptly interacting with relevant units of the FCS of Russia.

Correspondingly, as the first steps and as teamwork with representatives of the FCS of Russia, we considered it feasible to develop coordination between right-holders and the FCS of Russia in the region of post-audits. In consideration of difficulties arising within law enforcement practice, we would consider it possible to create the database of court decisions rendered on cases in connection with intellectual property and to install them on the website of the FCS of Russia. In our opinion, making this information available to the public would largely help right-holders, who are still unable to find efficient ways to fight counterfeits, and on the other hand, it would be an efficient aid for customs officers in their field of activity. Secondly, we would consider it possible to submit for discussion the issue of the formation in regional customs departments of task groups on intellectual property. Thirdly, we consider it possible to enhance the efficiency of workshops regularly conducted in the framework of the FCS of Russia.

We observe their considerable effect, but we believe that the introduction of practical fiedl training into the workshop organizing system would facilitate the arrangement of discussions with right-holders themselves, enabling them to see with their own eyes the operational activities of the FCS of Russia, and consequently to share the experience, gained not only in Russia but in foreign markets as well. In closing, I would like to note that problems existing in respect of protection of intellectual property are not considered by us to be problems with the system. Our cooperation with representatives of the FCS of Russia is indicative of the openness and fruitfulness of our dialogue. We believe that the issues I mentioned in my talk, as well as openness of discussions held on emerging problems, will enable us to set an effective barrier against the penetration of counterfeits into Russia and to protect the Russian market from commodities, which are harmful rather than useful. Thanks for your attention.

 V.SHAMAKHOV

 Thank you, Alexei Valentinovich. And now, Mr. Kudryashov Andrey Olegovich, Head of the Main Administration for Commodity Items and Trade Restrictions of the FCS of Russia, will present his supplementary report.

A.KUDRYASHOV

Dear Vladimir Alexandrovich, dear Sergei Nikolayevich, dear participants. First of all may I briefly give an account of the main results of the customs control operations carried out by the FCS of Russia in respect of intellectual property protection within 18 months, which have passed since the enforcement of the new Customs Code. Between 2004 and 2005 we have received more than 170 applications on the embodiment of intellectual property items into the Customs Register. As of today, 8 trademarks have been included in the Customs Register.

In 2004, 154 cases were opened on account of administrative violations of the law. Within the first 6 months of 2005 the number of these cases has reached 147. In the best customs administrations abroad the approximate number of trademarks amounts to 58 thousand. We have 488. Beginning from the 1st of January, we started a new trademark registration, and within the next few years well be able reach a figure of several thousand. We are going to reach the level of developed industrial countries in the number of customs protected trademarks. The main commodity items seized on account of misappropriation of trademarks were alcoholic beverages, foodstuffs, sportswear, footwear and perfumery, while the main items seized for copyright violation were videocassettes, CDs and DVDs.

Analysis of legal commodity turnover, carried out in connection with customs control over conveyance across the RF state border of commodities, incorporating objects of intellectual property, indicates actual cessation of unauthorized delivery across the state border of commodities, labeled with trademarks, included in the Customs Register of intellectual property objects. For instance, the firm Hennessy states that they have only 2 official distributors authorized to export its products into the Russian market, and no other participants are authorized to do this, being outside the legal turnover. Under these circumstances, the most acute problem lies in the full activation of illegal turnover of merchandise, incorporating intellectual property. We receive this information both through our dedicated channels and directly from right-holders. In this connection, the role and position of the customs law enforcement body is substantially increasing.

At the same time, as demonstrated by our small amount of experience and by the practices of foreign customs services, the most highly efficient level of this activity may only be achieved by means of close interaction between customs authorities and right-holders. Insofar as it is the right-holders who, by creating special security services, by hiring legal safe-keeping companies and by attracting various competent state agencies, keep track of the current market situation, working with distributive networks and suffering customers, they will be in possession of the most complete and reliable information necessary for identification of objects of control carried out by customs authorities. On the strength of Administrative Order 241 on the improvement of interaction in the field of protection of intellectual property rights, issued by the Head of the FCS of Russia, a joint workshop was formed, consisting of representatives of major right-holders, teamed up as a non-commercial partnership, a community of producers of corporate trademarks, and FCS of Russia officials, incorporating representatives of the Customs Inspection Administration, the Customs Investigation Administration and the Main Administration for Contraband Control.

We scheduled a meeting of the workshop to be held at the end of July or at the beginning of August. The agenda of the meeting is expected to include the issues of on-line bridging and elaboration of the procedure of intake from right-holders of information in respect of explored cases of realization of counterfeit commodities of foreign origin. I think that the practical activity of this joint workshop will improve the efficiency of customs control operations, carried out to expose dishonest foreign trade participants, violating customs law in this region. Dear colleagues! One of the most important lines of customs authorities activities on protection of intellectual property is its information support.

At present, the information, pursuant to the Customs Register data, the Register entry procedure, separate judicial decisions confirming justification of customs authorities actions in respect of protection of intellectual property rights, is installed on the website of the FCS of Russia. At the same time, we receive rather frequent complaints about the difficulty in finding this information in the website. This information is buried deeply in this site. In our opinion it creates certain difficulties. In this regard we consider it expedient to recognize the necessity of ensuring more accessible placement of the information, namely, creation of a section dedicated to the protection of intellectual property rights on the main page of the website of the FCS of Russia, enabling any user within the shortest time possible to obtain on-line access to this information. In addition, we are planning to arrange for all passed judicial decisions to be placed on this website so as to provide concerned users with access to this information, to enable them to make use of these decisions for the purpose of their own activities.

In conclusion Id like to say a few words on the staffing issue. Indeed, now we have become more aware of the fact that the problem of staffing may turn out to be a bottleneck in the further increase of the efficiency of customs authorities activities. We are trying hard to study international experience, which indicates the utmost importance of forming task units staffed with personnel who are equipped with the proper skill and knowledge. Protection of intellectual property is a highly knowledge-based activity, requiring the profound knowledge of a specialist. He must gain an understanding of many aspects of law, economics and customs. In this connection, we support the proposals made by the previous speaker in respect of the expediency of working over the issue of forming task units assigned to protect intellectual property rights, at least in regional customs administrations, exercising control over the highest traffic of such commodities. I am winding up. Thanks for your attention.

 V.SHAMAKHOV

Thank you, Andrei Olegovich. Any questions on this matter, please? Andrei Olegovich, could you confirm the availability of any relevant purpose-oriented program, if you please? Or any sort of generalized package plan in this sphere?

A. KOUDRIASHOV

We have the package plan, approved by the Ministry of Economic Development of Russia. It was approved just 2-3 months ago.

 V.SHAMAKHOV

 Here is another point at issue. Maybe we should concentrate on the allocation of certain stand-alone units for this allotted work. It was you who said that these units must be staffed by well-trained specialists, etc. So, maybe after our preliminary reconciliation we should take advantage of the proposal made by the Association of manufacturers of corporate trademarks. First, we should arrange for staff training based on the best experience of their specialists. Let them train their staff and well select the best as the backbone to proceed with forming these units.

Because if we allocate established posts now, there will be staff to recruit. The best thing to do, in my opinion, is to prepare first before making a decision. And what is your opinion? If they give us a shoulder and share the intellectual assets, and maybe the material resources, with us, then we may expect this to happen in a shorter time, but most importantly at higher quality.

 A.KUDRIASHOV

Vladimir Alexandrovich, our contacts are very well established, that is, we conduct a lot of joint workshops and training courses. So, we are starting from scratch. Our problem is that major customhouses, controlling a high volume of traffic of these commodities, have non-tariff control departments at best.

V.SHAMAKHOV

Well, youre speaking about what I started to ask you about.

A.KUDRIASHOV

 In my opinion, we have nobody to train, yet. Well, maybe a couple of customs officers, assigned to military technical control, control of licenses and safety certificates.

V.SHAMAKHOV

 Well, let us train those who, today, simply carry out customs control, control of goods. Lets have them trained first, and then re-profiled. Do you have any objections to this approach?

A.KUDRIASHOV

No objections.

V.SHAMAKHOV

Very well, thank you. Take a seat, please. Well, all talks on the item have been made. Now, are there any opinions, assertions, proposals? Yes, please.

A.AGALAROV

 I would like to raise a problem which, worldwide, has never been solved. The matter is that for us, importers, this issue is very interesting and pressing, and it should have been solved before. I am talking about the issue of distribution. An authorized distributor or a right-holder has exclusive right to commodity importation, which is very advantageous for him. But there is a very delicate moment, which Id like to warn you about. It is easy to identify a counterfeited commodity item, as it is clear that its manufacturer is unknown.

However, there is a practice around the world of importing real goods under real contracts, but not according to the right-holder. Relatively speaking, a certain commodity is sold to a certain country, where it is not realized. Then, it is re-contracted intentionally or unintentionally you never know, and consequently, transported to another country and another person, who has no rights but only this contract and the payment effected. How can we suppress this process? What do they do in America? If General Electric refrigerators are returned to the distribution network by an unauthorized distributor, due to price differences the company is forced to buy this commodity back in order to remove it from the market. I wanted to raise this issue in order to make us all aware of it at the stage of preparation and discussion, and to try to avoid such problems in the future.

Thanks.

V.SHAMAKHOV

Yes, thank you. Maybe this subject matter is worth discussing in the framework of the first item of the agenda as well. It may take significance of the Code or it may not. We might even think of forming a separate workshop.

S.KATYRIN

The draft resolution contains a proposal on forming a workshop. I believe that in the framework of this workshop it will be possible to discuss the above problem and to consider it from many angles.

V.SHAMAKHOV

We shall mark it out by all means, thank you. Anything else, please?

S.KATYRIN

I would like to put forward the motion to adopt the resolution. It is clearly stated, reflecting practically everything proposed by both co-speakers.

V.SHAMAKHOV

 We still have one of our main fighters: Vladimir Matveevitch Egorov from the Main Administration for Contraband Control. V.M.EGOROV With respect to the motion by Alexei Valentinovich, I would like to identify a few problems. Customs authorities are faced with this problem, but it must be remembered that today, if we do our job in the framework of administrative procedure, and expose law breakers in the framework of administrative procedure, we are not allowed to carry out operational investigations.

 We are not legally authorized to do this. Yes, we do expose counterfeited commodities and the illegal use of trademarks, but once exposed, including by operational investigation, all materials are transferred to internal affairs authorities in accordance with the relevant article of the Procedural Criminal Code, which prohibits us to handle this type of crime. In this regard, if we talk about forming a corresponding unit, which would be engaged in law enforcement too, the business community would have to come up with a proposal to make a corresponding article of the Criminal Code to be a competence of customs authorities. It will make the whole process complete within the administrative procedure. But we do work and, naturally, we will carry on exposing crimes in this region. Thanks.

V.SHAMAKHOV

Yes, it is clear.

 A.POPOVICHEV

 In order to continue, I would like to say that, firstly, it is vital for us to uncover penetration channels. Secondly, you are absolutely right in stating the importance of modifying the law, and that it has big holes. And we work along this line too. So, quite recently a working team was formed as an attachment to Mr. Draganovs Committee, and exhaustive amendments were collected from various associations on different trends and, of course, well take into account your proposals as well. And now, would you allow my colleague from NIKE to have his say.

V.SHAMAKHOV

Yes, welcome.

K.REINOT

Thanks a lot for this opportunity. My name is Constantine Reinot. I represent the company NIKE manufacturer of sports articles. I would like to make a few comments on the issue of protection of intellectual property. Primarily, on the matter of seminars, training and forming of task units. You know, I have been working for a long time along this line, and our experience shows that forming these units, and allocation of staff are of primary importance. Ill explain why. Because based on experience

V.SHAMAKHOV

 Whose experience? Do you mean that you have already formed task units? K.A.REINOT No, but our work, experience, our association experience, seminars in which we took part together with the Customs Service they all indicate that the hiring of staff is key, as experience has shown a high efficiency of training. Secondly, these task units, once formed, or the people allocated for this purpose, must be given, so to speak, a certain degree of independence. Because, for instance, the arrangement of filing of applications on account of our trademarks has a specific build-up. For example, the central region works very efficiently, I mean, they file a lot of applications, and many administrative cases were opened and successfully secured. They did a fine job.

V.SHAMAKHOV

 Who has a lot of applications, you? Please, be more specific.

K.REINOT

 I mean applications from customs houses, filed on account of seized counterfeited commodities.

V.SHAMAKHOV

Applications addressed to whom?

.REINOT

Addressed to us as a right-holder, because we must file applications, carry out examinations, etc. For instance, there have been no applications on account of seized counterfeit commodities from the Far East Region, though according to our information, vast amounts of counterfeits are delivered across China and distributed in the Far East.

V.SHAMAKHOV

Well, please give your information.

 .REINOT

I do not give information.

V.SHAMAKHOV

 Hold on, you say that according to your information, a vast amount of commodities was crossing customs borders. So, please, submit this information.

.REINOT

 Once again, Id like to point out that we must submit this information to the structures directly responsible for that.

V. SHAMAKHOV

 We have a relevant agency the Main Administration for Contraband Control.

V.EGOROV

 I am prepared to have a meeting with you to discuss it. I am always most willing to accept any information on the illegal conveyance of commodities across the customs border.

 K.REINOT

The second problem lies in seizure of the commodity immediately it crosses the state border, which is preferable to a consequent search for this commodity on the market.

V.SHAMAKHOV

Well, you know, this is under the jurisdiction of customs, not NIKE.

K.REINOT

I understand. Now, a few words on the matter of so called gray import. Today, an effective tool is provided to counteract this type of illegal import as, in accordance with the law on trademarks, any unauthorized import is considered to be a counterfeited commodity. This is just to comment that according to the law it is not a counterfeited commodity. Thank you.

V.SHAMAKHOV

Tatyana Nikolayevna, welcome.

 T.GOLENDEEVA

 Dear ladies and gentlemen!

I understand that this subject matter is very topical, and I know that we will hold more than one advisory council and council of experts dedicated to this matter. In my opinion, it is worth noting that the dynamic activities of customs authorities in respect of protection of intellectual property were initiated mainly by the enforcement of the new Customs Code, and these activities are intensifying and gathering strength. Yes, it is true that today there is a lack of personnel dealing with this subject matter.

We share your opinion in this regard. In part, the way we organize our activity, building it up skillfully, is evidence of the civilized approaches of customs authorities. You are well aware that for any country the work level of protection of intellectual property is a very important estimate value for entry into the World Customs Organization and, naturally, we must concern ourselves in full with this subject matter. We have had discussions long enough covering the lack of our knowledge in this field. And at times, according to Aras Iskanderovich, we are faced with matters of opinion on protection of property, where a commodity is unlikely to be counterfeited though, nonetheless, the importer does not have the authority for its realization; and stock purchase of alcohol beverages all these are a puzzling task for us.

We do not know the level of legal skill in the follow-up of these deliveries, etc. Therefore, we attach importance to the analysis of international experience. We never begrudge our personnel to go on business trips. We assign quite a lot of personnel of the Main Administration for Commodity Items and Trade Restrictions to go on business trips to the United States of America and to Europe to study international practices.

 You are aware of a scheduled council of experts to be held in the near future, sometime at the beginning of August, on the subject matter of law modification in respect of imported alcoholic beverages. It means that we reconsider certain points, regarding both the importation of goods, their labeling, etc. In this regard, I believe, well have full understanding, because our competence and expediency in carrying out our activities without close contact with you, without information support, including that on international standards and regulations, will not be efficient enough to raise these activities up to an adequate level. Therefore, we unanimously accept all the proposals made today.

As the Deputy supervising these activities, I am prepared to organize this activity consistently, so that we, and I emphasize this again, must meet all requirements, set up in front of the Customs Service. We set about this work actively and in full scale, probably at the beginning of 2004 and, as of today, we must properly allocate our resources, because it is more efficient to elaborate and make legally competent decisions at the central staff level than to scatter the strength of the personnel, resulting in inadequate decisions.

 I believe we must be consistent in our actions towards the solution of the designated problems. In my opinion, life, over time, will put everything right, and with the growing status and importance of these activities, these units will be formed gradually, in stages, based on the scope of customs clearance, location of a region, specifics, etc. Thank you. Accordingly, I believe that all requests and proposals made in the framework of our cooperation will be welcomed.

V.SHAMAKHOV

Thank you, Tatyana Nikolayevna.

 It was about to be a closing talk. May we then carry forward to the resolution? We have its draft. No substantial comments or fundamental amendments have been made. Should we, perhaps, adopt it as the original draft? But there is a slight addition Id like to make. I was cut to the quick by the statement concerning openness of right-holders in providing customs authorities with a free approach and access to information in search of the holders assistance. It seems to me that right-holders, no less than customs authorities, should be concerned about doing away with counterfeited commodities. And we do not need any extra task units to turn to for help they are available. So, we are expecting your information about those, infringing and undermining the image of trademarks, which interfere with the nations health, etc.

 I mean, we would like to welcome a better activity of making these proposals as well as the efforts of the secret services, created by many major companies. I believe it should be made a point of issue in the framework of the workshop. Vladimir Matveevich has expressed the readiness and willingness of our law enforcement units to take part in this workshop. Therefore, we are most interested in and motivated towards two-way information interchange. Thank you. Are there any objections on the resolution? No. Thanks. Well, then I declare the resolution adopted. Now, lets proceed to Item 4, which is in the Section Miscellaneous, concerning customs clearance of pharmaceuticals and medicines. Vadim Gennadievich Muziayev President of the Public Corporation PROTECH.

V.MUZIAYEV

Dear Chairman! Dear members of the Advisory Council! In my talk today I would like to place emphasis on certain problems of customs clearance of the pharmaceuticals, which, in our opinion, require attention and a possible solution, especially in the process of implementing the federal program BENEFIT-2005, or as it is also known the EBA program extra benefit award program. Here is some statistics related to this program. You know that 50.8 billion US dollars were subsidized for benefit users.

Today this category of benefit users includes a little over 14 million people, and it is still growing. It makes up over 10% of the population, who are lacking social security. In the framework of this program the share of imported medicine within the EBA program assortment is 58%. It comprises 1219 items out of the 2115 listed drugs. Domestic pharmaceutical manufacturing companies are developing, and the share of Russian drugs in the EBA market is 10% more than in the commercial market, though the amount of Russian drugs in this market constitutes only 30% of the total value. In 2004, the size of the pharmaceutical market in Russia in distribution prices amounted to only 4.3 billion US dollars.

The BENEFIT program amounted to 50,8 billion US dollars. You can look to find the amount of financial means allocated by the Federal Government to satisfy the populations demand for drugs. In 2005, taking into account the Federal program and the predictions that the pharmaceutical market will grow from approximately 25% to 35%, while in 2006 it is supposed to increase from 15 to 20%, the overall share of imported medicine in the Russian market, as I have noted, is 70% of the program of the subsidized and commercial market. Hence, the issue of customs clearance is of primary importance in terms of ensuring the stability of drugs delivery to the retail industry.

Today, a new stage of drug market development is closing in. In connection with the implementation of the Federal program, imported medicine tends to change both in terms of structure and composition, making it, therefore, imperative for customs authorities to obtain online and reliable information in respect of pharmaceuticals and corresponding raw materials imported to our country, and in terms of importance of the frame standards approved by the WCO as the basis for this activity.

 On the 12th of May, Mr. Michel Danet, Secretary General of the World Customs Organization, paid a visit to Moscow. In the Russian capital he met with representatives from the business circle and government agencies, and in his presentation he laid out 4 principles of the framework document signed by the WCO. The Association of Trade Pharmaceutical Organizations declares its full support to the idea of the necessity of introduction of regulations and standards, provided by this document.

They cover both preliminary information distribution, electronic declaration, the risk management system and establishing a close partnership between customs authorities and enterprises. All of these principles are laid into the Concept of the RF Customs Service development, extending up to 2010 and aimed at enhancing the quality of state control, improving customs management under streamlined procedures of time reduction for customs clearance of passengers, commodities and transport vehicles, and at consolidating interaction with international organizations in all countries. According to the statements made today, our national customs authorities have entered the current stage of transition from total commodity control to commodity information control. We consider it to be a revolutionary decision, and I think all of us are very clear on the relevancy of this approach. Even today, many enterprises in the pharmaceutical industry make active use of the ideas and standards of the Concept. With absolute certainty I can say the same about the company PROTECH.

 We lead todays national pharmaceutical market; the annual sales of our holding company amounted to 12 billion US dollars last year, and let me remind you that more than 70% of the turnover resulted from sales of imported pharmaceuticals and medicine. Maybe it is to our regret. In 2005, we plan to increase the turnover by 20-30%. Because all this arrangement will affect the companys deductions as customs, tax and other charges, collected to budgets of all levels. At present, the process design of customs clearance of pharmaceuticals and medicine, developed by our company in cooperation with the FCS of Russia specialists and reflected in Instruction 9-, dated September 20, 2004, has already given fruitful results to the state as additional replenishment of its treasury in the form of taxes and receipts, whereas for business streamlined procedures of customs clearance, cost reduction of imported commodities and acceleration of transfer of medicines to pharmaceutical institutions. Unfortunately, the above technologies do not include the elements of electronic information interchange between customs authorities and participants of foreign trade. It may be underlined that the pharmaceutical market is currently growing in Russia.

 Only in the framework of our holding a full-cycle ampoule production facility has been recently launched in the Sergiev-Posadsky district of the Moscow region. Its annual production capacity is more than 100 million ampoules. It is natural that this facility, constructed according to all process standards, necessitates fail-safety of the manufacturing process, requiring the organization of regular import deliveries of raw materials necessary for the manufacture of medicaments, packing material and laboratory engineering.

Today I can point out the extensive recovery of pharmaceutical production in Russia. At least 3 or 4 pharmaceutical manufacturing facilities are commissioned annually, making their contribution to national safety by driving out imported medicaments and replacing them with domestic ones. In order to provide for the uninterrupted manufacturing process of these facilities, as Ive said, it is vital to ensure delivery of raw materials, because of the fact that, unfortunately, production of all substances, once available in Soviet times, is left abroad, either found in the Baltic states, or as a result of the necessity to take their deliveries from Germany, China and India.

 This complicated process can be optimized as a whole by improving existing techniques in technological development and customs clearance of pharmaceuticals on the basis of the standards, worked out by the WCO and the Concept of the FCS of Russia development. I would like you to note a few problems faced by participants of the pharmaceutical market and related to customs clearance of medicines and pharmaceuticals. Today, the unavailability of the facility of calculation of the customs value of medicines imported in the framework of the program BENEFIT-2005 makes the distributor members of this program completely dependent upon the situation.

 I would like to make a request for the involvement of the Association of Trade Pharmaceutical Organization in the development of a relevant facility of teamwork, carried out today by the FCS of Russia and the Roszdravnadzor (National Health Control Committee of Russia). At present, the facility providing customs authorities with the option of carrying out control according to licenses, granted by the Ministry of Economic Development and Trade of the Russian Federation in respect of medicines, is somewhat improper.

 Id like to request the Main Administration for Commodity Items and Trade Restrictions to join us in an appraisal of the possibility of modification of the control facility in consideration of specificity of production and packing of medicines and, if necessary, to intercede the Ministry of Economic Development and Trade of the Russian Federation for introduction of amendments into the regulatory and legal framework, in respect of control exerted over imported licensable commodities.

This is represented in more detail in Attachment 1, which has been distributed to you, gentlemen. As far as the electronic declaration issue is concerned, Id like to point out the following. Unfortunately, we are unable to improve the efficiency of existing modern technology, as the effective law gives no chance of implementation of electronic declaration of pharmaceuticals and medicines. In this respect, it is also important to amend the regulatory and legal framework.

As I have already mentioned, the underlying principle of the Concept of development of foreign trade relationships is computer-aided preliminary data exchange, implying stringent preliminary distribution of information, improvement of the risk management system, streamlining of customs control procedures, selective control, post-audit and of the integrated computer-aided system for data acquisition, storage and processing under all types of state supervision. In consideration of Order 9, issued by the Ministry of Economic Development of Russia regarding the enforcement of Article 68 of the Customs Code, it would seem appropriate for the pharmaceutical market to acquire the technology of customs control of medicines with application of electronic information distribution within the existing legal framework.

It would be another step forward in accordance with the Concept proposed by the FCS of Russia in respect of development of the customs service and with the framework document on development of foreign trade relationship. I would like to request the Advisory Council to include in their schedule of measures on the realization of customs policy the development of customs clearance technology with application of information exchange elements for major companies operating in the market of pharmaceuticals. Thank you for your attention.

V.SHAMAKHOV

Yes, thank you, Vadim Gennadievitch.

Youve made quite a number of proposals. I would like to request the heads of the FCS of Russia departments, Viktor Vasilievitch and Alexander Borisovich to avoid a detailed account of all activities carried out along this line - this is well known - but, instead, make your talks reflect the response to the proposals made by PROTECH, and express your proposals to deliver them to members of the Advisory Council.

Your business report is not required. Any objections? The only note Id like to make concerning the talk made by Vadim Gennadievich, is that it was the last proposal, which might be very topical, but can hardly be expected to be made in the framework of the Advisory Council.

 S.KATYRIN

In the framework of a higher-level meeting.

V.SHAMAKHOV

Right, this proposal will be subject to consideration of a different level.

S.KATYRIN

Well, I think any initiative is punishable. My proposal is to develop this program and to offer it to customhouses to consider its introduction practicability for them and for the rest of potential users.

V.MUZIAYEV

Well, I think it will be more efficient. I am basing this on our experience, and all heads of administrations in attendance today are aware of the experience we gained in the development of process designs introduced under Order 9, which enabled us to achieve appreciable success. I believe the results would have been more effective, should we have joined our efforts.

V.SHAMAKHOV

Thanks. We have no objections. Now, Viktor Vasilievich, take the floor, please.

 V.DIYATCHENKO

Ill make this brief. Well, first of all, I would like to say that the process design implemented under Order 9 failed to provide for the allocation of a single kopeck to the budget, and I regard it as a positive result, because it has justified the reputation of PROTECH

. This process design was beneficial particularly for business and, based on the practice, seriously enough. This is just to inform you: in the Russian Federation today there are 610 organizations and enterprises operating as suppliers of imported medicines, and its worth noting that the top ten of these enterprises yield 52% of the cost amount of importation of medicines, against 40% of their weight amount. Among these ten, the firm PROTECH takes second place, and based on the above proposals, we closely cooperate with them. The basic technology in existence today contains all provisions regarding issues of distribution of preliminary information.

These provisions are implemented, including those regarding medicines, and there are no obstacles to the distribution of preliminary information to customs authorities. And, in fact, it is not distributed. In the framework of the Concept of distribution of preliminary information, in the future we shall have definitely more opportunities, particularly, gaining more from application of distribution of preliminary information.

The government and the customs service will benefit too. In respect to electronic declaration, indeed there are certain restrictions, familiar to everybody in this context, but I believe we should not take into consideration only electronic declaration itself, but distribution of preliminary information, thus enabling customs services to have their actions planned by the moment of arrival of medicines. Article 68 of the Customs Code opened the door for the application of streamlined procedures, and well not specify their purpose gain, and for the benefit of PROTECH as well.

We are always ready to consider applications, filed in the framework of Order 9 dated 27.01.2005, issued by the Ministry of Economic Development of Russia, as well as anything you consider appropriate for the purpose of streamlining procedures. Dear Vadim Gennadievich and dear members of the Advisory Council! Dear representatives of the business community! I would like to draw your attention to the importance of a very careful way of writing applications requesting the FCS of Russia to provide a streamlined procedure.

It applies also to implicit fulfillment of the requirements of Order 9, issued by the Ministry of Economic Development of Russia. Why do I mention it? Because as of today, 138 applications have been filed to the FCS of Russia with 33 obtaining permission and 67 refusals, the rest being processed. Reasons for rejections are failure to submit documents and data prescribed by the order, non-fulfillment of the criteria established by the Customs Code, and simple absence of signatures and of the chief accountants seal. So, careful treatment of this problem is strongly recommended.

Certainly, the market of pharmaceuticals and medicine has its specifics, and they are easier for you to understand. PROTECH might be more familiar with customs subjects, and it would be practicable for the FCS of Russia to consider proposals made not only by PROTECH, but, say, by the first 10 or 15 companies of the pharmaceutical market or to represent the association.

V.MOUZIYAEV

In the Advisory Council we represent the Association of Trade Pharmaceutical Organizations (ATPO), which includes these ten and many more companies. In fact, PROTECH is a co-founder of the Association and I am the president of PROTECH.

V.SHAMAKHOV

 Thank you.

To this end, it would probably be appropriate to refine slightly the proposal made by the Main Administration for Organization of Customs Control and to recommend associations and companies operating in this market to make use of streamlined procedures to optimize their customs control technologies in accordance with Article 68, as well as to prepare proposals on establishing one separate technology relevant to this commodity. Thank you. Alexander Borisovich, welcome, please.

A.VORONIN

Dear participants of the Advisory Council! As noted by Vadim Gennadievich, the share of imported medicines in the BENEFIT-2005 program is over 50%. At the same time, the share of specially imported medicine is 20% more than the amount of normal import. Under these conditions the issue of calculation of customs value becomes rather topical, both for customs authorities and for the market players. At the same time we cannot deny the importance of the quantities of medicines imported under the BENEFIT-2005 program.

So, for the purpose of elaboration of measures on keeping record and control of medicines imported into the Russian Federation under the BENEFIT-2005 program, the FCS of Russia together with Roszdravnadzor (National Health Control Committee of Russia) reached an agreement on the exchange of relevant information. In particular, Roszdravnadzor will have to submit to the FCS of Russia a list of imported medicaments intended for easy terms, supplies of medicaments for individual social groups with an indication of the country of origin, manufacturer, and total amount and cost of these medicaments. Under this agreement, subject to submission, are also copies of issued certificates, import licenses for the medicines, and information regarding the sellers and manufacturers of the medicaments, with submission of copies of foreign trade contracts.

The agreement is currently being prepared by the FCS of Russia and Roszdravnadzor, providing for adjustment of all problems with information interchange. In our opinion, this interaction will facilitate the establishment of importation without reduction of business activities, while we shall only welcome proposals made by ATPO in respect of participation, and we are pleased that the conference is marked not by finding faults with customs authorities but by calls for cooperation, and cooperation is what we are always ready for in general terms. Thank you.

V.SHAMAKHOV

Is anybody willing to take the floor? No. Thanks. We have a draft resolution on the matter in question, but in fact, it provides a summary of what we have been discussing. I would only suggest we should replace PROTECH with ATPO. Any objections? Agreed? Thank you. Well proceed to the last sub-item, concerning the agenda of the Councils session on September 23, that is, the next meeting. Id like to note that we have at least 3 items for each meeting. Is that too much in your opinion? Normal? Today weve had, in fact, 4 as an exception.

I believe if wed had 3 items, our work would not have been so tiresome. So, do you think it normal to have 3 items? Secondly, together with Sergei Nikolayevich we decided that it is not very effective to have 2 or 3 speakers representing one agency. Therefore, on our behalf we are ready to accept the 1+1 variant, meaning one speaker representing business and one the FCS of Russia, and others will take part in debate. Shall we accept it as a basis? Do you agree?

Now, we have the very last point at issue, regarding the information presented by Evtushenko. Once it was coordinated with Vladimir Petrivich. Yes? I did not see him in attendance at any meeting. Was it really coordinated? Well, fine. Well, are there any comments, proposals or amendments to the draft agenda of the next meeting? May I thank you for your work.

I wish you a pleasant weekend and see you next time.



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