Seven years after the creation of the Commonwealth of Independent States (CIS)—comprising the countries of the former Soviet Union minus the three Baltic states—some of its political leaders seem to be agreeing on one focus point: its development into a customs union for the ex-Soviet territory.

Until 1992 a common market existed among the republics of the former Soviet Union. Goods moved freely from one republic to another, although there were limits on what could leave and enter the Soviet Union itself. Following the independence of Latvia, Lithuania, and Estonia, the remaining republics put into place the trappings of sovereignty—including local currencies, central banks, border controls, and national customs authorities. In practice, however, this hindered the economic development of the region. Although most of the CIS customs codes were originally based on 20-year-old Soviet regulations, they have long since diverged, thanks to a stream of executive and legislative orders followed by a second wave of orders detailing how each piece of legislation was to be implemented.

Customs Functions

Answers to the fundamental question of what customs is meant to achieve differ depending on the interest of the CIS member. Russia—which aims to generate up to 45 percent of government revenue through customs—Belarus, and Ukraine have traditionally viewed the customs process first and foremost as a revenue earner rather than as a method for stimulating trade. The Central Asian and Caucasus states have generally been more determined to develop foreign investment by easing customs restrictions.

Some observers claim the Iron Curtain has been replaced by a curtain of red tape. Companies that previously dealt with one set of strict, but relatively clear customs procedures now must deal with at least 13 sets. There is widespread confusion and a lack of clarity about how customs rules should be applied, and interpretations of the rules can vary from one customs point to another, even within the same city!

Unwanted Diversity

This lack of clarity has resulted in customs officials going to extremes to err on the side of caution. Every "t" must be crossed and every "i" dotted. Required documentation can be refused even when minor typographical errors are made. For example, an airway bill can be refused if two digits of a 10-digit number are written incorrectly, even if the bill itself and other documents quote the number correctly.

Sending a product for repair or return under warranty can also be fiendishly complicated. While the practice of an individual temporarily exporting and re-importing a warranty item without being subject to duties is accepted as normal in the West, in the CIS such transactions are subject to extensive registration and licensing, often leading to additional rounds of paperwork and delays every time a piece of machinery needs to be fixed.

Resistance to Creation of a Customs Union

From the point of view of some of the CIS countries, there are as many reasons not to cooperate more closely with their neighbors as there are reasons to cooperate. First, there is the fear of going under during any future Russian economic meltdown, something that encourages each state to look beyond its borders for new trade routes (such as the Silk Road project and the southern pipelines). Second, there is the natural resistance of nationalism and the many unresolved conflicts between CIS countries (such as that between Armenia and Azerbaijan). Consider the difficulties that even the stable, like-minded governments making up the European Union have faced while attempting to create their own common market.

Nevertheless, the CIS countries still have a common language (despite nationalist tendencies, Russian is still the lingua franca of the CIS states), a shared history (including shared problems as a result of trying to adapt to a market system), and economic interdependency. For these reasons most multinationals, including DHL, continue to reflect the CIS in their organizational and commercial structures.

Solutions

DHL’s approach to customs in the CIS is on a country-by-country basis, with common long-term goals but differing issues. The best short-term solution available may be multilateral movement toward simplifying procedures, increasing automation in the customs process, establishing a consistent interpretation of customs regulations, and continuing to empower the companies that perform clearance. In themselves, these steps would be a huge improvement on the current state of affairs. At a political level, there is now a realization that the mountains of paperwork and bureaucracy in the CIS need to be reduced.

Unified Approach?

In November 1998, Russian Prime Minister Yevgeniy Primakov stated that bringing back a common economic space "is the way towards the economic revival of the CIS countries." Primakov expressed the hope that an initial customs union involving Belarus, Kazakhstan, the Kyrgyz Republic, and Russia could be extended to all 12 countries in the CIS—to facilitate their integration into the world community rather than isolate them from it. CIS Executive Secretary Boris Berezovsky backed up this notion when he said that the CIS should "follow the example of the European Union. The creation of a free trade zone seems the best option, with common customs regulations and a common economic space aimed at facilitating market-based relations."

As the leading air express carrier in all the CIS states, DHL has a keen interest in any steps that would support trade within and with the CIS to the benefit of DHL customers, who are the largest investors in the area. Far from undermining individual sovereignty, a unified CIS approach to trade would serve each member’s best interests and open them up to further trade and investment opportunities.