The expert of Stepanovski, Papakul and Partners Attorneys-at-Law Alexey Korol sheds light upon the legal aspects of export.
It is no secret that doing business is like crossing a minefield: it is easy to make an error, which can often become lethal for the business, not to mention doing business abroad. In the latter case, the probability of an error would be several times higher.
How can one avoid a sad outcome? We cannot save you from all risks. We shall do what we can: we shall shed light on the three popular errors and give practical advice, how to avoid them.
Error No. 1. Non-monetary extinguishment of obligations on foreign economic transactions
Example. You have supplied goods to a foreign company, and you were not paid on time. As a result, you have arrears under a foreign trade contract. The foreign company, in its turn, provided to you consultancy services, for which you failed to pay on time, as well. Thus, both parties have similar, though not counter, financial obligations. Therefore, it would be more profitable (saving on bank fees, at least) and reasonable to set off such claims without mutual bank transfers.
Basic rule: The list of methods of non-monetary extinguishment of obligations at export is strictly defined [1], and is applicable to export-oriented foreign trade transactions only.
Export
Error: not all forms of non-monetary extinguishment of obligations are allowed in Belarus. A common example: – set-off of mutual claims arising from a foreign economic (not foreign trade) contract. This method is applicable to foreign trade contracts only!
What should be done: An exhaustive list of permissible methods of non-monetary extinguishment of obligations is approved by the Council of Ministers of the Republic of Belarus. Please check with the list.
Import
Error: non-monetary extinguishment of obligations at import is not stipulated by the current laws. A common example – completion of an import-oriented foreign trade transaction with payment of a premium/bonus.
What shall be done: the legislation does not provide for the option and situations of completion of an import-oriented foreign trade transaction with non-monetary extinguishment of obligations. However, since there is no liability established for such actions, this instrument is actively used in practice.
Error No. 2. Late completion of foreign trade operations
Example. You have concluded an export-oriented foreign trade contract for supply of goods, but you cannot complete the transaction in time, as your counterparty fails to pay for goods by the deadline.
Basic rule: period of completion of foreign trade transactions: export – up to 90, import – up to 60 calendar days.
What should be done: when you realize that you cannot meet the deadline, you need to ask the National Bank of the Republic of Belarus for extension.
What may happen: failure to meet this obligation entails administrative measures! Even if the delay is the fault of your counterparty, not you – the measures will be applied against you only.
Error No. 3. Failure to meet a formal approach
Example: You successfully supplied some goods to Country A. You also submitted a declaration but made some errors in it (an arithmetical error, a typing error, etc., in other words, you accidentally, without any such intentions, entered false data).
Basic rule: In specified circumstances under an executed foreign trade contract, residents should submit a statistical declaration/periodic statistical declaration on export/import dispatch/delivery of goods to the Center for Statistical Declaring (Clause 1.16.1 of Edict 178).
Pursuant to Resolution of the Council of Ministers of the Republic of Belarus No. 549 of 30.04.2009 “On Statistical Declaration of Goods” (hereinafter, Resolution 549):
A statistical declaration shall be submitted on dispatch/delivery of goods with a total cost of Euro 1,000 and more.
A periodic statistical declaration for two and more instances of dispatch/delivery of goods for the reporting month under one foreign trade contract shall be submitted, when the total value of goods dispatched/delivered is Euro 1,000 and more.
What should be done: meet the formalities – submit a relevant declaration to the Center for Statistical Declaring. Carefully check the declaration for all discrepancies – inconsistencies, arithmetical errors, typing errors, etc.
What may happen: this offense is subject to administrative liability (Article 11.42 of the Administrative Offense Code of the Republic of Belarus (hereinafter, the AOC)). There is a risk of prosecution, when information is inaccurate. The penalty is 5-20 basic units for an individual entrepreneur or a legal entity – up to 20% of the contract value of the goods exported/imported.
Literally interpreted, the article implies that a penalty applies only to the value of the goods that were misreported in the declaration. In reality, competent agencies generally consider the contractual value of the entire amount of goods supplied under one foreign trade contract, rather than that of an individual dispatch/delivery.
Even if the incorrectness is caused by a typing or arithmetical error, you will be held liable for it. It is important that, according to Article 3.5 of the Administrative Offense Code, a legal entity shall be adjudged guilty of committing an administrative offense, if it is found that they have not complied with standards/rules, which are subject to administrative liability, or that they have not taken measures to comply with the current standards/rules. Thus, the guilt of the legal entity is established in the event of an insignificant fact of formal non-compliance with statutory requirements (e.g., a technical error made by an employee when filling out the statistical declaration, unless that person took all measures to ensure compliance, i.e., if the error has not been removed before submission of the statistical declaration to customs agencies).
As we see, one can easily make an error in foreign economic transactions: even a minor typing error in documentation may entail administrative liability. The only way out lies in careful control over all export and import transactions of your company, and in monitoring legislative changes.
[1] Resolution of the Council of Ministers of the Republic of Belarus, the National Bank of the Republic of Belarus No. 548/8 of 30.04.2009 (as revised on 11.02.2010) “On Certain Issues of Extinguishment of Obligations on Export Oriented Foreign Trade Transactions and Foreign Trade Contracts at Repurchase of Leased Assets”.
