Russia faces July deadline to fix $2.2 billion trucking row

Reuters News
Posted: Apr 04, 2014 1:35 PM

By Tom Miles

GENEVA (Reuters) - Russia is inflicting $2.2 billion of annual costs on crossborder trade by enforcing illegal customs charges and inspections on trucks, the Secretary General of the International Road Transport Union said on Friday.

The IRU is a U.N.-backed organization that runs the "TIR" system of customs guarantees, intended to make road haulage cheaper and quicker. Its members - national associations of trucking firms - gave IRU's board a mandate on Friday to withdraw TIR coverage from Russia if Moscow does not fix the problem by July 1.

IRU Secretary General Umberto de Pretto told Reuters that he remained hopeful of a solution, saying it was inconceivable that Russia would drop out of a system that has guaranteed speedy border crossings for trucks across Europe since 1954.

"Nobody can imagine a world without Russia in the TIR system, and nobody can imagine how you can trade with Russia without TIR," he said after the IRU meeting in Geneva.

"Ultimately those who will suffer most are the Russians, so we cannot believe they can continue to shoot themselves in the foot with a measure that penalizes themselves most of all."

With a TIR guarantee, a driver can take a sealed cargo across multiple borders without having to undergo customs checks each time, saving time and money.

Russia effectively pulled out of the TIR system last July, with Russian Customs citing a 20 billion ruble ($567 million) debt owed to its national TIR association. The IRU said the claim was groundless, defamatory and "a complete fabrication".

The Moscow Arbitration Court subsequently found Russian Customs had defamed the association and found the head of Customs, Andrei Belyaninov, personally liable for not respecting the court decision.

Despite the ruling, and despite Russia's Economy, Finance and Transport Ministries favoring the TIR system, Russian Customs is still demanding trucks get paperwork from its subsidiary Rostek, which de Pretto says breaks the TIR rules.

"It's just a very expensive system," he said. "And worse than that, the guarantee that they've put in place is in fact not really a guarantee. There's no guarantee that the liabilities of transport operators will be covered. They're still liable 100 percent and as such it doesn't really act as an efficient or secure system, as does TIR."

Russia's government said last November that the guarantee agreement with the Russian TIR association, ASMAP, will lapse on July 1.

"People are realizing that there is not very much time ahead," de Pretto said.

"They've started a tender process to see who can actually act as the guaranteeing association ... in fact only one association today can fulfill that function. And it's ASMAP - in terms of having the financial means and the knowhow."

Russia's rules are a trade restriction in breach of international law and could be challenged at the World Trade Organization, de Pretto said.

Since Russia has a Customs Union with Belarus and Kazakhstan, which support the TIR system, many truck drivers are travelling across Belarus to go between Russia and the European Union, which de Pretto said was economically and environmentally unsustainable.

Trade across the Ukraine-Russia border had slowed down "tremendously" since the Crimea crisis, de Pretto said.

Alternative routes can add 15 percent to transportation time, and transport operators are spending up to 25 percent more time on administrative work.

A conservative figure for the immediate cost of the Russian action was $2.2 billion per year, de Pretto said. But "you could have a multiplier effect of 10 times on missed business opportunities, on small and medium-sized enterprises that will not be able to get their goods to market because of these additional costs."

Much of the trade impact is felt by Russia's smaller neighbors, such as the Baltic states, Armenia and Azerbaijan, de Pretto said. In the short term, trucking companies have absorbed the extra cost, but Russian consumers will eventually suffer, he said.

($1 = 35.2870 Russian rubles)

(Reporting by Tom Miles; Editing by Ruth Pitchford)