Liability for Failure to Return Foreign Currency Proceeds
The obligation to credit foreign currency proceeds from export transactions to an account is provided for by Art. 5 of the Federal Law On Exchange Regulation and Control, para. 8 of the Decree of the President of RF No. 629 dated 14.06.1992 On Alteration of the Procedure of Obligatory Sale of Some Portion of the Foreign Currency Proceeds and Export Duties Exemption (effective in the version of 23.12.2000), para. 2.1. of the Directions No. 86-I dated 13.10.1999 On the Procedure of the Exchange Control over Receipt in RF of Foreign Currency Proceeds from Goods Export (effective in the version of 24.06.2002), Art. 98 of the Customs Code of RF.
Foreign currency proceeds received from exchange operations in export transactions must be credited to an account. The overall term of a continued exchange operation, that does not require approval of the Central Bank, within which the foreign currency proceeds should be received from a non-resident and credited to a resident's account is 90 days.
Law No. 72 dated 31.05.2001 introduced amendments to the Law On Exchange Regulation and Control with respect to certain goods, pursuant whereto the term of return of the foreign currency proceeds from export of these goods has been increased to 3 years.
However, it should be taken into account that the imperative rule of Art. 5 of the Customs Code of RF requires that those legal acts be applied to customs operations which are operative on the date of a customs declaration acceptance. Therefore, the aforementioned amendments cannot be automatically extended to the relations that had arisen before the amendments came into force.
In the event the goods were exported before adoption of the law amendments, the contract and the transaction passport should be amended respectively in order the provisions, related to the change of the term of a continued exchange operation, which does not require approval of the Central Bank, might be extended to the relations arising out of the foreign trade contract entered into before the amendments became effective. Otherwise, there will appear grounds for application of relative sanctions to the exporter for failure to return foreign currency proceeds within the term fixed in the contract and the transaction passport.
By signing a transaction passport an exporter undertakes to have foreign currency proceeds credited to an account in the whole amount and within the fixed period (para. 3.2 of Directions No. 86-I On the Procedure of the Exchange Control over Receipt in RF of Foreign Currency Proceeds from Goods Export). At that, the exporter is obliged to take all measures for receipt of the proceeds from the importer of the goods to guarantee crediting thereof to an account opened with a qualified bank
The exporter's efforts to receive foreign currency proceeds and that he acted without any intent to conceal the receipt thereof may be evidenced by:
- an action seeking recovery of the sums of money to be paid by the non-resident for the goods delivered by the exporter, filed before a court competent to consider such disputes in accordance with the terms and conditions of the foreign trade contract;
- an application to the respective institutions of RF and possibly to the counter agent's state institutions with the view of obtaining conclusions that objective reasons conditioned failure to return timely the foreign currency proceeds.
Failure to return the foreign currency proceeds as well as to undertake measures for receipt thereof is an offense against the customs regulations of export and falls under the operation of Art. 273 of the Customs Code of RF setting forth liability for failure to observe restrictions, requirements, and terms of the customs regulations in the form of penalties imposed at the rate of 100 to 200 percent of the value of the goods which are the subject of the offense.
The Code of RF On Administration Offenses (the CAO of Russia) became effective as of July 1, 2002.
Art. 16.17. of the CAO of Russia provides for liability for the aforementioned administration offense, in particular: failure to meet the requirements of the customs export regulations to credit foreign currency proceeds from goods export to an account with qualified banks or to obligatorily import goods for the value equivalent to that of the exported goods, works, services, or the outcome of the intellectual activities, entails imposition on the respective officials and legal entities of administrative penalties at the rate of single to triple value of the goods being the subject of the administration offense.
According to part 1 Art. 1.7. of the CAO of Russia the person who has committed an administration offense becomes liable under then-current laws. Part 2 of the above mentioned article stipulates that the law establishing or aggravating administrative liability for an administration offense or otherwise aggravating the position of the person has no retroactive effect.
Taking into account that the provisions of Art. 16.7. of the CAO of Russia aggravate the administrative liability for such offense, the rules of the customs laws are applicable with respect both to the offender, only if it is a legal entity, and to the sanctions imposed for the offense (Art. 273 of the Customs Code of RF).
Pursuant to the provisions of part 3 Art. 1.7. of the CAO of Russia the proceedings in a case of administration offense are conducted following then-current laws. Taking it into account, the limitation period of bringing a legal entity to an administrative liability will no longer be regulated by the rules of the customs laws but by the provisions of the CAO of Russia, pursuant whereto in the case of a lasting administration offense against the customs laws of RF the court cannot deliver a ruling after one year from the date of discovery of an administration offense (para 2 Art. 4.5. of the CAO of Russia).
In addition, we advise that pursuant to the Criminal Code of RF a failure to return from abroad foreign currency funds in big amounts (more than 10,000 minimal labour remuneration rates) entails punishment in the form of imprisonment for a period of up to three years (Art. 193 of the Criminal Code of RF).