Is Free Trade Between Serbia and Russia Allowed

Commercial outreach of Serbia

Did you know that Serbia can serve as a manufacturing hub for duty-free exports to a market of more than 1 billion people?

This customs-free regime, established through ratified bilateral or multilateral agreements, covers most key industrial products, with only a few exceptions and annual quotas for a limited number of goods.

In such context, Serbia currently has customs-free regime with the European Union, USA, Turkey, South East Europe, the European Free Trade Agreement members, as well as Russia, Belarus, Kazakhstan, Kyrgyzstan and Armenia i.e. the Euroasian Economic Union (“EAEU”).

Free Trade between Serbia and Russia

When it comes to the Free Trade Agreement between the Euroasian Economic Union and the Republic of Serbia (“Free Trade Agreement” or “FTA”), it is worth mentioning that this FTA does not contain any substantial changes in the preferential trade relations between signatory countries, namely, Serbia, Russia, Belarus, Kazakhstan, Kyrgyzstan and Armenia.

Yet, the Free Trade Agreement does, however, consist of some new provisions that are based on World Trade Organization rules, such as provisions on protective measures, anti-dumping, technical barriers, dispute resolution, etc.

So, the FTA to a large extent and with certain adjustments reaffirms existing international obligations in bilateral agreements concluded earlier between Serbia and Russia, Belarus and Kazakhstan, with the exception that the free trade zone has been expanded to new EAEU member states, Kyrgyzstan and Armenia, and the possibility of further expansion in the event other EAEU countries join.

Goods originating from EAEU and imported to Serbia

The FTA agreement provides for the liberalization of imports of a limited number of products (taps, valves for pipelines) exported from the EAEU and imported into Serbia, while for certain types of cheese, alcoholic beverages and cigarettes preferential tariff quotas are introduced for those EAEU member states for which such products have not been liberalized. The introduced tariff quotas also apply to new EAEU member states.

The list of products exempted from preferential trade upon import into Serbia and the list of goods subject to tariff quotas are given in Annex 1 to the FTA.

Goods originating from Serbia and imported to EAEU countries

In the consolidated lists of exemptions from the free trade regime, in relation to the currently valid lists of exemptions in trade with Russia, Belarus and Kazakhstan, additional liberalization has been introduced through tariff quotas for:

• certain types of cheese in the amount of 400 tons per year,
• alcoholic beverages from wine, crushed fruit and pomace in the total amount of 35,000 litters of pure alcohol per year
• cigarettes in the amount of 2,000,000 thousand pieces per year

The list of products exempted from preferential trade and the list of goods subject to tariff quotas are given in Annex 2 to the FTA.

On the other hand, the Free Trade Agreement does not contain provisions on the method of allocating quotas, so it is up to Serbia and the EAEU signatory countries to allocate quotas automatically, in accordance with national legislation, on a first come first serve basis, or for competent authorities of the importing country to conduct the procedure for issuing licenses for their use.

Rules of Origin

The criteria needed to determine the national source of a product given in Annex 3 to the FTA have not been substantially changed in relation to the conditions of origin currently in force, and products originating in a signatory state are still considered to be:

• products wholly obtained or manufactured in a signatory state,
• products manufactured in the territory of a signatory state using materials without origin whose total value does not exceed 50% of the value of the imported product,
• products manufactured in one or more signatory states from materials originating in those signatory states (based on the cumulation principle).

But, significant change in exercising the right to the preferential trade regime refers to the cancellation of direct payment conditions.

Namely, this will allow for the introduction of intermediaries in trade from a third country, where products originating from a signatory country can be imported with exemption from customs duties even when payment is not made to a person from the territory of the exporting country.

To that end, the origin of products is proven by attaching a CT-2 form or a declaration of origin, which may be issued by the manufacturer, exporter or consignor for products whose value does not exceed EUR 5,000.

The Free Trade Agreement between Serbia and EAEU also provides for the introduction of the System of Electronic Certification of Origin (eCO) no later than two years after the FTA enters into force, which will abolish the obligation to submit the CT-2 form.

A change in the procedure of control of proof of origin is the possibility of including the customs authorities of the importing country in the procedure performed by the authorities of the exporting country, under the conditions of agreed cooperation between the competent customs authorities.

When did the Free Trade Agreement come into effect

Serbia’s Free Trade Agreement with the Eurasian Economic Union came into effect on 10 July 2021 and has already significantly increased its trade with Russia over the past year.

It is also anticipated that trade will be increased between Serbia and other signatory countries i.e. Armenia, Belarus, Kazakhstan and Kyrgyzstan.

Appropriate changes are also made to the Regulation on Harmonization of Nomenclature of Customs Tariffs for 2021.

Serbian free trade agreement network

In addition to the above countries members of EAEU, Serbia’s network of free trade agreements currently includes the following jurisdictions:

• the European Union and its 27 member states, on the basis of the Stabilization and Association Agreement,
• Iceland, Liechtenstein, Norway and Switzerland, under the EFTA Agreement,
• Albania, Bosnia and Herzegovina, Northern Macedonia, Moldova, Montenegro and Kosovo*, under the CEFTA Agreement, and
• Turkey, under the Free Trade Agreement with the Republic of Turkey.

That said, with preferential trade between Serbia and the United Kingdom of Great Britain and Northern Ireland which is expected to also take place and gain momentum, on the basis of a free trade agreement, gives an immense advantage to Serbia over other neighbouring countries in SEE.

Finally, landlocked Serbia is the only European country thus far to have an EAEU Free Trade Agreement and is also a member of China’s Belt & Road Initiative, with Beijing financing several infrastructure projects due to connect the country to coastal ports in Montenegro.

*Refers to the territory of the Autonomous Province of Kosovo and Metohija in accordance with United Nations Resolution No 1244 of 10 June 1999.