China, Russia sign customes pact

The Administrations of Customs from China and Russia have signed a Letter of Intent for Cooperation. The deal is designed to regulate procedures to wipe out "gray customs clearance."

Premier Wen Jiabao and Russian counterpart Vladimir Putin attended the signing ceremony. The customs agreement is just one of many signed this time, but it's getting a lot of media attention. It means the two sides will work together to regulate clearance of imports and exports.

Cai Guiru, Chairman of Russia-China Chamber of Commerce said "We warmly welcome such an agreement, which is long-awaited. This agreement will make Russian Customs more transparent, and provide convenience to Chinese businesses. As long as we regulate customs clearance, businesses will choose the formal way, rather than a 'gray customs clearance'."

The so-called "gray customs clearance" refers to the practice by some Russian clearance companies of bringing imported goods into the market at a tax rate lower than regulated levels. Goods were in short supply in the 1990s, so the Russian government allowed this to encourage imports and simplify customs procedure.

Cai Guiru said "The major harm is that trade by Chinese businesses is not protected by the law, or is illegal. Their goods are not guaranteed, their operation is illegal. They don't pay taxes, so they can hardly expand business. Sometimes their lives are not safe."

According to the chamber, China sells textiles worth 10 billion US dollars each year in Russia. At the same time, Chinese businesses bear 500 million dollars in losses because the trade is not protected by law.

Cai Guiru said "I believe these gray businesses will gradually disappear as the agreement coming into effect. The agreement will forbid nonstandard practices, and other tricks."

Data shows that trade between China and Russia increased by ten times in the past ten years, hitting nearly 57 billion US dollars last year.