New Zealand-Russia Trade relationship
How much trade does New Zealand have with Russia?
Before the invasion, Russia made up 0.13% of New Zealand’s total goods imports; and 1% of overall New Zealand exports. Crude oil was our main import until the closure of Marsden Point, and dairy was our single largest export product.
Since Russia’s invasion, there has been a significant decrease in imports from, and exports to Russia, as New Zealand’s trade sanctions have taken effect and businesses have made their own decisions about whether to remain in the Russian market.
From April to September 2022, exports were down 87% compared to the same time last year, from NZ$42.5 million to NZ$5.6 million as we largely decoupled our economy from Russia’s.
Since the imposition of the 35% important tariff in April, imports from Russia have dropped by 90%. Imports from Russia in April were NZ$4.8 million, and in September just NZ$878,000.
What impact will the trade measures have on Russia?
Placing a punitive tariff of 35% on goods of Russian origin denies foreign exchange to the Russian Federation to help finance their aggression. It also closes off New Zealand from the possibility of Russian products being unloaded on New Zealand and undermining other similar efforts by our partners.
While our trade with Russia is relatively small, and has decreased significantly since we first imposed trade measures in April, these measures send a strong signal of our condemnation of the Russian Government’s actions in Ukraine.
What impact will the trade measures have on New Zealand?
Prior to the invasion, Russian products made up just 0.13% of total goods imports to New Zealand, being NZ$90 million in the year to December 2021. This was largely made up of crude oil which New Zealand stopped importing upon the closure of Marsden Point oil refinery (a decision that was made prior to Russia’s invasion).
New Zealand imports of Russian products mainly consist of fertilisers, building materials and copper wire. Within these sectors, trade with Russia made up less than 10% of total imports before the invasion.
Can we supply services to Russia?
You must not provide any services to a sanctioned individual or entity, or their associates. There are limited exceptions – please see Regulation 12. You can search the sanctions register on the MFAT website to find whether an individual or entity has been sanctioned.
We encourage you to complete your own due diligence to ensure you are not dealing with an associate of a sanctioned individual or entity. If you are unsure, we recommend you seek legal advice.
You may provide services to individuals or entities that are not sanctioned. However, you may face practical challenges in receiving payment for your services. We recommend you speak to your bank about receipt of payments.
We have recently sold goods to Russia. Can we provide follow-up services to assist commissioning of these goods?
The rule above applies: you must not provide any services to a sanctioned individual or entity or their associates. This includes the provision of follow up services, trouble shooting and any requests for assistance or advice. You may provide services to customers who are not sanctioned.
Can we provide financial services to Russia?
The rule above applies: you must not provide services to a sanctioned individual or entity or their associates. You may provide services to customers who are not sanctioned.
Imports
What can be imported from Russia?
Most goods of Russian origin can still be imported but if they are over NZ$1,000 they will be subject to a 35% tariff.
All Russian origin gold, oil, coal, gas and luxury goods (including liquor, truffles, certain kinds of seafood like caviar and lobster, precious stones, personal electronics and clothing), are not able to be imported.
The full list of prohibited imports is contained in the sanctions register. If these items are imported, they will be seized by Customs and attract a 35% tariff.
You should also check the sanctions register to ensure that you are not dealing with a sanctioned individual or company or their associates.
It’s worth noting that you may face practical challenges in trading with Russia, related to international shipping and making/receiving payments.
Imports under NZ$1,000 will not attract the tariff (de minimis). What about the prohibited imports?
Prohibited imports will be seized by Customs and will be subject to the 35% tariff, even where the value is less than $1,000 (see s70 of the Customs and Excise Regulations 1996).
Will imports that left Russia but had not arrived in New Zealand by 25 April 2022 attract the 35% tariff on entry?
Product of Russian origin that was en route to New Zealand from Russia prior to 25 April will be exempt from the 35% tariff, otherwise the 35% tariff will apply.
If the good is on the list of prohibited imports that entered into force on 4 November (see the sanctions register), is of Russian origin, and it was en route to New Zealand from Russia prior to 4 November, it will be exempt from the import prohibition but the 35% tariff will apply. This does not apply to the gold import ban.
What does “en route to New Zealand” in the context of the 35% tariff mean?
“en route to New Zealand” means:
- The decision to transport the goods to an importer in New Zealand was made prior to 25 April 2022 AND
- The goods commenced the journey to the importer in New Zealand prior to 25 April 2022.
The goods may still be physically in the country of export however must have departed the point of supply.
Importers with goods “en route to New Zealand” prior to 25 April 2022 can apply to Customs for an exemption from the 35% import tariff, unless their product is prohibited from import from 4 November (check the sanctions register).
What does “en route to New Zealand” in the context of prohibited imports of luxury goods and oil, coal and gas products mean?
“en route to New Zealand” means:
- The decision to transport the goods to an importer in New Zealand was made prior to 4 November 2022 AND
- The goods commenced the journey to the importer in New Zealand prior to 4 November 2022.
Importers with prohibited imports “en route to New Zealand” prior to 4 November 2022 can apply to Customs for an exemption from import prohibition. These imports will still attract the 35% tariff.
What does “en route to New Zealand” in the context of prohibited imports of Russian origin gold mean?
The import ban on gold of Russian origin came into force on 25 July. The transition provision contained in Schedule 1 of the Regulations (namely the “en route to New Zealand” rule), does not apply to the import of gold of Russian origin.
Will prohibited imports of luxury goods and oil, coal and gas products of Russian origin that left another country but not arrived in New Zealand by 4 November be prohibited?
If products of Russian origin, that are included in the list of prohibited imports, were en route to New Zealand from another country prior to 4 November, they will not be prohibited even if they arrive after 4 November. This does not apply to the gold import ban.
These products will attract the 35% import tariff.
What is the purpose of the tariff increases on Russian imports? Why raise the tariff and not impose an outright ban?
The increased tariff is part of a series of economic actions we have taken against Russia under the Russia Sanctions Act. 35% represents a high tariff barrier, particularly for the kind of products that New Zealand has imported from Russia in the past, most of which formerly attracted zero tariff. So, Russian products are unlikely to be competitive in the New Zealand market any longer.
This is consistent with the approach a number of our partners have taken. In practice, the effect of the tariff has meant a significant drop in imports coming from Russia (from April to September 2022 imports were down by 75.3% in dollar value).
New Zealand has also applied import bans on certain goods of Russian origin, such as gold, oil, coal, gas and luxury goods (including liquor, truffles, and certain kinds of seafood like caviar and lobster).
Can you ensure the oil we import from other countries isn’t mixed with Russian oil?
New Zealand’s oil largely comes from Asia. When oil is sufficiently transformed its origin is considered to be the place where it underwent transformation. For example, Russian oil, further processed in a third country would be considered to have originated from that third country.
The intent is not to stop Russia producing or selling oil, but to reduce Russia’s overall profit from its sales of oil and to ensure New Zealand is not adding to this profit.
For more information, see MFAT’s guidance on Russian energy products.
What does the ban on luxury goods mean?
We have imposed a ban on the import of luxury goods of Russian origin. This includes high-end products like truffles, caviar and lobster, and vodka, and applies to Russian origin products no matter where they are imported from.
Other food products of Russian origin are still able to be imported, but will attract the 35% import tariff if they are valued over $1,000.
Prohibited exports
What can still be sold into Russia (and other sanctioned countries including Belarus)?
The sanctions register contains a list of prohibited exports to Russia, which include items of strategic importance, oil exploration and oil production products, and luxury goods like wine and seafood.
A range of strategically important items are also banned for export to Belarus and listed in the sanctions register.
You should check the sanctions register to ensure that you are not dealing with a sanctioned individual or company or their associates.
Also prohibited are strategic items under our export controls regime. Please ensure that you are not violating sanctions or export control laws. If you are unsure about a specific product, we recommend you seek legal advice.
Be aware of shipping delays and difficulties in completing transactions. Speak to your freight forwarder about shipping, contact your bank to understand possible complications of completing transactions and seek qualified legal advice.
Will seafood exported to Belarus as a final destination be affected as a part of possible or existing sanction measurements?
At this time you can sell items to Belarus that are not to an individual or entity identified in the Regulations (see the sanctions register), if the items are not listed in the prohibited exports to Belarus (as outlined in the sanctions register), or covered by current export controls.
Be aware of shipping delays and difficulties in completing transactions. Speak to your freight forwarder about shipping, contact your bank to understand possible complications of completing transactions and seek qualified legal advice.
We export food to Russia, can we continue to export in future, if we get paid before shipping?
You can sell goods into Russia if they are not going to an individual or entity (or their associates) sanctioned by New Zealand (see the sanctions register), if the goods are not listed in the prohibited exports to Russia (as outlined in the sanctions register) or covered by current Export controls. Some food is now prohibited from export under the luxury goods ban.
Be cognisant of shipping delays and difficulties in completing transactions. Speak to your freight forwarder about shipping, contact your bank to understand possible complications of completing transactions and seek legal advice.
You said you wouldn’t stop the export of food, but you have now. Why is that?
We have imposed a ban on the export of luxury goods to Russia. This includes high-end products like wine and certain types of seafood like lobster. Other food products are still able to be exported to Russia.
Exports of prohibited items will be permitted if they are made in good faith for a humanitarian purpose and doing so is consistent with the purposes of the Russia Sanctions Regulations 2022 (regulation 14).
Why have you stopped the export of wine to Russia?
We have imposed a ban on the export of luxury goods to Russia. This includes high-end products like truffles, caviar and lobster, as well as wine.
Exports of prohibited items will be permitted if they are made in good faith for a humanitarian purpose and doing so is consistent with the purposes of the Russia Sanctions Regulations 2022 (regulation 14).
Payments
My business is not able to make/receive payments to Russia because my bank is complying with sanctions.
Due to the nature of financial transactions, institutions such as banks are also required to comply with sanctions imposed by other countries, including the United States, United Kingdom and Australia. This means that if an individual or entity (or in some cases, entire jurisdictions) is sanctioned by another country, it is possible that banks in New Zealand will refuse to engage in transactions related to them, or that transactions will be stopped before they arrive in New Zealand. We encourage you to seek legal advice on your specific situation and speak to your bank well in advance of any transactions.
What if you are still owed payment for exported goods? What if outstanding debts can’t be transacted due to measures through SWIFT? What options are there to deal with this?
Getting paid for exported goods is more difficult. Continue to talk to your Russian partners in market, many Russian businesses will be experiencing similar issues with completing transactions and may have some practical advice.
Additionally, contact your bank to discuss if it is possible to send or receive payments within the constraints imposed by the New Zealand and international sanctions regimes. You should seek qualified legal advice if necessary.
We have clients in Russia and former Soviet States. It would appear that many companies have bank accounts outside of Russia or their country.
The impact of SWIFT restrictions will depend very much on the precise payment arrangements in place. Banks in many countries will face similar limits as banks here do on their ability to do business with Russian banks. We suggest exporters contact their banks for advice on if, and how, payments can be received legally and within the spirit of the sanctions.
Is it possible that payments made to, and received by, New Zealand banks but are held-up in New Zealand or even returned by a New Zealand bank, despite no Government sanction on the goods traded? Is this legal?
Banks are required to comply with relevant sanctions imposed by New Zealand under the Russia Sanctions Act. Banks may also comply with sanctions imposed by other countries. This means that if an individual or entity is sanctioned by another country, it is possible that banks in New Zealand will refuse to engage in transactions related to them. SWIFT restrictions imposed on Russian banks can also make international payments very challenging.
In these instances we encourage you to speak to your bank in the first instance about why a payment has been blocked and seek legal advice on options. You may also contact the Banking Ombudsman for any complaints.
Exemptions, amendments or revocations
I have a legitimate need to engage with sanctioned individuals or entities, what can I do?
Regulation 12 of the Russia Sanctions Regulations 2022 details situations in which dealing with sanctioned persons, assets or services is allowed. Additionally, you can request an exemption, in relation to particular events or dealings with individuals, assets or services. Find out how to apply for an exemption.
The sanctions do not apply in relation to humanitarian organisations carrying out their humanitarian activities (Regulation 18) and the export prohibition does not apply if there is a humanitarian purpose for the export (Regulation 14).
I have a legitimate need to export or import prohibited goods, what can I do?
Regulation 12 of the Russia Sanctions Regulations 2022 details situations in which dealing with sanctioned persons, assets or services is allowed. Additionally, you can request an exemption, in relation to particular events or dealings with individuals, assets or services. Find out how to apply for an exemption.
The sanctions do not apply in relation to humanitarian organisations carrying out their humanitarian activities (Regulation 18) and the export prohibition does not apply if there is a humanitarian purpose for the export (Regulation 14).
Can a listing be amended or revoked?
Possibly. You can request an amendment or revocation of a regulation or a designation notice on the basis of humanitarian need or for any other reason. Find out how to apply for an amendment or revocation.
An application may not be considered if it is in relation to the same matter as an application already submitted within the last six months.
Other jurisdictions sanctions’ laws
What do US and other foreign sanctions laws mean for New Zealand businesses?
It is important you consider the wider legal and commercial context of your trade and investments. It may be necessary to seek your own legal advice on the sanctions laws of other countries, including the United States, which might apply to your specific context. You may also wish to consult with your financial institution to ensure that any payments from Russia can be accepted, as some banks have restricted dealing with Russia due to US sanctions law. The New Zealand Government is not in a position to provide advice on the implications of US sanctions law.
International trade rules and the World Trade Organisation
How do the trade measures fit within World Trade Organisation rules?
World Trade Organisation (WTO) rules include a national security exception which enables WTO Members to take ‘any action’ they consider necessary to protect their essential security interests ‘in time of war or other emergency in international relations’.
As with other members of the international community who have taken such action, we consider these trade measures are warranted in response to Russia’s war of aggression in Ukraine.
Supply chains and shipping routes
What impact do sanctions have on supply chains and shipping routes?
Many of the major shipping lines have suspended deliveries of non-essential goods to Russia itself. Essential goods, such as humanitarian goods like food, are still being shipped.
While freight connections for essential goods may still be functioning, there are blockages elsewhere in the system. Measures imposed by others like sanctions, restrictions on financial transfers, and restrictions at ports may impede flows of freight. There may also be disruptions where shipping routes go via Russia. Businesses are encouraged to find alternative routes in this case, for example, through Asia or Eastern Europe.
We ship ‘free on board’ (FOB) to all export markets, so don't have great visibility over shipping routes/destinations. Are goods still being delivered/shipped to Russia and/or increasingly unlikely?
Many of the major shipping lines have suspended deliveries of non-essential goods to Russia itself. Essential goods, such as humanitarian goods like food, are still being shipped.
While freight connections for essential goods may still be functioning, there are blockages elsewhere in the system. Measures imposed by others like sanctions, restrictions on financial transfers, and restrictions at ports may impede flows of freight.
There may also be disruptions where shipping routes have gone via Russia. Businesses are encouraged to find alternative routes in this case if possible.
Markets outside Russia
What European markets could end up most at risk for New Zealand exporters if the conflict continues?
New Zealand companies should think about future-proofing cost structures and the cost of the market models. You need to consider that, not just from a Russia/Ukraine perspective, but also in a European context and globally. With much of Europe not being significantly impacted, exporters are advised to engage regularly with their clients and also with NZTE.
What sanctions apply to Belarus?
A number of Belarusian individuals and entities are sanctioned (check the sanctions register).
Certain export prohibitions apply to Belarus as well as Russia. This is detailed in the sanctions register.
The 35% import tariff, import prohibitions, export prohibitions on certain oil exploration and oil production goods, and the export prohibitions on luxury goods only apply to Russia.
Why has New Zealand sanctioned Belarus?
A number of Belarusian individuals and entities are sanctioned (check the sanctions register).
Certain export prohibitions apply to Belarus as well as Russia. This is detailed in the sanctions register.
These sanctions recognise that Belarusian leaders and defence entities are supporting Russia’s actions in Ukraine.
