CASE STUDY: SHIFT FROM EXPORT TO LOCAL PRODUCTION A GUIDANCE FOR AUSTRIAN COMPANIES

Transcription

1 CASE STUDY: SHIFT FROM EXPORT TO LOCAL PRODUCTION A GUIDANCE FOR AUSTRIAN COMPANIES Wirtschaftskammer Österreich Association of Industrial Parks of Russia Forum Investment in Russian Federation Vienna, 1 February 2018 Falk Tischendorf Attorney-at-law, Managing Partner of the Moscow office

2 2 Investment Guide: Localisation and Setup of Production in Russia, Internationales Wirtschaftsrecht / Russland, Handbuch des Vertriebsrechts

3 Import substitution = localisation under a new name? 3 Do the provisions on import substitution affect my business in Russia? What are my products (my services, my work)? Who is my client? Are there any state financing programs applicable? Are my products deemed products "Made in Russia"?

4 What does my company manufacture? Who is my client? 4 Import substitution & localisation in Russia Regulation in specific industries Automotive industry: Industrial assembly State procurement Mechanical engineering: State procurement Subsidies State financing Agricultural equipment: Subsidies State financing Pharmaceuticals/medical devices: State procurement Information technology: State procurement Electronics engineering: State procurement "Buy Local" regulations in mechanical engineering and medical devices: "Listed Investment Projects" Import permit from the Government Commission State Financing Approval of operating characteristics by the Government Commission in the event of procurements Preferential regulation - Advantage for "Made in Russia"? Preferential regulation - The main advantage for Russian-made goods when state-owned companies place orders? Specifically, applied if the tender documentation contains an explicit indication of the origin of goods

5 Overview: Preferential Regulation for "Made in Russia" 5 TENDER 15% reduction when offering Russian-made goods or work Example: Offer: RUS: =100 (Made in Russia) AUT: =100 Offer assessed as: RUS: =85 (Made in Russia) AUT: 100 Concluding contract: Premium: RUS, as at 85, conclusion of contract at 100 AUCTION 15% "reduction" when offering goods, work or services that are not Russian-made Example: Starting price: 100 Offer: RUS: 80 (Made in Russia) AUT: 80 Concluding contract: If with RUS, then at 80 If with AUT, then at 80-15=65

6 When are my products deemed "Made in Russia"? 6 Local Content "No Russian-made equivalent" Government Resolution No. 719 dated listed goods CIS Rules 2009 not listed goods SIC (special contract Technical qualities and operating characteristics / energy efficiency, quality, safety, etc. (Government Resolution No dated 20 September 2017). Technical operations Share of foreign components in the finished product in % Other conditions (for example R&D, IP) Rules for determining country of origin in the CIS - sufficient level of processing Step-by-step localisation (Government Resolution No. 719 dated 17 July 2015) Mechanical engineering Automobile industry Railway mechanical engineering industry Pipeline valves General terms Special regulation Special mechanical engineering Photonics & light technology Power engineering, electrical engineering, cable industry Heavy engineering Medical products Pharmaceuticals Electronics products Construction materials The furniture and wood processing industry Chemical substances used during the extraction and processing of minerals; Certain types of technological equipment for the preparation, storage and processing of hydrocarbons; Compressor and refrigeration equipment Light industry Shipbuilding Pump equipment Drilling rigs Paints and varnishes

7 Procedure for the issue of the certificate "Made in Russia" in accordance with Government Resolution No APPLICATION Name of the applicant INN/OGRN Location Product name etc. 5 business days to check that the application is complete and correct, check compliance with requirements 5 business days for the issue of certificate or refusal to issue the certificate if a positive decision is adopted Certificated "Made in Russia" issued by the Ministry of Industry and Trade Product name Effective term of the certificate= 1 year APPENDICES Ministry of Industry and Trade LIST of issued certificates publicly available

8 Criteria for confirming the manufacturing of goods in Russia in accordance with Government Resolution No Yes Was a special contract concluded? No Special contract Yes Are the products being manufactured included in the annex to Government Resolution No. 719 dated 17 July 2015? No Expert Opinion of the Chamber of Commerce on compliance with the requirements of Government Resolution No. 719 dated 17 July 2015 The certificate of origin of the goods is issued by the competent body of the member state of the CIS Agreement dated 2009

9 Background: Special contract: (1) 9 Investor s application (Greenfield / Brownfield) Governed by Government Resolution No. 708 dated 16 July 2015 "On Special Investment Contracts for Certain Industrial Sectors" in the version dated 16 December 2017; Status of local manufacturer; Three years to comply with localisation provisions Approval by Commission Corporate income tax: Federal part set at 0% (instead of 3%) Regional part: possible reduction to 0% (from 17%) No increase in the investor s tax burden during the implementation of the project Expanded legal guarantees guarantee of stability of legislation Ministry of Industry and Trade - conclusion of a special contract with the investor (the regional authorities may also participate if concessions are to be granted on the regional level) Status of sole supplier for state procurement; Purchase by the state of up to 30% of products manufactured Access to state subsidies

10 Overview: Special contract: (2) 10 The Special Investment Contract is concluded for a maximum 10-year term Ministry of Industry and Trade (Chairman of Management Board + 4 members) At the same time, s must total not less than RUB 750 million Model form of the contract is established by the Government SIC Government Commission Ministry of Economic Development (1st Deputy Chair of Management Board + 2 members) Ministry of Finance 2 members Ministry of Energy 3 members Representatives of industrial, credit, public and scientific organizations 5 members

11 Special contract: Procedure for concluding a special contract (1) 11 Stage 1 Stage 2 Stage 3 Stage 4 Stage 5 Preparation of the application to be filed by the company Form of the application Business plan Financial model List of affiliates Confirmation of financing Localisation plan Filing of the application by the company to the Industrial Development Fund for preliminary review Completion of the application of the company after the preliminary review by the Industrial Development Fund Filing of the application to the Ministry of Industry and Trade Review of the application by the competent department of the Ministry of Industry and Trade

12 Special contract: Procedure for concluding a special contract (2) 12 Stage 6 Stage 7 Stage 8 Stage 9 Stage 10 Negotiations with the competent department of the Ministry of Industry and Trade on the key points of the application and the project (on the basis of the filed application) Preliminary approval of the project issued by the Ministry of Industry and Trade Filing of the application and preliminary approval of the project for final approval by the Inter- Departmental Commission Final approval of the project by the Inter- Departmental Commission Preparation of the draft special contract

13 Special contract. Procedure for concluding a special contract (3) 13 Stage 11 Stage 12 Stage 13 Stage 14 Stage 15 Negotiations with the Ministry of Industry and Trade on the draft special contract Negotiations on the draft special contract with members of the Inter- Departmental Commission, in particular with the Ministry of Finance Finalization of the special contract Signing of the special contract Filing of an application to receive "Made in Russia" confirmation based on the special contract

14 Localisation Strategy in practice: available options 14 Set up of production facility in Russia Joint production with partner in Russia Production at Russian subsidiary Contract manufacturing Foundation of new company / M&A Joint Venture/Consortium (Ownership vs. Lease) PPP Insight: Special Economic Zones, Industrial Parks, Clusters, Priority Development Areas

15 Background: Contract manufacturing in Russia 15 LOI Legal check of counterparty Due diligence Agreement on cooperation Implementation of transaction Contract Manufacturing Model content of agreement 1. Designation of parties to the agreement 2. Subject of the agreement: technical processes in Russia 3. Contracting agreement vs. sale and purchase agreement (Transfer of raw material and technical support of the client vs. sale on the basis of a separate sale and purchase agreement) 4. Property issues 5. Purchase price and settlement procedure 6. Warranties/quality control issues 7. Issues of liability/liability for the product 8. Provisions of anti-trust legislation 9. Effective term and cancellation 10. Confidentiality provisions/protection of know-how 11. Jurisdiction/arbitration clause 12. Applicable law 13. Concluding provisions 14. Documentation, annexes

16 Localisation in Russia: independently or with a Russian partner? 16 Why a Joint Venture? Who contributes what? The "marriage contract" Purpose of establishing a Joint Venture Structure of the Joint Venture Internal organization of the Joint Venture: control over the Joint Venture Financing of the Joint Venture Transfer of equity shares, termination, exit from the Joint Venture Regulation and resolution of dead-lock situations Provisions on competition and obligations of partners in the Joint Venture Intellectual property Bringing participants into the operations of the Joint Venture

17 Your contact: Falk Tischendorf 17 Managing Partner of Moscow office Attorney-at-law BEITEN BURKHARDT Turchaninov per. 6/2 Moscow, Russia Practice Groups Corporate Law, Commercial Law, Real Estate Phone: Falk Tischendorf started his career in 2002 as an attorney at Haarmann Hemmelrath & Partner. From 2006 he worked at CMS Hasche Sigle as a salary partner and the head of their Moscow Commercial and Real Estate practice. He has been the Head of BEITEN BURKHARDT s Moscow office since He is registered with the Ministry of Justice of the Russian Federation in the register of lawyers of foreign states working as attorneys in the Russian Federation, and is named as an arbitrator for international commercial disputes of the International Commercial Arbitration Court at the Chamber of Commerce and Industry of the Russian Federation (MKAS) and as an arbitrator of the Arbitration Court of the Association of European Businesses (AEB). Falk has been honored by the Russian Ministry for Economic Development for his contribution to the development of Russian-German foreign economic relations. In 2016 he was appointed official representative of the Federal State of Mecklenburg- Western Pomerania (Germany) in Russia. Falk Tischendorf is a member of the board of the Russian- German Chamber of Commerce (AHK) and has been Head of the Compliance Committee since He is also a member of the board of the Ostinstitut Wismar.

18 Beijing Berlin Brussels Dusseldorf Frankfurt a. M. Hamburg Moscow Munich St. Petersburg This presentation has been prepared exclusively for information purposes. It should not be considered to be a comprehensive analysis of legal or tax issues. This presentation does not constitute legal or tax advice by BEITEN BURKHARDT Rechtsanwaltsgesellschaft mbh. The issues considered in this presentation require separate and detailed legal or tax advice in each specific instance.