On the Export of Fruits and Vegetables

 
 The ongoing reforms indicate that the Government aims to turn Uzbekistan into one of the largest global exporters of fresh and processed fruit and vegetable products. The Action Strategy on 5 priority directions of Uzbekistan’s development for 2017-2021, approved by the President of the Republic of Uzbekistan on the 7^th of February 2017, envisages the implementation of 434 projects aimed at modernization and intensive development of rural economy. It also provides for setting up 14 trade and logistical centers in the provinces for processing, storage, packaging and exporting fruit and vegetable products with a capacity of more than 310 thousand tons till the year 2020. Availability of relevant infrastructure, which would secure high quality delivery, storage, sorting, grading, packaging, certification as well as exporting, will have to be taken into consideration in the process of their establishment. This is the expected way to achieve a 1,4 times increase in the production of food products, double the output of processed fruit and vegetable products and 2,3 times growth in the export of fruit and vegetable products in 2017-2021. 

It can be said that the Resolution of the President of the Republic of Uzbekistan №ПП-3077 dated 21^st of June 2017 “On measures on further supporting domestic exporter organizations and improvement of external economic activity” had opened up a new stage in the advancement of production and exporting the agricultural output in Uzbekistan. One of the measures taken in this Resolution was to enable entrepreneurs to independently export fresh fruit and vegetables, grapes and melon crops. If in the past the monopoly in this sector belonged to “Uzagroexport” JSC, then now the export of such products is possible to be carried out by all business entities on the basis of direct contracts. 

Such a measure sets the target of fostering an increase in the volumes of farms and dehkan farms’ output, raising the level of fruit and vegetable products’ competitiveness and expanding the geography of the country's exports. Moreover, this step, adopted by the Government in this direction, proved to be more efficient with the cancellation of the requirement for compulsory sale of 25% of foreign currency earnings for all exporters as of August 1, 2017 (Resolution of the President of the Republic of Uzbekistan No.ПП-3157 of July 28, 2017 “On additional measures to stimulate domestic exporter enterprises”). 

 Such contracts, however, will have to be concluded solely on the basis of a 100% advance payment. It should be reminded that the condition of compulsory 100% prepayment on contracts for the export of fresh fruit and vegetable products, grapes, and melon crops, as well as raw commodities, specified in Annex No. 2 to the Decree of the President of the Republic of Uzbekistan No.УП-1871 dated October 10, 1997, is an exception from the general rule for setting payment for export contracts, introduced from June 1, 2017. The Decree of the President of the Republic of Uzbekistan No.№УП-5057 of May 25, 2017 establishes the right of enterprises to export goods of their own production, except for those listed above, for foreign currency without prepayment, opening of a letter of credit, formalizing the bank's guarantee and without a policy on insurance of an export contract from political and commercial risks if the following conditions are met:

-  contract amount should not exceed the equivalent of US$ 100 thousand;
-  mandatory receipt of foreign currency earnings must be secured within 90 days from the date of actual export of goods. 

Subsequent export of goods of own production may be carried out in accordance with this rule of the Decree №УП-5057 only on condition that the exporter organization has no receivables for export deliveries previously performed in accordance with conditions specified in this subclause.
Other rather significant changes in the legislation, affecting positively the development of agricultural exports, were those general points on exports established in the Decree №ПП-3077 of June 21, 2017:

• for organizations, exporting for foreign currency goods of their own production at prices below their production cost, based on the decisions of the Special Expert Commission on consideration of issues on the export of goods at prices emerging actually at the world markets (set up by the resolution of the President of the Republic of Uzbekistan of March 26, 2012 №ПП-1731), including those below their production cost, the proceeds from the sales of goods (works, services) shall be determined for tax purposes on the basis on the actual selling price of goods (works, services). That is, the rule of Article 130 of the Tax Code of the Republic of Uzbekistan, which determines that when selling goods (works, services) at prices below the cost price or at purchase price of goods, the proceeds from the sale of goods (works, services) for tax purposes are determined on the basis of the cost of goods (works, services) or the purchase price of goods shall not be applied in this case, which reduces the tax burden for enterprises, which, in conditions of adverse conjuncture of external market, are forced to export products of their own production at below-cost prices.
• both tax and administrative preferences and benefits, that are in force for exporting organizations for the output of their own production, now extend to organizations that export products, of which they are owners. That is, if previously, one of the main problematic issues for exporters was the question of proving the “ownership” of output, in the sense of their participation in the technological production process, then now it is sufficient to be the owner of the exported product. In particular, such a provision, for example, allows all owners of export products to apply for a benefit in the form of a reduction in the Single Tax Rate by 30% or 50%, depending on exports for hard currency in the total sales volume (paragraph 1 of  Presidential Decree No.УП-2613 of June 5, 2000).

 The Resolution of the President №ПП-3377 dated November 6, 2017 “On additional measures in support of domestic exporters of fruit and vegetable products, grapes, melon crops, legumes as well as dried fruits and vegetables” had turned into another step in support of fruit and vegetable exporters.
 In compliance with this Resolution the economic entities were granted the right to export fruit and vegetable products without the conclusion of an export contract (agreement) on the basis of an invoice, subject to observation of the following conditions:

-   the delivery amount does not exceed the equivalent of US$ 20 thousand on the day of registration of the export customs declaration;
-    receipt of 100% advance payment in foreign currency from non-residents of the Republic of Uzbekistan to accounts in authorized commercial banks of the Republic of Uzbekistan, among them in the form of bank transfer, payment on international bank cards, as well as depositing cash in the national currency purchased in the commercial banks’ currency exchange offices;
-  importing of data on export delivery into the Foreign Trade Operations’ Unified Electronic Information System. 

Apart from that, the exporters are granted the right to adjust the invoice value of exported fruit and vegetable products in the process of storing, transporting and selling them within the limits of natural loss established by legislation. To this end, the relevant ministries and departments will elaborate appropriate standards and procedures for adjusting the invoice value of exported fruit and vegetable products. This measure will help resolve the problematic issue of the possibility for the customs authorities to account for the natural loss of such products, which earlier had led to the emergence of unjustified receivables.

 The Resolution also specifies that as of November 15, 2017:

-    when legal entities purchase fruit and vegetables from natural persons for subsequent export, the tax exemption on personal income tax shall be applied without presenting a document confirming that the products sold were produced on land plots allocated to those individuals or members of their families. This privilege is provided for by paragraph 12 of Article 179 of the Tax Code of the Republic of Uzbekistan: income from the sale of in kind and processed form crops cultivated in the households, including dehkan farms, are not subject to taxation. In accordance with the Tax Code, in the past these revenues were exempt from taxation provided that a taxpayer produced a document of the established form issued by a relevant local government authority, a self-governing body of citizens, board of a gardening, wine-growing or orchard partnership, which confirmed that the products sold had been cultivated by the taxpayer on the plot of land assigned to him/her or to members of his/her family members.

-  if the exporter has overdue accounts receivable on previously exported deliveries, the export of goods shall not be allowed only to that foreign buyer who has overdue accounts receivable. Such a rule is an exception for fruit and vegetable exporters, since the general rule says that the right to export shall be retained in the event of emergence of overdue receivables (Resolution of the President dated November 3, 2017 “On measures on the further liberalization of foreign trade activities and supporting business entities”;

-   registration of customs cargo declaration for the export of fruit and vegetable products shall be carried out after drawing up the customs clearance report within a period of not more than 3 hours;

-  time period for issuing a certificate, required for the export of fruit and vegetable and perishable goods, is reduced to one working day from the time the exporter provides documents.

It is worthwhile to admit the importance of the Resolution of the President № ПП–3344 of October 20, 2017 “On additional measures on ensuring the food security in the Republic and further improvement of activities of the “Uzbekoziqovqatzahira” Association in regard to the question of a stable provision of Uzbekistan’s population with fruit and vegetable products.

        In compliance with this Resolution as of November 1, 2017 the activities of procurement organizations within the structure of the Association shall be equated with commercial activities. They will be levied accordingly by a single tax payment as a trading enterprise. The object of taxation by a single tax payment for this type of activity is trade turnover, taxable at the rates established for respective types of trading activity. 

    Regarding the turnover of agricultural products, these organizations in this case shall be exempt from paying a single tax payment for a period of 5 years. 

   The funds released in connection with the provision of the aforementioned benefit shall be distributed as follows: 

• 50% goes to the Association for financing the construction and modernization of storage facilities, potato storage and refrigerating chambers, as well as for fitting out with equipment for processing and packaging of food products;
• 50% shall be left at the disposal of the organizations and shall be used to finance procurement, storage of fruit and vegetable products, as well as to repay the borrowed loans.