Copenhagen Economics has conducted a study on the economic costs of the non-application of the TIR system by the Russian Federation for the International Road transport Union (IRU).

The UN TIR system is an international harmonised system of customs control that facilitates trade and transport whilst effectively protecting the revenue of each country through which goods are carried. The nature of the TIR System means that administrative and financial burdens are minimised. Thereby, the TIR System allows goods to be transported cheaper and more effectively.

But in September 2013, Russia unilaterally decided to no longer accept TIR carnets as sufficient customs duty guarantee. Consequently transport operators hauling goods into Russia must obtain a new Russian guarantee to secure customs clearance. Until now, the cost of the new Russian system has not been known, but it was expected to be significantly more costly than a continuation of the TIR system.

In a new study, Copenhagen Economics provides a quantification of the economics costs associated with the non-application of the TIR system as well as an analysis of whether the new system is beneficial to the Russian and the global economy.

The main conclusions are:

• The new Russian system adds significant costs on imports into Russia. We estimate that the direct costs of the new system could be up to USD 2.2 billion per year. • In addition to the direct costs there are several indirect costs such as increased administrative burden and an increased financial risk for the transport operators. • Taking into account these indirect costs, the total costs of the new system could be up to USD 3.7 billion. As a consequence, the new system is harming Russia’s own economic interests by adding costs on trade with its main partners. Ultimately, Russian consumers will pay the bill.

The full report can be downloaded from IRU’s website

For further information please contact partner Martin Hvidt Thelle