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Natural Gas Export: Challenges Of State Regulation And Control
 
PIIS231243500022438-9-1
DOI10.18572/2410-4396-2020-2-83-87
Publication type Article
Status Published
Authors
Sergey S. Koshman 
Affiliation: Saint-Petersburg State Economic University
Address: Russian Federation, St. Petersburg
Journal nameEnergy law forum
EditionIssue 2
Pages83-87
Abstract

Export of natural gas is becoming ever more important for the economy of the Russian Federation. The circumstances mentioned above, as well as the strategic value of natural gas as an energy resource make adequate legal support in the field of state regulation and control necessary. Peculiarities of natural gas customs declaration are due to specific features of natural gas as an energy resource. These include the need for continuous natural gas supply via pipelines. The quantity of natural gas supplied is determined by dedicated metering devices and specified in the corresponding monthly reports. The most pressing issues of natural gas exports include the procedures for customs declaration and customs valuation by customs authorities. The key aspect of customs declaration when exporting natural gas is that the customs applicant must submit a temporary declaration and a full declaration. With temporary periodic declaration, it is not two separate procedures that take place, but rather one, continuous procedure of customs clearance of the exported natural gas starting with submission of a temporary customs declaration by the applicant and ending with submission of a full customs declaration. The applicant specifies final information on the delivery based on the documents drawn up upon completion of the natural gas delivery in the full customs declaration. This approach means that the customs applicant should not be held administratively liable for failing to declare goods based on the information provided in the temporary customs declaration, as long as they include full details on the quantity and other supply terms in the full customs declaration. Challenges also arise during customs valuation of the exported natural gas and imposition of administrative sanctions for failure to deliver currency returns due to circumstances beyond the exporter’s control. The author offers a case law analysis of dispute settlement and suggestions on how to improve the existing legal regulation model.

Keywordsenergy law, legal regulation of natural gas export, state regulation, state control
Received06.05.2020
Publication date03.06.2020
Number of characters15966
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1 Export of natural gas is becoming ever more important for the economy of the Russian Federation. From just 138.6 billion m3 in 2010, the volume of natural gas exported in its gaseous form increased to 200.8 billion m3 in 2018. [1]
2 The Power of Siberia pipeline supplies gas to China since December 2019. [2] Under the contract for delivery of Russian gas along the “Eastern” route, 38 billion m3 of gas will be supplied to China annually [3].
3 As per statistical reports of the Russian Federal Customs Service, 219.9 billion m3 of natural gas for the amount of USD 41,633.1 billion was exported in 2019. [4]
4 The circumstances mentioned above, as well as the strategic value of natural gas as an energy resource make it necessary to ensure state control over public relations arising during natural gas exports.
5 State regulation of the natural gas export relations means that the government represented by authorized bodies takes action seeking to establish a procedure for exporting natural gas. The government implements regulation of natural gas export activities by adopting relevant international and national laws and regulations. The entirety of these laws and regulations creates a system of requirements and limitations that are to be met in order to export natural gas.
6 Principal laws and regulations governing natural gas export from the Russian Federation are the Customs Code of the Eurasian Economic Union (hereinafter referred to as the EAEU Customs Code), Federal Law No. 289 On Customs Regulation in the Russian Federation and Introduction of Amendments to Certain Laws of the Russian Federation (hereinafter referred to as the Federal Law on Customs Regulation), Federal Law No. 164 On Fundamentals of State Regulation of International Trade, Federal Law No. 117 On Gas Export, Decree of the Government of the Russian Federation No. 1694 On Approval of the Rules for Customs Valuation of Goods Exported from the Russian Federation, etc.
7 To ensure compliance with the natural gas export procedure, the government establishes state control measures, i.e., a set of actions aimed at checking the exporters’ compliance with the natural gas export regulations.
8 State control over natural gas export is implemented via authorized government bodies vested with the corresponding powers.
9 Successfully completing the customs formalities is necessary to export natural gas.
10 Natural gas export customs regulation has a number of peculiarities that are to be considered when engaging in such activities.
11 An analysis of provisions of the EAEU Customs Code shows that it is the member states of the Eurasian Economic Union that are largely responsible for regulation of natural gas export relations. First of all, it can be seen in the peculiarities of natural gas customs declaration, determination of export customs duties for natural gas, as well as in the procedure of declaring customs valuation methods for the exported goods by the customs applicant. In accordance with Article 3 Part 3 of Russian Law No. 5003-1 on the Customs Duty Rate dated May 21, 1993, export customs duty rates and the list of goods they apply to are established by the Government of the Russian Federation, unless otherwise stipulated thereby.
12 As per Decree of the Government of the Russian Federation No. 754 on Approval of Export Customs Duty Rates for Goods Exported from the Russian Federation to Countries Other than the Customs Union Treaty Parties, and Repeal of Certain Enactments of the Government of the Russian Federation dated August 30, 2013, the export customs duty for natural gas (code 2711 21 000 0 under the Foreign Economic Activity Commodity Nomenclature) is 30%.
13 The most problematic aspects of natural gas exports include the procedures for customs declaration and customs valuation by customs authorities.
14 Customs clearance of exported natural gas is performed by temporary periodic declaration. Specific aspects of such customs declaration are established in Articles 102 and 204 of the Federal Law on Customs Regulation. Consideration should be given to Article 204 of the Federal Law on Customs Regulation establishing the points of temporary periodic declaration for goods delivered via pipelines that include natural gas.
15 The key aspect of customs declaration when exporting natural gas is that the customs applicant must submit a temporary and full declarations. [5] Before making the delivery, the applicant has to submit a temporary customs declaration (TCD) stating the provisional information on the planned delivery of natural gas, and pay at least 50% of the customs duty calculated based on the information in the temporary customs declaration.
16 No later than on the 20th day of the month following the month of delivery, the applicant must submit a full customs declaration (FCD). The applicant has to specify definitive information on the actual quantity of natural gas delivered in the FCD and pay the rest of the customs duty.
17 In practice, this peculiarity of the temporary periodic declaration procedure requiring a twostep process of exported natural gas customs clearance resulted in disputes between the customs authorities and the applicant. The customs authority held companies administratively liable under Article 16.2 Part 1 of the Code of Administrative Offenses of the Russian Federation (hereinafter referred to as the CAO of Russia) for failing to declare goods, when the quantity of natural gas declared in the FCD upon completion of the export procedure exceeded the quantity stated in the TCD before the delivery.

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