Judicial practice concerning exemptions from customs payments for temporarily imported spare parts installed on airplanes flying internationally from Russia

28 July 2023
Tax Messenger
On July 7, 2023, the Arbitration Court of Moscow Region handed down a decision on Case No. А41−49 426/2022, which involved a customs authority’s refusal to grant an exemption from customs payments on grounds that temporarily imported spare parts installed on an airplane in the Russian Federation had left the Eurasian economic union (hereinafter, EAEU) with the airplane.

Сourts at three levels upheld the position of the foreign trade participant in all respects.
Facts of the case

  • A Russian airline (hereinafter, the Airline) imported spare parts for a Boeing 737 civil airplane to the Russian Federation and placed them under the customs procedure of temporary importation (hereinafter, Spare Parts).
  • The Spare Parts were imported with a full conditional exemption from customs payments because they were designated for the maintenance and repair of airplanes (Decision No. 331, clause 25, of the Customs Union Commission of June 18, 2010).
  • After importation to the Russian Federation, the Spare Parts were installed on the airplanes (i.e. in Russia).
  • Subsequently, the airplanes with the installed Spare Parts left the Russian Federation, flying to Germany and Cyprus. These airplanes crossed the EAEU customs border as the international transport vehicle.
  • Based on a desk audit, the customs authority concluded that the Spare Parts had been used outside the EAEU, which constituted a violation of the terms for granting a full conditional exemption from customs payments (Article 222, Part 7, of the EAEU Customs Code). In the view of the customs authority, the Spare Parts should not have left EAEU customs territory before the completion of the customs procedure of temporary importation.

The Airline considered the customs authority’s decision to be illegal and took the case to arbitration court.
The court’s position

The arbitration court agreed with the Airline’s arguments, basing its decision on the following:

  • When the Spare Parts went through customs clearance, the purpose of their use was declared, and it was specifically stated that the Spare Parts were designated and would be used for the maintenance and repair of passenger airplanes. As the Spare Parts were installed on airplanes in the Russian Federation, the airline complied with the restriction on their use stipulated in Article 222, Part 7, of the EAEU Customs Code.
  • Resolution No. 331, clause 25, of the Customs Union Commission of June 18, 2010, does not restrict the categories of airplanes on which engines, spare parts and other equipment may be installed.
  • Airplanes, and not separate Spare Parts, were used as international transport vehicle and exported from EAEU customs territory, and the Spare Parts were thus never exported as separate goods.
  • An international flight of an airplane, as international transport vehicle, is not a means of relocating movable property, i.e., the Spare Parts. Therefore, special equipment, maintenance materials, fixtures and spare parts designated for the repair, maintenance and operation of a vehicle acquire the same legal status as the vehicle.
  • The law does not prohibit international transport from crossing the EAEU customs border with installed spare parts that were temporarily imported for its repair, maintenance or operation, nor does the law require completion of the customs procedure of temporary importation for such Spare parts.

Point of interest

Recently, laws and regulations have been interpreted conservatively, worsening the position of foreign trade participants. The customs authorities, when adopting decisions in connection with customs audits and supporting their position in court, often base their conservative interpretations on internal (i.e., not publicly accessible) letters of Russia’s Ministry of Finance and Federal Customs Service. In the case under review, the customs authority based its position in part on Letter No. 23−21/51 497 of Russia’s Federal Customs Service of August 30, 2021, which states that «the use of spare parts that were designated for the maintenance and repair of civil aircraft and installed on airplanes flying outside the EAEU constitutes failure by the declarant to comply with the terms of use of goods under the temporary importation procedure». Note that the court dismissed the customs authority’s argument because the letter of the Federal Customs Service is not a binding legal act and as such is not to be used by the arbitration court in considering cases.
How can B1 help?

  • Analysis of the most effective applicable customs procedures for arriving / departing airplanes and ships
  • Analysis of exemptions and preferred terms of payment of customs duty and import VAT applicable to airplanes and ships
  • Analysis of compliance with restrictions on the use of airplanes and ships under various customs procedures, their movement as international transport vehicle and the application of customs exemptions
  • Consulting on the exportation of airplanes and ships from the EAEU for repair and maintenance (analysis of the application of customs procedures and exemptions and the determination of customs value)
  • Support during customs audits
  • Administrative or judicial appeal of resolutions and actions (omissions) of the customs authorities

  • Alexandra Gorokhova
    Global trade and Customs
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