Could a compulsory Transport Document for carriage of goods be introduced successfully in the Russian Federation?

A team of European experts is currently working with the Russian Ministry of Transport as part of the TACIS programme. They have two key tasks – to recommend ways to improve the regulation of the transport industry and to assist in the foundation of regional transport associations which will represent the interests of operators and provide them with advice.

From conversations with operators and authorities, it has become apparent that a major problem is the lack of comprehensive documentation accompanying domestic carriage of goods. International operators will be familiar with CMR documentation – a system of standard documents containing details of the consignor, consignee, cargo and destination which is readily understood by customs officials in many countries. Russian domestic carriers either produce their own unique documents or fail to document the journey entirely. This can present a number of serious problems to the operator and the industries that rely on him.

For example, there may be a dispute if the consignee argues that a part of the cargo has been lost or stolen. The operator may be honest, but there is no way to prove who was responsible for the goods at the time. It is also possible that the carrier sub-contracted the transport operation without telling the consignor or consignee. A lack of documentation makes it virtually impossible to insure the cargo. It is likely that operators and their customers will wish to introduce insurance of goods in transit in the near future, to avoid financial losses in the event of theft or accidental damage.

It is not a new idea to suggest that transport operations must be documented. The existing Civil Code of the Russian Federation ( Chapter 40 article 785) requires that contracts of carriage be evidenced by a document. Russian experts have advised that the carrier will have no liability in respect of the goods unless there is a written contract. The Civil Code does not, however, specify the contents of the document nor does it contain a model of its presentation. It is recommended to make the appropriate provisions for this as soon as possible

Another related problem is that law abiding operators face unfair competition from illegal operators who do not pay tax, do not maintain their vehicles up to safety standards and may not take proper care of their customers property. This unfair competition reduces the income of legal operators, reducing their ability to invest in new vehicles. It is often difficult for the Transport Inspectorate and Police to find these operators. If it were compulsory for an operator to hold an operators licence before he could obtain standard carriage documentation and the carriage document was examined at a normal roadside check together with the drivers licence, it would be more difficult to operate illegally.

‘Own account’ carriers – for example a factory that operates its own lorries – may also wish to insure their cargoes in the future. Though the risk of theft will be less than that which arises from third party carriage, the risk of accidental damage and theft remains.

Furthermore, third party carriers may face unfair competition from own account carriers who carry goods illegally for other people, instead of just for their own business. For example, a vehicle licensed for own account operation has to return empty after making a delivery, but the operator uses this spare capacity by carrying goods for a third party. The additional income will enable the carrier to charge an artificially low price for other third party services, competing unfairly with the operators ‘for hire and reward’, whose commercial activity is transport only. Moreover, he may take the additional cash for the return journey without declaring it in his accounts. The federal treasury loses tax income, for which compensation is sought by higher payments from law abiding operators who are quite visible for the tax collectors.

If the third party’s goods are lost or stolen, this will present the customer with a problem. There are no documents, so he cannot prove that the illegal (own account) carrier was responsible for them. He cannot claim compensation, nor can he make an insurance claim.

For these reasons it is suggested that own account carriers should be required to use the same standard documentation. They will be able to note that the carriage is “own account” on the form. The details of the own account operator (who is both consignee and carrier), together with the consignee (who might sell the goods or use them in a manufacturing process for profit) are recorded. It should then be possible to insure the goods.

Carriers of dangerous goods and cargoes with special handling requirements such as food items, must advise other people of the nature of the goods and the hazards or special demands of their transport.

It will be possible to include this information in the standard document, in a box for “special instructions”.

These documents are not compulsory for domestic transport in Western Europe and at first sight it may seem unnecessarily bureaucratic to introduce such a requirement in Russia. There is, however, one crucial difference between the European and Russian methods of commerce.

The systems of business accounting, compulsory auditing and tax inspection and insurance have existed in Europe and America for hundreds of years. Over this time many refinements have been made and it is very difficult to conduct business on the black market to an appreciable extent. All businesses—individual traders, partnerships and companies—are subject to inspection by a number of different agencies, in connection with Value Added (purchase) tax, tax payments on staff salaries, Corporation tax and the detection of fraud.

In Europe and America, there are long established systems of private law facilitating the enforcement of debt repayments which will require evidence that the debt had been incurred legitimately. Systems of insurance are also long established, with a framework of law together with individual requirements of insurance companies for proving the existence of cover and making claims. In any legal case it will be necessary to produce evidence of the loss or damage done. Therefore, though the law does not require the use of a standard transport document per se, it is virtually impossible to do business without documentation with the very similar function.

In Russia, systems of commercial accounting are relatively immature. There is not yet a mechanism for the compulsory auditing of company accounts and there are fewer transactions recorded electronically, for example direct debits and credit card payments. Insurance is not widespread and commercial laws are at an early stage of development. Systems of documentation are an essential foundation to the development of private law. For many years, (transport) enterprises have been shielded from the effects of major financial losses due to theft, fires, fraud and accidents. This is no longer the case and, as in the west, a catastrophic loss can lead to the enterprise (and its customers) becoming insolvent. To prevent this, insurance will be essential.

The TACIS consultants are assisting with developing procedures for issuing and using these documents. At the moment there are almost 40 Regional Associations with some formalised status, and the Ministry of Transport is strongly promoting the establishment of a Federal Association – the Russian Road Transport Union - to be based in Moscow.

It will be important that the envisaged transport document is readily available in all the regions of Russia. It is also important that the design of the document and the rules relating to its use are the same throughout Russia. Operators must be confident that their documents will be valid and understood by officials wherever they go, and there must not be unfair price competition between the organisations who will be authorised to issue transport documents.

Therefore it is suggested that the Russian Road Transport Union (RTTU) should be in overall control of the scheme. At the same time, Regional Associations should be allowed to issue documents under licence of RTTU, if they are able to show that they meet precise standards and rules which will be laid down in writing.

RRTU officials should then be able to inspect the Regional Associations to check that the correct issuing procedure has been followed. An inspector may terminate the authority of an organisation to issue and sell documents if it fails to observe the agreed rules. There must be an appeal mechanism – perhaps to the Minister of Transport or a Court - if a regional association believes it has been unjustly refused the right to issue transport documents.

It will be some time before regional associations exist in all regions of Russia. As the RRTU will be located in Moscow, it will be necessary to delegate the powers to issue documents to another organisation – perhaps the Road Transport Inspectorate – in those regions where no Association exists. Therefore the term “Licensed Issuer” is used to refer to either a Regional Association or whichever body is permitted by the RRTU to sell documents.

There is an important reason for proposing that the Licensed Issuers are strictly licensed and regulated. Each document will be allocated a unique reference number, from which it will be possible to trace the supplier and the transport company to which it has been issued. This will enable the tax authorities to check that the carrier has recorded the work and the transport charge correctly in his accounts.

RRTU will arrange for the printing of documents and the bulk supply to each Licensed Issuer. The Licensed Issuer will be required to pay a small fixed fee for each document. The fee will be reclaimed – together with a small fixed profit margin – from the carrier. The price at which the document is sold to the Licensed Issuer and the price which is to be charged to customers will both be fixed by the RRTU. The price must be low – not more than $1 per document - to avoid the introduction of a substantial financial burden to operators. The aim is to improve systems of fair competition and accountability in commerce, not to make a vast profit and not to covertly introduce a new tax.

It is in the interests of the transport industry as a whole that Regional Associations grow to serve their members and profit making should not be their primary concern. If discounts were offered by RRTU to Licensed Issuers in large industrial regions where demand will be high, there will be two consequences:

1. Smaller Associations will be unfairly prejudiced
2. The larger Association will—in turn—be able to offer its customer a discount. This will discriminate against operators in different regions and against smaller legal operators. As the transport document will all be valid throughout Russia, it is inevitable that the large Association will be tempted to offer documents for sale at a lower price to operators from another region. Such a price war could destroy smaller Regional Associations before they have had the chance to develop.

It should not be compulsory for an operator to be a member of an Association on order to be able to buy transport documents.

• Reduction of unfair black market competition
• Facilitation of cargo insurance
• Facilitation of debt collection
• Facilitation of making customers claims in the event of loss or damage.

Altogether, this shall not pose an extra burden but rather produce savings to the national economy at large.

In order become a Licensed Issuer, the organisation (e.g. Regional Association) must sign a contract with the RRTU, making promises:

• To observe strictly the issuing procedure, in particular it must check that the operator has a valid operators licence
• To keep its stock of documents secure
• To advice the RRTU immediately of loss or theft
• To record the identity of the buyer and the unique numbers of the documents sold
• To make its records available at any reasonable time for inspection by the Transport Inspectorate and Tax Authority
• To keep proper accounts, itemising each sale of documents and the income received
• To co-operate with the relevant Government ministry concerning the keeping of statistics – perhaps sending regular returns of the number of documents issued.

The document will consist of three sheets and will be designed so that writing on the top sheet produces three identical copies without carbon paper – similar to a CMR note. It could be completed by hand, by typewriter or by printer. The individual sheets are given to and retained by consignor, carrier and consignee respectively.

In addition to the essential basic information – identity of consignor, carrier, description of goods – it is proposed to add the following:

• Unique number of document (including code number for the Licensed Issuer)
• Dangerous goods information and consignor’s declaration that goods are correctly packed and labelled
• Special instructions, such as …. this way up, fragile, temperature control requirements, “use by” date (foodstuffs)
• Vehicle Registration number
• Name of Driver
• Odometer reading at start and end of journey (so that it can be checked if a vehicle has unaccounted usage)
• Date and time of collection and delivery (which can be checked against distance to reduce the likelihood of black market dealing by repeatedly using the same document for many journeys)
• “Own Account” Declaration (if appropriate).

It is suggested that the transport document should be laid out in a form according to the United Nations Layout for key documents.

The carrier must submit a standard application form to the Licensed Issuer together with a copy of his operators licence document. The form will contain a legally binding declaration that the operator :-

• is correctly licensed
• will only carry goods for hire or reward if he holds an appropriate operators licence
• promises to keep the documents in a safe place and to keep proper records of their use
• will ensure that the various boxes are filled in with correct information
• will ensure that all parties – consignor, carrier, consignee sign the document and are given the appropriate section to keep.

The documents form a chain of records, enabling identification and investigation of everyone who has profited from the goods. If goods are lost or damaged, it will be possible to identify who was responsible for them at the time. This will enable legal claims to be made and insurance will be possible.

Regular checks can be made of transport companies, using the list of unique numbers provided by the Licensed Issuer. For each number the Inspector can expect to see either an unused document or second and third copies of used documents, together with a receipt or entry in the accounts for the transport fee.

Checks can be made at the roadside by GIBDD – if a lorry is found to be carrying goods and the driver cannot produce a document, a fine will be charged. The GIBDD officer should also report the violation to the Transport Inspectorate. It may be that the operator will not hold a licence and that there will be evidence of other illegalities, such as a lack of proper accounts. The Transport Inspectorate can pass this information on to the Tax Authority, customs or other official bodies.